Case: Knowlton, et al. v. Anheuser-Busch Companies Pension Plan — Eighth Circuit
Areas of Law: Retirement; ERISA; Plan Drafting
Panel: Riley, Chief Judge; Murphy and Smith, Circuit Judges
Date of Issued Opinion: February 22, 2017
Author of Opinion: Chief Judge Riley
Docket Numbers: 15-3538 and 15-3851
Decided: February 22, 2017
Case Alert Authors: Minyon Bolton, JD and Jennifer Kiesewetter, Esq.
Issue Presented: Whether a plan administrator’s interpretation of ERISA-subject plan language that resulted in a denial of pension benefits was reasonable.
Brief Summary: Plaintiffs brought a class-action lawsuit against Anheuser-Busch under ERISA seeking enhanced pension benefits, pursuant to the Plan document, following Anheuser-Busch’s denial of these benefits. The Eighth Circuit found that where an ERISA-subject plan grants discretionary authority to a plan administrator or fiduciary to determinate eligibility for benefits or construe the terms of a plan, the plan administrator/fiduciary’s decision is reviewed under an abuse-of-discretion standard. Under this standard, the Eighth Circuit determines whether the plan administrator/fiduciary’s interpretation of uncertain plan terms was reasonable. ERISA-subject plan language is to be interpreted according to its literal and natural meaning. Thus, a plan administrator/fiduciary cannot contradict the plain language of an ERISA plan to deny benefits. Finding the Plan language unambiguous in this matter, the Eighth Circuit affirmed that the Plaintiffs were entitled to enhanced benefits pursuant to the Plan.
Extended Summary: Brian Knowlton, Douglas Minerd, Gary Lensenmayer, Charles R. Wetesnik, Nancy J. Anderson, Richard F. Angevine, Joe Mullins, Andy Fichthorn, Donald Mills, individually and on behalf of those similarly situated (“Plaintiffs”), brought a class-action lawsuit against Anheuser-Busch Companies Pension Plan; Anheuser-Busch Companies, LLC; Anheuser-Busch Companies Pension Plan Appeals Committee; and Anheuser-Busch Companies Pension Plan Administrative Committee (“Anheuser-Busch”) under the Employee Retirement Income Security Act , as amended (“ERISA”), codified at 29 U.S.C. §§ 1001, et seq. Plaintiffs sought enhanced pension benefits, pursuant to the Anheuser-Busch Companies Pension Plan (“Plan”) document, following Anheuser-Busch’s denial of these benefits.
This appeal centered around the interpretation of Plan Section 19.11(f) language that provided enhanced pension benefits for a Plan participant “whose employment with the Control Group is involuntarily terminated within three (3) years after the Change in Control” and added five (5) additional years to the participant’s credited service. Plaintiffs were former employees of Busch Entertainment Corporation (“BEC”), a subsidiary of Anheuser-Busch, and defined as a control group pursuant to the Plan. In November of 2008, Anheuser-Busch InBev, N.V. (InBev) either combined or acquired (this fact is disputed by the parties) Anheuser-Busch resulting in a “Change of Control” under the Plan. Later, in 2009 InBev sold BEC to another company.
In September of 2012, Plaintiffs brought claims to Anheuser-Busch for enhanced pension benefits claiming they were entitled to the benefits because (1) a change in control occurred when InBev combined with or acquired Anheuser-Busch and (2) Plaintiffs were involuntarily terminated from employment with the control group when InBev sold BEC. The Plan Administrator denied Plaintiffs’ claims stating that (1) the purpose for enhanced benefits under Plan Section 19.11(f), was to provide additional benefits to individuals who were out of work after involuntarily losing their employment and (2) the Plan language required an actual break in employment not just a change in ownership during a period of continuous employment. After the Anheuser-Busch Companies Pension Plan Appeals Committee denied Plaintiffs’ appeal, Plaintiffs filed suit.
Once the district court certified Plaintiffs’ proposed class, Plaintiffs moved for partial judgment, as to certain requested relief, which was granted. The district court adopted the Sixth Circuit’s reasoning in parallel case Adams, et al. v. Anheuser-Busch Cos., et al., 758 F.3d 743 (6th Cir. 2014). The Adams case involved plan participants and former employees of an Anheuser-Busch affiliate. In the Adams case, the Sixth Circuit, applying de novo review, found the Plan Section 19.11(f) language unambiguous and concluded the plan administrator’s denial of benefits was arbitrary and capricious.
Before the Eighth Circuit on the cross-appeal of both parties, the Court held that a denial of plan benefits challenged under 29 U.S.C. § 1132(a)(1)(B) was to be reviewed under a de novo standard unless the plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. The plan administrator/fiduciary’s decision is reviewed for an abuse-of-discretion, when a plan subject to ERISA grants discretionary authority to a plan administrator/fiduciary to determine participants’ benefits. Provided the plan administrator/fiduciary’s interpretation of uncertain plan terms is reasonable, the Eighth Circuit will uphold that interpretation. The Anheuser-Busch Plan in this matter, grants the Plan Administrator discretion to interpret all Plan provisions including eligibility for participant benefits. The Eighth Circuit opined that the district court erred in only addressing the meaning of Section 19.11(f) of the Plan without further addressing whether the Plan Administrator’s interpretation of Section 19.11(f) of the Plan was reasonable.
Anheuser-Busch argued that the language of Section 19.11(f) of the Plan was ambiguous, reasonably supporting multiple interpretations. Thus, Anheuser-Busch alleged that the Plan Administrator’s interpretation should be upheld if it was reasonable. However, the Eighth Circuit found this argument unpersuasive stating that a plan administrator could not contradict the plain language of an ERISA-subject plan to deny benefits. The Eighth Circuit agreed with the reasoning of the Fourth Circuit that ERISA insurance plans are to be enforced according to the plan’s plain language, in its ordinary sense. In the Eighth Circuit, ERISA-subject plan language is to be enforced according to its literal and natural meaning. Under this standard, the Eighth Circuit held that the Anheuser-Busch Plan Administrator could not reasonably interpret Section 19.11(f) of the Plan to require an actual break in an individual’s employment. The Eighth Circuit agreed with the Sixth Circuit’s interpretation of Section 19.11(f) of the Plan, when it was presented with the identical issue—that according to the ordinary meaning of the Plan language a plan participant is entitled to enhanced benefits when his or her employment with the Control Group is involuntary terminated within three years after a change in control. Finding those requirements met, the Eighth Circuit upheld that the Plaintiffs were entitled to enhanced pension benefits under the Plan, with the district court to calculate and award benefits owed to Plaintiffs, to the extent provable.
Take Away From Case:
Plans subject to ERISA should be drafted to give the administrator or fiduciary of the plan discretionary authority (1) to determine eligibility for benefits and/or (2) to construe the terms of the plan. Should the plan language be litigated in the Eighth Circuit, these provisions will entitle the plan to be reviewed under the deferential abuse-of-discretion standard of review rather than the stricter de novo standard of review. Under the abuse-of-discretion standard of review, a plan administrator’s interpretation of uncertain plan terms will be upheld if that interpretation is reasonable. Reasonableness, however, requires a plan administrator to interpret the plan language in a manner that does not contradict the plain language of the plan. In contrast, a de novo standard of review requires a stricter review wherein interpretation of plan language, using any extrinsic evidence deemed necessary, is possible. While a plan sponsor would prefer to avoid litigation altogether, the abuse-of-discretion standard narrows a court’s review and is thus preferential should plan language be litigated.
In the Eighth Circuit, plans subject to ERISA are interpreted according to the plan’s plain language. Because the Eighth Circuit has held that a plan administrator’s interpretation of plan language that conflicts with its ordinary meaning is an abuse of discretion, plan language must be drafted in a manner that allows its ordinary meaning to comport with its intended meaning.
Link to Full Opinion: http://media.ca8.uscourts.gov/opndir/17/02/153538P.pdf