Controlled Group Case Sent Back for Calculation of Damages

The 8th U.S. Circuit Court of Appeals has agreed with a lower court that participants in the Anheuser-Busch salaried employee pension plan are entitled to enhanced pension benefits under Section 19.11(f) of the plan, but disagreed with the lower court that no calculation of benefits due was necessary.

According to the appellate court’s opinion, Section 19.11(f) of the Anheuser-Busch Companies Pension Plan provides for an enhanced pension benefit for a plan participant “whose employment with the Controlled Group is involuntarily terminated within three (3) years after the Change in Control.” It does so by adding “an additional five (5) years” to the participant’s “Credited Service” for purposes of calculating the participant’s benefits.

In November 2008, Anheuser-Busch InBev, N.V. combined the Anheuser-Busch Companies. The parties in the case agree the transaction resulted in a “change of control” under the plan. As a subsidiary, BEC was a member of the Anheuser-Busch family of Companies, defined under the plan as the “controlled group.” At some point in the following year, InBev announced it was selling BEC to Blackstone Capital Partners V.L.P., to be finalized on December 1, 2009.

In September 2012, participants in the plan brought claims to Anheuser-Busch for enhanced pension benefits. They contended a change in control occurred when InBev combined Anheuser-Busch Companies, that they were involuntarily terminated from employment with the controlled group when InBev sold BEC, and that they were entitled to enhanced benefits under Section 19.11(f) of the plan.

The Anheuser-Busch retirement plan administrator denied the claims. The plan administrator stated the “purpose for the special benefits under Section 19.11(f) is to provide additional benefits to individuals who are out of work after they involuntarily lose their employment within three years after a change in control of Anheuser-Busch Companies.” According to the plan administrator, eligibility for enhanced benefits under Section 19.11(f) required “an actual break in an individual’s employment, rather than simply a change in the owner of the entity employing the individual during a period of continuous employment.” Plaintiffs appealed the denials of benefits to the Pension Plans Appeals Committee, which upheld the decisions. They then filed a class action lawsuit to obtain enhanced benefits under the plan.

The district court adopted the 6th U.S. Circuit Court of Appeals reasoning in Adams v. Anheuser-Busch Cos., which the 8th Circuit said presented “the identical issue.” The district court concluded the plan administrator’s denial of benefits was “arbitrary and capricious. Three months after the district court entered judgment on the pleadings, the district court granted Anheuser-Busch’s motion for a final order and stay of judgment pending appeal. Rejecting plaintiffs’ request to calculate the specific amount of benefits due to each class member, the district court simply ordered Anheuser-Busch to direct the plan administrator to provide each member of the class with the enhanced pension benefit under Section 19.11(f).

Citing 8th Circuit Local Rule 47A, plaintiffs moved to dismiss Anheuser-Busch’s appeal on the basis that the district court had not yet issued a final order. Plaintiffs argue another 8th Circuit decision in Dieser v. Continental Casualty Co. “confirms” the district court’s order entering judgment was not final because it failed to calculate the benefits owed to each member of the class. Although plaintiffs contend the order is not final because they were not awarded damages, the district court considered their argument but decided the nature of their action was declaratory, and they were not entitled to an award that calculated the benefits owed.

Upon examination of plaintiffs’ prayer for relief in Count I of their consolidated complaint, the appellate court concluded that plaintiffs made a sufficient request for an actual award of certain benefits with the application of the enhanced benefit—in addition to a declaration that Section 19.11(f) applies. Therefore, the appellate court reversed and remanded the case back to the district court with instructions to reconsider the plaintiffs’ prayer for relief and, to the extent requested and provable, calculate and award the benefits owed to plaintiffs by applying Section 19.11(f). Upon remand, the district court may reconsider whether certain records will assist in its calculation of the requested benefits, the 8th Circuit said.

The district court determined it need not go “beyond the words of Section 19.11(f) itself,” and concluded the only reasonable interpretation of the section entitled plaintiffs to enhanced benefits. Because the district court did not analyze the rest of the plan or the plan administrator’s written decision, Anheuser-Busch argues the district court failed to consider the plan as a whole and was “unaware of the Plan-based support for the Appeals Committee’s conclusion that Section 19.11(f) was intended to provide enhanced benefits only to those participants who lose their job, and not to participants who continue in the same job after a transfer.”

Anheuser-Busch proposes Sections 3.1 and 2.5 of the plan, providing conditions for “Severance from Service Date” and “Employee Transfers and Layoffs,” respectively, support its argument that Section 19.11(f) was not intended to apply to plaintiffs because they suffered no break in their employment. Section 3.1 defines vesting of benefits upon severance, and “include[s] for this purpose a termination of employment in connection with sale of part or all of its interest in an incorporated or unincorporated business or assets by a member of the Controlled Group.” Section 2.5 states that a transfer or “other change in . . . employment classification . . . shall [not] be treated as a Break in Service or a termination of employment.” It also provides that if a transfer shall result in an employee becoming ineligible for plan participation, that employee will “no longer accrue any benefits under the Plan.” The 8th Circuit found neither section demonstrates, as Anheuser-Busch contends, that “termination” should mean “loss of a job” in the sense that Anheuser-Busch wants the court to read it.

Second, Anheuser-Busch argues Section 19.11(f) is ambiguous because it “reasonably supports multiple interpretations” and the plan administrator’s interpretation must be upheld if it was reasonable. Anheuser-Busch proposes the phrase “with the Controlled Group” merely clarifies that the employment referenced in the section means the job that made the participant eligible for the plan. The appellate court did not dispute the phrase “with the Controlled Group” modifies the type of employment the plan was describing; however, “involuntar[y] terminat[ion]” of “employment with the Controlled Group” cannot reasonably be interpreted to exclude the circumstances in the present case.

“Plaintiffs here were all salaried participants in the plan, and on December 1, 2009, when the sale of BEC finalized, ‘without the plaintiffs’ consent and for reasons beyond the plaintiffs’ control,’ their employment with the Controlled Group was terminated. Whether plaintiffs’ employment continued in the same capacity once they were no longer employed by a member of the Controlled Group is irrelevant. Section 19.11(f) is unambiguous,” the appellate court concluded.