Gosselink v. American Telephone & Telegraph, Inc.

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 YELLOW 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 Plaintiffs, John Gosselink, Phillip Tutt, and Richard

Simms, on behalf of themselves and all others similarly situated

(“Plaintiffs”) appeal from the district court’s judgment which

1
denied class certification, dismissed Gosselinks’s claim for

increased pension benefits, dismissed Gosselink’s claims for

declaratory and injunctive relief, and dismissed their claims

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 the 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

assigned to each band.1 The Pension Bands covered the entire

1
The Pension Bands were later renumbered from Pension Band 301
through Pension Brand 335.

2
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,

1980. 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

Pension 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 Plan 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 to

2
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
calculate the monthly pension benefit of a particular DSR.

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

average of an individual 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, obtained a pension

calculation from Southwestern Bell. Believing his calculated

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

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

filed an administrative complaint. SBC denied his complaint.3

Gosselink filed further administrative appeals, which were all

denied.

3
In the denial letter, SBC maintained that it had calculated
the denominator in the multiplier “by multiplying 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 Band 335," but “has
grown at the same rate as negotiated increases for other bargained
employees.”

4
 In 1997, the Plaintiffs filed suit against the 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 Retirement 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 denominator 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 court

4
29 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
Plaintiffs’ 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 longer before the Court and will not be addressed in this
opinion.

5
denied Plaintiffs’ motion for class certification, reasoning that

the class lacked numerosity because of Plaintiffs’ failure to show

that each purported class member had exhausted 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 grant 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 of benefits is reviewed for abuse of

6
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 de novo the district court’s

holding on whether the plan administrator abused its discretion.

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 instance by the

plain meaning of the plan language.” Threadgill, 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 interpretation 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 administrator has given the plan a

uniform construction, (2) whether the interpretation is consistent

with a fair reading of the plan, and (3) any unanticipated costs

7
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, the 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. Id. "Only if the court determines that the

administrator did not give the plan the legally incorrect

interpretation, must the court then determine whether the

administrator's decision was an abuse of discretion." Tolson, 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 that 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 Plan

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.

8
 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. Texaco, 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 interprets 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 administrator’s interpretation of the plan is

“legally correct.”

B. Plan Interpretation

Neither 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

first 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 employees

9
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 employees, including DSRs,

receive pension benefits of approximately 35-38% of their pre-

retirement 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 most 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 Band number
135, as of the applicable August 1 date, and
the medians of the respective maximum basic
rates of pay related to Pension Band number
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 135

6
The relationship between pre-retirement compensation (wages)
and pension amounts is commonly referred to as a replacement ratio.

10
 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 the 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-

7
Interestingly, Plaintiffs contended at 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
commissioned employees determined during collective bargaining

between SWB Yellow Pages and the Communication Workers of America

(“CWA”). Plaintiffs argue that the “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,

the “median maximum annual basic rate of pay” for 1981 would be

calculated by using the undisputed 1980 “median maximum annual

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 find that the administrator’s interpretation of the

relevant plan language, i.e., “the rate of increase . . . 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 plan

12
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 increase 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

paid to a fixed wage employee who received the Pension Band 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

employee, or “job” assigned to Pension Band 135.9 Indeed, the

8
We 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
Plaintiffs’ 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 this 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 band 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
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

maximum annual basic rate of pay” figure was in the wage range

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 of 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.10

of pay” as specified in the 1980 Plan.

10
The 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
 Finally, we note that the administrator’s interpretation of

the disputed plan language 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 interpretations.11 Therefore, the district’s court

summary judgment rulings on Plaintiff Gosselink’s claims for

increased pension benefits and declaratory/injunctive relief are

AFFIRMED.

Because we AFFIRM the district court’s rulings on the

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

declaratory/injunctive relief, we need not review either the

failure to exhaust administrative remedies issue or the district

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

increase 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 benefits they
claimed entitlement to under the terms of the Plan.

15
AFFIRMED.

16