1 UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

______________________________

No.00-20887

______________________________

JOHN A. GOSSELINK; PHILLIP W. TUTT; RICHARD E. SIMMS, on behalf of

themselves individually and all others similarly situated

Plaintiffs - Appellants

VERSUS

AMERICAN TELEPHONE & TELEGRAPH, INC., formerly known as

American Telephone & Telegraph Company; Et Al

Defendants

SBC COMMUNICATIONS, INC., formerly known as Southwestern Bell

Corporation individually and as successor in interest to Bell

Systems, Inc.; SOUTHWESTERN BELL YELL OW PAGES, INC.; THE SBC

PENSION BENEFIT PLAN - BARGAINED PROGRAM

Defendants - Appellees

___________________________________________________

Appeal from the United States District Court

for the Southern District of Texas

___________________________________________________

November 7, 2001

Before EMILIO M. GARZA, PARKER, and DENNIS, Circuit Judges.

ROBERT M. PARKER, CIRCUIT JUDGE:

The Plainti ffs, John Gosselink, Phillip Tutt, and Richard

Simms, on behalf of themselves and all others similarly situated

(“Plaintiffs”) appeal from the district court’s judgment which1 The Pension Bands were later renumbered from Pension Band 301

through Pension Brand 335.

2 denied class certification, dismissed Gosselinks’s claim for

increased pension benefits, dismissed Gosselink’s claims for

declaratory and injunctive relief, and dismissed their cla i ms

against AT&T as time barred. The issue on appeal is whether the

Southwestern Bell Communications Benefit Plan Committee (“Plan

Committee”) interpreted specific plan language in a manner that is

consistent with a fair reading of the plan as a whole. Because it

did, we AFFIRM.

I. FACTS AND PROCEDURAL HISTORY

Plaintiffs Gosselink, Tutt, and Simms are retired Southwestern

Bell Yellow Pages (“SWBYP”) directory sales representatives who

currently receive pension benefits from th e Southwestern Bell

pension benefit plan (the “Plan”). The dispute in this case arises

from language in the Plan document.

The Plan was originally adopted in 1980 by AT&T. Sponsorship

was transferred for administration to Southwestern Bell

Communication’s (“SBC”) predecessor at the time of the divestiture

of the regional telephone companies by AT&T in 1984. The design of

the Plan was as follows.

Job salaries for employees were assigned to “Pension Bands”

numbered from 101 through 135, and a pension benefit amount was

assi gned to each band. 1 The Pension Bands covered the entire2 As one would expect, the basic monthly pension benefits

increased as the Pension Band numbers (and the corresponding range

of salaries in the Pension Bands) increased.

3 salary range for Plan participants with fixed wages. In most

cases, jobs were assigned to a Pension Band based upon the annual

salary of an experienced employee set for that job as of August 9,

1 980. A complete “Pension Band Conversion Table” containing the

“Maximum Basic Rate of Pay for Job Titles and Classifications” was

set forth in the 1980 plan. These wage rate tables were then

updated annually by AT&T, and thereafter by SBC, to reflect the

general wage increase agreed upon in collective bargaining.

The Plan also included a Monthly Benefit Table which provided

dollar amounts for the basic monthly pension benefit for each

P ension Band. 2 Thus, for the vast majority of employees, their

monthly pension benefit could be calculated by multiplying the

employee’s years and months of service by the dollar amount shown

in the Monthly Benefit Table for the Pension Band to which the

employee’s job title was assigned.

However, the Pl an provided a different methodology for

calculating the pension benefits for SWBYP directory sales

representatives (“DSRs”) because DSRs’ compensation varied from

year to year depending upon the commissions they earned. Under the

Plan, all DSRs were assigned to Pension Band 135, the highest

Pension Band. Then, for DSRs only, a special “multiplier” was

applied to the benefit shown in the Monthly Benefit Table to3 I n the denial letter, SBC maintained that it had calculated

the denominator in the multiplier “by multiply ing the median

maximum annual basic rate of pay

. . . plus the percentage increase

in the annual based rate of pay

. . . for the job rate at the

midpoint of Pension Band Number 335.” It further explained that

the “fixed average” denominator in the multiplier “was never based

on the average of AT&T employees in Pension Ban d 335," but “has

grown at the same rate as negotiated increases for other bargained

employees.”

4 calculate the monthly pension benefit of a particular DSR.

In fact, the multiplier was a fraction. The numerator was the

average of an indiv idual commission sales representatives’s last

three years of income. The denominator was the three-year average

of the median maximum annual basic rate of pay related to Pension

Band 135. This was also referred to as the “fixed average.” Thus,

an individual DSR’s pension amount was calculated by multiplying

the “employee’s years of service” times the “Pension Band 135

Monthly Pension Amount” times the “multiplier.” With respect to

the pension formula for DSRs, the only dispute between the parties

is how to calculate the denominator of the multiplier under the

Plan language.

In 1995, Plaintiff Gosselink, a DSR, obta ined a pension

calc u lation from Southwestern Bell. Believing his calculated

pension to be t oo low, he sought out an explanation. However,

Gosselink never received an explanation to his liking. Thus, he

filed an administ rative complaint. SBC denied his complaint. 3

Gosselink filed further administrative appeals, which were all

denied.4 2 9 U.S.C. § 1132 (a)(1)(B) provides in relevant part: A civil

action may be brought by a participant or beneficiary to recover

benefits due to him under the terms of his plan, to enforce his

rights under the terms of the plan, or to clarify his rights to

future benefits under the terms of the plan.

5 P laintiffs’ original brief contends that the district court

erred in dismissing its claims against AT&T. However, on February

7, 2001, Plaintiffs filed a motion seeking to dismiss AT&T from the

appeal. We subsequently dismissed Plaintiffs’ appeal with respect

to AT&T. Accordingly, the briefed issues which dealt with AT&T are

no l onger before the Court and will not be addressed in this

opinion.

5 In 1997, the Plaintiffs filed suit against th e various

defendants in this case: SBC, as Plan Administrator; the former

employer, SWBYP; the Plan itself, SBS Pension Benefit Plan; and the

former administrator, AT&T Corp. Plaintiffs asserted various

claims, on behalf of themselves and a putative class, for

violations of the Employee Re tirement Income Security Act

(“ERISA”), 29 U.S.C. § 1132(a)(1)(B) 4 ,(a)(2), and (a)(3). The gist

of Plaintiffs’ claims was that the plan administrator had

wrongfully interpreted the plain language of the Plan with respect

to the calculation of the denomin ator portion of the special

multiplier. Plaintiffs alleged that the incorrect interpretation

reduced their monthly pension benefits.

On August 4, 1999, the district court dismissed Plaintiffs’

claims against AT&T on statute of limitations grounds. 5 On August

9, 1999, the District Court granted summary judgment dismissing all

of Plaintiffs Tutt and Simms’ claims because they had not exhausted

their administrative remedies. On the same day, the district court6

denied Plaintiffs’ motion for class certification, reasoning that

the class lacked numerosity because of Plaintiffs’ failure to show

that each purported class member had exha u sted his/her

administrative remedies. Subsequently, the district court granted

summary judgment to the remaining Defendants on all of Gosselink’s

claims. The district court held that Gosselink’s ERISA claims for

declaratory and injunctive relief could not be maintained under

Varity Corp. v. Howe , 516 U.S. 489 (1996) because the claim for

pension benefits under section 1132(a)(1)(B) afforded him an

adequate avenue for legal redress. It then dismissed Gosselink’s

section 1132(a)(1)(B) claim for increased pension benefits, holding

that, as a matter of law, the Plan administrator’s interpretation

of the relevant plan language was legally correct and not an abuse

of discretion.

II. STANDARD OF REVIEW

The district court’s decision to gran t summary judgment on

Gosselink’s claim for recovery of pension benefits is the central

issue on appeal. We review the district court’s grant of summary

judgment on this claim de novo, applying the well-known standards

specified in Rule 56(c) which were applied by the district court.

McClendon v. City of Columbia, 258 F.3d 432, 435 (5th Cir. 2001).

When an ERISA benefits plan provides the plan administrator

with discretionary authority to construe the terms of the Plan, the

plan administrator’s denial o f benefits is reviewed for abuse of7

discretion. Barhan v. Ry-Ron Inc. , 121 F.3d 198, 201 (5th Cir.

1997)(citing Firestone Tire and Rubber Co. v. Bruch

, 489 U.S. 101,

115 (1989)). Here, the Plan vests the administrator with this

authority. Therefore, we review d e novo the district cou rt’s

holding on whether the plan administrator abused its disc retion.

Threadgill v. Prudential Securities Group, Inc.

, 145 F.3d 286, 292

(5th Cir. 1998); Tolson v. Avondale Industries, Inc.

, 141 F.3d 604,

608 (5th Cir. 1998).

III. DISCUSSION

A. Applicability of the Wildbur Two-Step

It should go without saying that eligibility for benefits

“under any ERISA plan is governed in the first inst ance by the

plain meaning of the plan language.” T hreadgill

, 145 F.3d at 292.

However, in this Circuit, we have often applied a two-part test

when reviewing a plan administrator’s denial of benefits: First, a

court must determine the legally correct interp retation of the

plan. If the administrator did not give the plan the legally

correct interpretation, the court must then determine whether the

administrator's decision was an abuse of discretion. In answering

the first question, i.e., whether the administrator's

interpretation of the plan was legally correct, a court must

consider: (1) whether the administr ator has given the plan a

uniform construction, (2) whether the interpretation is consistent

with a fair reading of the plan, and (3) any unanticipa ted costs8

resulting from different interpretations of the plan. Wildbur v.

ARCO Chemical Co. , 974 F.2d 631, 637-638 (citations omitted).

If a court concludes that the administrator's interpretation

is legally incorrect, th e court must then determine whether the

administrator abused his discretion. Three factors are important in

this analysis: (1) the internal consistency of the plan under the

administrator's interpretation, (2) any relevant regulations

formulated by the appropriate administrative agencies, and (3) the

factual background of the determination and any inferences of lack

of good faith. I d. " Only if the court determines that the

administrator did not give the plan the legally incorrect

i nterpretation, must the court then determine whether th e

administrator's decision was an abuse of discretion." T olson, 141

F.3d at 608.

Plaintiffs contend that the Defendants’ interpretation of the

Plan violates the plain meaning of the language governing the

calculation of pension benefits for DSRs. As such, Plaintiffs

argue th at the court should not employ the two-step test as set

forth in Wildbur . Plaintiffs suggest that rigid adherence to the

Wildbur approach could produce the anomalous finding that a Pl a n

administrator’s interpretation which directly violates the plain

meaning of the plan language is not an abuse of discretion simply

because the plan language has always been interpreted in the same

manner and there are no inferences of bad faith.9

We agree with the Plaintiffs that the second step in the

Wildbur two-step approach is not instructive to our analysis of the

instant case. See Duhon v. T exaco, Inc. , 15 F.3d 1302, 1307-08 &

n.3 (5th Cir. 1994) (recognizing that “the reviewing court is not

rigidly confined to [ Wildbur’s ] two-step analysis in every case”);

accord Threadgill

, 145 F.3d at 292, n.12. Clearly, if an

administrator inter prets an ERISA plan in a manner that directly

contradicts the plain meaning of the plan language, the

administrator has abused his discretion even if there is neither

evidence of bad faith nor of a violation of any relevant

administrative regulations. However, in the instant case, the

flaws in the second step of the Wildbur approach need not concern

us because the admini strator’s interpretation of the plan is

“legally correct.”

B. Plan Interpretation

Nei ther party disputes the fact that the administrator has

given the plan a uniform construction. The terms of the Plan

formula for determining DSR benefits have been consistently

interpreted since the plan’s inception in 1980. Therefore, the

f irst prong of the “legally correct” test weighs in favor of the

Defendants.

Similarly, the third prong of the “legally correct” test

weighs in favor of the Defendants. The drafter of the Plan devised

the fractional multiplier to provide equity to AT&T employees6 T he relationship between pre-retirement compensation (wages)

and pension amounts is commonly referred to as a replacement ratio.

10 across all pension bands. In other words, pension benefits as a

percentage of pre-retirement compensation should be relatively

equivalent between a DSR and any other employee, given a common

number of years of service. 6 In practice, proportionality has been

maintained because most categories of e mployees, including DSRs,

receive pension benefits of approximately 35-38% of t heir preretirement compensation. Since Plaintiffs’ interpretation of the

plan language would increase the DSR replacement percentage above

the target replacement percentage range, it is apparent that there

would be unanticipated costs resulting from Plaintiffs’

interpretation.

The m ost important factor to consider, whether the

administrator’s interpretation is consistent with a fair reading of

the plan, also cuts in favor of the Defendants. As mentioned

previously, the question in this case is how to calculate the

denominator of the special multiplier in the DSR pension formula.

We look to the relevant plan language for the answer.

[T]he denominator of such fraction shall equal

the average of the median maximum annual basic

rate of pay related to Pension Ba nd number

135, as of the applicable August 1 date, and

the medians of the respective maximum basic

r ates of pay related to Pension Band nu mber

135, as of August 1 of each of the preceding

two years. The median maximum annual basic

rate of pay related to Pension Band number 1357 Interestingly, Plaintiffs contended a t the district court

level that the original 1980 “median maximum annual basic rate of

pay related to Pension Band 135" is $8,970 (the lower base salary

excluding commissions paid to DSRs in 1980). This interpretation

results in Plaintiff Gosselink’s monthly pension benefits exceeding

100% of his pre-retirement salary. Clearly, Plaintiffs’ district

court argument presents a result that is incongruous with the plain

language of the plan and absurdly disproportional to the monthly

pension benefits of the other non-DSR employees.

11 shall be $23,954 as of August 1, 1978, $25,996

as of August 1, 1979 and $28,720 as of August

1, 1980. The median maximum annual basic rate

of pay as of August 1 of any subsequent

applicable year shall be determined by

multiplying the median maximum annual basic

rate of pay as of August 1 of the immediately

preceding year by the sum of one plus the rate

of increase, from such previous August 1 date,

in the general maximum annual basic rate of

pay for the job rate at th e midpoint of

Pension Band number 135.

This language explains how to calculate the denominator number

for 1980. The “median maximum annual basic rate of pay related to

Pension Band 135" dollar amounts for 1980 ($28,720), 1979

($25,996), and 1978 ($23,954) are specified in the Plan. The three

year average of these numbers is $26,223. The Defendants utilized

the $26,233 figure as the denominator of the special multiplier in

1980. Plaintiffs now concede that the denominator number in 1980

was correctly determined by the Plan Committee. 7

Plaintiffs, however, take exception to the administrator’s

determination that the “job rate” at the midpoint of the Pension

Band 135 wage range scale stated in the Plan was to be increased

each year by the generally bargained for wage increase for all non-12

commissioned employees determined during collective bargaining

between SWB Yellow Pages and the Communication Workers of America

(“CWA”). Plaintiffs argue that t he “median maximum annual basic

rate of pay related to Pension Band 135" may be determined for each

year after 1980 only by taking into account the sporadic times when

the basic fixed wage for the DSR job itself received a collectively

bargained increase. For example, under Plaintiffs’ interpretation,

t he “median maximum annual basic rate of pay” for 1981 wou ld be

c alculated by using the undisputed 1980 “median maximum annua l

basic rate of pay” figure of $28,720 as a starting point for the

fixed average calculation. However, the “rate of increase in the

general maximum basic rate of pay for the job rate at the midpoint

of Pension Band 135" would be calculated by determining the

percentage increase, if any, in the base weekly salary received by

DSRs between 1980 and 1981. The same “rate of increase”

calculation would be done for the successive years after 1981.

Plaintiffs claim that this type of “rate of increase” calculation

increases their pension benefits. Specifically, Plaintiff

Gosselink calculates that his monthly pension benefit, as of April

1, 1997, would increase from $1,543.60 to $1,944.90.

We fi nd that the administrator’s interpretation of the

relevant plan language, i.e., “the rate of increa se . . . in the

general maximum basic rate of pay for the job rate at the midpoint

of Pension Band 135,” is consistent with a fair reading of the plan8 W e note that the relevant language at issue is hardly a model

of clarity. Even so, however, the relevant language does not

require the Plan to be interpreted in the manner espoused by the

Plaintiffs.

9 P laintiffs’ argument concerning the use of the term “Annual

Basic Rate of Pay” in the 1992 Plan does not dissuade us from

accepting this understanding of the term “job rate.” The 1992 Plan

does define the term “Annual Basic Rate of Pay” to mean “the

specific, annualized, fixed wage rate assigned

. . . to an

employee.” Plaintiffs suggest that this definition requires the

administrator to construe the escalator provision as referring to

an increase in the basic rate of pay for the DSR job. We do not

find t his argument to be persuasive for two reasons. First, the

definition is generic and does not link the “specific annualized,

fixed wage rate” to a DSR employee or even an employee assigned to

pension ban d 135. It simply defines the term to mean “the

specific, annualized fixed wage rate assigned

. . . to an

employee .” Second, the capitalized term is used in sections of the

Plan unrelated to the specific provision at issue in this case.

There is simply no indication that the use of the capitalized term

“Annual Basic Rate of Pay” in the 1992 Plan intended to change the

original understanding of the uncapitalized term “annual basic rate

13 for several reasons. 8 First, the Plaintiffs interpret the relevant

plan language as requiring the denominator to be increased by the

rate of increase in the base weekly salary of a “job”, i.e, the DSR

job, assigned to Pension Band 135. However, the plan language

specifically refers to the rate of incr ease in the “job rate” at

the midpoint of Pension Band 135. According to the Defendants, that

“job rate” would then be used to relate a DSR’s pension to that

p aid to a fixed wage employee who received the Pension Ban d 135

amount. From this viewpoint, therefore, the reference to “job

rate” indicates that the escalation of the denominator is not to be

linked with any actual pay increases received by any specific

employe e, or “job” assigned to Pension Band 135. 9 Indeed, theof pay” as specified in the 1980 Plan.

10 T he plausibility of the administrator’s interpretation is

further underscored by the fact that fixed wage employees were

assigned to Pension Band 135 from 1980-1983, but none have been

assigned since 1984. If, after 1983, there would have been fixed

wage employees in a job assigned to Pension Band 135 who received

increases in their annual basic rate of pay(through wage increases

bargained for in the collective bargaining process), the midpoint

of the job rate in Pension Band 135 would clearly have had to

14 Plan’s draftsman testified that the so-called “job rate” did not

refer to “individuals [or] a particular job.”

Second, as a practical matter, it seems unlikely that the

DSRs’ base weekly salary was to be the benchmark for the

calculation of subsequent rates of increase in all years after 1980

when it is agreed to by both parties that the calculation of the

denominator in 1980 did not even remotely involve the DSRs’ actual

base weekly salary. On the other hand, because the 1980 “median

m aximum annual basic rate of pay” figure was in the wage rang e

related to the Pension Band 135 pension amount as provided in the

Plan’s “Pension Band Conversion Table,” it makes some sense to

interpret the escalator provision in a way that adjusts the “job

rate” at the midpoint o f the Pension Band 135 wage range in

accordance with the generally bargained rate of wage increase

determined through the collective bargaining agreement. This is

especially true because the midpoints of every other Pension Band

wage range were similarly adjusted to reflect increases in the

generally bargained for rate of wage increases. 10increase in accordance with those wage increases. But not for this

peculiarity, Plaintiffs’ interpretation would be facially

unsupportable.

11 The Plaintiffs themselves relied upon three alternative

formulations for calculating the amount of pension b enefits they

claimed entitlement to under the terms of the Plan.

15 Finally, we note that the administrator’s interpr etation of

the disputed plan languag e furthers the overall plan goal of

maintaining proportionality of pension benefits as a percentage of

wages across pension bands. Thus, we find that the administrator’s

approach is consistent with a fair reading of the plan.

IV. CONCLUSION

In sum, our analysis of the three factors outlined in the

first step of Wildbur leads us to conclude that the administrator’s

interpretation is legally correct. By implication, we also find

that the administrator’s interpretation does not violate the plain

meaning of the plan language as the language itself is susceptible

to various interpre tations. 1 1 Therefore, the district’s court

summary judgment rulings on Plaintiff Gosselink’s claims for

increased pension benefits and declaratory/injunctive relief are

AFFIRMED.

B ecause we AFFIRM the district court’s rulings on the

section 1132(a)(1)(B) claims for denial of pension benefits and

declarato ry/injunctive relief, we need not review either the

failure to exha ust administrative remedies issue or the district

court’s denial of Plaintiffs’ motion for class certification.16

AFFIRMED.