AK Steel Corp. Retirement Accumulation Pension Plan v. West - Amicus Invitation (Petition)

Docket number: 
No. 07-663
Supreme Court Term: 
2008 Term
Court Level: 
Supreme Court

No. 07-663

 

In the Supreme Court of the United States

AK STEEL CORPORATION RETIREMENT ACCUMULATION PENSION PLAN, ET AL., PETITIONERS

v.

JOHN D. WEST, 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 SIXTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

 

GREGORY G. GARRE
Solicitor General
Counsel of Record
EDWIN S. KNEEDLER
Deputy Solicitor General
NICOLE A. SAHARSKY
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
ELIZABETH HOPKINS
Counsel for Appellate and
Special Litigation
STEPHEN SILVERMAN
Attorney
Department of Labor
Washington, D.C. 20210

QUESTIONS PRESENTED

1. Whether the court of appeals erred in deter mining that respondents' claim was a claim "to recover benefits due [to them] under the terms of the plan" under Section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1132(a)(1)(B).

2. Whether the court of appeals erred in applying the principle of contra proferentem in affirming the district court's award of additional retirement benefits to respondents.

 

 

In the Supreme Court of the United States

No. 07-663

AK STEEL CORPORATION RETIREMENT ACCUMULATION PENSION PLAN, ET AL., PETITIONERS

v.

JOHN D. WEST, 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 SIXTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

This brief is submitted in response to this Court's order 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 denied.

STATEMENT

1. Under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq., pension plans are classified as either "defined contribution plans" or "defined benefit plans." A "defined contribu tion plan" provides "an individual account for each par ticipant," and benefits are "based solely upon the amount contributed" to that account by the participant and his employer. 29 U.S.C. 1002(34). Under such a plan, "[t]he employee bears the investment risks and the employer does not guarantee a retirement benefit to the employee." Register v. PNC Fin. Servs. Group, Inc., 477 F.3d 56, 61-62 (3d Cir. 2007).

A "defined benefit plan" is generally any other type of pension plan. 29 U.S.C. 1002(35). Under a traditional defined benefit plan, the participant is entitled to certain benefits upon retirement, and the "employer's contribu tion is adjusted to whatever level is necessary to provide those benefits." Nachman Corp. v. PBGC, 446 U.S. 359, 364 n.5 (1980). Such a plan "consists of a general pool of assets rather than individual dedicated accounts." Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439 (1999). Under such a plan, "members have a right to a certain defined level of benefits, known as 'accrued bene fits.'" Id. at 440; see pp. 3-4, infra.

A "cash balance plan" is a hybrid that is classified as a defined benefit plan. See 26 C.F.R. 1.401(a)(4)- 8(c)(3)(i). As under a traditional defined benefit plan, the participant is entitled to certain pension benefits, but as under a defined contribution plan, the partici pant's benefits are calculated using an account for each participant. Register, 477 F.3d at 62. Those accounts are hypothetical and are used for recordkeeping pur poses only. 26 C.F.R. 1.401(a)(4)-8(c)(3)(i). Each ac count reflects the pension benefits that the employee has earned under the plan's benefit formula, which usu ally consists of "pay credits," which are hypothetical employer contributions, and "interest credits," which are hypothetical earnings on the accumulated account balance. Register, 477 F.3d at 62.

b. One of ERISA's primary purposes is to "protect contractually defined benefits." Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985). Con gress wanted to "mak[e] sure that if a worker has been promised a defined pension benefit upon retirement- and if he has fulfilled whatever conditions are required to obtain a vested benefit-he actually will receive it." Nachman Corp., 446 U.S. at 375.

ERISA furthers that goal through its non-forfeiture and actuarial-equivalence provisions. First, the statute provides that, in a defined benefit plan, an employee's benefits must vest no later than as provided under the applicable statutory vesting schedule. 29 U.S.C. 1053(a) (2000 & Supp. V 2005). When the employee's benefits vest, the "employee's right to his normal retirement benefit is nonforfeitable," and, if the employee leaves his employment before normal retirement age, he is entitled to the benefit he has accrued up to that point. Ibid.

Second, ERISA ensures that, if a participant retires after his pension benefits have vested but before normal retirement age, he is not penalized for that choice. The statute defines a participant's "accrued benefit" as his "accrued benefit determined under the plan and, except as provided in section 1054(c)(3) of [Title 29], expressed in the form of an annual benefit commencing at normal retirement age," i.e., an annuity payable at retirement. 29 U.S.C. 1002(23)(A). ERISA then specifies that, if a participant retires early, his "accrued benefit * * * shall be the actuarial equivalent of" an annuity commencing at normal retirement age. 29 U.S.C. 1054(c)(3). Therefore, if a participant retires early and elects to take a lump-sum distribution of his vested ben efits, that lump-sum amount must be at least equal to the present value of the annuity the participant would have received if he had deferred commencement of the annuity until normal retirement age. See ibid.; 26 C.F.R. 1.417(e)-1.1

c. ERISA also protects the interests of participants and beneficiaries by "providing for appropriate re- medies, sanctions, and ready access to the Federal courts." 29 U.S.C. 1001(b). As relevant here, Section 502(a)(1)(B) of ERISA authorizes a plan participant or beneficiary to bring a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. 1132(a)(1)(B). Section 502(a)(3) authorizes a plan participant, beneficiary, or fiduciary to bring a civil action "to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan," or "to obtain other appropriate equitable relief (i) to re dress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. 1132(a)(3).

2. a. Lead respondent John West (respondent) was employed by Armco, Inc., a predecessor to AK Steel Corporation, for over thirty years, and was a participant in what is now petitioner AK Steel Corporation Retire ment Accumulation Pension Plan (Plan). Pet. App. 1a, 9a-10a. The Plan is a cash balance pension plan gov erned by ERISA. Id. at 1a, 6a. The Plan vests its ad ministrator, petitioner AK Steel Corporation Benefit Plans Administrative Committee (Committee), with dis cretionary authority to interpret the Plan and deter mine entitlement to benefits. Id. at 92a.

As is typical in a cash balance pension plan, the Plan specifies that each participant will have a hypothetical account used for bookkeeping purposes. Pet. App. 75a- 76a (Plan § 1.1). The value of that account is based on pay credits and interest credits. Id. at 87a-89a (Plan §§ 3.1-3.3). The Plan sets certain minimum rates for calculating interest credits. Id. at 88a-89a (Plan § 3.3).

The Plan defines each participant's "accrued benefit" in terms of a benefit paid as an annuity commencing at normal retirement age that is the actuarial equivalent of the amount in the participant's hypothetical account. Pet. App. 76a (Plan § 1.2). That annuity is calculated by projecting the hypothetical account amount forward to the participant's normal retirement date and converting it to an annuity. Ibid.

A participant who retires on or after normal retire ment date may elect to receive his pension benefits in one of three ways: (a) as a "Full lump-sum payable on his Benefit-Commencement Date equal to his Ac counts"; (b) as a "Full annuity beginning on his Benefit Commencement Date equal to the Actuarial Equivalent of his Accounts"; or (c) as a "Partial lump-sum and par tial annuity payable or beginning on his Benefit Com mencement Date equal to the respective pro-rata amounts determined under (a) and (b) above." Pet. App. 90a (Plan § 4.1). The Plan provides that a participant taking an early retirement benefit also may receive his benefit in any of those three ways. Ibid. (Plan § 4.2). No matter how the benefit is distributed, however, the Plan guarantees that the benefit will not be "less than the actuarial equivalent of his accrued benefit deter mined under the [Plan] terms." Id. at 5a (quoting Plan § 4.8).

b. In August 1997, respondent West elected to take early retirement and to receive his pension benefits in a lump-sum distribution. Pet. App. 9a. The Plan paid him an amount equal to the balance in his hypothetical account. Id. at 10a. Respondent filed an administrative appeal, arguing that that lump-sum amount was not the actuarial equivalent of the annuity he would have re ceived at normal retirement age. Ibid.

Respondent contended that the Plan should have calculated his lump-sum benefit using a two-step "whip saw calculation." Under that approach, his hypothetical account balance would be projected forward to normal retirement age using the rate, specified in the Plan, at which interest credits would have accumulated had he stayed in the Plan until normal retirement age. Pet. App. 6a-8a. Then the projected amount would be dis counted back to its present value on the date of the lump-sum distribution, id. at 7a, using a discount rate specified by statute, see 26 U.S.C. 411(e)(2), 417(e)(3); 29 U.S.C. 1053(e)(2), 1055(g)(3); see also Pet. 11 n.4. If the rate used to calculate interest credits is greater than the statutory discount rate, then the lump-sum benefit would be greater than the participant's hypothetical account balance on the date of distribution. Pet. App. 7a. In respondent's view, the Plan was required to cal culate his lump-sum benefit in that manner to comply with the non-forfeiture and actuarial-equivalent provi sions of ERISA. Id. at 8a; Br. in Opp. 13-14.

The Committee rejected respondent's claim on the grounds that it was untimely and that respondent had received all of the benefits he was due under the Plan. Pet. App. 10a.

3. Respondent filed suit under ERISA Sections 502(a)(1)(B) and 502(a)(3), 29 U.S.C. 1132(a)(1)(B) and 1132(a)(3), arguing that the Committee's failure to use the whipsaw calculation deprived him and a class of sim ilarly situated individuals of benefits due under the Plan, in violation of ERISA. Pet. App. 10a, 36a-37a.

a. The district court granted partial summary judg ment to respondents. Pet. App. 36a-60a. It explained that, when a Plan participant "receives his or her bene fit in the form of a non-annuity," e.g., as a lump-sum disbursement, "ERISA requires that * * * the alter native form must 'be the actuarial equivalent' of an an nuity commencing at normal retirement age." Id. at 40a-41a (quoting 29 U.S.C. 1054(c)(3)). Here, the court continued, the whipsaw calculation is required to deter mine the lump-sum amount that is actuarially equivalent to the annuity each respondent would receive at normal retirement age. Id. at 41a-42a. The court relied on Treasury Department regulations that interpreted ERISA to require use of the whipsaw calculation to de termine actuarial equivalence for cash balance plans to avoid a forfeiture of accrued benefits, id. at 41a-42a, 59a-60a, as well as Section 1.2 of the Plan, which defines each participant's "accrued benefit" as an annuity at normal retirement age, not as his or her hypothetical account balance, id. at 45a.

b. The district court also rejected petitioners' con tention that respondents' suit was not properly brought under either Section 502(a)(1)(B) or Section 502(a)(3). Pet. App. 61a-68a. It explained that respondents' claim arose under Section 502(a)(1)(B) because respondents seek "benefits 'under the terms of the Plan,'" and the fact that they also argue that Plan terms that reduce their accrued benefits violate ERISA does not change the nature of their claim. Id. at 65a.

4. The court of appeals affirmed. Pet. App. 1a-33a.

a. The court first determined that respondents' claim for relief arose under ERISA Section 502(a)(1)(B). Pet. App. 11a-18a. The court held that respondents "cannot recover the relief they request" as "equitable relief" under Section 502(a)(3) because their complaint "centers on money damages for the alleged underpay ment of a benefit," and money damages are "the classic form of legal relief." Id. at 12a-13a. But the court de termined that respondents' claim was properly brought under Section 502(a)(1)(B), because "the key issue is whether [respondent West] was paid less than the full accrued benefit due him under the AK Steel Plan." Id. at 17a. Despite the fact that respondents contended that some Plan terms were illegal under ERISA, the court held that their claim was still one for benefits "un der the terms of the Plan" because "those terms must * * * comply with ERISA." Ibid.

b. The court of appeals then upheld the district court's use of the whipsaw calculation to award respon dents additional benefits. Pet. App. 18a-33a. The court rejected petitioners' argument that they could pay re spondents lump-sum benefits equal to their account bal ances because the Plan "does not provide an accrued benefit in the form of an annual benefit commencing at normal retirement age." Id. at 25a (internal quotation marks omitted). The court noted that Section 1.2 of the Plan "clear[ly]" defines the "accrued benefit" to which each participant is entitled as an "annual benefit com mencing at normal retirement age." Id. at 26a. "To the extent that the Plan's language with respect to lump- sum distributions is ambiguous in that it conflicts with the definition of 'accrued benefit' in another section of the Plan," the court stated, "the ambiguity must be re solved in [respondents'] favor." Ibid. In any event, the court explained, Sections 4.1 and 4.2 of the Plan, which appear to limit a lump-sum disbursement to the partici pant's account balance (rather than the actuarial equiva lent of his accrued benefit), cannot be enforced because they "d[o] not comply with the law," specifically, ERISA's anti-forfeiture and actuarial-equivalence pro visions. Id. at 26a-27a.2

5. The court of appeals denied petitioners' petition for rehearing en banc, with no judge in regular active service calling for a vote. Pet. App. 34a-35a.

DISCUSSION

The court of appeals correctly held that a claim for ERISA plan benefits that requires the court to in terpret the provisions of ERISA may be brought under Section 502(a)(1)(B). Petitioners' contrary contention (Pet. 13-14) represents an unduly narrow view of Sec tion 502(a)(1)(B) that is contrary to its text as well as its fundamental purposes. There is no split in the lower courts on this issue, and further review is therefore un warranted. Petitioners' contention (Pet. 22-27) that the court of appeals erred in applying the principle of con tra proferentem likewise does not warrant this Court's review. Accordingly, the petition should be denied.

A. The Section 502(a)(1)(B) Question Does Not Warrant This Court's Review

1. Petitioners contend (Pet. 13-22) that respondents do not seek "to recover benefits due to [them] under the terms of [the] plan" for purposes of ERISA Section 502(a)(1)(B) because resolution of their claim turns not only on the terms of the Plan but also on ERISA's statu tory provisions. That is incorrect. Respondents are not foreclosed from suing to recover additional benefits un der Section 502(a)(1)(B) because they claim that Plan provisions that cut back on accrued benefits violate ERISA.

A claim that a plan administrator failed to provide benefits in compliance with the terms of the plan and the provisions of ERISA is a claim for benefits due un der the terms of the plan cognizable under Section 502(a)(1)(B). Plan documents create the "contractually defined benefits" that are the focus of ERISA's protec tive regime. Massachusetts Mut. Life Ins. Co. v. Rus sell, 473 U.S. 134, 148 (1985). Because "[n]othing in ERISA requires employers to establish employee bene fits plans," Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996), a participant's basic entitlement to benefits arises not under ERISA but under his plan.

ERISA provides, however, that plan fiduciaries must interpret and apply plan documents consistently with the governing provisions of ERISA. See 29 U.S.C. 1104(a)(1)(D) (plan fiduciary must "discharge his duties * * * in accordance with the documents and instruments governing the plan insofar as such docu ments and instruments are consistent with the provi sions of" Title I of ERISA (emphasis added)); see Cen tral States, Se. & Sw. Areas Pension Fund v. Central Transp., Inc., 472 U.S. 559, 568 (1985) ("trust docu ments cannot excuse trustees from their duties under ERISA," and "trust documents must generally be con strued in light of ERISA's policies").

Accordingly, a plan administrator, as an ERISA fi duciary, must look both to the terms of the plan and the requirements of ERISA in deciding a claim for benefits under the plan. When a participant seeks review of a benefits decision in federal court, the court likewise con strues the plan in light of the requirements of ERISA. Although such a suit may turn on both the plan's terms and the statute's requirements, it remains a suit for benefits under the plan within the meaning of Section 502(a)(1)(B). See Varity Corp. v. Howe, 516 U.S. 489, 512 (1996) (Section 502(a)(1)(B) "specifically provides a remedy for breaches of fiduciary duty with respect to the interpretation of plan documents and the payment of claims").

This Court has repeatedly recognized that ERISA plans must be interpreted and applied to adhere to ERISA's requirements. In Central Laborers' Pension Fund v. Heinz, 541 U.S. 739 (2004), for example, the Court observed-in the specific context of a suit "to re cover * * * suspended benefits"-that ERISA's prohi bition of forfeitures provides "a global directive that regulates the substantive content of pension plans" and "adds a mandatory term to all retirement packages that a company might offer." Id. at 742, 750. Similarly, in Unum Life Ins. Co. of Am. v. Ward, 526 U.S. 358 (1999), the Court concluded that a state insurance law provision that was saved from preemption under ERISA "effec tively create[d] a mandatory contract term that re quired the insurer to prove prejudice before enforcing a timeliness-of-claim provision," and thereby overrode any contrary plan terms. Id. at 374, 376-377 (internal quotation marks omitted). The Unum Court specifically noted that the participant's claim was one "to recover benefits due . . . under the terms of his plan," even though it was the state-law notice-prejudice rule, which overrode the terms of the plan, that "supplied the rele vant rule of decision." Id. at 377.3

The principle that ERISA plans incorporate the re quirements of ERISA is consistent with the fundamen tal principle of contract law that "[l]aws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as fully as if they had been expressly referred to or incorporated in its terms." Norfolk & W. Ry. v. Ameri can Train Dispatchers Ass'n, 499 U.S. 117, 130 (1991). That principle is also reflected in trust law, which makes clear that a trust must be interpreted and applied con sistently with governing law. See Restatement (Second) of Trusts §§ 62, 166 (1959) (discussing unenforceability of illegal terms and duty of trustee to administer trust in compliance with the law). And the same principle has been applied under Section 301 of the Labor Manage ment Relations Act of 1947 (LMRA), 29 U.S.C. 141 et seq., from which ERISA was drawn. See Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 76-79 (1982) (collective bargaining agreement was subject to federal labor and antitrust laws); see also 29 U.S.C. 185 (§ 301).

Applying that principle, the court of appeals cor rectly determined that respondents' claim was one "to recover benefits due to [them] under the terms of [the] plan" for purposes of Section 502(a)(1)(B). Respondents contended that they "w[ere] paid less than the full ac crued benefit due [them]" under the Plan, because Sec tion 1.2 of the Plan entitled them to lump-sum distribu tions that were actuarially equivalent to the amounts in their hypothetical accounts, and Sections 4.1 and 4.2 of the Plan, which appeared to limit their lump-sum distri butions to the amounts in their hypothetical accounts, violated the requirements of ERISA. Id. at 8a, 17a; Br. in Opp. 13-14. The relief respondents seek is in the form of additional retirement benefits, and their entitlement to those benefits arises from Section 1.2 of the Plan. The fact that respondents also contend that contrary Plan provisions are illegal under ERISA does not change the character of their claims.

2. Petitioners contend (Pet. 13-14) that Section 502(a)(1)(B) is confined to claims that rely solely on plan terms without regard to the provisions of ERISA, be cause Section 502(a)(1)(B) "authorizes relief only for violations of 'the terms of the plan,'" while Section 502(a)(3) "authorizes relief for violations of either 'any provision of this title or the terms of the plan.'" That argument fails. Respondents' claim is a claim for Plan benefits, because their entitlement to benefits arises under Section 1.2 of the Plan. Neither plan administra tors nor the courts can properly resolve benefit claims without regard to the provisions of ERISA, because ERISA specifies that plan terms are operative only to the extent that they "are consistent with" the statutory provisions, 29 U.S.C. 1104(a)(1)(D), and the require ments of ERISA are therefore incorporated into ERISA plans. See pp. 10-13, supra.

In contrast to Section 502(a)(1)(B)'s specific focus on benefit claims, Section 502(a)(3) functions as a "'catch all[],' providing 'appropriate equitable relief' for 'any' statutory violation" or violation of the terms of the plan. Varity, 516 U.S. at 512. It is designed to afford "re- lief for injuries caused by violations that § 502 does not elsewhere adequately remedy." Ibid. In a suit under 502(a)(1)(B), but not one under Section 502(a)(3), a par ticipant must point to a provision of the plan that, when read in light of a statutory requirement or prohibition, entitles him or her to benefits. Respondents have done so here, and their claim thus arises under Section 502(a)(1)(B). There accordingly is no need to rely on Section 502(a)(3).

Petitioners argue (Pet. 13) that Section 502(a)(1)(B) must be limited to claims that do not refer to the provi sions of ERISA because Congress did not intend for state courts "to interpret and apply the provisions of ERISA." That is incorrect. "[S]tate courts" are "pre sumptively competent[] to adjudicate claims arising un der the laws of the United States." Tafflin v. Levitt, 493 U.S. 455, 458 (1990); see U.S. Const. Art. VI, Cl. 2. Many ERISA plans contain clauses that incorporate ERISA or require that their terms be read consistently with ERISA. It can hardly be said that allowing state courts to award benefits in light of those provisions runs contrary to the federal scheme, and it would make little sense for state-court jurisdiction to turn on whether such incorporation of ERISA's requirements is explicit or implicit.4

Significantly, petitioners argued to both the district court and the court of appeals that respondents had no remedy under Section 502(a)(1)(B) or 502(a)(3), even if plan terms were clearly illegal under ERISA. See, e.g., Pet. App. 12a, 64a; see also id. at 67a (petitioners' posi tion would "permit plan terms that blatantly violated ERISA to stand unchallenged"). They now contend that respondents could seek equitable reformation of the Plan under Section 502(a)(3) and then seek benefits un der the "reformed" plan under Section 502(a)(1)(B). There is no evident reason why a participant or benefi ciary must proceed in two steps, or invoke two statutory provisions, rather than one. Petitioners suggest that the relief of reformation might be denied at the first step on the ground that it would not be "equitable" and "appropriate." Pet. 18 n.7. The fact that petitioners' position thus would either eliminate jurisdiction or sub stantially restrict relief in cases involving plan terms that ERISA renders illegal weighs heavily against their interpretation. Because a plan administrator is obli gated to disregard plan terms that are inconsistent with ERISA (see pp. 10-11, supra), there is no reason to be lieve that Congress intended to allow a court, when re viewing a plan's decision denying benefits, to decline to enforce the applicable provisions of ERISA.

3. Contrary to petitioners' contention (Pet.13-19), the lower courts have not divided on whether a claim like respondents' may be brought under Section 502(a)(1)(B). The Seventh Circuit has agreed with the court below that the particular type of claim at issue here-that additional plan benefits are due because fail ure to use the whipsaw calculation violates ERISA- arises under Section 502(a)(1)(B). See Berger v. Xerox Corp. Ret. Income Guarantee Plan, 338 F.3d 755, 763 (7th Cir. 2003). No court of appeals considering this type of claim has disagreed, and no court of appeals has adopted the radical contention that courts may not con sider the requirements of ERISA in suits for benefits under Section 502(a)(1)(B).

The decision below does not conflict with the Fifth and Eighth Circuit decisions petitioners cite (Pet. 15- 16). In Ross v. Rail Car Am. Group Disability Income Plan, 285 F.3d 735 (8th Cir.), cert. denied, 537 U.S. 885 (2002), a participant claimed that two amendments to a disability plan were adopted through an improper pro cedure, and he sought "to reform the Plan by obtaining a declaration that the purported 1990 and 1991 amend ments are void." Id. at 739-740. Although the partici pant ultimately would have been entitled to additional benefits if the plan were reformed, the court determined that his claim was one for "equitable relief" under Sec tion 502(a)(3) because "the vehicle" he chose to reach that outcome, and the declaratory relief he sought, was "invalidation of the plan amendments." Id. at 740-741. Ross concerned a fundamentally different type of claim than the claim at issue here-a declaration that the plan must be reformed, rather than monetary relief repre senting additional plan benefits. And the Ross Court did not hold that a claim for benefits in which a court would have to interpret the plan terms in light of ERISA could not be brought under Section 502(a)(1)(B). The decision below likewise does not conflict with Carrabba v. Randalls Food Markets, Inc., 252 F.3d 721 (5th Cir.), cert. denied, 534 U.S. 995 (2001). The Carrabba court's one-paragraph affirmance of the dis trict court's decision, which did not even mention Sec tion 502(a)(1)(B), id. at 721-722, is not the type of deci sion that gives rise to a circuit conflict warranting this Court's review. In any event, the district court's deci sion affirmed in Carrabba does not conflict with the de cision below. The district court determined that the plan in question was not exempt from ERISA's vesting requirements and then stated, in fashioning a remedy, that "equity would be served in this case if the members of the Class were to be placed in basically the same fi nancial position in which they would be if the employer had complied with" those requirements. Carrabba v. Randalls Food Markets, Inc., 145 F. Supp. 2d 763, 766, 770-771 (N.D. Tex. 2000). The district court did not hold that a claim for benefits that relies in part on statu tory requirements can never arise under Section 502(a)(1)(B); it simply decided that the plaintiffs' partic ular claim, which essentially required reformation of the plan, was equitable in nature under Section 502(a)(3).5

Nor is there a conflict between the decision below and the state court decisions petitioners cite. In re Marriage of Oddino, 939 P.2d 1266 (Cal. 1997), cert. denied, 523 U.S. 1021 (1998), is entirely consistent with the decision below. There, the court held that it had jurisdiction to determine whether a certain state domes tic relations order was a "qualified domestic relations order" under ERISA because the putative beneficiary sought benefits under the terms of the plan. Id. at 1268, 1272-1274. The court specifically rejected the argument petitioners now make, stating that "Congress did not in ERISA limit state court jurisdiction to actions in which the provisions of title I of ERISA have no application." Id. at 1273.6

In Duffy v. Brannen, 529 A.2d 643 (Vt. 1987), the court held that a participant's claim for benefits under the terms of a plan was "clearly * * * within the scope of state court jurisdiction under § [502](a)(1)(B)," while her claims for statutory penalties for failure to furnish plan documents and for damages for breaches of fidu ciary duties were not. Id. at 649-651. Similarly, in Richland Hospital, Inc. v. Ralyon, 516 N.E.2d 1236 (Ohio 1987), the court determined that it had jurisdic tion under Section 502(a)(1)(B) to award plan benefits, but not to award extracontractual punitive damages. Id. at 1238-1240. In neither case did the court address whether a claim for benefits is one "under the terms of the plan" when the plaintiff relies on both plan terms and the requirements of ERISA, and neither case, therefore, conflicts with the decision below. The remaining state court decisions petitioners cite (Pet. 14- 15) are not from the highest courts of the respective States and therefore could not give rise to the type of conflict that warrants this Court's review. See Sup. Ct. R. 10(a). Further review of petitioners' first contention is therefore unwarranted.

B. The Plan Interpretation Question Does Not Warrant This Court's Review

Petitioners also contend (Pet. 22-27) that review is warranted because the court of appeals applied the doc trine of contra proferentem, i.e., the doctrine that am biguous contract language should be construed against the drafter. Petitioner is correct that the courts of ap peals have expressed different views on whether the contra proferentem principle applies when reviewing an administrator's interpretation 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 administrator has a conflict of in terest, 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 for three reasons, this case is not an appropriate vehicle to resolve that disagreement.7

First, the decision below is ultimately based on the court's conclusion that petitioner's interpretation of the Plan would violate ERISA, not the principle of contra proferentem. The court of appeals explained that Sec tion 1.2 of the Plan unambiguously defined each partici pant's "accrued benefit" as an "annual benefit commenc ing at normal retirement age." Pet. App. 26a. The court noted that other provisions of the Plan suggested that an early retiree is entitled only to the amount in his hy pothetical account, not the actuarial equivalent of an annuity at normal retirement age, but it determined that those other provisions violated ERISA's anti-forfei ture and actuarial-equivalence provisions. Id. at 26a- 27a. The court also invoked the principle of contra proferentem as a basis to ignore those illegal provisions, id. at 26a, but that principle had no practical effect, be cause the court determined that the illegal provisions were unenforceable under ERISA.8

Second, even if the result below depended 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 the court of appeals did not analyze the issue. Because this Court does not ordinarily address issues that were not pressed or passed upon in the court of appeals, see NCAA v. Smith, 525 U.S. 459, 470 (1999), this case does not furnish a suitable vehicle for considering when or whether contra proferentem applies in an ERISA benefits case.

Third, resolution of the contra proferentem issue would in any event be unlikely to affect the outcome of this case. The court of appeals held, in agreement with the three other circuits that have considered the issue, that the whipsaw calculation is required for cash bal ance plans to avoid violation of ERISA's anti-forfeiture and actuarial-equivalence provisions. See Berger, 338 F.3d at 759-763; Esden v. Bank of Boston, 229 F.3d 154, 162-168 (2d Cir. 2000), cert. dismissed, 531 U.S. 1061 (2001); Lyons v. Georgia-Pac. Corp. Salaried Employ ees Ret. Plan, 221 F.3d 1235, 1241-1252 (11th Cir. 2000), cert. denied, 532 U.S. 967 (2001). Petitioners do not explain how resolution of the contra proferentem argu ment in their favor could affect the resolution of their case in light of the court of appeals' conclusion that the Plan terms upon which they rely are illegal. Moreover, the underlying whipsaw issue is of diminishing impor tance in light of the 2006 amendments to ERISA. See n.2, supra. Further review on the second issue there fore is unwarranted as well.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

GREGORY G. GARRE
Solicitor General
EDWIN S. KNEEDLER
Deputy Solicitor General
NICOLE A. SAHARSKY
Assistant to the Solicitor
General

GREGORY F. JACOB
Solicitor of Labor
TIMOTHY D. HAUSER
Associate Solicitor
ELIZABETH HOPKINS
Counsel for Appellate and
Special Litigation
STEPHEN SILVERMAN
Attorney
Department of Labor
Washington, D.C. 20210

 

 

DECEMBER 2008

1 ERISA's non-forfeiture and actuarial-equivalence provisions are mirrored in the Internal Revenue Code, 26 U.S.C. 401 et seq. See 26 U.S.C. 411(a)(2), 411(c)(3). The Secretary of the Treasury has rule making authority concerning ERISA's benefit-accrual and vesting pro visions. Reorganization Plan No. 4 of 1978, 3 C.F.R. 332, § 101(a) (1979); see also 29 U.S.C. 1202(c) (adopting Secretary's regulations to implement ERISA); 29 C.F.R. 2530.200a-2 (same).

2 The court of appeals also rejected petitioners' argument that the Pension Protection Act of 2006 (PPA), Pub. L. 109-280, 120 Stat. 780, applies to respondents' claims. Pet. App. 31a-33a. The PPA amended ERISA to provide that the whipsaw calculation is not required for distributions made after August 17, 2006. PPA § 701, 120 Stat. 981. Because respondents' benefits were paid before that date, the court explained, the PPA does not apply to them. Pet. App. 32a.

3 See also, e.g., Feifer v. Prudential Ins. Co. of Am., 306 F.3d 1202, 1210 (2d Cir. 2002) ("ERISA's written instrument requirement essen- tially operates as a strong integration clause, statutorily inserted in every plan document." (internal quotation marks omitted)); May Dep't Stores Co. v. Federal Ins. Co., 305 F.3d 597, 601-602 (7th Cir. 2002) ("[L]ike many other contracts, pension plans governed by ERISA con tain provisions implied by law.").

4 The legislative history on which petitioners rely (Pet. 20-21) does not compel a different result. The broad text of Section 502(a)(1)(B), combined with the statutory requirement that plans be administered consistent with ERISA, makes clear that Congress did not intend courts considering Section 502(a)(1)(B) to ignore the provisions of ERISA. Moreover, immediately following the language petitioners cite, the Conference Report states that "[a]ll such actions in Federal or State courts are to be regarded as arising under the laws of the United States in a similar fashion to those brought under section 301 of the [LMRA]." H.R. Conf. Rep. No. 1280, 93d Cong., 2d Sess. 327 (1974). This Court has construed Section 301 to require courts to read the substantive provisions of the labor laws into the terms of collective bargaining agreements, Kaiser Steel Corp., 455 U.S. at 76-79, and has recognized that Congress intended state courts to interpret the federal labor laws in Section 301 cases, see Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 506-514 (1962).

5 Todisco v. Verizon Communications, 497 F.3d 95 (1st Cir. 2007), also does not conflict with the decision below. The Todisco Court held that a claim for compensatory money damages is not a claim for "equit able relief" under ERISA Section 502(a)(3), id. at 99, and a claim for money damages for an oral misrepresentation, where there was no "interpretation [of the plan] under which [the plaintiff] would be eligible for benefits," was not a claim for plan benefits under Section 502(a)(1)(B), id. at 97 n.3, 101-102.

6 In its amicus brief in Oddino, the Department of Labor (DOL) disagreed that the beneficiary had brought a claim for benefits under Section 502(a)(1)(B) "merely by seeking an adjudication of plan rights in the context of an otherwise unrelated dissolution proceeding" in state family court. See DOL Amicus Br., Oddino, supra, 1997 WL 33559420, at *20 (filed Jan. 16, 1997). DOL's position was based on the "unusual set of facts" present in that case, id. at *15, and DOL did not contend that a claim for benefits that seeks to have the plan interpreted con sistently with ERISA does not arise under Section 502(a)(1)(B).

7 This Court recently denied review of the contra proferentem issue in AT&T Pension Benefit Plan v. Call, 128 S. Ct. 2900 (2008) (No. 06- 1398). The same result is appropriate here; in both cases, the courts invoked the principle without any discussion and it was not essential to the courts' ultimate conclusion.

8 The court of appeals cited its previous decision in Regents of the University of Michigan v. Employees of Agency Rent-A-Car Hosp. Ass'n, 122 F.3d 336, 340 (1997), but review in that case was de novo, not for abuse of discretion, and the court did not discuss when the contra proferentem principle applies in ERISA benefits cases.

Type: 
Petition Stage Amicus Brief (Invitation)
Updated October 21, 2014