Joseph S. Leone v. Tyco Electronics Corporation

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-1821
JOSEPH S. LEONE,
Plaintiff - Appellant,
v.
TYCO ELECTRONICS CORPORATION,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Wilmington. James C. Fox, Senior
District Judge. (5:08-cv-00290-F)
Argued: December 7, 2010 Decided: January 12, 2011
Before MOTZ, AGEE, and KEENAN, Circuit Judges.
Affirmed by unpublished opinion. Judge Keenan wrote the
opinion, in which Judge Motz and Judge Agee joined.
Andrew O. Whiteman, HARTZELL & WHITEMAN, LLP, Raleigh, North
Carolina, for Appellant. Gregory Phillip McGuire, OGLETREE,
DEAKINS, NASH, SMOAK & STEWART, PC, Raleigh, North Carolina, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.

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KEENAN, Circuit Judge:
Joseph Leone brought this action against his former
employer, Tyco Electronics Corporation (Tyco). Leone alleged
that Tyco breached a contractual provision of its short-term
disability policy by refusing to pay him short-term disability
benefits from June 6, 2007 through December 5, 2007. Leone also
alleged that Tyco’s refusal to pay these short-term disability
benefits violated the North Carolina Wage and Hour Act (the
Act), N.C. Gen. Stat. §§ 95-25.1, et seq.
The district court granted summary judgment in favor of
Tyco on both claims. On the breach of contract claim, the
district court held that Tyco processed Leone’s application in
compliance with the short-term disability policy, and that Leone
failed to produce evidence that Tyco’s actions in denying the
claim were unreasonable, unfair, or in bad faith. The district
court also held that Leone failed to establish a claim for wages
under the Act. We affirm.
I.
Between 1996 and 2006, Leone worked as a “mold maker” for
Tyco. In November 2006, he filed a claim for short-term
disability benefits. At that time, Leone was being treated for
a bipolar disorder by Dr. Jason Crandell and for a sleep
disorder by Dr. Baldwin Smith. On November 14, 2006, Tyco’s

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short-term disability administrator, Hoover Rehabilitation
Services, Inc. (Hoover), informed Leone that his short-term
disability claim had been approved effective November 7, 2006.
Leone returned to work without restrictions on May 1, 2007.
One month later, however, he filed a new claim for short-term
disability benefits. Upon receipt of Leone’s application,
Hoover’s representative contacted Tyco’s corporate medical
director, Dr. Mark A. Bates, and asked him to review Leone’s
claim. After reviewing Leone’s medical documentation and
speaking with Dr. Smith, Dr. Bates recommended that Leone’s
claim be denied. According to Dr. Bates, the medical
documentation did not substantiate any change in Leone’s medical
condition that would explain how Leone could have been disabled
from working for almost six months, then able to work without
restrictions for thirty-one days, and immediately thereafter be
unable to work again. Hoover later informed Leone that Tyco had
denied his claim for short-term disability benefits, and advised
Leone of his appeal rights under Tyco’s short-term disability
policy.
Leone filed an appeal with Hoover challenging the denial of
his claim. In support of his appeal, Leone enclosed records
from Dr. Smith and a letter from Leone’s wife. These documents
were sent to Dr. Bates for review.

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After receiving these documents, Dr. Bates contacted Dr.
Smith to discuss Leone’s condition. Based on Dr. Bates’ review
of the medical documents and his conversation with Dr. Smith,
Dr. Bates informed Hoover of his opinion that although Leone had
“some sort of sleep disturbance,” there was no change in Leone’s
condition between the period that he was working without
restriction and the time that he requested resumption of short-
term disability benefits. Dr. Bates therefore recommended to
Hoover that Leone’s appeal be denied. On July 18, 2007, Hoover
sent Leone a letter notifying him that his appeal had been
denied.
After receiving Hoover’s denial letter, Leone asked for the
opportunity to submit additional documentation to support his
claim. Hoover agreed and conducted a review of Leone’s
additional documentation, including Leone’s physicians’ letters.
These letters were forwarded to Dr. Bates for further review of
Leone’s claim. When Dr. Bates again recommended that the claim
be denied, Hoover informed Leone of the final denial of his
claim for a resumption of short-term disability benefits.
On July 26, 2007, Tyco sent Leone a letter stating that his
employment was terminated, effective June 6, 2007. Tyco stated
that its decision was based on the fact that Leone had been
absent from work since June 6, 2007, that his short-term

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disability claim and appeal had been denied, and that he had
exhausted his leave under the Family Medical Leave Act.
In June 2008, Leone filed an action against Tyco in Wake
County Superior Court in North Carolina. In the complaint, Leone
alleged that Tyco breached a contractual provision in the short-
term disability policy by refusing to pay him short-term
disability benefits. He also alleged that Tyco’s refusal of his
claim violated the Act.
Tyco removed the case to the federal district court and
later moved for summary judgment on all of Leone’s claims. The
district court granted Tyco’s motion for summary judgment on
Leone’s breach of contract claim, holding that “Leone proffered
no evidence that Tyco’s processing of his second [short-term
disability] claim was anything other than compliant with Tyco’s
Policy.” The district court also granted summary judgment to
Tyco on Leone’s claim under the Act, concluding that Tyco did
not owe Leone wages after the effective date of his termination.
Leone filed a timely an appeal in this court challenging the
district court’s judgment.
II.
We review an award of summary judgment de novo. Homeland
Training Ctr., LLC v. Summit Point Auto. Research Ctr., 594 F.3d
285, 290 (4th Cir. 2010). Under this standard, summary judgment

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is appropriate when “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a).
III.
We first address Leone’s argument that Tyco breached its
contract by refusing to pay Leone short-term disability
benefits. The parties agree that we apply North Carolina law to
this breach of contract claim.*
Under North Carolina law, Tyco’s short-term disability
policy is a unilateral contract in which Tyco offered its
employees an opportunity to apply for and to receive short-term
disability benefits. See White v. Hugh Chatham Mem’l Hosp.,
Inc., 387 S.E.2d 80, 81 (N.C. Ct. App. 1990); Hamilton v.
Memorex Telex Corp., 454 S.E.2d 278, 282-83 (N.C. Ct. App.
1995). A Tyco employee accepts that offer by entering or
maintaining employment. See White, 387 S.E.2d at 81.
North Carolina law provides that a contract is construed as
a whole, and that individual clauses are construed in their
context. Sec. Nat’l Bank v. Educators Mut. Life Ins. Co., 143
* The parties agree that Tyco’s short-term disability policy
is not governed by the Employee Retirement Income Security Act
(ERISA) because the policy falls within the “payroll practices”
exception to ERISA’s coverage. See 29 C.F.R. § 2510.3-1(b)(2).

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S.E.2d 270, 275 (N.C. 1965). If a contract provides a party
“discretionary power affecting the rights of others,” then that
party must exercise its discretionary power “in a reasonable
manner based upon good faith and fair play.” Mezzanotte v.
Freeland, 200 S.E.2d 410, 414 (N.C. Ct. App. 1973). A contract
confers “discretionary power” when the contract language
provides one party with the right to exercise its sole judgment.
See Midulla v. Howard A. Cain Co., 515 S.E.2d 244, 246 (N.C. Ct.
App. 1999).
We consider the plain language of the short-term disability
contract. See Holshouser v. Shaner Hotel Group Props. Ltd.
P’ship, 518 S.E.2d 17, 18 (N.C. Ct. App. 1999). The stated
purpose of Tyco’s short-term disability policy is to “establish
the procedure to determine an employee’s eligibility to receive
Short-Term and Long-Term Disability Benefits for non-
occupational illness/injury.” The policy defines a “Short Term
Disability” as “a condition that renders an employee incapable
of performing the required duties of his/her occupation . . .
due to non-occupational injury or illness.” The policy states
that a short-term disability benefit “may” be available to an
employee who has a short-term disability.
The policy includes a section entitled “Short-Term
Disability Procedure.” In that section, the policy explains
that an employee must notify his supervisor when he is unable to

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work due to an illness or injury. The policy further details
the responsibilities of the supervisor in contacting the short-
term disability “vendor.” According to the policy, the vendor
is responsible for contacting the employee and the employee’s
medical provider to verify the employee’s medical information.
The procedure section of the policy also explains the
various requirements imposed after the approval or denial of an
employee’s disability claim. For example, if a claim is
approved, the employee must provide medical updates to the
vendor on a regular basis. However, if the disability claim is
denied, the employee must return to work immediately or appeal
the denial of the claim within fourteen days.
A “disclaimer” is provided at the end of the policy. The
disclaimer states that “[t]he Vice President of Human Resources,
or designee, whose decision shall be final, shall make any
interpretation(s) of, or exception(s) to [the] policy.”
The plain language of Tyco’s policy demonstrates that the
policy does not guarantee that an employee will receive short-
term disability benefits if the employee meets the policy’s
requirements for establishment of a short-term disability.
Instead, the policy merely provides that short-term disability
benefits “may” be available to an employee who has a short-term
disability. This language also must be construed in light of
other policy provisions, including the disclaimer and the

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statement that a claim may be “approved” or “denied.” See Sec.
Nat’l Bank, 143 S.E.2d at 275.
These provisions, when viewed together, provide employees
alleging a disability with the right to file a claim for
benefits, and with an established claims procedure that allows
Tyco the right to exercise its judgment when reviewing claims
made under the policy. This policy language provides Tyco with
“discretionary power” to approve or deny claims. See
Mezzanotte, 200 S.E.2d at 414. An employee’s right to short-
term disability benefits therefore is contingent upon Tyco’s
exercise of its discretionary power.
We are not persuaded by Leone’s argument that Tyco lacks
discretionary power to approve or deny benefit claims because
such power is not stated expressly in the policy. In advancing
this argument, Leone exclusively relies on court decisions
involving claims brought under the Employee Retirement Income
Security Act (ERISA). See Gallagher v. Reliance Standard Life
Ins. Co., 305 F.3d 264, 268-69 (4th Cir. 2002); Herzberger v.
Standard Ins. Co., 205 F.3d 327, 331-32 (7th Cir. 2000). These
ERISA cases, which reflect the fiduciary relationship of an
employer to its employees in certain contexts not applicable
here, are not relevant to our breach of contract analysis. See
Griggs v. E.I. Dupont De Nemours & Co., 237 F.3d 371, 379-80
(4th Cir. 2001) (discussing the responsibilities of a fiduciary

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under ERISA). As explained above, we reach our conclusion
concerning Tyco’s contractual authority upon consideration of
the plain language of the entire policy.
We also observe that, under North Carolina contract law,
Tyco was required to exercise its discretionary power “in a
reasonable manner based upon good faith and fair play.”
Mezzanotte, 200 S.E.2d at 414. The evidence in the record shows
that Tyco acted reasonably in reviewing Leone’s second claim for
short-term disability benefits. Tyco referred Leone’s claim to
Dr. Bates for multiple reviews, considered Leone’s appeal and
additional documentation, and relied on Dr. Bates’ various
recommendations to deny Leone’s claim. Additionally, Leone has
not presented any evidence that Tyco failed to exercise its
discretionary power in a reasonable manner. Therefore, we hold
that the district court did not err in granting summary judgment
to Tyco on Leone’s breach of contract claim.
IV.
Leone next challenges the district court’s decision
awarding summary judgment to Tyco on Leone’s claim for wages
under the Act. The relevant provision of the Act states that
employers must pay “all wages and tips accruing to the employee
on the regular payday.” N.C. Gen. Stat. § 95-25.6. The Act
further provides that “[e]mployees whose employment is

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discontinued for any reason shall be paid all wages due.” N.C.
Gen. Stat. § 95-25.7.
The Act defines “wages” as “compensation for labor or
services rendered by an employee.” N.C. Gen. Stat. § 95-
25.2(16). The Act states that a “wage” includes “sick pay,
vacation pay, severance pay, commissions, bonuses, and other
amounts promised when the employer has a policy or a practice of
making such payments.” N.C. Gen. Stat. § 95-25.2(16).
The Act does not require that an employer have a policy
providing wage-related benefits. Narron v. Hardees Food Sys.,
Inc., 331 S.E.2d 205, 207 (N.C. Ct. App. 1985). However, if the
employer decides to offer wage-related benefits, then the Act
requires, among other things, that an employer notify its
employees of the benefits policy, inform its employee of the
conditions that must be met to earn the benefits, and provide
the benefits due when the employee performs the work required to
earn the benefits. Id.
Even if we assume, without deciding, that short-term
disability benefits are considered wage-related benefits payable
as “wages” under the Act, we conclude that Leone does not have a
valid claim under the Act. Tyco’s policy did not guarantee
short-term disability benefits to disabled employees. Under the
language of the policy, a claim for benefits accrues after Tyco
approves an employee’s benefits claim. Leone’s final claim for

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short-term disability benefits was not approved by Tyco and,
thus, Leone never accrued short-term disability benefits for
that later time period. See Moses Cone Mem’l Health Servs.
Corp. v. Triplett, 605 S.E.2d 492, 496 (N.C. Ct. App. 2004).
Therefore, we conclude that the district court did not err in
awarding summary judgment to Tyco on Leone’s claim for wages
under the Act.
For these reasons, we affirm the district court’s award of
summary judgment to Tyco.
AFFIRMED

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