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No. 06-1398

 

In the Supreme Court of the United States

AT&T PENSION BENEFIT PLAN, AS SUCCESSOR TO
THE AMERITECH MANAGEMENT PENSION PLAN,
PETITIONER

v.

LINDA CALL, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

PAUL D. CLEMENT
Solicitor General
Counsel of Record
EDWIN S. KNEEDLER
Deputy Solicitor General
MATTHEW D. ROBERTS
Assistant to the Solicitor
General
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

GREGORY F. JACOB
Solicitor of Labor
TIMOTHY D. HAUSER
Associate Solicitor
NATHANIEL I. SPILLER
Counsel for Appellate and
Special Litigation
EDWARD D. SIEGER
Attorney
Department of Labor
Washington, D.C. 20210

 

QUESTIONS PRESENTED

1. Whether the court of appeals misapplied the ab use-of-discretion standard of review applicable in cer tain denial-of-benefits cases under the Employee Retire ment Income Security Act of 1974, 29 U.S.C. 1001 et seq.

2. Whether the court of appeals correctly affirmed the district court's award of prejudgment interest.

In the Supreme Court of the United States

No. 06-1398

AT&T PENSION BENEFIT PLAN, AS SUCCESSOR TO
THE AMERITECH MANAGEMENT PENSION PLAN,
PETITIONER

v.

LINDA CALL, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

This brief is submitted in response to the order of this Court inviting the Solicitor General to express the views of the United States. In the view of the United States, the petition for a writ of certiorari should be de nied.

STATEMENT

1. Under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq., a defined benefit plan entitles employees to fixed periodic pay ments upon retirement. Beck v. Pace Int'l Union, 127 S. Ct. 2310, 2314 (2007). In general, defined benefits are provided in the form of an annuity. Under certain condi tions, however, a defined benefit plan may also provide for the immediate distribution of the present value of the annuity in a lump-sum payment. 29 U.S.C. 1055(g) (2000 & Supp. V 2005); 26 U.S.C. 417(e) (2000 & Supp. V 2005).

The present value is calculated using an actuarial mortality table that indicates how long a pensioner is expected to receive annuity payments and a discount rate that converts the expected stream of payments into its current value as a lump sum. Pet. App. 2a; see 29 U.S.C. 1055(g)(3); 26 U.S.C. 417(e)(3). A mortality table that predicts a longer life expectancy produces a larger lump sum. A higher discount rate produces a smaller lump sum. Pet. App. 2a.

Before 1994, ERISA generally required pension plans calculating lump-sum distributions to use a discount rate no greater than the rate that the Pension Benefit Guar anty Corporation (PBGC) would use in determining the present value for a lump-sum distribution on plan termination. 29 U.S.C. 1055(g)(3) (1988); 26 U.S.C. 411(a)(11)(B)(ii), 417(e)(3) (1988). ERISA did not, how ever, require plans to use a specific mortality table in calculating lump-sum distributions.

Plans are restricted in their ability to change interest rates and mortality tables by ERISA's "anti-cutback" provision. That provision generally prohibits any plan amendment that would decrease the "accrued benefit" of a plan participant, subject to limited exceptions. 29 U.S.C. 1054(g)(1); 26 U.S.C. 411(d)(6) (2000 & Supp. V 2005).

Since its enactment, ERISA has defined a partici pant's "accrued benefit" in a defined benefit plan as the "accrued benefit determined under the plan," generally "expressed in the form of an annual benefit commencing at normal retirement age." 29 U.S.C. 1002(23)(A) (em phasis added). As enacted, ERISA did not expressly address whether benefits payable on early retirement are treated like accrued benefits for purposes of apply ing the anti-cutback rule. In 1977, however, the Secre tary of the Treasury, who is authorized to issue regula tions concerning benefit accruals, see Reorg. Plan No. 4 of 1978, 3 C.F.R. 332, § 101(a) (1979); 29 U.S.C. 1202(c); 29 C.F.R. 2530.200a-2, issued regulations indicating that the anti-cutback rule applied to changes in actuarial fac tors used to determine optional or early-retirement ben efits. See 42 Fed. Reg. 42,340 (1977) (promulgating 26 C.F.R. 1.411(d)-3(b) (1978)).

In 1984, Congress expressly addressed the issue. The Retirement Equity Act of 1984, Pub. L. No. 98-397, § 301, 98 Stat. 1426, amended ERISA's anti-cutback provision to clarify that a plan amendment that has the effect of eliminating or reducing an early-retirement benefit or a retirement-type subsidy, or eliminating an optional form of benefit "shall be treated as reducing accrued benefits." 29 U.S.C. 1054(g)(2) (2000 & Supp. V 2005); 26 U.S.C. 411(d)(6)(B) (2000 & Supp. V 2005). The 1984 amendment thus eliminated any "initial ques tion about whether the [anti-cutback] provisions ad dressed early retirement benefits" and made clear that amendments reducing early-retirement benefits, as well as amendments eliminating "optional form[s] of benefit[s]," are generally prohibited by the anti-cutback rule. Central Laborers' Pension Fund v. Heinz, 541 U.S. 739, 744 (2004); 29 U.S.C. 1054(g)(2) (2000 & Supp. V 2005); see 26 U.S.C. 411(d)(6)(B) (2000 & Supp. V 2005).

Current Treasury regulations, promulgated in Au gust 2005, reflect the existing statutory provisions. See 26 C.F.R. 1.411(d)-3, 1.411(d)-4; see also 26 C.F.R. 1.411(a)-7(a)(1)(i). The regulations further provide that an optional form of benefit is a "distribution alternative * * * that is available under the plan with respect to an accrued benefit or * * * a retirement-type benefit" and that the optional form includes all terms affecting its value, including actuarial factors. 26 C.F.R. 1.411(d)- 3(g)(6)(ii)(A); see 70 Fed. Reg. 47,109 (2005). Thus, un der the existing statute and regulations, absent an appli cable exception, an amendment to an ERISA plan can not, by changing actuarial factors, decrease the amount of early-retirement benefits that a participant would have received under an optional form of benefit, such as a lump sum, without violating the anti-cutback provision.

The Retirement Protection Act of 1994 (RPA), Pub. L. No. 103-465, Tit. VII, Subtit. F, 108 Stat. 5012, cre ated a limited exception to the anti-cutback rule. The RPA eliminated the requirement that plans rely on the PBGC discount rate to calculate lump-sum benefits; in stead, the RPA required that a participant's lump-sum benefit be no less than the present value of the partici pant's annuity as calculated using a mortality table spec ified by the Secretary of the Treasury and a discount rate based on 30-year Treasury securities (GATT rate). § 767, 108 Stat. 5037; see 29 U.S.C. 1055(g)(3)(A); 26 U.S.C. 417(e)(3)(A). The RPA gave plans until Decem ber 31, 1999, to comply with the new requirement. See § 767(c)(3), 108 Stat. 5040; 29 U.S.C. 1055(g)(3)(B); 26 U.S.C. 417(e)(3)(B). The RPA expressly provided that plan amendments adopting the Treasury mortality table and GATT rate would not be treated as reducing ac crued benefits for purposes of ERISA's anti-cutback provision. § 767(d)(2), 108 Stat. 5040.

2. Until 1993, the PBGC valued pension plan benefits using a mortality table called Unisex Pensions-1984 (UP84), which had relatively short life expectancies. See 58 Fed. Reg. 5129 (1993). Because of the short life ex pectancies, the PBGC combined that mortality table with a relatively low discount rate (old PBGC rate) in order to produce a benefits value corresponding to the price of an equivalent annuity in the private insurance market. See ibid.; 63 Fed. Reg. 57,228 (1998).

In 1993, the PBGC revised its methodology for valu ing benefits paid as annuities. The PBGC adopted a mortality table with longer life expectancies called the 1983 Group Annuity Mortality Table (83GAM) and a new, higher discount rate (new PBGC rate), to reflect the longer life expectancies. Pet. App. 2a-3a; 58 Fed. Reg. at 50,812. But the PBGC did not adopt the 83GAM and the new PBGC rate for valuing benefits paid as lump sums. Instead, the PBGC continued to use the UP84 mortality table and the old PBGC rate for that purpose. Pet. App. 3a; 58 Fed. Reg. at 50,814. As a result, until Congress enacted the RPA, ERISA re quired plans also to continue to use the old PBGC rate in calculating lump-sum distributions, although it al lowed them to use any mortality table they chose. See p. 2, supra.

3. Petitioner is the successor to the Ameritech Man agement Pension Plan (Ameritech plan or plan), an ERISA defined benefit pension plan. Pet. ii. Until 1993, the Ameritech plan , in calculating lump-sum benefits, used the old PBGC rate (as required at the time by ERISA) and the mortality table used by the PBGC to value annuities (which was then the UP84 mortality table). Pet. App. 2a-3a. In 1994, the Ameritech plan was amended to clarify that, notwithstanding the PBGC's revision of the discount rate it used to calculate annuities, the plan would continue to use the old PBGC rate to calculate lump-sum benefits. Id. at 3a-4a. There was no parallel amendment addressing the mortality table, which PBGC had also revised in 1993. Id. at 4a. A class of employees sued the plan, arguing that the plan terms therefore required use of the 83GAM mortality table adopted by the PBGC in 1993. Id. at 4a, 13a. The district court agreed and required the plan to apply the 83GAM mortality table. Id. at 4a; see Malloy v. Ameritech, No. CIV 98-488-GPM, 2000 WL 35525477 (S.D. Ill. Feb. 7, 2000). Thus, as of 1994, the plan required lump-sum distributions to be based on the 83GAM mortality table and the old PBGC rate, and ERISA's anti-cutback provision prohibited plan amend ments that would result in lower lump-sum distribu tions. Pet. App. 4a; see p. 4, supra.

In July 1999, Ameritech adopted an "Eleventh Amendment" to the plan, which provided that lump-sum distributions would be the greater of (1) the amount pro duced by using the old PBGC rate and the UP84 mortal ity table or (2) the amount produced by using the GATT rate and the 83GAM mortality table. Pet. App. 5a, 15a. The Eleventh Amendment complied with the RPA's re quirement for calculating lump-sum distributions, be cause the Treasury Department had specified that the GATT rate and the 83GAM mortality table applied for purposes of that requirement. See 26 C.F.R. 1.417(e)- 1(d)(2), (3); Rev. Rul. 95-6, 1995-1 C.B. 80, superseded in part by Rev. Rul. 2001-62, 2001-2 C.B. 632. Moreover, because the RPA exempted plan amendments that adopted the Treasury Department's mortality table and the GATT rate from ERISA's anti-cutback provision, the Eleventh Amendment did not violate that anti-cut back provision. Pet. App. 5a-6a, 18a; see pp. 4-5, supra.

There remained an open question, however, whether the Eleventh Amendment complied with the anti-cut back provision of the Ameritech plan itself, set forth in Section 12.1 of the plan. Section 12.1, which was in ef fect at the time the Eleventh Amendment was adopted, provides that:

no amendment will reduce a Participant's accrued benefit to less than the accrued benefit that he would have been entitled to receive if he had resigned from the employ of the Employers and Related Companies on the day of the amendment (except to the extent permitted by [26 U.S.C. 412(c)(8)]) and no amend ment will eliminate an optional form of benefit with respect to a Participant or Beneficiary except as oth erwise permitted by law and applicable regulation.

Resp. C.A. Br. 4 (emphasis omitted).

4. In November 1999, respondent Linda Call took early retirement and received a lump-sum distribution of $219,312.14, which was calculated in accordance with the Eleventh Amendment. Pet. App. 12a-13a. Under the plan terms in effect before that amendment, how ever, respondent would have been entitled to a l ump- sum of $255,088.45. Id. at 13a. Because the plan admin istrator refused to pay her the greater amount, respon dent brought this class action lawsuit under ERISA. See id. at 12a-13a, 17a.

The parties' dispute turned on how to interpret Sec tion 12.1 of the Ameritech plan. See Pet. App. 17a-21a. Respondent argued that, under Section 12.1, the actuar ial assumptions used to calculate her lump-sum early- retirement distribution were part of her "accrued bene fit" that could not be eliminated by amendment. Id. at 19a. Petitioner argued that the distribution was not an "accrued benefit" but was instead "an optional form of benefit" that the plan could eliminate under the last clause of Section 12.1 because the amendment was "oth erwise permitted by law." See id. at 19a-20a; Pet. 7. Petitioner also argued that the "except as otherwise per mitted by law" clause permits a reduction to either an accrued benefit or an optional form of benefit. Ibid. (emphasis omitted).

The district court granted summary judgment in re spondent's favor. Pet. App. 12a-21a. The court con cluded that the actuarial assumptions used to calculate respondent's lump-sum early-retirement distribution were part of her "accrued benefit." Id. at 19a. The court further explained that, although an optional form of benefit may be eliminated in certain instances, respon dent's right to take her accrued benefit in a lump sum as an optional form of benefit was not challenged. Id. at 20a. The court also found it "abundantly clear that the words 'otherwise permitted by law' [in Section 12.1 of the Ameritech plan] refer only to the term 'optional form of benefit;' these words do not in any way qualify the term 'accrued benefit' which is found in the immedi ately preceding independent clause." Ibid. Because Section 12.1 was "clear and unambiguous," the court concluded that petitioner had no discretion to interpret that provision to allow the Eleventh Amendment to re duce the amount of respondent's distribution. Id. at 21a.

In a later decision, the district court awarded pre judgment interest calculated at the prime rate. Pet. App. 22a-24a. The court rejected, as foreclosed by Sev enth Circuit precedent, petitioner's contention that pre judgment interest should not be awarded. Id. at 23a. Accordingly, the court entered judgment in favor of the plaintiff class in the amount of $31,193,689.56. Id. at 26a.

5. The court of appeals affirmed. Pet. App. 1a-11a. The court noted that Section 12.1 does not define "ac crued benefit," and, although that term is defined else where in the plan, the plan indicates that the definition does not apply to Section 12.1. Id. at 7a. The court therefore looked to the meaning of "accrued benefit" in ERISA's anti-cutback provision, 29 U.S.C. 1054(g) (2000 & Supp. V 2005). The court observed that, in that provi sion, an early-retirement benefit is treated as an "ac crued benefit" that cannot be reduced, and the court reasoned that "accrued benefit" has the same meaning in Section 12.1. See Pet. App. 8a.

The court found that interpretation supported by Section 12.1's "separate treatment" of "optional form of benefit." Pet. App. 8a. The court concluded that an early-retirement benefit is not an "optional form of bene fit," which the court described as generally a choice about "the way in which payments due to [a participant] under a plan will be made or applied," such as the choice between a lump sum or annuity. Id. at 7a-8a (citation omitted). Because Section 12.1 addresses reductions in a participant's "accrued benefit" in one clause, and elim ination of an "optional form of benefit" in a second, inde pendent clause, the court concluded that Section 12.1 "implies that 'early-retirement benefits' are accrued benefits within the meaning of the first clause" and that, unlike an optional form of benefit, they may not be elimi nated even if the law so permits. Id. at 8a. If the plan meant to allow amendments that eliminate early-retire ment benefits, it would have said so, the court reasoned, instead of "putting 'except as otherwise permitted' in a separate clause referring to optional forms of benefits." Ibid. Thus, the court concluded, Section 12.1 of the plan prevents an amendment, such as the Eleventh Amend ment, that reduces a lump-sum early-retirement benefit.

The court further explained that this "literal" inter pretation of Section 12.1 did not affront "common sense" or "economic realities." Pet. App. 8a. Instead, the court stated that petitioner's interpretation lacks common sense because it gives no force to Section 12.1 as a pri vate anti-cutback rule. Id. at 8a-9a. The court further rejected as "nonsense" petitioner's argument that Sec tion 12.1 merely reflects petitioner's legal obligation to state its statutory obligations in the plan. Id. at 9a. The court reasoned that Section 12.1 did not appear in ear lier versions of the plan and does not accurately state petitioner's statutory obligations. Ibid.

The court also observed that respondent might have decided not to retire early if she had known that she would lose $36,000 or 14% of her pension-the differ ence between the $219,312.14 she received and the $255,088.45 she claimed. Pet. App. 9a. That possibility, the court stated, was "a practical reason for invoking the principle that ambiguities in a contract that remain after extrinsic evidence has been presented (which neither party wishes to do in this case) are resolved against the party who drafted the contract." Ibid.

The court recognized that because petitioner had discretion to interpret the plan, the court could reject petitioner's interpretation only if it was "an abuse of that discretion." Pet. App. 10a. The court found, how ever, that deference "is overridden in this case by the lack of any reasoned basis for [petitioner's] interpreta tion." Ibid. The court stated that "unambiguous terms of a pension plan leave no room for the exercise of inter pretive discretion by the plan's administrator, or at least not enough to carry the day for the administrator in this case." Id. at 11a.

The court did not address petitioner's objections to the award of prejudgment interest. It stated, however, that "[t]he Plan's remaining arguments are make-weights, perfunctorily argued." Pet. App. 11a.

In denying rehearing, the court reiterated that Sec tion 12.1 does not track ERISA's anti-cutback provision, 29 U.S.C. 1054(g) (2000 & Supp. V 2005), or an IRS man ual suggesting language to include in ERISA plans. Pet. App. 28a-29a. In particular, the court noted that the last clause in Section 12.1 of the Ameritech plan-"ex cept as otherwise permitted by law and applicable reg ulations"-does not appear in the statute or in the IRS manual. Id. at 29a (emphasis omitted).

DISCUSSION

This case essentially involves a dispute about the proper interpretation, not of a federal statute or regula tion, but of the Ameritech plan. Applying abuse-of-dis cretion review, the court of appeals held that the district court had properly rejected petitioner's interpretation of the plan as unreasonable. The court of appeals was correct to apply abuse-of-discretion review, and peti tioner's case-specific disagreement with the interpreta tion of the plan by the two courts below does not present an important legal issue that warrants this Court's re view. Petitioner's contention that the court of appeals erred in affirming the district court's award of prejudg ment interest likewise does not warrant review. The decision of the court of appeals does not conflict with any decision of this Court or another court of appeals. Accordingly, the Court should deny the petition for a writ of certiorari.

A. The Plan Interpretation Issue Does Not Warrant This Court's Review

1. Petitioner's primary contention (Pet. 14-17) is that the court of appeals failed to apply abuse-of-discretion review in rejecting petitioner's interpretation of the plan and that the court's decision therefore conflicts with Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), and decisions of other courts of appeals applying the Firestone standard. Contrary to that contention, the court of appeals applied abuse-of-discretion review, and there is therefore no conflict.

a. In Firestone, this Court held that, although ERISA benefit determinations generally are reviewed de novo, abuse-of-discretion review applies if "the bene fit plan gives the administrator or fiduciary discretion ary authority to determine eligibility for benefits or to construe the terms of the plan." 489 U.S. at 115. In this case, the court of appeals determined that the plan terms provide discretionary authority to the plan admin istrator and recognized that "to reject his interpretation we must find an abuse of that discretion." Pet. App. 10a. The court's decision is therefore consistent with Firestone and court of appeals decisions applying abuse- of-discretion review.

The court of appeals concluded that petitioner abused its discretion in construing Section 12.1 because petitioner's interpretation "lack[ed] * * * any reasoned basis" and was contrary to the "unambiguous terms" of the plan. Pet. App. 10a-11a. Other courts of appeals have likewise reached the unremarkable conclusion that a plan administrator abuses its discretion by adopting an interpretation that is contrary to a plan's plain language. See, e.g., Erven v. Blandin Paper Co., 473 F.3d 903, 906, 909 (8th Cir. 2007); DeWitt v. Penn-Del Directory Corp., 106 F.3d 514, 520 (3d Cir. 1997); O'Shea v. First Man hattan Co. Thrift Plan & Trust, 55 F.3d 109, 112 (2d Cir. 1995). Finding an abuse of discretion in those cir- cumstances is entirely logical and consistent with this Court's refusal to defer to agency interpretations at odds with the plain language of a statute. See, e.g., John Hancock Mut. Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86, 109 (1993).

Petitioner contends (Pet. 16) that the plan administra tor's construction should have been upheld under Fire stone's abuse-of discretion standard. Petitioner may well be correct that the court of appeals erred in con cluding that the plan terms were unambiguously con trary to the administrator's interpretation.1 But that plan-specific disagreement with the court of appeals' decision does not warrant this Court's review, especially since the district court also concluded that the adminis trator's interpretation was contrary to the "clear and unambiguous" terms of the plan, Pet. App. 21a. See Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 336 U.S. 271, 275 (1949); United States v. Johnston, 268 U.S. 220, 227 (1925).

b. Petitioner also argues (Pet. 17) that the court of appeals' holding that an early-retirement benefit re ceived in a lump sum is not an "optional form of benefit" under Section 12.1 of the Ameritech plan conflicts with Steiner Corp. Retirement Plan v. Johnson & Higgins, 31 F.3d 935 (10th Cir. 1994), cert. denied, 513 U.S. 1081 (1995), which held that a lump sum is an optional form of benefit under ERISA. See Pet. 17. Petitioner is incor rect.

Steiner differs from the decision below in critical respects. Unlike the decision below, Steiner did not in volve an early-retirement benefit, a point which the Tenth Circuit stressed in its opinion. See 31 F.3d at 935. Moreover, Steiner interpreted ERISA itself, while the decision below interpreted the Ameritech plan. Al though the court below relied in part on the meaning of "accrued benefit" under ERISA in interpreting the plan, the court also relied on the specific plan language-in particular its "separate treatment" of "accrued benefit" and "optional form of benefit." See Pet. App. 8a.

2. Petitioner also contends (Pet. 18-23) that the deci sion below conflicts with decisions of other courts of ap peals because the court below purportedly applied can ons of construction that are inconsistent with deferential review. The court below did not apply the canons of con struction that petitioner attributes to it.

a. Petitioner asserts that the decision below adopted an "interpretive rule that, if an ERISA plan incorpo rates a statutory protection, the plan presumptively should be read to afford beneficiaries greater protection than the parallel statutory provision." Pet. 18. Peti tioner contends (Pet. 19) that this interpretive rule con flicts with Spacek v. Maritime Association-ILA Pen sion Plan, 134 F.3d 283 (5th Cir. 1998) (abrogated on other grounds by Central Laborers' Pension Fund v. Heinz, 541 U.S. 739 (2004)) which held that a pension plan will not be construed to contain extra-statutory commitments unless they are stated in clear and express language. Petitioner further contends (Pet. 19) that the interpretive rule conflicts with decisions of other courts of appeals that have imposed a similar "clear and ex press language" requirement for welfare plans.

Contrary to petitioner's assertion, the decision below does not announce a broad rule that plans that incorpo rate an ERISA protection are presumed to afford bene ficiaries greater protection than ERISA itself provides. The court of appeals construed Section 12.1 of the plan to provide greater protection than ERISA based on what the court viewed as a "literal" interpretation of the plan's terms. Pet. App. 8a. The court did not purport to rely on a presumption about how to construe plan terms that track ERISA. Instead, the court specifically re jected petitioner's contention that the terms of Section 12.1 parallel ERISA, noting that Section 12.1 contains language that departs significantly from the text of the statute. Id. at 9a, 28a-29a (opinion on rehearing).

Accordingly, petitioner is mistaken in asserting (Pet. 18, 20) that the decision below will interfere with the ability of pension plan sponsors to adopt plan terms that track ERISA's protections in order to ensure that their plans are tax-qualified. At most, the decision will re quire plan sponsors to exercise care to avoid significant unintentional deviations from statutory or regulatory language when drafting those plan terms.

The decision below also does not conflict with the holding in Spacek (and in court of appeals decisions in volving welfare plans) that commitments beyond ERISA requirements "must be found in the plan documents and must be stated in clear and express language." Spacek, 134 F.3d at 293 (citation omitted). The Seventh Circuit has likewise held that clear and express language is re quired. See Vallone v. CNA Fin. Corp., 375 F.3d 623, 632 (welfare plan), cert. denied, 543 U.S. 1021 (2004). The court simply found what it considered unambiguous language in this case. See Pet. App. 11a.

b. Petitioner also asserts (Pet. 21-23) that the court of appeals applied the canon of contra proferentem, i.e., the principle that ambiguous contract language should be construed against the drafter. Petitioner contends (ibid.) that the courts of appeals disagree on whether and when that principle applies to the interpretation of ERISA plans and that the Court should grant review in this case to resolve that disagreement. Petitioner is correct that the courts of appeals have expressed differ ent views on whether the contra proferentem principle applies when reviewing an administrator's interpreta tion of an ERISA plan for abuse of discretion. See, e.g., Carolina Care Plan Inc. v. McKenzie, 467 F.3d 383, 389 (4th Cir. 2006) (applying principle where plan adminis trator has a conflict of interest, although some other courts of appeals do not do so), cert. dismissed, 128 S. Ct. 6 (2007), and No. 06-1436 (July 30, 2007). But this case is not an appropriate vehicle to resolve that dis agreement, for two reasons.

First, the decision below is ultimately based, not on the doctrine of contra proferentem, but on what the court viewed as the "unambiguous" language of Section 12.1. Pet. App. 11a. The court discussed the principle of contra proferentem only in considering whether a "lit eral" interpretation of Section 12.1 (i.e., what it viewed as the unambiguous import of the text) "affronted the common sense of, or the economic realities behind," that section. Id. at 8a. After concluding that petitioner's interpretation "lacks the appeal of common sense," the court observed that respondent might have decided not to retire early if she knew that doing so would result in a substantial reduction of her pension. Id. at 8a-9a. The court then stated that that is a "practical reason" for invoking contra proferentem. The court did not say that contra proferentem actually applied in this case. On the contrary, the court recognized that the doctrine applies to "ambiguities in a contract that remain after extrinsic evidence has been presented (which neither party wishes to do in this case)." Id. at 9a. The court did not explain how its discussion of a rule that it recognized applied only to resolve ambiguities squared with its ulti mate holding that the plan language unambiguously foreclosed petitioner's interpretation. But that ambigu ity in the decision below does not justify this Court's review, especially when pre-existing Seventh Circuit precedent holds that contra proferentem is inapplicable when a court reviews a plan administrator's benefits decision for abuse of discretion. Hess v. Reg-Ellen Mach. Tool Corp., 423 F.3d 653, 662 (2005).

Moreover, even if the court of appeals had based its decision in part on contra proferentem, review would not be warranted in this case to address the extent to which the doctrine applies in ERISA cases. The parties did not brief the issue in the court of appeals, and that court did not analyze the issue. The case therefore does not furnish a suitable setting for this Court to consider when or whether contra proferentem applies in an ERISA benefits case.

B. The Interest Issues Do Not Warrant This Court's Review

Petitioner also contends (Pet. 27-29) that review is warranted to decide whether ERISA authorizes an award of prejudgment interest and, if so, whether the district court erred in awarding interest at the prime rate rather than the postjudgment rate specified in 28 U.S.C. 1961(a). It is not clear that the interest issues are properly before this Court, and, in any event, they do not warrant review.

1. Although the court of appeals' opinion is not en tirely clear, the court appears to have declined to ad dress the interest issues because they were only "per functorily argued." Pet. App. 11a; see Pet. C.A. Br. 40- 41; Pet. C.A. Reply Br. 24-25. Courts of appeals, includ ing the Seventh Circuit, routinely decline to address issues on that ground. See, e.g., Hershinow v. Bona parte, 735 F.2d 264, 266 (7th Cir. 1984); United States v. Zannino, 895 F.2d 1, 17 (1st Cir.), cert. denied, 494 U.S. 1082 (1990); SEC v. Banner Fund Int'l, 211 F.3d 602, 613-614 (D.C. Cir. 2000). If the court in fact declined to address the interest issues because they were not ade quately presented, then those issues are not properly before this Court. See United States v. Williams, 504 U.S. 36, 41 (1992). Even if the court of appeals implicitly decided the interest issues on the merits, its failure to address them in its opinion makes this case a poor vehi cle for further review of the issues.

2. In any event, the interest issues do not warrant this Court's review. The Court has recognized that, ab sent special considerations such as sovereign immunity, the lack of a specific statutory authorization of prejudg ment interest does not indicate congressional intent to deny prejudgment interest, but instead "merely indi cates that the question is governed by traditional judge- made principles." City of Milwaukee v. Cement Div., Nat'l Gypsum Co., 515 U.S. 189, 194 (1995). Consistent with those principles, courts of appeals have correctly concluded that an ERISA participant or beneficiary may recover prejudgment interest in a suit to recover bene fits under 29 U.S.C. 1132(a)(1)(B). See, e.g., Moore v. CapitalCare, Inc., 461 F.3d 1, 12 (D.C. Cir. 2006); Skretvedt v. E.I. DuPont de Nemours, 372 F.3d 193, 205-206 (3d Cir. 2004); Ford v. Uniroyal Pension Plan, 154 F.3d 613, 616 (6th Cir. 1998). Courts have also al lowed the recovery of prejudgment interest as an ele ment of "appropriate equitable relief" under 29 U.S.C. 1132(a)(3). See, e.g., Moore, 461 F.3d at 13; Skretvedt, 372 F.3d at 212-215; Parke v. First Reliance Standard Life Ins. Co., 368 F.3d 999, 1006-1009 (8th Cir. 2004); Clair v. Harris Trust & Sav. Bank, 190 F.3d 495, 498- 499 (7th Cir. 1999), cert. denied, 528 U.S. 1157 (2000).

As petitioner notes (Pet. 28), the Eleventh Circuit has held that 29 U.S.C. 1132(a)(1)(B) does not authorize a participant to recover interest for a delay in paying benefits. Flint v. ABB, Inc., 337 F.3d 1326, 1329-1331 (2003), cert. denied, 540 U.S. 1219 (2004). That holding is inapposite here, however, because this case involves an award of interest on benefits that were wrongfully denied rather than merely delayed. The Eleventh Cir cuit recognizes that "nothing in Flint would preclude the trial court from including interest * * * as part of its ultimate benefits award" in such a case. Green v. Hol land, 480 F.3d 1216, 1223 n.4 (2007). The Seventh Cir cuit similarly recognizes a distinction between delayed and denied benefits. See Senese v. Chicago Area I.B. of T. Pension Fund, 237 F.3d 819, 825 (2001). Accordingly, there is no conflict between Flint and this case.

Petitioner also asserts (Pet. 27) that Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002), undercuts Seventh Circuit precedent allowing prejudgment interest as an element of "equitable relief" under 29 U.S.C. 1132(a)(3). No court of appeals, how ever, has held that prejudgment interest is unavailable after Great-West. See Green, 480 F.3d at 1226 (reserv ing issue); Flint, 337 F.3d at 1331 (same). Neither court below indicated whether the award of interest in this case was based on 29 U.S.C. 1132(a)(1)(B) or (3). Ac cordingly, there is no occasion here to grant review to consider the effect of Great-West on some early Seventh Circuit precedents awarding prejudgment interest un der 29 U.S.C. 1132(a)(3).

3. Petitioner's challenge to the interest rate used by the district court also does not warrant review. When, as in the ERISA context, an award of interest is based on common law rather than a specific statutory provi sion, "district courts retain discretion to choose the ap propriate rate in a given case." United States v. Texas, 507 U.S. 529, 536 (1993). At least nine courts of appeals have accordingly recognized that district courts have some discretion in selecting the rate of prejudgment interest on an award of ERISA benefits.2

Some courts of appeals have expressed preferences for different rates in their review of district court deci sions. The Seventh Circuit has suggested use of the prime rate and cautioned against setting a rate too low by neglecting the risk of default. Fritcher v. Health Care Serv. Corp., 301 F.3d 811, 820 (2002). The Ninth Circuit requires an explanation for not using the Trea sury bill rate set by 28 U.S.C. 1961(a) for post-judgment interest. See Blankenship v. Liberty Life Assurance Co., 486 F.3d 620, 628 (2007). The Fifth Circuit has in structed district courts to look to state law rates for guidance, although use of those rates is not mandatory. Hansen v. Continental Ins. Co., 940 F.2d 971, 984 (1991). The Eighth Circuit has stated that the post- judgment rate should be used without suggesting that another rate is appropriate. See, e.g., Mansker v. TMB Life Ins. Co., 54 F.3d 1322, 1330 (1995).

These modest differences in the circuits do not war rant this Court's attention in this case. The courts of appeals' general use of an abuse-of-discretion standard can be expected to lead to the use of different interest rates in at least some cases, particularly because there are "three recognized bases" for awarding prejudgment interest in ERISA benefits cases-preventing unjust enrichment, ensuring full compensation, and promoting settlement. See Moore, 461 F.3d at 13. Petitioner does not cite any decision in which a court of appeals has held that prejudgment interest under ERISA may never be awarded based on the prime rate, and we are not aware of any. Nor has petitioner made any argument that, because of the particular facts of this case, the award of interest at the prime rate was an abuse of discretion. Accordingly, there is no reason for this Court to address whether the district court erred in awarding interest at the prime rate.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

PAUL D. CLEMENT
Solicitor General
Counsel of Record
EDWIN S. KNEEDLER
Deputy Solicitor General
MATTHEW D. ROBERTS
Assistant to the Solicitor
General

GREGORY F. JACOB
Solicitor of Labor
TIMOTHY D. HAUSER
Associate Solicitor
NATHANIEL I. SPILLER
Counsel for Appellate and
Special Litigation
EDWARD D. SIEGER
Attorney
Department of Labor

 

 

MAY 2008

 

 

1 There is greater ambiguity concerning the proper classification of early-retirement benefits than the court below acknowledged. Because the plan did not define "accrued benefit" as used in Section 12.1, the court of appeals looked to how that term is used in ERISA, specifically in 29 U.S.C. 1054(g) (2000 & Supp. V 2005). Pet. App. 7a. The court concluded that an early-retirement benefit is an "accrued benefit" under that provision. Ibid. An early-retirement benefit, however, is not strictly speaking an accrued benefit. See 26 C.F.R. 1.411(a)-7(a)(1)(i); American Stores Co. v. American Stores Co. Ret. Plan, 928 F.2d 986, 993-994 (10th Cir. 1991). Rather, an amendment eliminating or reduc ing an early-retirement benefit is "treated as" an accrued benefit under the anti-cutback provision. 29 U.S.C. 1054(g)(2) (2000 & Supp. V 2005). The court also concluded that respondent's lump-sum early-retirement benefit was not an optional form of benefit. Pet. App. 7a-8a. Treasury regulations, effective for amendments adopted on or after August 12, 2005, indicate, however, that an optional form of benefit includes a lump-sum benefit payable upon early retirement. See 26 C.F.R. 1.411(d)-3(g)(6)(i) and (ii)(A).

2 See, e.g., Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100 F.3d 220, 223 (1st Cir. 1996); Jones v. UNUM Life Ins. Co. of Am., 223 F.3d 130, 139 (2d Cir. 2000); Skretvedt, 372 F.3d at 201 n.9; Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1031 (4th Cir. 1993) (en banc); Han sen v. Continental Ins. Co., 940 F.2d 971, 984 (5th Cir. 1991); Rybarczyk v. TRW, Inc., 235 F.3d 975, 985-986 (6th Cir. 2000); Fritcher v. Health Care Serv. Corp., 301 F.3d 811, 820 (7th Cir. 2002); Blankenship v. Liberty Life Assurance Co., 486 F.3d 620, 628 (9th Cir. 2007); Allison v. Bank One-Denver, 289 F.3d 1223, 1243-1244 (10th Cir. 2002); Florence Nightingale Nursing Serv., Inc. v. Blue Cross/Blue Shield, 41 F.3d 1476, 1484 (11th Cir.), cert. denied, 514 U.S. 1128 (1995).