                      NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                                 File Name: 12a0746n.06
                                                                                                              FILED
                                                     No. 11-3405
                                                                                                         Jul 11, 2012
                                 UNITED STATES COURT OF APPEALS                                  LEONARD GREEN, Clerk
                                      FOR THE SIXTH CIRCUIT


DENNIS SHAPPIE,                      )
                                     )                                     ON APPEAL FROM THE UNITED
      Plaintiff-Appellant,           )                                     STATES DISTRICT COURT FOR
                                     )                                     THE NORTHERN DISTRICT OF
v.                                   )                                     OHIO
                                     )
MINSTER MACHINE COMPANY RESTATED     )                                                                  OPINION
NON-BARGAINING EMPLOYEES’ RETIREMENT )
PLAN,                                )
                                     )
      Defendant-Appellee.            )



BEFORE:           COLE and CLAY, Circuit Judges; and MATTICE, District Judge.*

         MATTICE, District Judge. Plaintiff-Appellant Dennis Shappie appeals the district court’s

determination on cross-motions for judgment on the administrative record that the Retirement

Committee (“the Committee”), the administrator of Defendant-Appellee Minster Machine Company

Restated Non-Bargaining Employees’ Retirement Plan (“the Plan”), was not arbitrary and capricious

in interpreting the phrase “regular monthly rate of earnings as reported for Form W-2 purposes

divided by the applicable number of months in the calendar year” in the Plan to exclude the housing

allowance provided by Minster Machine Company (“Minster”) to Shappie while working for it

overseas.




         *
          The Honorable Harry S. Mattice, Jr., United States District Judge for the Eastern District of Tennessee, sitting
by designation.
No. 11-3405
Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

       Shappie argues that the language of the Plan unambiguously provides that the housing

allowance should be included when calculating his monthly earnings in determining his retirement

income, making the Committee’s decision not to do so arbitrary and capricious. Shappie also argues

that, even if the Court finds the language to be ambiguous, the Committee’s decision was still

arbitrary and capricious given the Committee’s substantial conflict of interest; its use of financial

calculations – of the cost of the competing definitions to the self-funding employer – instead of the

language and intent of the Plan in making its decision; and the indistinguishability of certain

included items – such as the commodities and services allowance – from the excluded housing

allowance. The Plan responds that the Committee’s decision was “rational, well-reasoned and

consistent with Plan language and prior practices,” not arbitrary and capricious, and thus this Court

is “require[d]” to uphold that decision and affirm the district court.

       For the following reasons, we AFFIRM the judgment of the district court.

                                                  I.

       The relevant facts are not in dispute. Shappie was hired by Minster on February 19, 1973,

and continued in its employ until he retired on May 31, 2009, at the age of 57. From October 1995

through November 2004, he worked on foreign assignment for Minster in Hong Kong.

       In July 1995, Minster enacted the “Expatriate Policy,” a policy applicable to all employees

working outside their home country for at least twelve months. The policy is divided into six

sections: 1.0 Scope, 2.0 Employment Conditions, 3.0 Compensation, 4.0 Benefits, 5.0 Taxes, and

6.0 Termination.

       Section 1.0 (“Scope”) specifies that:

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Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

       In consideration of the impact such assignment may have on employees and their
       families, it is the Company’s intent, through this policy, to:

       A.      Provide adequate incentives for employees and their families to move and to
               adjust to different living patterns and cultural and social environments.

       B.      Provide reasonable assurance that no undue personal or financial hardships
               accrue to the employee as a result of a foreign assignment.

It further specifies that “[t]his policy covers only those items of overall·company practice which are

different from those which routinely apply to all Minster employees.”

       The items included – and explained in detail – under the “Compensation” heading are: 3.1

Base Salary, 3.2 Salary Increase, 3.3 Housing and Utilities Allowance, 3.4 Commodities and

Services Allowance, 3.5 Education Allowance, and 3.6 Method of Payment. The items included

under “Benefits” are: 4.1 Coverage (relating to benefit program coverage), 4.2 Holidays, 4.3

Vacations, 4.4 Home Leave (providing for air fare to home country), 4.5 Emergency Leave, 4.6

Travel To and From Overseas Assignment, 4.7 Household and Personal Effects Transportation, 4.8

Automobile, and 4.9 Relocation Allowance. Section 5.0 “Taxes” has two provisions, one related to

tax equalization payments and one related to tax preparation.

       To arrange for the payment of his housing when he lived in Hong Kong, at first, Shappie

would write letters to Bob Sudhoff, a Minster executive, specifying the amount of rent and to whom

it should be paid, including bank account information. In 2002, Minster started paying the money

for rent directly to Shappie.

       The record also includes copies of documents entitled “The Minster Machine Company

International Compensation Package” that are described as either “Prepared by Ernst Young, LLP”


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Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

or “Ernst and Young LLP,” depending on the year, with effective dates of July 1, 1996, January 1,

1997, and January 1 and February 20, 1998. These appear to be summaries of compensation relating

to Dennis Shappie, all of which list amounts – given in both “annual” and “weekly” amounts – for:

(1) “Base Salary”; (2) “Hypothetical Tax Withholding Federal and State of Ohio”; (3) “Relocation

Allowance”; (4) “Housing and Utilities Allowance”; (5) “Hypothetical Shelter Retention” (with a

notation below “Reflects your home country rent or mortgage interest, utilities, property and

household goods, insurance, maintenance and repair, and property tax”); (6) “Commodities and

Services Allowance”; and (7) “NET PAY IN HOME CURRENCY.” The 1997 summary adds“Qtrly.

Adj. - Weekend & Holidays (27% x Base)” and “401K Contribution (13% x Base).” The 1998

summary keeps those two additions – although moving the “Qtrly Adj.” to after the net pay line and

excluding it from that value – and omits the “Relocation Allowance” amount. For each of these three

summaries, the “Housing and Utilities Allowance” is listed as “Paid in Kind” with no fixed monetary

value given (or included in the “net pay” values). There are no more of these summaries for any of

the other years Shappie was in Hong Kong.

        On August 7, 1997, Dave Stucke sent Shappie a memorandum with the subject line “Tax

Issues” that addressed tax issues surrounding Shappie’s living costs while he was “an Expatriate.”

It said that the “living costs” of his for which Minster was paying “are a taxable fringe benefit to you,

and you must pay payroll taxes on this amount,” while continuing to say “[t]he only taxes you must

pay on this benefit are social security and medicare taxes.” The memorandum said that the amount

Minster paid for Shappie’s housing (approximately $2900 a month) would be “added to” his weekly

pay so that his “taxes [would be] calculated on [his] gross plus the benefit,” with “the amount of the

                                                  -4-
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Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

adjustment [then being] deducted back out of [his] net pay.” Stucke said “I know this is confusing

. . . You just need to remember that you receive no additional cash compensation as a result of

receiving the benefit; however, your net pay will be reduced by the amount of the taxes on the

benefit.” It concluded by saying that because the living expenses had not been recorded by payroll,

his paychecks would reflect “catch up” payments through October 1997, after which he would be

“current” and would see only the once-monthly adjustment. While not addressed by this

memorandum, both the Plan and the district court identified another tax issue as significant: that

while Shappie was living in Hong Kong, it appears as though he claimed not only the Housing

Exclusion and/or Deduction, but also the Foreign Earned Income Exclusion on his federal tax

returns.

        Shappie became a participant in the Plan on June 20, 1977, the current version of which was

last amended October 1, 1997. The Plan specifies that Shappie’s “Monthly Retirement Income . . .

shall be equal to . . . [o]ne and two tenths percent (1.2%) of [his] Average Monthly Earnings

multiplied by [his] Credited Service,” but “in no event less than . . . [s]ixteen dollars and fifty cents

($16.50) multiplied by the [his] Credited Service.” “Average Monthly Earnings” is defined (in

relevant part) in Section 1.07 as “the highest average of Monthly Earnings (as defined in this Article

I) as determined for any sixty (60) consecutive months prior to the Participant’s Disability Date,

Early Retirement Date, Normal Retirement Date, termination 1 date under Section 4.01, or date of

death.” “Monthly Earnings” – the phrase subject to so much dispute in this action – is defined (in

relevant part) in Section 1.31 as “the Participant’s regular monthly rate of earnings as reported for



                                                  -5-
No. 11-3405
Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

Form W-2 purposes divided by the applicable number of months in the calendar year.” The provision

goes on to specify “[s]uch rate shall be determined as of the first day of each month.”

        The Plan also specifies how it is to be administered in Article V (“The Retirement

Committee”). Section 5.01 sets forth how the Committee is to be established: “The Board of

Directors shall appoint three (3) or more persons to be known as the ‘Retirement Committee’ to

administer the Plan and to keep records of individual Participant benefits.” Those members “shall

serve until their resignation or dismissal by the Board of Directors,” and “[t]he Board of Directors

may dismiss any member of the Retirement Committee at any time with or without cause.” Claims

Procedures are set forth in Section 5.03, which includes the provision “[t]he Retirement Committee

shall interpret the Plan and shall determine all questions arising in the administration, interpretation

and application of the Plan.” It also directs the Committee to “rely on the records of the Employer,

as certified to it, with respect to any and all factual matters dealing with the employment of an

Employee or Participant,” and specifies that if there is a factual dispute, the Committee “shall resolve

such dispute giving due weight to all evidence available to it.” During the dispute over Shappie’s

retirement benefits, the Committee had three members – Stephen Kill, Robert Sudhoff, and John

Winch – who were, respectively, Minster’s Vice-President for Human Resources, Chief Financial

Officer, and President.

        Shappie began considering retirement in 2008 and asked Kill to calculate his potential

retirement benefits. Kill provided Shappie with a “Retirement Calculation Detail” on July 15, 2008,

which (among other things) showed that the five years of compensation to be used for the average

were 2000-2004 and had compensation in the amounts of $105,855.60, $103,570.72, $141,426.98,

                                                  -6-
No. 11-3405
Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

$135,206.99, and $122,162.70 respectively. After briefly reviewing these figures, Shappie decided

to delay making a decision until 2009. In February 2009, he looked at the figures again and noticed

that the housing allowance was included in his compensation only for the years 2002-2004. He asked

Kill to revise the calculations such that the housing allowance was included for all the years he

worked in Hong Kong; Kill responded that the housing allowance should not have been included at

all. Kill provided a revised Retirement Calculation Detail on February 20, 2009, which showed the

highest five years to be 1998-2002, with compensation in the This updated calculation excluded not

only the housing allowance, but also the Commodities and Services Allowance (“C&S allowance”)

and the foreign service bonus.

       In a letter to Kill dated April 4, 2009, Shappie wrote that he “disagree[d] with [his]

calculation,” going on to explain:

       My reason for the appeal is that, in computing my monthly retirement benefit, you
       did not take into account the full amount of my reported W-2 income in determining
       the highest consecutive 60 months of Monthly Earnings under section 1.31 of the
       Plan and Average Monthly Earnings under section 1.07 of the Plan.

       Since 1995 and the beginning of my ex-pat contract I have understood that the W-2
       statements would be used to determine my retirement benefits the same that is stated
       in the Summary Plan Description. I have been provided with periodic statements
       since 2004 with calculations of retirement benefits that were based on the W-2
       statements. I was told by Jim Maish that the retirement benefits were based on the
       W-2 statements and that the housing allowance was included in the calculation.

       As you recall in February 2009 I approached you for a review of the calculation since
       I saw that the years used in the calculation were not my best years and some did not
       show the correct W-2 earnings. At that time you reviewed my calculations and
       reduced the benefit by removing the housing allowance from the W-2 reported
       income. The reason offered was that it was the interpretation of the plan
       administrators that the housing allowance was to be excluded. I cannot find any


                                                -7-
No. 11-3405
Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

        language in the Plan or Summary Plan Description to support this decision so I feel
        it necessary to request a review by the retirement Committee.

        The record also includes an undated document prepared by an unidentified author labeled

“Dennis Shappie Pension Eligible Earnings Worksheet” (“the Worksheet”). Given Shappie’s letter,

the language used in that document and its general content, and the course of the relevant events, it

appears that the Worksheet was prepared around the time Shappie wrote his April 4, 2009 letter and

before the Committee’s May 4, 2009 decision. The worksheet gives dollar amounts for the following

line items for the years 1996 through 2004, with what appear to be the author’s added comments and

descriptions, identified in the original with italics or parentheses: (1) “Base and 10% Foreign

Assignemnt [sic] Amt”; (2) “Commodities & Services Allow”; (3) “Hypo Tax deduction”; (4)

“Vacation Adjustment”; (5) “Hong Kong Housing” with a note below “Housing was paid to his

landlord with a non-cash tfb1 adjustment done in payroll”; and (6) “Family Travel” with the

parenthetical “(non-cash TFB).”

        Three other line items are also included, but have values for only one or two years: (1)

“Travel Bonus Adjustment”; (2) “Insurance Bonus Adjustment” with the parenthetical “(Mercer

didn’t include, we did on the latest calcs and will this time too)”; and (3) “Tax Equalization 95 - 98"

with both the parenthetical “(not going to include for calc, but was included on the latest calcs given

to DS)” and a note below “compares taxes would have been liable for if in Ohio against his tax

liability per his returns.”




       1
           Given the context provided by the Stucke letter, “tfb” can be read to stand for “taxable fringe benefit.”

                                                          -8-
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Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

       Following these values is a table – headed by the italicized comment “1998 max comp was

$160k - he hits the limit if we include housing” – that appears to give estimates under four different

scenarios, identified as: “Grand Total with 401k def included”; “Pension Eligible excluding C&S”;

“Pension Eligible Cash Compensation including C&S” (which appears to be highlighted or selected);

and “Pension Eligible if have to include Housing too.” Below the table is a note saying “note If we

have to do this - these are even higher than what originally tipped him off to the problem, because

those numbers backed out the hypo tax.” There is also a summary table – prefaced with the note

“These are very rough estimates!!” – showing the value for “Mthly Ave Used for calc given to

Dennis” as 8669.29 and then showing results for “Increase to Mthly Average,” “Approx effect to

mthly pension amount,” and “Over 20 years” under two different scenarios – “with C&S” and “with

housing & C&S.” As Shappie notes, the “Over 20 years” column shows a difference of almost

$300,000 between “with C&S” ($98,580) and “with housing & C&S” ($395,146).

       In keeping with the claims procedures outlined in Section 5.03 of the Plan, the Committee

responded to Shappie’s letter and provided a written notice related to the partial denial of Shappie’s

claim by its own letter dated May 4, 2009, noting (in relevant part):

       The Plan definition of Monthly Earnings provides that the earnings to be considered
       are the Participant’s "regular monthly rate of earnings as reported for Form W-2
       purposes." Thus, not only must the earnings be reported for W -2 purposes, but the
       payments at issue must be a regular rate of monthly earnings. On this basis, the
       following are included in your "Monthly Earnings" for purposes of calculating your
       benefits:

               • Base and 10% Foreign Assignment Bonus
               • Commodities and Services Allowances
               • Weekend and Holiday Pay
               • Vacation Adjustments

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Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

                  • Travel Bonus Adjustments
                  • Health Insurance Premium Adjustments

Excluded from your "Monthly Earnings" for purposes of calculating your benefits are the following:

                  • Airline tickets purchased for your family
                  • Lump sum tax equalization payments
                  • Housing allowance

         The items excluded were not part of your regular rate of monthly earnings. You
         specifically questioned the exclusion of your housing allowance. As you know, the
         housing allowance was paid to your Hong Kong landlord, and the amount of the
         payment was based on the actual rent incurred. Although we were required to include
         these on your W-2 statement for tax purposes, these payments were not a part of your
         "regular rate of monthly earnings" and are properly excludable from your pension
         calculation.

Nowhere does the Committee give what it believes the definition of “regular rate of monthly

earnings” to be, nor does it say why certain items were included or excluded, save the housing

payment, although its statement “[y]ou specifically questioned the exclusion of your housing

allowance” may reflect its belief that Shappie’s letter questioned only the exclusion of the housing

allowance, despite his letter’s reference to the W-2 reported amount of income generally.2 The letter

concludes “[t]his is intended to serve as a partial denial of your claim for additional benefits” and

sets forth the process for appealing from the Committee’s determination.

         Shappie timely appealed this decision, by letter from his counsel dated June 11, 2009. It set

forth a number of grounds for his appeal, including: (1) that statements made by Ms. Barbara Smith

– an Ernst & Young employee engaged by Minster to help develop the Expatriate Policy – induced



         2
          The value of the tickets and the equalization payments are negligible as compared to the effect of the housing
payment, which may explain the apparent confusion.

                                                         -10-
No. 11-3405
Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

him to accept the foreign assignment based, in part, on the expectation of higher earnings in

retirement; (2) the multiple, conflicting calculations of his retirement benefits he had received from

Kill and the Committee; (3) the plain language of the Plan, with his argument emphasizing the

phrase “as reported for Form W-2 purposes”; and (4) his arguments that the fact that the housing

allowance was briefly paid to a third party not only should not have had any effect on the treatment

of that money, but also that there was no language in the Plan justifying such differential treatment.

        On August 7, 2009, the Committee issued its final decision upholding its May 4

determination. The Committee recounted the history of Shappie’s employment and the instant

dispute, before stating that:

        In reaching its conclusions, the Retirement Committee has reviewed Attorney
        Keister’s letter, as well as historic actuarial calculations, the language and intent of
        the Plan, the intent of the expatriate arrangement with Mr. Shappie, the history
        surrounding Mr. Shappie’s foreign assignment and the nature of the items which have
        been included and excluded from the definition of Monthly Earnings for purposes of
        the Plan.

        The Committee then outlined the “Basis for Determination,” addressing the points in

Shappie’s appeal in turn. As to Ms. Smith, it said that it could not find any evidence she made the

statements Shappie alleged, but that even if she had, she was not a Minster employee, a member of

the Retirement Committee, nor a fiduciary of the Plan, and thus could not make representations on

the Plan’s behalf.

        As to Shappie’s arguments regarding the language of the Plan, the Committee reframed his

attorney’s arguments somewhat, in a manner not entirely in keeping with the arguments actually

made by Shappie’s counsel, construing Attorney Keister to be arguing that it “should ignore the


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Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

portion of the definition of Monthly Earnings which references ‘regular rate of monthly earnings’

because that phrase is not defined in the Plan” and that “in order to exclude the housing allowance,

the Plan must specifically provide for such an exclusion,” which the Committee then took to mean

Keister was arguing that “the only relevant language in the definition of Annual Earnings is the

reference to the Form W-2.” The Committee rejected these arguments in turn, citing its full

discretion to interpret the Plan and noting that adopting such a construction of the language would

ignore the phrase “regular monthly rate of earnings.” The Committee went on to say that “[b]ased

on the language of the Plan, the nature of the payments at issue and historic Plan administration, the

Retirement Committee has determined that the Housing Allowance was not part of Mr. Shappie’s

regular monthly rate of earnings,” which conclusion was unchanged by “[t]he fact that the Plan does

not contain a specific exclusion for the Housing Allowance . . . .”

       Third, the Committee addressed the inconsistencies in the various calculations given by

discussing a change in actuarial consulting firms and the technical source of compensation figures

they used.

       Finally, the Committee discussed the Housing Allowance specifically, noting that “Shappie

was aware that the Housing Allowance was not part of regular earnings,” because he “was provided

with a summary of his compensation package, dated July 1, 1996,” which “showed the Housing

Allowance as ‘Paid in Kind’ and not part of Mr. Shappie’s pay.” Next, it noted that “[t]he Housing

Allowance payments were not made as part of Minster’s regular payroll,” and referenced the August

1997 Stucke Memorandum regarding tax issues. Third, it discussed the manner of payment of the

housing allowance – first to United Asia, then to Shappie directly after United Asia closed – saying

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only that “[a]lthough the payments were reported for W-2 purposes, they were not part of Mr.

Shappie’s regular earnings.” Fourth, the Committee analyzed Shappie’s W-2 statements, noting that

“[t]he 1996 W-2 clearly shows that Housing Allowance and reimbursement for family travel were

not considered regular earnings,” because “[t]hese items were reported on a ‘Supplemental W-2’ and

shown as ‘Benefits’ in Box 12,” and because “[s]imilarly, the 1997, 1998, 1999 and 2000 W-2s also

showed the housing allowance as a ‘Benefit’ in Box 12,” until 2001, when “the government changed

the Form W-2, and there was no longer a clear place to break out Benefits included in the wages

box.” Fifth, it stated that it believed that the purpose of the housing allowance was not “irrelevant,”

as it believed Keister had argued, because “[t]he payments were based on the actual rent incurred”

and because “[u]nder no circumstances were the payments intended to be used by Mr. Shappie for

any other purpose.” Finally, it stated that “Shappie himself did not treat the housing allowance as

part of his regular earnings,” because he “reduced his taxable income on his U.S. income tax return

each year by the maximum amount permitted which was attributable to his housing allowance. This

amount was treated separately from his foreign earned income.” The letter advised Shappie that if

he did “not agree with this decision, he ha[d] a right to bring a civil action under Section 502(a) of

[ERISA].”

       Shappie did so, filing the instant suit in state court on November 3, 2009. The Plan removed

the case to the Northern District of Ohio on November 30, 2009. After cross-motions for judgment

on the administrative record, the district court ruled in the Plan’s favor on March 22, 2011.

       The district court found the phrase “regular monthly rate of earnings as reported for Form

W-2 purposes” to be ambiguous. It rejected Shappie’s argument – that “because the housing

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Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

allowance was ‘paid at a regular monthly rate’ by Minster, it was part of his ‘regular monthly

earnings.’” – on the grounds that (1) “the phrase ‘regular’ would be redundant with ‘monthly’ if it

were interpreted to refer only to the intervals at which Plaintiff received compensation”; and (2)

“while the housing allowance was ‘regular’ in the sense that it was paid on a regular monthly basis,

it was not ‘regular’ in the sense that it was, by Plaintiff’s own admission, a variable amount

dependent entirely on the actual housing costs incurred by Plaintiff.” The district court also

emphasized that “it was the only item listed on Plaintiff’s compensation package as ‘Paid in Kind’”

and reiterated the Committee’s arguments about the W-2 breakout of housing costs. It then found

that the Committee’s August 2007 decision was a “‘reasoned explanation’ adequately supported by

the record,” repeating the five bases laid out in that decision (in-kind designation, based on actual

rent, August 1997 memorandum, broken out on W-2, and Shappie’s deducting it).

       The district court then addressed Shappie’s conflict of interest argument – premised upon

the Committee’s being comprised of three of the highest-level executives within the company that

was also responsible for paying claims – although it seemed to focus almost exclusively on precedent

emphasizing a history of biased claims administration. It said that Shappie “attempts to bolster his

‘conflict-of-interest’ argument with evidence that the Committee’s interpretation creates unjustifiable

inconsistencies between the treatment of his housing allowance and ‘other employment revenue’ he

derived, such as his Commodities and Services Allowance,” but rejected these arguments, finding

that there was a reasonable basis for treating the C&S allowance differently from the housing

allowance. Among these bases were that the C&S allowance “was analogous to a cost of living

adjustment, which most employees receive annually as an increase in salary” and that it “did not vary

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Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

on a monthly basis; was not demarcated ‘Paid in Kind’ on the itemization of Plaintiff’s

compensation but instead given a specific dollar amount; was not tied to actual expenses incurred;

and was not listed in Box 12 on Plaintiff’s Form W-2.”

       Finally, Shappie appealed to this Court on April 22, 2011.

                                                  II.

       Because the Plan gives the “administrator or fiduciary discretionary authority to determine

eligibility for benefits or to construe the terms of the plan,” this Court reviews the district court’s

decision de novo but reviews the Committee’s decision under the arbitrary and capricious standard

of review. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). As we have previously

noted “[u]nder this deferential standard, when it is possible to offer a reasoned explanation, based

on the evidence for a particular outcome, that outcome is not arbitrary or capricious.” Cox v.

Standard Ins. Co., 585 F.3d 295, 299 (6th Cir. 2009). Further, “we grant plan administrators who

are vested with discretion in determining eligibility for benefits great leeway in interpreting

ambiguous terms.” Moos v. Square D Co., 72 F.3d 39, 42 (6th Cir. 1995) (citing Cook v. Pension

Plan for Salaried Emps. of Cyclops Corp., 801 F.2d 865 (6th Cir. 1986)). Yet the arbitrary and

capricious standard “is not a rubber stamp of the administrator’s decision,” but rather “requires us

to review the quality and quantity of the evidence and the opinions on both sides of the issues.”

Kovach v. Zurich Am. Ins. Co., 587 F.3d 323, 328 (6th Cir. 2009) (internal citations, quotation

marks, and alterations omitted).

       The parties disagree, though, on how this standard of review is affected by any conflict of

interest. In Cox, we explained the effect of any conflict of interest:

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        Deferential review is tempered, however, when an important conflict of interest
        consideration requires that benefits decisions be closely scrutinized. When the same
        entity determines eligibility for benefits and also pays those benefits out of its own
        pocket, an inherent conflict of interest arises. In close cases, courts must consider that
        conflict as one factor among several in determining whether the plan administrator
        abused its discretion in denying benefits.

Cox, 585 F.3d at 299 (citing Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008)). While “such a

conflict is a red flag that may trigger a somewhat more searching review of a plan administrator’s

decision, [ ] the arbitrary and capricious standard remains in place.” Schwalm v. Guardian Life Ins.

Co. of Am., 626 F.3d 299, 311-12 (6th Cir. 2010) (citing Glenn, 554 U.S. at 115).

        We reject Shappie’s contention that the language of the Plan is unambiguous. In doing so,

it is important to note that, first and foremost, all relevant parties, including the district court, have

been analyzing only part of the key phrase; the full sentence containing the disputed language reads:

“regular monthly rate of earnings as reported for Form W-2 purposes divided by the applicable

number of months in the calendar year.” The term “rate” is nonsensical if the emphasized language

is excluded, as the earnings reported on the W-2 are yearly sums, not a monthly rate. To achieve a

monthly rate, it is necessary to divide that yearly sum by the number of months worked (usually –

as in this case – twelve). From the full context, it appears to the Court that the only way to read that

sentence is as the Plan setting forth an objective measure to determine the “monthly rate of

earnings,” that is as the W-2 wages, compensation, tips, etc. divided by the number of applicable

months. The addition of “regular,” though, introduces significant confusion and ambiguity, as –

despite the Committee’s contentions – the W-2 Form does not break income down into “regular” and

other. Further, the Plan uses the word “regular” or one of its related form in other contexts, and the


                                                  -16-
No. 11-3405
Shappie v. Minster Mach. Co. Restated Non-Bargaining Emps.’ Ret. Plan

meaning therein tends to support Shappie’s “routinely recurring” construction. Regardless, because

this Court agrees that “regular” introduces significant ambiguity into the phrase "regular monthly rate

of earnings as reported for Form W-2 purposes divided by the applicable number of months in the

calendar year,” we thus must defer significantly to the Committee in interpreting the phrase.

       The Court agrees with Shappie, however, that the Committee here evidenced significant bias

in this case. Even factoring in this bias, this Court cannot say that the Committee’s decision was

arbitrary and capricious. While – despite the Plan’s contentions – the W-2 Form does not break

income down into “regular” and other, it did for some time allow certain amounts to be broken out

as “benefits.” Further, the employer is the individual who chooses how to characterize such income,

and thus it could argue by using the definition “as reported for Form W-2 purposes” it incorporated

the distinction embedded in the W-2 until 2001. This argument is somewhat bolstered by the August

1997 Tax Issues Memorandum that outlined the tax issues and emphasized that the housing

allowance entailed “no additional cash compensation.”

       Therefore, because the relevant language is ambiguous and because this Court cannot say that

the Committee’s decision was arbitrary and capricious, the judgment of the district court is hereby

AFFIRMED.




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