Opinion
CASE NO. 4:02-CV-111
June 9, 2003
Douglas K. Magary, of Magary and Associates, Dallas, TX, Attorneys For Plaintiffs
Brian Edward Robison, of Vinson Elkins, Dallas, TX, Attorneys For Defendants
MEMORANDUM OPINION AND ORDER
This case is before the court on cross-motions for summary judgment (Docket Nos. 18 20). The primary issue is whether Plaintiff Sandra Marlowe ("Marlowe") was eligible to receive enhanced retirement pension ("EPR") benefits under the Defendant SBC Pension Benefit Plan (the "Plan"). For the reasons stated herein, Defendant's Motion for Summary Judgment is GRANTED and Plaintiff's Motion for Summary Judgment is DENIED.
Originally, Marlowe brought this suit against SBC Enhanced Pension and Retirement Program Pension Benefits Plan. The Court has granted Plaintiff's Motion to Amend Complaint to substitute the proper defendant, SBC Pension Benefit Plan.
BACKGROUND
On September 29, 2000, SBC Communications Inc. ("SBC") amended the Plan to provide an Enhanced Pension and Retirement Program (the "EPR Program") to eligible employees to encourage early retirement. The EPR Program awarded an additional five years of age and five years of net credited service for purposes of determining an employee's eligibility for benefits under certain retirement programs, including the Plan.
The EPR Program benefits were offered only to employees who were employed by a select group of SBC participating companies as of September 7, 2000 and who had been with SBC since at least November 15, 1999. However, the EPR Program excluded from participation employees who were, as of September 7, 2000, assigned full time to projects for one or more the seventeen affiliates generally engaged in the wireless communications business. Specifically, the EPR Program provided for a "wireless exclusion":
Employees Eligible to Elect to Participate in the EPR Program
Any Eligible Employee who is employed by an EPR Participating Company on the September 7, 2000, and who was hired by any Controlled Group Member on or before November 15, 1999, may elect to participate in the EPR program other than an Eligible Employee who:
(1) is assigned full time to projects for one or more of the companies listed in Attachment B (as determined by such Eligible Employee's Participating Company) as of September 7, 2000. . . .
Attachment B lists companies that were engaged in the wireless communications business. The EPR Program does not define the phrase "assigned full time to projects." The EPR Program does state that each employee's participating company would make the determination as to whether an employee was assigned full time projects for the wireless entities listed in Attachment B.
In 1976, Marlowe began working for SBC. From September 1997 to October 2000, SBC Services, Inc ("Services") employed Marlowe as a payroll manager. Services was an EPR participating company during this time. In early 2000, SBC announced that its wireless companies and BellSouth had entered into a joint venture to form a new wireless company, which eventually became Cingular Wireless. On May 8, 2000, Services placed Marlowe on a list of employees dedicated to supporting SBC's wireless operations and who would move to Cingular when the joint venture was completed. On August 14, 2000, Services finalized this list.
From January 1999 until October 4, 2000, Marlowe had two payroll offices reporting to her — the Pacific Telesis Shared Services ("PTSS") office in San Ramon, California and the wireless payroll office in Dallas, Texas. From January 1999 until October 2000, Marlowe spent up to ten days a month in the San Ramon, California office. From January 2000 until October 2000, Marlowe devoted 30% of her time to non-wireless projects, primarily at the PTSS office in San Ramon, which included closing down the office, moving employees into other jobs, and terminating certain employees. Marlowe spent the other 70% of her time on wireless projects at the wireless payroll office in Dallas.
Marlowe became aware of the EPR Program when it was announced on September 7, 2000. On September 20, 2000, Marlowe e-mailed her supervisor, Sandy Huebner ("Huebner"), Executive Director of Payroll Systems, requesting that she take Marlowe off the list of dedicated wireless employees. On September 19, 2000 and September 25, 2000, Marlowe received internal e-mails, which provide:
If you are eligible for the program, you will receive a calculation summary at home during the first week in October. The summary will include a personalized calculation of your pension benefit under both the current plan provisions and the EPR Program.
Marlowe received an EPR Program Calculation Summary ("Summary") dated October 2, 2000. Marlowe then received a document dated October 3, 2000, stating that the Summary was sent to her erroneously due to an administrative error.
On October 5, 2000, Marlowe was formally notified of her assignment to SBC Wireless, Inc. However, her current position of Director of Payroll was still being listed as a position under review in e-mails dated October 3, 2000 and October 23, 2000. On November 17, 2000, an e-mail regarding Cingular HR Organization announced that Marlowe was the Director of Employee Systems for SBC Services and her current responsibilities were to oversee the payroll operations for SBC Wireless.
Marlowe retired on April 21, 2001. Marlowe requested the EPR benefits, but her request was denied. She appealed this decision. Both the first-level Plan committee and the Plan's Benefit Plan Committee ("BPC"), after considering the terms of the Plan and all of the evidence in the record, including the evidence submitted by Marlowe, denied Marlowe's request for EPR benefits. The BPC determined that as of September 7, 2000, Marlowe was assigned full time to wireless projects by her participating company, Services and, thus, she fell under the wireless exclusion and was not entitled to EPR benefits. Marlowe then filed the instant lawsuit.
The Plan moves for summary judgment arguing that the BPC's decision was legally correct and not an abuse of discretion. Marlowe argues that the BPC incorrectly relied on Services' determination that she was assigned full time to wireless projects because she was still employed by Services on September 7, 2000 and doing some work for one of SBC's non-wireless companies both before and after September 7, 2000.
SUMMARY JUDGMENT STANDARD
Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). An issue of material fact is genuine if the evidence could lead a reasonable jury to find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether a genuine issue for trial exists, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Anderson, 477 U.S. at 248; Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986). Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must assert competent summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586.
Mere conclusory allegations, unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. See Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996); Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994). The party opposing summary judgment is required to identify evidence in the record and articulate the manner in which that evidence supports his claim. Ragas, 136 F.3d at 458. "Only disputes over facts that might affect the outcome of the suit under the governing laws will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Summary judgment must be granted if the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear the burden of proof at trial. Celotex, 477 U.S. at 322-23.
STANDARD OF REVIEW FOR DENIAL OF BENEFITS
An administrator's denial of benefits under an ERISA plan is "reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) (citation omitted). Because the Plan gives the BPC such discretion, the Court applies the abuse of discretion standard. Sweatman v. Commercial Union Ins. Co., 39 F.3d 594, 601 (5th Cir. 1994).
The Plan granted the BPC discretion to decide disputes relating to an employee's eligiblity to participate in the EPR Program:
The [Benefit Plan] Committee and each organizational committee or subcommittee to whom claim determination or review authority has been delegated shall have full and exclusive authority and discretion to grant or deny claims for benefits, including the power to interpret the EPR program and determine the eligibility of any individual to receive benefits pursuant to the EPR Program. The decision of the [Benefit Plan] Committee organizational committee or subcommittee on any claim in accordance with the claim procedures established by the Nonbargained Program shall be final and conclusive and shall not be subject to further review.
Marlowe makes a number of arguments that the de novo standard should apply. First, she argues that because SBC was both a fiduciary and the source of EPR funds and SBC employees served on the BPC, a conflict of interest exists. In essence, Marlowe argues that because the Plan's funds belonged to SBC, the SBC employees on the BPC had an incentive to deny her claim to save SBC money. This argument is misplaced. The funds for the Plan are held in trust and cannot benefit SBC. See ERISA § 403(a); 29 U.S.C. § 1103(a); Plan at § 3.1.3. Once the assets have been placed in the Plan's trust, those assets may "never inure to the benefit of any employer" and may only be used "for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan." See ERISA § 403(c)(1); 29 U.S.C. § 1103(c)(1).
De novo standard of review would never apply under the circumstances of this case. If the court did find a conflict of interest, which it does not, it would still apply the abuse of discretion standard, albeit with less deference. A "sliding scale" is applied to the abuse of discretion standard where it is determined that the administrator has acted under a conflict of interest. See Vega v. National Life Ins. Services, 188 F.3d 287, 296 (5th Cir. 1999) (en banc). "The greater the evidence of conflict on the part of the administrator, the less deferential our abuse of discretion standard will be." Id. at 297. When a minimal basis for a conflict is established, the court reviews the decision with "only a modicum less deference than we otherwise would." Id. at 301.
Marlowe also argues that since the BPC was composed of SBC employees a conflict of interest exists. The presence of company employees on the benefit review committee, in and of itself, does not create a conflict of interest. Instead, a Plan's denial of benefits will be given less deference under the abuse of discretion standard only if the plaintiff shows (1) that the employment relationship created a conflict of interest and (2) that the conflict influenced the committee's decision. See, e.g., McDaniel v. Chevron Corp., 203 F.3d 1099, 1109 (9th Cir. 2000); de Nobel v. Vitro Corp., 885 F.2d 1180, 1191 (4th Cri. 1989); Ashenbaugh v. Crucible Inc. 1975 Salaried Retirement Plan, 854 F.2d 1516, 1531 (3d Cir. 1988). No such evidence exists in this case.
Marlowe also argues that the Court should apply de novo standard of review because the BPC allegedly failed to list enough facts in its first two denial letters. The Court finds that the letters satisfy the ERISA requirement that the BPC give specific reasons for denying benefits and cite a specific provision in the Plan on which the denial is based. See, e.g., Schadler v. Anthem Life Ins. Co., 147 F.3d 388, 395 (5th Cir. 1998) (quoting the two requirements in 29 C.F.R. § 2560.503-1(f)); Murphy v. Wal-Mart Assoc. Group Health Plan, 928 F. Supp. 700, 707-08 (E.D.Tex. 1996) (concluding that a denial letter was not arbitrary when it stated that coverage was denied because the treatment was "determined to be not medically appropriate at this time); Somme v. Burton, 1998 WL 249224, *4 (E.D.La. 1998) (finding denial letter sufficient when it stated that coverage was denied because there was a lack of medical necessity, a term used in the plan).
The proper remedy for a deficient denial letter would be a remand to the plan administrator. See, e.g., Murphy v. Wal-Mart Assoc. Group Health Plan, 928 F. Supp. 700, 708 (E.D.Tex. 1996).
The Court finds that no conflict of interest exists and will apply the abuse of discretion standard. When applying the abuse of discretion standard, the Court "analyzes whether the plan administrator acted arbitrarily and capriciously." Id. (quoting Salley v. E.I. DuPont de Nemours Co., 966 F.2d 1011, 1014 (5th Cir. 1992)). A decision is arbitrary when made "without a rational connection between the known facts and the decision or between the found facts and the evidence." Bellaire Gen. Hosp. v. Blue Cross Blue Shield of Mich., 97 F.3d 822, 828 (5th Cir. 1996). An administrator's decision to deny benefits must be "based on evidence, even if disputable, that clearly supports the basis for its denial." Vega, 188 F.3d at 299. The Court must find that "[w]ithout some concrete evidence in the administrative record that supports the denial of the claim, . . . the administrator abused its discretion." Id. at 302.
Even if a conflict of interest existed, the Court would still uphold the BPC's decision under the less deferential test.
APPLICATION OF THE ABUSE OF DISCRETION STANDARD
Application of the abuse of discretion standard may involve a two-step process. Wildbur, 974 F.2d at 637. This procedure requires the Court to first determine the legally correct interpretation of the plan and then to examine whether the administrator applied the same. If the administrator failed to apply a legally correct interpretation of the plan, the Court must then determine whether the administrator's actions constituted an abuse of discretion. Id. When determining the legally correct interpretation of the plan, the Court must look to: (1) whether the administrator has given the plan a uniform construction; (2) whether the interpretation is consistent with the fair reading of the plan; and (3) any unanticipated costs resulting from different interpretations of the plan. Id. at 638 (citing Jordan v. Cameron Iron Works, Inc., 900 F.2d 53, 56 (5th Cir. 1990)).
If the administrator has applied a legally correct interpretation of the plan, then no further inquiry is required. See, e.g., Chevron Chemical Co. v. Oil, Chemical Atomic Workers Local Union 4-447, 47 F.3d 139, 146 (5th Cir. 1995); Haubold v. Intermedics, Inc., 11 F.3d 1333, 1341 (5th Cir. 1994). However, if the Court determines that the administrator's interpretation is legally incorrect, then it must evaluate whether that interpretation constitutes an abuse of discretion. In conducting this analysis, the Court must look to: (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. Wildbur, 974 F.2d at 638 (citing Batchelor v. International Brotherhood of Elec. Workers Local 861 Pension and Retirement Fund, 877 F.2d 441, 445-48 (5th Cir. 1989)).
If a benefits denial is supported by substantial evidence and is not erroneous as a matter of law, it is not arbitrary or capricious, and therefore is not an abuse of discretion. See Wildbur, 974 F.2d at 637 n. 12. Substantial evidence is "`more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'" Girling Health Care, Inc. v. Shalala, 85 F.3d 211, 215 (5th Cir. 1996) (quoting Richardson v. Perales, 402 U.S. 389, 401 (1971) (citation omitted)).
i. The Legally Correct Interpretation
Marlowe argues that the BPC's denial of her claim for EPR benefits was legally incorrect because, as of September 7, 2000, she was (1) an employee of Services, (2) on the Services' payroll, and (3)was working on some non-wireless projects. Thus, she could not have properly been considered to have been assigned full time to wireless projects. The Court will address each of the three elements that are analyzed when determining whether the plan administrator's gave the plan a legally correct interpretation.
a. Uniformity of Construction
The evidence reveals that not a single employee whom Services listed as dedicated to supporting wireless projects was allowed to participate in the EPR Program. Marlowe's supervisor, Sandra Huebner, confirmed that the BPC's decision to deny EPR benefits to Marlowe was consistent with the treatment afforded to all other employees in Marlowe's circumstances. In sum, all the evidence shows that BPC consistently and uniformly applied the EPR Program eligibility requirements.
b. Fair Reading of the Plan
Marlowe argues that the EPR Program is ambiguous. The interpretation of an ERISA plan is governed by federal common law. Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1451 (5th Cir. 1995). Nevertheless, in developing federal common law, the courts may draw on analogous state law. Id. Whenever possible, insurance policies should be interpreted according to their plain meaning. Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex. 1984). In construing ERISA plan provisions, the court interprets the contract language in an ordinary and popular sense as would a person of average intelligence and experience. In essence, the words of insurance contracts should be given their ordinary and generally accepted meaning if there is one. Wegner v. Standard Ins. Co., 129 F.3d 814, 818 (5th Cir. 1997) (citing Todd, 47 F.3d at 1451 n. 1). Only if the terms remain ambiguous after applying ordinary principles of contract interpretation is the court compelled to apply the rule of contra proferentum and construe the terms strictly in favor of the insured. Todd, 47 F.3d at 1451-52. Accordingly, application of the principles of contract interpretation of the terms of an ERISA plan require the court to apply the plain language of the plan.
Marlowe argues that ". . . assigned full time to projects for one or more of the companies listed in Attachment B . . . as of September 7, 2000" is ambiguous. The Court disagrees. The wireless exclusion in Section 3.1 of the EPR Program provides that employees "assigned full time to projects for one or more of the companies listed in Attachment B (as determined by such Eligible Employee's Participating Company) as of September 7, 2000" would not be eligible for the EPR Program. Marlowe completely ignores the language "as determined by such Eligible Employee's Participating Company." It is undisputed that as of September 7, 2000, Marlowe was an employee of Services. It is undisputed that Services was a "participating company" under the EPR Program. It is undisputed that prior to September 7, 2000, Services generated a list of employees who were deemed to have skills that were critical to the wireless joint venture and who were dedicated full time to projects for SBC's wireless entities. It is undisputed that Marlowe was placed on this list and that she was a valuable employee of the wireless operation. This list was finalized on August 14, 2000. Further, it is undisputed that Marlowe and all other employees on the Services list were not permitted to participate in the EPR Program. The BPC properly denied Marlowe's request for EPR benefits because her participating company, Services, had assigned her full time to wireless projects prior to September 7, 2000. The Court finds that the Plan is unambiguous.
Pursuant to the EPR Program, "EPR Participating Company" means "a Participating Company that is participating in the EPR Program and any successor in interest to such Company. The EPR Participating Companies are listed in Attachment C to the EPR Program." In Attachment C, SBC Services, Inc. is listed as a participating company.
Even if the Court did determine that the Plan is ambiguous, which it does not, the plaintiff would still need to satisfy the elements of the second part of the abuse of discretion test, which she has not done. See Spacek v. Maritime Ass'n, 134 F.3d 283, 298-99 (5th Cir. 1998).
The Court recognizes that "assigned full time" is not defined in the Plan. The fact that "assigned full time" is not defined does not make the Plan ambiguous. See, e.g., Cozzie v. Metropolitan Life Ins. Co., 140 F.3d 1104, 1109 (7th Cir. 1998) (stating that the plan administrator has discretion to interpret the plan, and as part of that discretion, must define terms that are not defined in the plan). Although Marlowe can propose another definition of "assigned full time," this does not entitle her to relief. See Vega, 188 F.3d at 297 (finding that under the abuse of discretion standard, the Court need only ensure that a denial decision falls "somewhere on a continuum of reasonableness — even if on the low end"). Looking at the wireless exclusion as a whole, the Court finds that it is unambiguous.
Marlowe essentially asks this Court to second guess Services decision to assign her full time to wireless projects. This the Court cannot do. A fair reading of the Plan leaves no room for second guessing the designation by Services. The fact that Marlowe was an employee of Services and not one of the wireless companies, does not mean that Services, pursuant to the EPR Program, could not assign her full time to wireless projects. The fact that Marlowe was still spending a percentage of her time winding down operations at the PTSS payroll office does not mean that Services could not assign her full time to wireless projects. The exclusion does not state that it applies only if the employee spends 100% of her time working on wireless projects or assigned "exclusively" to wireless projects. Instead, the exclusion applies if an employee is designated as assigned full time to wireless projects even if the employee must devote time to wrapping up old projects. In sum, Marlowe has produced no evidence that the BPC applied an unfair reading of the Plan when it deferred to Services' designation.
The evidence reveals that every project assigned to Marlowe from April 2000 forward was a wireless project. Marlowe also received a bonus and TEAM award that she would not have received if she had not been a wireless-dedicated employee.
c. Unanticipated Costs
The Court finds that there are potential unanticipated costs that would result form Marlowe's interpretation of the Plan. If Marlowe's argument is accepted, then any employee who, as of September 7, 2000, did not spend 100% of his/her time working for one of SBC's wireless companies would be entitled to participate in the EPR Program, regardless of any assignment made by the employee's participating company. This would require SBC to analyze the day-to-day work that each of its thousands of employees performed as of September 7, 2000 resulting in unanticipated costs. Further, the Plan would have to pay early unanticipated retirement benefits to a larger group of employees thus resulting in unanticipated costs.
Based on the foregoing, the Court concludes that the BPC's interpretation was legally correct. With this said, the Court is not obligated to conduct any further inquiry. See, e.g., Chevron Chemical Co., 47 F.3d at 146.
ii. Application of the Abuse of Discretion Standard
Even if the Court were to find that the BPC applied a legally incorrect interpretation of the Plan, it would still validate the BPC's ultimate decision to deny the supplemental life insurance benefits to Marlowe under the applicable abuse of discretion standard. The Court will address each of the three elements that are analyzed when determining whether the plan administrator's abused its discretion.
a. Internal Consistency
The EPR Program was designed to provide certain non-critical employees an incentive to retire early. The wireless exclusion in the EPR Program was designed to ensure that employees necessary to supporting SBC's wireless joint venture would not be eligible for the EPR benefits because the early retirement of such individuals would detrimentally effect SBC's wireless joint venture. Pursuant to the terms of the Plan, the BPC, based on all the evidence before it, determined that Marlowe was assigned full time to wireless projects and, thus, denied Marlowe's request for EPR benefits. This decision was entirely consistent with the intent behind both the EPR Program and the wireless exclusion.
b. Relevant Administrative Regulations
The Court could find no administrative regulation that prohibits or cast doubt on the BPC's determination that Marlowe was not eligible to participate in the EPR Program.
c. Factual Background and Inferences of a Lack of Good Faith
The Court finds that there is no evidence that the BPC acted in bad faith in reaching its decision. The evidence shows that (1) no employee on Services' list of wireless designated employees was permitted to participate in the EPR Program and (2) SBC had a valid business reason for not permitting employees like Marlowe to participate in the EPR Program.
DISCRIMINATORY TREATMENT
In Marlowe's Complaint and Motion for Summary Judgment there is a general allegation of discriminatory treatment. Specifically, Marlowe alleges that the BPC discriminated against her by denying her EPR request, while at the same time allowing others in her position to participate. In particular, Marlowe alleges that SBC allowed other employees such as TRI employees to participate in the EPR Program, but intentionally excluded Marlowe without her knowledge or notice and, thus, this disparity of treatment is discriminatory.
In her Complaint, Marlowe does not seek any affirmative relief for discrimination. She asserts two causes of action: (1) breach of contract under ERISA and (2) attorney's fees under ERISA. Nowhere does she allege a cause of action for discrimination. Nevertheless, Marlowe has not come forward with any evidence of discrimination besides her own affidavit. The Court finds that Marlowe has not created a genuine issue of material fact as to her discrimination claim.
In her Affidavit, Marlowe states:
There were employees who supported Wireless exclusively for an extended period of time who were declared eligible to receive benefits under the EPR Program. Several officers excluded from the EPR Program were allowed to participate. (Ex. 12). I was informed in a November 9, 2000 meeting that TRI, one of the SBC affiliates, had not designated its employees who would be assigned to Wireless. The Company allowed TRI employees to participate in the EPR Program, but intentionally excluded me without my knowledge or notice.
During her deposition, Marlowe admitted that she had no first-hand knowledge that any of this was true. All this information is based on what she heard from friends.
CONCLUSION
The Court determines that the BPC applied a legally correct interpretation of the Plan, and did not abuse their discretion in denying EPR benefits to Marlowe. Further, the Court does not find any discriminatory treatment. Accordingly, the Plan's Motion for Summary Judgment is GRANTED and Marlowe's Motion for Summary Judgment is DENIED.
IT IS SO ORDERED.