Opinion ID: 773412
Heading Depth: 2
Heading Rank: 2

Heading: Interpreting the Terms of J&J's Top Hat Plan

Text: 39 The District Court concluded, and Goldstein has not disputed, that under the language of the Plan documents the Pension Committee was given broad authority to interpret the terms of the Plan and to make final decisions with regard to the payment of benefits. 7 Nonetheless, Goldstein disputes the Committee's interpretation of whether his commissions constituted pensionable compensation, although, as we explained in the recitation of facts, his argument as to how his commissions fall under the definition of Covered Compensation has taken a variety of forms over the course of this dispute. 8 As it is currently presented to us, Goldstein's claim is that, although his commissions were not covered under the 1989 version of the Plan, the 1994 changes to the Plan, in particular the deletion of the statement that All other earnings . . . not specifically described above, are not included in Plan earnings, suggests that the phrase basic remuneration was given a broader definition in 1994. In Goldstein's view, the 1994 Plan's list of pensionable items was intended merely to provide examples of the type of compensation covered; because Goldstein's commissions constituted 75% of his earnings, he maintains that the commissions were, in fact, his basic remuneration, and therefore are pensionable under the terms of the 1994 Plan. 40 J&J responds that the list of pensionable earnings was intended as an exclusive list of all covered items, and that because Goldstein's commissions were not included in the list, they are therefore not pensionable. As explained above, the question presented to the Court is not whether J&J's interpretation offers the best reading of the contract; rather, given the discretion granted to the Pension Committee, the question is whether the interpretation offered by J&J was reached in good faith. The District Court, after listening to the testimony of the parties and examining the documentary evidence, concluded that J&J's interpretation of the terms of its Plan was reasonable, and that J&J administrators had used their best efforts to interpret the Plan accurately and fairly to assess Goldstein's claim. The District Court's findings are not clearly erroneous. 41 In reaching its conclusions, the court first relied on its assessment of the credibility of J&J's plan administrators, and specifically found that the members of the Pension Committee and the BCC were not biased in their decisions, and had exerted their best efforts accurately to interpret the plan and fairly to adjudicate Goldstein's claim. It is axiomatic that we defer to a district court's credibility determinations. 42 Further, we find no fault with the District Court's determination that the numerous irregularities identified by Goldstein in the process by which the administrators interpreted the Plan do not give rise to an inference of bias or bad faith. These alleged irregularities relate first to the manner by which the Pension Committee delegated its responsibilities to the BCC, and second to what Goldstein perceives as the lack of opportunities for him to present arguments and evidence on his behalf. 43 Goldstein begins by submitting that the Pension Committee never formally delegated authority to the BCC to make benefits determinations, and therefore its decision to rubber stamp the BCC decision without reaching its own independent conclusions rendered its interpretation of the Plan terms nugatory. It is true that courts have refused to accord Firestone Tire deference to the decisions of administrators who, in the courts' determination, have failed to exercise the discretion granted to them under the terms of an ERISA plan. See, e.g., Sharkey v. Ultramar Energy Ltd., 70 F.3d 226 (2d Cir. 1995). As we have explained, however, we review here the decision of the administrators not under Firestone Tire standards, but rather to determine whether there has been a violation of the terms of the contract. Therefore, whatever weight Goldstein's arguments on this score might carry in the context of a more ordinary ERISA plan, these arguments are only relevant in the context of a top hat plan to the extent they bear upon compliance with the plan's contractual provisions, including the implied duty of good faith and fair dealing. 44 In this case, Goldstein's argument that discretionary power was never delegated to the BCC rests on the fact that the formal resolution delegating the Pension Committee's power to the BCC specifically granted the BCC only the authority to hear and decide claims and appeals. Whether the power to hear and decide claims and appeals necessarily carries with it a discretionary power to interpret the terms of the Plan (and it is difficult to see why it would not), any technical flaws in the Pension Committee's efforts to delegate discretion to the BCC do not bear on the issue of good faith. The Plan documents themselves granted the Pension Committee the right to delegate its authority, and the Committee declared its intention to do so in the Summary Plan Description. Additionally, the final disposition of Goldstein's claim was made by the Pension Committee itself in September 1996. Thus, it cannot be said that the delegation to the BCC, and the decision of the Pension Committee to adopt its reasoning, somehow violated the contractual provisions of the Plan granting the Pension Committee the power to interpret the Plan terms, or demonstrated any lack of good faith on the part of J&J. 45 As for Goldstein's second argument, that he was denied an opportunity to make his case before the BCC, the facts simply do not bear him out. He exchanged numerous letters with J&J employees, including the Chair of the BCC, in which he was able to explain his interpretation of the Plan. In fact, during cross-examination, Goldstein admitted that he had, at one time or another, submitted to the BCC all of the information he believed it needed to reach a determination. Goldstein was informed of the initial BCC meeting, but never asked to attend or to submit evidence. Finally, as the District Court found, Goldstein's claim was reviewed by J&J on at least three separate occasions: during the initial meeting of the BCC, during the course of Goldstein's exchange of correspondence with Carey, and during the Pension Committee's September 1996 meeting. In the face of this evidence, we see no grounds for concluding that the District Court's finding of good faith on the part of J&J was clearly erroneous. 9 46 In addition to the propriety of the process by which J&J reached its decision, there is no inherent unreasonableness in the substantive interpretation of the Plan terms offered by J&J giving rise to an inference of bias or bad faith. As written, Goldstein's contract discusses his salary and bonuses in the same section as the discussion of his right to participate in the Plan; his commissions, in contrast, are placed in a separate section, suggesting that the parties construed these payments to be something other than pensionable earnings. 47 Further, the contract specifically avers that the commissions were intended to replace other forms of executive compensation such as CECs. As the District Court observed, these forms of executive compensation were not pensionable at the time of the execution of Goldstein's contract, and only some of them became pensionable when they were explicitly added to the list of pensionable earnings in 1994. Thus, it is clear that the phrase basic remuneration did not encompass either these alternative forms of compensation, or Goldstein's commissions, in 1989, and the fact that these forms of executive compensation had to be explicitly added to the list of pensionable earnings in 1994, while the phrase basic remuneration remained intact, suggests that there was no implied broadening of the definition of basic remuneration, but instead an expanded list of included items. 48 Additionally, as the District Court concluded, the phrase Covered Compensation includes is reasonably susceptible of meaning either that the earnings listed are a sample of the types of compensation to be included, or that the phrase Covered Compensation is intended to encompass only those forms of compensation explicitly mentioned in the list. 10 Thus, there is nothing unreasonable in J&J's interpretation of the Plan to cover only those forms of compensation specifically enumerated. And although Goldstein plausibly argues that the 1994 deletion from the Summary Plan Description of the clause excluding forms of compensation not otherwise specified must be interpreted as evincing an intent to alter the Plan from providing an exclusive list to providing only a sample listing, the District Court credited testimony of J&J employees that the phrase had been deleted as surplusage, because the intent all along was to create a list of covered compensation solely by listing the included items. Certainly, such an interpretation of the motivation for the deletion is not unreasonable either. 49 Goldstein's position is not an unsympathetic one, and we can understand his anger that, notwithstanding the large sums that his thymopentin patent yielded to J&J (and the fact that he was brought into J&J for his expertise in developing profitable drugs, a skill that might often be rewarded by large royalty-like payments), he was nonetheless given a pension based merely upon his salary. Concomitantly, were we reviewing the plan's terms de novo, we might reach a different result. After all, the fact that Goldstein's employment contract specifies that the salary and bonus payments were to be made in lieu of J&J's obligation to market Goldstein's products suggests that it was the commissions -- and not the salary -- that constituted Goldstein's basic remuneration. But, as the Department of Labor has explained, highly-compensated employees such as Goldstein are well-placed to form employment contracts that protect their interests, and in this case, the contract expressly grants the Pension Committee the power to make final determinations as to the types of compensation that are pensionable. 50 Therefore, we conclude that although courts need not defer to the construction of disputed contract terms given by the administrators of top hat plans, effect must be given to all of the terms, including those conferring discretion on the administrators (subject as always to the implied duty of good faith). In this case, the discretion granted to the administrators was quite broad, and there is nothing in the process by which J&J reached its decision, or in the decision itself, that would lead us to conclude that the District Court's determination as to J&J's good faith was clearly erroneous. Thus, we conclude that J&J did not breach its contractual obligation to Goldstein. The judgment of the District Court will be affirmed.