Fralick v. Plumbers & Pipefitters National Pension Fund

Filing 60

Memorandum Opinion and Order granting 41 Motion for Judgment; denying 40 Motion for Summary Judgment; granting in part and denying in part 43 , 54 Motion to Strike. (see order) (Ordered by Chief Judge Sidney A Fitzwater on 6/22/2010) (axm)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION FRED FULTON FRALICK, Plaintiffcounterdefendant, VS. PLUMBERS AND PIPEFITTERS NATIONAL PENSION FUND, Defendantcounterplaintiff. § § § § § Civil Action No. 3:09-CV-0752-D § § § § § § §

MEMORANDUM OPINION AND ORDER In this civil action seeking benefits under an ERISA1 pension benefit plan, the court must decide whether the plan trustees abused their discretion in concluding that the plaintiff-

beneficiary was precluded from receiving early retirement benefits because he was engaged in disqualifying employment under the plan. I Plaintiff-counterdefendant defendant-counterplaintiff Fred Fralick and ("Fralick") sues

Plumbers

Pipefitters

National

Pension Fund (the "Fund") under ERISA § 502, seeking retirement benefits and cessation of the Fund's collection efforts for money previously paid. The Fund counterclaims to recover sums paid to

Fralick. The suit arises from a dispute over Fralick's entitlement to retirement benefits under the terms of the Fund's Plan of

Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461.

1

Benefits (the "Plan"). Fralick is currently 61 years old and has worked for most of his life in the plumbing industry.2 was a member of the United During most of that time, he of Journeymen and

Association

Apprentices of the Plumbing and Pipefitting Industry (the "Union") and its local 100. Fralick worked for various employers who, under the terms of the applicable collective bargaining agreement, made contributions on his behalf to the Fund. The Fund is a defined

benefit multi-employer pension fund that accepts payments from employers (referred to as "contributing employers"), in exchange for a promise to later pay pension benefits to individual employees according to the terms of the Plan. The Plan contains several relevant provisions that relate to retirement and post-retirement employment by beneficiaries. the Plan, normal can retirement take early age is generally but age early 65. Under Plan

participants

retirement,

retirement

pension benefits are available only if a participant is retired.

Because the court is considering both Fralick's motion for judgment on the pleadings and the Fund's motion for summary judgment, this memorandum opinion and order will recite primarily the facts that are uncontested. If a contested fact is relevant to the court's analysis of a particular motion, the court will view the evidence in the light most favorable to the nonmoving party. See, e.g., Owens v. Mercedes-Benz USA, LLC, 2008 WL 3152966, at *1 (N.D. Tex. Aug. 6, 2008) (Fitzwater, C.J.) (stating Fed. R. Civ. P. 12(c) standards); AMX Corp. v. Pilote Films, 2007 WL 1695120, at *1 n.2 (N.D. Tex. June 5, 2007) (Fitzwater, J.) (stating Rule 56 standards). If a contested fact issue is relevant to the analysis of both motions, the court will note the disagreement. -2-

2

"To be considered `Retired,' a Participant must have separated from service with any and all Contributing Employers and from any and all employment that D. would App. be considered In the to be Disqualifying of this case,

Employment[.]"

26.

context

"disqualifying employment" includes, inter alia, (1) "Employment with any Contributing Employer," (2) "Employment with any employer in the same or related business as any Contributing Employer," or (3) "Employment or self-employment in any business which is under the jurisdiction of the Union." Id. at 27.3 Engaging in

disqualifying employment merits a six-month suspension of benefits after the conflicting work ceases, with an additional six-month term possible if the beneficiary failed to notify the Fund of the disqualifying employment or wilfully misrepresented facts. Both

six-month periods are waivable at the discretion of the Fund's Board of Trustees. In 2005, before this litigation, Fralick worked for Brandt Engineering, engineering. a contributing employer engaged in mechanical

Both parties agree that this work falls within the Fralick, who was 57 years old

plumbing and pipefitting industry.

at the time, contacted Robert Cooke ("Cooke"), an employee of the Union. Fralick asked Cooke about the option of taking early

Under the Plan, "the Union" means the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada and its affiliated Local Unions and District Councils. D. App. 19. -3-

3

retirement.

He inquired about whether he could begin receiving

pension payments if he retired in 2005 from Brandt Engineering, even if he subsequently went to work for an electrical engineering company. Cooke informed Fralick that performing work as an

electrical engineer would not endanger his entitlement to pension benefits. mechanical Because electrical engineering work is distinct from engineering work, Fralick's electrical engineering

employment would not disqualify him from being "retired" from the plumbing and pipefitting business. Neither Fralick nor the Fund

disputes this conclusion in principle. Fralick concluded his employment with Brandt Engineering in December 2005. He was awarded early retirement benefits and Beginning in

received monthly payments for the majority of 2006.

January 2006, Fralick began working for Brandt Electric, a legally distinct sister company to Brandt Engineering. The two companies

apparently share the same corporate hierarchy, advertise through the same website, and have their headquarters offices at the same Dallas location, although they are legally distinct and perform different services. The part of the company website that pertains

to "Electrical Services" states that "Brandt Electric was organized in August 2001, with a goal to expand our services to our key customers[.]" D. App. 84. Brandt Electric's contact email address Id. Brandt Engineering is

is "[e-mail]."

apparently the older of the two companies. -4-

In November 2006 the Fund received notice from the business manager of a Union local that Fralick was employed by Brandt Engineering (not Brandt Electric). The Fund informed Fralick that

this was "disqualifying employment," that he was not entitled to Plan benefits, and that the Fund was suspending payment of

benefits. It requested that he return the money it had distributed in 2006. Fralick appealed the decision, arguing that he was

employed by Brandt Electric----not Brandt Engineering----and that Brandt Electric did not engage in any business covered by the Union that could trigger the disqualifying employment sanctions. Fund affirmed its initial decision. Fralick filed this lawsuit seeking unpaid retirement benefits and cessation of the Fund's attempts to recoup benefits it had paid before it learned of his employment by Brandt Electric. Fralick The

alleges claims for benefits and equitable estoppel, and he seeks an award of attorney's fees.4 The Fund counterclaims to recover sums Fralick moves for judgment on the Fralick also

previously paid to Fralick.

pleadings, and the Fund moves for summary judgment.

moves to strike the Fund's motion for summary judgment and its response and appendixes to Fralick's motion for judgment on the pleadings.

Fralick initially brought a claim for breach of fiduciary duty, but this count was later dismissed on the Fund's unopposed motion. -5-

4

II The court turns first to Fralick's two motions to strike, which are addressed to the Fund's response brief to Fralick's motion for judgment on the pleadings and the Fund's motion for summary judgment. The court must address these motions as a

threshold matter because they bear on the scope of the evidence that is properly considered in evaluating the merits of the motions for summary judgment and for judgment on the pleadings. Fralick

maintains that these filings must be stricken because they are both based largely on evidence that the court is not permitted to consider in reviewing the Fund's decision to terminate his pension benefits. The Fund opposes Fralick's motions, contending that the

evidence is admissible for relevant purposes. A As a preliminary matter, the Fund asserts that Fralick's motions to strike are procedurally misplaced, arguing that neither the Fund's motion for summary judgment nor its response to

Fralick's motion for judgment on the pleadings are pleadings to which Fed. R. Civ. P. 12(f) applies. The Fund also argues that

Fralick has not identified any procedural basis for striking the filings. The Fifth Circuit has endorsed the use of a motion to strike to challenge evidence supporting or opposing a motion for summary judgment. See Metro. Life Ins. Co. v. Daftary, 2004 WL 1960101, at -6-

*3 n.4 (N.D. Tex. Sept. 3, 2004) (Fitzwater, J.) ("The correct procedure is to file a motion to strike when evidence submitted in support of or opposition to summary judgment is inadmissible." (citing Auto Drive-Away Co. of Hialeah v. Interstate Commerce Comm'n, 360 F.2d 446, 448-49 (5th Cir. 1966))). The court can

discern no reason not to apply this procedure when evidence is offered in support of or in opposition to a motion for judgment on the pleadings. Although Fralick's motions to strike are not procedurally misplaced, the court is not aware of any basis to strike the Fund's filings in their entirety----as Fralick requests----as opposed to striking the inadmissible components. Accordingly, the court will

consider only whether the particular evidence in question should be stricken rather than whether the filings should be stricken in their entirety. B As the court explains below, it reviews the Fund's denial of Fralick's benefits claim under an abuse of discretion standard. Subject to limited exceptions, that review is conducted on the administrative record. See Griffin v. Raytheon Co. Long Term

Disability Plan No. 558, 2005 WL 4891214, at *2 (N.D. Tex. Aug. 31, 2005) (Fitzwater, J.) ("With limited exceptions, this court's review of [the Plan's] decision in this ERISA case is restricted to consideration of the administrative record." (citing Vega v. Nat'l -7-

Life Ins. Servs., Inc., 188 F.3d 287, 299 (5th Cir. 1999) (en banc))). Fralick's motions to strike require that the court

determine what evidence it may consider in addressing Fralick's claims. Fralick asserts that the Fund's submissions rely on The

inadmissible evidence from outside the administrative record.

Fund responds that the disputed evidence falls within exceptions to the administrative-record limitation and is admissible. The most important piece of evidence that is the subject of Fralick's motions to strike is his deposition testimony. took the deposition for this litigation, and it The Fund the

cites

transcript repeatedly in its summary judgment motion and its response Moreover, to Fralick's motion for judgment is the on the pleadings. source of The

the

deposition

testimony

primary

evidence supporting one of the Fund's principal arguments.

court will therefore analyze first whether it can consider this testimony and then turn to the other evidence at issue. To place Fralick's motions to strike in proper context, the court must analyze the grounds that the Fund has advanced for denying Plan benefits. The Fund appears to have originally

maintained that Fralick was an employee of Brandt Engineering, a contributing employer, and therefore ineligible for benefits. The

Fund asserted that it initially became aware that Fralick was possibly disqualified from receiving Plan benefits when it received a letter from the business manager of a Union local that stated -8-

that Fralick "is currently employed by Brandt Engineering." App. 58.

D.

Apparently based largely, if not entirely, on this

communication, the Fund notified Fralick by December 6, 2006 letter that it had "received notification that you are currently working at the [plumbing and pipefitting] trade with Brandt Engineering in Austin, TX." Id. at 59. Consequently, it suspended benefits It therefore appears to the court, and

effective January 1, 2007.

is not disputed by either party, that the Fund originally based its disqualification decision on the assumption that Fralick was an employee of Brandt Engineering (as opposed to Brandt Electric). The second theory on which the Fund relied was that Brandt Electric was an employer in the same or related business as any contributing employer, i.e., that Brandt Electric engaged in work of a type that was performed by contributing employers. Fralick

notified the Fund that he was employed by Brandt Electric in its Computer Aided Design ("CAD") department and in document control. The Fund responded that this work would be a violation of [the Plan], in that such work is for any employer in a related business as a Contributing Employer since the electrical contracting company would be having these individuals perform mechanical CAD work, which is work done by Contributing Employers to [the Fund], and thus work that is done by an employer in the same or related business. Id. at 61. Fralick appealed again, arguing that "Brandt Electric has -9-

never requested that I do any mechanical drawings, since they do no mechanical work, or any other work, that is related to the Plumbing and Pipefitting industry." Id. at 65. In addition, Fralick

submitted a letter from Brandt Electric's president that stated: "Brandt Electric is an Electrical Contractor. separate company from Brandt Engineering. Pipefitting, or Mechanical work. We are a completely We do no Plumbing,

We have our own detailing Id. at 69.

department and they do only electrical drawings."

In response to these communications, the Fund sent a third letter to Fralick rejecting his arguments. Here, the basis for the Fund's decision to deny benefits appears to have shifted again. The Fund denied his appeal on the basis that "Brandt Electric is a sister company to Brandt Engineering. [Contributing Employer]. Brandt Engineering is a

You are employed by Brandt Electric,

which is Disqualifying Employment since such work is for an employer in a related business as a Contributing Employer." Id. at 70. The Fund relied on this same reasoning in subsequent letters

that it sent to Fralick after he retained counsel and submitted additional evidence about his employment with Brandt Electric. In its submissions in this case, the Fund has raised a new argument to justify its decision, and it draws the supporting evidence primarily from Fralick's deposition testimony.

Essentially, the Fund asserts that, although Fralick may have been employed by Brandt Electric, he actually continued to work for - 10 -

Brandt Mechanical.

The Fund characterizes Fralick's arrangement

with Brandt Electric as "sham employment," and points to deposition testimony showing that Fralick was supervised by Brandt Engineering employees, was assigned work by Brandt Engineering on job sites where Brandt Electric was not involved, performed work that was covered by the Union (and which did not benefit Brandt Electric), and was unfamiliar with the employees and management of Brandt Electric. The Fund maintains that, although Fralick may have been

on Brandt Electric's payroll, his testimony shows that he actually performed work for, The of and Fund under posits the supervision because is broad of, the Brandt Plan's to

Engineering. understanding

that,

disqualifying

employment

enough

encompass this situation and is not limited simply to being on the payroll of a contributing employer, Fralick's services for Brandt Engineering demonstrate that he was not "retired" under the Plan. C This last argument----that Fralick's employment for Brandt Electric was a "sham"----is supported almost entirely by Fralick's deposition testimony. The Fund has pointed to no evidence, and the court has located none, that the plan trustees relied on or even considered this justification when they made the initial decision or denied Fralick's appeals. To the contrary, the only reason the

Fund cited in its letters following Fralick's appeals is that the two Brandt companies were related to one another and that his - 11 -

employment for Brandt Electric was "for an employer in a related business as a Contributing Employer." mention of Fralick's actual D. App. 85. There is no or

employment

responsibilities

indication that the Fund believed that he was being less than forthright in his statements regarding his work. Thus the sham

employment argument appears to have been advanced for the first time in this litigation, and it is supported almost entirely by Fralick's deposition testimony.5 The court will therefore examine

whether it is permissible for the parties to rely on, and for the court to consider, the deposition testimony in adjudicating the merits of Fralick's claims. "A long line of Fifth Circuit Cases stands for the proposition that, when assessing factual questions, the district court is constrained to the evidence before the plan administrator." Vega,

188 F.3d at 299. "[T]he district court is precluded from receiving evidence to resolve disputed material facts----i.e., a fact the administrator relied on to resolve the merits of the claim itself." Id. "[T]he administrative record consists of relevant information

made available to the administrator prior to the complainant's filing of a lawsuit and in a manner that gives the administrator a

The Fund also points to the letter from the business manager of the Union local as evidence that Fralick was engaged in sham employment. But there is no indication in the record that the Plan administrators ever considered such an argument prior to this litigation. Furthermore, the letter alone, without the deposition evidence, is insufficient to support the Fund's argument. - 12 -

5

fair opportunity to consider it."

Id. at 300.

"It is the plan

administrator's responsibility to compile a record that he is satisfied is sufficient for his decision." Griffin, 2005 WL

4891214, at *2 (alteration omitted) (citing Barhan v. Ry-Ron Inc., 121 F.3d 198, 201 (5th Cir. 1997)). "Once the administrative record has been determined, the district court may not stray from it except for certain limited exceptions." Angel v. Boeing Co. Retiree Health & Welfare Benefit

Plan, 2006 WL 929364, at *6 (N.D. Tex. Apr. 11, 2006) (Fitzwater, J.) (quoting Vega, 188 F.3d at 299). Such exceptions include

"evidence of `how an administrator has interpreted terms of the plan in other instances, and evidence, including expert opinion, that assists the district court in understanding the medical terminology or practice related to a claim.'" Griffin, 2005 WL

4891214, at *2 (quoting Estate of Bratton v. Nat'l Union Fire Ins. Co., 215 F.3d 516, 521 (5th Cir. 2000)). A litigant cannot

"disregard the evidence before the administrator and relitigate in court the historical facts surrounding a claim." Chem. Co., 974 F.2d 631, 639 (5th Cir. 1992). Wildbur v. ARCO Fifth Circuit

precedent "would support a decision by a district court conducting an abuse of discretion review to limit its review of the historical facts underlying a claim to those presented to the plan

administrator[.]"

Id. at 642.

The court concludes that no exception permits the Fund to rely - 13 -

on

Fralick's

deposition

testimony

to

establish

a

factual

proposition concerning the nature of Fralick's work while employed by Brandt Electric. The Fund has not demonstrated that its

reliance on Fralick's deposition testimony falls into one of the exceptions. Indeed, because the testimony is the only apparent

evidentiary basis for the Fund's sham employment argument, the Fund's reliance clearly relates to the historical facts underlying Fralick's claim. The court cannot look beyond the administrative

record to determine historical facts, and the nature of Fralick's work while employed by Brandt Electric falls into this category. The court therefore holds that the deposition is inadmissible. Because there is no basis in the administrative record to support this reason for the Fund's initial decision or for denying

Fralick's appeals, the court rejects the Fund's argument that the trustees did not abuse their discretion because Fralick was engaged in sham employment. D Fralick also moves to strike the Fund's motion for summary judgment and response to Fralick's motion for judgment on the pleadings in their entirety, contending that they contain numerous references to inadmissible evidence. Fralick concedes, however,

that some of the evidence is likely part of the administrative record. And he fails even to attempt to distinguish inadmissible

from admissible evidence, complaining in each motion that "[i]t - 14 -

would be burdensome for Plaintiff to attempt to determine which documents, if any, in the Appendix are part of the administrative record." Strike 3. P. Jan. 7, 2010 Mot. Strike 3; P. Jan. 26, 2010 Mot. Although the court would probably not abuse its

discretion by declining to consider Fralick's motions in the absence of greater specificity, it has instead generally reviewed the evidence that Fralick challenges. The court holds that this evidence, including that contained in the appendixes, is admissible. Much of the evidence is composed of pre-lawsuit letters and correspondence between the Fund and Fralick, duplicating and augmenting the attachments to Fralick's complaint. Other items include relevant portions of the Plan,

Internet printouts from the website of Brandt Engineering and Brandt Electric, and affidavits of Fund employees. These all

appear to be materials that would have been available to the Fund when it made its determinations and therefore part of the

historical record.

Some of the evidence and appendixes are

composed of information about other benefits cases decided by the Fund but not directly related to Fralick's case. The Fund argues

that these materials are relevant because they fall into an established exception to the administrative record limitation: evidence of how the Fund has applied the Plan in other cases, to determine if there is a consistent practice. See Vega, 188 F.3d at

299 ("[E]vidence related to how an administrator has interpreted - 15 -

terms of the plan in other instances is admissible."); Wildbur, 974 F.2d at 638 ("Determining whether the administrator has given a uniform construction to a plan may require a court to evaluate evidence of benefit determinations other than the one under

scrutiny.").

Fralick has not demonstrated that this exception is

inapplicable to these documents, and therefore the court denies the motions to strike to the extent they are directed toward these materials. E In evidence sum, that except is for Fralick's of deposition his motions testimony, to strike the is

the

subject

admissible.

The deposition transcript is inadmissible for the Any flaws in the other evidence, however, are

reasons explained.

less readily apparent, and Fralick has chosen to forgo a sufficient identification and analysis of the evidence that might demonstrate why the evidence is inadmissible. Moreover, it does not appear

that the Fund has relied on any of the evidence, other than the deposition testimony, to raise new arguments that the trustees did not consider, or that the other evidence presents facts that would not have been available as part of the administrative process. Finally, Fralick has not identified any factual errors or

discrepancies in the evidence that the court has deemed admissible. The court therefore grants the motions as they relate to the deposition testimony and otherwise denies them. - 16 -

III The court now turns to the merits of the Fund's motion for summary judgment and Fralick's motion for judgment on the pleadings and, in doing so, begins again with a threshold procedural issue. A Fralick moves under Rule 12(c) for judgment on the pleadings establishing that the Fund trustees abused their discretion when they found him disqualified for Plan benefits. A Rule 12(c) motion "is designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts." Hebert Abstract Co. v. Touchstone Props., Ltd., 914 F.2d

74, 76 (5th Cir. 1990) (per curiam) (citing 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1367, at 509-10 (1990)). The motion should be granted only if there is no

issue of material fact and if the pleadings show that the moving party is entitled to prevail as a matter of law. Greenberg v. Gen. The

Mills Fun Group, Inc., 478 F.2d 254, 256 (5th Cir. 1973).

standard for deciding a motion under Rule 12(c) is the same as the one for deciding a motion to dismiss under Rule 12(b)(6). Great

Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 313 n.8 (5th Cir. 2002) ("A number of courts have held that the standard to be applied in a Rule 12(c) motion is identical to that used in a Rule 12(b)(6) motion." (footnote omitted) (quoting 5A - 17 -

Wright &

Miller, supra, § 1368, at 591 (Supp. 2002)).

"Motions filed under [Rule] 12(b)(6) and 12(c) are designed to test the sufficiency of the pleadings, and courts do not consider materials outside those pleadings in deciding those motions." In

re Carmelita, Inc., 2009 WL 2356488, at *2 (S.D. Tex. July 29, 2009). Although courts cannot ordinarily consider materials

outside the pleadings in deciding a motion to dismiss, they may do so when those documents are central to the plaintiff's claims and are referred to in the plaintiff's complaint. Canal Breaches Litig., 495 F.3d 191, 205 See In re Katrina (5th Cir. 2007).

"Documents that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to her claim." Causey v.

Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004). "In so attaching [such materials], the defendant merely assists the plaintiff in establishing the basis of the suit, and the court in making the elementary determination of whether a claim has been stated." Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 499 Furthermore, "matters incorporated by reference

(5th Cir. 2000).

or integral to the claim [and] items appearing in the record of the case . . . may be considered by the district judge without converting the [12(b)(6)] motion into one for summary judgment." 5B Wright & Miller, supra § 1357, at 376 (3d ed. 2004). Rule 12(d) provides that if, in a motion to dismiss, "matters - 18 -

outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment." A

motion for judgment on the pleadings can be converted into a motion for summary judgment if it relies on anything outside the pleadings and incorporated materials, even if the new material is submitted by the nonmoving party in response to the motion. See, e.g.,

Flores v. Sullivan, 945 F.2d 109, 110 n.3 (5th Cir. 1991). B The Fund asserts that consideration of materials outside the pleadings is necessary for the court to evaluate fully whether the trustees abused their discretion. attach the full administrative It posits that Fralick did not record to his complaint, but

selectively chose the portions of the record that favored him. The Fund asserts that the entire record must be considered for the court to determine the ultimate issues in this case. Moreover, it

argues that Fralick's complaint and supporting materials do not include any evidence of how the Fund has interpreted the relevant provision of the Plan in similar cases; therefore, the court cannot determine from the complaint and supporting materials whether the Fund's interpretations here are consistent, as is required. infra § V(B)(1). Fralick responds that the Fund had See the

opportunity to attach such documents to its answer, and because it chose not to, it must rely only on the pleadings and incorporated documents in opposing his Rule 12(c) motion. - 19 -

The court holds that deciding Fralick's motion for judgment on the pleadings requires that the court consider documents that exceed in scope those that are properly consulted in addition to the complaint. should be Consequently, it concludes that Fralick's motion to a summary judgment motion. Fralick

converted

apparently does not dispute that the attachments to his complaint omit documents that are properly considered part of the

administrative record. The court must consult the entire record to determine discretion. whether the trustees' decision was an abuse of

The court is therefore unable to make a ruling

based

on the pleadings alone.

And as the Fund points out, the court has

no way of determining whether the Fund's interpretation of terms in the Plan here is consistent with other cases. The court cannot

reach a conclusion in this respect without consulting documents that exceed the complaint and the documents that are properly consulted when addressing a Rule 12(c) motion. The next procedural question is whether the court should notify the parties and allow additional briefing before deciding Fralick's converted motion. "A party is on notice of the

possibility that a court may convert a motion to dismiss into a motion for summary judgment ten days after a party submits evidence outside of the pleadings if the evidence is not excluded by the court." Rainwater v. 21st Mortgage Corp., 2010 WL 1330624, at *7

n.11 (E.D. Tex. Feb. 25, 2010) (citing Wash. v. Allstate Ins. Co., - 20 -

901 F.2d 1281, 1284 (5th Cir. 1990)). "[T]he simple act of placing matters outside the pleadings before the court provides adequate notice that a motion to dismiss may be converted into a motion for summary judgment." Mackey v. Owens, 182 F.3d 915, *2 (5th Cir.

1999) (per curiam) (unpublished opinion) (holding that nonmovant was put on notice of potential conversion to summary judgment when movant attached affidavits to Rule 12(b)(6) motion). Because Rule

12(d) applies to Rule 12(c) motions as well as to Rule 12(b)(6) motions,6 cases applying Rule 12(d) to Rule 12(b)(6) motions guide the treatment of Rule 12(c) motions as well. Indeed, notice of

conversion would appear to be more important to the nonmovant (who may need to present summary judgment evidence) than to the movant, and the Fund (the nonmovant in relation to Fralick's motion) has itself relied on additional documents to file its response to Fralick's motion as well as its own motion for summary judgment. Moreover, it is not apparent that either party would benefit were the court to provide notice and another opportunity for briefing. "[D]istrict courts are widely acknowledged to possess

the power to enter summary judgments sua sponte, so long as the
6

Rule 12(d) provides: If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion. - 21 -

losing party was on notice that she had to come forward with all of her evidence." Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986). Because the Fund has moved for summary judgment, Fralick and the Fund have both had the opportunity to submit summary judgment evidence. And because, with limited exceptions, the court in

deciding this case is confined to the administrative record, and neither party contends that any relevant portions of the record have yet to be submitted, it is unlikely that additional briefing or submissions are necessary to ensure a fair decision. Accordingly, Fralick's motion for judgment on the pleadings under Rule 12(c) is converted to a summary judgment and will be decided accordingly. IV Having determined the scope of the record and the procedural posture of Fralick's motion, the court now considers both summary judgment motions together. Both parties agree that the Plan is subject to ERISA. "A plan participant who is denied benefits under an ERISA plan can sue to recover them." Leake v. Kroger Texas, L.P., 2006 WL 2842024, *4

(N.D. Tex. Sept. 6, 2006) (Fitzwater, J.) (citing 29 U.S.C. § 1132(a)(1)(B)). This court has jurisdiction to review

determinations made by an ERISA employee benefit plan. F.3d at 295. In reviewing the a decision of by the an

Vega, 188 plan

ERISA

administrator----here,

trustees - 22 -

Fund----factual

determinations are always given deference, and are reviewed only for abuse of discretion. Vercher v. Alexander & Alexander Inc., "[F]or factual determinations

379 F.3d 222, 226 (5th Cir. 2004).

under ERISA plans, the abuse of discretion standard of review is the appropriate standard; that is, federal courts owe due deference to an administrator's factual conclusions that reflect a reasonable and impartial judgment." 993 F.2d 98, 101 (5th So. Farm Bureau Life Ins. Co. v. Moore, Cir. 1993) (internal quotation marks

omitted). An administrator's interpretation of the terms of the plan, as opposed to a determination of the underlying facts, however, can be reviewed differently depending on the level of discretion given to the administrator by the plan. See Vercher, 379 F.3d at 226. "[A]

denial of benefits challenged under [ERISA] § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The parties do not dispute that the trustees have discretionary authority over the Plan.7 Thus "[i]n this case, because the Plan

The Plan vests the Fund trustees with "the exclusive right and discretionary authority to construe the terms of the Plan, to resolve any ambiguities, and to determine any questions which may arise with the Plan's application or administration, including but not limited to determination of eligibility for benefits." D. App. 25. - 23 -

7

undisputedly

gives

the

Plan

Administrator

the

discretionary

authority to construe the Plan's terms and to render benefit decisions, we reverse the Plan Administrator's denial of benefits to [Fralick] only if it abused its discretion." Holland v. Int'l

Paper Co. Ret. Plan, 576 F.3d 240, 246 (5th Cir. 2009). In cases where discretion is given to ERISA plan

administrators, a district court employs a two-step process to evaluate the interpretation of the terms of the plan. "First, it

determines whether the administrator gave the Plan a legally correct interpretation. Second, it decides whether the incorrect Krusos v. Atl.

decision constitutes an abuse of discretion."

Richfield Co., 2003 WL 21383656, at *5 (N.D. Tex. June 11, 2003) (Fitzwater, J.). Courts consider three factors in answering the

first inquiry (i.e., whether the Fund's interpretation of the 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 (3) any

unanticipated costs resulting from different interpretations of the plan." Wildbur, 974 F.2d at 638. If "the fiduciary's

interpretation of the plan was legally correct, the inquiry is over, pretermitting any need to consider whether a legally

incorrect interpretation of the fiduciary was not an abuse of discretion." Ellis v. Liberty Life Assurance Co. of Boston, 394 "If the determination was legally

F.3d 262, 270 (5th Cir. 2004).

- 24 -

correct, there is no abuse of discretion; if it was incorrect, then [the court] must review whether that interpretation was an abuse of discretion." Holland, 576 F.3d at 246 n.2. It is not

automatically an abuse of discretion for a plan administrator to improperly interpret the terms of the plan. Allen v. Travelers

Ins. Co., 29 F.3d 624, *2 (5th Cir. 1994) (unpublished opinion). But "[i]f the administrator's legal interpretation of the plan was correct, the inquiry ends, because a legally correct interpretation of a plan cannot constitute an abuse of discretion." WL 21383656, at *5. Assuming that the plan administrator's interpretation of the terms is incorrect, the court then turns to the question of abuse of discretion. "Three factors are important in this analysis: (1) Krusos, 2003

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." Wildbur, 974 F.2d at 638. The court will reverse the Fund's denial of benefits only if the decision was not rational or supported by substantial evidence in the record. See, e.g., Green v. Bert

Bell/Pete Rozelle NFL Player Ret. Plan, 1999 WL 417925, at *2 (N.D. Tex. June 22, 1999) (Fitzwater, J.). "A plan administrator abuses

its discretion where the decision is not based on evidence, even if disputable, that clearly supports the basis for its denial." - 25 -

Holland, 576 F.3d 246 (internal quotation marks omitted).

"Review

of the administrator's decision need not be particularly complex or technical; it need only assure that the administrator's decision falls somewhere on a continuum of reasonableness----even if on the low end." Leake, 2006 WL 2842024, at *5 (internal quotation marks

and alteration omitted) (quoting MacLachlan v. ExxonMobil Corp., 350 F.3d 472, 478 (5th Cir. 2003)). Finally, "if a benefit plan gives discretion to an

administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a factor in determining whether there is an abuse of discretion." Bruch, 489 U.S. at 115 Courts do not where plan

(internal quotation marks and alteration omitted). apply a different standard of review to

cases

administrators are alleged to have some level of conflict of interest in making their benefits determination. Holland, 576 F.3d at 247. "Quite simply, `conflicts are but one factor among many

that a reviewing judge must take into account.'" Id. at 247-48 (quoting Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 128 S.Ct. 2343, 2351 (2008)). V A The Fund trustees' ultimate reason for denying Plan benefits to Fralick is that his "employment with Brandt Electric is

Disqualifying Employment, since such work is for an employer in a - 26 -

related business as a Contributing Employer.

This determination

was made in accordance with Section 9.07(a)(i)(B) of the Plan." D. App. 92. Section 9.07(a)(i)of the Plan provides: "Disqualifying Employment," for the before Normal Retirement Age, is: period

(A) Employment with any Contributing Employer. (B) Employment with any employer in the same or related business as any Contributing Employer. (C) Self-employment in the same or related business as a Contributing Employer. (D) Employment or self-employment in any business which is under the jurisdiction of the Union. ... D. App. 27. In support of this determination, the Fund now offers

several arguments, and it points to evidence that the trustees were within their discretion to conclude that Brandt Electric and Brandt Engineering were sister companies. Fralick does not dispute the corporate relationship between Brandt Electric and Brandt Engineering. He does assert, however,

that he worked only for Brandt Electric, which does not do any work in the plumbing or pipefitting industry. Fralick submitted

correspondence to this effect during the administrative review process, including letters from executives at Brandt Electric confirming his statements about the company's work. - 27 -

In their determination letters, the trustees did not dispute Fralick's employment with Brandt Electric rather than Brandt

Engineering, the evidence that Brandt Electric does not engage in plumbing and pipefitting work, or the assertion that the two companies are distinct. Furthermore, the Fund does not now argue

that working for an electrical contractor is per se incompatible with the requirements to be "retired" under the Plan. Instead, the Fund simply concluded, and still maintains, that "Fralick was employed with an employer `related' to a Contributing Employer," due to the corporate D. Br. 11. B The court evaluates the Fund's legal interpretation of the Plan under an abuse of discretion standard.
8

relationship

between

the

two

Brandt

companies.8

"In reviewing a plan

For purposes of this litigation, the Fund also contends that Fralick was ineligible for benefits under § 9.07(a)(i)(A) and (D) of the Plan. These arguments, however, depend almost entirely on evidence that the court has found to be inadmissible (i.e., the transcript of Fralick's deposition), as explained supra at § II. Because this evidence was not part of the administrative record, and therefore cannot be used to determine factual questions underlying Fralick's claim, the court rejects the Fund's arguments based on the deposition evidence. The only non-deposition evidence relevant to the Fund's arguments under subparagraphs (A) and (D) is the single line in the letter from the business manager of the Union local that Fralick was "currently employed by Brandt Engineering." D. App. 58. Without more, this is not substantial evidence supporting a claim that Fralick violated subparagraph (A) or (D), and it is therefore insufficient to support the Fund's argument. Moreover, the court notes that the Fund trustees relied exclusively on subparagraph (B) in their letters to Fralick denying his appeals, and they do not appear even to have considered the theories that the Fund's attorneys now present. - 28 -

for abuse of discretion, the district court first must determine whether the administrator's interpretation is legally correct; if it is not, the court must decide whether the decision was an abuse of discretion." Leake, 2006 WL 2842024, at *4. 1 The first step in determining whether the interpretation is legally correct is "whether the administrator has given the plan a uniform construction." Wildbur, 974 F.2d at 638. Courts

addressing this question ask whether the ERISA plan administrators "consistently apply the Plan to similarly situated applicants." Stone v. UNOCAL Termination Allowance Plan, 570 F.3d 252, 258 (5th Cir. 2009). The Fund asserts that its interpretation of

§ 9.07(a)(i)(B) is consistent with its practice in other cases. It cites two examples of disputes in which it maintains a similar application was used. These examples are not particularly helpful. The materials are heavily redacted, preventing the court from understanding the relationship between the companies at issue. Moreover, the documents in the two examples repeatedly refer to § 9.07 of the Plan, but they only occasionally specify

§ 9.07(a)(i)(B).

Therefore, it is not clear that, as here,

§ 9.07(a)(i)(B) served as the exclusive reason for the trustees' decision. Regardless, because the court would reach the same

decision ultimately, it will assume arguendo that the Fund has consistently interpreted the terms of the Plan. - 29 -

2 The second step requires that the court evaluate "whether the interpretation is consistent with a fair reading of the plan." Wildbur, 974 F.2d at 638. This "is the most important factor."

Stone, 570 F.3d at 260 ("Under any ERISA plan, the eligibility for benefits is governed in the first instance by the plain meaning of the plan language." (internal quotation marks omitted)). "We

interpret ERISA plans `in their ordinary and popular sense as would a person of average intelligence and experience.' In other words,

we must interpret ERISA provisions as they are likely to be `understood by the average plan participant, consistent with the statutory language.'" Crowell v. Shell Oil Co., 541 F.3d 295, 314

(5th Cir. 2008) (quoting Tucker v. Shreveport Transit Mgmt. Inc., 226 F.3d 394, 398 (5th Cir. 2000)) (alteration omitted). Courts

must ensure that term language is "given its generally accepted meaning if there is one." Chacko v. Sabre, Inc., 473 F.3d 604, 612

(5th Cir. 2006) (internal quotation marks omitted). Courts employ various methods to determine the fair reading of plan terms. The plain meaning of a term should not result in

portions of the plan becoming "meaningless surplusage," nor should the interpretation conflict with other parts of the contract. See

Ellis, 394 F.3d at 272; see also Izzarelli v. Rexene Prods. Co., 24 F.3d 1506, 1520 (5th Cir. 1994). An interpretation of a plan that

would lead to an "unexpected result," see Chacko, 473 F.3d at 612, - 30 -

or an "unreasonable" outcome, see Sanders v. Rubicon Inc., 103 F.3d 126, at *4 (5th Cir. 1996) (unpublished opinion), is unlikely to constitute a fair reading. Courts may consider whether a posited Gosselink v.

interpretation "furthers the overall plan goal[s]."

Am. Tel. & Tel., Inc., 272 F.3d 722, 729 (5th Cir. 2001); see also Ellis, 394 F.3d at 271 (considering "the context of the Policy as a whole" when determining plain meaning of a term); Whittaker v. BellSouth Telecomms., Inc., 206 F.3d 532, 353 (5th Cir. 2000) (evaluating overarching purpose of benefit plan as part of fair reading analysis). Dictionary definitions can also prove helpful See

in identifying the common meaning of words in a plan document.

Branson v. Greyhound Lines, Inc., Amalgamated Council Ret. & Disability Plan, 126 F.3d 747, 758 (5th Cir. 1997). Basic contract interpretation principles can be utilized to determine the meaning of a plan. expressio unius est exclusio See id. ("The Latin maxim proves instructive.").

alterius

Moreover, "ambiguities in insurance policies are construed against the insurer" when conducting a fair reading analysis of ERISA benefit plans. See Lain v. UNUM Life Ins. Co. of Am., 279 F.3d

337, 345 (5th Cir. 2002). Neither the Plan nor the Summary Plan Description ("SPD") that accompanies the Plan provides any definition for "business" as it is used in the relevant sections. The Fund's arguments make clear, however, that its reliance on - 31 § 9.07(a)(i)(B) depends on

interpreting

the

word

"business"

to

mean

the

equivalent

of

"business organization" or "company."

As the Fund asserts in its

motion for summary judgment, "Fralick was employed with an employer `related' to a Contributing Employer." D. Br. 11. Because Brandt

Electric and Brandt Engineering were "related"----in the sense that both belonged to the same corporate family----Fralick's employment with Brandt Electric constituted disqualifying employment. This

interpretation would effectively require that § 9.07(a)(i)(B) be read to prohibit "Employment with any employer in the same or related business [organization] as any Contributing Employer." The court holds that a plain reading of the Plan does not support the Fund's interpretation, and that the meaning of the term "business" is at best ambiguous, if not clearly contrary to the Fund's view. Rather than "company," a fairer meaning to ascribe to "business" is "occupation" or "line of work." In other words,

§ 9.07(a)(i)(B) would prohibit employment in the same or related line of work as any contributing employer. The provision is thus

concerned with retirees performing work akin to plumbing and pipefitting, not with the corporate structure of beneficiaries' employers. The Fund's original interpretation of subparagraph (B) in Fralick's case is consistent with the court's plain reading of the terms and inconsistent with the Fund's arguments following

Fralick's appeals and in this litigation. In its December 22, 2006 - 32 -

letter to Fralick, the Fund wrote: Any work that has any relation to work covered by the [Fund] is disqualifying employment under the plan rules for retirees who have not reached normal retirement age (65). Such work would be a violation of subsection (b), in that such work is for any employer in a related business as a Contributing Employer since the electrical contracting company would be having these individuals perform mechanical CAD work, which is work done by Contributing Employers to the [Fund], and thus work that is done by an employer in the same or related business. D. App. 61. The Fund's interpretation in this letter makes clear

that the disputed language is concerned with employment for a company that is engaged in "work that has any relation to work covered by the Fund" and "work done by Contributing Employers," such as "mechanical CAD work." Only after Fralick

appealed----arguing that Brandt Electric did not do any "mechanical CAD work," a fact that is uncontested in the administrative record----did the Fund change its interpretation to apply

subparagraph (B) to corporate relationships.

Thus the initial

interpretation by the Fund fully supports the court's reading: subparagraph (B) covers employment with an employer engaged in the same or related line of work as any contributing employer. It is

not concerned with the corporate relationships of a beneficiary's employer. Turning to the SPD, "if there is a conflict between the summary plan description and the terms of the policy, the summary - 33 -

plan description shall govern. Congress recognized, grossly

Any other rule would be, as the unfair to employees and would

undermine ERISA's requirement of an accurate and comprehensive summary." Parker v. Owens-Ill. Inc., 275 F.3d 43, at *3 (5th Cir.

2001) (per curiam) (unpublished opinion) (quoting Hansen v. Cont'l Ins. Co., 940 F.2d 971, 982 (5th Cir. 1991)). contra proferentum, that ambiguities in "[T]he rule of are to be

contracts

resolved against the drafter, must be applied when a summary plan description contains an ambiguous term or requirement." Roher v.

Raytheon Eng'rs & Constructors, Inc., 181 F.3d 634, 640-41 (5th Cir. 1999). In contracts of insurance generally, ambiguities are resolved against the drafter. The same rule should apply here; the ambiguity in the summary plan description must be resolved in favor of the employee and made binding against the drafter. Any burden of uncertainty created by careless or inaccurate drafting of the summary must be placed on those who do the drafting, and who are most able to bear that burden, and not on the individual employee, who is powerless to affect the drafting of the summary or the policy and ill equipped to bear the financial hardship that might result from a misleading or confusing document. Accuracy is not a lot to ask. And it is especially not a lot to ask in return for the protection afforded by ERISA's preemption of state law causes of action----causes of action which threaten considerably greater liability than that allowed by ERISA. Hansen, 940 F.2d at 982 (citation omitted). The SPD chapter entitled, - 34 "Working After

Retirement----Suspension of Benefits," states: "When you retire from the trade in the plumbing and pipefitting industry, you can work in other industries and continue to receive your pension. However,

once you retire . . ., your monthly benefits will be suspended if you return to work in `Disqualifying Employment.'" 2010 App. 3. D. Jan. 11,

The SPD includes nearly verbatim the disputed

language from § 9.07(a)(i)(B) of the Plan, without providing any guidance on the intended meaning of "same or related business." The evidence here points to a concern on the part of the Plan about post-retirement work in the plumbing and pipefitting industry rather than with a corporate sister of a company engaged in such work. The language of § 9.07(a)(i)(B) is, at best, ambiguous The

regarding whether business means "company" or "line of work." SPD language established that Fralick could "work in

other

industries [besides the plumbing and pipefitting industry] and continue to receive [his] pension." D. Jan. 11, 2010 App. 3.

Reading the "disqualifying employment" language according to the "ordinary and popular sense as would a person of average

intelligence and experience," the court cannot say that Fralick should have understood that employment with an electrical

contractor in the same corporate family as a mechanical contractor was prohibited. "Absent a clear expression of this significant

limitation, the SPD cannot be fairly read to prohibit" Fralick from - 35 -

working for Brandt Electric.

See Parker, 275 F.3d 43, at *4.

"Therefore, as the terms of the SPD are inconsistent with the terms of the Retirement Plan, the SPD controls the outcome of this case." Id. at *3. Apart from the SPD, other factors counsel against adopting the Fund's interpretation as a fair reading of the term "business." Webster's Dictionary supports the court's interpretation as the more common usage of the word. See, e.g., Chacko, 473 F.3d at 612

(consulting dictionary definition when interpreting ERISA plan terms). The first listed definition is: "The occupation, work, or Webster's II New Riverside The third definition coincides

trade in which one is engaged." University Dictionary 212 (1984).

with the Fund's reading of the term: "A commercial enterprise or establishment or gain." Id. Black's Law Dictionary offers a

definition of "business" that slightly blends the two concepts. Its first definition is "[a] commercial enterprise carried on for profit; a particular occupation or employment habitually engaged in for livelihood." Black's Law Dictionary 226 (9th ed. 2009). Id. The

second definition is "commercial enterprises."

The court also examines the internal consistency of the Plan itself. When read in tandem with § 9.07(a)(i)(C) and (D), which

also use the term "business," as well as subparagraph (A), which prohibits "work for any Contributing Employer," the best

interpretation of the term is that it means "line of work." - 36 -

Subparagraph (C) prohibits "Self-employment in the same or related business as a Contributing Employer." Applying the Fund's

interpretation of "business" in § 9.07(a)(i)(B) to subparagraph (C) results in the prohibition against "self employment in the same or related business [organization] as a Contributing Employer." It is possible that, by prohibiting "self-employment" in the same business as a contributing employer, the Plan intended to bar some sort of contracting arrangement whereby a beneficiary would be "self-employed," but still in the same company as a contributing employer. But this goal is more simply achieved by defining It is difficult to

"employment" to include work as a contractor.

conceptualize a scenario in which a beneficiary would be "selfemployed" in the same business organization as a contributing employer; those who are self-employed are their own business organization. The same analysis applies to the part of

§ 9.07(a)(i)(D) that precludes self-employment in any business under Union jurisdiction. Similar problems arise when subparagraphs (A) and (B) are read in tandem using the Fund's interpretation. reading would render (A) ("Employment The Fund's preferred any Contributing

with

Employer") and part of (B) ("Employment with any employer in the same . . . business [organization] as any Contributing Employer") duplicative and surplusage. Admittedly, there may be some

conceivable scenario in which a "contributing employer" and "an - 37 -

employer in the same company as a contributing employer" refer to different entities, but this would hardly be the generally accepted meaning. The Fund's reading gives the two subparagraphs a

duplicative meaning and therefore is unlikely to constitute a fair reading, especially if a better alternative is available. On the other hand, if "business" in § 9.07(a)(i)(B) means "occupation" or "line of work," a retiree like Fralick would quite logically be precluded under (C) from self-employment in the same or related occupation as a contributing employer, or under (D) from a line of work under Union jurisdiction. This would prevent

beneficiaries from "retiring" and then becoming self-employed doing work that is the same or related to work being done by contributing employers to the Fund. Moreover, (B) would cover

employment in the same or related occupation as a contributing employer, and would thus be complementary----rather than

duplicative----of (A).

The focus would be on the type of work being

performed----consistent with the language and tone of the SPD----rather than on corporate relationships. The court must "interpret the contract language in an ordinary and popular sense as would a person of average intelligence and experience, such that the language is given its generally accepted meaning if there is one." may be possible to Chacko, 473 F.3d at 612. facts that justify Although it the Fund's

construct

interpretation, it is not how a typical person would read the - 38 -

phrase. The court cannot say that Fralick should have understood the section to prohibit his working in the electrical engineering field, simply because his employer had a corporate affiliation with a contributing employer. Accordingly, the Fund's interpretation is not a fair reading of the term "business." The alternate

reading----"line of work" or "occupation"----allows all the terms in § 9.01(a)(i) to be given their generally accepted meaning, avoids surplusage, and is the fairest reading of the term. Moreover, as the above discussion makes clear, there are at least two reasonable ways to interpret "business" in

§ 9.07(a)(i)(B).

The court must construe the terms according to

their plain meaning. "If, however, the plan terms remain ambiguous after application they of are ordinary construed principles strictly in of favor contract of the

interpretation, insured."

Keszenheimer v. Reliance Standard Life Ins. Co., 402 Thus to the extent that, when the

F.3d 504, 507 (5th Cir. 2005).

Plan is analyzed, it is not conclusive that "line of work" is the generally accepted interpretation of "business" in this context, the term is ambiguous and must be construed in favor of Fralick. The Fund's reading would lead to unreasonable results in cases with facts different from Fralick's. beneficiaries from employment with If § 9.07(a)(i)(B) prohibits any company who shares a

corporate affiliation with (and is therefore "related" to) a Contributing Employer, this would foreclose employment that has - 39 -

nothing to do with the plumbing and pipefitting industry.

The

Fund's interpretation would place restrictions on beneficiaries' being employed, for example, by a furniture retail store, if that store had a corporate affiliation with a contributing employer. It is difficult to envision any plausible interest served by the Plan's prohibiting employment in the retail furniture business, merely because of some happenstance in the employer's corporate structure. This is especially true because the SPD states that That the Fund's

beneficiaries can work in other industries.

interpretation would lead to such an "unexpected result" is further evidence that it is not a fair reading of the term. 473 F.3d at 612.9 The court's interpretation of the Plan language is consistent with the conclusions of other courts that have interpreted virtually identical language. These cases are not direct evidence of what is a fair reading of the term in the context of this case; instead, they are illustrative of the generally accepted understanding of the phrase "same or related business." In one pension benefits case, the court interpreted a provision identical to the one at issue here to inquire whether there were "contributing employers who perform work in the same or related business" as the beneficiaries' employer. Wildeboer v. Sheet Metal Workers' Nat'l Pension Fund, 2010 WL 821122, at *8 (E.D. Ky. Mar. 5, 2010) (emphasis added). The court did not mention, much less analyze, whether there was any other entity within the employer's corporate family who was engaged in relevant work. Instead, the court focused on the type of work actually performed by the beneficiary and his employer in the relevant period. It concluded that "the services rendered by Wildeboer----in this case welding----constituted services provided by contributing employers." Id. An identical application of "same or related business" was used in Morton v. Sheet Metal Workers' National Pension Fund, where the key determinations in the court's analysis were that the beneficiary's employer "performed abatement services" and "engaged in lead and asbestos abatement." Morton v. Sheet - 40 9

See Chacko,

For the reasons explained, the Fund's proposed interpretation of § 9.07(a)(i)(B) is inconsistent with a fair reading of the Plan. The Fund's interpretation appears to be incongruous with the overall focus of the Plan (i.e., on the type of work being performed), and with the language of the SPD. The plain meaning of "business" is at best ambiguous and must therefore be construed against the Fund. It cannot be said that the average person, or

Fralick, would understand that § 9.07(a)(i)(B) prohibits him from working for a company who shares some corporate affiliation with a contributing employer. Accordingly, the Fund's interpretation is

inconsistent with a fair reading of the Plan terms. 3 The third step in the court's analysis is whether there would be "any unanticipated costs resulting from different As the

interpretations of the plan."

Wildbur, 974 F.2d at 638.

court has held, the Fund's interpretation is not a fair reading of the Plan. Courts analyze whether a cost is truly "unanticipated"

in conjunction with the analysis of whether the plan administrator

Metal Workers' Nat'l Pension Fund, 2009 WL 1809988, at *6 (E.D. Va. June 23, 2009). In another case, the district court analyzed the question whether the beneficiary was employed in the "same or related business" as a contributing employer by examining "whether pipefitting is, in fact, a business related to insulation." Asbestos Workers Local 53 Pension Benefit Fund v. Dupuis, 1992 WL 165675, at *5 (E.D. La. July 6, 1992). The court is not aware of any case in which the language has been interpreted to cover the circumstance where two companies perform dissimilar work, but merely belong to the same corporate family. - 41 -

applied a fair reading to the terms.

Crowell, 541 F.3d at 316-17.

If . . . an administrator had been interpreting the plan contrary to its plain language, and an alternate interpretation using a fair reading of the plan's plain language suggested that more benefits were due, that alternate interpretation would result in costs that were not subjectively anticipated by the employer but should have been objectively anticipated. As such, an alternate interpretation under a fair reading would not result in unanticipated costs. Id. at 317 (emphasis in original). Giving the Plan language its

most plausible meaning cannot be said to cause "unanticipated" costs; plan administrators should anticipate that terms will be applied according to their fair meaning. "The question of

`unanticipated' costs is more accurately approached as an inquiry into the plain reading of the plan language and whether a proposed alternate reading would result in costs unanticipated under the plain meaning." Id. at 316.

The Fund maintains that a contrary reading will lead to unanticipated costs due to additional benefit payments to Fralick and other similarly-situated beneficiaries. misplaced. This argument is

In every case in which an ERISA beneficiary brings a

meritorious challenge, the plan stands to face costs that it did not predict (for the simple reason that the administrators had been incorrectly interpreting the plan). Moreover, "to determine

whether an interpretation results in unanticipated costs a court may be required to review what costs were anticipated and what - 42 -

costs may flow from the challenged interpretation." F.2d at 638. The Fund has failed to

Wildbur, 974 even

demonstrate----or

argue----that there are significant numbers of persons like Fralick or that it has heavily relied on the interpretation of

§ 9.07(a)(i)(B) that it urges here.

There is thus no basis to

support the claim that an alternate reading of the term would lead to significant unanticipated costs. 4 Accordingly, the court holds that the Fund's interpretation of the Plan is not legally correct. C The court considers next whether the Fund's legally incorrect interpretation constitutes an abuse of discretion. 2003 WL 21383656, at *5.10 1 The first factor to be considered is the internal consistency Although the Wildbur two-step approach is commonly used in the Fifth Circuit, a court is not required to determine that a plan administrator abused his discretion. "[T]he reviewing court is not rigidly confined to this two-step analysis in every case. As noted in [Wildbur], `application of the abuse of discretion standard may involve the two-step process.'" Duhon v. Texaco, Inc., 15 F.3d 1302, 1307-08 & n.3 (5th Cir. 1994) (alterations omitted; emphasis in original). Based on the court's conclusion that the Fund's application of § 9.07(a)(i)(B) is contrary to a fair interpretation of the text, the second step of Wildbur takes on less significance. "Clearly, 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 discretio