William Langley v. Howard Hughes Mgmt Co., L.L.C.

Filing

UNPUBLISHED OPINION FILED. [16-20724 Reversed and Rendered 17-20217 Reversed and Rendered ] Judge: CDK , Judge: EGJ , Judge: ECP Mandate pull date is 06/22/2017 [16-20724, 17-20217] denying motion to invite briefing to this court on the limited issue of Langley's attorney's fees on appeal under 29 U.S.C. section 1132(g) filed by Appellant Mr. William Langley [8511413-2] in 16-20724 [16-20724, 17-20217].

Case: 16-20724

Document: 00514016499

Page: 1

Date Filed: 06/01/2017

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 16-20724
Cons. w/ No. 17-20217
WILLIAM LANGLEY,

United States Court of Appeals
Fif h Circuit

FILED
June 1, 2017
Lyle W. Cayce
Clerk

Plaintiff - Appellant
v.
HOWARD HUGHES MANAGEMENT COMPANY, L.L.C., SEPARATION
BENEFITS PLAN, Director of Human Resources, Howard Hughes
Management Company, L.L.C., as Plan Administrator,
Defendant - Appellee

Appeals from the United States District Court
for the Southern District of Texas
USDC No. 4:13-CV-3595
Before KING, JOLLY, and PRADO, Circuit Judges.
PER CURIAM:*
Plaintiff–Appellant William Langley sued Defendant–Appellee Howard
Hughes Management Company, L.L.C. Separation Benefits Plan alleging, in
pertinent part, a claim for severance benefits under the Plan pursuant to the
provisions of the Employee Retirement Income Security Act. After the parties

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
*

Case: 16-20724

Document: 00514016499

Page: 2

Date Filed: 06/01/2017

No. 16-20724
filed cross-motions for summary judgment, the district court ordered Langley
take nothing from the Plan and that Langley pay the Plan’s attorneys’ fees.
Langley now appeals. We REVERSE and RENDER for Langley.
I.

FACTUAL AND PROCEDURAL BACKGROUND

In 2002, the Woodlands Operating Company, L.P. (TWOC) hired William
Langley on an at-will basis to manage two golf clubs, the Woodlands Country
Club and the Club at Carlton Woods.
In 2006, Langley was promoted to vice president of club operations. In
connection with that promotion, TWOC provided Langley with an unsigned
memorandum captioned “DRAFT” to document the parties’ “recent discussions
relating to [Langley’s] compensation.” The memorandum stated, in pertinent
part, that Langley would receive (1) an annual “Cash Flow Participation
Award” of 4% of the approved award pool, and (2) a “Club Sale Incentive
Award” of between 0.5% and 1% of the sales price if the Woodlands Country
Club or the Club at Carlton Woods was sold, depending on the sales price of
the relevant club. The Cash Flow Participation Award was granted pursuant
to TWOC’s Senior Management Incentive Plan. 1 It is unclear whether the
Club Sale Incentive Award was made pursuant to an existing benefit plan; the
“DRAFT” memorandum simply describes the award as a “bonus.”
In June 2007, the Woodlands Country Club was sold and Langley was
paid 1% of the club’s sales price in accordance with the Club Sale Incentive
Award. The earning statement provided to Langley described the payment as
a “commission.”

The Senior Management Incentive Plan provided that, after certain financial targets
were met, a percentage of cash distributions made by TWOC to its partners would be
available for cash flow participation awards to eligible participants. TWOC’s executive
committee was granted sole discretion in determining how the cash flow participation pool
was allocated among participants.
1

2

Case: 16-20724

Document: 00514016499

Page: 3

Date Filed: 06/01/2017

No. 16-20724
In 2011, the Howard Hughes Corporation (Howard Hughes) purchased
the outstanding equity interests in TWOC, and TWOC became a wholly owned
subsidiary of Howard Hughes. At year’s end, Howard Hughes terminated the
Senior Management Incentive Plan. 2 Howard Hughes also adopted a new
compensation structure, which included the Howard Hughes Management
Company, L.L.C. Separation Benefits Plan (the Plan) at issue in this case.
The Plan is an employee welfare benefit plan governed by the Employee
Retirement Income Security Act (ERISA). It provides that if an “Employee” is
involuntarily terminated, he or she is entitled to receive 12 “Weeks of Pay,”
plus 4 “Weeks of Pay” for each continuous year of full-time service. 3 The Plan’s
definition of “Employee” is of critical importance to this appeal:
Employee means a person who is employed by [Howard Hughes],
including a person on an approved leave of absence. The term
Employee shall not include:
(a) Any person whom the [Plan] Administrator
determines is compensated by special fees or
employed pursuant to a special contract or
arrangement;
(b) Any person engaged in a capacity which the
Administrator determines to be contract labor or an
independent contractor; or
(c) Any person whom the Administrator determines is
a temporary employee.
At least two other provisions of the Plan are also relevant to this appeal. The
first provides that “separation pay” under “any other contract or arrangement”
will reduce the separation benefits available under the Plan. The second

As discussed supra, it is not entirely clear from the record whether Howard Hughes
also terminated the Club Sale Incentive Award (or ever recognized it in the first instance).
3 The Plan defines “Week of Pay” as “the Employee’s gross annual base salary,
excluding overtime, bonuses and commissions, divided by 52.”
2

3

Case: 16-20724

Document: 00514016499

Page: 4

Date Filed: 06/01/2017

No. 16-20724
provides that the Administrator of the Plan has “full discretionary authority
to interpret the Plan.”
In May 2012, the Plan’s Administrator emailed Langley the Summary
Plan Description (SPD) for the Plan.

The email indicated that the Plan

replaced TWOC’s Severance Pay Plan and that the SPD was being distributed
to Langley because ERISA required it to be “distributed to all employees.” In
pertinent part, the SPD states that “[y]ou are eligible to participate in the Plan
if you are on the Company’s active payroll,” unless “you are determined [by the
Administrator] to be contract labor or an independent contractor . . . or in any
other employee group or classification not eligible to participate in this Plan.”
In June 2013, Langley was involuntarily terminated by TWOC. The
following month he submitted a claim for $255,000 in severance benefits under
the Plan. The Administrator—who was also the director of Howard Hughes’s
human resources department—denied Langley’s claim, concluding that he was
not an “Employee,” as defined by the Plan. According to the Administrator,
Langley was “compensated by special fees or employed pursuant to a special .
. . arrangement” and, thus, ineligible for benefits. 4 The purpose of the Plan’s
eligibility exclusions for special fees and special arrangements, the
Administrator asserted, was “to prevent employees . . . from receiving Plan
separation benefits in addition to separation . . . payments under employment
agreements or special compensation arrangements.”

Because Langley’s

employment likely would have terminated with the sale of both clubs, the
Administrator further asserted, the Club Sale Incentive Award was, in effect,
a substitute for separation benefits under the Plan. Langley timely appealed
the Administrator’s determination, which the Administrator also denied.

The Administrator conceded that Langley was not employed pursuant to a special
contract. Accordingly, we do not separately address that prong of the Plan’s “Employee”
eligibility exclusion.
4

4

Case: 16-20724

Document: 00514016499

Page: 5

Date Filed: 06/01/2017

No. 16-20724
Langley filed the instant suit on December 9, 2013, asserting claims
under ERISA, namely a claim for separation benefits under 29 U.S.C.
§ 1132(a)(1)(B) and, alternatively, a claim for breach of fiduciary duty under
29 U.S.C. § 1132(a)(3)(B). 5 In February 2014, the Administrator filed her
answer, and the parties filed cross-motions for summary judgment. On August
10, 2014, the district court issued an opinion on summary judgment, indicating
the Administrator “will” prevail and Langley “will” take nothing, and
“invit[ing]” the Administrator to move for attorneys’ fees. The Administrator
subsequently moved for $143,814 in attorneys’ fees, which the district court
granted in full in an opinion and accompanying order on October 24, 2016.
Langley timely appealed. 6

Because we agree with Langley that the Administrator abused her discretion in
denying Langley’s claim for separation benefits, we need not, and do not, address Langley’s
alternative claim for breach of fiduciary duty.
6 Langley technically filed two notices of appeal, which resulted in the two
consolidated appeals before us. On October 31, 2016, before the district court entered its
March 6, 2017 final judgment, Langley filed his first notice of appeal. That appeal was
docketed in this court as No. 16-20724. On March 31, 2017, after the district court entered
its March 6, 2017 final judgment, Langley filed another notice of appeal. That appeal was
docketed in this court as No. 17-20217. On May 4, 2017, we consolidated both of Langley’s
appeals. Before consolidation, the Administrator moved for partial dismissal in No. 1620724, arguing that Langley’s appeal was only timely as to attorneys’ fees because the district
court’s opinion on summary judgment was itself a final appealable order. A prior panel of
this court properly denied the Administrator’s motion. See Creaghe v. Albemarle Corp., 98
F. App’x. 972, 973–74 (5th Cir. 2004) (per curiam) (holding that ruling on motion for summary
judgment that indicated action “will” be dismissed was a not a final order that would start
the clock for appealing); see also United States v. F. & M. Schaefer Brewing Co., 356 U.S. 227,
232 (1958) (recognizing an opinion only embodies a final decision when the district court
“clearly declare[s]” that intention in the opinion); Blanchard v. Commonwealth Oil Co., 294
F.2d 834, 836–37 (5th Cir. 1961) (holding that opinion issued in anticipation of order was not
final decision because court did not consider it to be final act in the case). Although Langley’s
notice of appeal in No. 16-20724 may have been premature because it was filed before the
district court entered its final judgment on March 6, 2017, the notice, in any event, perfected
Langley’s appeal as of the date judgment was actually entered. See Fed. R. App. P. 4(a)(2)
(“A notice of appeal filed after the court announces a decision or order—but before the entry
of the judgment or order—is treated as filed on the date of and after the entry.”).
5

5

Case: 16-20724

Document: 00514016499

Page: 6

Date Filed: 06/01/2017

No. 16-20724
II.

THE ADMINISTRATOR ABUSED HER DISCRETION

This court reviews summary judgment in ERISA cases de novo, applying
the same standards as the district court. Robinson v. Aetna Life Ins. Co., 443
F.3d 389, 392 (5th Cir. 2006). However, when a district court hears a complaint
about the denial of benefits, it is not sitting as a court of first impression, but
rather in an appellate role. McCorkle v. Metro. Life Ins. Co., 757 F.3d 452, 456
(5th Cir. 2014). And when, as in this case, the language of a benefit plan grants
discretion to an administrator to interpret the plan and determine eligibility
for benefits, the district court’s appellate role is narrowly restricted to
affirming the administrator’s decision unless the administrator has abused its
discretion. Id. at 457–58.
Typically, the review of an administrator’s interpretation of a benefit
plan for abuse of discretion is a two-step process. 7 See Gosselink v. AT&T, Inc.,
272 F.3d 722, 726–27 (5th Cir. 2001). The first step inquires into whether the
administrator’s decision was legally correct. Id. at 726. If the administrator’s
interpretation of the plan is legally correct, the inquiry ends because no abuse
of discretion could have occurred. Id. If the administrator’s interpretation of
the plan is legally incorrect, a court must then inquire into whether the
decision was an abuse of discretion. Id. We address each step in turn.
A. Legal Correctness
We have previously identified several factors to consider in deciding
whether an administrator’s interpretation of a benefit plan was legally correct:
“(1) whether the administrator has given the plan a uniform construction,
(2) whether the interpretation is consistent with a fair reading of the plan, and
Notably, this two-step analysis is not applicable in every case. For instance, “if an
administrator interprets an ERISA plan in a manner that directly contradicts the plain
meaning of the plan language, the administrator has abused his discretion even if there is
neither evidence of bad faith nor of a violation of any relevant administrative regulations.”
Gosselink, 272 F.3d at 727.
7

6

Case: 16-20724

Document: 00514016499

Page: 7

Date Filed: 06/01/2017

No. 16-20724
(3) any unanticipated costs resulting from different interpretations of the
plan.” Gosselink, 272 F.3d at 726. Here, the parties have not identified any
costs, besides the benefits at stake in this litigation, associated with the
Administrator’s (or Langley’s) interpretation of the Plan or any cases other
than Langley’s in which the Administrator has construed the Plan provisions
at issue. Accordingly, in deciding whether the Administrator’s interpretation
of the Plan is legally correct, we focus on the critical second factor—whether
the Administrator’s interpretation is consistent with a fair reading of the Plan.
See id. at 727 (describing the second factor as “the most important” one to
consider).
The Plan provides that a person is ineligible for benefits if he or she “is
compensated by special fees or employed pursuant to a special . . .
arrangement.”

(Emphases added.)

compensation

arrangements

The Plan thus distinguishes between

and

employment

arrangements.

The

Administrator largely ignores this distinction, arguing that “the Plan excluded
employees with special ‘arrangements,’” and that the Club Sale Incentive
Award was one such arrangement.

The Plan, however, does not exclude

employees “with” special arrangements; it excludes those “employed pursuant
to” such arrangements. Here, Langley was not employed pursuant to a special
arrangement; he was an ordinary at-will employee.

Accordingly, the

“employed pursuant to a special . . . arrangement” prong of the Plan’s
“Employee” eligibility exclusion plainly does not encompass the Club Sale
Incentive Award or, consequently, bar Langley from receiving severance
benefits.
The same is true for the “compensated by special fees” prong of the Plan’s
“Employee” eligibility exclusion. Any compensation Langley may have been
receiving from the Club Sale Incentive Award at the time of his termination
cannot fairly be considered “special fees.” The Administrator combines several
7

Case: 16-20724

Document: 00514016499

Page: 8

Date Filed: 06/01/2017

No. 16-20724
definitions for “special” and “fee” that she finds favorable to argue that the
phrase “special fees” can fairly be read to mean any payment for labor or
service (the “fees” component) that has a particular purpose or is extraordinary
in nature (the “special” component).

Although dictionary definitions are

helpful in reading an ERISA plan, see, e.g., Branson v. Greyhound Lines Inc.,
Amalgamated Council Ret. & Disability Plan, 126 F.3d 747, 758 (5th Cir.
1997), a fair reading of the phrase “special fees” in this case requires more than
defining its two constituent terms in isolation, as the Administrator does.
Rather, it requires that the phrase be defined in context. See, e.g., Ellis v.
Liberty Life Assurance Co. of Bos., 394 F.3d 262, 271 (5th Cir. 2004)
(considering “the context . . . as a whole” when determining plain meaning of
an ERISA plan’s term).
In context, it is clear that the Administrator’s reading of “special fees” is
not a fair one. Under the Administrator’s reading, a broad range of employee
benefits, including bonuses and commissions (the two ways in which TWOC
described the Club Sale Incentive Award), would constitute “special fees” and,
thus, result in an employee’s exclusion from the Plan. The Plan, however,
provides that “bonuses” and “commissions” are not to be used in calculating
“Weeks of Pay,” making plain that an employee’s receipt of, much less
eligibility for, bonuses and commissions does not furnish a basis for excluding
him or her from the Plan.
The Administrator, implicitly recognizing this conflict with the Plan’s
plain terms, argues that the Club Sale Incentive Award was “different in kind”
from ordinary bonuses and commissions and, therefore, “deserved different
treatment” under the Plan.

According to the Administrator, Langley’s

employment likely would have terminated if both golf clubs were sold, creating

8

Case: 16-20724

Document: 00514016499

Page: 9

Date Filed: 06/01/2017

No. 16-20724
a potential duplication of separation benefits. 8 But again, the Administrator’s
position contradicts the Plan’s plain terms. The Plan plainly provides that
“[a]n Employee’s Separation Benefit [under the Plan] will be reduced by the
total of all payments paid or payable to the Employee pursuant to any other
contract or arrangement providing for separation pay.” (Emphasis added.) It
does not provide that an employee may be excluded on the basis of a potential
duplication of separation of benefits; as worded, there simply can never be a
duplication of separation benefits under the Plan.
The “compensated by special fees” prong of the Plan’s “Employee”
eligibility exclusion, when read in context, can only be given one reasonable
meaning: that an employee will be excluded if, at the time of termination, he
or she was being paid a preset amount for a single task regardless of the time
required for its completion (rather than being paid a salary). See 29 C.F.R. §§
541.300(a), 541.605(a) (2016) (defining when a professional employee will be
considered to be compensated on a fee, rather than salary, basis for purposes
of the Fair Labor Standards Act and, thus, potentially excluded from the Act’s
overtime requirement); see also Wegner v. Standard Ins. Co., 129 F.3d 814, 819
(5th Cir. 1997) (holding that “overtime” in an ERISA plan could only
reasonably be read in a manner consistent with the Fair Labor Standards Act).
Because the amount of the Club Sale Incentive Award was neither preset nor
related to the accomplishment of any particular task by Langley, any
compensation Langley may have been receiving from the award at the time of
his termination cannot fairly be considered “special fees.” Accordingly, the

Incidentally, the Administrator has not pointed to any evidence in the record
demonstrating that the Club Sale Incentive Award was intended to provide a separation
benefit. Payment of the Club Sale Incentive Award was not triggered by termination; rather,
it was triggered by the sale of either of the clubs.
8

9

Case: 16-20724

Document: 00514016499

Page: 10

Date Filed: 06/01/2017

No. 16-20724
Administrator’s reading of the Plan to exclude Langley on the basis of the Club
Sale Incentive Award was not legally correct.
B. Abuse of Discretion
Because we conclude that the Administrator’s reading of the Plan was
not legally correct, we now consider whether it was also an abuse of discretion.
In deciding whether a plan administrator has abused his or her discretion,
we consider whether (as in this case) the administrator was both paying and
reviewing claims and, thus, operating under a structural conflict of interest.
See Porter v. Lowe’s Cos., Inc.’s Bus. Travel Accident Ins. Plan, 731 F.3d 360,
364 (5th Cir. 2013). We also consider: “(1) the internal consistency of the plan
under the administrator’s interpretation, (2) any relevant regulations
formulated by the appropriate administrative agencies, and (3) the factual
background of the determination and any inferences of lack of good faith.”
Gosselink, 272 F.3d at 726. But “if an administrator interprets an ERISA
plan in a manner that directly contradicts the plain meaning of the plan
language, the administrator has abused his discretion even if there is neither
evidence of bad faith nor of a violation of any relevant administrative
regulations.” Id. at 727.
In this case, the Administrator’s interpretation of the Plan was an
abuse of discretion because it “‘directly contradict[ed] the plain meaning of
the plan language’ under the ‘factual background’ abuse of discretion prong.”
LifeCare Mgmt. Servs. LLC v. Ins. Mgmt. Adm’rs Inc., 703 F.3d 835, 842 (5th
Cir. 2013) (alteration in original) (quoting Gosselink, 272 F.3d at 726–27). As
detailed supra, the Plan’s “Employee” eligibility exclusion plainly did not bar
Langley, an ordinary at-will employee compensated at the time of his
termination by salary and bonus, from receiving severance benefits.

10

Case: 16-20724

Document: 00514016499

Page: 11

Date Filed: 06/01/2017

No. 16-20724
Therefore, “we do not need to consider the other . . . abuse of discretion
factors.” 9 Id.
III.

CONCLUSION

For the foregoing reasons, we REVERSE the district court and RENDER
judgment in favor of Langley in the amount of $255,000, plus attorneys’ fees of
$18,970. 10 We DENY Langley’s request to invite briefing on the limited issue
of appellate attorneys’ fees under 29 U.S.C. § 1132(g)(1).

Regardless, most, if not all, of the abuse of discretion factors weigh in favor of finding
an abuse in this case. Thus, we would reach the same result if we did consider them.
10 We note that the Administrator has not (1) disputed the amount of benefits or
attorneys’ fees requested by Langley; (2) argued that the district court’s award of attorneys’
fees could stand if we found she abused her discretion in applying the Plan’s “Employee”
eligibility exclusion; or (3) requested that this case be remanded to her or affirmed on the
alternative basis that no “Separation Event” occurred under the Plan (an issue the
Administrator declined to decide during the Administrative appeals process). We further
note that Langley has not requested an award of pre-judgment interest. By failing to raise
any of these issues on appeal, the parties have waived them. See, e.g., Robinson v. Aetna Life
Ins. Co., 443 F.3d 389, 395 n.4 (5th Cir. 2006).
9

11