# Petition for Writ of Certiorari — Kinam Gold, Inc. v. Lettes

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2001
- **Citation:** 533 U.S. 929

## Text

je Supreme Court, U.S.
(V) FILED

001631 APR 25 2002

No. 00-.

Supreme Court of the Hntted States

KINAM GOLD INC., a Delaware Corporation, formerly known
as Amax Gold, Inc.; AMAX GOLD, INC. SEPARATION PLAN
FOR KEY EMPLOYEES; AMAX GOLD, INC. BENEFITS
COMMITTEE; KINROSS GOLD CORPORATION BENEFITS
COMMITTEE; and KEINROSS GOLD CORPORATION,

Petitioners,

MARK LETTES,
Respondent.

On PETITION FOR A Writ OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

WILLIAM A. WRIGHT RAYMOND M. DEENy*
SHERMAN & Howarb L.L.C. N. DAWN WEBBER
Suite 3000 SHERMAN & Howarp L.L.C.
633 Seventeenth Street Suite 1500
Denver, CO 80202 90 South Cascade Avenue
(303) 297-2900 Colorado Springs, CO 80903
(719) 475-2440
* Counsel of Record :
Attorneys for Petitioners

166533 g

COUNSEL PRESS
(800) 274-3321 + (800) 359-6859

i
QUESTION PRESENTED

An employer, engaged in interstate commerce, created
a Separation Plan for Key Employees. At the discretion of a
Plan Administrator, the Separation Plan provides lump-sum
severance benefits to select employees who suffer a
“Separation from Service” not for “Cause,” but due to a
“Change in Control,” and who are not offered “Comparable
Employment.” The Separation Plan specifies a source of
funding, eligibility standards for participants, formulae for
benefit calculations, claims and appeals procedures, and
participants’ rights under the Employee Retirement Income
Security Act of 1974,\as amended (“ERISA”).

The question presented here is: Does Fort Halifax
Packing Co. v. Coyne, 482 U.S. 1 (1987), provide the proper
standard to determine whether ERISA preempts state
common law claims for benefits from the employer-
sponsored Separation Plan for Key Employees?

il

PARTIES TO THE PROCEEDING AND
STATEMENT PURSUANT TO RULE 29.6

The petitioners are Kinam Gold, Inc.; Amax Gold, Inc.
Separation Plan for Key Employees; Amax Gold, Inc.
Benefits Committee; Kinross Gold Corporation Benefits
Committee; and Kinross Gold Corporation. Kinross Gold
Corporation does business in the United States as Kinam
Gold, Inc., a Delaware corporation. Kinross Gold
Corporation is a nongovernmental corporation. Trimark
Financial Company, a Canadian company, owns in excess
of 10% of Kinross Gold Corporation stock. The other named
petitioners are not corporations.

ili

TABLE OF CONTENTS

Question Presented... . stieets Be

Parties to the Proceeding and Statement Pursuant to
2! Peer ee er ee

eI, a G0 SUK bak oc deuce dade cess
EE Wa ca buwaN Sas eve tS eweuuebevs
Statement of Jurisdiction ......-......ccccccees
Statutory Provisions Involved .................
I OT CMI oo va ccc ceccctsncecvesces

ee

1. The AGI Plan Provides Separation
DL GUS ON bsGG 000s ced b e048 bs 0

2. The AGI Plan Provides Claims and
Appeals Procedures. ...............

3. The AGI Plan Names an Administrator
I, Nc hc aceccaccucacees

iv

Contents
Page
4. The AGI Plan Documents Describe It as
Oh Re OU 6 Shc nus cue eteteess ec cteaee
5. Respondent Applied for Benefits Under
ip AGO: 6.05 60 sasess sees 5
B. The Pracestegs Belew. ...ccccscsceess: 6
S.. FR ee. skein e 6
2. FRO COME OF AMRUI. 005s cciccccess 6
Reasons for Granting the Writ ................. 7
I. The. Court Should Resolve The Federal
Question Concerning ERISA’s Coverage Of
Employer-Sponsored Benefit Plans. ...... 8
A. The Tenth Circuit’s Ruling Conflicts
with ERISA’s Definition of “Plan.” .. . 8
1. ERISA Defines “Plan.” ......... 8
2. The Department Of Labor Has
Interpreted ERISA “Plan.” ....... 10

3. Before Fort Halifax, the Circuit
Courts Interpreted ERISA’s
Definition of “Plan.” ........... 11

Vv

Contents

4. Under the Statutory Definition as

Interpreted by the Department of
Labor and the Circuit Courts, the
AGI Plan Is an ERISA Plan. .....

The Tenth Circuit Departed from
Department of Labor and Circuit
Court Interpretations by Determining
that the AGI Plan Is Not A “Plan”
errr reese

B. The Tenth Circuit’s Ruling Misapplies
Pune Fs 6 v4 ka ocd cbs ee

i

Fort Halifax Held that ERISA Does
Not Preempt State Statutes that Do
Not Require Employers to Establish
ES PRS koa es 6 TS RS

Fort Halifax Did Not Hold that
ERISA Preempts State Law Claims
for Benefits Only If the Employer-
Sponsored Plan is Sufficiently
POET PPPS Te Cy er

The Tenth Circuit Misapplied Fort
Halifax’s Holding Concerning State
Statutes to Limit ERISA Preemption
of State Law Claims to Claims for
Benefits Under Complex Employer-
Sponsored Plans. ..............

Page

12

13

13

13

15

16

vi

Contents

.
C. The Tenth Circuit’s Ruling Eliminates
ERISA’s Protections for Employees.
sodcecectéccheuduealeesweleceus - 18
Il. This Court Should Resolve Conflicts Among
The- Circuit Courts Concerning The
Application Of Fort Halifax To Employer-
SOGRRNOS TOU i bk es Caedersdackeekes 19
A. The Circuit Courts Conflict Over the
Appropriate Standard under Fort Halifax
for Employer-Sponsored ERISA
“TU. «— cndwouveneeereeeetnnceas 19
B. The Circuit Courts Conflict Over
Whether Employer-Sponsored Plans
Similar to the AGI Plan Are ERISA
“FO” conve cee te re eeieenwennt 23

C. The Circuit Courts’ Conflicts over the
Appropriate Standard and over Plans
Similar to the AGI Plan Subject ERISA
Plans to Divergent State and Federal

Conclusion

vii
TABLE OF CITED AUTHORITIES
Page

Cc ases:

Belanger v. Wyman-Gordan Co., 71 F.3d 451
(Tat Cin. 1995) 22.05 sddecute secre 20

Blau v. Del Monte Corp, 748 F.2d 1348 (9th Cir.
SSGS) on cciuwsessaerenb chbckbiedele es ve 18

Bogue v. AMPEX Corp., 976 F.2d 1319 (9th Cir.
I = ccs bcabbecacssuninananeneelanne 21, 23

Collins v. Ralston Purina Co., 147 F.3d 592
y ft PA rer ee ree 24, 25

Commonwealth v. Morash, 522 N.E.2d 409
(Mass. 1988), rev'd, 490 U.S. 107 (1989) ..... 10, 16

Custer v. Pan American Life Ins. Co., 12 F.3d 410
DES SEE RA kactbinnaecksredsgeeeen tes 22

Cvelbar v. CBI Illinois Inc., 106 F.3d 1368 (7th Cir.
SPER Du ncedurvesersbedecusdstaneasenseune 21

Director of Bureau of Labor Standards, et al. v. Fort
Halifax Packing Co., 510 A.2d 1054 (Maine
1986), aff'd, 482 U.S. 1 (1987) .............. 13,14

District of Columbia v. Greater Washington Bd. of
re 15, 16

vili

Cited Authorities
Page

Donovan v. Dillingham, 688 F.2d 1367 (11th Cir.
TD asavavdcussanhuawinbaceweas 11, 12, 15, 22

Egelhoff v. Egelhoff, No. 99-1529 (U.S. March 21,
ND’ vivisnseten ls ae eae 7,14

FMC Corp. v. Holliday, 498 U.S. 52 (1990)«...... 14

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1
CUDOTE 28654 cccnsdyad snes cwebadvesetsnest passim

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133
ET rer ree are fe

Johnston v. Paul Revere Life Ins. Co., 241 F.3d 623
Ge Gas DUET viewer ctiossseeee ay eti avert 22

Kulinski v. Medtronic Bio-Medicus, Inc., 21 F.3d 254
Ses EOD os ccndencbveseaweesaeeieres 21

Massachusetts v. Morash, 490 U.S. 107 (1989) eS

Memorial Hosp. Sys. v. Northbrook Life Ins. Co.,
906 F.26 250 Cree Ge. 1990) 6 ec te hb ciieecs: 22

New England Mut. Life Ins. Co. v. Baig, 166 F.3d 1
Si nS UNE 08 esp wknd Ging bard wacked e wie s 20

Pane v. RCA Corp., 667 F. Supp. 168 (D.N.J. 1987),
aff'd, 868 F.2d 631 (3d Cir. 1989) ............ 21

ix

Cited Authorities
Page
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987)

Russe/lo v. United States, 464 U.S. 16(1983) ...: 10

Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d
Fe GA CEE bho ho Kaka biaeeeeun 20, 21, 23, 24

Scott v. Gulf Oil Corp., 754 F.2d 1499 (9th Cir. 1985)
5 i aha pie RA DRED SORES CARER oa 12

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) . 7, 18

Siemon v. AT&T Corp., 117 F.3d 1173 (10th Cir.

RRR AREER D REED Sire retin gre greg ee 22
Williams v. WCI Steel Co., 170 F.3d 598 (6th Cir.
EP er ee Pre Pee dnt PER Rarer, Meer 22
Williams v. Wright, 927 F.2d 1540 (11th Cir. 1991)
PAN NOD Se Raa ep Mae wR aaa gee 22
Young v. Washington Gas Light Co., 206 F.3d 1200
EE Gis Sn kaa ak i babe abwad ne 20
Statutes:
es es a ha aed aaieuce ncn l

I 6

x

Cited Authorities

Page
Be UDR. BARRE fos ic nedacivaceshactackden 6
Be Uae: SPORES 0c casas 6cdpaeb vena 9, 16
Be Nels B PEE 60 nce ha 9 4504 biGbaeaes I
EP Was BPN os 0 nnn cud cciseaasasaia 14
oP ULB. © SD 6s dca cvawscsticxsaee 9, 12,18
£P Gaal SPR hs i nctiaddiavsreser 8
ae Rs G POLS. hs ccnceckerkexisacsenes 10
oP URE... | TR 0 ik kn ecaskedcerdee 4
BP Ea PEE ono arab cask ceedeaees 1, 13
SF Res © OU. 2454 046 6k nse le 12
rg Ee eer ee tie vka eee 5
Se Are 0 5 8h a 5
or Cs CE 645s cae G a eae 9, 10
Be Ss © PE: és ben eek ek sae 10

WUAL tN 3 10

xi

Cited Authorities

Page
29 U.S.C. §.1133 s.siwanexe vias abe. dee
29 U.S.C. §1 ISSO) ssc eisai eee 3
29 U.3.C.:§ 113362)):2543 ce Riera 3
29 USS: § 1838 4a te ees 10
29 USL GIR ce ie IS CARS 1,7, 14
Other Authorities:
yo ae FO | a ee ee re 12
120 Cong. Rec. 29927-29928 (1974) ............ 7
DOL Op. Letter 79-22A (1979) .......50.00500. 10
DOL Op. Letter 80-TZA (1980) |... 0. ccc cceee 11
DOL Op. Letter $3-S35A (1983): 2.56 ck cise ewes 1]

DOL Op. Letter 99-O1A (1999) . 2.0... ccc cease. 11

xii

TABLE OF APPENDICES

Appendix A — Order And Judgment Of The United
States Court Of Appeals For The Tenth Circuit
Dated And Filed January 23, 2001 ...........

Appendix B — Memorandum Opinion And Order
Of The United States District Court For The
District Of Colorado Dated January 5, 2000 And
Feeee SOMMREY Dy DP 605 cs coe se kee

Appendix C — Memorandum Opinion And Order
Of The United States District Court For The
District Of Colorado Dated And Filed May 10,
FE 5:6 ahd ook ai had bad eee

Appendix E — Amax Gold Inc. Separation Plan For
Key Employees Effective March 5, 1997 ......

Appendix F — Resolutions Relating To Employee
UT FE ivan Shae enko an eee

Page

la

lla

l
OPINIONS BELOW

Lettes v. Kinam Gold Inc.; Amax Gold, Inc. Separation
Plan for Key Employees; Amax Gold, Inc. Benefits
Committee; Kinross Gold Corporation Benefits Committee;
Kinross Gold Corporation, 242 F.3d 389, No. 00-1057
(10th Cir. January 23, 2001). (App. A.)

Lettes v. Kinam Gold Inc.; Amax Gold, Inc. Separation
Plan for Key Employees; Amax Gold, Inc. Benefits
Committee; Kinross Gold Corporation Benefits Committee;
Kinross Gold Corporation, No. 98-S-1899 (D. Colo. Jan. 5,
2000) (order granting Defendants’ Motion for Summary
Judgment on Plaintiff's Amended Complaint). (App. B.)

Lettes v. Kinam Gold Inc.; Amax Gold, Inc. Separation
Plan for Key Employees; Amax Gold, Inc. Benefits
Committee; Kinross Gold Corporation Benefits Committee;
Kinross Gold Corporation, No. 98-S-1899 (D. Colo. May
10, 1999) (order granting Defendants’ Motion to Dismiss
original Complaint). (App. C.)

STATEMENT OF JURISDICTION

The Tenth Circuit Court of Appeals issued its opinion
‘and order on January 23, 2001. Petitioners did not seek
rehearing before the Court of Appeals. This Court has
jurisdiction to review this order on a writ of certiorari
pursuant to 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

29 U.S.C. §§ 1002(1)-(3), 1003, 1144(a) (1994).
(App. D.)

2

STATEMENT OF THE CASE
A. Factual Background.

Amax Gold, Inc. (“AGI”) adopted a Key Employee
Separation Plan (“AGI Plan” or “Plan”).'

1. The AGI Plan Provides Separation Benefits.

Subject to the Administrator’s discretionary
determinations described below, the Plan provides an
Eligible Employee severance benefits if the employee incurs
a “Separation from Service” in anticipation of, or within
12 months following, a “Change of Control.” (Plan at L 6.)

The Plan defines “Separation from Service” to include:
(a) the employer’s termination of the Eligible Employee’s
employment without “Cause,” and (b) the Eligible
Employee’s termination of his or her own employment for
“Good Reason.” (Amendment at L 25.) The employer has
“Cause” to terminate an Eligible Employee’s employment,
inter alia, for “substantial and continued” poor performance.
(/d.) An Eligible Employee has “Good Reason” to terminate
employment if his or her compensation, benefits, title or
duties are “substantially” reduced, or if the employer
transfers the employee to a distant workplace. (/d. at L 26.)

A “Change of Control” as defined under the Plan occurs
when, for example, an unrelated entity buys twenty percent
or more of the outstanding stock of the company, the current

1. The Plan and its Amendments appear in a lodging appendix.
They appear in the record beginning at Appellant’s Appendix 245
and 740, respectively.

3

members of the Board of Directors cease to be a majority of
the Board of Directors, or the shareholders choose to liquidate
the company or sell substantially all of its assets. (Plan at
L 3-5.)

An Eligible Employee is not entitled to benefits under
the Plan if AGI or a successor offers the Eligible Employee
“Comparable Employment” following a Change of Control.
(Plan at L 7.) The Plan defines an Eligible Employee’s new
position as “Comparable” to the previous position if it:
(a) is reasonably comparable without substantial diminution
of duties . . . (b) pays substantially the same Compensation,
and (c) is entitled to participate in an incentive plan at
substantially the same long-term incentive award level.”
(/d. at L 5.)

2. The AGI Plan Provides Claims and Appeals
Procedures.

If an employee does not receive benefits, he or she may
file a claim for benefits with the Administrator. (Plan at
L 12.) Such a claim must be filed within ninety days of the
employee's Separation from Service or the cessation of
benefits. (/d. at L 12-13.) The Plan requires the Administrator
to provide a specific written denial to the claim, including a
statement of the reasons for the denial, a description of
additional materials or information necessary to perfect the
claim, and an explanation of the review procedure. (/d. at
L 13.) See also 29 U.S.C. § 1133(1) (ERISA plan must
provide claim procedure). The employee then has sixty days
to seek review, and the Administrator has a further sixty days
to provide a second, written determination. (Plan at L 13.)
See also 29 U.S.C. § 1133(2) (ERISA plan must provide
appeal procedure).

4

3. The AGI Plan Names an Administrator with
Discretion.

The Plan names AGI as Administrator. (Plan at L 11-12.)
See also 29 U.S.C. § 1002(16)(A) (defining “Administrator”).
Among other powers, the Administrator has “complete and
discretionary authority to construe and interpret the
Plan, correct defects, supply omissions, and reconcile
inconsistencies and ambiguities in and with respect to the
Plan.” (Plan at L 12.)

The Administrator resolves all questions about eligibility
and the amount of benefits. (Plan at L 12.) Determining
whether Eligible Employees are entitled to benefits requires
the Administrator to determine, inter alia, whether the employee
suffered a Separation from Service due to a Change of Control;
substantially failed to perform his or her job; received an
offer of Comparable Employment; complied with applicable
confidentiality and non-competition agreements; and
executed releases. (Jd. at L 6-7; Amendment at L 25-26.)

The Administrator has duties to perform both before and
after any claim for benefits. Under the Plan, the
Administrator has an ongoing duty to answer questions from
Eligible Employees, a duty to allow Eligible Employees to
review the Plan documents, and a duty to provide copies of
the documents, upon request, within thirty days. (Plan at
L 13-14.) Even after payment of benefits, the Administrator
has to monitor the Eligible Employee’s performance of
confidentiality and non-competition agreements, and must
demand repayment of benefits upon any breach. (/d. at L 7.)
The Administrator also must monitor whether an Eligible
Employee accepted Comparable Employment within
seventy-eight weeks of separation and therefore owes AGI
repayment of benefits. (/d. at L 8.)

5

The Plan became effective March 5, 1997. (Plan at L 5.)
Unless modified, the Plan was to terminate automatically
December 31, 1999. (/d. at L 15.) Nevertheless, the Plan
provides for continuing review of an Eligible Employee’s
Comparable Employment for seventy-eight weeks. (Jd. at
L 8.) The Plan, therefore, imposes duties on the Administrator
lasting from March 1997 until at least June 2001.

4. The AGI Plan Documents Describe It as an ERISA
Plan.

ERISA requires plans to provide claims and appeals
procedures and notice of the Eligible Employees’ rights under
ERISA. 29 U.S.C. §§ 1024(c), 1133. The AGI Plan complies
with these requirements and expressly notifies Eligible
Employees that they have ERISA rights because they are
participants in the AGI Plan. (See Plan at L 10-11, 13.) The
AGI Plan also provides information of the kind required in a
summary plan description, including the Plan’s agent for
service of process, its administrator, trustees, eligibility
requirements, disqualification requirements, source of
financing, and plan year. See 29 U.S.C. § 1022(b). (Plan at
L 6-8, 11, 14-15.)

5. Respondent Applied for Benefits Under the AGI
Plan.

In March 1998, the AGI shareholders approved a merger
with Kinross Gold Company, This merger was a “Change of
Control” under the Plan. The merger was accomplished June
1, 1998. Other “key employees” received benefits under the
Plan. Respondent Lettes filed a claim for benefits under the
AGI Plan. The Administrator denied his claim because the

6

Administrator determined that Respondent had been offered,
and had rejected, Comparable Employment with the new
company.

B. The Proceedings Below.
1. The District Court.

Respondent Lettes originally filed this action in
Colorado state court, alleging breach of contract, promissory
estoppel, and unjust enrichment. Petitioners removed the case
to the United States District Court for the District of Colorado
based on 28 U.S.C. §§ 1331 and 1332. On May 10, 1999,
the District Court ruled that it had jurisdiction based on
ERISA preemption and dismissed Respondent’s state law
claims. (See App. C.) Respondent amended his Complaint
to include claims under ERISA. On January 5, 2000, the
District Court granted Petitioners’ Motion for Summary
Judgment on the Amended Complaint. (See App. B.)

2. The Court of Appeals.

On appeal, the Tenth Circuit reversed the District Court
on the issue of ERISA preemption. (See App. A.) Relying
on this Court’s ruling in Fort Halifax Packing Co. v. Coyne,
482 U.S. 1 (1987), the appellate court ruled: “AGI’s
agreement providing for a lump-sum payment in the event
of a separation after a change of control during a limited
time period did not constitute an employee welfare benefit
‘plan’ within ERISA’s ambit. Federal jurisdiction based upon
§ 1331 therefore must fail.” (App. at 10a.) The Circuit Court
remanded the case to the District Court with instructions to
remand it to state court. (/d.)

7

REASONS FOR GRANTING THE WRIT

ERISA is “a comprehensive statute designed to promote
the interests of employees and their beneficiaries in employee
benefit plans.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85,
90 (1983). ERISA buttresses these employee protections by
preempting “all State laws insofar as they . . . relate to any
employee benefit plan.” 29 U.S.C. § 1144(a). ERISA
preemption is deliberately “expansive.” Pilot Life Ins. Co.
v. Dedeaux, 481 U.S. 41, 46 (1987) (internal quotation marks
omitted). By eliminating state regulation of plans, ERISA
preemption subjects the entire field of “private employee
benefit programs” to uniform federal regulation. 120 Cong.
Rec. 29927-29928 (1974) (statement of Sen. Javits). See also
Egelhoff v. Egelhoff, No. 99-1529, slip op. at 6 (U.S. March
21, 2001). ERISA preemption also makes “all suits brought
by beneficiaries or participants asserting improper processing
of claims under ERISA-regulated plans . . . federal questions.”
Pilot Life, 481 U.S. at 56. See also Ingersoll-Rand Co. v.
McClendon, 498 U.S. 133, 139-40 (1990) (preemption
applies to common law claims as well as to state statutes
specifically designed to affect employee benefit plans).

In Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987),
this Court considered whether ERISA preempted a state
Statute that provided severance benefits to employees laid
off because of plant closure. The Court concluded that ERISA
did not preempt the state statute because the statute did not
establish, or require an employer to establish, an
administrative scheme that constituted a “plan” under
ERISA. /d. at 16.

Since Fort Halifax, Circuit Courts have relied on its
holding, not only to determine whether ERISA preempts state

statutes, but to determine whether ERISA preempts state
common law claims for benefits under employer-sponsored
benefit plans. In the case below, the Tenth Circuit relied on
Fort Halifax to rule that ERISA does not preempt state
common law claims for benefits unless the employer-
sponsored plan is sufficiently complex. The Tenth Circuit’s
ruling thus presents questions of federal law that this Court
must settle. The Tenth Circuit’s ruling also conflicts with
decisions of other Circuit Courts, and therefore creates a split
in the application of ERISA that this Court must resolve.

THE COURT SHOULD RESOLVE THE FEDERAL
QUESTION CONCERNING ERISA’S COVERAGE OF
EMPLOYER-SPONSORED BENEFIT PLANS.

A. The Tenth Circuit’s Ruling Conflicts with ERISA’s
Definition of “Plan.”

The Tenth Circuit held in this case that the AGI Plan is
not an ERISA “plan,” but rather a contract under state law.
This ruling contradicts authoritative interpretations of
ERISA’s definition of “plan.”

1. ERISA Defines “Plan.”

ERISA’s basic term “plan” refers to an “employee
welfare benefit plan” or to an “employee pension benefit
plan,” or to a plan that is both a welfare and a pension benefit
plan. 29 U.S.C. § 1002(3). ERISA further defines these
terms. A welfare benefit plan is “any plan, fund, or program,”
“established or maintained by an employer” to the extent its

9

purpose is to provide, inter alia, “benefits in the event of
sickness, accident, disability, death or unemployment.”
29 U.S.C. § 1002(1). A pension benefit plan is:

any plan, fund, or program ... established or
maintained by an employer . . . to the extent that
by its express terms or as a result of surrounding
circumstances such plan, fund, or program —

(i) provides retirement income to
employees, or

(ii) results in a deferral of income by
employees for periods extending to the
termination of covered employment or
beyond,

regardless of the method of calculating the
contributions made to the plan, the method of
calculating the benefits under the plan or the
method of distributing benefits from the plan.

29 U.S.C. § 1002(2)(A).

Congress demonstrated its intent to include arrangements
like the AGI Plan in the statutory definition of “plan” by
specifically exempting such arrangements from some but not
all provisions of ERISA. Arrangements like the AGI Plan
are known as “Top Hat” plans. A Top Hat plan is “a plan
which is unfunded and is maintained by an employer
primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated
employees.” 29 U.S.C. § 1051(2). ERISA expressiy exempts
Top Hat plans from participation and vesting, funding, and

10

fiduciary rules. See 29 U.S.C. §§ 1051(2), 1101(a)(1),
1081(a)(3). Top Hat plans are not exempt from ERISA’s
provisions concerning reporting and disclosure, claims and
appeal procedure, or federal jurisdiction and preemption.
Because Congress exempted Top Hat plans from some
ERISA rules, Congress must have intended such arrangements
to be “plans” under ERISA. See Russello v. United States,
464 U.S. 16, 22-23 (1983).

2. The Department Of Labor Has Interpreted ERISA
“Plan.”

The Department of Labor is responsible for interpreting
the terms of ERISA and this Court pays deference to the
Department’s interpretation. 29 U.S.C. §§ 1002(13), 1135;
Massachusetts v. Morash, 490 U.S. 107, 116 (1989). The
Department of Labor has interpreted the definitions of
“plan,” “welfare benefit plan,” and “pension benefit plan”
in light of similar definitions in the Welfare and Pension
Plans Disclosure Act. See, e.g., DOL Op. Letter 79-21A
(1979). Applying the statutory definitions, the Department
identifies five functional “elements” for an ERISA “plan”:

(1) the plan must be established or maintained
by an employer or employee organization, as
those terms are defined, or by both;

(2) jurisdiction [exists] under the commerce
clause;

{3) the plan provides benefits to participants and
beneficiaries as defined;

1]

(4) the plan provides benefits specified in the
definition of “employee welfare benefit plan” or
“employee pension benefit plan”; and

(5) the plan is not exempt under section
[1003(b)).

DOL Op. Letter 83-55A (1983). Applying these “elements
of coverage,” both before and after this Court’s decision in
Fort Halifax, the Department has concluded that relatively
simple severance arrangements are ERISA plans. See, e.g.,
DOL Op. Letter 80-72A (1980) (plan providing lump-sum
payment of one week's wages for each year of employment
is an ERISA “plan”); DOL Op. Letter 99-01A (1999) (plan
lasting only six months and providing one year’s salary in
lump-sum or on schedule of payments is an ERISA “plan”).

3. Before Fort Halifax, the Circuit Courts Interpreted
ERISA 's Definition of “Plan.”

Prior to the Supreme Court’s ruling in Fort Halifax, the
Circuit Courts applied ERISA’s statutory definition of
“plan.” Incorporating other statutory definitions, the Eleventh
Circuit summarized ERISA’s definition of “employee
welfare benefit plan”:

a “plan, fund or program” under ERISA is
established if from the surrounding circumstances
a reasonable person can ascertain the intended
benefits, a class of beneficiaries, the source of
financing, and procedures for receiving benefits.

Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir.
1982). Other Circuit Courts have applied this interpretation

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15a

Appendix B

Complaint § 3.5. pp. 11-12). Title 29 U.S.C. § 1132 provides
the exclusive remedy for the failure to obtain benefits from
an ERISA plan. Winchester v. Prudential Life Ins. Co. of
America, 975 F.2d 1479, 1483 (10th Cir. 1992).

A denial of benefits challenged under 29 U.S.C.
§ 1132(a)(1)(B) is reviewed under a de novo standard unless
the benefit plan gives the administrator or fiduciary
discretionary authority to determine eligibility for benefits
or to construe the terms of the plan. Firestone Tire & Rubber
Co. v. Bruch, 489 U.S. 101, 115 (1989). If the plan
representative, administrator, or fiduciary is entitled to
exercise such discretion, then judicial review of the
challenged denial of benefits is limited to a determination
of whether the decision is arbitrary or capricious. Kimber v.
Thiokol Corp., __ F.3d __, 1999 WL 1020834 at *3 (10"
Cir. (Utah) Nov. 10, 1999); Adams v. Cyprus Amax Minerals
Co., 149 F.3d 1156, 1159 (10th Cir. 1998); Chambers v.
Family Health Plan Corp., 100 F.3d 818, 825 (10th Cir.
1996); Arfsten v. Frontier Airlines, Inc. Retirement Plan for
Pilots, 967 F.2d 438, 440 (10th Cir. 1992); Woolsey v.
Marion Laboratories, Inc., 934 F.2d 1452, 1457 (10th Cir.
1991); Pratt v. Petroleum Production Management Employee
Sav. Plan & Trust, 920 F.2d 651, 657 (10th Cir. 1990); Torix
v. Ball Corp., 862 F.2d 1428, 1429 (10th Cir. 1988); Sage v.
Automation, Inc. Pension Plan and Trust, 845 F.2d 885, 895
(10th Cir. 1988); Naugle v. O’Connell, 833 F.2d 1391, 1393
(10th Cir. 1987); Peckham v. Board of Trustees of Intern.
Broth. of Painters and Allied Trades Union & Industry Nat.
Pension Fund, 719 F.2d 1063, 1066 (10th Cir. 1983).

l6a

Appendix B

Plaintiff concedes that the standard of judicial review
for the challenged denial of benefits is whether the decision
is arbitrary or capricious. However, Plaintiff argues that the
plan administrator was operating under a conflict of interest
and, therefore, the court should grant less deference to his
decision. See Chambers, 100 F.3d at 825 (noting that a
conflict of interest “triggers a less deferential standard of
review.”).

A conflict of interest can arise between a plan
administrator’s duty to act ‘solely in the interest
of the participants and beneficiaries’ of the plan,
29 U.S.C. § 1104(a)(1), and his self interest or
loyalty to his employ«r. In Firestone, the Supreme
Court noted that ‘if a benefit plan gives discretion
to an administrator or fiduciary who is operating
under a conflict of interest, that conflict must be
weighed as a “facto[r] in determining whether
there is an abuse of discretion.” ’ Firestone, 489
U.S. at 115 (citation omitted). The standard
always remains arbitrary and capricious but the
amount of deference present may decrease ‘on a
sliding scale in proportion to the extent of conflict
present, recognizing the arbitrary and capricious
standard is inherently flexible.’ McGraw v.
Prudential Ins. Co., 137 F.3d 1253, 1258 (10"
Cir. 1998) (citing Chambers, 100 F.3d at 826-27).

Kimber, 1999 WL 1020834 at *4.

Before the court may apply a decreased amount of
deference based on a conflict of interest, there must first be

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17a
Appendix B

evidence of a conflict of interest, i.e. proof “that the plan
administrator’s dual role jeopardized his impartiality.”
Kimber, 1999 WL 1028034 at * 4 (quoting Jones v. Kodak
Med. Assistance Plan, 169 F.3d 1287, 1291 (10" Cir. 1999)).
Plaintiff advances two arguments in support of his assertion
of a conflict of interest. First, “the plan is unfunded.”
(Plaintiff's Brief in Opposition to Motion for Summary
Judgment p. 17). Second, “both Chris Crowl and Allan
Schoening were responsible for human resources for their
respective employers.” /d.

Chris Crow] was the plan administrator for AGI until
the merger on June 1, 1998. (Crowl Deposition pp. 13-14;
Exhibit 2 p. 21; Exhibit 4 p. 39). Prior to June 1, 1998, Crowl
had determined that Plaintiff was not entitled to severance
benefits. (Exhibit 4 p. 38; Lettes Deposition pp. 148-49).
Allan D. Schoening was hired as Vice President of Human
Resources and Community Affairs for Kinross on July 1,
1998. Schoening was appointed as the plan administrator
for Kinross on November 12, 1998. (Exhibit J). Schoening
reviewed and, on November 19, 1998, denied Plaintiff's
second request for severance benefits. (Schoening Deposition
pp. 6-7, 9; Exhibit 19; Exhibit 1 4 26).

The mere fact that a plan administrator was an employee
of the company is not enough per se to demonstrate a conflict
of interest. Kimber, 1999 WL 1028034 at * 4 (citations
omitted). In determining whether or not a conflict of interest
existed, a court should consider various factors including
whether:

18a

Appendix B

(1) the plan is self-funded; (2) the company
funding the plan appointed and compensated the
plan administrator; (3) the plan administrator’s
performance reviews or level of compensation
were linked to the denial of the benefits; and
(4) the provision of benefits had a significant
economic impact on the company administering
the plan.

Kimber, 1999 WL 1028034 at * 4.

Here, the first factor appears to be present. However,
while Chris Crow] was the plan administrator for AGI until
the merger on June 1, 1998, the evidence demonstrates that
Crowl was never an employee of AGI. (Crowl Deposition
pp. 5, 13-14). And, while Schoening was an employee of
Kinross, neither his compensation nor his performance
reviews were in any way related to the denial of benefits.
(Exhibit M § 4). Moreover, a payment of benefits to Plaintiff
under the AGI Plan would not have had a significant
economic impact on Kinross. (Exhibit M 4 4). After
considering the relevant factors, the court finds that there is
insufficient evidence of a conflict of interest and that review
with deference is appropriate.

IV. Analysis of Denial of Benefits

A decision to Geny benefits is arbitrary and capricious
if it is not a reasonable interpretation of the plan’s terms.
McGraw, 137 F.3d at 1259; see also Miller v. Metropolitan
Life Ins. Co., 925 F.2d 979, 984-86 (6th Cir. 1991); Torix,
862 F.2d at 1429; Naugle, 833 F.2d at 1393-94. Indiciayf— -

19a

Appendix B

arbitrary and capricious conduct include lack of substantial
evidence, mistake of law, bad faith, and conflict of interest.
Sandoval v. Aetna Life and Cas. Ins. Co., 967 F.2d 377, 380
(10th Cir. 1992). When reviewing a denial of benefits under
the arbitrary and capricious standard, the court may consider
only the evidence available to the claims administrator at
the time the final decision was made. Miller, 925 F.2d at
986; Perry v. Simplicity Engineering, 900 F.2d 963, 966 (6th
Cir. 1990); Voliva v. Seafarers Pension Plan, 858 F.2d 195,
196 (4th Cir. 1988).

When reviewing under the arbitrary and
capricious standard, ‘[t]he Administrator[’s]
decision need not be the only logical one nor even
the best one. It need only be sufficiently supported
by facts within [his] knowledge to counter a claim
that it was arbitrary and capricious.’ Woolsey, 934
F.2d at 1460. The decision will be upheld unless
it is ‘not grounded on any reasonable basis.’ /d.
(citation omitted). The reviewing court ‘need only
assure that the administrator’s decision fall[s]
somewhere on a continuum of reasonableness —
even if on the low end.’ Vega v. National Life
Ins. Serv., Inc., 188 F.3d 287, 297 (5" Cir. 1999).

Kimber, 1999 WL 1028034 at * 5 (emphasis in original).

Plaintiff asserts that Defendants arbitrarily and
capriciously denied him severance benefits under the Plan,
as evidenced by Defendants’ failure to comply with
procedural requirements provided by the Plan and 29 C.F.R.

20a
Appendix B

§ 2560.503-1, coupled with Defendants’ failure to offer
Plaintiff comparable employment. (Plaintiff's Brief in
Opposition pp. 9-10, 20).

1. Comparable Employment

In 1994, Plaintiff was promoted to Chief Financial
Officer (CFO) of AGI. (Lettes Affidavit § 4). As part of his
duties as CFO, Plaintiff was responsible for the trading and
hedging program, by which AGI bought and sold
commodities such as gold, silver, energy, and interet rates
through the use of derivatives and securities in order to
maximize prices and minimize the risk of falling prices.
(Lettes Affidavit 4 5, 7; Exhibit 2 pp. 39-40). In 1997,
Plaintiff's position was changed to vice president of trading
and he became responsible for the entire trading and hedging
program. (Lettes Deposition p. 30, Lettes Affidavit 4 10;
Exhibit 2 p. 29).

Plaintiff knew that AGI and Kinross signed a merger
agreement in February of 1998 and that the majority
sha: eholder approved the merger agreement in March of 1998
(Exhibit 15). During the merger transition period, Plaintiff
discussed his potential future employment at Kinross with
Robert Buchan, Chairman and Chief Executive Officer
(CEO) of Kinross. (Lettes Affidavit § 17; Buchan Deposition
p. 15). In approximately April of 1998, Kinross made
Plaintiff an oral offer of employment, indicating that “the
offer was to fulfill [Plaintiff's] needs and allow him to
do what he had done effectively for AGI at Kinross.”
(Exhibit 5 p. 17). On May 4, 1998, Kinross made Piaintiff a
preliminary offer in writing. (Buchan Deposition p. 21;

2la
Appendix B

Exhibit F; Exhibit 5 p. 17). Kinross offered Plaintiff
employment “as Vice President, with essentially the same
duties and responsibilities as you have had with Amax.”
(Exhibit F). On May 5, 1998, Plaintiff wrote a memo to Scott
Shellhaas, President of AGI, indicating that he was rejecting
Kinross’ offer. (Exhibit G). On May 8, 1998, Plaintiff wrote
a memo to Buchan rejecting Kinross’ offer. (Exhibit I).

Plaintiff argues that because he was not offered
comparable employment by Kinross, he was entitled to
severance benefits under the Plan. Defendants denied
Plaintiff severance benefits on the grounds that Kinross had
offered Plaintiff comparable employment and therefore,
pursuant to § 2.1.(b) of the Plan, Plaintiff was not entitled to
severance benefits.

ERISA benefits are determined by reference to the plan.
Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 511-14
(1981). ERISA mandates no minimum substantive content
for employee welfare benefit plans; rather, the private parties
creating the plans control the level of benefits to be provided.
Alessi, 451 U.S. at 511; Ryan by Capria-Ryan v. Federal
Express Corp., 78 F.3d 123, 126 (3d Cir. 1996). Section 1.1.
of the Plan defines “comparable employment” as:

the employment of an Eligible Employee by an
employer in a position that (a) is reasonably
comparable without substantial diminution of
duties to the position the Eligible Employee held
immediately prior to the Change of Control,
(b) pays substantially the same Compensation,
and (c) is entitled to participate in an incentive

22a

Appendix B

plan at substantially the same long-term incentive
award level in effect for the Eligible Employee
immediately prior to the Change of Control.

(Exhibit A to Amended Complaint p. 3).

Since the time he learned of the merger and the severance
benefits provisions of the Plan, Plaintiff has prepared and
asserted a litany of reasons why Kinross’ job offer was not
sufficiently comparable employment and he is entitled to
severance benefits. Plaintiff's primary concerns were that:
(1) the Kinross job would be “truly comparable” only if he
could report to the CEO, Buchan, rather than the CFO, Brian
Penny; (2) his increased salary would not make up for other
losses in compensation; and (3) he would be required to move
to Toronto, Canada. (Exhibit G; Exhibit 1 9 21, 22; Lettes
Deposition pp. 98-99; Exhibit I (May 5, 1998 memo from
Shellhaas); Exhibit I (at handwritten p. 12); Exhibit I (April
29, 1998 memo from Shellhaas); Exhibit 1 4 18).

The court need not decide whether Plaintiffs subjective
perception of Kinross’ job offer was reasonable. (See i.e.,
Ward Deposition p. 69; Lettes Deposition p. 147). The court
need only determine whether Defendants’ decision regarding
Plaintiff's entitlement to severance benefits was grounded
on any reasonable basis. Woolsey, 934 F.2d at 1460 (citation
omitted).

Plaintiff was offered an executive officer position at
Kinross, with the title of vice president. (Exhibit 6 p. 35;
Exhibit F). Plaintiff would have been part of an executive
team and been involved in the trading and hedging activities

23a

Appendix B

of the company. (Exhibit 6 p. 19). Kinross’ job offer raised
Plaintiff's salary from 5165,000 to $175,000. (Exhibit 1
4 19; Exhibit F). Kinross offered Plaintiff an option to
purchase 50,000 Kinross shares and to convert Plaintiff's
Amax options to Kinross shares. (Exhibit F; but see Exhibit
1 § 19). While Plaintiff was not offered a target bonus at
Kinross, Plaintiff admitted that he did not always receive
his target bonus at AGI. (Lettes Deposition p. 82). Kinross
offered Plaintiff a discretionary bonus package and offered
to match the retirement, medical, and severance benefits
Plaintiff had at AGI. (Exhibit F). Plaintiff acknowledged that
Kinross’ severance benefits were “the same” and that
Kinross’ benefits were reasonably comparable to AGI’s
benefits. (Exhibit I handwritten p. 12; Lettes Deposition
p. 82).

Plaintiff was concerned with the level of autonomy that
he would be permitted at Kinross. At AGI, Plaintiff reportec
to Shellhaas, President of AGI. (Lettes Deposition p. 37).
Plaintiff also reported to the AGI Risk Management
Committee (Exhibit 3 pp. 38-41). At Kinross, Plaintiff would
have reported to the CFO and to a similar risk management
committee. (Schoening Deposition pp. 10, 12; Exhibit 1
{ 18; Exhibit 5 pp. 22-23; Exhibit 6 pp. 13-15; see also
Shellhaas Deposition p. 37). Plaintiff admitted that Kinross’
CEO would have control over his level of autonomy. (Lettes
Deposition pp. 117-18; see also Exhibit F). The evidence
shows that Kinross planned to give Plaintiff substantial
autonomy and expected Plaintiff to work in “much the same
fashion” that.he had while employed by AGI. (Schoening
Deposition p. 12; Exhibit F).

24a

Appendix B

Plaintiff was also concerned that Kinross would not
permit him to stay in Denver. However, the evidence shows
that Kinross intended Plaintiff to remain in Denver. (Penny
Deposition p. 22; Exhibit F; Exhibit M § 3; Exhibit 5
pp. 23-24, 27; Exhibit 6 p. 37). Plaintiff concedes that no
one at Kinross told him that he would be required to move
to Toronto. (Lettes Deposition p. 123).

Plaintiff found Kinross’ hedging program unequal to
AGI’s hedging program. (Lettes Deposition p. 101). Plaintiff
conceded that energy hedging was not a large part of the
program at AGI. (Lettes Deposition p. 42). Kinross did not
have an interest rate hedging program because, unlike AGI,
Kinross had little or no debt. (Exhibit 6 pp. 10, 18). While
Kinross’ hedging program was not as active or developed as
AGI’s hedging program, Kinross had a hedging program and
Kinross intended to and did further develop its hedging
program. (Exhibit 2 p. 50; Exhibit 3 pp. 44-45; Exhibit 5
pp. 9-14; Exhibit 6 pp. 9-12, 21-22, 34; Schoening Deposition
p. 10). Plaintiff would have performed hedging activities for
Kinross. (Lettes Deposition p. 102; Exhibit 6 pp. 19, 21-22).
Plaintiff's hedging knowledge was the strength that he would
have brought to Kinross. (Schoening Deposition p. 10;
Exhibit 6 pp. 21-22).

It is apparent from the evidence that Plaintiff wanted
Kinross to provide him a job virtually identical to the job he
had at AGI. (Lettes Deposition pp. 61, 64) (“the same status,
the same compensation, the same responsibilities, the same
duties . . . the same discretion . . .). Defendants’ position was
that

25a

Appendix B

in any kind of a merger where two smaller
companies joined together, positions can’t be
exactly the same and responsibilities can’t be
exactly the same. . . . everybody knows that in any
merger event, that job responsibilities and duties
are going to move around as part of the merger
event. And as long as a person had essentially the
same general responsibilities or comparable
responsibilities in another position as to what he
had before the merger, then he would not be
eligible for a benefit.

(Crowl Deposition pp. 12-13, 20).

Based on their assessment of the relative responsibilities
and compensation made in the Kinross job offer, Defendants
believed that the Kinross job offer was “very comparable”
to Plaintiff's job at AGI. (Exhibit H; Lettes Deposition
p. 145; Schoening Deposition p. 9; Ward Deposition p. 66;
Exhibit 5 pp. 22-23; Exhibit 7 p. 18). The court agrees.
Although there were some differences in the reporting
relationship and the amount of hedging that Plaintiff would
do at Kinross, the Kinross job offer provided Plaintiff with
the same title, an increase in salary, a discretionary bonus,
health and welfare benefits equivalent to AGI’s benefits, the
same size staff, and a Denver location. The Kinross job offer
was reasonably comparable to Plaintrff’s job at AGI
immediately prior to the merger. Defendants’ interpretation
of the Kinross job offer was not unreasonable or inconsistent
with the provisions of the Plan. Defendants did not act
arbitrarily or capriciously in denying Plaintiff severance

26a

Appendix B

benefits under the Plan. Defendants are entitled to summary
judgment on Plaintiffs First Claim for Relief in the Amended
Complaint.

2. Alleged Procedural Violations

While Plaintiff has not alleged a claim pursuant to
29 U.S.C. § 1133 for breach of procedural requirements, he
argues that Defendants’ failure to comply with certain
procedural requirements demonstrates that the denial of
severance benefits was arbitrary and capricious, citing,
inter alia, Blau v. Del Monte Corp., 748 F.2d 1348, 1353-54
(9" Cir. 1984), cert. denied, 474 U.S. 865 (1985). But see
McKenzie v. General Telephone Co. of California, 41 F.3d
1310, 1314 (9" Cir. 1994) (“ ‘[c]ourts have either
distinguished the facts of Blau or criticized its holding...’ ”)
(cert. denied, 514 U.S. 1066 (1995)); Hozier v. Midwest
Fasteners, Inc., 908 F.2d 1155, 1167-70 (3d Cir. 1990)
(“[w]e believe that Blau’s rather freewheeling statutory
construction, . . . has little place in the context of a carefully
balanced and reticulated statute like ERISA”). Plaintiff
alleges various procedural violations. (Plaintiff's Brief in
Opposition pp. 12-15). The court concludes that the alicged
procedural violations do not render arbitrary and capricious
Defendants’ decision to deny severance benefits to Plaintiff.

Defendants cooperated with Plaintiff in his active pursuit
of severance benefits under the Plan. “‘[O]n several occasions,”
plan administrator Crowl met with Plaintiff and discussed
“his eligibility for benefits.” (Crowl Deposition pp. 12-13;
see also Exhibit 4 p. 37). Crowl explained to Plaintiff
“specifically what the requiring and triggering events would

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27a

Appendix B

be for him to become eligible for the benefits” and “the
definition of comparability” of jobs. (Crowl Deposition p.
12). By at least May 19, 1998, Plaintiff knew that Crowl
had determined that the job offer made by Kinross to Plaintiff
was comparable to Plaintiff's job with AGI. (Lettes Deposition
p. 148).

Because Plaintiff was still employed by AGI until the
date of the merger on June 1, 1998, Crowl determined that
Plaintiff was not entitled to benefits prior to June 1, 1998.
(Crow! Deposition pp. 13-14; Exhibit 2 p. 71; see also
Exhibit 3 p. 124). Deborah Friedman, general counsel for
AGI, consulted with outside counsel, whose opinion was also
that Plaintiff was not entitled to severance benefits before
June 1, 998. (Exhibit 3 pp. 118, 122). Crowl had determined
by May 26, 1998 that Plaintiff was not entitled to severance
benefits. (Exhibit 4 p. 38). Plaintiff was told by Shellhaas
on or about June 1, 1998 that he would not be receiving
severance benefits. (Lettes Deposition p. 149).

Crowl ceased being the plan administrator on June 1,
1998. (Crowl Deposition pp. 13-14). Plaintiff sent his first
claims letter to Crowl on May 26, 1998. Schoening was not
hired by Kinross until July 1, 1998 and was not appointed as
the plan administrator for Kinross until November 12, 1998.
(Exhibit J). Due to the press of business associated with the
merger, Schoening did not respond to Plaintiff's first claims
letter. (Schoening Deposition p. 13). Schoening responded
to Plaintiff's second claims letter. Schoening reviewed the
terms of Kinross’ job offer, Plaintiff's numerous submissions
(Exhibit 1), and consulted with Crowl, Buchan, Penny, and
outside counsel. (Schoening Deposition pp. 6-7, 9). On

28a
Appendix B_

November 19. 1998, Schoening communicated to Plaintiff
in writing that Plaintiff was not entitled to severance benefits
under the Plan. (Exhibit 19; Exhibit 1 § 26).

While Plaintiff disagrees with Defendants’ ultimate
decision that he was not entitled to severance benefits, the
evidence shows that Plaintiff was afforded ample opportunity
to pursue his claim for benefits. The evidence does not show
that Plaintitf was caused any substantive harm by the alleged
procedural violations. The evidence does not demonstrate
that Defendants’ decision was arbitrary and capricious based
on the alleged procedural irregularities. The alleged
procedural violations do not establish that Defendants’
decision to deny severance benefits to Plaintiff was arbitrary
and capricious.

In sum, Defendants are entitled to summary judgment
on Plaintiff's First Claim for Relief in the Amended
Complaint.

V. Breach of Fiduciary Duty Claim

Plaintiff claims that Defendants breached their fiduciary
duties by failing to pay him benefits under the Plan and by
failing to recover benefits alleged improperly paid to other
key employees. (Amended Complaint 4 49).

ERISA fiduciaries must discharge their “duties with
respect to a plan solely in the interests of the participants
and beneficiaries, . . . in accordance with the documents and
instruments governing the plan,” and with the care, skill,
prudence, and diligence that a prudent person would use.

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29a

Appendix B

29 U.S.C. § 1104(a)(1)(A), (B), (D). ERISA does not
enumerate all the powers and duties of trustees and other
fiduciaries, but borrows some of the principles from the
common law of trusts to impose a duty on a fiduciary to
exercise such skill and care as a person of ordinary prudence
would exercise, bearing in mind the special nature and
purpose of an employee benefits plan, to preserve the trust
corpus, deal impartially with the beneficiaries, and not to
prefer the present interest of one group, among other things.
Ershick v. United Missouri Bank of Kansas City, N.A., 948
F.2d 660, 666 (10th Cir. 1991); Morse v. Stanley, 732 F.2d
1139, 1145 (2d Cir. 1984); Smith v. National Distillers &
Chemical Corp., 728 F. Supp. 491, 493-94 (W.D. Tenn.
1989). A court may intervene in the administration of an
employee benefit plan only when the trustees transgress their
fiduciary duties by acting in an arbitrary and capricious
manner. Morse, 732 F.2d at 1145.

Defendants dispute whether they are fiduciaries within
the meaning of ERISA. Defendants assert that an unfunded
deferred compensation plan, such as this Plan, does not
involve fiduc'ary obligations and is not subject to fiduciary
standards, citir.g Pane v. RCA Corp., 868 F.2d 631, 637 (3d
Cir. 1989). In light of the court’s conclusions in parts III
and IV of this Memorandum Opinion and Order, above, that
Defendants’ denial of severance benefits to Plaintiff was not
arbitrary and capricious, the court concludes that, even if
the Plan were subject to fiduciary standards, Defendants did
not transgress any fiduciary duties under ERISA. Defendants
are entitled to summary judgment on Plaintiff's Second
Claim for Relief in the Amended Complaint.

30a

Appendix B
Accordingly, IT IS ORDERED:

1. Defendants’ Motion for Summary Judgment is
GRANTED. Summary judgment shall enter in favor of
Defendants and against Plaintiff on Plaintiff's Amended
Complaint.

2. Each party shall bear his, her, or its own costs and
attorney fees.

3. The trial preparation conference scheduled Wednesday
February 16, 2000 and the trial scheduled Monday February
28, 2000 are hereby VACATED.

DATED at Denver, Colorado, thi. 5th day of January,
2000.

BY THE COURT:

s/ Daniel B. Sparr
Daniel B. Sparr
United States District Judge

3la

APPENDIX C — MEMORANDUM OPINION AND
ORDER OF THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF COLORADO
DATED AND FILED MAY 10, 1999

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Daniel B. Sparr

Civil Action No. 98-S-1899 :
MARK LETTES,
Plaintiff,
v.

- AMAX GOLD, INC. and KINROSS
GOLD CORPORATION,

Defendant.
MEMORANDUM OPINION AND ORDER

THIS MATTER comes before the court on the
Recommendation of United States Magistrate Judge
Watanabe that Defendant Kinross’ Motion to Dismiss (filed
September 4, 1998) be granted and that Plaintiff be allowed
to amend his complaint to allege his claims pursuant to the
Employees Retirement Income Security Act (ERISA), 29
U.S.C. § 1001 et seq. The Recommendation was filed om
April 14, 1999 and served by mail on April 15, 1999. On
April 23, 1999, Plaintiff filed his Objections to the
Recommendation. The court must make a de novo

32a
Appendix C

determination of those portions of the proposed findings or
recommendations to which specific objection is made. 28
U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). The court has
reviewed de novo Defendant’s motion, Plaintiff's Response
(filed October 9, 1998), Defendant’s Reply (filed November
18, 1998), Defendant’s Supplemental Authority (filed
February 24, 1999), Plaintiff's Supplemental Response (filed
March 5, 1999), the Recommendation, Plaintiff's Objections,
Defendant’s Response (filed May 3, 1999), the exhibits, and
the applicable law, and is sufficiently advised in the premises.

1. Standard of Review

If, on a motion to dismiss pursuant to Fed. R. Civ. P.
12(b)(6) for failure to state a claim upon which relief can be
granted, matters outside the pleadings are presented to and
not excluded by the court, the motion shall be treated as one
for summary judgment and disposed of as provided in
Rule 56. Fed. R. Civ. P. 12(b). Because both parties have
submitted and the Magistrate Judge and the court have
considered materials outside the pleadings, the court will
treat the Defendant’s motion as one for summary judgment
under Fed. R. Civ. P. 56. Summary judgment is appropriate
“if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that -
the moving party is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(c); accord Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 247 (1986); Russillo v. Scarborough, 935

F.2d 1167, 1170 (10th Cir. 1991). The court must determine —

“whether the evidence presents a sufficient disagreement to

33a

Appendix C

require submission to a jury or whether it is so one-sided
that one party must prevail as a matter of law.” Anderson,
477 U.S. at 251-52.

2. Background

Plaintiff was an employee of AMAX Gold, Inc. (“AGT”).
As a “key employee,” Plaintiff was party to an agreement
known as the Separation Plan for Key Employees (“the
Plan”). The Plan contained provisions for severance upon
certain conditions precedent. (Exhibit B to Plaintiff's
Response Brief). Plaintiff alleges that when Defendants AGI
and Kinross Gold Corporation merged, he was not offered a
reasonably comparable position as defined by the Plan.
Therefore, Plaintiff asserts that he became entitled to certain
payments and benefits pursuant to the terms of the Plan.
Defendants have denied such payments and benefits. Plaintiff
alleges four claims for relief: (1) Defendants have breached
the Separation Plan for Key Employees (“the Plan”);
(2) Plaintiff is entitled to a declaratory judgment determining
the rights and obligations of the parties under the Plan;
(3) Defendants are “promissorily estopped” from denying
that payments and benefits are due and owing to Plaintiff
under the terms and provisions of the Plan; and
(4) Defendants have been unjustly enriched to Plaintiff's
detriment by failing and refusing to pay payments and
benefits due and owing to Plaintiff under the terms and
provisions of the Plan. (Complaint).

Defendant Kinross asserts that the Complaint must be
dismissed because the Plan is an ERISA plan and, therefore,
Plaintiff's state law claims are preempted by ERISA. The

34a

Appendix C

Magistrate Judge agreed that the Plan is governed by ERISA ,
and that Plaintiff's state jaw claims must be dismissed
because they are preempted by ERISA. Plaintiff objects that
the Plan is not governed by ERISA. However, Plaintiff
concedes that if ERISA governs the Plan, his state law claims
are preempted and he must pursue his claims under ERISA.
(Response Brief p. 3).

3. Analysis

ERISA is a comprehensive federal statute enacted by
Congress to regulate employer-sponsored empluyee benefit
plans. If a state law claim relates to an employee welfare
benefit plan, it is preempted by ERISA. 29 U.S.C. § 1144(a);
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 52, 57 (1987);
Settles v. Golden Rule Ins. Co., 927 F.2d 505, 508 (10th Cir.
1991). ERISA’s provisions are deliberately expansive,
designed to ensure that employee benefit plans are regulated
exclusively by federal law. Pilot Life, 481 U.S. at 45-46.

ERISA governs “employee benefit plan[s]}.” 29 U.S.C.
§ 1003(a). One form of employee benefit plan is an
“employee welfare benefit plan.” 29 U.S.C. § 1002(3). An
“employee welfare benefit plan” is

any plan, fund, or program which was heretofore
or is hereafter established or maintained by an
employer or by an employee organization, or by
both, to the extent that such plan, fund or program
was established or is maintained for the purpose
of providing for its participants or their
beneficiaries, through the purchase of insurance

35a

Appendix C

or otherwise, (A) medical, surgical, or hospital
care or benefits, or benefits in the event of sickness,
accident, disability, death or unemployment, or
vacation benefits, apprenticeship or other training
programs, or day care centers, scholarship funds,
or prepaid legal services, or (B) any benefit
described in section 186(c) of this title [which
includes “severance or similar benefits,” 29
U.S.C. § 186(c)(6)} (other than pensions on
retirement or death, and insurance to provide such
pensions).

29 U.S.C. § 1002(1).

A plan to pay severance benefits may constitute an
“employee welfare benefit plan.” 29 U.S.C. § 1002(1); Fort
Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 7n.5 (1987);
Tischmann v. ITT/Sheraton Corp., 145 F.3d 561, 565 (2d
Cir.), cert. denied, 119 S.Ct. 406 (1998); Schonholz v. Long
Island Jewish Medical Center, 87 F.3d 72, 75 (2d Cir.),
cert. denied, 519 U.S. 1008 (1996). Because ERISA’s
preemption provision was intended “to afford employers the
advantages of a uniform set of administrative procedures
governed by a single set of regulations,” only “benefits whose
provision by nature requires an ongoing administrative
program to meet the employer’s obligation” will implicate
ERISA’s preemption provision. Fort Halifax, 482 U.S. at
11-12; see also Collins v. Ralston Purina Co., 147 F.3d 592,
595 (7th Cir. 1998); Siemon v. AT&T Corp., 117 F.3d 1173,
1178 (10th Cir. 1997).

36a
Appendix C

Citing several cases where other severance plans were
found not governed by ERISA, Plaintiff argues that the Plan
in this case is not governed by ERISA because it does not
require an ongoing administrative scheme; rather, the Plan
“contemplates a single event, short-term payout to a key
employee of a lump sum that can be determined
arithmetically ....” (Response Brief p. 6). The Plan here
provides severance pay for its eligible key employees under
certain limited circumstances. (Exhibit B to Plaintiff's
Response Brief). The Plan provides certain employees
severance benefits if they are separated from employment
due to a “change of control” of the employer. (Exhibit B to
Plaintiff's Response Brief pp. 1-9). Plaintiff contends that
because all payments must be made within a short time after
a “change of control,” because the Plan extends only to a
small number of key employees, and because the Plan was
unfunded, the Plan does not require an ongoing
administrative scheme and is not governed by ERISA. The
court disagrees and concludes that the Plan here demonstrates
sufficient indicia of an ongoing administrative scheme to be
governed by ERISA.

The Plan requires more from its Administrator than a
mere one-time mechanical calculation and payment. See Fort
Halifax, 482 U.S. at 12; Kulinski v. Medtronic Bio-Medicus,
Inc., 21 F.3d 254, 258 (8th Cir. 1994); Fontenot v. NL
Industries, Inc., 953 F.2d 960, 962-63 (Sth Cir. 1992); Hijeck
v. United Technologies Corp., 24 F. Supp. 2d 243, 250-51
(D. Conn. 1998). The making of severance payments
pursuant to the Plan requires the “exercise of managerial
discretion.” James v. Fleet/Norstar Financial Group, Inc.,
992 F.2d 463, 468 (2d Cir. 1993). The Plan grants the

37a

Appendix C

Administrator “complete and discretionary authority to
construe and interpret the Plan, correct defects, supply
omissions, and reconcile inconsistencies and ambiguities in
and with respect to the Plan.” (Exhibit B 4 3.2(a) to Plaintiff's
Response Brief). The Plan Administrator must determine,
inter alia, whether a “change of control” has occurred under
the terms of the Plan (Exhibit B Article I to Plaintiff’s
Response Brief), whether eligible employees are entitled to
benefits (Exhibit B Article II to Plaintiff's Response Brief),
and whether eligible employees have been offered
“Comparable Employment,” have performed their jobs
satisfactorily, and have abided by the terms of all agreements
even after separation. (Exhibit B J 2.1 to Plaintiff's Response
Brief). The Plan provides a dispute procedure for employees
to challenge a denial of benefits. (Exhibit B 4 3.3 to Plaintiff's
Response Brief). The Pian requires managerial discretion to
the extent that benefits may be denied if

there exists a special situation or circumstances
for which it is necessary to establish a separate
nolicy disallowing severance pay, on a group
or individual basis, as determined by the
Administrator in its sole discretion.

(Exhibit B 4 2.1(b)(3) to Plaintiff's Response Brief). The
fact that AGI actually has in place an express administrative
regime (Exhibit B Article III to Plaintiff's Response Brief)
to evaluate applications for severance benefits is also “strong
evidence that an onge::g administrative scheme is
necessary... .” Siemon, 117 F.3d at 1178. Like the plans
interpreted in several other cases, although severance payments
were to be made within a short time after a “change of

38a

Appendix C

control,” the Plan extends only to a small number of key
employees, and the Plan was unfunded, the Plan’s
administration requires “case-by-case, discretionary
application of its terms... .” Bogue v. Ampex Corp., 976
F.2d 1319, 1323 (9th Cir. 1992); see also Collins, 147 F.3d
at 597; Tischmann, 145 F.3d at 566-67; Siemon, 117 F.3d
at 1179.

4. Conclusion

The court concludes that the Plan requires administrative
discretion and that it is governed by ERISA. Therefore, all
of Plaintiff's claims are concededly preempted by ERISA
and must be dismissed.

Accordingly, IT IS ORDERED:

1. The Recommendation of United States Magistrate
Judge is ACCEPTED.

2. Defendant’s Motion to Dismiss is GRANTED.

3. Plaintiff may file and serve an amended complaint
alleging his claims pursuant to ERISA within 20 days after
the date of this Memorandum Opinion and Order.

DATED at Denver, Colorado, this 10th of May, 1999.

BY THE COURT:

s/ Daniel B. Sparr
Daniel B. Sparr
U.S. District Judge

39a

APPENDIX D — RELEVANT STATUTES

Employee Retirement Income Security Act of 1974
as Amended, 29 U.S.C. §§ 1002(1)-(3), 1003, 1144(a) (1994)

§ 1002. Definitions

(1) The terms “employee welfare benefit plan” and
“weifare plan” mean any plan, fund, or program which was
heretofore or is hereafter established or maintained by an
employer or by an employee organization, or by both, to the
extent that such plan, fund, or program was established or is
maintained for the purpose of providing for its participants
or their beneficiaries, through the purchase of insurance or
otherwise, (A) medical, surgical, or hospital care or benefits,
or benefits in the event of sickness, accident, disability, death
or unemployment, or vacation benefits, apprenticeship or
other training programs, or day care centers, scholarship
funds, or prepaid legal services, or (B) any benefit described
in section 186(c) of this title (other than pensions on
retirement or death, and insurance to provide such pensions).

(2)(A) Except as provided in subparagraph (B), the
terms “employee pension benefit plan” and “pension plan”
mean any plan, fund, or program which was heretofore or 1s
hereafter established or maintained by an employer or by an
employee organization, or by both, to the extent that by its
express terms or as a result of surrounding circumstances
such plan, fund, or program —

(1) provides retirement income to
employees, or

40a

Appendix D

(ii) results in a deferral of income
by employees for periods extending to
the termination of covered employment
or beyond,

regardless of the method of calculating the
contributions made to the plan, the method of
calculating the benefits under the plan or the
method of distributing benefits from the plan.

(B) The Secretary may by regulation
prescribe rules consistent with the standards and
purposes of this chapter providing one or more
exempt categories under which —

(1) severance pay arrangements,
and

(11) supplemental retirement income
payments, under which the pension
benefits of retirees or their beneficiaries
are supplemented to take into account
some portion or all of the increases in
the cost of living (as determined by the
Secretary of Labor) since retirement,

shall, for purposes of this subchapter, be treated
as welfare plans rather than pension plans. In the
case of any arrangement or payment a principal
effect of which is the evasion of the standards or
purposes of this chapter applicable to pension
plans, such arrangement or payment shall be

4la

Appendix D

treated as a pension plan.

(3) The term “employee benefit plan” or “plan” means
an employee welfare benefit plan or an employee pension
benefit plan or a plan which is both an employee welfare
benefit plan and an emp!cyee pension benefit plan.

§ 1003. Coverage

(a) Except as provided in subsection (b) of this section
and in sections 1051, 1081, and 1101 of this title, this
subchapter shall apply to any employee benefit plan if it is
established or maintained —

(1) by any employer engaged in commerce
or in any industry or activity affecting commerce;
or

(2) by any employee organization or
organizations representing employees engaged in
commerce or in any industry or activity affecting
commerce; or

(3) by both.

(b) The provisions of this subchapter shall not apply to
any employee benefit plan if —

(1) such plan is a governmental plan (as
defined in section 1002(32) of this title);

42a

Appendix D

(2) such plan is a church plan (as defined in
section 1002(33) of this title) with respect to
which no election has been made under section
410(d) of Title 26;

(3) such plan is maintained solely for the
purpose of complying with applicable workmen’s
compensation laws or unemployment compensation
or disability insurance laws;

(4) such plan is maintained outside of the
United States primarily for the benefit of persons
substantially all of whom are nonresident aliens;
or

(5) such plan is an excess benefit plan (as
defined in section 1002(36) of this title) and is
unfunded.

§ 1144. Other laws

(a) Supersedure; effective date

Except as provided in subsection (b) of this section, the
provisions of this subchapter and subchapter III of this
chapter shall supersede any and all State laws insofar as they
may now or hereafter relate to any employee benefit plan
described in section 1003(a) of this title and not exempt under
section 1003(b) of this title. This section shall take effect on
January 1, 1975.

43a

APPENDIX E — AMAX GOLD INC. SEPARATION
PLAN FOR KEY EMPLOYEES EFFECTIVE
MARCH 5, 1997

{Omitted here but submitted separately
as Lodging Appendix]

44a

APPENDIX F — RESOLUTIONS RELAYING TO
EMPLOYEE BENEFIT PLANS

[Omitted here but submitted separately
as Lodging Appendix]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386010_1125%3A1. Public record. Not legal advice.