The opinion
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
DEREK KRAMER,
Plaintiff,
:
v. Case No. 2:21-cv-5501
Judge Sarah D. Morrison
Magistrate Judge Kimberly A.
AMERICAN ELECTRIC POWER Jolson
EXECUTIVE SEVERANCE PLAN,
:
et al.,
Defendants.
OPINION AND ORDER
Derek Kramer brings this ERISA action against the American Electric Power
Executive Severance Plan and its sponsor, American Electric Power Service
Corporation, after a determination that Mr. Kramer was not entitled to benefits
under the Plan. (See Compl., ECF No. 1.) The Administrative Record was filed (ECF
No. 21-1), though Mr. Kramer was allowed limited additional discovery. The matter
is now before the Court on Defendants’ Motion for Summary Judgment. (Mot., ECF
No. 41.) Mr. Kramer responded (Resp., ECF No. 52) and Defendants replied (Reply,
ECF No. 53). Because AEP’s conclusion that Mr. Kramer was terminated for Cause
was neither arbitrary nor capricious, AEP’s Motion for Summary Judgment is
GRANTED.
I. BACKGROUND
AEP established and maintains the American Electric Power Executive
Severance Plan (“Plan,” appearing at ECF No. 21-1, PAGEID # 155–80) to provide
severance benefits to a select group of employees if their employment is
involuntarily terminated. (Id., § 1.1.)
In July 2018, AEP hired Mr. Kramer to be Vice President and Chief Digital
Officer of AEP CHARGE, “a new AEP innovation hub.” (ECF No. 21-1, PAGEID
# 139.) AEP invited Mr. Kramer to participate in the Plan and, on April 3, 2019, he
accepted. (Id., PAGEID # 145.)
A. Mr. Kramer was terminated after an internal investigation into
his assistant’s use of company credit cards.
Two weeks after becoming a participant in the Plan, Mr. Kramer had a call
with Thomas Festi and Tom DeHaven from AEP’s Audit Services Department
(“ASD”). (Id., PAGEID # 195.) During an annual proactive audit of company credit
card use, ASD discovered that Martha Napalo (Mr. Kramer’s Executive Assistant)
had been charging personal expenses1 to her company credit card—including
“amazon purchases, meals for herself while out running errands for the department,
supplies and snacks for the office, office hygiene and grooming items and gas for her
personal vehicle.” (Id.; see also id., PAGEID # 205 (“[Ms. Napalo] had 66 personal
expenses for $2,069.01 for the period 9/19/16 (her hire date) through 3/22/19.”).)
Messrs. Festi and DeHaven raised the issue directly with Mr. Kramer, “because Mr.
Kramer, as Ms. Napalo’s supervisor, has the responsibility to approve only
appropriate charges and he is AEP’s control over expenses for his subordinates.”
1 AEP’s Corporate Credit Card Policy prohibits using the company credit card
use “for personal or non-business purposes.” (ECF No. 21-1, PAGEID # 280.) The
Policy also provides that “[a]pproving supervisors are responsible for verifying the
validity of” charges to a company credit card. (Id.)
(Id., PAGEID # 195.) Mr. Kramer “indicated that he wanted to discuss the charges
with” Ms. Napalo. (Id.) Later that day, Mr. Kramer emailed Mr. DeHaven:
Thomas,
Thanks for the insight.
Connected with Martha this morning and covered off on the personal
expense as a rare exception, timely submission, and mileage-over-gas
reimbursement.
Thank you again,
(Id., PAGEID # 198.)
In ASD’s audit the following year, however, “Ms. Napalo’s name appeared as
having the third highest number of charges on an AEP credit card. Her charges
rivaled those of [AEP’s] entire Fleet Services and Aviation organizations.” (Id.,
PAGEID # 195–96.) ASD investigated and found that $854 of expenses were
personal in nature, but processed by Ms. Napalo and approved by Mr. Kramer as
business-related. (Id., PAGEID # 189.) Those charges included “Christmas and
birthday gifts for [Mr. Kramer], flowers for [Mr. Kramer’s] wife, flowers for [Ms.
Napalo’s] family, [and] a dress and bottles of personal fragrance for [Ms. Napalo].”
(Id.)
On September 22, 2020, AEP’s Ethics and Compliance department
interviewed Mr. Kramer about the expenses. (Id.) His employment was then
suspended for the remainder of the investigation. (Id.; see also id., PAGEID # 185.)
Per company policy, AEP Region Security Coordinator Kerrie Campbell went to Mr.
Kramer’s home after the interview to retrieve his company-issued cell phone. (Id.,
PAGEID # 202.) Her Affidavit recounts the event:
5. When I arrived at Mr. Kramer’s home, and upon ringing the door
bell, Mr. Kramer answered. I identified myself and advised Mr. Kramer
that I was there to collect his phone for an ongoing investigation.
6. Upon my asking Mr. Kramer for the phone, Mr. Kramer hesitated
and asked if he could place a call first. As a courtesy, I agreed. At that
time, he went back into the house and left me on his front porch.
7. When Mr. Kramer returned, I again asked him for the cell phone.
He held it in his hand and hesitated and said it was his phone and he
used it for personal use. He then provided me with the phone and,
pursuant to our protocol, I requested the PIN/security code for the
phone. Mr. Kramer once again hesitated and then stated that if “I give
you the Pin you will be able to see what I have on the phone” I looked at
him and stated “yes they may need to look at the phone.” Mr. Kramer
told me the pin and I repeated it back to him. He advised it was correct.
I wished him a good day and I returned to my vehicle.
8. Upon returning to my vehicle, I wrote the Pin down he had given
me, and started to pull away. I tested the PIN and learned that it was
incomplete. I looked back towards Mr. Kramer’s front door and saw him
pacing outside, talking to himself in an animated manner.
9. I pulled my car around through Mr. Kramer’s circle driveway and
got out of the car with the phone. I advised Mr. Kramer that I needed to
confirm the PIN because I was not sure I had the complete PIN. Mr.
Kramer then provided the complete PIN, which I confirmed unlocked
the phone.
(Id., PAGEID # 202–03 (reproduced as written).)
When the phone returned to AEP, it was sent for digital forensic
examination. (Id., PAGEID # 182.) AEP Security Manager Michael Knorps swore in
an Affidavit:
The phone was powered on and displayed the airplane mode symbol and
the standard login password screen. The phone was unlocked using the
passcode provided by Mr. Kramer. Password prompts were observed.
This indicated a potential network connection and the Apple ID
password having been changed prior to the phone being turned on, in
addition to application passwords being changed remotely. The phone
connected to an internal wireless network at AEP. The normal forensic
extraction process was started but the device rebooted and began wiping
itself clean. No other settings or operations were pressed on the phone.
When the phone finished the rebooting process, it was fully wiped which
indicated that a remote wipe had taken place.
(Id.)
On September 29, 2022, Mr. Kramer was asked why the phone wiped clean
and restored to factory settings. He explained,
in setting up his new phone, he removed his personal Apple ID and
iCloud account from the old phone. Mr. Kramer did not do so with the
intention of wiping the company phone or know that his actions had
done so until it was brought to his attention during the September 29,
2020 call.
(Id., PAGEID # 153.) But that explanation “did not appear to be possible.” (Id.,
PAGEID # 210.) Later research and testing confirmed that the fact scenario Mr.
Kramer described “did not result in a wiped iPhone[.]” (Id., PAGEID # 215.)
Instead, AEP “concluded that the phone had been wiped remotely by Mr. Kramer.”
(Id., PAGEID # 185.)
Three days later, on October 2, 2020, Mr. Kramer’s employment was
terminated. (Id., PAGEID # 140.)
B. The Plan provides severance benefits to participants who
experience an Involuntary Termination—which does not
include termination for Cause.
The Plan2 provides severance benefits to participating AEP employees in the
event that their employment “is terminated due to an Involuntary Termination or a
Good Reason Resignation.” (Plan, § 1.1.) An “Involuntary Termination” is a
2 The only Plan document included in the record was amended and restated
as of January 4, 2021. Neither party argues or alleges that the Plan’s terms were
different in any material or relevant way on the date of Mr. Kramer’s employment
termination.
“termination of employment initiated by [AEP] for any reason other than Cause.”
(Id., § 2.18.) A participant whose employment is terminated for Cause is not entitled
to Plan benefits. (Id., §§ 3.2(c)(4), 4.3.) “Cause” is defined to include:
(ii) commission of an act of willful misconduct, fraud, embezzlement or
dishonesty either in connection with the Employee’s duties to any
AEP System Company or which otherwise is injurious to the best
interest or reputation of any AEP System Company; [and]
(v) a material violation of any of the rules of conduct of behavior of any
AEP System Company, such as may be provided in any employee
handbook or as an AEP System Company may promulgate from time
to time, following notice and a reasonable opportunity to cure (if such
violation is capable of cure)[.]
(Id., § 2.5.) The Plan provides that “[t]he Committee3, in its sole and absolute
discretion, shall determine Cause.” (Id.)
C. Mr. Kramer made a claim for Plan benefits. On receiving an
adverse benefit determination, he appealed. The appeal was
unsuccessful.
Mr. Kramer filed a claim for Plan benefits in November 2020. (ECF No. 21-1,
PAGEID # 143.) The claim was denied in a January 19, 2021 letter from AEP Chief
Human Resources Officer Julius Cox. (Id., PAGEID # 145–47.) Mr. Cox determined
that Mr. Kramer was “not entitled to executive severance benefits under the Plan
because [his] termination was for ‘Cause.’” (Id., PAGEID # 145.) Mr. Cox cited both
the corporate credit card misuse and the remote wiping of his company-issued cell
phone as for-Cause reasons driving his termination. (Id., PAGEID # 146.)
3 The “Committee” is defined as “the Human Resources Committee of the
Board of such other committee to which the Board has delegated the functions of its
Human Resources Committee.” (Plan, § 2.8.)
Mr. Kramer appealed Mr. Cox’s decision to the AEP Executive Severance
Plan Appeal Committee. (Id., PAGEID # 149.) The Appeal Committee concluded
that Mr. Kramer’s employment was terminated for failure to supervise Ms. Napalo’s
company credit card use and for remotely wiping his company-issued cell phone
during an internal investigation—and that those reasons constitute Cause. (Id.,
PAGEID # 289–92.) This lawsuit followed.
II. STANDARD OF REVIEW
ERISA benefit determinations are reviewed de novo unless the plan expressly
grants its administrator or fiduciary discretionary authority “to determine
eligibility for benefits or to construe the terms of the plan.” Firestone Tire and
Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); see also Yaeger v. Reliance Std. Life
Ins. Co., 88 F.3d 376, 380 (6th Cir. 1996). If a plan grants discretionary authority,
“application of the highly deferential arbitrary and capricious standard of review is
appropriate[.]” Yaeger, 88 F.3d at 380.
Though the parties agree that the Plan grants discretionary authority to both
the Plan Administrator and the Committee, they dispute the applicable standard of
judicial review.4 Mr. Kramer argues that the Defendants are “judicially estopped
4 They also dispute the proper form of Defendants’ motion for judgment. Mr.
Kramer asserts that the pending Motion for Summary Judgment is either
technically improper or somehow distinct from the ordinary motion for judgment on
the administrative record. (Resp., PAGEID # 584–86 (citing Wilkins v. Baptist
Healthcare Sys., Inc., 150 F.3d 609 (6th Cir. 1998)).) Mr. Kramer puts up a paper
tiger. The Administrative Record is before the Court. (ECF No. 21-1.) Mr. Kramer
was allowed additional discovery, but attached nothing to his Response. The locus of
the dispute is thus the Administrative Record. For avoidance of doubt, the Court
hereby CONSTRUES Defendants’ Motion for Summary Judgment as a motion for
judgment on the Administrative Record.
from asserting a right to deferential review.” (Resp., PAGEID # 586.) Earlier in the
litigation, Defendants successfully argued that the Plan is a top hat plan exempt
from ERISA’s fiduciary provisions. (See ECF No. 49, PAGEID # 575.) In Mr.
Kramer’s view, the Firestone standard applies only to plans subject to those
fiduciary provisions, and urges the Court to proceed with a de novo review. (Resp.,
586–87.) But this Court has concluded that Firestone applies “even if” a plan is a top
hat plan. Whitescarver v. Sabin Robbins Paper Co., No. C-1-03-911, 2005 WL
8168487, at *4 (S.D. Ohio Apr. 28, 2005) (Dlott, J.).5 The Court sees no reason to
alter its prior conclusion.
“A decision reviewed according to the arbitrary and capricious standard must
be upheld if it results from ‘a deliberate principled reasoning process’ and is
supported by ‘substantial evidence.’” Schwalm v. Guardian Life Ins. Co. of Am., 626
F.3d 299, 308 (6th Cir. 2010) (quoting Baker v. United Mine Workers of Am. Health
& Ret. Funds, 929 F.2d 1140, 1144 (6th Cir. 1991)). Judicial review is no “rubber
stamp”—rather the court examines the “quantity and quality of the . . . evidence on
each side.” Id. (citing Evans v. UnumProvident Corp., 434 F.3d 866, 876 (6th Cir.
2006). “[T]hough the [arbitrary and capricious] standard is not without some teeth,
5 Although Whitescarver was affirmed, the Sixth Circuit expressly declined to
take up the question of whether “an ERISA top hat plan must be reviewed under a
de novo standard.” Whitescarver v. Sabin Robbins Paper Co., 313 F. App’x 781, 787
(6th Cir. 2008). Of note, the same Plan language that gave the Court of Appeals
comfort in applying an arbitrary and capricious standard in Whitescarver is also
present here. See id. at 786–87 (“Where the Plan . . . describes the interpretation
reached by the employer/administrator to be ‘binding and conclusive,’ we can only
conclude that the plan meaning is to vest the type of discretion in the Plan
Administrator that must be reviewed under an arbitrary and capricious standard.”).
(See also Plan §§ 7.1 and 7.3, PAGEID # 171.)
it is not all teeth.” McClain v. Eaton Corp. Disability Plan, 740 F.3d 1049, 1064 (6th
Cir. 2014). “[I]ndications of arbitrary and capricious decisions include a lack of
substantial evidence, a mistake of law, bad faith and a conflict of interest by the
decision-maker.” Zenadocchio v. BAE Sys. Unfunded Welfare Ben. Plan, 936 F.
Supp. 2d 868, 884 (S.D. Ohio 2013) (Rose, J.) (citing Caldwell v. Life Ins. Co. of N.
Am., 287 F.3d 1276, 1282 (10th Cir. 2002)). However, “[w]hen it is possible to offer a
reasoned explanation, based on the evidence, for a particular outcome, that outcome
is not arbitrary or capricious.” Shields v. Reader’s Digest Ass’n, Inc., 331 F.3d 536,
541 (6th Cir. 2003) (quoting Davis v. Kentucky Fin. Cos. Ret. Plan, 887 F.2d 689,
693 (6th Cir. 1989)).
III. ANALYSIS
A. Count One – Benefit Denial
Mr. Kramer first asserts that he was improperly denied Plan benefits to
which he was entitled. See 29 U.S.C. § 1132(a)(1)(B). Mr. Cox and the Appeal
Committee concluded that he was not entitled to those benefits because he was
terminated for Cause. Mr. Kramer challenges the basis for those conclusions.
1. The adverse benefit determination was not arbitrary or
capricious.
It is “a fundamental principle of ERISA law—the plain language of the plan
controls.” West v. AK Steel Corp. Retirement Accumulation Pension Plan, 318 F.
Supp. 2d 579, 585 (S.D. Ohio 2004) (Beckwith, J.) (citation omitted). Accordingly,
the Court’s “starting point is the language of the Plan itself.” Farhner v. United
Transp. Union Discipline Income Prot. Program, 645 F.3d 338, 343 (6th Cir. 2011)
Under the Plan, “[e]ach Eligible Employee in the Plan who incurs an
Involuntary Termination or Good Reason Resignation . . . and who satisfies the
conditions of Section 3.2 shall be eligible to receive the Severance Benefits described
in the Plan.” (Plan, § 3.1.) Section 3.2 provides that “[a]n Eligible Employee shall
not be eligible to receive Severance Benefits upon the Eligible Employee’s . . .
termination for Cause[.]” (Id., § 3.2(c).)
Mr. Kramer’s employment was terminated on October 2, 2020. (See ECF No.
21-1, PAGEID # 140.) Ms. Risch swore an Affidavit that she
made the decision to terminate Mr. Kramer’s employment. [She] had
lost trust in Mr. Kramer as a leader of the CHARGE organization and
as a Senior Officer of AEP. Mr. Kramer had been advised a year earlier
that he had an employee whose commingling of company and personal
credit card use was unacceptable and needed to be addressed. He was
also either approving questionable expenses or not paying close enough
attention to notice or question them. Mr. Kramer had a reasonable
opportunity to cure these violations but he took no steps to correct the
behavior. Mr. Kramer failed in his high duty as an Officer of the
Company to manage and monitor corporate assets. When confronted
with these concerns by investigators, he did not show accountability.
Additionally, remotely wiping his Company cell phone was misconduct
and an intentional and willful act of dishonesty.
(Id., PAGEID # 186.)
On review of the claim, Mr. Cox concluded that Mr. Kramer’s employment
“was terminated for Cause for two reasons”—first, a material violation of the rules
of conduct (failure to supervise Ms. Napalo’s corporate credit card) and, second,
willful dishonesty (remotely wiping his company-issued cell phone during an
internal investigation). (Id., PAGEID # 145–48.)
On review of the appeal, the Appeal Committee came to the same conclusion:
Mr. Kramer’s employment was terminated for two independent reasons constituting
Cause and he was, thus, ineligible for Plan benefits. (Id., PAGEID # 289–92.) The
Appeal Committee made additional, explicit findings as to Mr. Kramer’s culpability
for the conduct underlying his termination. As to the material violation of the rules
of conduct, the Appeal Committee explained:
Ms. Napalo used her card to purchase personal goods at your direction,
including a dress for Ms. Napolo’s personal use. It was your
responsibility to review these purchases and ensure that they were
appropriate, which you failed to do.
Further,
[b]oth the 2019 [audit] report and the additional information provided
in the affidavit of Thomas Festi . . . make it clear that you were notified
that your conduct concerning business expenses, including the improper
method for approving the expenses of others, was a material violation of
the company’s rules of conduct and that you were informed as such in
2019.
(Id., PAGEID # 290.) And as to the willful dishonesty, the Appeal Committee found
that the iPhone Research and Testing Report
concludes that you or someone under your control or action must have
intentionally erased the cell phone’s contents remotely. In so doing, you
attempted to deceive AEP about your company cell phone’s contents
during an ongoing investigation and lied about the actions you took to
wipe the cell phone. Further, in the affidavit of Kerrie Campbell . . . , the
record shows that you were not completely cooperative with the
investigation but instead were resistant and dishonest in that process.
(Id., PAGEID # 291.)
Mr. Cox and the Appeal Committee each offered a reasonable explanation,
based on evidence, for their conclusion that Mr. Kramer was terminated for Cause.
As such, the adverse benefit determination was neither arbitrary nor capricious.
The Court will not disturb it.
2. Mr. Kramer’s arguments otherwise fail.
Mr. Kramer offers a laundry list of reasons why the Court should set aside
the determination. None have merit.
Conflict of Interest. Mr. Kramer first argues that “the Plan has a significant
conflict of interest” because a large sum of money is at stake. (Resp., PAGEID
# 589.) Under Sixth Circuit precedent, “conclusory allegations of bias based on th[e]
(relatively common)” conflict of interest that exists when a single entity both
decides and pays claims “do not deserve much weight.” Autran v. Procter & Gamble
Health & Long-Term Disability Benefit Plan, 27 F.4th 405, 418 (6th Cir. 2022)
(internal quotations marks omitted). Instead, a plaintiff “should attempt to uncover
evidence suggesting that the conflict materialized in a concrete way to influence the
administrator’s decisional process.” Id. (citations omitted). Mr. Kramer offers no
such evidence—despite having been allowed discovery outside the Administrative
Record on his allegations of conflict. (See ECF No. 24, PAGEID # 308–09.)
Written Explanation. Mr. Kramer next argues that he was never given a
written explanation for his termination. (Resp., PAGEID # 589.) But neither the
Plan nor the law requires that an employer provide a contemporaneous written
explanation on termination.
Ex Post Facto Evidence. Mr. Kramer further argues that “[a]ll of the ‘for
cause’ evidence was generated after Kramer sought severance benefits.” (Id.) The
Court is unswayed by the insinuation that Mr. Cox’s and the Appeal Committee’s
conclusions were based on ex post facto evidence. The conduct underlying the
decision undeniably occurred before the termination. That it took another week for
the audit report to be finalized, or another month for Ms. Risch to complete an
affidavit, is irrelevant.
Attorney Engagement. With no citation to authority, Mr. Kramer seeks a
negative inference from Defendants’ engagement of attorneys on this matter. (Id.,
PAGEID # 590.) The Court draws none.
Inconsistent Explanations. In an August 29, 2023 declaration, Mr. Kramer
states that AEP’s reasons for his suspension and termination changed over time.
(ECF No. 52-1.) The declaration was not subject to cross-examination, was not
produced in discovery, and was not included in the Administrative Record. The
Court thus declines to consider it. Cf. Ace Am. Ins. Co. v. Gerling & Assocs., Inc.,
630 F. Supp. 3d 919, 926 (S.D. Ohio 2022) (Marbley, J.) (“Self-serving affidavits
alone . . . are not enough to create an issue of fact sufficient to survive summary
judgment.”).
Termination Not For Cause. Mr. Kramer disputes that the conduct alleged
constituted “Cause” under the Plan. (See, e.g., Resp., PAGEID # 591 (“The allegation
the Kramer committed a material violation of the rules of conduct regarding his
expense account does not support a determination that Kramer was terminated for
cause.”).) Mr. Kramer’s multi-part challenge fails to show that the for-Cause
determination was arbitrary or capricious.
Defendants’ motion is GRANTED as to Count One.
B. Count Two – Interference
In Count Two, Mr. Kramer alleges that AEP interfered with his ERISA-
protected rights. See 29 U.S.C. § 1140. According to the Sixth Circuit, the
emphasis of a § 1140 action is to prevent persons and entities from
taking actions which might cut off or interfere with a participant’s
ability to collect present or future benefits or which punish a participant
for exercising his or her rights under an employee benefit plan.
Hogan v. Jacobson, 823 F.3d 872, 885 (6th Cir. 2016) (internal quotations and
citation omitted). But a plaintiff must “show more than the mere denial of a claim to
establish that an [administrator] has acted with the intent of interfering with a
future right under 29 U.S.C. § 1140.” Id. (internal quotation and citation omitted).
Mr. Kramer does not allege that AEP engaged in any conduct beyond denying his
claim for Plan benefits.6 The claim thus fails.
Defendants’ motion is GRANTED as to Count Two.
IV. CONCLUSION
For the reasons above, Defendants’ Motion for Summary Judgment (ECF No.
41) is GRANTED.
IT IS SO ORDERED.
/s/ Sarah D. Morrison
SARAH D. MORRISON
UNITED STATES DISTRICT JUDGE
6 Mr. Kramer argues that AEP interfered with his right to benefits by
“designat[ing] his discharge as ‘for cause’.” (Resp., PAGEID # 598.) That designation
is part and parcel of the claim denial.