Dowling v. Pension Plan for Salaried Employees of Union Pacific Corp. & Affiliates
2017 U.S. App. LEXIS 17863
| 3rd Cir. | 2017Background
- John Dowling, a former Union Pacific VP, became totally disabled in 1997 and received long-term disability benefits until age 65; he formally retired in 2012.
- The Union Pacific Pension Plan calculates benefits using Credited Service and Final Average Compensation (average of highest 36 months within the 120 months immediately preceding the last date the participant is a Covered Employee).
- The plan treats disabled participants specially for Credited Service (they continue to accrue service during disability) and contains a deeming rule that during certain "absences" an employee is "deemed to have received" base pay.
- The plan grants the administrator discretionary authority to interpret and construe plan terms; the employer funds the plan and its administrators were company officers.
- Administrator calculated Dowling’s Final Average Compensation using a ten-year window ending at his 2012 retirement by deeming his base pay during the disability period, producing a lower monthly pension; Dowling argued the window should end in 1997 (the start of his disability).
- District Court upheld the administrator’s interpretation as reasonable; the Third Circuit majority affirmed, finding the relevant plan language ambiguous and the administrator’s interpretation not arbitrary and capricious; a dissent would have reversed.
Issues
| Issue | Plaintiff's Argument (Dowling) | Defendant's Argument (Union Pacific) | Held |
|---|---|---|---|
| Whether plan language unambiguously requires using the 10-year period before Dowling became disabled (1997) to compute Final Average Compensation | Final Average Compensation is defined by the 120 months immediately preceding the last date the participant is a Covered Employee; Dowling ceased being a Covered Employee in 1997, so the window ends then | The plan’s deeming/absence provisions and disability rules allow treating the disability period as an "absence" and "deeming" base pay through 2012, so the 10-year window may end at retirement | Ambiguous: reasonable alternative interpretations exist; court defers to administrator’s reasonable construction |
| Whether the term "absence" in the deeming provision encompasses long-term disability | "Absence" should be read to exclude a disability separation; the disability rules treat Total Disability separately | "Absence" is undefined and its ordinary meaning (“not present”) can encompass indefinite disability absences; administrator reasonably so interpreted | Court: term ambiguous; administrator’s broader reading is reasonable |
| Whether plan silence on how to calculate Final Average Compensation for disabled participants forbids administrator from adopting a different rule | Silence must be read as continuing the default rule; expressio unius indicates no special rule for Final Average Compensation | Silence permits reasonable administrator interpretation; expressio unius is not dispositive when deference applies | Court: silence creates ambiguity; administrator’s reasonable choice stands |
| Whether the employer’s conflict of interest (funding + administering plan) requires less deference to the administrator | The conflict undermines the administrator’s decision; prior reversal by Willis suggests bias | Mere structural conflict exists but no evidence it infected decisionmaking; one prior advisory reversal alone is insufficient | Court: conflict is only a factor; absent evidence it affected decision, deference remains and administrator’s decision affirmed |
Key Cases Cited
- Conkright v. Frommert, 559 U.S. 506 (2010) (plan can grant administrator discretionary authority; standard of review depends on plan text)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (default de novo review unless plan gives discretionary authority)
- Glenn v. Metropolitan Life Ins. Co., 554 U.S. 105 (2008) (conflict of interest is a factor in abuse-of-discretion review but does not automatically convert review to de novo)
- Fleisher v. Standard Ins. Co., 679 F.3d 116 (3d Cir. 2012) (administrator’s interpretation of unambiguous text must be reasonably consistent; ambiguous text reviewed for arbitrary and capriciousness)
- McElroy v. SmithKline Beecham Health & Welfare Benefits Tr. Plan, 340 F.3d 139 (3d Cir. 2003) (standards for disturbing administrator interpretations)
- Miller v. American Airlines, Inc., 632 F.3d 837 (3d Cir. 2011) (conflict plus other procedural/factual defects warranted rejecting administrator’s decision)
- Bill Gray Enters. v. Gourley, 248 F.3d 206 (3d Cir. 2001) (standard for interpreting administrator decisions when discretion is granted)
- Zheng v. Gonzales, 422 F.3d 98 (3d Cir. 2005) (text and structure inform ambiguity analysis)
- Van Hollen, Jr. v. FEC, 811 F.3d 486 (D.C. Cir. 2016) (silence in a text can signal a decision not to mandate a solution; permissive reading supports deference)