Same Severance Plan, Different Results: What The Fifth And Tenth Circuits Teach About Employer Discretion In Eligibility Disputes

Seyfarth Synopsis: Two unpublished decisions involving the same change in control severance plan went in opposite directions on the standard of review. In 2026, the Fifth Circuit applied abuse of discretion based on plan language delegating interpretive authority to the administrator. In 2025, the Tenth Circuit applied de novo review to similar facts involving the same plan because it viewed the delegation as triggered only by textual ambiguity. The divergent results underscore the importance of carefully drafted discretionary authority clauses in top hat severance plans, particularly for employers seeking to avoid de novo review of factual eligibility disputes.

What happened in the Fifth Circuit?

• On February 26, 2026, the United States Court of Appeals for the Fifth Circuit issued an unpublished opinion affirming summary judgment for the Anadarko Petroleum Corporation Change of Control Severance Plan and its administrative committee.
• The dispute centered on whether an executive was eligible to resign for “good reason” after a change in control based on a “material and adverse” diminishment in duties or a material reduction in base salary.
• The plan empowers the committee to interpret the plan and to construe ambiguous, unclear, or implied terms “in its sole judgment,” and states that its interpretations and determinations are not subject to de novo review.
• The former employee argued that the plan’s standards for “good reason” were ambiguous that therefore did not trigger the administrative committee’s discretion.
• The court emphasized that deciding whether duties or salary were “materially” and “adversely” affected requires qualitative, comparative fact-finding—including comparing duties, authority, and compensation before and after the change in control—and concluded that abuse of discretion was the appropriate standard of review.

What happened in the Tenth Circuit?

• In an earlier unpublished decision, Hoff v. Amended and Restated Anadarko Petroleum Corporation Change of Control Severance Plan, the Tenth Circuit addressed the same plan language and similar circumstances.
• In this case, neither party argued the “material and adverse diminishment” language was ambiguous. Treating ambiguity as a strictly textual question, the court read the plan’s delegation as operative only if a term was ambiguous on its face.
• Because no textual ambiguity was claimed, the court declined to defer and applied de novo review to the committee’s determination.
• Under the de novo lens, the court independently concluded the employee’s responsibilities were materially and adversely diminished and awarded benefits.

Why the same clause produced different review standards

The Fifth Circuit treated ambiguity as arising through application. It emphasized that determining whether duties were materially and adversely diminished after a change in control requires comparative factual assessments and judgment about the significance of the changes. Because the Severance Plan grants the committee authority to interpret the plan and bars de novo review of its determinations, the court concluded that these evaluative determinations fall within the committee’s discretionary authority, making abuse of discretion the proper standard.

The Tenth Circuit instead treated ambiguity as a strictly textual question. It concluded that discretionary authority applies only when a term is ambiguous as written. Because the parties in Hoff did not argue that the material and adverse diminishment standard was ambiguous, the Tenth Circuit viewed the language as clear, found no basis to invoke the delegation of discretion, and therefore applied de novo review.

As a result, identical plan language produced two different standards of review because the Fifth Circuit recognized ambiguity in the evaluative work required, while the Tenth Circuit recognized ambiguity only when the text itself was unclear.

Practical implications for plan sponsors

Although the Fifth Circuit and Tenth Circuit opinions are unpublished and therefore not precedential, they nonetheless provide meaningful insight into how courts may approach the interpretation of severance plan discretionary clauses. The split demonstrates the vulnerability of clauses that tie deference only to ambiguous terms. To reduce that risk, consider:

• Delegate discretion broadly. Grant the administrator explicit authority to make all determinations under the plan, including factual findings, eligibility assessments, and interpretations of all terms—whether or not ambiguous.
• Mandate deferential review. State that all interpretations, determinations, and findings of fact are final and binding unless arbitrary or capricious.
• Avoid ambiguity triggers. Do not limit discretion to “ambiguous,” “unclear,” or “implied” terms; that limitation invites de novo review.
• Call out judgment-heavy topics. Clarify that materiality assessments, comparative evaluations of duties and authority pre- and post-transaction, and compensation-change assessments fall squarely within the administrator’s discretion.

The takeaway

Unpublished or not, these decisions are a timely reminder that the breadth and framing of a severance plan’s discretionary authority clause can decide the standard of review—and, with it, the outcome of a court’s review of close eligibility disputes. Employers should review their severance plans and discuss with legal counsel if the delegation of authority in its plan will ensure the maximum deference is afforded to the plan decisionmaker’s eligibility decisions.