Opinion
Case No. 5:04cv2403, Resolving Doc. No. 28., 29.
January 31, 2006
OPINION AND ORDER
Plaintiff Walter Lawrence Godleski and Defendants FirstEnergy Corp. ("FirstEnergy") and FirstEnergy Solutions, Inc., move for judgment on the administrative record in this ERISA proceeding. [Docs. 28, 29]. After reviewing the parties' briefs and the administrative record, the Court DENIES the plaintiff's motion for judgment on the administrative record, and GRANTS the defendants' motion.
FirstEnergy Solutions was a subsidiary of FirstEnergy Corp. during the relevant time period.
I. Background
Plaintiff Godleski began working for FirstEnergy Solutions in May 1997. Godleski became a National Sales Manager in 2002. During his employment, Godleski was covered by FirstEnergy's Severance Benefits Plan (the "Plan"). Under the Plan, employees subject to "involuntary separation" from employment would receive severance pay and various other benefits. [A.R. at 74]. The Plan conditioned these benefits upon the employee "signing an agreement releasing the Company from any and all legal claims as a result of [the] separation from employment." Id. The Plan directed FirstEnergy to provide the proposed release agreement when it offered severance benefits. Id. The employee would have at least 21 days to consider the severance package before being required to sign the release. Id. The Plan cautioned that "failure to sign the release within these time frames . . . will make [the employee] ineligible to receive the severance benefits provided under the Plan." Id.
The parties electronically filed the Administrative Record as Doc. 27.
On January 28, 2004, the plaintiff received notice that FirstEnergy was eliminating his position as part of a corporate realignment, and that he would be eligible for severance pay and other benefits under the Plan. Id. at 71. The notice informed Godleski that if he did not find another position with FirstEnergy by February 27, 2004, the company would terminate his employment. Id. Although Godleski could have continued to work at FirstEnergy Solutions until February 27, he did not report for work after January 28. FirstEnergy Solutions continued to pay Godleski through February 27, 2004.
On February 24, 2004, the plaintiff received an exit interview packet which included information regarding the potential severance benefits. Id. at 32. Based on his salary and years of service, Godleski could receive a one-time severance payment of $18,226.37 under the Plan. Id. at 11. The document provided: "In accordance with the Severance Benefits Plan, the receipt of severance pay is contingent upon you signing the enclosed Agreement To Release In Full. You have until 04/12/2004 to make your decision." Id. (emphasis in original). FirstEnergy required Godleski to sign and return the Release to Steve Mileski of FirstEnergy by April 12, 2004. Id. At that time, Mileski was FirstEnergy's Manager of Executive Benefits and Capital Accumulation. [Doc. 16 at 6].
The Release provided that discharged employees would receive severance benefits in return for discharging FirstEnergy, its subsidiaries, and its personnel from all claims relating to their employment. A.R. at 20-21. The Release also contained the following provision:
G. I am agreeing to waive, release and forego any chance, right or opportunity to seek employment with the Company, its parents, subsidiaries, divisions, affiliates or successors now or in the future and further agree that I shall not apply for any such employment in the future.Id. at 21. Again, the plaintiff had until April 12, 2004 to sign the Release.
On February 24, 2004, the same day he received the severance information packet, Godleski received a job offer from Roth Bros., Inc. Id. at 6, 23. Like FirstEnergy Solutions, Roth Bros. is a wholly-owned FirstEnergy subsidiary. [Doc. 17 at 30]. Godleski signed an employment agreement with Roth Bros. on Friday, February 27. [A.R. at 6, 23]. February 27 was also Godleski's termination date at FirstEnergy Solutions. Godleski's first day at Roth Bros. was Monday, March 1. Id. At Roth Bros., Godleski received different employee benefits than he did at FirstEnergy Solutions, and he did not receive credit for his previous years of service. Id. at 32-33.
According to Godleski, he met with Steve Mileski of FirstEnergy on April 8, 2004 to submit the necessary forms to receive the severance benefits. Id. at 28, 32. Although Mileski recalled several phone conversations with Godleski regarding the severance benefits, he could not remember whether he met Godleski in-person. [Doc. 16 at 14]. Mileski had the authority to grant or deny benefits payments to employees. Id. at 13. When Godleski expressed interest in receiving the severance package, Mileski told Godleski that he was ineligible for the package and disapproved the payment of benefits to Godleski. Id.; [A.R. at 32]. Godleski says that when he attempted to submit the Release to Mileski, "Mileski refused to allow [Godleski] to sign and refused to execute the document." Id. Mileski informed Godleski of the severance appeal process and referred him to Richard LaFleur, FirstEnergy's Manager of Benefits Integration and the Chair of the Employee Benefits Claims Appeals Committee. [Doc. 16 at 13; Doc. 17 at 6].
On May 12, 2004, the plaintiff submitted a letter to LaFleur asking for a review of Mileski's decision. [A.R. at 63]. Godleski stated that he did not agree with Mileski's interpretation of the Plan and requested that the Appeals Committee review the matter.
On June 10, 2004, LaFleur responded by letter to Godleski on behalf of the Appeals Committee. LaFleur wrote:
It was the decision of the Committee to uphold the initial denial of your benefits. The reason that benefits are denied is that in order to be eligible to receive benefits you must complete an Agreement to Release in Full. One of the provisions of the Release is an agreement that you will not seek employment with the Company, its parents, subsidiaries, divisions, or affiliates. Since you accepted employment with Roth Bros. you do not qualify for benefits.Id. at 60. The Appeals Committee thus upheld the "initial denial" by Mileski because (1) Godleski did not sign the Release, and (2) Godleski was not eligible because he worked for a FirstEnergy subsidiary.
Plaintiff Godleski sued FirstEnergy and FirstEnergy Solutions on December 6, 2004. [Doc. 1]. On May 6, 2005, the Court granted the plaintiff's motion for additional time to permit him to resubmit his case to FirstEnergy's Severance Benefits Committee. [Doc. 22].
In submitting his claim to the Benefits Committee, Godleski pointed to two former FirstEnergy employees who received severance benefits even though they returned to work at FirstEnergy or Roth Bros. The Benefits Committee considered Godleski's request and denied it by letter dated June 29, 2005. [A.R. at 30-31]. In the denial letter, Dawn Pensyl, the Chairwoman of the Benefits Committee, wrote in pertinent part:
Under the terms of the [Plan], to be eligible for benefits from the Plan you were required to return the signed and witnessed Agreement to Release in Full to FirstEnergy Corp., no later than 4/12/2004. This requirement was not met.
. . .
We spoke with Steve Mileski in regards to your claim that he refused to allow you to sign the Release Agreement, but he does not have a clear recollection of his conversation with you. However, it is our opinion that even if he had refused to accept such agreement at that time, it in no way prohibited you from signing and submitting the Release within the specified time period. There were clearly other means of submitting the signed Release Agreement, such as certified mail. You certainly could have raised this issue in your letter to Mr. LaFleur dated May 12, 2004.
In addition, the Agreement to Release in Full states that you will not seek employment with the Company, its parents, subsidiaries, divisions, affiliates or successors now or in the future. Because you accepted employment with Roth Bros. you also did not meet this provision of the Release Agreement. The Company was aware of those circumstances at the time in question.
Furthermore, we looked into the circumstances regarding the two individuals whom you claim received severance and returned to work for the Company. One individual you claimed became an employee of Roth Bros., Inc. However, we confirmed with Roth Bros. that this person was never hired as an employee of that Company. The second person that you mentioned received a severance payment in 2002. He was not rehired until January of 2005. Therefore at the time that the severance benefit was paid, the Company was not aware of any circumstance violating the Agreement to Release in Full or the other terms of the Severance Plan. While it is not general practice, the Company does reserve the right to — at some future date — rehire a previously severed employee of the Company.
After the Benefits Committee issued its decision, the Court granted additional time for the parties to complete FirstEnergy's internal appeals process. [Doc. 26]. Godleski resubmitted his claim to the Appeals Committee, and on August 15, 2005, the Appeals Committee denied it. [A.R. at 2-3]. Timothy Hayes, the Chairman of the Appeals Committee, wrote:
The denial was based upon the provision of the Plan Document that requires your signing of a Release Agreement in order to qualify for benefits.
. . .
Section 3G of the Release Agreement states that you were willing to `waive, release and forego any chance, right or opportunity to seek employment with the Company, its parents, subsidiaries, divisions, affiliates or successors now or in the future and further agree that I shall not apply for any such employment in the future.' Mr. Mileski knew in April when he discussed your eligibility for benefits that you had accepted a position with Roth Brothers. He informed you that this disqualified you from being eligible for benefits under the Severance Plan. The Committee agrees with Mr. Mileski's interpretation of the Plan in relation to your particular circumstances. Even assuming that you had executed the Release, you had already breached your commitments under it. At the time you claim to have presented the agreement and offered to execute it, you were in violation of its terms. The terms set forth in the Release are, much like the language in the Plan, conditions precedent. You did not meet those conditions and the original denial for benefits was appropriate for the two reasons cited above.Id. (emphasis in original).
In response to the Appeals Committee's August 2005 decision, the parties filed the instant motions for judgment on the administrative record.
II. Legal Standard
Because the Plan documents gave the Benefits Committee and the Appeals Committee discretion to construe and interpret the Plan [ see id. at 53-55], the standard of review in this case is whether the denial of benefits was arbitrary and capricious. See Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115, 103 (1989); Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 983 (6th Cir. 1991). The arbitrary and capricious standard is the least demanding form of judicial review of an administrative decision. Williams v. International Paper Co., 227 F.3d 706, 712 (6th Cir. 2000). A decision regarding eligibility for benefits is not arbitrary and capricious if the decision is "rational in light of the plan's provisions." Yeager v. Reliance Standard Life Ins. Co., 88 F.3d 376, 381 (6th Cir. 1996). Stated differently, "when it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious." Davis v. Kentucky Finance Cos. Retirement Plan, 887 F.2d 689, 693 (6th Cir. 1989) (internal quotations and citation omitted); see also Perez v. Aetna Life Ins. Co., 150 F.3d 550, 555 (6th Cir. 1998) (en banc). In applying the arbitrary and capricious standard in ERISA actions, a court is limited to reviewing the evidence contained within the administrative record. Wilkins, 150 F.3d at 615.
Courts within the Sixth Circuit utilize the arbitrary and capricious standard even when a conflict of interest exists. Davis, 887 F.2d at 694 (conflict of interest significant "only to the extent that any possible conflict of interest should be taken into account as a factor in determining whether the Committee's decision was arbitrary and capricious"). Courts will, however, weigh a potential conflict of interest as a factor in determining whether the decision to deny benefits was arbitrary and capricious. Firestone, 489 U.S. at 115; Davis, 887 F.2d at 694.
III. Analysis
The parties focus their attention on two issues: (1) Did Plaintiff Godleski forfeit his eligibility for the severance package by failing to return a signed and witnessed Release form to Steve Mileski; and (2) Did Godleski forfeit his eligibility for the severance package by accepting employment at Roth Bros. Mileski, the Benefits Committee, and the Appeals Committee decided Godleski was ineligible for severance benefits. The Court finds that while it was arbitrary and capricious to deny Godleski benefits because of his Roth Bros. employment, he forfeited his eligibility by failing to timely submit the Release.
A. Submission Of Release
The defendants say that because Mileski did not receive a signed and executed Release from Godleski by April 12, 2004, Godleski was ineligible for severance benefits. Godleski says that he attempted to submit a Release to Mileski, but Mileski would not accept it. Under the arbitrary and capricious standard, the Court agrees with the defendants.
Godleski offers the only clear account in the administrative record of his meeting with Mileski. The plaintiff wrote to the Appeals Committee that on April 8, 2004, he went to Akron to meet with Mileski to submit the necessary forms to receive severance benefits. [A.R. at 32]. When the plaintiff attempted to submit the forms, Mileski "refused to allow [the plaintiff] to sign, and refused to execute the document." Id. Mileski does not recall the precise circumstances of his meeting with Godleski. While Mileski says that he told the plaintiff he was not eligible to receive the severance benefits, he does not say that he refused to let the plaintiff sign the necessary documents. [Doc. 16 at 11-13]. The plaintiff eventually did sign the Release and submitted it to FirstEnergy, but not until May 2005. [A.R. at 35].
The Plan requires a person seeking severance benefits to complete a Release form by a deadline "established at the discretion of the Company. . . ." Id. at 74. The exit interview packet informed Godleski that he must execute and return the Release to Mileski by April 12, 2004. Id. at 11. FirstEnergy did not require Godleski to return the form to Mileski in person. Rather, the exit interview packet provided Mileski's work address for mailing. Id.
Godleski does not argue that he actually submitted a signed Release to FirstEnergy. Instead, he says that submitting the Release would have been pointless because Mileski already denied the benefits. [Doc. 29 at 5-6]. This was the same argument he made to the Benefits and Appeals Committees. The Benefits Committee found:
[I]t is our opinion that even if [Mileski] had refused to accept such agreement at that time, it in no way prohibited you from signing and submitting the Release within the specified time period. There were clearly other means of submitting the signed Release Agreement, such as certified mail.
00.[A.R. at 30]. In affirming the Benefits Committee's decision, the Appeals Committee adopted this position as well. Id. at 2.
The decisions of the Benefits Committee and the Appeals Committee were not arbitrary and capricious. Assuming that Mileski refused to accept a signed Release from the plaintiff on April 8, 2004, the Plan documents made clear that submitting a signed Release was a necessary step before receiving severance benefits. Godleski had until April 12 to sign and submit the Release form to Mileski, even if Mileski did not accept personal delivery of the form. As the Benefits Committee pointed out, Godleski could have submitted a completed form by mail and still complied with the Plan requirements.
Mileski also made the plaintiff aware of FirstEnergy's appeals process, and so the plaintiff knew he could challenge Mileski's decision. Even if Mileski disagreed with Godleski over the Roth Bros. employment, Godleski would still have needed to comply with the other Plan requirements for a reviewing committee to overturn Mileski's denial of benefits. Instead of submitting the Release by the deadline, Godleski mailed a signed Release to the Appeals Committee in May 2005. Id. at 35. This delay rendered him ineligible for severance benefits.
The Court finds that there was sufficient evidence for the Benefits Committee and the Appeals Committee to find that the plaintiff waived his right to severance benefits by not submitting a signed Release within the deadlines set by the Plan documents.
B. Employment At Roth Bros.
Mileski, the Benefits Committee, and the Appeals Committee all decided that Plaintiff Godleski breached the Release by accepting employment with Roth Bros. Those decisions were arbitrary and capricious.
FirstEnergy required that Godleski execute and return the Release by April 12, 2004. Id. at 11. Godleski received his job offer from Roth Bros. on February 24, 2004. Id. at 6, 23. He signed his employment agreement with Roth Bros. on Friday, February 27, and began work on Monday, March 1. With respect to seeking future employment with FirstEnergy and its corporate affiliates, the Release provided the following:
G. I am agreeing to waive, release and forego any chance, right or opportunity to seek employment with the Company, its parents, subsidiaries, divisions, affiliates or successors now or in the future and further agree that I shall not apply for any such employment in the future.Id. at 21. In signing the Release, Godleski only would have agreed not to apply for positions at the FirstEnergy companies "now or in the future." The Release made no reference to current employment. Godleski had already applied for and received his Roth Bros. position more than a month before the deadline for signing the Release. He thus could have signed the Release on April 12, and still complied with its prohibition on not applying for or seeking future employment with FirstEnergy. It was arbitrary and capricious for Mileski, the Benefits Committee, and the Appeals Committee to find otherwise.
The Court is highly unimpressed with the defendants' bare assertion that an employee seeking severance benefits must not "be employed by" any FirstEnergy-related company. [Doc. 28 at 10]. The Release says nothing of the kind, and it is telling that the defendants do not cite a single provision of the Release or Plan in support. The Release is unambiguous, and the Court will not ignore its plain language. If FirstEnergy wanted to exclude those currently employed by a FirstEnergy affiliate, the company should have included such language in the Release. See Dalesandro v. International Paper Co., 214 F.R.D. 473, 480 (S.D. Ohio 2003) (Beckwith, J.) (interpreting severance plan according to its terms, despite protests from the company that wrote the plan).
Although Godleski's Roth Bros. employment did not render him ineligible for severance benefits, the fact that he failed to timely execute the Release prevents him from collecting the benefits.
IV. Conclusion
For the foregoing reasons, the Court DENIES the plaintiff's motion for judgment on the administrative record [Doc. 29], and GRANTS the defendants' motion for judgment on the administrative record. [Doc. 28].
Accordingly, this action is terminated under Fed.R.Civ.P. 58.
IT IS SO ORDERED.