Ahearn v. Marsh McLennan Co , 124 F. App'x 118 ( 2005 )


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  •                                                                                                                            Opinions of the United
    2005 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    3-3-2005
    Ahearn v. Marsh McLennan Co
    Precedential or Non-Precedential: Non-Precedential
    Docket No. 04-1654
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    Recommended Citation
    "Ahearn v. Marsh McLennan Co" (2005). 2005 Decisions. Paper 1480.
    http://digitalcommons.law.villanova.edu/thirdcircuit_2005/1480
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    NOT PRECEDENTIAL
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    No. 04-1654
    JOSEPH M. AHEARN, individually and
    on behalf of all others similarly situated,
    Appellant
    v.
    MARSH & MCLENNAN COMPANIES, INC.; MARSH, INC;
    FRANCIS N. BONSIGNORE, as plan administrator;
    MARSH & MCLENNAN SUPPLEMENTAL RETIREMENT PLAN
    APPEAL FROM THE UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF NEW JERSEY
    D.C. Civil No. 02-cv-00875
    District Judge: The Honorable Jose L. Linares
    Argued: February 7, 2005
    Before: BARRY, FUENTES, and BECKER, Circuit Judges
    (Opinion Filed: March 3, 2005)
    Noel C. Crowley, Esq. (Argued)
    Crowley & Crowley
    20 Park Place, Suite 206
    Morristown, NJ 07960
    Counsel for Appellant
    Edward Cerasia, II, Esq. (Argued)
    Proskauer Rose
    One Newark Center, 18th Floor
    Newark, NJ 07102
    Counsel for Appellees
    OPINION
    BARRY, Circuit Judge
    I. BACKGROUND
    Joseph Ahearn retired from his employment with Marsh & McLennan Companies,
    Inc.,1 on December 1, 2000, at the age of 69. As a highly-compensated former employee,
    Ahearn was a participant in three separate retirement plans: the U.S. Retirement Plan,2
    the Benefit Equalization Plan, and the Supplemental Executive Compensation Program
    (“the SERP”). Only the SERP is at issue here, with Ahearn arguing, among other things,
    that the benefits he was (and is) entitled to receive were improperly computed. The
    District Court disagreed, as do we. We have jurisdiction under 
    28 U.S.C. § 1291
    .
    A.       SERP Social Security Offset
    The SERP is a so-called “top hat” pension plan under ERISA. A top hat plan is a
    1
    Marsh & McLennan Supplemental Retirement Plan, Marsh & McLennan Companies,
    Inc., and Francis B. Bonsignore as plan administrator will be referred to collectively as
    “Marsh.”
    2
    The parties also refer to the U.S. Retirement Plan as the Basic Plan. Its formal title is
    the Marsh & McLennan Companies Retirement Plan.
    2
    “plan which is unfunded and is maintained by an employer primarily for the purpose of
    providing deferred compensation for a select group of management or highly trained
    employees.” Goldstein v. Johnson & Johnson, 
    251 F.3d 433
    , 436 (3d Cir. 2001) (quoting
    Miller v. Eichleay Eng’rs, Inc., 
    886 F.2d 30
    , 34 n.8 (3d Cir. 1989)). Pursuant to Article 4
    of the SERP, the benefits a participant receives under it are reduced by the “Social
    Security Offset” as defined in the SERP. The dispute in this case concerns the definition
    of “Social Security Offset,” a definition found in Article 1, Section 1.21 of the SERP:
    1.21   Social Security Offset
    1.21.1 For a Participant who retires at age 65 or thereafter, the
    estimated monthly primary Social Security benefit to which he is entitled at
    such time of retirement under the Social Security Act as then in effect on
    the assumption that he was fully insured for such benefit, made proper
    application therefor, and does not disqualify himself from receipt of such
    benefit.
    1.21.2 For a Participant who retires prior to age 65, the estimated
    monthly primary Social Security benefit to which he would have become
    entitled at age 65 under the Social Security Act as in effect on the day he
    terminates employment if he had remained in the employ of the Company
    until age 65 with Monthly Earnings equal to his rate of Monthly Earnings
    immediately prior to his termination of employment.
    Joint Appendix (hereinafter “JA”) 270.
    The phrase “Social Security benefit” is not a defined term under the SERP.3 The
    3
    Article 1 of the SERP provides that “[u]nless the context otherwise indicates, all
    capitalized terms used herein (other than terms defined herein) that are also used in the
    Basic Plan shall have the meanings set forth in the Basic Plan.” JA 266. Neither “Social
    Security benefit” nor “primary Social Security benefit” are defined in the Basic Plan.
    3
    Social Security regulations provide that a retiree “may earn a credit for each month during
    the period beginning with the month you attain full retirement age . . . but do not receive
    an old-age benefit.” 
    20 C.F.R. § 404.313
    (a). These credits are known as “Delayed
    Retirement Credits.” 
    Id.
     Although Ahearn reached full retirement age at 65, he did not
    begin receiving his Social Security benefits until age 69, when he retired. Therefore, he
    received four years’ worth of Delayed Retirement Credits, and his Social Security
    benefits were correspondingly higher.
    Marsh takes the position that the phrase “Social Security benefit” as used in § 1.21
    of the SERP means the actual amount of benefits received by the retiree. Therefore,
    Marsh included the Delayed Retirement Credits as part of the Social Security Offset, and
    reduced Ahearn’s overall SERP benefits accordingly. Ahearn, on the other hand, takes
    the position that because the SERP uses the term “primary Social Security benefit”, this
    term should be understood to refer to the “Primary Insurance Amount” (“PIA”) as used
    in the Social Security Regulations. The relevant regulation defines “Primary Insurance
    Amount” as “the basic figure we use to determine the monthly benefit amount payable to
    you and your family. For example, if you retire in the month you attain full retirement
    age . . . you will be entitled to a monthly benefit equal to your PIA.” 
    20 C.F.R. § 404.201
    (a). Because the PIA does not change based on the age at which the retiree
    actually retires, Ahearn argues that the “primary Social Security benefit” under the SERP
    should similarly remain unchanged notwithstanding Ahearn’s retirement at age 69.
    4
    B.       History of the Dispute
    In February, 2001, Ahearn expressed his dissatisfaction to Marsh concerning
    Marsh’s calculation of the Social Security Offset of his SERP benefits. In response,
    Marsh obtained a legal opinion from the law firm of Sullivan & Cromwell, which
    interpreted the Social Security Offset in the SERP as equivalent to actual benefits
    received, including any Delayed Retirement Credits. Marsh forwarded this opinion letter
    to Ahearn in June, 2001. Ahearn subsequently filed a four-count complaint against
    Marsh alleging, in Count One, wrongful denial of benefits under ERISA; in Count Two,
    breach of fiduciary duty under ERISA; in Count Three, common law unjust enrichment;
    and in Count Four, violation of the ADEA. On February 9, 2004, the District Court
    granted Marsh’s motion for summary judgment on Counts One, Two and Three of the
    Complaint, and granted Marsh’s motion to dismiss Count Four. Ahearn appeals the
    District Court’s disposition only as to Counts One and Four. Although we have
    considered Ahearn’s various arguments as to each of those counts,4 we will limit our
    discussion to what we consider to be the heart of Count One. We will affirm.
    II. DISCUSSION
    Section 12 of the SERP provides as follows:
    4
    Ahearn also argues that the plan administrator improperly delegated authority to Ms.
    Agnello and Mr. Sherman. In addition, Ahearn appeals from the rejection of an estoppel
    defense, the denial of additional discovery, the dismissal of Count Four because disparate
    treatment was not alleged, and the denial of leave to amend the complaint to allege
    disparate treatment. We find these arguments to be without merit.
    5
    12.1 Committee
    12.1.1 The Program 5 shall be administered by the
    Administrative Committee appointed from time to time by
    [Marsh] . . . the Committee shall have the power and
    discretion to:
    . . .
    12.1.2 to [sic] interpret the Program, to resolve ambiguities,
    inconsistencies and omissions and to decide questions
    concerning the eligibility of any person to become a
    Participant or Plan Participant, such interpretations,
    resolutions and decisions to be final and conclusive on all
    persons;
    JA 294-295.
    We have set forth the framework for analyzing top hat pension plans:
    [A] top hat plan is a unique animal under ERISA’s provisions.
    These plans are intended to compensate only highly-paid
    executives, and the Department of Labor has expressed the
    view that such employees are in a strong bargaining position
    relative to their employers and thus do not require the same
    substantive protections that are necessary for other employees.
    See DOL Opin. Letter 90-14 A, 
    1990 WL 123933
    , at *1
    (May 8, 1990). We have held that such plans are more akin to
    unilateral contracts than to the trust-like structure normally
    found in ERISA plans (internal citations omitted).
    Accordingly, top hat plans are not subject to any of ERISA’s
    substantive provisions, including its requirements for vesting
    and funding (internal citations omitted).
    Goldstein, 
    251 F.3d at 442
    .
    In Goldstein, the contract explicitly vested the plan administrator with discretion to
    5
    The SERP is also referred to as “the Program.” JA 266.
    6
    interpret provisions of the plan. Under such circumstances, we noted that “[o]rdinary
    contract principles require that, where one party is granted discretion under the terms of
    the contract, that discretion must be exercised in good faith -- a requirement that includes
    the duty to exercise the discretion reasonably.” 
    251 F.3d at 444
    . Thus, “the question
    presented to the Court is not whether J&J’s interpretation offers the best reading of the
    contract; rather, given the discretion granted to the Pension Committee, the question is
    whether the interpretation offered by J&J was reached in good faith.” 
    Id. at 445
    .
    While Ahearn acknowledges the “good faith” standard established in Goldstein,
    he argues that Marsh’s actions were unreasonable and in bad faith. In support of his
    argument, Ahearn cites to several pension documents provided by Marsh. The “Personal
    Benefit Statement” for the years 1998 through 2000 purport to show Ahearn’s retirement
    benefits from the various Marsh retirement plans, including the SERP. The statements
    also included an “estimated primary social security” which the statements define as “the
    Primary Insurance Amount payable at age 65.” JA 418, 420. Based on this definition,
    Ahearn argues that Marsh initially treated “primary Social Security benefit” as equal to
    PIA as defined under the Social Security Regulations. While the 1998 and 1999
    statements show Ahearn’s “estimated primary social security” as $14,604 and $14,603,
    respectively, the 2000 statement lists this amount as $19,584. Ahearn argues that the
    increase from 1999 to 2000 resulted from Marsh erroneously adding his Delayed
    Retirement Credit to his PIA. Thus, Ahearn contends that while the 1998 and 1999
    7
    statements accurately reflect his PIA and corresponding SERP amounts, the 2000
    statement represents an “abrupt departure” from Marsh’s prior practice, and demonstrates
    that Marsh was acting in bad faith in reducing his SERP benefits because of his increased
    Delayed Retirement Credits.
    Not surprisingly, Marsh disputes Ahearn’s interpretation of the relevant
    documents. Marsh cites to the Retirement Program worksheets for 1999 and 2000, which
    list Ahearn’s “Estimated Social Security PIA” as $19,008 and $20,592, respectively. JA
    456, 453. Marsh notes that it is the worksheets, rather than the Personal Benefit
    Statement or the Social Security Regulations, which actually determine the calculation of
    benefits under the SERP. Thus, although the amounts listed in the Personal Benefit
    Statement may differ from those in the worksheets, it is only the latter figures which are
    relevant for purposes of the SERP. Because the worksheets have always calculated the
    Social Security Offset based upon the actual amount of Social Security benefits a retiree
    receives, Marsh argues that its position on this issue has been both consistent and
    reasonable.
    Ahearn’s arguments are at least colorable, and if this were a straightforward breach
    of contract case, summary judgment might well have been premature. As noted above,
    however, the language of Section 12.1 of the SERP vests Marsh with discretion to
    interpret the SERP’s provisions. Therefore, we must apply the deferential “good faith”
    standard set forth in Goldstein. Although Ahearn attempts to argue that this case is
    8
    analogous to other cases where a claimant has prevailed under this standard, the cases
    upon which he relies are different in important ways.
    In Epright v. Envioronmental Resources Management, Inc., 
    81 F.3d 335
     (3d Cir.
    1996), an employee had been denied benefits under an ERISA health and welfare benefit
    plan on the ground that he was not a “full time employee,” despite the fact that he
    “unquestionably met the definition of an active, full-time employee” as explicitly defined
    in the relevant documents. 
    81 F.3d at 338
    . Thus, even under the deferential standard
    accorded to plan administrators, we found in favor of the employee, noting that “[s]imply
    because [the employer] has consistently misinterpreted the term ‘full-time employee’ does
    not mean that such misinterpretation should be deemed part of the Plan and sanctioned as
    lawful.” 
    Id. at 340
    . See also, e.g., Wolf v. National Shopmen Pension Fund, 
    728 F.2d 182
     (3d Cir. 1984) (plan administrator’s interpretation is arbitrary and capricious when
    contrary to clear language of the plan provisions). While Ahearn argues that the language
    of Marsh’s SERP is similarly clear-cut, in fact the disagreement here stems largely from
    the fact that the SERP plan, unlike the plan in Epright, does not define the term at issue,
    “primary Social Security benefit,” and the parties have offered competing definitions.
    Where the definition of the relevant term is unclear, a court must defer to the
    administrator’s interpretation of the plan, so long as that interpretation is reasonable.
    Moench v. Robertson, 
    62 F.3d 553
     (3d Cir. 1995), is similarly unavailing. Moench
    involved a retirement plan which was invested in the employer’s common stock.
    9
    Although the stock price dropped dramatically, the plan’s administrators continued to
    invest solely in the company’s stock, and argued that the language of the plan did not
    permit any other types of investments. In Moench, as here, the plan “gave the Committee
    unfettered discretion to interpret its terms; it further provided that the Committee’s
    interpretations are conclusive.” 
    62 F.3d at 566
    . Thus, we noted that “assuming that the
    Committee interpreted the plan. . .we will disturb its interpretation only if its reading of
    the plan documents was unreasonable.” 
    Id.
    We noted, however, that the Committee’s position was inconsistent with its own
    conduct, inasmuch as it had also voted to invest funds in money market instruments rather
    than company stock. 
    Id. at 567
    . Under such circumstances, the Committee’s
    interpretation of the plan documents could not be considered reasonable. Although
    Ahearn argues that the documents in this case demonstrate that Marsh similarly acted
    inconsistently with the position it has taken in this case, the relevant documents appear to
    be at least as supportive of Marsh’s position.
    Moreover, we held in Moench that “the record is devoid of any evidence that the
    Committee construed the plan at all.” 
    Id. at 567
    . Therefore, the deferential standard of
    review was inapplicable, and we instead applied de novo review. Here, however, unlike
    the plan administrators in Moench, Marsh clearly did attempt to construe the plan. As
    part of this process, it retained an outside law firm to provide an independent opinion
    interpreting the SERP provisions at issue. Indeed, it is difficult to imagine what more
    10
    Marsh could have done.6
    As noted above, in order to prevail on Count One, Ahearn was required to
    demonstrate that Marsh acted unreasonably and in bad faith in denying his claim for
    SERP benefits. While the parties dispute the interpretation of the various documents in
    the record, Ahearn failed to present evidence sufficient to raise a genuine issue of
    material fact as to Marsh’s good faith. See United States v. Dell'Aquilla, 
    150 F.3d 329
    ,
    332 n.2 (3d Cir. 1998). Summary judgment was properly granted on Count One.
    III.
    The order of February 9, 2004 will be affirmed.
    6
    It should be noted that the cases cited by Ahearn involved ERISA plans which were
    not “top hat” plans, and were thus analyzed under the “arbitrary and capricious” standard,
    rather than the “good faith standard.” Although neither party explicitly addresses this
    issue, Ahearn appears to be arguing that the two standards are essentially identical.
    Indeed, the analysis in both Epright and Moench turned on whether or not the plan
    administrator’s interpretation was reasonable. See Moench, 
    62 F.3d at 566
    ; Epright, 
    81 F.3d at 340
    . We need not decide this issue, however, because even if we assume that the
    standards are essentially identical, the cases are distinguishable for the reasons discussed
    above.
    11