ERISA-Fifth Circuit Rules That Plan Administrator’s Denial Of Severance Pay Cannot Be Upheld

In Napoli v. Johnson & Johnson, Inc., No. 14-31000 (5th Cir. 2015), plaintiff Dean Napoli (“Napoli”) appeals from a grant of summary judgment by the district court for defendant, Johnson & Johnson, Inc. (“Johnson & Johnson”), on his ERISA claim for the denial by the plan administrator of post-termination severance benefits. In this case, Napoli, during his employment with Johnson & Johnson, participated in the company’s Severance Pay Plan (“SPP”). Under the SPP, a participant could be denied a severance benefit if he is fired for one of several specified reasons, namely misconduct, violation of company policy or any conduct detrimental to the company. In September 2010, Johnson & Johnson fired Napoli, prompting him to apply for severance pay. The plan administrator denied the benefit claim.

The Fifth Circuit Court of Appeals (the “Court”) reviewed the plan administrator’s decision to deny the claim for abuse of discretion. The Court noted that the only documents before the plan administrator at the time of its initial review were Johnson & Johnson’s Performance and Conduct Standards Policy and a September 2010 letter from Johnson & Johnson’s general counsel to Napoli. The Performance and Conduct Standards Policy is not specific to Napoli or to his alleged violation of company policy; rather, it merely is the policy itself. Needless to say, a citation to a policy is not evidence that Johnson & Johnson fired Napoli for violating that policy, or any of the reasons for which the SPP denies a severance benefit. The September 2010 letter asserts that Napoli is ineligible for severance benefits because he “was terminated for a Group I violation.” The letter then states: “Furthermore, since [Napoli] wrongfully expensed over $3,000 on his American Express account, the company hereby demands repayment.” The Court felt that this letter, like the policy, does not demonstrate that Napoli was fired for any of the reasons for which the SPP denies a severance benefit.

Based on the foregoing, the Court found that the plan administrator’s denial of severance benefits was not supported by substantial evidence and could not be upheld even under a deferential review. Accordingly, the Court reversed the district court’s decision, and remanded the case back to the district court.

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