Wagener v. Sbc Pension Benefit Plan-Non Bargained, 04-7060.

• Citation: 407 F.3d 395
• Decision Date: 17 May 2005
• Docket Number: No. 04-7060.,04-7060.
• Parties: 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
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 395

407 F.3d 395

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

No. 04-7060.

United States Court of Appeals, District of Columbia Circuit.

Argued February 11, 2005.

Decided May 17, 2005.

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.

HARRY T. 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, thus confirming their entitlement to benefits under a non-discrimination 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 class-certification 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 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 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.

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...