E-Alert Case Updates

United States District Court for the District of Maryland enters summary judgment in favor of defendant employer in unpaid severance benefits case

Strauch v. Exelon Corp.
No. 13-1543 (Nov. 18, 2013 D. Md.)
by Wayne C. Heavener, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In Strauch v. Exelon Corporation, the United States District Court for the District of Maryland entered summary judgment in favor of a defendant employer, against whom plaintiff employees filed claims for unpaid wages and benefits. Writing for the Court, Judge James K. Bredar reviewed the decision reached by the plaintiff’s service plan administer for an abuse of discretion. Ultimately, the Court found the administrator’s interpretation of the plan — in particular, the administrator’s interpretation of the term “Successor” employer — to be reasonable, and entered summary judgment in the defendant’s favor.

John Strauch and Jason Endlich (“Plaintiffs”) worked for Constellation Energy Group (“Constellation”), a subsidiary of the Exelon Corporation (“Exelon”). While working at Constellation, Plaintiffs were covered by the Constellation Energy Group’s Service Plan (“Service Plan”). The Service Plan entitled employees to severance benefits should there be a “change of control,” unless the employees met certain ineligibility criteria. These criteria included employees who were offered any position with a “Successor.” The Service Plan defined Successor as an employer that purchased a subsidiary or affiliate of Exelon. In November 2012, Constellation sold three (3) power plants to Raven Power Holdings, LLC (“Raven”), including the facilities at which Plaintiffs worked. A month prior to the sale, Plaintiffs were offered positions with a Raven affiliate, Topaz Power Management (“Topaz”). When Plaintiffs’ employment at Constellation ended, Plaintiffs immediately began working for Topaz. Taking the position that Topaz was not a Successor under the Service Plan, Plaintiffs filed claims with the Plan Administrator for severance benefits. The Plan Administrator denied Plaintiffs’ claims, determining that Topaz was a Successor under the Service Plan. Plaintiffs filed a Complaint naming Exelon and the Service Plan as defendants in the United States District Court for the District of Maryland, and sought unpaid wages and severance benefits under the Service Plan. Exelon and the Service Plan (collectively, “Defendants”) moved for summary judgment.

The Court granted Defendants’ motion, entering judgment in their favor, and against Plaintiffs. The Court noted that the Service Plan was regulated by the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132, and that the standard of review depended upon the nature of the plan. If the Service Plan conferred discretionary authority upon the Plan Administrator to determine benefit eligibility, then the Court should review the Plan Administrator’s decision for an abuse of discretion. In contrast, if the Service Plan did not confer such discretion, the Plan Administrator’s decision should be reviewed de novo. In this case, the Service Plan granted the Plan Administrator the “exclusive right” to grant or deny benefits, which the Court held created “discretion by implication.” The Court, therefore, reviewed the Plan Administrator’s denial of benefits for an abuse of discretion. In reaching its decision, the Court rejected Plaintiffs’ argument under the “plan document rule,” which prevents plan administrators from considering external documents in disbursing benefits. Because the term “Successor” was found within the plan documents themselves, the plan document rule was inapplicable. Similarly, the Court rejected Plaintiffs’ argument under contra proferentum, which is an insurance doctrine requiring ambiguities to be construed in favor of the insured. Because contra proferentum only applies in ERISA cases where a plan administrator lacks discretion in disbursing benefits, the doctrine was inapplicable to this case. Reviewing the record, the Court held that the Plan Administrator did not abuse her discretion in denying Plaintiffs’ benefits. Topaz could reasonably be interpreted as a “Successor” under the Service Plan, thereby disqualifying Plaintiffs for severance benefits.