Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-04-07060/USCOURTS-caDC-04-07060-0/pdf.json

Parties Involved:
Donald F. Champoux
Appellant
SBC Pension Benefit Plan - Non Bargained Program
Appellee
Marian R. Wagener
Appellant

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 11, 2005 Decided May 17, 2005

No. 04-7060

MARIAN R. WAGENER, ON BEHALF OF HERSELF 

AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED AND

DONALD F. CHAMPOUX, ON BEHALF OF HIMSELF 

AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,

APPELLANTS

v.

SBC PENSION BENEFIT PLAN - NON BARGAINED PROGRAM,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 03cv00769)

Marc I. Machiz argued the cause for appellants. With him

on the briefs were Marka Peterson and Eli Gottesdiener.

John L. Carter argued the cause for appellee. With him on

the brief were Bruce A. Blefeld and C. Michael Buxton.

Before: EDWARDS, SENTELLE, and ROBERTS, Circuit

Judges.

Opinion for the Court filed by Circuit Judge EDWARDS.

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EDWARDS, Circuit Judge: The principal question in this

case is whether plaintiffs-appellants Marian Wagener and

Donald Champoux stated a claim upon which relief can be

granted in their complaint alleging that defendant-appellee, the

SBC Pension Benefit Plan-Nonbargained Program (“SBC Plan”

or “Plan”), impermissibly discriminated against plaintiffs and

other Plan participants in the administration of the SBC Plan.

We conclude that plaintiffs have indeed stated a claim under §

502(a)(1)(B) of the Employee Retirement Income Security Act

of 1974 (“ERISA”), 29 U.S.C. § 1132(a)(1)(B) (2000).

Therefore, we reverse the District Court’s dismissal of plaintiffs’

claims.

According to their complaint, Wagener and Champoux

worked for companies that are affiliated with the Plan sponsor,

SBC Communications, Inc. (“SBC”). Wagener and Champoux

are both participants in the Plan and, in November 2000, they

retired pursuant to an enhanced benefit program that was

designed to encourage early retirement. The calculation of

benefits under the terms of this program depends in part on the

amount of a participant’s compensation between January 1,

1995 and December 31, 1999. The present dispute turns on how

to calculate plaintiffs’ compensation during this period.

According to the defendant, plaintiffs’ compensation between

January 1, 1995 and December 31, 1999 includes only the

amount of pay plaintiffs actually received during this period,

thus excluding a paycheck that Wagener and Champoux

received on January 5, 2000 for work they performed in 1999.

By contrast, Wagener and Champoux argue that their level of

compensation for benefit calculation purposes includes

compensation earned between January 1, 1995 and December

31, 1999, even though one paycheck for this period was received

at the beginning of the 2000 calendar year. They also allege that

other similarly situated Plan participants have been paid benefits

based on compensation earned, not received, in the base period,

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thus confirming their entitlement to benefits under a nondiscrimination clause in the Plan.

We hold that Wagener and Champoux have alleged

sufficient facts to state a claim for denial of benefits under

ERISA, 29 U.S.C. § 1132(a)(1)(B), because their complaint

includes the allegation that Plan officials discriminated against

them vis-à-vis similarly situated Plan participants in

contravention of the Plan’s plain language. Any deference we

owe to discretionary decisions of Plan officials does not extend

to decisions that discriminate among Plan participants in

violation of the plain terms of the Plan. Therefore, we reverse

the District Court’s decision granting the Plan’s motion to

dismiss. We also vacate the District Court’s denial of the classcertification motion filed by Wagener and Champoux, as that

motion is no longer moot in light of our disposition of this

appeal. 

I. BACKGROUND

The following facts are taken from plaintiffs’ complaint, as

well as the exhibits attached to, and the documents incorporated

by reference in, that complaint. Because we are reviewing the

District Court’s decision to grant the SBC Plan’s motion to

dismiss for failure to state a claim, we assume that the facts

alleged in plaintiffs’ complaint are true. World Wide Minerals,

Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1157 n.2 (D.C.

Cir. 2002).

The SBC Pension Benefit Plan – Nonbargained Program is

a defined benefit plan within the meaning of ERISA § 3(35), 29

U.S.C. § 1002(35), sponsored by SBC, which is the Plan

administrator and a named fiduciary of the Plan. Compl. ¶ 7,

3/27/03, reprinted in Joint Appendix (“J.A.”) 6, 12. The Benefit

Plan Committee (“Committee”) is also a named fiduciary of the

Plan and has primary responsibility for the review of benefit

claims under the Plan. Id. The Committee has delegated

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administrative responsibility and authority to review claims to

the SBC Pension Plan Service Center (“Service Center”), which

services, administers, and operates the Plan on a day-to-day

basis. Id. Plaintiffs Wagener and Champoux were at all

relevant times participants in the Plan. Id. ¶¶ 5-6, J.A. 11. 

SBC altered the Plan’s benefit structure in 1997, but

preserved the pre-existing structure for certain employees,

including plaintiffs, who retained a “Grandfathered Benefit.”

See id. ¶¶ 11-12, J.A. 13; SBC Communications, Inc. Board of

Directors Resolutions Amending the Plan Effective 6/1/1997,

J.A. 788, 792. It is undisputed that the 1997 Plan amendment

has no bearing on the merits of this case. 

In 1998, SBC began requiring some SBC-affiliated

companies that participated in the Plan to change the method

that they used to determine the Basic Compensation portion of

a Plan participant’s Pension Compensation, which ultimately

affected the amount of the participant’s benefits under the Plan.

Compl. ¶ 18, J.A. 15. Under the regime in place prior to 1998,

Basic Compensation was calculated based on a participant’s

Basic Rate of Pay over a specified period. Id. ¶ 15, J.A. 14.

Under this approach, Basic Compensation meant that a

participant would obtain credit for his or her full-time base pay

rate, whether or not she worked full time during that period. Id.

¶ 17, J.A. 14-15. 

Beginning in 1998, SBC required some participating

companies to use “actual base pay” instead of Basic Rate of Pay

to determine an employee’s Basic Compensation under the Plan.

The purpose of this change, which was implemented through a

series of Plan amendments (“actual base pay amendments”), was

to allow participants to accrue pension credits only for work

they actually performed. Id. ¶¶ 18-19, J.A. 15-16. Under the

terms of an April 13, 1999 Plan amendment (“April 1999 actual

base pay amendment”), SBC switched SBC Management

Services, Inc., which employed plaintiffs Wagener and

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Champoux, from the Basic Rate of Pay to the “actual base pay”

method for calculating employee participants’ Basic

Compensation, effective July 1, 1999. Id. ¶¶ 19-20, J.A. 16.

On June 14, 1999, SBC, acting as Plan administrator, sent

a written notice to Wagener, Champoux, and others, which

stated in relevant part:

“The [Plan] is being amended effective July 1, 1999 to

change the method that is used to calculate your pension

compensation, which may affect the amount of your benefit

. . . . The Basic Rate of Pay portion of Pension

Compensation will be replaced by Actual Base Pay. The

Basic Rate of Pay is your full time monthly Base Pay,

whether you worked it or not. The Actual Base Pay is the

base pay you actually receive.”

Id. ¶ 22, J.A. 17 (alterations in original); see also J.A. 89 (copy

of the notice attached as an exhibit to the complaint).

On January 4, 2000, actual base pay was defined in the

Plan, id. ¶ 24, J.A. 17, to mean “a Participant’s Compensation

that has actually been paid out by a Participating Company on

such Participant’s behalf and that has been identified by such

Participating Company as base pay.” Plan Amendment, 1/4/00,

J.A. 91, 93 (attached as exhibit to the complaint). 

On September 20, 2000, as part of a company-wide

downsizing, SBC adopted a Plan amendment that added an

Enhanced Pension and Retirement Program (“EPR Program”) to

the Plan. The EPR Program was designed to encourage

thousands of employees of SBC and SBC-related companies to

take early retirement by offering them a larger retirement benefit

than they would have otherwise received. Compl. ¶ 8, J.A. 12.

The EPR Program provided that employees who decided to

retire under its terms would receive the largest of several

alternative benefits for which they were eligible. See id. ¶ 11,

J.A. 13. 

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Plaintiffs Wagener and Champoux were eligible for the

EPR Program, and they elected to retire under it. Their last day

of work was November 15, 2000. Id. ¶¶ 9-10, J.A. 13. For

Wagener and Champoux, the largest benefit available under the

EPR Program was the “Enhanced Grandfathered Benefit.” Id.

¶ 11, J.A. 13. The “Enhanced Grandfathered Benefit” calculated

participants’ benefits as if they were five years older and had

worked five years longer for a SBC company than they actually

had. See SBC Pension Benefit Plan Nonbargained Program, As

Restated Effective 2/1/95 (incorporating EPR amendments)

(“SBC Plan” or “Plan”), J.A. 254, 262. Except for that

enhancement, the Plan amendments creating the EPR Program

explicitly provided that “the Enhanced Grandfathered Benefit

shall be a benefit calculated in the same manner as the

Grandfathered Benefit would be calculated . . . under the current

[Plan].” Id.

The present dispute emanates from the Committee’s

calculation of plaintiffs’ benefits under the EPR Program. To

calculate the “Enhanced Grandfathered Benefit” under the EPR

Program, the Committee must first determine a participant’s

“Adjusted Career Income,” which is a function of, among other

things, the participant’s “Average Annual Compensation” for

the period from January 1, 1995 through December 31, 1999.

Compl. ¶ 12, J.A. 14. As the term was used in the portion of the

Plan providing for the Grandfathered Benefit at the time that the

EPR Program was adopted, “Average Annual Compensation”

meant “‘a Participant’s Pension Compensation [which included

Basic Compensation plus other forms of compensation] during

the Averaging Period, divided by five years.’” Id. ¶ 13, J.A. 14;

see also J.A. 257 (copy of the SBC Plan). Thus, with regard to

plaintiffs and other individuals eligible for the “Enhanced

Grandfathered Benefit,” “Average Annual Compensation” was

their total Pension Compensation between January 1, 1995 and

December 31, 1999 – the relevant “Averaging Period” – divided

by five. 

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On September 6, 2001, plaintiff Champoux wrote the SBC

Pension Plan Service Center, complaining that one full pay

period from 1999 had been excluded from the Averaging Period

used to calculate his Pension Compensation. He stated:

“Since SBC paid the management employees on a semimonthly basis, the total number of payments necessary for

a full year compensation is 24. As you will note in the

[attached table regarding the calculation of Champoux’s

benefits], the total number of payments . . . for the year

1999 is only 23. All years except 1999 have 24

payments. . . . If SBC believes it is appropriate to exclude

some compensation from within the total base period

compensation, then it should also exclude the applicable

time period from the averaging calculation.”

Id. ¶ 31, J.A. 21 (emphasis added by complaint omitted). On

December 7, 2001, the Service Center denied Champoux’s

request, stating that, because the April 1999 actual base pay

amendment changed the method used to calculate Pension

Compensation from Basic Rate of Pay to actual base pay

effective July 1, 1999, one of the paychecks Champoux received

in July 1999 was not included in the calculation of his Pension

Compensation. See id. ¶¶ 32-33, J.A. 22. 

In February 2002, Champoux appealed this denial to the

Plan’s Benefit Plan Committee. The Committee wrote

Champoux in May 2002, informing him that his appeal had been

denied. The denial letter did not endorse the position taken by

the Service Center in its December 2001 letter to Champoux.

Instead, the Committee explained:

“What actually happened was that the [April 1999 actual

base pay] amendment caused a delay in the recognition of

pay, so that the pay you received for the period ended

December 31, 1999 was recognized as pay in the calendar

year 2000 (because it was paid on January 5, 2000); prior to

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the amendment, pay received for the period ended

December 31, 1999 would have been recognized in 1999.

Therefore, as a result of the amendment, twenty-three pay

periods were included in 1999 pay instead of twenty-four.

It was the accounting change to actual base pay in 1999 that

resulted in what appeared to you to be discrepancy in your

pension calculation.”

Id. ¶ 37, J.A. 25 (emphasis added by complaint omitted). 

The Committee reached this decision notwithstanding that

it had previously endorsed a contrary interpretation of the actual

base pay amendments for Grandfathered retirees who were not

participants in the EPR Program. Specifically, the plaintiffs’

complaint alleges that 

between January 1, 1998 and today, the Plan has

consistently administered the Grandfathered Benefit for all

retirees – except the Enhanced Grandfathered Benefit for

EPR retirees – by including all pay periods as part of

“Average Annual Compensation” for the year in which they

were earned, notwithstanding the [actual base pay

amendments], and notwithstanding the fact that one full pay

period was not received until after the end of the Averaging

Period.

Id. ¶ 25, J.A. 18-19.

Champoux submitted two appeals of the Benefit

Committee’s decision, which were denied in August 2002 and

October 2002. See id. ¶¶ 39-42, J.A. 26-28. 

With regard to this appeal, the material facts relating to

plaintiff Wagener’s claim for benefits are virtually identical to

those relating to Champoux. She also sought additional benefits

from the SBC Plan and, like Champoux, she was informed that

her benefits had been calculated by excluding one full pay

period from 1999 from the calculation of her Pension

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Compensation. Wagener’s claim for additional benefits was

also denied by both the Service Center, and, on appeal, by the

Committee. See id. ¶¶ 43-48, J.A. 29-32.

Wagener and Champoux allege a number of facts that they

assert demonstrate that the Committee’s decision to deny their

claims for additional benefits was influenced by a conflict of

interest. Specifically, the complaint alleges that the plaintiffs’

“correct interpretation of the Plan” would cost SBC roughly $30

million plus interest in additional contributions to what is

already an underfunded Plan. Id. ¶ 58, J.A. 38. According to

plaintiffs, “On information and belief, the members of the

Benefit Plan Committee are officers and employees of SBC and

its affiliates whose jobs and prospects for raises and promotions

are affected, and/or are seen by them to be affected, by decisions

interpreting the plan in a manner disadvantageous to SBC,

especially one which would cost SBC some $30 million plus

interest.” Id. The complaint further alleges that this conflict of

interest has influenced not only the Committee’s ultimate

interpretation of the Plan, but also other matters relating to the

Committee’s handling of plaintiffs’ requests regarding their

benefits, including (1) the Committee’s refusal to provide

plaintiffs with documents relating to their benefit claims, (2) the

Committee’s failure to provide plaintiffs with a reasoned basis

for its decisions denying their claims for additional benefits, and

(3) the Committee’s October 2001 adoption of an after-the-fact

Plan amendment to make it appear that the disparate treatment

of EPR Grandfathered retirees vis-à-vis similarly situated nonEPR Grandfathered retirees had a textual basis when in fact the

discriminatory treatment had been ongoing prior to the

promulgation of the amendment. Id. ¶¶ 59-60, J.A. 38-39. 

Having fully exhausted the internal claims procedures of the

Plan, id. ¶ 49, J.A. 32, plaintiffs Wagener and Champoux filed

suit against the SBC Plan in District Court in March 2003. In

Count Two of their complaint, plaintiffs sought, on behalf of

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themselves and a class of similarly situated participants and

beneficiaries, additional benefits under ERISA, 29 U.S.C. §

1132(a)(1)(B), which authorizes individuals, inter alia, to bring

civil actions to recover benefits due to them under the terms of

their pension plan. Plaintiffs filed a motion for class

certification concurrent with the filing of their complaint. In

addition, in Count One of their complaint, plaintiffs sought

additional disclosures of documents relating to their individual

claims, as authorized by ERISA § 503, 29 U.S.C. § 1133, and its

accompanying regulations. Plaintiffs’ complaint also included

two additional counts, which are not at issue here. 

In May 2003, the SBC Plan moved to dismiss plaintiffs’

complaint for failure to state a claim upon which relief can be

granted under Rule 12(b)(6) of the Federal Rules of Civil

Procedure. Plaintiff Wagener then moved for summary

judgment on the document disclosure claim.

The District Court granted the motion to dismiss the

complaint and denied Wagener’s motion for summary judgment.

Wagener v. SBC Pension Benefit Plan-Nonbargained Program,

Civ. A. No. 03-00769 (D.D.C. Mar. 29, 2004), reprinted in J.A.

1021. The District Court stated:

The central question presented is whether the defendant

Pension Benefit Plan was required to include a payment

made on January 5, 2000, in the calculation of each

plaintiff’s “Average Annual Compensation.” The

defendant’s Benefit Plan Committee, which interpreted the

plan and calculated the benefits, decided that the Plan did

not authorize inclusion of the January 5, 2000, payment

because it was received after December 31, 1999, the end

of each plaintiff’s “Averaging Period.” The Court finds

that the Committee’s interpretation of the plan is

reasonable, and since that is all that is required due to the

substantial-deference owed to the Committee’s decision,

that is the end of the matter.

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Id., J.A. 1021. The District Court further concluded that the

plaintiffs’ other claims were derivative of the benefit claim and

thus dismissed them as well. Id., J.A. 1022. In a separate order

issued the same day, the District Court denied plaintiffs’ motion

for class certification as moot in light of its decision granting the

SBC Plan’s motion to dismiss. Wagener v. SBC Pension Benefit

Plan-Nonbargained Program, Civ. A. No. 03-00769 (D.D.C.

Mar. 29, 2004), reprinted in J.A. 1023. Plaintiffs appeal the

dismissal of their claim for additional benefits under §

1132(a)(1)(B) and the dismissal of their motion for class

certification as moot; Plaintiff Wagener also appeals the District

Court’s dismissal of the document disclosure claim (Count One)

and the denial of her motion for summary judgment on that

claim.

II. ANALYSIS 

A. Standard of Review

We review de novo the District Court’s dismissal of

plaintiffs’ complaint for failure to state a claim, accepting the

factual allegations made in the complaint as true and giving

plaintiffs the benefit of all inferences that can reasonably be

drawn from their allegations. Kaempe v. Myers, 367 F.3d 958,

963 (D.C. Cir. 2004). We are constrained to reverse the District

Court’s decision unless it appears beyond doubt that Wagener

and Champoux can prove no set of facts in support of their

claims that would entitle them to relief. Id. (citing Conley v.

Gibson, 355 U.S. 41, 45-46 (1957)).

B. The Level of Deference Owed the Committee’s

Interpretation 

Before analyzing the specific facts of this case, we consider

the level of deference owed to the Committee’s interpretation of

the SBC Plan. In Firestone Tire & Rubber Co. v. Bruch, 489

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U.S. 101, 115 (1989), the Supreme Court held that “a denial of

benefits challenged under [29 U.S.C.] § 1132(a)(1)(B) is to be

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.” In this latter category of cases, the standard of review –

variously described by the Court as “arbitrary and capricious”

and “abuse of discretion” review – is plainly deferential. See id.

at 111-15. This court has defined the Firestone deferential

standard as one of “reasonableness.” Block v. Pitney Bowes,

Inc., 952 F.2d 1450, 1452, 1454 (D.C. Cir. 1992). 

In this case, Wagener and Champoux concede that the terms

of the SBC Plan give the Committee discretionary authority to

construe the Plan. See Appellants’ Br. at 23. Nevertheless,

plaintiffs argue that this court should apply heightened scrutiny

to the Committee’s interpretation of the SBC Plan, because they

maintain that they have pleaded facts demonstrating that

members of the Benefit Plan Committee had conflicts of

interest. Plaintiffs find support for this position in Firestone,

where the Court indicated that, “[o]f course, 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 (alteration in original)

(quoting RESTATEMENT (SECOND) OF TRUSTS § 187 (1959)). 

The Firestone Court’s “opaque direction about how courts

should review discretionary benefits denials by potentially

conflicted [plan] fiduciaries” in ERISA cases has “bedeviled the

federal courts” ever since. Pinto v. Reliance Standard Life Ins.

Co., 214 F.3d 377, 378 (3d Cir. 2000). Pinto identified three

approaches that federal appellate courts have taken in reviewing

decisions of conflicted plan administrators that otherwise would

be subject to only arbitrary and capricious or abuse of discretion

review under Firestone: (1) shifting the burden to require

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conflicted administrators to prove that their interpretation was

not motivated by self-interest when that interpretation was

apparently reasonable but would not survive de novo review; (2)

reviewing decisions of administrators who have been influenced

by a conflict of interest de novo; and (3) employing a slidingscale approach, which accords different degrees of deference

depending on the apparent seriousness of the conflict. See id. at

390-92 (collecting cases). Pinto embraced the sliding-scale

approach, which it identified as the majority position. See id. at

379, 392-93.

The plaintiffs in this case maintain that they have pleaded

adequate facts to demonstrate that the disputed decisions of the

Committee warrant no deference, because they were tainted by

conflicts of interest. On the record here, we need not determine

(1) whether plaintiffs have pleaded adequate facts to suggest that

the Committee operated under a conflict of interest under

Firestone or, (2) assuming plaintiffs have pleaded sufficient

facts, what the appropriate standard of review should be. As

explained below, if we accept plaintiffs’ allegations as true, it is

clear that the officials responsible for administering the Plan

construed the Plan in a manner that discriminated against

plaintiffs in violation of the Plan’s plain terms. An

interpretation of the Plan that rests on impermissible

discrimination is clearly unreasonable and, therefore, it fails

whether we apply de novo review or a deferential standard of

review. See Springfield, Inc. v. Buckles, 292 F.3d 813, 818

(D.C. Cir. 2002) (declining to decide which standard of review

to apply to an agency interpretation of a statute, when the court

would have upheld the agency’s interpretation under either of

the two possible alternative standards). 

C. The Reasonableness of the Committee’s Interpretation 

On the merits, the disposition of the parties’ dispute in this

case turns on a construction of § 4.2 of the SBC Plan, which

governs benefit calculations for Grandfathered participants in

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the EPR Program. Under § 4.2, benefits for EPR Grandfathered

retirees depend on, among other things, a participant’s “Average

Annual Compensation for the period from January 1, 1995,

through December 31, 1999.” SBC Plan § 4.2, J.A. 262.

Wagener and Champoux contend that, in calculating “Average

Annual Compensation,” the Plan erroneously excluded one pay

period from 1999 on the mistaken assumption that the plaintiffs

could receive credit only for compensation actually received, not

earned, in 1999. 

As noted above, the Plan defined “Average Annual

Compensation” to mean “the Participant’s Pension

Compensation during the Averaging Period, divided by five

years.” Id. § 4.2.1(b)(3), J.A. 257. Pension Compensation, in

turn, was based on a participant’s Basic Compensation. See id.,

§ 2.66, J.A. 259. Prior to the actual base pay amendments, Basic

Compensation for participants such as plaintiffs had been

defined as a participant’s “Basic Rate of Pay, as determined by

his Participating Company, over a specified period.” Id. § 2.8,

J.A. 258. However, the actual base pay amendments substituted

actual base pay for Basic Rate of Pay in determining Basic

Compensation. See Plan Amendment 4/13/1999, J.A. 71, 73.

Thus, due to the actual base pay amendments, “Average Annual

Compensation” was calculated based on a participant’s “actual

base pay, as determined by his Participating Company, over a

specified period, during the Averaging Period, divided by five

years.” The question presented here then is whether the

Committee reasonably interpreted “actual base pay . . . during

the Averaging Period” to mean pay actually received during the

Averaging Period, as opposed to pay actually earned during the

Averaging Period.

If this were the only relevant provision in the Plan, we

would be hard pressed to hold that the Committee’s

interpretation was unreasonable. An interpretation of “actual

base pay . . . during the Averaging Period” to mean pay actually

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received is not itself unreasonable. There is nothing in the plain

language of “actual base pay” that clearly indicates whether the

term is intended to refer to pay actually earned or pay actually

received. In other words, this language, without more,

reasonably supports either construction.

This is not the end of the analysis however, because § 4.2

includes another clause that is crucial for the purposes of this

appeal. Specifically, § 4.2 states that, except for the five-year

enhancement to the participant’s age and length of service, “the

Enhanced Grandfathered Benefit shall be a benefit calculated

in the same manner as the Grandfathered Benefit would be

calculated . . . under the current [Plan].” SBC Plan § 4.2, J.A.

262. Plaintiffs allege that the Committee clearly violated this

equal-treatment clause:

the Plan has consistently administered the Grandfathered

Benefit for all retirees – except for the Enhanced

Grandfathered Benefit for EPR retirees – by including all

pay periods as part of “Average Annual Compensation” for

the year in which they were earned notwithstanding [the

actual base pay amendments], and notwithstanding the fact

that one full pay period was not received until after the end

of the Averaging Period. 

Compl. ¶ 25, J.A. 18-19. In other words, plaintiffs contend that,

while Plan officials have interpreted “actual base pay” to mean

pay actually received for the EPR Program Grandfathered

participants, they have interpreted “actual base pay” to mean pay

actually earned for other Grandfathered participants,

notwithstanding the plain language of § 4.2 mandating that the

benefits for the two groups of participants be calculated in the

same manner (except for the “enhancement” for EPR Program

participants). 

Applying even the most deferential standard of review, we

hold that plaintiffs’ allegations clearly state a claim for which

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relief can be granted. As plaintiffs justly contend, it is patently

unreasonable for the Committee and other Plan officials who are

authorized to administer the Plan to interpret the Plan in a

manner that discriminates against plaintiffs in direct

contravention of the Plan’s plain language. See Fuller v. CBT

Corp., 905 F.2d 1055, 1058-60 (7th Cir. 1990) (concluding that

evidence of disparate treatment in benefit decisions precluded

summary judgment for an ERISA plan’s trustees, even applying

ordinary abuse of discretion review, where the governing

document contained “an express requirement of uniform

treatment”); cf. Air Transport Ass’n of Am., Inc. v. FAA, 291

F.3d 49, 53 (D.C. Cir. 2002) (explaining that, while agency

interpretations of their own regulations “must be afforded

substantial deference,” the court will not defer if an alternative

conclusion is compelled by the regulation’s plain language). 

The SBC Plan does not argue that it would be reasonable

for the Committee, or other Plan fiduciaries with responsibility

for construing and administering the Plan, to adopt Plan

interpretations that directly contravene the plain meaning of the

Plan’s governing provisions. See Appellee’s Br. at 20, 25; see

also Recording of Oral Argument at 28:08-23 (acknowledgment

by the Plan’s counsel that, notwithstanding its discretion, the

Committee does not have the authority to discriminate between

similarly situated Plan participants). Rather, the Plan asserts

that, “[i]f true, Plaintiffs’ allegations would establish only that

the Plan’s recordkeeper, which performs such ministerial

functions as the mathematical calculation of pension benefits,

mistakenly paid certain Plan participants more than they were

entitled to under the Plan.” Appellee’s Br. at 25. This argument

is meritless, because it completely ignores the substance of

plaintiffs’ complaint.

In their complaint, Wagener and Champoux specifically

allege that “SBC and Plan officials interpreted” the actual base

pay amendments in a manner that was more favorable to nonUSCA Case #04-7060 Document #894828 Filed: 05/17/2005 Page 16 of 18
17

EPR Grandfathered participants than to EPR Grandfathered

participants. See Compl. ¶¶ 25-28, J.A. 18-20 (quote at ¶ 25,

J.A. 18). In other words, plaintiffs allege that the differential

treatment accorded non-EPR Grandfathered participants and

EPR Grandfathered participants was the result of deliberate

decisions made by officials responsible for the administration of

the Plan, not to ministerial errors. The Plan’s suggestion to the

contrary in its brief to this court surely does not negate

plaintiffs’ well pleaded complaint. 

In short, plaintiffs’ complaint asserts that Plan officials have

administered the Plan in a manner that treats EPR and non-EPR

Grandfathered retirees differently, notwithstanding the Plan’s

unmistakable command to treat these two groups similarly

except for the benefit enhancement EPR participants receive.

Treating this allegation as true, plaintiffs have stated a claim

upon which relief can be granted. As noted above, even under

a deferential standard of review, Plan fiduciaries cannot claim

deference for an interpretation of the Plan that discriminates

against plaintiffs in a manner that contradicts the Plan’s plain

language. We therefore reverse the District Court’s judgment

dismissing plaintiffs’ action for additional benefits under §

1132(a)(1)(B) and remand the case for further proceedings

consistent with this opinion. 

* * * * * 

We also vacate the District Court’s order denying plaintiffs’

motion for class certification, as that motion is no longer moot.

Likewise, we reverse the District Court’s judgment granting the

Plan’s motion to dismiss plaintiffs’ document disclosure claim.

That decision was based on the trial court’s conclusion that

plaintiffs’ document disclosure claim could not survive absent

their claim for additional benefits, a judgment that we reverse

with this decision. 

USCA Case #04-7060 Document #894828 Filed: 05/17/2005 Page 17 of 18
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Finally, we vacate the District Court’s denial of Wagener’s

motion for summary judgment on her document production

claim. We express no view on the merits of this claim, for we

believe that this matter should be addressed by the District Court

in the first instance in light of our decision. 

III. CONCLUSION 

The District Court’s grant of the SBC Plan’s motion to

dismiss is hereby reversed with regard to Counts One and Two

of the plaintiffs’ complaint, and the District Court’s denial of

plaintiffs’ motions for class certification and for summary

judgment are hereby vacated. The case is remanded for further

proceedings consistent with this opinion.

So ordered.

USCA Case #04-7060 Document #894828 Filed: 05/17/2005 Page 18 of 18