Conkright v. Frommert

(Slip Opinion) OCTOBER TERM, 2009 1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader.

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

CONKRIGHT ET AL. v. FROMMERT ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE SECOND CIRCUIT

No. 08–810. Argued January 20, 2010—Decided April 21, 2010

Petitioners are Xerox Corporation’s pension plan (Plan) and the Plan’s

current and former administrators (Plan Administrator). Respon

dents are employees who left Xerox in the 1980’s, received lump-sum

distributions of retirement benefits earned up to that point, and were

later rehired. To account for the past distributions when calculating

respondents’ current benefits, the Plan Administrator initially inter

preted the Plan to call for an approach that has come to be known as

the “phantom account” method. Respondents challenged that method

in an action under the Employee Retirement Income Security Act of

1974 (ERISA). The District Court granted summary judgment for

the Plan, but the Second Circuit vacated and remanded. It held that

the Plan Administrator’s interpretation was unreasonable and that

respondents had not received adequate notice that the phantom ac

count method would be used to calculate their benefits. On remand,

the Plan Administrator proposed a new interpretation of the Plan

that accounted for the time value of the money respondents had pre

viously received. The District Court declined to apply a deferential

standard to this interpretation, and adopted instead an approach

proposed by respondents that did not account for the time value of

money. Affirming in relevant part, the Second Circuit held that the

District Court was correct not to apply a deferential standard on re

mand, and that the District Court’s decision on the merits was not an

abuse of discretion.

Held: The District Court should have applied a deferential standard of

review to the Plan Administrator’s interpretation of the Plan on re

mand. Pp. 4–15.

(a) This Court addressed the standard for reviewing the decisions

of ERISA plan administrators in Firestone Tire & Rubber Co. v.

2 CONKRIGHT v. FROMMERT

Syllabus

Bruch, 489 U. S. 101. Firestone looked to “principles of trust law” for

guidance. Id., at 111. Under trust law, the appropriate standard de

pends on the language of the instrument creating the trust. When a

trust instrument gives the trustee “power to construe disputed or

doubtful terms, . . . the trustee’s interpretation will not be disturbed

if reasonable.” Ibid. Under Firestone and the Plan’s terms, the Plan

Administrator here would normally be entitled to deference when in

terpreting the Plan. The Court of Appeals, however, crafted an ex

ception to Firestone deference, holding that a court need not apply a

deferential standard when a plan administrator’s previous construc

tion of the same plan terms was found to violate ERISA. Pp. 4–5.

(b) The Second Circuit’s “one-strike-and-you’re-out” approach has

no basis in Firestone, which set out a broad standard of deference

with no suggestion that it was susceptible to ad hoc exceptions. This

Court held in Metropolitan Life Ins. Co. v. Glenn, 554 U. S. ___, ___,

that a plan administrator operating under a systemic conflict of in

terest is nonetheless still entitled to deferential review. In light of

that ruling, it is difficult to see why a single honest mistake should

require a different result. Nor is the Second Circuit’s decision sup

ported by the considerations on which Firestone and Glenn were

based—the plan’s terms, trust law principles, and ERISA’s purposes.

The Plan grants the Plan Administrator general interpretive author

ity without suggesting that the authority is limited to first efforts to

construe the Plan. An exception to Firestone deference is also not re

quired by trust law principles, which serve as a guide under ERISA

but do not “tell the entire story.” Varity Corp. v. Howe, 516 U. S. 489,

497. Trust law does not resolve the specific question whether courts

may strip a plan administrator of Firestone deference after one good

faith mistake, but the guiding principles underlying ERISA do.

ERISA represents a “ ‘careful balancing’ between ensuring fair and

prompt enforcement of rights under a plan and the encouragement of

the creation of such plans.” Aetna Health Inc. v. Davila, 542 U. S.

200, 215. Firestone deference preserves this “careful balancing” and

protects the statute’s interests in efficiency, predictability, and uni

formity. Respondents claim that deference is less important once a

plan administrator’s interpretation has been found unreasonable, but

the interests in efficiency, predictability, and uniformity do not sud

denly disappear simply because of a single honest mistake, as illus

trated by this case. When the District Court declined to apply a def

erential standard of review on remand, the court made the case more

complicated than necessary. Respondents’ approach threatens to in

terject additional issues into ERISA litigation that “would create fur

ther complexity, adding time and expense to a process that may al

ready be too costly for many [seeking] redress.” Glenn, supra, at ___.

Cite as: 559 U. S. ____ (2010) 3

Syllabus

This case also demonstrates the harm to predictability and uniform

ity that would result from stripping a plan administrator of Firestone

deference. The District Court’s interpretation does not account for

the time value of money, but respondents’ own actuarial expert testi

fied that fairness required recognizing that principle. Respondents

do not dispute that the District Court’s approach would place them in

a better position than employees who never left the company. If

other courts construed the Plan to account for the time value of

money, moreover, Xerox could be placed in an impossible situation in

which the Plan is subject to different interpretations and obligations

in different States. Pp. 5–13.

(c) Respondents claim that plan administrators will adopt unrea

sonable interpretations of their plans seriatim, receiving deference

each time, thereby undermining the prompt resolution of benefit dis

putes, driving up litigation costs, and discouraging employees from

challenging administrators’ decisions. These concerns are overblown

because there is no reason to think that deference would be required

in the extreme circumstances that respondents foresee. Multiple er

roneous interpretations of the same plan provision, even if issued in

good faith, could support a finding that a plan administrator is too

incompetent to exercise his discretion fairly, cutting short the rounds

of costly litigation that respondents fear. Applying a deferential

standard of review also does not mean that the plan administrator

will always prevail on the merits. It means only that the plan admin

istrator’s interpretation “will not be disturbed if reasonable.” Fire

stone, 489 U. S., at 111. The lower courts should have applied the

standard established in Firestone and Glenn. Pp. 13–14.

535 F. 3d 111, reversed and remanded.

ROBERTS, C. J., delivered the opinion of the Court, in which SCALIA,

KENNEDY, THOMAS, and ALITO, JJ., joined. BREYER, J., filed a dissenting

opinion, in which STEVENS and GINSBURG, JJ., joined. SOTOMAYOR, J.,

took no part in the consideration or decision of the case.

Cite as: 559 U. S. ____ (2010) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Wash

ington, D. C. 20543, of any typographical or other formal errors, in order

that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

No. 08–810

_________________

SALLY L. CONKRIGHT, ET AL., PETITIONERS v. PAUL

J. FROMMERT ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE SECOND CIRCUIT

[April 21, 2010]

CHIEF JUSTICE ROBERTS delivered the opinion of the

Court.

People make mistakes. Even administrators of ERISA

plans. That should come as no surprise, given that the

Employee Retirement Income Security Act of 1974 is “an

enormously complex and detailed statute,” Mertens v.

Hewitt Associates, 508 U. S. 248, 262 (1993), and the plans

that administrators must construe can be lengthy and

complicated. (The one at issue here runs to 81 pages, with

139 sections.) We held in Firestone Tire & Rubber Co. v.

Bruch, 489 U. S. 101 (1989), that an ERISA plan adminis

trator with discretionary authority to interpret a plan is

entitled to deference in exercising that discretion. The

question here is whether a single honest mistake in plan

interpretation justifies stripping the administrator of that

deference for subsequent related interpretations of the

plan. We hold that it does not.

I

As in many ERISA matters, the facts of this case are

exceedingly complicated. Fortunately, most of the factual

details are unnecessary to the legal issues before us, so we

2 CONKRIGHT v. FROMMERT

Opinion of the Court

cover them only in broad strokes. This case concerns

Xerox Corporation’s pension plan, which is covered by

ERISA, 88 Stat. 829, as amended, 29 U. S. C. §1001 et seq.

Petitioners are the plan itself (hereinafter Plan), and the

Plan’s current and former administrators (hereinafter

Plan Administrator). See §1002(16)(A)(i); App. 32a. Re

spondents are Xerox employees who left the company in

the 1980’s, received lump-sum distributions of retirement

benefits they had earned up to that point, and were later

rehired. See 328 F. Supp. 2d 420, 424 (WDNY 2004); Brief

for Respondents 9–10. The dispute giving rise to this case

concerns how to account for respondents’ past distribu

tions when calculating their current benefits—that is, how

to avoid paying respondents the same benefits twice.

The Plan Administrator initially interpreted the Plan to

call for an approach that has come to be known as the

“phantom account” method. 328 F. Supp. 2d, at 424.

Essentially, that method calculated the hypothetical

growth that respondents’ past distributions would have

experienced if the money had remained in Xerox’s invest

ment funds, and reduced respondents’ present benefits

accordingly. See id., at 426–428; App. to Pet. for Cert.

146a. After the Plan Administrator denied respondents’

administrative challenges to that method, respondents

filed suit in federal court under ERISA, 29 U. S. C.

§1132(a)(1)(B). See 328 F. Supp. 2d, at 428–429. The

District Court granted summary judgment for the Plan,

applying a deferential standard of review to the Plan

Administrator’s interpretation. See id., at 430–431, 439.

The Second Circuit vacated and remanded, holding that

the Plan Administrator’s interpretation was unreasonable

and that respondents had not been adequately notified

that the phantom account method would be used to calcu

late their benefits. See 433 F. 3d 254, 257, 265–269

(2006).

The phantom account method having been exorcised

Cite as: 559 U. S. ____ (2010) 3

Opinion of the Court

from the Plan, the District Court on remand considered

other approaches for adjusting respondents’ present bene

fits in light of their past distributions. See 472 F. Supp.

2d 452, 456–458 (WDNY 2007). The Plan Administrator

submitted an affidavit proposing an approach that, like

the phantom account method, accounted for the time value

of the money that respondents had previously received.

But unlike the phantom account method, the Plan Admin

istrator’s new approach did not calculate the present value

of a past distribution based on events that occurred after

the distribution was made. Instead, the new approach

used an interest rate that was fixed at the time of the

distribution, thereby calculating the current value of the

distribution based on information that was known at the

time of the distribution. See App. to Pet. for Cert. 147a–

153a. Petitioners argued that the District Court should

apply a deferential standard of review to this approach,

and accept it as a reasonable interpretation of the Plan.

See Defendants’ Pre-Hearing Brief Addressed to Remedies

in No. 00–CV–6311 (WDNY), pp. 7–8; Defendants’ Pre-

Hearing Reply Brief Addressing Remedies in No. 00–CV–

6311 (WDNY), p. 2.

The District Court did not apply a deferential standard

of review. Nor did it accept the Plan Administrator’s

interpretation. Instead, after finding the Plan to be am

biguous, the District Court adopted an approach proposed

by respondents that did not account for the time value of

money. Under that approach, respondents’ present bene

fits were reduced only by the nominal amount of their past

distributions—thereby treating a dollar distributed to

respondents in the 1980’s as equal in value to a dollar

distributed today. See 472 F. Supp. 2d, at 457–458. The

Second Circuit affirmed in relevant part, holding that the

District Court was correct not to apply a deferential stan

dard on remand, and that the District Court’s decision on

the merits was not an abuse of discretion. See 535 F. 3d

4 CONKRIGHT v. FROMMERT

Opinion of the Court

111, 119 (2008).

Petitioners asked us to grant certiorari on two ques

tions: (1) whether the District Court owed deference to the

Plan Administrator’s interpretation of the Plan on re

mand, and (2) whether the Court of Appeals properly

granted deference to the District Court on the merits. Pet.

for Cert. i. We granted certiorari on both, 557 U. S. ___

(2009), but find it necessary to decide only the first.

II

A

This Court addressed the standard for reviewing the

decisions of ERISA plan administrators in Firestone, 489

U. S. 101. Because ERISA’s text does not directly resolve

the matter, we looked to “principles of trust law” for guid

ance. Id., at 109, 111. We recognized that, under trust

law, the proper standard of review of a trustee’s decision

depends on the language of the instrument creating the

trust. See id., at 111–112. If the trust documents give the

trustee “power to construe disputed or doubtful terms, . . .

the trustee’s interpretation will not be disturbed if reason

able.” Id., at 111. Based on these considerations, we 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 discre

tionary authority to determine eligibility for benefits or to

construe the terms of the plan.” Id., at 115.

We expanded Firestone’s approach in Metropolitan Life

Ins. Co. v. Glenn, 554 U. S. ___ (2008). In determining the

proper standard of review when a plan administrator

operates under a conflict of interest, we again looked to

trust law, the terms of the plan at issue, and the principles

of ERISA—plus, of course, our precedent in Firestone. See

554 U. S., at ___ (slip op., at 4, 6–7, 9–10). We held that,

when the terms of a plan grant discretionary authority to

the plan administrator, a deferential standard of review

Cite as: 559 U. S. ____ (2010) 5

Opinion of the Court

remains appropriate even in the face of a conflict. See id.,

at ___ (slip op., at 9).

It is undisputed that, under Firestone and the terms of

the Plan, the Plan Administrator here would normally be

entitled to deference when interpreting the Plan. See 328

F. Supp. 2d, at 430–431 (observing that the Plan grants

the Plan Administrator “broad discretion in making deci

sions relative to the Plan”). The Court of Appeals, how

ever, crafted an exception to Firestone deference. Specifi

cally, the Second Circuit held that a court need not apply a

deferential standard “where the administrator ha[s] previ

ously construed the same [plan] terms and we found such

a construction to have violated ERISA.” 535 F. 3d, at 119.

Under that view, the District Court here was entitled to

reject a reasonable interpretation of the Plan offered by

the Plan Administrator, solely because the Court of Ap

peals had overturned a previous interpretation by

the Administrator. Cf. ibid. (accepting the District

Court’s chosen method as one of “several reasonable

alternatives”).

B

We reject this “one-strike-and-you’re-out” approach.

Brief for Petitioners 51. As an initial matter, it has no

basis in the Court’s holding in Firestone, which set out a

broad standard of deference without any suggestion that

the standard was susceptible to ad hoc exceptions like the

one adopted by the Court of Appeals. See 489 U. S., at

111, 115. Indeed, we refused to create such an exception

to Firestone deference in Glenn, recognizing that ERISA

law was already complicated enough without adding

“special procedural or evidentiary rules” to the mix. 554

U. S., at ___ (slip op., at 10). If, as we held in Glenn, a

systemic conflict of interest does not strip a plan adminis

trator of deference, see id., at ___ (slip op., at 9), it is diffi

cult to see why a single honest mistake would require a

6 CONKRIGHT v. FROMMERT

Opinion of the Court

different result.

Nor is the Court of Appeals’ decision supported by the

considerations on which our holdings in Firestone and

Glenn were based—namely, the terms of the plan, princi

ples of trust law, and the purposes of ERISA. See supra,

at 4–5. First, the Plan here grants the Plan Administrator

general authority to “[c]onstrue the Plan.” App. to Pet. for

Cert. 141a–142a. Nothing in that provision suggests that

the grant of authority is limited to first efforts to construe

the Plan.

Second, the Court of Appeals’ exception to Firestone

deference is not required by principles of trust law. Trust

law is unclear on the narrow question before us. A leading

treatise states that a court will strip a trustee of his dis

cretion when there is reason to believe that he will not

exercise that discretion fairly—for example, upon a show

ing that the trustee has already acted in bad faith:

“If the trustee’s failure to pay a reasonable amount [to

the beneficiary of the trust] is due to a failure to exer

cise [the trustee’s] discretion honestly and fairly, the

court may well fix the amount [to be paid] itself. On

the other hand, if the trustee’s failure to provide rea

sonably for the beneficiary is due to a mistake as to

the trustee’s duties or powers, and there is no reason

to believe the trustee will not fairly exercise the dis

cretion once the court has determined the extent of

the trustee’s duties and powers, the court ordinarily

will not fix the amount but will instead direct the

trustee to make reasonable provision for the benefici

ary’s support.” 3 A. Scott, W. Fratcher, & M. Ascher,

Scott and Ascher on Trusts §18.2.1, pp. 1348–1349

(5th ed. 2007) (hereinafter Scott and Ascher) (footnote

omitted) (citing cases).

This is not surprising—if the settlor who creates a trust

grants discretion to the trustee, it seems doubtful that the

Cite as: 559 U. S. ____ (2010) 7

Opinion of the Court

settlor would want the trustee divested entirely of that

discretion simply because of one good-faith mistake.1

Here the lower courts made no finding that the Plan

Administrator had acted in bad faith or would not fairly

exercise his discretion to interpret the terms of the Plan.

Thus, if the District Court had followed the trust law

principles set out in Scott and Ascher, it should not have

“act[ed] as a substitute trustee,” Eaton v. Eaton, 82 N. H.

216, 218, 132 A. 10, 11 (1926), and stripped the Plan

——————

1 The dissent is wrong to suggest a lack of case support for this inter

pretation of trust law. Post, at 10–12 (opinion of BREYER, J.). See, e.g.,

Hanford v. Clancy, 87 N. H. 458, 461, 183 A. 271, 272–273 (1936)

(“Affirmative orders of disposition, such as the court made in this case,

may only be sustained if, under the circumstances, there is but one

reasonable disposition possible. If more than one reasonable disposi

tion could be made, then the trustee must make the choice” (emphasis

added)); In re Sullivan’s Will, 144 Neb. 36, 40–41, 12 N. W. 2d 148,

150–151 (1943) (although trustees erred in not providing any support to

plaintiff, “the court was without authority to determine the amount of

support to which plaintiff was entitled from the trust fund” because

“the court has no authority to substitute its judgment for that of the

trustees” (emphasis added)); Eaton v. Eaton, 82 N. H. 216, 218–219,

132 A. 10, 11 (1926) (“[The trustee’s] failure to administer the fund

properly did not entitle the court to act as a substitute trustee. . . .

[W]ithin the limits of reasonableness the trustee alone may exercise

discretion, since that is what the will requires” (emphasis added) (cited

in 3 A. Scott & W. Fratcher, Law of Trusts §187.1, pp. 30–31 (4th ed.

1988))); In re Marre’s Estate, 18 Cal. 2d 184, 190, 114 P. 2d 586, 590–

591 (1941) (lower court erred in setting amount of payments to benefi

ciary after ruling that trustees had mistakenly failed to make payment;

“[i]t is well settled that the courts will not attempt to exercise discretion

which has been confided to a trustee unless it is clear that the trustee

has abused his discretion in some manner. . . . The amounts to be paid

should therefore be determined in the discretion of the trustees” (cited

in 3 Scott and Ascher 1349, n. 4 (5th ed. 2007))); Finch v. Wachovia

Bank & Trust Co., 156 N. C. App. 343, 348, 577 S. E. 2d 306, 310 (2003)

(agreeing with lower court that trustee abused its discretion, but

vacating the court’s remedial order because it would “strip discretion

from the trustee and replace it with the judgment of the court”). See

also Brief for Petitioners 40–43.

8 CONKRIGHT v. FROMMERT

Opinion of the Court

Administrator of the deference he would otherwise enjoy

under Firestone and the terms of the Plan.

Other trust law sources, however, point the other way.

For example, the Restatement (Second) of Trusts states

that “the court will control the trustee in the exercise of a

power where he acts beyond the bounds of a reasonable

judgment.” Restatement (Second) of Trusts §187, Com

ment i, p. 406 (1957). Another treatise states that, after a

trustee has abused his discretion, “[s]ometimes the court

decides for the trustee how he should act, either by stating

the exact result it desires to achieve, or by fixing some

limits on the trustee’s action and giving him leeway within

those limits.” G. Bogert & G. Bogert, Law of Trusts and

Trustees §560, p. 223 (2d rev. ed. 1980).

The unclear state of trust law on the question was per

haps best captured by the Texas Supreme Court:

“There is authority for ordering a dismissal of the case

to afford the trustee an opportunity to exercise a rea

sonable discretion in arriving at the amount of pay

ments to be made in the light of our discussion of the

problem and after a proper consideration of the many

factors involved. On the other hand, there is author

ity for remanding the case to the trial court to hear

evidence and in the exercise of its supervisory juris

diction to fix the amount of such payments. There is

still other authority for remanding the case to the

trial court to hear evidence and fix the boundaries of a

reasonable discretion to be exercised by the trustee

within maximum and minimum limits.” State v.

Rubion, 158 Tex. 43, 54–55, 308 S. W. 2d 4, 11 (1957)

(citations omitted).

While we are “guided by principles of trust law” in

ERISA cases, Firestone, 489 U. S., at 111, we have recog

nized before that “trust law does not tell the entire story,”

Varity Corp. v. Howe, 516 U. S. 489, 497 (1996); see ibid.

Cite as: 559 U. S. ____ (2010) 9

Opinion of the Court

(“In some instances, trust law will offer only a starting

point, after which courts must go on to ask whether, or to

what extent, the language of the statute, its structure, or

its purposes require departing from common-law trust

requirements”); Brief for Respondents 50 (pressing same

view as the dissent but concluding that the dispute over

trust law “need not be resolved”). Here trust law does not

resolve the specific issue before us, but the guiding princi

ples we have identified underlying ERISA do.

Congress enacted ERISA to ensure that employees

would receive the benefits they had earned, but Congress

did not require employers to establish benefit plans in the

first place. Lockheed Corp. v. Spink, 517 U. S. 882, 887

(1996). We have therefore recognized that ERISA repre

sents a “ ‘careful balancing’ between ensuring fair and

prompt enforcement of rights under a plan and the en

couragement of the creation of such plans.” Aetna Health

Inc. v. Davila, 542 U. S. 200, 215 (2004) (quoting Pilot Life

Ins. Co. v. Dedeaux, 481 U. S. 41, 54 (1987)). Congress

sought “to create a system that is [not] so complex that

administrative costs, or litigation expenses, unduly dis

courage employers from offering [ERISA] plans in the first

place.” Varity Corp., supra, at 497. ERISA “induc[es]

employers to offer benefits by assuring a predictable set of

liabilities, under uniform standards of primary conduct

and a uniform regime of ultimate remedial orders and

awards when a violation has occurred.” Rush Prudential

HMO, Inc. v. Moran, 536 U. S. 355, 379 (2002).

Firestone deference protects these interests and, by

permitting an employer to grant primary interpretive

authority over an ERISA plan to the plan administrator,

preserves the “careful balancing” on which ERISA is

based. Deference promotes efficiency by encouraging

resolution of benefits disputes through internal adminis

trative proceedings rather than costly litigation. It also

promotes predictability, as an employer can rely on the

10 CONKRIGHT v. FROMMERT

Opinion of the Court

expertise of the plan administrator rather than worry

about unexpected and inaccurate plan interpretations that

might result from de novo judicial review. Moreover,

Firestone deference serves the interest of uniformity,

helping to avoid a patchwork of different interpretations of

a plan, like the one here, that covers employees in differ

ent jurisdictions—a result that “would introduce consider

able inefficiencies in benefit program operation, which

might lead those employers with existing plans to reduce

benefits, and those without such plans to refrain from

adopting them.” Fort Halifax Packing Co. v. Coyne, 482

U. S. 1, 11 (1987). Indeed, a group of prominent actuaries

tells us that it is impossible even to determine whether an

ERISA plan is solvent (a duty imposed on actuaries by

federal law, see 29 U. S. C. §§1023(a)(4), (d)) if the plan is

interpreted to mean different things in different places.

See Brief for Chief Actuaries as Amici Curiae 5–11.

Respondents and the United States as amicus curiae do

not question that deference to plan administrators serves

these important purposes. Rather, they argue that defer

ence is less important once a plan administrator has is

sued an interpretation of a plan found to be unreasonable.

But the interests in efficiency, predictability, and uniform

ity—and the manner in which they are promoted by defer

ence to reasonable plan construction by administrators—

do not suddenly disappear simply because a plan adminis

trator has made a single honest mistake.

This case illustrates the point. Consider first the inter

est in efficiency, an interest that Xerox has pursued by

granting the Plan Administrator authority to construe the

Plan. On remand from the Court of Appeals, if the Dis

trict Court had applied a deferential standard of review

under Firestone, the question before it would have been

whether the Plan Administrator’s interpretation of the

Plan was reasonable. After answering that question, the

case might well have been over. Instead, the District

Cite as: 559 U. S. ____ (2010) 11

Opinion of the Court

Court declined to defer, and therefore had to answer the

more complicated question of how best to interpret the

Plan.

The prospect of increased litigation costs inherent in

respondents’ approach does not end there. Under respon

dents’ and the Government’s view, the question whether a

deferential standard of review was required in this case

turns on whether the Plan Administrator was interpreting

the “same terms” or deciding the “same issue” on remand.

See Brief for Respondents 43, 46–48, 53, and n. 13; Brief

for United States as Amicus Curiae 13–15, 23. Whether

that condition is satisfied will not always be clear. Indeed,

petitioners dispute that question here, arguing that the

Plan Administrator confronted an entirely new issue on

remand—how to interpret the Plan, knowing that specific

provisions requiring use of the phantom account method

could not be applied to respondents due to a lack of notice.

See Brief for Petitioners 50–51. Respondents would force

the parties to litigate this potentially complicated “same

issue” or “same terms” question before a district court

could even decide whether deference is owed to a plan

administrator’s view. As we recognized in Glenn, there is

little place in the ERISA context for these sorts of “special

procedural rules [that] would create further complexity,

adding time and expense to a process that may already be

too costly for many of those who seek redress.” 554 U. S.,

at ___ (slip op., at 10).

The position of respondents and the Government could

interject other additional issues into ERISA litigation. For

example, even under their view, the District Court here

could have granted deference to the Plan Administrator;

the court merely was not required to do so. See Brief for

Respondents 43, 49–50, 52–53; Brief for United States as

Amicus Curiae 23–24. That raises the question of how a

court is to decide between the two options; respondents’

answer is to weigh an indeterminate number of factors,

12 CONKRIGHT v. FROMMERT

Opinion of the Court

which would only further complicate ERISA proceedings.

See Tr. of Oral Arg. 34, 40–45.

This case also demonstrates the harm to the interest in

predictability that would result from stripping a plan

administrator of Firestone deference. After declining to

apply a deferential standard here, the District Court

adopted an interpretation of the Plan that does not ac

count for the time value of money. 472 F. Supp. 2d, at

458; 535 F. 3d, at 119. In the actuarial world, this is

heresy, and highly unforeseeable. Indeed, the actuaries

tell us that they have never encountered an ERISA plan

resembling this one that did not include some adjustment

for the time value of money. Brief for Chief Actuaries as

Amici Curiae 12.

Respondents’ own actuarial expert testified before the

District Court that fairness would require recognizing the

time value of money in some fashion. See App. 127a,

130a. And respondents and the Government do not dis

pute that the District Court’s approach, which does not

account for the fact that respondents were able to use

their past distributions as they saw fit for over 20 years,

would place respondents in a better position than employ

ees who never left the company. Cf. Brief for Respondents

42–43; Brief for United States as Amicus Curiae 32–33.

Deference to plan administrators, who have a duty to all

beneficiaries to preserve limited plan assets, see Varity

Corp., 516 U. S., at 514, helps prevent such windfalls for

particular employees.

Finally, this case demonstrates the uniformity problems

that arise from creating ad hoc exceptions to Firestone

deference. If other courts were to adopt an interpretation

of the Plan that does account for the time value of money,

Xerox could be placed in an impossible situation. Similar

Xerox employees could be entitled to different benefits

depending on where they live, or perhaps where they bring

a legal action. Cf. 29 U. S. C. §1132(e)(2) (permitting suit

Cite as: 559 U. S. ____ (2010) 13

Opinion of the Court

“where the plan is administered, where the breach took

place, or where a defendant resides or may be found”). In

fact, that may already be the case. In similar litigation

over the Plan, the Ninth Circuit also rejected the use of

the phantom account method, but held that the Plan

Administrator should utilize actuarial principles in ac

counting for rehired employees’ past distributions—which

would presumably include taking some cognizance of the

time value of money. See Miller v. Xerox Corp. Retirement

Income Guarantee Plan, 464 F. 3d 871, 875–876 (2006);

Brief for ERISA Industry Committee and American Bene

fits Council as Amici Curiae 8–9. Thus, failing to defer to

the Plan Administrator here could well cause the Plan to

be subject to different interpretations in California and

New York. “Uniformity is impossible, however, if plans

are subject to different legal obligations in different

States.” Egelhoff v. Egelhoff, 532 U. S. 141, 148 (2001).

Firestone deference serves to avoid that result and to

preserve the “careful balancing” of interests that ERISA

represents. Pilot Life Ins. Co., 481 U. S., at 54.

C

In spite of all this, respondents and the Government

argue that requiring the District Court to apply Firestone

deference in this case would actually disserve the purposes

of ERISA. They argue that continued deference would

encourage plan administrators to adopt unreasonable

interpretations of plans in the first instance, as adminis

trators would anticipate a second chance to interpret their

plans if their first interpretations were rejected. And they

argue that plan administrators would be able to proceed

seriatim through several interpretations of their plans,

each time receiving deference, thereby undermining the

prompt resolution of disputes over benefits, driving up

litigation costs, and discouraging employees from chal

lenging the decisions of plan administrators at all.

14 CONKRIGHT v. FROMMERT

Opinion of the Court

All this is overblown. There is no reason to think that

deference would be required in the extreme circumstances

that respondents foresee. Under trust law, a trustee may

be stripped of deference when he does not exercise his

discretion “honestly and fairly.” 3 Scott and Ascher 1348.

Multiple erroneous interpretations of the same plan provi

sion, even if issued in good faith, might well support a

finding that a plan administrator is too incompetent to

exercise his discretion fairly, cutting short the rounds of

costly litigation that respondents fear.

Applying a deferential standard of review does not mean

that the plan administrator will prevail on the merits. It

means only that the plan administrator’s interpretation of

the plan “will not be disturbed if reasonable.” Firestone,

489 U. S., at 111; see also ibid. (“ ‘Where discretion is

conferred upon the trustee with respect to the exercise of a

power, its exercise is not subject to control by the court

except to prevent an abuse by the trustee of his discre

tion’ ” (quoting Restatement (Second) of Trusts §187)).

Thus, far from “impos[ing] [a] rigid and inflexible re

quirement” that courts must defer to plan administrators,

post, at 8, we simply hold that the lower courts should

have applied the standard established in Firestone and

Glenn.

III

The Court of Appeals erred in holding that the District

Court could refuse to defer to the Plan Administrator’s

interpretation of the Plan on remand, simply because the

Court of Appeals had found a previous related interpreta

tion by the Administrator to be invalid. Because we re

verse on that ground, we do not reach the question

whether the Court of Appeals also erred in applying a

deferential standard of review to the decision of the Dis

Cite as: 559 U. S. ____ (2010) 15

Opinion of the Court

trict Court on the merits.2

The judgment of the Court of Appeals for the Second

Circuit is reversed, and the case is remanded for further

proceedings consistent with this opinion.

It is so ordered.

JUSTICE SOTOMAYOR took no part in the consideration

or decision of this case.

——————

2 The Government raises an additional argument—that the District

Court should not have deferred to the Plan Administrator’s second

interpretation of the Plan because that interpretation would have

violated ERISA’s notice requirements. See Brief for United States as

Amicus Curiae 25–26. That is an argument about the merits, not the

proper standard of review, and we leave it to be decided, if necessary,

on remand.

Cite as: 559 U. S. ____ (2010) 1

BREYER, J., dissenting

SUPREME COURT OF THE UNITED STATES

_________________

No. 08–810

_________________

SALLY L. CONKRIGHT, ET AL., PETITIONERS v. PAUL

J. FROMMERT ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE SECOND CIRCUIT

[April 21, 2010]

JUSTICE BREYER, with whom JUSTICE STEVENS and

JUSTICE GINSBURG join, dissenting.

I agree with the Court that “[p]eople make mistakes,”

ante, at 1, but I do not share its view of the law applicable

to those mistakes. To explain my view, I shall describe the

three significant mistakes involved in this case.

I

A

The first mistake is that of Xerox Corporation’s pension

plan (Plan) and its administrators (collectively, Plan

Administrator), petitioners here. The Plan, as I under­

stand it, pays employees the highest of three benefits upon

retirement. App. 29a–31a. These benefits are calculated

as follows (I simplify and use my own words, not those of

the Plan):

(1) “The Pension”: Take your average salary for your

five highest salary years at Xerox; multiply by 1.4 per­

cent; and multiply again by the number of years you

worked at Xerox (up to 30). Id., at 7a–11a, 29a–30a.

Thus, if the average salary of your five highest paid

years was $50,000 and you worked at Xerox for 30

years, you would be entitled to receive $21,000 per

year ($50,000 × 1.4 percent × 30).

(2) “The Cash Account”: Every year, Xerox credits 5

2 CONKRIGHT v. FROMMERT

BREYER, J., dissenting

percent of your salary to a cash account. Id., at 40a.

This account accrues interest at a yearly fixed rate 1

percent above the 1-year Treasury bill rate. Id., at

41a. To determine your benefits under this approach,

take the balance of your cash account and convert the

final amount to an annuity. Id., at 31a. Thus, if you

have accrued, say, $200,000 in your account and the

relevant annuity rate at the time of your retirement is

7 percent, you would be entitled to receive approxi­

mately $14,000 per year upon your retirement (ap­

proximately $200,000 ×7 percent).

(3) “The Investment Account”: Before 1990, Xerox

contributed to an employee profit sharing plan. Id., at

33a–34a. Thus, all employees who were hired by the

end of 1989 have an investment account that consists

of all of the contributions Xerox made to this profit

sharing plan (prior to its discontinuation) and the in­

vestment returns on those contributions. Id., at 33a–

36a. To determine your benefits under this approach,

take the balance of your investment account and con­

vert the final amount to an annuity. Id., at 31a.

Thus, just like the cash account, if you have accrued

$400,000 in your account and the relevant annuity

rate at the time of your retirement is 7 percent, you

would be entitled to receive approximately $28,000

per year upon your retirement (approximately

$400,000 × 7 percent).

Given these three examples, the retiring employee’s pen­

sion would come from the investment account, and the

employee would receive $28,000 per year.

This case concerns one aspect of Xerox’s retirement

plan, namely, the way in which the Plan treats employees

who leave Xerox and later return, working for additional

years before their ultimate retirement. The Plan has long

treated such leaving-and-returning employees as follows

Cite as: 559 U. S. ____ (2010) 3

BREYER, J., dissenting

(again, I simplify and use my own words):

First, when an employee initially leaves, she is paid a

lump-sum distribution equivalent to the benefits she has

accrued up to that point (i.e., the highest of her pension,

her cash account, or, if she was hired before the end of

1989, her investment account). See ante, at 2.

Second, when the employee returns, she again begins to

accrue amounts in her cash account, App. 40a–41a, start­

ing from scratch. (She accrues nothing in her investment

account, because Xerox no longer makes profit sharing

contributions. Id., at 34a.) Thus, by the time of her re­

tirement the employee may not have accrued much money

in this account.

Third, a rehired employee’s pension is calculated in the

way I have set forth above, with her entire tenure at Xerox

(both before her departure and after her return) taken into

account. See Brief for Petitioners 9–10.

Fourth, the employee’s benefits calculation is adjusted

to take account of the fact that the employee has already

received a lump-sum distribution from the Plan. See App.

32a; Brief for Petitioners 10–11.

This case is about the adjustment that takes place dur­

ing step four. It concerns the way in which the Plan Ad­

ministrator calculates that adjustment so as to reflect the

fact that a retiring leaving-and-returning employee has

already received a distribution when she initially left

Xerox. Before 1989, the Plan Administrator calculated the

adjusted amount by taking the benefits distribution previ­

ously received (say, $100,000) and adjusting it to equal the

amount that would have existed in the investment account

had no distribution been made. Ibid. Thus, if an employee

had not left Xerox, and if the $100,000 had been left in her

investment account for, say, 20 years, that amount would

likely have increased dramatically—perhaps doubling,

tripling, or quadrupling in amount, depending upon how

well the Plan’s investments performed.

4 CONKRIGHT v. FROMMERT

BREYER, J., dissenting

It is this hypothetical sum—termed the “phantom ac­

count,” ante, at 2—that is at issue in this case. Xerox’s

pre-1989 Plan assumed that a rehired employee had this

hypothetical sum on hand at the time of her final retire­

ment from the company, and in effect subtracted the

amount from the employee’s benefits upon her departure.

Brief for Petitioners 10–11; cf. ante, at 2. Depending on

how the Plan’s investments did over time, the Administra­

tor’s use of this “phantom account” could have a substan­

tial impact on a rehired employee’s benefits. (See Appen­

dix, infra, for an example of how this “phantom account”

works.)

When the Plan Administrator amended Xerox’s Em­

ployee Retirement Income Security Act of 1974 (ERISA)

Plan in 1989, however, it made what it tells us was an

“inadverten[t]” omission. Brief for Petitioners 11, n. 3. In

a section of the 1989 Plan applicable to the roughly 100

leaving-and-returning employees who are plaintiffs here,

the Plan said that it would “offset” the retiring employees’

“accrued benefit” (as ordinarily calculated) “by the accrued

benefit attributable” to the prior lump-sum “distribution”

those employees received when they initially left Xerox.

App. 32a. But the Plan said nothing about how it would

calculate this “offset.” In other words, the Plan said noth­

ing about the Administrator’s use of the “phantom ac­

count.”

This led to the first mistake in this case. Despite the

Plan’s failure to include language explaining how the

Administrator would take into account an employee’s prior

distribution, the Plan Administrator continued to employ

the “phantom account” methodology. In essence, the

Administrator read the 1989 Plan to include the language

that had been omitted—an interpretation that, as de­

scribed below, see Part I–B, infra, the Court of Appeals

found to be arbitrary and capricious and in violation of

ERISA.

Cite as: 559 U. S. ____ (2010) 5

BREYER, J., dissenting

B

The District Court committed the second mistake in this

case. In 1999, the respondents, nearly 100 employees who

left and were later rehired by Xerox, brought this lawsuit.

Ante, at 2; Brief for Petitioners ii–iii, 12. They pointed out

that the 1989 Plan said that it would decrease their re­

tirement benefits to reflect the fact that they had already

received a lump-sum benefits distribution when they

initially left Xerox. But, they added, neither the 1989

Plan, nor the 1989 Plan’s Summary Plan Description, said

anything about whether (or how) the Administrator would

adjust their previous benefits distribution to take into

account that they had received the distribution well before

their retirement. They thus claimed that the Plan Admin­

istrator could not use the “phantom account” methodology

to adjust their previous distributions. See Brief for United

States as Amicus Curiae 4–5.

The District Court, however, rejected respondents’

claims. 328 F. Supp. 2d 420 (WDNY 2004). The court

accepted the Administrator’s argument that the 1989 Plan

implicitly incorporated the “phantom account” approach

that had previously been part of Xerox’s retirement plan.

Id., at 433–434. And the court thus held in favor of peti­

tioners—thereby committing the second mistake in this

case. Id., at 439.

On appeal, the Second Circuit disagreed with the Dis­

trict Court and vacated the District Court’s decision in

relevant part. 433 F. 3d 254 (2006). The Court of Appeals

concluded that, because the 1989 Plan said nothing about

how the Administrator would adjust the previous benefits

distributions, it was “arbitrary and capricious” for the

Administrator to interpret the 1989 Plan as if it still in­

corporated the “phantom account.” Id., at 265–266, and

n. 11. And the Court of Appeals thus held that the lan­

guage of the Plan and the Summary Plan Description, at

the least, violated ERISA by failing to provide respondents

6 CONKRIGHT v. FROMMERT

BREYER, J., dissenting

with fair notice that the Administrator was going to use

the “phantom account” approach. See id., at 265 (discuss­

ing 29 U. S. C. §1022); see also 433 F. 3d, at 263, 267–268

(holding that the Administrator’s attempt to apply the

“phantom account” to respondents violated two other

ERISA provisions: 29 U. S. C. §1054(h)’s notice require­

ment and §1054(g)’s prohibition on retroactive benefit

cutbacks). Rather, the court noted, respondents “likely

believed”—based on the language of the Plan—“that their

past distributions would only be factored into their [cur­

rent] benefits calculations by taking into account the

amounts they had actually received.” 433 F. 3d, at 267.

In light of these conclusions, the Court of Appeals rec­

ognized the need to devise a remedy for the Administra­

tor’s abuse of discretion and ERISA violations—a remedy

that took into account the previous benefits distributions

respondents had received in a manner consistent with the

1989 Plan. The court therefore remanded the case to the

District Court, with the following instructions:

“On remand, the remedy crafted by the district court

for those employees [in the respondents’ situation]

should utilize an appropriate [pre-1989 Plan] calcula­

tion to determine their benefits. We recognize the dif­

ficulty that this task poses . . . . As guidance for the

district court, we suggest that it may wish to employ

equitable principles when determining the appropri­

ate calculation and fashioning the appropriate rem­

edy.” Id., at 268.

On remand, the District Court invited the parties to

submit remedial recommendations. Brief for Petitioners

14. The Plan Administrator proposed an approach that

would adjust respondents’ previous benefits distributions

by adding interest, and, as a fallback, the Administrator

suggested that the Plan should treat respondents as new

hires. Ante, at 3; Brief for United States as Amicus Curiae

Cite as: 559 U. S. ____ (2010) 7

BREYER, J., dissenting

6–7. The District Court rejected these suggestions and

concluded that the “appropriate” remedy was the one

suggested by the Second Circuit: no adjustment to the

prior distributions received by respondents. 472

F. Supp. 2d 452, 458 (WDNY 2007). The court stated that

this remedy was “straightforward; it adequately pre­

vent[ed] employees from receiving a windfall[;] and . . . it

most clearly reflect[ed] what a reasonable employee would

have anticipated based on the not-very-clear language in

the Plan.” Ibid. And the Court of Appeals, finding that

the District Court did not abuse its discretion in crafting a

remedy, affirmed. 535 F. 3d 111 (CA2 2008).

II

The third mistake, I believe, is the Court’s. As the

majority recognizes, ante, at 4, “principles of trust law”

guide this Court in “determining the appropriate stan­

dard” by which to review the actions of an ERISA plan

administrator. Firestone Tire & Rubber Co. v. Bruch, 489

U. S. 101, 111–113 (1989); see also Metropolitan Life Ins.

Co. v. Glenn, 554 U. S. ___, ___ (2008) (slip op., at 4);

Aetna Health Inc. v. Davila, 542 U. S. 200, 218–219

(2004); Central States, Southeast & Southwest Areas Pen

sion Fund v. Central Transport, Inc., 472 U. S. 559, 570

(1985). And, as the majority also recognizes, ante, at 4,

where an ERISA plan grants an administrator the discre­

tionary authority to interpret plan terms, trust law re

quires a court to defer to the plan administrator’s inter­

pretation of plan terms. See, e.g., Glenn, supra, at ____

(slip op., at 4). But the majority further concludes that

trust law “does not resolve the specific issue before” the

Court in this case—i.e., whether a court is required to

defer to an administrator’s second attempt at interpreting

plan documents, even after the court has already deter­

mined that the administrator’s first attempt amounted to

an abuse of discretion. Ante, at 9. In my view, this final

8 CONKRIGHT v. FROMMERT

BREYER, J., dissenting

conclusion is erroneous, as trust law imposes no such rigid

and inflexible requirement.

The Second Circuit found the Administrator’s interpre­

tation of the Plan to be arbitrary and capricious and in

violation of ERISA, and it made clear that the District

Court’s task on remand was to “craf[t]” a “remedy.” See

433 F. 3d, at 268. Trust law treatise writers say that in

these circumstances a court may (but need not) exercise its

own discretion rather than defer to a trustee’s interpreta­

tion of trust language. See G. Bogert & G. Bogert, Law of

Trusts and Trustees §560, pp. 222–223 (2d rev. ed. 1980)

(hereinafter Bogert & Bogert) (after finding an abuse of

discretion, a court may “decid[e] for the trustee how he

should act,” possibly by “stating the exact result” the court

“desires to achieve”); see also 2 Restatement (Third) of

Trusts §50, p. 258 (2001) (hereinafter Third Restatement)

(“A discretionary power conferred upon the trustee . . . is

subject to judicial control only to prevent misinterpreta­

tion or abuse of the discretion by the trustee”); 1 Restate­

ment (Second) of Trusts §187, p. 402 (1957) (hereinafter

Second Restatement) (“Where discretion is conferred upon

the trustee . . . , its exercise is not subject to control by the

court, except to prevent an abuse by the trustee of his

discretion”); see also Firestone, supra, at 111. Judges

deciding trust law cases have said the same. See, e.g.,

Colton v. Colton, 127 U. S. 300, 322 (1888) (stating that it

was the “duty of the court” to determine the trust pay­

ments due after rejecting the trustee’s interpretation);

State v. Rubion, 158 Tex. 43, 55, 308 S. W. 2d 4, 11 (1957)

(“Considering that we have held that there has already

been an abuse of discretion by the trustee . . . , we have

concluded that a remand of the case to the trial court for

the definite establishment of amounts to be paid will

better promote a speedy administration of justice and a

final termination of this litigation”); Glenn, supra, at ____

(SCALIA, J., dissenting) (slip op., at 5) (court may exercise

Cite as: 559 U. S. ____ (2010) 9

BREYER, J., dissenting

discretion under trust law when a “trustee had discretion

but abused it”). In short, the controlling trust law princi­

ple appears to be that, “[w]here the court finds that there

has been an abuse of a discretionary power, the decree to

be rendered is in its discretion.” Bogert & Bogert §560, at

222.

Of course, the fact that trust law grants courts discre­

tion does not mean that they will exercise that discretion

in all instances. The majority refers to the 2007 edition of

Scott on Trusts, ante, at 6, which says that, if there is “no

reason” to doubt that a trustee “will . . . fairly exercise” his

“discretion,” then courts “ordinarily will not fix the

amount” of a payment “but will instead direct the trustee

to make reasonable provision for the beneficiary’s sup­

port,” 3 A. Scott, W. Fratcher, & M. Ascher, Scott and

Ascher on Trusts §18.2.1, pp. 1348–1349 (5th ed. 2007)

(emphasis added). As this passage demonstrates, there

are situations in which a court will typically defer to a

trustee’s remedial suggestion. The word “ordinarily”

confirms, however, that the Scott treatise writers recog­

nize that there are instances in which courts will not

defer. And other treatises indicate that black letter trust

law gives the district courts authority to decide which

instances are which. See Bogert & Bogert §560, at 222–

223 (when there is an abuse of discretion, a court “may set

aside the transaction,” “award damages to the benefici­

ary,” or “order a new decision to be made in the light of

rules expounded by the court”); 2 Third Restatement §50,

and Comment b, at 261 (discussing similar remedial op­

tions); 1 Second Restatement §187, and Comment b, at

402 (same); see also 3 Third Restatement §87, and Com­

ment c, at 244–245 (noting that “judicial intervention on

the ground of abuse” is allowed when a “good-faith,” yet

“unreasonable,” decision is made by a trustee); Rubion,

supra, at 54–55, 308 S. W. 2d, at 11 (discussing a court’s

remedial options).

10 CONKRIGHT v. FROMMERT

BREYER, J., dissenting

Nevertheless, the majority reads the Scott treatise as

establishing an absolute requirement that courts defer to

a trustee’s fallback position absent “reason to believe that

[the trustee] will not exercise [his] discretion fairly—for

example, upon a showing that the trustee has already

acted in bad faith.” Ante, at 6. And based on this reading,

the majority further concludes that the existence of the

Scott treatise creates uncertainty as to whether, under

basic trust law principles, a court has the power to craft a

remedy for a trustee’s abuse of discretion. Ante, at 6–9.

It is unclear to me, however, why the majority reads the

passage from Scott as creating a war among treatise writ­

ers, compare ante, at 6 (discussing Scott) with ante, at 8

(discussing Bogert), when the relevant passages can so

easily be read as consistent with one another. I simply

read the Scott treatise language as identifying circum­

stances in which courts typically choose to defer to an

administrator’s fallback position. The treatise does not

suggest that the law forbids a court from acting on its own

in the exercise of its broad remedial authority—authority

that trust law plainly grants to supervising courts. See

supra, at 8–9.

A closer look at the Scott treatise confirms this under­

standing. The treatise cites seven cases in support of the

passage upon which the majority relies. See 3 Scott

§18.2.1, at 1349, n. 4. Three of these cases explicitly state

that a court may exercise its discretion to craft a remedy if

a trustee has previously abused its discretion. See Old

Colony Trust Co. v. Rodd, 356 Mass. 584, 589, 254 N. E.

2d 886, 889 (1970) (“A court of equity may control a trus­

tee in the exercise of a fiduciary discretion if it fails to

observe standards of judgment apparent from the applica­

ble instrument”); In re Marre’s Estate, 18 Cal. 2d 184, 190,

114 P. 2d 586, 590–591 (1941) (“It is well settled that the

courts will not attempt to exercise discretion which has

been confided to a trustee unless it is clear that the trustee

Cite as: 559 U. S. ____ (2010) 11

BREYER, J., dissenting

has abused his discretion in some manner” (emphasis

added)); In re Ferrall’s Estate, 92 Cal. App. 2d 712, 716–

717, 207 P. 2d 1077, 1079–1080 (1949) (following In re

Marre’s Estate). Three other cases are inapposite because

their circumstances do not involve any allegation of abuse

of discretion by the trustee. See In re Ziegler’s Trusts, 157

So. 2d 549, 550 (Fla. Dist. Ct. App. 1963) (per curiam)

(“There is no contention here that the court . . . would not

retain its rights, upon appropriate petition or other plead­

ings by an interested party, to review an alleged abuse, if

any, of the discretion exercised by the trustees”); In re

Grubel’s Will, 37 Misc. 2d 910, 911, 235 N. Y. S. 2d 21, 23

(Surr. Ct. 1962) (stating that “in the first instance” it is

the “proper function of the trustees” to set an amount to be

paid (emphasis added)); Orr v. Moses, 94 N. H. 309, 312,

52 A. 2d 128, 130 (1947) (declining to construe will be­

cause none “of the parties now assert claims adverse to

any position taken by the trustee”). In the final case, the

court decided that, on the facts before it, it did not need to

control the trustees’ discretion. See Estate of Stillman,

107 Misc. 2d 102, 111, 433 N. Y. S. 2d 701 (Surr. Ct. 1980)

(“The fine record of the trustees in enhancing the equity of

these trusts while earning substantial income, also per­

suades the court of the wisdom of retaining their services

as fiduciaries”). Which of these cases says that, after the

trustee has abused its discretion, a district court must still

defer to the trustee? None of them do. I repeat: Not a

single case cited by the Scott treatise writers supports the

majority’s reading of the treatise.

The majority seeks to justify its reading of the Scott

treatise by referring to four cases that Scott does not cite.

See ante, at 7, n. 1. I am not surprised that the treatise

does not refer to these cases. In the first three, a court

thought it best, when a trustee had not yet exercised

judgment about a particular matter, to direct the trustee

to do so. See In re Sullivan’s Will, 144 Neb. 36, 40–41, 12

12 CONKRIGHT v. FROMMERT

BREYER, J., dissenting

N. W. 2d 148, 150–151 (1943) (finding that the trustees’

“failure to act” was erroneous, and directing the trustees

to exercise their discretion in setting a payment amount);

Eaton v. Eaton, 82 N. H. 216, 218, 132 A. 10, 11 (1926)

(same); Finch v. Wachovia Bank & Trust Co., 156 N. C.

App. 343, 347–348, 577 S. E. 2d 306, 309–310 (2003) (hold­

ing trustee erred by “[f]ail[ing] to exercise judgment,” and

directing it to do so). The fourth case concerns circum­

stances so distant from those before us that it is difficult to

know what to say. (The question was whether the benefi­

ciary of a small trust had title in certain trust assets or

whether the trustee had discretionary power to allocate

them in her best interest; the court held the latter, adding

that, if the trustee acted unreasonably, the lower court in

that particular case should seek to have the trustee re­

moved rather than trying to administer the trust funds

itself.) See Hanford v. Clancy, 87 N. H. 458, 460–461, 183

A. 271, 272–273 (1936).

I cannot read these four cases, or any other case to

which the majority refers, as holding that a court, as a

general matter, is required to defer to a trust administra­

tor’s second attempt at exercising discretion. And I am

aware of no such case. In contrast, the Restatement and

Bogert and Scott treatises identify numerous cases in

which courts have remedied a trustee’s abuse of discretion

by ordering the trustee to pay a specific amount. See 2

Third Restatement §50, Reporter’s Note, at 283 (citing

cases such as Coker v. Coker, 208 Ala. 354, 94 So. 566

(1922)); Bogert & Bogert §560, at 223, n. 19 (citing cases

such as Rubion); 3 Scott §18.2.1, at 1348–1349, nn. 3–4

(citing cases such as Emmert v. Old Nat. Bank of Martins

burg, 162 W. Va. 48, 246 S. E. 2d 236 (1978)); see also

Brief for United States as Amicus Curiae 18 (listing cases).

I thus do not find trust law “unclear” on this matter. Ante,

at 6. When a trustee abuses its discretion, trust law

grants courts the authority either to defer anew to the

Cite as: 559 U. S. ____ (2010) 13

BREYER, J., dissenting

trustee’s discretion or to craft a remedy. See, e.g., 3 A.

Scott & W. Fratcher, Scott on Trusts §187, pp. 14–15 (4th

ed. 1988) (“This ordinarily means that so long as [the

trustee] acts not only in good faith and from proper mo­

tives, but also within the bounds of reasonable judgment,

the court will not interfere; but the court will inter-

fere when he acts outside the bounds of a reasonable

judgment”).

Nor does anything in the present case suggest that the

District Court abused its remedial authority. The Second

Circuit stated that the interpretive problem on remand

was in essence a remedial problem. See 433 F. 3d, at 268.

It added that the remedial problem was “difficul[t]” and

that “the district court . . . may wish to employ equitable

principles when determining the appropriate calculation

and fashioning the appropriate remedy.” Ibid. The Ad­

ministrator had previously abused his discretionary

power. Id., at 265–268. And the District Court found that

the Administrator’s primary remedial suggestion on re­

mand—adjusting respondents’ previous benefits distribu­

tions by adding interest—probably would have violated

ERISA’s notice provisions. 472 F. Supp. 2d, at 457. Under

these circumstances, the District Court reasonably could

have found a need to use its own remedial judgment,

rather than rely on the Administrator’s—which is just

what the Second Circuit said. 535 F. 3d, at 119.

Moreover, even if the “narrow” trust law “question

before us” were difficult, ante, at 6—which it is not—this

difficulty would not excuse the Court from trying to do its

best to work out a legal solution that nonetheless respects

basic principles of trust law. “Congress invoked the com­

mon law of trusts” in enacting ERISA, and this Court has

thus repeatedly looked to trust law in order to determine

“the particular duties and powers” of ERISA plan adminis­

trators. Central States, Southeast & Southwest Areas

Pension Fund v. Central Transport, Inc., 472 U. S. 559,

14 CONKRIGHT v. FROMMERT

BREYER, J., dissenting

570–572 (1985); see also, e.g., Glenn, 554 U. S., at ___ (slip

op., at 4); Davila, 542 U. S., at 218–219; Firestone, 489

U. S., at 111–113. While, as the majority recognizes, ante,

at 8, trust law may “not tell the entire story,” Varity Corp.

v. Howe, 516 U. S. 489, 497 (1996), I am aware of no other

case in which this Court has simply ignored trust law (on

the basis that it was unclear) and crafted a legal rule

based on nothing but “the guiding principles we have

identified underlying ERISA,” ante, at 9. See Varity,

supra, at 497 (“In some instances, trust law will offer only

a starting point, after which courts must go on to ask

whether, or to what extent, the language of the statute, its

structure, or its purposes require departing from common­

law trust requirements” (emphasis added)).

In any event, it is far from clear that the Court’s legal

rule reflects an appropriate analysis of ERISA-based

policy. To the contrary, the majority’s absolute “one free

honest mistake” rule is impractical, for it requires courts

to determine what is “honest,” encourages appeals on the

point, and threatens to delay further proceedings that

already take too long. (Respondents initially filed this

retirement benefits case in 1999.) See Glenn, supra, at ___

(slip op., at 10). It also ignores what we previously have

pointed out—namely, that abuses of discretion “arise in

too many contexts” and “concern too many circumstances”

for this Court “to come up with a one-size-fits-all proce­

dural [approach] that is likely to promote fair and accu­

rate” benefits determinations. Ibid. And, finally, the

majority’s approach creates incentives for administrators

to take “one free shot” at employer-favorable plan inter­

pretations and to draft ambiguous retirement plans in the

first instance with the expectation that they will have

repeated opportunities to interpret (and possibly reinter­

pret) the ambiguous terms. I thus fail to see how the

majority’s “one free honest mistake” approach furthers

ERISA’s core purpose of “promot[ing] the interests of

Cite as: 559 U. S. ____ (2010) 15

BREYER, J., dissenting

employees and their beneficiaries in employee benefit

plans.” Shaw v. Delta Air Lines, Inc., 463 U. S. 85, 90

(1983); see also, e.g., 29 U. S. C. §1001(b) (noting that

ERISA was enacted “to protect . . . employee benefit plans

and their beneficiaries”); Curtiss-Wright Corp. v. Schoone

jongen, 514 U. S. 73, 83 (1995) (discussing ERISA’s central

“goa[l]” of “enab[ing] plan beneficiaries to learn their

rights and obligations at any time”); Massachusetts Mut.

Life Ins. Co. v. Russell, 473 U. S. 134, 148 (1985) (ERISA

was enacted “to protect contractually defined benefits”).

The majority does identify ERISA-related factors—e.g.,

promoting predictability and uniformity, encouraging

employers to adopt strong plans—that it believes favor

giving more power to plan administrators. See ante, at 9–

13. But, in my view, these factors are, at the least, offset

by the factors discussed above—e.g., discouraging admin­

istrators from writing opaque plans and interpreting them

aggressively—that argue to the contrary. At best, the

policies at issue—some arguing in one direction, some the

other—are far less able than trust law to provide a “guid­

ing principle.” Thus, I conclude that here, as elsewhere,

trust law ultimately provides the best way for courts to

approach the administration and interpretation of ERISA.

See, e.g., Firestone, supra, at 111–113. And trust law

here, as I have said, leaves to the supervising court the

decision as to how much weight to give to a plan adminis­

trator’s remedial opinion.

III

Since the District Court was not required to defer to the

Administrator’s fallback position, I should consider the

second question presented, namely, whether the Court of

Appeals properly reviewed the District Court’s decision

under an “abuse of discretion” standard. Ante, at 4 (ac­

knowledging, but not reaching, this issue). The answer to

this question depends upon how one characterizes the

16 CONKRIGHT v. FROMMERT

BREYER, J., dissenting

Court of Appeals’ decision. If the court deferred to the

District Court’s interpretation of Plan terms, then the

Court of Appeals most likely should have reviewed the

decision de novo. See Firestone, supra, at 112; cf. Davila,

supra, at 210 (“Any dispute over the precise terms of the

plan is resolved by a court under a de novo review stan­

dard”). If instead the Court of Appeals deferred to the

District Court’s creation of a remedy, in significant part on

the basis of “equitable principles,” then it properly re­

viewed the District Court decision for “abuse of discre­

tion.” See, e.g., Cook v. Liberty Life Assurance Co., 320

F. 3d 11, 24 (CA1 2003); Zervos v. Verizon N. Y., Inc., 277

F. 3d 635, 648 (CA2 2002); Grosz-Salomon v. Paul Revere

Life Ins. Co., 237 F. 3d 1154, 1163 (CA9 2001); Halpin v.

W. W. Grainger, Inc., 962 F. 2d 685, 697 (CA7 1992).

The District Court opinion contains language that sup­

ports either characterization. On the one hand, the court

wrote that its task was to “interpret the Plan as written.”

472 F. Supp. 2d, at 457. On the other hand, the court said

that “virtually nothing is set forth in either the Plan or the

[Summary Plan Description]” about how to treat prior

distributions; and, in describing its task, it said that the

Court of Appeals had directed it to use “equitable princi­

ples” in fashioning a remedy. Ibid. Ultimately, the Dis­

trict Court appears to have used both the Plan language

and equitable principles to arrive at its conclusion. See

id., at 457–459.

The Court of Appeals, too, used language that supports

both characterizations. Compare 535 F. 3d, at 117 (noting

that the District Court “applied [Plan] terms” in crafting

its remedy), with id., at 117–119 (describing the District

Court’s decision as the “craft[ing]” of a “remedy” and

acknowledging that it had directed the District Court to

use “equitable principles” in doing so). But the Court of

Appeals ultimately treated the District Court’s opinion as

if it primarily created a fair remedy. Ibid. Given the prior

Cite as: 559 U. S. ____ (2010) 17

BREYER, J., dissenting

Court of Appeals opinion’s language, supra, at 6 (quoting

433 F. 3d, at 268), I believe that view is a fair, indeed a

correct, view. And I consequently believe the Court of

Appeals properly reviewed the result for an “abuse of

discretion.”

Petitioners argue that, because respondents were seek­

ing relief under 29 U. S. C. §1132(a)(1)(B), the Court of

Appeals was, in effect, prohibited from treating the rem­

edy as anything other than an application of a plan’s

terms. Brief for Petitioners 55–56; Reply Brief for Peti­

tioners 3, and n. 8, 16–17. While this provision allows

plaintiffs only to “enforce” or “clarify” rights or to “recover

benefits” “under the terms of the plan,” §1132(a)(1)(B)

(emphasis added), it does not so limit a court’s remedial

authority, Great-West Life & Annuity Ins. Co. v. Knudson,

534 U. S. 204, 221 (2002) (In §1132(a)(1)(B), “Congress

authorized ‘a participant or beneficiary’ to bring a civil

action . . . without referenc[ing] whether the relief sought

is legal or equitable”). The provision thus does not pro­

hibit a court from shaping relief through the application of

equitable principles, as trust law plainly permits. See,

e.g., 2 Third Restatement §50, and Comment b, at 261

(discussing remedial options); Bogert & Bogert §870, at

123–126 (2d rev. ed. 1995). Indeed, a court that finds, for

example, that an administrator provided employees with

inadequate notice of a plan’s terms (as was true here) may

have no alternative but to rely significantly upon those

principles. Cf. 29 U. S. C. §1104(a)(1)(D) (plan fiduciary

must “discharge his dut[y] . . . in accordance with the

documents and instruments governing the plan insofar as

such documents and instruments are consistent” with

ERISA).

For these reasons I would affirm the decision of the

Court of Appeals. And I therefore respectfully dissent

from the majority’s contrary determination.

18 CONKRIGHT v. FROMMERT

AppendixREYER, J., dissenting

B to the opinion of BREYER, J.

APPENDIX

The “Phantom Account”

This Appendix provides a simplified and illustrative

example of, as I understand it, how the “phantom account”

works. For the purposes of this Appendix, I make the

following assumptions: John worked at Xerox for 10 years

from 1970 to 1980. At the time of his departure from

Xerox, he was issued a lump-sum benefits distribution of

$140,000. He was then rehired in January 1989, and he

worked for Xerox for 5 more years before retiring (until

December 1993), earning $50,000 each year of his second

term of employment. I also assume that (1) Xerox’s con­

tribution to John’s investment account was $2,500 in 1989

(the last year such accounts were offered), (2) Xerox’s

contributions to John’s cash and investment accounts are

always made on the final day of the year, (3) the rate of

return in John’s cash and investment accounts is always 5

percent, and (4) annuity rates are also always 5 percent.

(For the sake of simplicity, I treat all annuities as perpe­

tuities, meaning that I calculate the present value of the

annuities thusly: Present Value = Annual Pay­

ment/Annuity Rate.)

Given the above assumptions, John’s pension upon his

retirement would be $10,500 per year ($50,000 × 1.4 per­

cent × 15 years), which has a present value of $210,000

($10,500/5 percent). John’s cash and investment accounts

at the end of his fifth year would look as follows (While

Xerox’s ERISA Plan did not include cash accounts until

1990, each employee’s opening cash account balance was

credited with the balance of his investment account at the

end of 1989. The figures for John’s cash account in 1989

thus reflect the performance of his investment account. In

addition, all numbers are rounded to the nearest hun­

dred):

Cite as: 559 U. S. ____ (2010) 19

AppendixREYER, J., dissenting

B to the opinion of BREYER, J.

Year (A) (B) (C) (D) (E) (F) (G) (H)

Inv. Inv. Inv. Inv. Cash Cash Cash Cash

Account: Account: Account: Account: Account: Account: Account: Account:

Xerox Accrued Phantom Total Xerox Accrued Phantom Total

Contri­ Since Account (Columns Contribu­ Since Account (Columns

butions Return B+C) tions Return F+G)

1989 2,500 2,500 217,200 219,700 2,500 2,500 217,200 219,700

1990 0 2,600 228,000 230,700 2,500 5,100 228,000 233,200

1991 0 2,800 239,400 242,200 2,500 7,900 239,400 247,300

1992 0 2,900 251,400 254,300 2,500 10,800 251,400 262,200

1993 0 3,000 264,000 267,000 2,500 13,800 264,000 277,800

Now, as far as I understand it, John’s retirement bene­

fits are calculated as follows, see 433 F. 3d, at 260:

First, the Plan Administrator would choose which of

John’s three accounts would yield him the greatest bene­

fits. In making this comparison, the Plan Administrator

would assume that John had never left Xerox when calcu­

lating John’s pension. The Plan Administrator would also

assume, when calculating the value of John’s cash and

investment accounts, that the lump-sum distribution John

had received from Xerox had remained invested in his

accounts. (In other words, the Plan Administrator would

include the “phantom account” in his calculations. The

total value of this phantom account in 1989, when John

rejoined Xerox, is equal to John’s lump-sum distribution of

$140,000 × 1.059, or approximately $217,200.)

The Plan Administrator would thus compare John’s

pension, column D, and column H to determine John’s

benefit. As you can see above, column H provides the

greatest benefit, so John’s cash account would be used to

calculate the benefits he would receive upon retirement.

Second, the Plan Administrator would “offset” John’s

prior distribution against his current benefits to deter­

mine the amount of benefits John would actually receive.

Thus, the Plan Administrator would take the “total” value

of John’s cash account, including the “phantom account”

($277,800), and subtract out the value of the “phantom

20 CONKRIGHT v. FROMMERT

AppendixREYER, J., dissenting

B to the opinion of BREYER, J.

account” ($264,000). The total present value of the bene­

fits John would receive upon his second retirement would

thus be $13,800.

This means that John would receive approximately $690

annually ($13,800 × 5 percent) upon retirement under the

Plan Administrator’s “phantom account” approach. In

comparison, if John had simply been treated as a new

employee when he was rehired, his pension would have

entitled him to at least $3,500 annually ($50,000 × 1.4

percent × 5 years) upon his retirement. And the impact of

the “phantom account” may have been even more dramatic

with respect to some of the respondents in this case. See

Brief for Respondents 24 (describing how respondent Paul

Frommert erroneously received a report claiming that his

retirement benefits were $2,482.00 per month, before later

discovering that, because of the “phantom account,” his

actual monthly pension was $5.31 per month); see also

App. 63a.