United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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Nos. 02-3671/03-1072
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Reba Hebert, *
*
Appellee, *
* Appeals from the United States
v. * District Court for the
* Western District of Missouri.
SBC Pension Benefit Plan, Non *
Bargained Program by and through the *
Plan Sponsor and Administrator SBC *
Communications, Inc., *
*
Appellant. *
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Submitted: September 12, 2003
Filed: January 12, 2004
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Before WOLLMAN, HEANEY, and RILEY, Circuit Judges.
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RILEY, Circuit Judge.
Reba Hebert (Hebert) was employed by Southwestern Bell Telephone
Company (SW Bell), a subsidiary of SBC Communications, Inc. (SBC). Hebert sued
the SBC Pension Benefit Plan (SBC Plan), seeking to add three years to her term of
employment in calculating her benefits under the SBC Plan based on an amendment
of the benefit plan by her prior employer, Pacific Telesis Group (PTG). SBC is the
SBC Plan sponsor and administrator. The district court granted summary judgment
to Hebert, concluding SBC abused its discretion in interpreting the SBC Plan. The
district court also awarded Hebert attorney fees. SBC appeals, asserting it did not
abuse its discretion in interpreting the SBC Plan, and the district court erred in
awarding attorney fees. We reverse, vacate the district court’s attorney fees award,
and remand for entry of summary judgment for the SBC Plan.
I. BACKGROUND
In 1971, Hebert began working for American Telephone & Telegraph (AT&T)
in St. Joseph, Missouri. AT&T offered the Bell System Pension Plan to its
employees. In the early 1980s, federal antitrust litigation split AT&T into
independent companies. The division to which Hebert was assigned became PTG.
Each independent company adopted a pension plan, and the Bell System Pension Plan
assets were divided among the newly formed pension plans. To ensure the portability
of employee benefits, the new companies entered into the Divestiture Interchange
Agreement of January 1, 1984, and the Mandatory Portability Agreement of January
1, 1985 (Portability Agreements), which govern the recognition of pension benefits
of certain employees who move between the newly created independent companies.
In 1990, PTG offered management employees a retirement incentive, the
Management Retirement Opportunity Amendment (MRO Amendment). The MRO
Amendment provided each employee a minimum benefit enhancement, adding three
years to an employee’s term of employment in calculating the employee’s minimum
pension benefit (three MRO years). Hebert accepted the MRO Amendment. In
November 1990, Hebert resigned from PTG with 18 years, 7 months, and 13 days of
actual service. Two days after leaving PTG, Hebert became employed by SW Bell,
another newly created independent company formed by AT&T’s breakup, and
transferred her pension benefits under the Portability Agreements to the SBC Plan.
In 1999, Hebert contemplated retirement and requested SBC, acting as plan
administrator, to calculate Hebert’s SBC pension benefits. When calculating Hebert’s
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pension benefits, SBC used paragraph 8.2.1(b) of the SBC Plan, and did not include
the three MRO years. SBC did include the three MRO years in an alternative
calculation under paragraph 8.2.1(a), although this calculation produced lower
benefits. Hebert appealed the calculation to the SBC Plan Review Committee
(Review Committee), asserting her term of employment should be increased by three
years. The Review Committee denied Hebert’s request.
Hebert filed this suit against the SBC Plan, asserting SBC abused its discretion
by not including the three MRO years in calculating Hebert’s pension benefits under
paragraph 8.2.1(b). The district court granted summary judgment to Hebert,
concluding SBC abused its discretion in interpreting the SBC Plan because SBC’s
interpretation (1) rendered language in the SBC Plan internally inconsistent by
assigning different meanings to the term “all-service credit” and (2) contradicted the
SBC Plan’s clear language. The district court also awarded Hebert attorney fees.
SBC appeals the district court’s grant of summary judgment and award of attorney
fees.
II. DISCUSSION
A. SBC’s Interpretation of the SBC Plan
We review a district court’s summary judgment de novo. Interstate Cleaning
Corp. v. Commercial Underwriters Ins. Co., 325 F.3d 1024, 1027 (8th Cir. 2003). We
will affirm a district court’s grant of summary judgment if the record demonstrates
no genuine issue of material fact and the moving party is entitled to judgment as a
matter of law. Fed. R. Civ. P. 56(c); Interstate Cleaning, 325 F.3d at 1027.
Because it is undisputed “[the SBC Plan] gives [SBC] discretionary authority
to determine eligibility for benefits or to construe the terms of the plan,” we review
the denial of benefits for an abuse of discretion, Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 115 (1989), and reverse SBC’s decision only if it is arbitrary
and capricious, Brumm v. Bert Bell NFL Ret. Plan, 995 F.2d 1433, 1437 (8th Cir.
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1993). We uphold SBC’s interpretation of the SBC Plan if it is reasonable. Id.
SBC’s interpretation “is not unreasonable merely because the reviewing court
disagrees with it.” Fletcher-Merrit v. Noram Energy Corp., 250 F.3d 1174, 1180 (8th
Cir. 2001).
This controversy involves SBC’s interpretation of paragraph 8.2.1 of the SBC
Plan, which states as follows:
If the [SBC Plan] provides for the computation of monthly pension
benefits in a different manner than that provided under [the PTG Plan],
[Hebert’s] monthly pension benefit under [the SBC Plan] shall equal the
greater of
(a) the sum of
(1) the monthly pension benefit determined for all service credit
included in [Hebert’s] Pension Service Credit under [the PTG
Plan], in accordance with the provisions of such plan . . ., plus
(2) the monthly pension benefit determined for all periods of
Pension Calculation Service [Hebert] was covered by [the SBC
Plan], or
(b) the monthly pension benefit determined for all service credit
included in [Hebert’s] Pension Service Credit under [the PTG Plan] and
all Pension Calculation Service during which [Hebert] was covered by
[the SBC Plan], in accordance with the provisions of the Plan.
(Emphasis added). Both parties agree paragraph 8.2.1(b) provides Hebert with the
greatest amount of pension benefits, regardless whether the three MRO years are
included in paragraph 8.2.1(b)’s calculation.
SBC interpreted paragraph 8.2.1(a) to include Hebert’s three MRO years in
computing Hebert’s benefits. However, SBC interpreted 8.2.1(b) not to include
Hebert’s three MRO years in computing Hebert’s benefits. SBC based its differing
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interpretations on how the “in accordance” phrases are used in paragraphs 8.2.1(a)(1)
and 8.2.1(b).
To determine if SBC’s interpretation of paragraph 8.2.1 is reasonable, we
consider five factors: (1) whether SBC’s interpretation is consistent with the SBC
Plan’s goals; (2) whether SBC’s interpretation renders any of the SBC Plan’s
language internally inconsistent or meaningless; (3) whether SBC’s interpretation
conflicts with ERISA’s substantive or procedural requirements; (4) whether SBC has
consistently interpreted the words at issue; and (5) whether SBC’s interpretation is
contrary to the SBC Plan’s clear language. Finley v. Special Agents Mut. Benefit
Ass’n, 957 F.2d 617, 621 (8th Cir. 1992). The above factors need not be examined
in any order as each factor presents us with a discrete inquiry. Hutchins v. Champion
Int’l Corp., 110 F.3d 1341, 1344 (8th Cir. 1997).
SBC’s interpretation does not render any of the SBC Plan’s language internally
inconsistent or meaningless and is not contrary to the SBC Plan’s clear language.
Under paragraph 8.2.1(a)(1), a portion of Hebert’s pension benefit and Pension
Service Credit are determined “in accordance with the provisions of such plan.” The
phrase “in accordance with the provisions of such plan” refers to the PTG Plan as
modified by the MRO Amendment. Under the PTG Plan’s MRO Amendment, for the
purpose of computing benefits, Hebert’s “term of employment shall equal [Hebert’s]
term of employment as of [Hebert’s] MRO Effective Date increased by three years.”
Thus, for computing Hebert’s benefit under paragraph 8.2.1(a)(1), Hebert receives the
full benefit of the three extra MRO years.
Two interpretations arguably exist regarding the calculation of Hebert’s PTG
Pension Service Credit under paragraph 8.2.1(b), because a comma separates the
phrase “in accordance with the provisions of the Plan” from the remainder of the
sentence. The phrase “in accordance with the provisions of the Plan” clearly refers
to the SBC Plan. Under one interpretation, the phrase “in accordance with the
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provisions of the Plan” could modify the phrase “[Hebert’s] Pension Service Credit
under the [PTG Plan].” Under this interpretation, SBC looks to the SBC Plan’s
Pension Service Credit definition to determine whether Hebert’s three MRO years are
used to calculate her benefits under the SBC Plan, and the Pension Service Credit
clearly does not include the three extra MRO years. Under another interpretation, the
phrase “in accordance with the provisions of the Plan” could modify the term
“monthly pension benefit.” Under this interpretation, the phrase simply specifies the
SBC Plan’s formula is used to calculate benefits, while Hebert’s Pension Service
Credit under the PTG Plan would be calculated by referring to the PTG Plan. SBC
adopted the first interpretation of paragraph 8.2.1(b). We conclude SBC’s
interpretation is reasonable and logical.
Two other reasons reveal SBC’s interpretation is reasonable. First, the SBC
Plan’s drafters could have included the modifier “in accordance with the PTG Plan”
after the Pension Service Credit in paragraph 8.2.1(b), as the drafters did in paragraph
8.2.1(a)(1). Second, the PTG Plan does not define Pension Service Credit. Without
such a definition, it would be difficult to determine Hebert’s Pension Service Credit
in calculating Hebert’s benefits under the SBC Plan.
We now turn to SBC’s application of the SBC Plan’s Pension Service Credit
definition to Hebert. Under the SBC Plan, a service credit must be recognized for
eligibility, accrual, and vesting to be a Pension Service Credit. SBC asserts the three
MRO years do not qualify as a Pension Service Credit because the three MRO years
were not recognized, inter alia, for vesting. The MRO Amendment contains no
provision stating whether the three MRO years can be used to vest an employee’s
pension. With the MRO Amendment’s silence on the vesting of the three MRO
years, we cannot conclude SBC’s interpretation rendered terms of the MRO
Amendment or the SBC Plan internally inconsistent with or contradictory to the clear
language of the MRO Amendment or the SBC Plan.
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We conclude the remaining Finley factors do not suggest SBC abused its
discretion. Aside from conclusory or circular arguments, nothing before us suggests
SBC’s interpretation is inconsistent with the SBC Plan or its goals. Finally, no
contention exists that SBC’s interpretation violates ERISA. Paragraph 8.2.1(a)
preserves Hebert’s benefits under the PTG Plan by giving her the full benefits
accorded her under the PTG Plan, including the three MRO years, plus any benefits
accrued under the SBC Plan. Paragraph 8.2.1(b) actually provides Hebert greater
benefits, because of the larger multiplier used under paragraph 8.2.1(b) of the SBC
Plan.1
B. Attorney Fees
We review a district court’s award of attorney fees for an abuse of discretion.
Fletcher-Merrit, 250 F.3d at 1181. In determining whether attorney fees should be
awarded in an ERISA suit, a court considers the following factors:
(1) the degree of the opposing parties’ culpability or bad faith; (2) the
ability of the opposing parties to satisfy an award of attorneys’ fees; (3)
whether an award of attorneys’ fees against the opposing parties could
deter other persons acting under similar circumstances; (4) whether the
parties requesting attorneys’ fees sought to benefit all participants and
beneficiaries of an ERISA plan or to resolve a significant legal
[question] regarding ERISA itself; and (5) the relative merits of the
parties’ positions.
Lawrence v. Westerhaus, 749 F.2d 494, 496 (8th Cir. 1984) (per curiam); see Brown
v. Aventis Pharm., Inc., 341 F.3d 822, 828-29 (8th Cir. 2003). “An abuse of
discretion occurs when the district court ‘commits a clear error of judgment’ in
weighing the relevant factors.” Fletcher-Merrit, 250 F.3d at 1181 (citations omitted).
1
SBC does not receive a windfall, because Hebert’s benefits under paragraph
8.2.1(b) are greater than the benefits she would receive under paragraph 8.2.1(a),
using the three extra MRO years.
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Weighing the relevant factors: first, SBC’s reasonable interpretation of the
SBC Plan does not constitute culpable conduct; second, SBC’s ability to pay the
attorney fees is not sufficient to support an award of attorney fees when the other
factors weigh against an attorney fees award, see id.; third, the award would not deter
any culpable conduct; fourth, Hebert never sought to benefit other participants and
beneficiaries and never sought to resolve a significant legal issue specific to ERISA;
and fifth, SBC’s position had merit. Given our holding that SBC’s interpretation is
reasonable, we vacate the award of attorney fees.
III. CONCLUSION
For the foregoing reasons, we reverse the district court’s grant of summary
judgment to Hebert, vacate the district court’s award of attorney fees, and remand for
entry of summary judgment in favor of SBC.
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