Roden v. Amerisourcebergen Corp. (186 Cal. App. 4th 620, 2010)

Opinion

MOORE, J.

We now have before us Donald R. Roden (Roden) and AmerisourceBergen Corporation (AmerisourceBergen) in the fourth round of their dispute concerning Roden’s entitlements arising out of his employment termination. In the third appeal, we addressed a postjudgment order concerning retirement benefits, a severance payment, a stock option award, and loan forgiveness. As concerns the retirement benefits, we reversed the portions of the postjudgment order with respect to the amount of the change in control benefit and the amount of any excise taxes and resultant income taxes owing to Roden under the company’s supplemental executive retirement plan (SERF). “We remand[ed] those issues to the trial court with directions to further remand them to the plan administrator for determination in the first instance.” (Roden v. AmerisourceBergen Corp. (2007) 155 Cal.App.4th 1548, 1552 [67 Cal.Rptr.3d 26] (Roden III).)

On remand, the trial court rejected the determination of the administrative review official to the effect that Roden was entitled to a change in control benefit in the amount of $7,503,300. The court awarded Roden a change in control benefit in the amount of $14,432,141.74 instead. However, it affirmed the determination of the administrative review official to the effect that Roden was not entitled to an additional amount for excise taxes and resultant income taxes. AmerisourceBergen appeals from those portions of the order pertaining to the amount of the change in control benefit, the postjudgment interest rate applied, and the manner of application of payments made towards principal and interest. Roden also appeals, seeking to overturn the portions of the order pertaining to the prejudgment interest rate, the date from which postjudgment interest begins to accrue, the denial of his request for excise taxes and resultant income taxes, and the denial of his request for attorney fees and costs.

We hold that the trial court erred in concluding the review official had abused his discretion in calculating the amount of Roden’s change in control benefit. The review official properly followed actuarial principles, methods and assumptions found to be appropriate by the plan actuary. We reverse the portion of the order overturning the review official’s award and awarding Roden a $14,432,141.74 change in control benefit. We remand the matter to the trial court with instructions to modify its order to affirm the review official’s determination of the change in control benefit, as expressed in his February 6, 2009 order.

The trial court was correct in affirming the decision of the review official to the effect that Roden is not, at this time, entitled to any payment with respect to potential excise tax liability. It would result in an absurdity to construe the SERF as requiring the payment of over $8 million with respect to excise taxes that are extremely unlikely ever to become due. Furthermore, as the review official held, and AmerisourceBergen has agreed, in the unlikely event excise taxes ever do become due, AmerisourceBergen will indemnify Roden as required by the SERF.

The trial court also did not err in affirming the decision of the review official as to the application of prejudgment interest at the federal bank discount rate. Federal law controls with respect to the application of prejudgment interest to benefits paid under the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq.), and Roden has not shown that the review official erred in his application of Ninth Circuit law in the determination of that interest rate.

We further hold the trial court did not err in applying the state statutory postjudgment interest rate. Postjudgment interest, unlike prejudgment interest, is not a part of the ERISA benefit, and there is no reason to apply the federal statutory postjudgment interest rate to a state court judgment. The trial court was also correct in applying postjudgment interest from the date of the order that is the subject of this fourth appeal. As we held in Roden III, supra, 155 Cal.App.4th 1548, Roden’s legal entitlement to a change in control benefit was established in the order that was the subject of the third appeal, but the trial court had no authority, at the time it made that order, to award damages. (Id. at p. 1551.) It was not until after the plan administrator, on remand, had determined the amount of the change in control benefit in the first instance, and the matter had gone through the administrative review process, that the court first had the authority to award damages. No money judgment was properly entered with respect to the change in control benefit until the order that is the subject of this fourth appeal was entered on April 9, 2009. Postjudgment interest runs from that date.

We also hold that the trial court did not err in providing that payments made pursuant to the order, which is in essence a money judgment, are to be applied first to interest and then to principal. This mandate is consistent with Code of Civil Procedure section 695.220. However, t\yo sizeable payments were made to Roden before the date of the order, and the rules on application of payments to a money judgment are inapplicable to those two payments.

Finally, the trial court did not err in declining to award Roden attorney fees and costs. It did not abuse its discretion in concluding that neither party was the prevailing party at trial.

We affirm in part, reverse in part, and remand.

I

FACTS

A. Prior Appeals

“ ‘As discussed in our [first] opinion, Bergen hired Roden as its president and chief operating officer in 1995. [Citation.] Roden later became chief executive officer. Bergen terminated Roden’s employment in 1999 and a disagreement ensued concerning Roden’s rights under his employment contract and the company’s benefit plans. Rancorous litigation followed. [Citation.]’ [Citation.]” (Roden III, supra, 155 Cal.App.4th at p. 1552.)

“ ‘The matter [first] came to this court on the interpretation of a Code of Civil Procedure section 998 settlement agreement that had been reduced to judgment. The judgment required, inter alia, the payment to Roden of $5 million .. . and the continuation of certain benefits as provided in section 5 of Roden’s employment contract. [Citation.] We affirmed the postjudgment order at issue. [Citation.] In doing so, we stated, “Bergen agreed to pay a $5 million lump sum to get rid of the litigation, and to continue the section 5 employment benefits, including retirement benefits.” [Citation.]’ [Citation.]” (Roden III, supra, 155 Cal.App.4th at p. 1552.)

The next time we saw the parties, they were fighting over an order permitting postjudgment discovery. That appeal ended in dismissal. (Roden III, supra, 155 Cal.App.4th at p. 1551.)

Judgment in hand, “ ‘Roden sought to collect the amounts due him .... However, the parties disagreed as to the amount of the employment benefits to which he was entitled.’ [Citation.] Consequently, Roden filed a motion for a second postjudgment order interpreting and implementing the judgment. He sought an order regarding his rights under the company’s supplemental executive retirement plan (SERF). . . .” (Roden III, supra, 155 Cal.App.4th at p. 1553.) “The court awarded Roden $14,432,141.74 in SERF benefits .... Roden and AmerisourceBergen both appealed].” (Ibid.)

“In [the third] appeal, . . . Roden claim[ed] the court erred in awarding him only $14,432,141.74 in employment benefits, over and above the $5 million settlement amount previously awarded .... In its cross-appeal, AmerisourceBergen . . . , successor by merger to Bergen Brunswig Corporation (Bergen), countered] that the court erred in awarding the additional $14,432,141.74.” (Roden III, supra, 155 Cal.App.4th at p. 1551.)

In the third appeal, we held that “[t]he trial court did not err in determining that Roden was entitled to a change in control benefit under the retirement plan. However, the court did err in calculating the amount of that benefit. The benefit amount must be determined in the first instance by the retirement plan administrator, not by the trial court. It is also the province of the plan administrator to determine in the first instance whether the terms of the retirement plan require the employer to pay excise and/or income taxes with respect to the change in control benefit. To the extent the court made a decision with respect to such taxes, the court erred.” (Roden III, supra, 155 Cal.App.4th at p. 1551.)

“Accordingly, we affirm[ed] the portions of the order holding that Roden was entitled to a change in control benefit.... We reverse[d] the portions of the order concerning the amount of the change in control benefit, and the amount, if any, of excise and/or income taxes owing to Roden under the retirement plan. We remand[ed] those issues to the trial court with directions to further remand them to the plan administrator for determination in the first instance.” (Roden III, supra, 155 Cal.App.4th at p. 1552.)

B. Proceedings on Remand After Third Appeal

On remand, Roden demanded $14,432,141.74 for the change in control benefit, minus the amount of a partial payment he had received. He also demanded reimbursement for any excise taxes, and resultant income taxes, for which he might become liable with respect to the change in control benefit. In addition, he requested attorney fees and costs. Finally, he claimed interest at the rate of 10 percent per annum from August 29, 2001.

By letter of June 10, 2008, claims official Donna Dasher denied Roden’s claim. She stated: “I have determined that pursuant to the SERF you should be awarded a [change in control] benefit in the amount of $6,876,487, less the $1,898,066 already paid to you by Wachovia in July 2004, plus interest on the [change in control] benefit (less the $1,898,066 Wachovia payment) from August 29, 2001, to present at the rate specified by 28 U.S.C. § 1961(a).” The claims official also stated: “It is my further determination that you are not entitled to any gross [-]up payment to compensate for Internal Revenue Code (‘Code’) Section 4999 excise taxes, as you are not a ‘disqualified individual’ subject to the Section 4999 excise tax within the meaning of Code Section 280G(c). Therefore, you cannot reasonably be expected to become liable for the excise tax for which any gross-up payment is intended to compensate. As your claims have been denied, I have also determined that you are not entitled to any award of attorneys’ fees under the Fourth SERF, Section 10.8, which provides that attorneys’ fees shall only be awarded in the event a claim is granted by the Plan Administrator.”

Roden filed an administrative appeal. The matter was once again heard before the Honorable Eugene F. Lynch, retired, as the review official. In a 21-page interim statement of decision dated October 31, 2008, the review official concluded: “1. In calculating Claimant’s [change in control] benefit pursuant to Section 5.1, the term Equivalent refers to the actuarial Equivalent as defined in Section 2.14, and thus the Plan actuary properly discounted his benefit to [its] present value based on Claimant’s actual age (i.e. 54[]) at the time of the [change in control]. [][]... [][] 4. Claimant is not entitled to an excise tax gross-up payment pursuant to Section 5.1(b)(iii). If there is such a tax respondent of [course] would have the duty of indemnity, [f] 5. Claimant will be awarded interest for the time period he was without his [change in control] benefit at the federal bank discount rate. . .

In the interim statement of decision, the review official observed that “the parties [had] agreed that once a ruling was issued on the various disputes that they would be able among themselves to agree on the exact amount owed and [would] submit such a stipulation re: said amounts to the Review Official. ...” In a subsequent order dated February 6, 2009, he stated that the plan actuary, implementing the rulings contained in the interim statement of decision, had calculated the change in control benefit, “which amounted to $7,503,300, and applying compounded interest at the federal discount rate from August 29, 2001 to November 24, 2004 (less offsets), [had] determined the total net lump sum payment to be awarded Roden to be $6,954,305.”

Dissatisfied, Roden filed, in the superior court, a motion for a third order in implementation of judgment. He challenged portions of the calculations of the SERF change in control benefit, sought interest on his benefit at the rate of 10 percent per annum from the date of the merger, and further sought a gross-up payment with respect to excise taxes.

The court awarded Roden SERF benefits in the amount of $14,432,141.74, plus interest thereon at the federal bank discount rate from August 29, 2001 through the date of the order, less the amount of any prior payments to Roden. The court further ordered that the award would bear interest at the rate of 10 percent per annum until paid. The court affirmed the review official’s decision with regard to excise taxes. In addition, the court denied attorney fees and costs.

AmerisourceBergen filed an appeal from the third order in implementation of judgment and Roden filed a cross-appeal. In addition, Roden filed a motion to augment the record, to which AmerisourceBergen has filed objections.

II

DISCUSSION

A. Motion to Augment

As a preliminary matter, we address Roden’s motion to augment. He seeks to augment the record with a copy of the 2009 W-2 wage and tax statement issued by AmerisourceBergen with respect to the change in control benefit paid to him. AmerisourceBergen opposes the motion contending, inter alia, that the record on appeal cannot be augmented to include items that were not before the trial court. AmerisourceBergen is correct. The W-2 form was issued after the third order in implementation of judgment was entered and, indeed, after this appeal was filed. We do not consider matters that were not before the trial court. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3 [58 Cal.Rptr.2d 899, 926 P.2d 1085].) The motion to augment is denied.

B. Standard of Review

(1) Introduction

We start off with much ado about the standard of review. “We review de novo a district court’s choice and application of the standard of review to decisions by fiduciaries in ERISA cases. [Citation.] We review for clear error the underlying findings of fact. [Citation.]” (Abatie v. Alta Health & Life Ins. Co. (9th Cir. 2006) 458 F.3d 955, 962; accord, Montour v. Hartford Life & Acc. Ins. Co. (9th Cir. 2009) 588 F.3d 623, 629 (Montour).)

The big question here is the standard of review to apply to the determinations of the review official. Taking the same positions they did in the third appeal, AmerisourceBergen says the abuse of discretion standard of review applies, while Roden contends the de novo standard of review applies. (Roden III, supra, 155 Cal.App.4th at pp. 1558-1559.) The answer is not a simple one and, in this case, varies depending on the particular determination at issue. We begin our analysis with a review of the principles we noted in our third opinion, since it appears that there has been some misunderstanding, even on the part of the trial court, as to the scope of our holding therein with respect to the applicable standard of review.

(2) Firestone rule

“While the parties agree that the SERF is governed by the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq.), they nonetheless disagree as to the standard of review applicable to the administrative decisions at issue here. . . . Both parties cite Firestone Tire & Rubber Co. v. Bruch (1989) 489 U.S. 101 [103 L.Ed.2d 80, 109 S.Ct. 948] in support of their positions.” (Roden III, supra, 155 Cal.App.4th at pp. 1558-1559.)

“That case addressed the standard of review applicable to certain challenges to benefit denials under ERISA-govemed plans, in particular challenges brought under 29 U.S.C. § 1132(a)(1)(B). [Citation.] That section ‘allows a suit to recover benefits due under the plan, to enforce rights under the terms of the plan, and to obtain a declaratory judgment of future entitlement to benefits under the provisions of the plan contract.’ [Citation.] The Firestone court held ‘that a denial of benefits challenged under § 1132(a)(1)(B) is to be 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.’ [Citation.]” (Roden III, supra, 155 Cal.App.4th at p. 1559.)

“Interpreting Firestone Tire & Rubber Co. v. Bruch, supra, 489 U.S. 101, the court in Abatie v. Alta Health & Life Ins. Co. (9th Cir. 2006) 458 F.3d 955, stated that ‘if the plan does confer discretionary authority as a matter of contractual agreement, then the standard of review shifts to abuse of discretion. [Citation.]’ (Abatie v. Alta Health & Life Ins. Co., supra, 458 F.3d at p. 963[; accord, Conkright v. Frommert (2010) 559 U.S. _, _ [176 L.Ed.2d 469, 130 S.Ct. 1640, 1646]].) ‘[F]or a plan to alter the standard of review from the default of de novo to the more lenient abuse of discretion, the plan must unambiguously provide discretion to the administrator. [Citation.] The essential first step of the analysis, then, is to examine whether the terms of the ERISA plan unambiguously grant discretion to the administrator. Accordingly, we first turn to the text of the plan.’ [Citation.]” (Roden III, supra, 155 Cal.App.4th at p. 1559.)

(3) Discretionary authority under SERP section 7.5, now inapplicable

“In the case before us, SERP section 7.5 unambiguously gives the plan administrator the discretion to construe the terms of the SERP and specifically states that an arbitrary and capricious standard of review shall apply. However, section 7.5 concludes with the following language: ‘This Section shall cease to apply upon the occurrence [of] a Change in Control . . . and it shall thereafter never be reinstated in any way.’ ” (Roden III, supra, 155 Cal.App.4th at p. 1559.)

“Up until the time of the merger, then, the plan administrator clearly had a discretionary authority, under SERP section 7.5, that would have been subject to the abuse of discretion standard of review. Once the merger took place, however, SERP section 7.5 became inapplicable.” (Roden III, supra, 155 Cal.App.4th at p. 1559.) In the third appeal, AmerisourceBergen argued that, after the date of the merger, the provisions of the “Master Trust Agreement for Bergen Brunswig Corporation Executive Deferral Plans” dated December 27, 1994 (Master Trust Agreement) governed and gave rise to an abuse of discretion standard of review. Roden disagreed. (Id. at pp. 1553-1554, 1559-1560.) We determined that we did not need to resolve the issue because, unlike the situation in Firestone Tire & Rubber Co. v. Bruch, supra, 489 U.S. 101, we were not then addressing the standard of review to be applied when the question was the interpretation of an ERISA plan provision, but rather were addressing “the interpretation of a state court judgment encapsulating a Code of Civil Procedure section 998 settlement agreement, a postjudgment order implementing the judgment, [and] an appellate court opinion addressing both the judgment and the order.” (Roden III, supra, 155 Cal.App.4th at p. 1560.)

Interestingly, in this fourth appeal, AmerisourceBergen does not renew its arguments concerning the effect of the Master Trust Agreement, and Roden does not mention the document either. However, Roden reminds us that we previously stated SERP section 7.5, granting the plan administrator certain discretionary authority, became inapplicable once the merger took place. (Roden III, supra, 155 Cal.App.4th at p. 1559.) Reinforcing this statement, Roden also points out that another SERP provision, subsection 5.1(b)(iv), additionally declared that SERP section 7.5 became inapplicable upon the change in control. Consequently, he maintains, in this fourth appeal, that the de novo standard of review must apply. While it is true that SERP section 7.5 is now inapplicable, it is not the only plan provision concerning the plan administrator’s discretionary authority.

(4) Disretionary authority under SERP section 2.14, affecting change in control benefit

In our third opinion, after we concluded that the judgment entitled Roden to a SERP change in control benefit, we turned to address the proper calculation of that benefit. (Roden III, supra, 155 Cal.App.4th at p. 1563.) We stated: “As we have already discussed, when an ERISA plan unambiguously confers discretionary authority on the plan administrator to determine benefits or to interpret plan provisions, we apply an abuse of discretion standard of review to his or her decision. (Abatie v. Alta Health & Life Ins. Co., supra, 458 F.3d at p. 963.) At this juncture, we are no longer talking about interpreting the provisions of either the judgment or the first implementation order—a judicial function. Now, we are talking instead about interpreting the complex SERP provisions concerning benefits calculations, based on certain actuarial principles, methods and assumptions. In this context, SERP section 2.14 clearly vests discretion in the plan administrator to determine the actuarial equivalent of the Executive Participant’s vested accrued benefit under SERP subsection 5.1(b)(i)(F), based on principles, methods and assumptions proffered by the plan actuary. In short, the abuse of discretion standard of review applies with respect to the plan administrator’s determination of the actuarial equivalent in question. However, we have no plan administrator’s determination to review. Because the plan administrator concluded that Roden was not entitled to a change in control benefit, it did not interpret the SERP provisions pertaining to the change in control benefit calculation.” (Roden III, supra, 155 Cal.App.4th at pp. 1565-1566.)

We concluded that we had no choice but to “remand the matter of the change in control benefit calculation to the trial court with direction for it to further remand the matter to the plan administrator for determination in the first instance. [Citations.]” (Roden III, supra, 155 Cal.App.4th at p. 1566.) Although we did not review the amount of the change in control benefit, we did determine the standard of review with respect to the determination of that one benefit. The abuse of discretion standard applies, given the unambiguous grant of discretionary authority upon the plan administrator in SERP section 2.14. It is important to note that, in the third appeal, we did not determine the standard of review to be applied with respect to the determination of any other benefit.

(5) Discretionary authority under SERP subsection 5.1(b)(iii), affecting tax benefits

SERP section 2.14 does not apply with respect to every issue we are addressing in this fourth appeal. The section defines the term “Equivalent” for the purposes of the SERP, but that term is not at issue in SERP subsection 5.1(b)(iii), pertaining to excise taxes and resultant income taxes. Since SERP section 2.14 has no bearing on the determination of tax benefits, we must take a separate look at the standard of review applicable to that determination.

SERP subsection 5.1(b)(iii) does not give the plan administrator the discretionary authority to interpret its terms. So, to the extent we must resolve whether the terms of SERP subsection 5.1(b)(iii) provide Roden with any benefit at all, we must apply the de novo standard of review to the interpretation of those terms.

If Roden is entitled to a benefit under SERF subsection 5.1(b)(iii), the review of the determination of the amount of that benefit is another matter. Subsection 5.1(b)(iii) provides: “In the event that the Company and the Executive Participant are unable to agree upon the amount of the payment required under this subsection (iii), such amount shall be determined by Tax Counsel .... The decision of such Tax Counsel shall be final and binding upon both the Company and the Executive Participant. . . .” This language unambiguously grants discretionary authority to tax counsel to make the final determination with respect to the amount of the payment to be made to the executive participant with respect to excise taxes and resultant income taxes. Consequently, the abuse of discretion standard applies to a review of tax counsel’s determination on that topic.

(6) Effect of conflict of interest

In this fourth appeal, Roden raises a new argument with respect to the abuse of discretion standard of review. He contends that even if this court determines to apply an abuse of discretion standard of review, the plan administrator’s exercise of discretion must be highly scrutinized because of a conflict of interest. Roden, without citation to the record, says there is a conflict of interest because AmerisourceBergen both funds the SERF and has the authority to determine who qualifies for benefits.

We admonish Roden that we need not address any argument that is unsupported by record references. (Del Real v. City of Riverside (2002) 95 Cal.App.4th 761, 768 [115 Cal.Rptr.2d 705].) However, we nonetheless chose to check a few items in the record that, as it turns out, provide support for his assertion that there is a conflict of interest.

Section 7.4 of the SERF sets forth the claim and review procedures. Subsection 7.4(b) provides that the claim shall be determined by a claims official appointed by the plan administrator. Subsection 7.4(d) states that the claimant may appeal the decision to a review official, also designated by the plan administrator. SERF section 2.23 defines the “Plan Administrator” as Bergen Brunswig Corporation. That company, after the merger, has been supplanted by AmerisourceBergen. In the matter before us, these portions of section 7.4 were clearly implemented in the manner specified. The initial claims decision was made by claims official Donna Dasher, who provided her determination to Roden on AmerisourceBergen letterhead. AmerisourceBergen thereafter appointed Lynch to act as the review official.

It does then appear, as Roden asserts, that there was a conflict of interest inherent in the review procedure. AmerisourceBergen does not contend otherwise. However, that fact does not change the standard of review, only the manner in which it is applied. (Montour, supra, 588 F.3d at p. 631.) “Abuse of discretion review applies to a discretion-granting plan even if the administrator has a conflict of interest. But Firestone also makes clear that the existence of a conflict of interest is relevant to how a court conducts abuse of discretion review. In discussing abuse of discretion review, the Supreme Court cautioned that, ‘if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a “facto[r] in determining whether there is an abuse of discretion.” [Citation.]’ [Citation.]” (Abatie v. Alta Health & Life Ins. Co., supra, 458 F.3d at p. 965, fn. omitted.)

When “weighing a conflict of interest as a factor in abuse of discretion review [we engage in] a case-by-case balance . . . .” (Abatie v. Alta Health & Life Ins. Co., supra, 458 F.3d at p. 968.) The court should “tailor its review to all the circumstances before it. [Citation.] The level of skepticism with which a court views a conflicted administrator’s decision may be low if a structural conflict of interest is unaccompanied, for example, by any evidence of malice, of self-dealing, or of a parsimonious claims-granting history. A court may weigh a conflict more heavily if, for example, the administrator provides inconsistent reasons for denial [citation]; fails adequately to investigate a claim or ask the plaintiff for necessary evidence [citation]; fails to credit a claimant’s reliable evidence [citation]; or has repeatedly denied benefits to deserving participants by interpreting plan terms incorrectly or by making decisions against the weight of evidence in the record.” (Id. at pp. 968-969; accord, Joas v. Reliance Standard Life Ins. Co. (S.D.Cal. 2007) 621 F.Supp.2d 1001, 1007 (Joas).)

However, while Roden flags the existence of a conflict of interest, he does not discuss any of the factors the court should consider in evaluating how heavily to weigh that conflict of interest. He does not, for example, cite any evidence of self-dealing, malice, a stingy claims-granting history, inconsistent reasons for claims denial, failure to adequately investigate a claim, or repeatedly making decisions against the weight of the evidence in the record. (See Abatie v. Alta Health & Life Ins. Co., supra, 458 F.3d at pp. 968-969.) He simply declares that the plan administrator has interpreted the terms of the SERF incorrectly and urges this court to scrutinize the claim denial. He cites Joas, supra, 621 F.Supp.2d 1001 for the proposition that “where a plan confers discretion upon a conflicted plan administrator to interpret the plan, a district court reviews the decision of the conflicted plan administrator for an abuse of discretion, ‘tempered by skepticism commensurate with the plan administrator’s conflict of interest.’ [Citation.]” (Id. at p. 1006.) However, the alleged misinterpretation of the SERF, standing alone, does not give rise to an alarming level of skepticism.

Rather, we note several factors Roden has failed to point out. Neither the claims official nor the review official failed to provide an adequate explanation of his or her decision. The claims official provided a 13-page analysis, accompanied by the actuarial analysis of Towers Perrin and opinions of tax counsel Ivins, Phillips & Barker. The review official provided a 21-page analysis. Each analysis was cogent and detailed.

It is important to observe that the actuarial firm provided the change in control calculation, and explained the actuarial basis for taking Roden’s actual age into consideration in performing the computations. Towers Perrin stated that it “used the same methodology and assumptions [it had] used in calculating the monthly retirement benefit of other executives of Bergen Brunswig at the time the Change in Control provisions became effective.” The claims official, in turn, stated that, in compliance with SERF subsection 5.1(b)(i)(F), she “based [her] decision on the terms of the SERF and calculations performed by the SERF Plan actuary, Julia Weyand of Towers Perrin.” The claims official further stated: “Ms. Weyand of Towers Perrin, the SERF Plan actuary since 1999, has calculated your [change in control benefit] under the SERF using ... the same ‘principles, methods, and assumptions’ under the SERF she used to calculate the benefits of the other executives who received a [change in control] payment at the time of the Merger in 2001.” (Fn. omitted.) The claims official also remarked that Roden’s “entitlement to any [change in control] benefit [was] derived from the obligation of the Company to provide benefits to [Roden] as if [he] had remained an employee. It [was], therefore, appropriate that [his change in control] benefit be calculated in the same manner as the [change in control] benefits for other executives were calculated.” The reliance on a third party actuary, and the application of a consistent rule as to all persons receiving a change in control benefit, tempers the degree of skepticism applied in connection with the conflict of interest issue Roden raises.

It occurs to us that there may be one potential conflict of interest issue that Roden does not mention. That is, whether tax counsel may have a conflict of interest by virtue of having been hired by the claims official. We note that tax counsel was ostensibly hired to perform the function of a neutral third party and that SERF subsection 5.1(b)(iii) contains safeguards concerning the qualifications of tax counsel and the lack of preexisting conflicts of interest. That subsection provides in pertinent part: “As used in this subsection (iii), the term ‘Tax Counsel’ shall mean an attorney at law or certified public accountant who is a partner at a law firm of at least 25 attorneys or a partner at a ‘Big 6’ accounting firm, respectively, provided that such firm has not provided services to the Company or the respective Executive Participant or any affiliate of the Company or such Executive Participant within the last year.” The claims official hired tax counsel with the requisite qualifications.

Roden does not address whether these safeguards are sufficient to counteract any possible conflict of interest, and we will not do research on our own to further an issue Roden does not raise. (Niko v. Foreman (2006) 144 Cal.App.4th 344, 368 [50 Cal.Rptr.3d 398].) Suffice it to say that we will bear in mind the possibility of a conflict of interest on the part of tax counsel as we apply the abuse of discretion standard of review.

(7) Other issues

We address the standard of review to be applied in connection with other issues as those issues arise.

C. Change in Control Benefit

(1) Introduction

AmerisourceBergen requests that this court reverse the trial court’s award of $14,432,141.74 with respect to the change in control benefit. It further requests that we affirm the review official’s award of $7,503,300, less certain offsets, plus interest, as more particularly expressed in his February 6, 2009 order. Roden argues in favor of the trial court’s award and against the review official’s award.

(2) SERF subsection 5.1(b)(i) and section 2.14

In the third appeal, we held that Roden was entitled to a change in control benefit under SERF subsection 5.1(b)(i). (Roden III, supra, 155 Cal.App.4th at pp. 1563-1564.) The amount of the benefit is dependent upon the interpretation of that provision and related section 2.14 of the SERP.

Subsection 5.1(b)(i) of the SERF provides in pertinent part: “ ‘Notwithstanding any other provisions of the Plan, upon the occurrence of a Change in Control. . . , each Participant’s Accrued Benefit shall [be] deemed to be fully Vested . . . and each Executive Participant shall be entitled to benefits ... in accordance with the following: (A) As of the date of the Change in Control, such Executive Participant shall be deemed to have attained the Normal Retirement Age; [][]... [f] (E) such Executive Participant’s Accrued Benefit. . . shall be calculated in accordance with the assumptions set forth in the preceding clauses (A)-(D); and (F) prior to or upon the consummation of the transactions giving rise to the Change in Control, the Company shall pay to such Executive Participant ... a cash lump sum payment that is the Equivalent of such Executive Participant’s Vested Accrued Benefit determined in accordance with this Section 5.1(b).’ ” (Roden III, supra, 155 Cal.App.4th at pp. 1556-1557, fn. 2.)

The term “Equivalent,” as used in SERF subsection 5.1(b)(i), clause (F), is defined in SERF section 2.14 as “ ‘the actuarial equivalent of a given amount or benefit payable in another manner, at another time or by any other means, determined conclusively by, or under the direction of, the Plan Administrator in accordance with actuarial principles, methods and assumptions which are found to be appropriate by the Plan’s actuary. . . .’ ” (Roden III, supra, 155 Cal.App.4th at p. 1565.) Here, the multimillion-dollar question is whether SERF section 2.14 is properly applied to take into consideration the fact that Roden was 54 years old at the time of the change in control.

(3) Determination of plan actuary

In her June 10, 2008 actuarial analysis, Weyand, a principal at Towers Perrin, stated: “The determination of a lump sum payment under the Plan can be thought of as the amount of money a life insurance carrier would charge today in return for the promise to pay a specified annuity to Mr[.] Roden beginning at age 62 and continuing for his life with a reduced amount continuing to his surviving beneficiary following his death. The lump sum payment is considered to be Equivalent in value to the future stream of annuity payments.”

She further stated: “At the time of the Change in Control, based on the definition of Equivalent in Section 2.14 and the provisions in [sub] section 5.1(b)(i)(A)-(F), we obtained quotes from an annuity provider for each of the Bergen Executives whose retirement benefit we had calculated. The quotes were based on the following assumptions: 1) an annuity' starting at the Participant’s 62nd birthday and continuing for life, . . . and 4) an Interim Period to reflect the period of time from the date of the Change in Control to the Participant’s 62nd birthday, recognizing that payment of an annuity under the Plan begins at age 62 and not the Participant’s current age.”

Weyand said that taking the described “Interim Period” into consideration was required under actuarial principles. She explained: “[Performing the calculation without recognizing the Interim Period would result in significant and unintended windfalls for younger executives compared to older executives. For example, one eligible participant was 40 years old at the time of the Change in Control. Had he been given 4% increases for 22 years and then simultaneously been treated for payment purposes as if he was already 62 so that the Interim Period was ignored, his resulting lump sum payment would have been much larger than several executives whose level of responsibility and compensation were far higher than his. That windfall and inequity confirmed our conclusion that calculating the lump sum in that manner was neither appropriate nor intended.”

She concluded: “We did not obtain an annuity quote for Mr. Roden at the time of the Change in Control and historical annuity quotes are not now available. However, we did obtain an annuity quote for another eligible Executive Participant who is approximately 2 months older than Mr. Roden (the ‘comparable Executive Participant’). Given their proximity in age, we believe it is reasonable to use the annuity quote for the comparable Executive Participant as a basis for converting Mr. Roden’s monthly retirement benefit into a lump sum equivalent as of May 31, 2001. Using the annuity quote for a participant 2 months older than Mr. Roden provides Mr. Roden with a slightly higher lump sum payment than if his actual age were used.”

(4) Determination of claims official

The claims official adopted the calculations of Weyand, as the plan actuary. The claims official noted that the calculations of Roden’s actuary, Adam Reese, employed a lump-sum conversion factor that was 91 percent higher than the one employed by the plan actuary. She said that “Mr. Reese’s factor calculate[d] the lump-sum amount that would be necessary to purchase an annuity for [Roden] that would pay [his] monthly retirement benefit commencing at the time of the Merger (when [he was] in fact 54 years old), rather than at the time of [his] 62nd birthday. But starting the annuity earlier requires a much larger lump-sum payment because there is less time for the lump-sum to grow and accrue interest before the annuity commences.”

In rejecting Reese’s calculation, the claims official explained: “The Plan actuary found that it was appropriate to determine the value of the cash lump sum as being the Equivalent of a deferred annuity payable starting at Normal Retirement Age. This is consistent with payment ‘at another time’ as provided in the definition of Equivalent. Mr. Reese’s calculation is inconsistent with the definition of Equivalent because it does not adjust for payment ‘at another time.’ ”

(5) Determination of review official

The review official explained that SERP subsection 5.1(b)(i), clause (E) requires that the accrued benefit “ ‘be calculated in accordance with the assumptions set forth in the preceding clauses (A)-(D).’ These assumptions have the effect of crediting the Executive Participant with his projected compensation from the date of the [change in control] until Normal Retirement Age at 62. Thus they ensure the Participant’s final pay used for calculating the benefit will be the same as it would have been absent the [change in control]. However, the Accrued Benefit under the SERP is a monthly payment, not a lump sum. That is why [clause] (F) provides that in the event of a [change in control] a cash lump sum that is the Equivalent of the Accrued [B]enefit will be paid to the Participant.” (Fn. omitted.)

The review official characterized the argument Roden made at the time as a claim that the accrued benefit should be converted to lump sum without a discount to present value based on his actual age at the time of the change in control. The review official rejected the argument as rewriting the term “Equivalent” out of SERP subsection 5.1(b)(i), clause (F). “In other words, there would be no point in having the term used [in subsection 5.1(b)(i), clause (F)] at all if not in reference to the definition set forth in Section 2.14.”

In conclusion, the review official stated: “As [AmerisourceBergen] contends, the SERP is a retirement plan designed to provide retirement benefits to [its] Participants at age 62 at specified levels. [Roden] was 54 and not 62 at the time of the [change in control], and thus from a retirement and actuarial perspective needed less money to fund his retirement than an individual who was in fact age 62. As [AmerisourceBergen] points out, [Roden’s] approach has the illogical effect of providing a Participant a greater age 62 retirement benefit the younger the Participant is at the time of the [change in control]. HQ Therefore, the Review Official concludes that the Plan Official properly discounted [Roden’s] age 62 [change in control] benefit to its present value at the time of the [change in control] in 2001 when [Roden] was in fact age 54.”

(6) Third order in implementation of judgment; analysis

The trial court correctly selected the abuse of discretion standard to apply to its review of the portion of the review official’s decision pertaining to the calculation of the change in control benefit. However, for reasons we shall show, we disagree with the manner in which that standard of review was applied.

The third order in implementation of judgment states: “The Court finds that the Decision of the Review Official with regard to the calculation of the change in control benefit and the finding that the language of the SERP calls for a discount of the change in control benefit payable based on the actual age of 54 to arrive at present value is an abuse of discretion and finds that Mr. Roden should be deemed 62 years of age for the purposes of calculating the cash lump sum equivalent.”

More specifically, the court explained that the review official had abused his discretion in construing the SERF provisions in a manner contrary to their plain language. The court focused on the opening clause of SERF subsection 5.1(b)(i) which provides: “Notwithstanding any other provisions of the Plan, upon the occurrence of a Change in Control. . . , each Participant’s Accrued Benefit shall [be] deemed to be fully Vested under the Plan and each Executive Participant shall be entitled to benefits under the Plan in accordance with the following: (A) As of the date of the Change in Control, such Executive Participant shall be deemed to have attained the Normal Retirement Age . . . .” (Italics added.)

The court construed this language as “an absolute declaration that, in spite of anything else in the [SERF], at the date of Change in Control, the executive is deemed to be 62, the normal retirement age.” In other words, his actual age is not to be taken into consideration in any regard.

However, this analysis, though it considers clause (A) of SERF subsection 5.1(b)(i), completely ignores clause (F) thereof. Consequently, we are compelled to perform a second reading of subsection 5.1(b)(i), this time including both clauses at issue. Subsection 5.1 (b)(i) provides in pertinent part: “Notwithstanding any other provisions of the Plan, upon the occurrence of a Change in Control . . . each Executive Participant shall be entitled to benefits under the Plan in accordance with the following: (A) As of the date of the Change in Control, such Executive Participant shall be deemed to have attained the Normal Retirement Age; [][]... [f] and (F) . . . the Company shall pay to such Executive Participant, ... a cash lump sum payment that is the Equivalent of such Executive Participant’s Vested Accrued Benefit determined in accordance with this Section 5.1(b).” (Roden III, supra, 155 Cal.App.4th at pp. 1556-1557, fn. 2, italics added.)

On second reading, we see that the “notwithstanding” qualification does not elevate SERF subsection 5.1(b)(i), clause (A) over clause (F). Both clauses apply, notwithstanding any other provision of the SERB Just as we must look outside subsection 5.1(b)(i) to find the definition of “Normal Retirement Age,” in section 2.19 of the SERF, we must also look outside of subsection 5.1(b)(i) to find the definition of “Equivalent,” in section 2.14 of the SERF.

SERF section 2.14 provides in full: “ ‘Equivalent’ shall mean the actuarial equivalent of a given amount or benefit payable in another manner, at another time or by any other means, determined conclusively by, or under the direction of, the Plan Administrator in accordance with actuarial principles, methods and assumptions which are found to be appropriate by the Plan’s actuary. For purposes of this Plan, equivalencies shall be based on the mortality assumptions included in the indices used by Metropolitan Life Insurance Company, or such other nationally recognized insurance company, in quoting a premium to purchase a non-qualified individual annuity with survivor coverage as of the date of the event necessitating the calculation (e.g. retirement, termination of Employment, disability, etc.).” (Italics added.)

The trial court construed the phrase “the date of the event necessitating the calculation,” as contained in SERF section 2.14, to mean the date of the change in control. Therefore, the court reasoned, the section 2.14 equivalency calculation must be made as of that date, and using an age of 62, without discount based on actual age. Again, we disagree. The phrase at issue notwithstanding, nothing in the last sentence of section 2.14, regarding equivalencies based on certain mortality assumptions, excludes consideration of actual age, or the time value of money.

As we have already indicated, Weyand, the plan actuary, explained the use of quotations from an annuity provider. And, the date of the change in control was a factor in the quotations obtained. Weyand also explained why actuarial principles and methods required not only the consideration of the date of the change in control, but also the participant’s actual birth date. She explained the anomaly wherein, without the consideration of a participant’s actual birth date, a 40-year-old executive with far less seniority and responsibility would obtain a far greater cash lump sum at the date of the change in control than a much older, higher level senior executive, were birth date not taken into consideration. To avoid this inequity, in Weyand’s calculation, the plan participant was still deemed to be age 62 at the date of the change in control, for the purpose of determining the amount of compensation he would have been earning at that age were he then employed. But actuarial principles and methods nonetheless required a discount to present value given the fact that the plan participant was not in fact age 62 at the date of the change in control, when the cash lump sum payment was to be made.

We emphasize the directive of SERF section 2.14 to the effect that “the actuarial equivalent of a given amount or benefit payable in another manner, at another time or by any other means, [shall be] determined conclusively by, or under the direction of, the Plan Administrator in accordance with actuarial principles, methods and assumptions which are found to be appropriate by the Plan’s actuary.” The actuarial principles having been soundly described by the plan actuary, and adopted by the plan administrator and the review official, the reviewing court does not substitute its discretion for theirs. “ ‘Our inquiry is not into whose interpretation of the plan documents is most persuasive, but whether the plan administrator’s interpretation is unreasonable.’ [Citation.]” (Winters v. Costco Wholesale Corp. (9th Cir. 1995) 49 F.3d 550, 553.)

Roden maintains that the review official’s interpretation is indeed unreasonable, and an abuse of discretion, because it clearly conflicts with the plain language of the SERB. As Joas, supra, 621 F.Supp.2d 1001, states, “ ‘[a]n ERISA administrator abuses its discretion ... if it.. . construes provisions of the plan in a way that conflicts with the plain language of the plan . . . .’ [Citation.]” (Id. at p. 1009.)

According to Roden, the SERF required a simple two-step calculation: (1) his vested accrued benefit was to be determined as though he were 62 years old at the time of the change in control; and (2) because his vested accrued benefit would have been paid as a monthly income stream absent the change in control, the lump sum that was paid instead was to be reduced to present value. However, he insists that the plan actuary, the claims official and the review official each failed to perform that simple calculation, as required by the plain language of SERF subsection 5.1(b)(i) and section 2.14. Furthermore, he contends they violated the plain language of the SERF by applying a discount to the discount. In other words, he says that while it was proper, under standard actuarial principles, to discount the monthly income stream to present value because the benefit had to be paid as a lump sum on change in control, it was wholly unauthorized by the provisions of the SERF to superimpose a second discount to present value on top of the first one, on account of his age at the time of the change in control.

It is true that neither SERF subsection 5.1(b)(i) nor section 2.14 mentions a double discount. But subsection 5.1(b)(i), clause (F) requires an “Equivalent,” within the meaning of section 2.14, to be paid, and section 2.14, in turn, requires equivalencies to be determined in accordance with actuarial principles, methods and assumptions specified by the plan actuary. Like it or not, the plan actuary had to address two separate issues: (1) the issue of the payment of the vested accrued benefit as a lump sum rather than a monthly income stream; and (2) the fact that certain executive participants had not in fact attained age 62 as of the date of the change in control. The second issue is not made nonexistent just because subsection 5.1(b)(i) required “Normal Retirement Age” to be taken into consideration for the purpose of determining compensation a given executive participant would have earned had he in fact worked until that age and attained that age as of the date of change in control.

Roden urges us to disregard the actuarial principles, methods and assumptions applied by the plan actuary. He emphasizes that even assuming the plan actuary calculated the change in control benefits for other executive participants in the same manner as she had for him, this does not mean that those executive participants agreed with the manner in which their benefits were calculated; rather, some of them may have entered into settlement agreements with AmerisourceBergen that affected their willingness to accept the sums in question as part of an overall package.

We are not here to adjudicate whether other plan participants were happy with their benefits or why they chose not to litigate the matter as has Roden. We are here to determine whether the trial court properly held that the review official had abused his discretion in construing the SERF to require taking Roden’s actual age into consideration in calculating the amount of his change in control benefit. In our review of the applicable provisions of the SERF, we observe that section 2.14 requires the application of the actuarial principles, methods and assumptions applied by the plan actuary. Those principles, methods and assumptions were reasonable and not contrary to the terms of the SERF. The representation that they were applied equally to all executive participants is of interest primarily with respect to the conflict of interest issue and the weighing of that conflict in addressing abuse of discretion. The equal application of the actuarial principles, methods and assumptions to each executive participant lessens our concerns regarding the conflict of interest. However, it is immaterial whether the executive participants other than Roden were pleased with their benefits or not.

As a final point, we observe that Roden’s approach fails to consider the time value of money. “In the actuarial world, this is heresy . . . .” (Conkright v. Frommert, supra, 559 U.S. at p._ [130 S.Ct. at p. 1650].) “ ‘[Y]ounger workers have (statistically) more time left before retirement, and thus a greater opportunity to earn interest on each year’s retirement savings.’ [Citation.]” (Hurlic v. Southern California Gas Co. (9th Cir. 2008) 539 F.3d 1024, 1031.) One must not “ignore[] the realities of the time value of money. Under [certain defined benefit plans], younger workers have more years in which to earn interest, but must wait longer until their benefit is paid out. However, if a participant elects to receive a payout before reaching [normal retirement age], the Plan must distribute the ‘actuarial equivalent’ of the annuity that would be available at normal retirement age. [Citation.] This value is calculated by adding all the interest that the participant would accrue through [normal retirement age] and discounting the resulting sum to its present value. [Citation.]” (Ibid.) True, Roden did not, in this case, elect to receive an early payout, but the foregoing principles apply equally well to the situation at hand, where an early payout is required due to a change in control.

As AmerisourceBergen remarks, Roden’s “interpretation converts the SERF from a plan designed to provide retirement income into a change-in-control jackpot that increases in ‘value’ the younger the participant happens to be . . . .” Well put. The SERF is, after all, a retirement plan.

(7) Conclusion regarding change in control benefit

The review official, in determining the amount of the change in control benefit, applied SERF subsection 5.1(b)(i) and section 2.14 in a reasonable manner, in accordance with the actuarial principles, methods and assumptions found to be appropriate by the plan actuary. In so doing, he did not abuse his discretion. The trial court erred when it concluded to the contrary. We reverse the trial court’s award of $14,432,141.74 with respect to the change in control benefit. We remand the matter to the trial court with instructions to modify the third order in implementation of judgment to affirm the review official’s award of $7,503,300, less certain offsets, plus interest, as more particularly expressed in his February 6, 2009 order.

D. Excise Taxes and Resultant Income Taxes

(1) SERF subsection 5.1(b)(iii)

The dispute over excise taxes and resultant income taxes arises out of SERF subsection 5.1(b)(iii). That provision states in pertinent part: “ ‘In the event of a Change in Control, upon payment to each Executive Participant of the cash lump sum payment referred to in clause (F) of subsection 5.1(b)(i) above, the Company shall also pay to such Executive Participant ... a cash lump sum payment equal to ([a]) the amount of excise tax for which such Executive Participant is or may become hable under Internal Revenue Code Section 4999 . . . with respect to the payments made under this Section 5.1(b) . . . plus (b) the amount of such Executive Participant’s income tax liability arising from the Company’s payment of the excise tax liability referred to in the preceding clause (a), such that the payments under clauses (a) and (b) taken together shall provide such Participant with sufficient after-income tax dollars to pay such Participant’s liability for Internal Revenue Code Section 4999 excise taxes. ... In the event that the Company and the Executive Participant are unable to agree upon the amount of the payment required under this subsection (iii), such amount shall be determined by Tax Counsel (as defined below). The decision of such Tax Counsel shall be final and binding upon both the Company and the Executive Participant. . . .’ ” (Roden III, supra, 155 Cal.App.4th at p. 1567, fn. 5.)

In the third appeal, Roden claimed the trial court erred in failing to award him $8,073,925.45 in excise taxes and resultant income taxes under SERF subsection 5.1(b)(iii). (Roden III, supra, 155 Cal.App.4th at pp. 1566-1567.) Having concluded that it was not appropriate for this court to make the tax determination ab initio, we remanded the matter. (Id. at pp. 1567, 1580.)

(2) Dispute between claims official and Roden

In her decision on remand, the claims official indicated that she had reviewed the provisions of SERF subsection 5.1(b)(iii) and determined that no amount was owing to Roden with respect to taxes. She explained her interpretation of subsection 5.1(b)(iii) as follows: “I interpret the language ‘is or may become liable’ contained in [subsection] 5.1(b)(iii) of the SERF to mean that the excise tax has become payable or could reasonably be expected to become payable by the plan Participant.... [1] I considered whether ‘may become liable’ should be interpreted to mean that the gross-up payment should be made if there is any possibility, however remote, that the excise tax under Section 4999 may be imposed. I reject that interpretation. That interpretation would result in a windfall to any Participant who received the gross-up payment, but who did not actually become liable for the tax. This is inconsistent with the obvious intent of the gross-up provision, which is to make executives whole for the tax should it become payable. . . .”

Roden disputed the interpretation of the claims official and demanded a $8,246,496.57 gross-up payment. Because of the dispute between Roden and herself, the claims official determined that the SERF subsection 5.1(b)(iii) resolution provision had been triggered. In other words, pursuant to the dictates of subsection 5.1(b)(iii) itself, the matter was required to be resolved by the binding determination of tax counsel.

The claims official explained to Roden: “In keeping with the SERF’S requirements, I retained Rosina B. Barker of the firm Ivins, Phillips & Barker, Chtd. as Tax Counsel. Ms. Barker is an attorney at law who is a partner at Ivins, Phillips & Barker, a law firm of at least 25 attorneys, and neither Ms. Barker nor the firm of Ivins, Phillips & Barker has provided any services to either you or [AmerisourceBergen] within the last year.”

(3) Opinion of tax counsel

Barker prepared an opinion addressing “whether Roden could reasonably be expected to become liable for the excise tax under Internal Revenue Code ... section 4999 upon his receipt of a Change in Control . . . benefit under the SERF.” In that opinion, she explained: “[Internal Revenue] Code section 4999 imposes an excise tax on any person who receives an ‘excess parachute payment’ as defined by [Internal Revenue] Code section 280G(b). An excess parachute payment is defined in relevant part as a payment contingent on a change in ownership or control of a corporation, to or for the benefit of a ‘disqualified individual.’ I.R.C. § 2800(b)(2)(A).” Her opinion contained a detailed analysis of the applicable treasury regulations.

Barker summed up as follows: “We conclude, with a confidence level of