Robert Johnston v. Dow Employees' Pension Plan
703 F. App'x 397
| 6th Cir. | 2017Background
- Robert Johnston worked for Dow (1980–1996), transferred to Dow DuPont Elastomers (DDE) (1996–2005), then returned to Dow and retired in 2011; he is eligible for pensions from both Dow and DDE.
- Johnston disputed Dow’s pension calculation, arguing Dow misapplied plan provisions and undercounted service when offsetting DDE benefits.
- Administrative review: Initial Claims Reviewer denied his claim; Johnston timely appealed to the Dow Retirement Board (Appeals Administrator), which affirmed.
- Johnston sued in district court; the court granted judgment on the administrative record for the board, finding the board’s interpretations not arbitrary or capricious.
- On appeal, the Sixth Circuit applied the arbitrary-and-capricious standard (Plan grants discretionary authority) and affirmed, rejecting Johnston’s arguments about ambiguity, anti-cutback violations, conflict of interest, and HC3A computation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper plan provision to govern Johnston’s Dow pension (§ 9.6(b)(i)(B) vs § 10.46(c)(i)) | Johnston: § 9.6(b)(i)(B) controls and yields a larger benefit (counts pre-DDE Dow service in numerator). | Board: § 10.46(c)(i) is the specific Article X provision for DDE transfers and properly governs; board consistently applied § 10.46 to similar employees. | Court: Ambiguity exists; board reasonably chose § 10.46(c)(i) (specific governs general) — affirmed. |
| Whether board’s reconciliation violates ERISA anti-cutback rule and notice requirements | Johnston: Applying § 10.46(c)(i) (or applying § 4.10 to § 9.6) reduces his accrued benefit and thus violates § 204(g)/anti-cutback and notice rules. | Board: Board’s interpretation produced a greater benefit under § 10.46; applying § 4.10 to avoid double-counting is a reasonable interpretation and not an impermissible amendment that triggers anti-cutback protections. | Court: Applying § 4.10 to § 9.6(b)(i)(B) to prevent double-counting is a reasonable interpretation of ambiguous provisions and does not violate anti-cutback rules because the board’s chosen rule (§ 10.46) provided the greater benefit; no notice or cutback violation. |
| Whether the board’s discretionary grant is void for vagueness or conflict of interest requires heightened review | Johnston: Grant of discretion is vague/multi-person and board’s funding role/conflict and use of outside counsel show bias meriting reduced deference. | Board: Plan properly grants discretion to named reviewers and appeals board; conflict is a factor but does not change deferential standard; retention of counsel is permitted by plan. | Court: Standard remains arbitrary-and-capricious; alleged conflicts and procedural delays do not show substantial evidence of bias — give little weight. |
| Calculation of HC3A (Average Annual Compensation) under § 10.46(c)(i) | Johnston: He had more than three years of Annualized Compensation after returning to Dow (2005–2011) so the .925 freeze factor should not apply; HC3A should be calculated using last three years pre-retirement. | Board: For grandfathered (ERP) formula, inputs were frozen Dec 31, 2005; Johnston had three years or less of Annualized Compensation after returning to Dow at freeze, so .925 factor applies; DDE compensation not counted as ‘Company’ compensation. | Court: Board provided reasoned explanation; treating DDE compensation as non-Company and applying the .925 factor under the frozen grandfathered formula was not arbitrary or capricious — affirmed. |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (ERISA benefit-denial review standard; defer to administrator when plan grants discretion)
- Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (conflict-of-interest is a factor in abuse-of-discretion review)
- McClain v. Eaton Corp. Disability Plan, 740 F.3d 1059 (6th Cir.) (standard: decision upheld if from deliberate, principled reasoning supported by substantial evidence)
- Farhner v. United Transp. Union, 645 F.3d 338 (6th Cir.) (applying arbitrary-and-capricious review when plan grants discretion)
- McDaniel v. Chevron Corp., 203 F.3d 1099 (9th Cir.) (Treasury regulation addressing overly broad discretion and limits on treating interpretations as amendments)
- Kirkendall v. Halliburton, 707 F.3d 173 (2d Cir.) (distinguishing reinterpretation cases and Treasury Reg. §1.411(d)-4 issues)
- Thornton v. Graphic Commc’ns Conference, 566 F.3d 597 (6th Cir.) (purpose of anti-cutback rule; application in ERISA contexts)