## Facts

- Ronald E. Peck was a long-time, at-will employee of SELEX Systems Integration, Inc. (SELEX) and participated in SELEX’s Key Employee Deferred Compensation Plan (the Plan), an ERISA-governed deferred-compensation (“top-hat”) plan.
- After SELEX’s CEO gave Peck a negative performance review, SELEX reassigned Peck on August 23, 2012 to a different position that required relocation.
- Peck objected to the reassignment and did not accept the relocation-based position.
- By letter dated September 14, 2012, SELEX’s CEO told Peck that refusing the new position would be treated as “cause” for termination and gave Peck two weeks to reconsider.
- Peck did not change his position, and SELEX terminated his employment for cause effective September 30, 2012.
- The Plan barred benefits for participants terminated “for cause.” The Plan defined “cause” to include an “intentional refusal to perform the material duties of [the employee’s] employment.”
- The Plan gave its administrative committee broad discretion to interpret the Plan and determine eligibility for benefits. The CEO served on, and acted for, the committee in handling Peck’s claim.
- On April 5, 2013, Peck submitted a claim for Plan benefits. The committee denied the claim, with the CEO acting for the committee.
- On July 11, 2013, Peck appealed. The committee upheld the denial, concluding that Peck’s refusal to accept the reassignment qualified as “cause” under the Plan.
- Peck sued under ERISA for benefits, arguing (1) he was not terminated for cause because he never held the new position and therefore did not refuse to perform the duties of his employment, and (2) the CEO should not have participated in deciding the claim because the CEO had already decided to terminate him for cause.
- SELEX and Peck filed cross-motions for summary judgment.

## Issues

1. What standard of review applied to the committee’s denial of benefits under the Plan’s grant of discretion, and how (if at all) should the CEO’s dual role be considered?
2. Was the committee’s interpretation of “cause”—treating Peck’s refusal to accept a relocation reassignment as an “intentional refusal to perform the material duties” of his employment—reasonable under the applicable standard of review?

## Decision

- The court applied a deferential, arbitrary-and-capricious style review because the Plan granted the committee broad discretion to interpret Plan terms and decide eligibility.
- The court considered the CEO’s participation (as both the person who warned and terminated Peck for cause and the person acting for the committee on the benefits decision) as a potential conflict factor, but it did not change the standard of review.
- The court held that the committee had a rational basis to treat Peck’s refusal to accept the reassignment as “cause” within the Plan’s definition and therefore to deny benefits.
- The court granted SELEX’s motion for summary judgment and denied Peck’s motion, upholding the benefits denial.

## Legal Principles

- When an ERISA plan grants the administrator discretionary authority to interpret plan language and decide eligibility, a court generally reviews a benefits denial under a deferential reasonableness standard (often described as arbitrary-and-capricious review).
- A decisionmaker’s conflict (including a role in both employment actions and plan administration) does not automatically require de novo review; it is weighed in deciding whether the administrator’s decision was reasonable on the record.
- Under deferential review, an administrator’s interpretation need not be the best reading of the plan; it must be a reasonable reading tied to the plan text and supported by the administrative record.

## Conclusion

In Peck v. SELEX Systems Integration, the district court upheld the Plan committee’s denial of deferred-compensation benefits, concluding that the committee reasonably interpreted the Plan’s “for cause” provision to cover Peck’s refusal to accept a relocation-based reassignment and that the CEO’s involvement in both the termination and benefits determinations did not make the denial unreasonable under the applicable deferential review.


Peck v. SELEX Systems Integration, 2016 WL 1225650, 172 F. Supp. 3d 171 (2016)