<nobr>Sep 22, 2009</nobr>

ERIC Urges Supreme Court to Reverse Appeals Court Failure to Provide Judicial Deference Under ERISA Plan

Washington, D.C. -- The ERISA Industry Committee (ERIC), the Washington, D.C.-based trade association representing America's major employers, on September 21 filed with the U.S. Supreme Court an amicus curiae ("friend of the court") brief urging the Court to reverse an appeals court ruling for failure to provide judicial deference to a plan administrator in interpreting the plan under the Employee Retirement Income Security Act (ERISA) (Conkright v. Frommert). The American Benefits Council joined ERIC on the brief.

Howard Shapiro, Amy Covert, and Heather Magier of Proskauer Rose LLP, and Christopher Landau, Craig Primis and Elizabeth Locke of Kirkland & Ellis LLP drafted the brief.

The case arose when company employees sued their ERISA retirement plan and administrator challenging the method used to calculate how their current benefits are offset to reflect prior distributions. The employees claimed that the plan violated ERISA's provisions relating to summary plan description, notice, and anti-cutback rules.

The Second Circuit heard two different appeals resulting from the case. In the first appeal, the Second Circuit held that the plan had violated ERISA, and remanded the case and instructed the district court to craft a remedy. On remand, the district court decided upon a remedy without first remanding the case to the plan administrator. In the second appeal, the Second Circuit ruled, among other things, that the district court was not required to defer to the plan administrator's views on the appropriate remedy.

The brief argues that the Second Circuit -- as a matter of both policy and precedent -- should have deferred to the plan administrator, and erred by deferring instead to the district court. In so doing, the Second Circuit, contrary to long standing law, effectively replaced the administrator, who acts under the discretionary authority conferred by the plan document, with the district court as the plan's primary decision maker.

To allow courts to substitute their own interpretations of a plan for an administrator's reasonable interpretation would make ERISA plans essentially unworkable, as no single person or entity would have primary interpretive authority.

ERIC President Mark Ugoretz said that, "if the Second Circuit ruling is allowed to stand, you will see an influx of litigation from participants merely second guessing their plan administrator's discretionary authority."

"Indeed, the Second Circuit's approach would foster litigation as plan participants, dissatisfied with an administrator's interpretation, would shop for a more participant-friendly, if not necessarily more reasonable, judicial interpretation of the plan," the brief argues.

Moreover, if a plan administrator's reasonable interpretation is not entitled to deference, plans will be subject to different reasonable interpretations, making uniform administration virtually impossible. "Thus, for example, a plan beneficiary working in a company's New York office may be entitled to benefits different from those of a colleague working in the Los Angeles office - or, indeed, different from those of another colleague in New York - simply because different courts may interpret the same plan provisions in different, albeit reasonable, ways," the brief explains.

"The bottom line from a policy perspective is that plan administrators, not courts, have the necessary expertise in interpreting and applying plan terms," the brief says.

With respect to precedent, the brief explains that the high court has long held that ERISA must be interpreted by reference to the common law of trusts, and in light of these principles, the Second Circuit erred by holding that deference to the administrator was unwarranted. Under trust law principles, a reviewing court must defer to a trustee's reasonable discretionary decision, even if the court could have rendered an equally reasonable alternative decision.

"Contrary to the Second Circuit's apparent assumption, this principle applies with full force under ERISA regardless of the context in which an administrator exercises his discretion," the brief says.

"In particular, as most relevant here, plan administrators are entitled to judicial deference even where a court has concluded that a previous discretionary decision violated ERISA and therefore a new calculation of benefits was necessary," the brief further argues.

A link to the brief appears below.

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For more information:
Ted Godbout
Manager, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202)789-1400
Fax: (202)789-1120
tgodbout@eric.org
www.eric.org

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The ERISA Industry Committee (ERIC) is a non-profit association committed to representing the advancement of the employee retirement, health, and compensation plans of America's largest employers. ERIC's members provide benchmark retirement, health care coverage, compensation, and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.



Text Files:

Amicus Brief in Conkright v. Frommert

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