Opposition Brief — Young v. Standard Oil

Supreme Quert, US.

FILED

NOV 14 1988

OL, JR,

»))

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a

No. 88-496

In The

Supreme Court of the United States

October Term, 1988

ry

Vv

PHILIP A. YOUNG, MAX GOSSARD,

ROBERT L. BROEKER, MARK BOKELMAN,

JAMES ROHLF, OLIVER E. MOLDESTAD,

LARRY GODEJAHN, EMERY PISTULKA

and ARTHUR REINSMA,

Petitioners,

We

STANDARD OIL (INDIANA) and

AMOCO OIL COMPANY,

Respondents.

ray

Vv

On Petition For Writ Of Certiorari To The

United States Court of Appeals For The Seventh Circuit

ray

Vv

RESPONDENTS’ BRIEF IN OPPOSITION

4)

Vv

STANLEY C. FicKE*

Cuar.es E. Bruess

OF

Barnes & THORNBURG

1313 Merchants Bank Building

11 South Meridian Street

Indianapolis, Indiana 46204

Telephone: (317) 638-1313

*Counsel of Record for Respondents

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

or call collect (402) 342-2831

i

QUESTIONS PRESENTED

1. Whether there is no sound reason to hold this case

for Firestone Tire d Rubber Co. v. Bruch, No. 87-1054,

cert. granted, 56 U.S.L.W. 3682 (U.S. 1988) because:

(a) the issue in Firestone is the proper standard for

judicial review under the Employee Retirement

Income Security Act of 1974 (‘‘ERISA’’) of the

plan fiduciary’s interpretation of ambiguous or

uncertain plan provisions;

(b) this case does not present such an issue but rather

involves plan provisions which explicitly disallow

plan benefits on the undisputed facts presented ;

and

(c) in contrast to Firestone, petitioners in this case

must invalidate or avoid the applicable plan pro-

visions in order to recover benefits.

2. Whether, in circumstances where the petitiones

plan participants had no accrued or vested rights to fu-

ture benefits under the terms of the existing benefit plan,

the respondent employer was prevented by ERISA or a

‘federal common law of contracts’’ from establishing a

new benefit plan prescribing a different eligibility con-

dition for any future benefits.

3. Whether, in circumstances where the terms of a

benefit plan do not contravene any statutory or regula-

tory requirement, ERISA permits judicial review of the

plan terms for substantive reasonableness. :

4, Whether, under ERISA, plan participants may

recover benefits contrary to explicit plan provisions on

the basis of ‘‘procedural’’ statutory violations that caused

no prejudice to any benefit right or other substantive

harm.

li

RULE 28.1 LISTING

At the time this action was commenced, respondent

Amoco Oil Company was a wholly owned subsidiary of

respondent Standard Oil (Indiana). In 1985, Standard

Oil (Indiana)’s name was changed to Amoco Corporation

and Amoco Oil Company became a wholly owned sub-

sidiary of Amoco Company, which is, in turn, a wholly

owned subsidiary of Amoco Corporation. Amoco Cor-

poration has no parent corporation. Non-wholly owned

subsidiaries or affiliates of Amoco Corporation, including

subsidiaries and affiliates of wholly owned subsidiaries,

include the following:

Southridge Park Associates

OK Tedi Mining Limited

3ennett/South Shore Association

Chicago Equity Fund 1985 Partnership

5836 W. Washington LTD. Partnership

33 North Lorel Limited Partnership

Midwest Club

Panorama Office Park IT

Tangley Oaks

Gene-Trak Systems, Ine.

Intelligenetics, Incorporated

Solare S.P.A.

Trout Lake Golf and Country Club

Detour Lake Mining Project

Rhodiaco Industries Quimieas Ltda

Amoco Fina N.V.

A. G. Intl. Chemical Company, Inc.

Singapore Petroleum Company, PTE., LTD.

Singapore Refining Company PTE., LTD.

iil

Cliffe Storage Limited

Kharg Chemical Company Limited

Petroleum Storage Limited

China American Petrochemical Company, LTD.

Samsung Petrochemical Company, LTD.

ACM Services, Ine.

Atlas Supply Company

Fertilizers of Trinidad & Tobago LTD.

Frontier Pipeline Company

Raven Ridge Pipeline Company

Chicap Pipe Line Company

Wyco Pipe Line Company

Kkma Oil Company

Gulf of Suez Petroleum Company

Rodeis Oil Company

Torsina Oil Company

Iran Pan American Oil Company

Sharjam LPG Company, Limited

Aimsa 8.A. DE C.V.

Amoco Exploration Zaire S.P.R.L.

H&R Industries

S.I. Tech. Ine.

iv

TABLE OF CONTENTS

Page

QUESTIONS PRESENIOY WN i

pe ad I ste a eat eee ea il

ga NES ae ig S88 big >, Sn Re Vv

PURE St ty | Seepnt mente eae as Ae hee ORS ee aCe re 1

STATEMEN? OF THE CASE 2. 1

ti ra ae 1

i: Ce Se 2

REASONS FOR DENYING THE WRIT WW ... 10

I. This Case Will Not Be Affected By And Should

Not Be Held For The Court’s Decision In Fire-

EN Bi Ne ntact cand eipan toons 11

II. ERISA Does Not Prevent An Employer From

Amending A Benefit Plan With Respect To Un-

accrued And Contingent Future Benefits 00000... 14

lil. Under ERISA, Plan Participants May Not Chal-

lenge Welfare Plan Provisions As Substantively

“Unreasonable” or “Arbitrary” 2... = wi

IV. Plan Participants Are Not Entitled To Benefits

Contrary To The Terms Of The Plan Based On

Procedural ERISA Violations Which Caused No

Prejudice To Any Benefit Right Or Any Other

punstantve Harm AeA eres 25

CONCLUSION 30

Vv

TABLE OF AUTHORITIES

Page

Cass:

Adcock v. Firestone Tire & Rubber Co., 616 F. Supp.

409 (M.D. Tenn. 1985), rev’d in part and aff’d in

part, 822 F.2d 623 (6th Cir. 1987) 19

Adcock v. Firestone Tire d& Rubber Co., 822 F.2d

623 (6th Cir. 1987) 12, 20, 27

Agro v. Joint Plumbing Industry Bd., 623 F.2d 207

(2d Cir. 1980) 19

Anderson v. Ciba-Geigy Corp., 759 F.2d 1518

(11th Cir.), cert. denied, 474 U.S. 995 (1985) 0. 27, 28

Anderson v. John Morrell & Co., 830 F.2d 872 (8th

ye a) 17, 20, 21

Baker v. Lukens Steel Co., 793 F.2d 509 (3d Cir.

| PAE SII Silo A 19

Bencivenga v. Western Pa. Teamsters and Em-

ployers Pension Fund, 763 F.2d 574 (3d Cir. 1985) .. 16

Blakeman v. Mead Containers, 779 F.2d 1146 (6th

+} NCR Sitter 24.0 12

Blau v. Del Monte Corp., 748 F.2d 1348 (9th Cir.

1984), cert. denied, 474 U.S. 865 (1985) 0 28, 29

Bruch v. Firestone Tire and Rubber Co., 828 }".2d

Ie (2G Cie. Sie eh eee 11, 12, 14, 18

Cattin v. General Motors Corp., 641 F. Supp. 591

(E.D. Mich. 1986). .................. 20

Deak v. Masters, Mates and Pilots Pension Plan,

821 F.2d 572 (11th Cir. 1987), cert. denied, 108

Sup. Ct. 698 (1988) ........ iret Eh ara Pree 19

Dhayer v. Weirton Steel Div. of Nat. Steel Corp.,

571 F. Supp. 316 (N.D. W. Va.), aff’d, 724 F.2d

406 (4th Cir. 1983), cert. denied, 467 U.S. 205

(1984) ............ 1 gal besmeeo desc tg ea enlneeane leone 18

vi

TABLE OF AUTHORITIES—Continued

Doughe rly v. Chrysl r Motors Corp., S40 I 2d 2

(6th Cir. 1988) 17. )

Elli nburg v. Bro¢ kway, Inc., 163 I vd LOO] (9th

Cir. 19085) 2v

lirestone Tire & Rubber Co. v. Bruch. No. 8&7-

1054, cert. granted, 56 U.S.L.W. 3682 (U.S.

1988) i 10, 11, 13, 14, 18, 28

Hickman v. Tosco Corp., 840 F.2d 564 (Sth Cir.

1988) ....... 17

Holland v. Burlington Indus., Inc., 772 F.2d 1140

(4th Cir. 1985), aff’d, 477 U.S. 901, cert. denied,

477 U.S. 903 (1986) 2, 24, oo

In re White Farm Equip. Co., 788 F.2d 1186 (6th

Cir. 1986) reine cecrabasisisoatislanatan 21

Jung v. FMC Corp., 755 F.2d 708 (9th Cir. 1985) 12, 29

Me tropolitan Life Ins. Co. v. Massachius: tts, 471

U.S. 724 (1985) 23

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58

(1987) l

Moore Vv. R: ynolds Me tals C'o. Pe 4 Program. 740

I.2d 454 (6th Cir. 1984), cert. denied, 469 U.S.

1109 (1985) 23

Norman v. United Mine Workers of America

Health and Ret. Funds, 755 F.2d 509 (6th Cir.

1985) ...... D4

Northe ast De pt. ILGWW HT alth and We lfare Fund

v, T amsters Local Union No. 229 Wee lfa ( I tnd,

764 F.2d 147 (38d Cir, 1985) 19

Pabst Brewing Co. v. Anger, 610 F. Supp. 214 (D.

Minn. 1985), aff'd, 784 F.2d 338 (Sth Cir. 1986)

TABLE OF AUTHORITIES—Continued

Phillips v. Amoco Oil Co., 799 F.2d 1464 (11th

Cir. 1986), cert. denied, 107 S. Ct. 1893 (1987) 0. =17

Sharron v. Amalgamated Ins. Agency Services,

iée., fee Fae oe Cee Oe. ee .

Simmons v. Diamond Shamrock Corp., 844 F.2d

517 (8th Cir. 1988) ened 2, 18, 19, 27, 29

Stanton v. Gulf Oil Corp., 792 F.2d 432 (4th Cir.

RRR ER a snes Neen fra ae VR Ro RATA 17

724 F.2d 406 (4th Cir. 1983), cert. denied, 467

ae EE RD dttincceenncinnat a Peace STI? 16, 17, 19, 20

Torimino v. United Food and Com. Workers Int’l

Union Indus. Pension Fund, 548 F. Supp. 1012

(E.D. Mo. 1982), aff’d, 712 F.2d 882 (8th Cir.

1983)... SE RT ae ODE FOS a RC ee A Se Ls SOR 24

United Elec., Radio and Mach. Workers v. Amcast

Indus. Corp., 634 F. Supp. 1135 (S8.D. Ohio 1986)... 19

United Ind. Flight Officers, Inc. v. United Air

Lines, Inc., 756 F.2d 1262 (7th Cir. 1985) oo. 17

United Mine Workers of America Health & Ret.

Funds v. Robinson, 455 U.S. 562 (1982) 200. 24

West v. Greyhound Corp., 813 F.2d 951 (9th Cir.

STATUTES AND RULEs:

28 U.S.C. § 1254(1) Se Leen ee a:

nuseane 1

29 U.S.C. § 186 ee suitanaensiceeeas ae

29 U.S.C. §§ 1001 et 8€Q. vvcccccncmmnnmmenernnnnnnnnnenn 1

Vili

TABLE OF AUTHORITIES—Continued

29 U.S.C. § 1002(1)-(2)

29 U.S.C. §§ 1022, 1024

29 U.S.C. § 1051-1061, 1081-1086

29 U.S.C. § 1104(1)

29 U.S.C. § 1132(a)(1)(B)

99 U.S.C. § 1133

29 C.F.R. § 2510.3-2

Supreme Court Rule 28.2

S.D. IND. R. 15(e)

OTHER AUTHORITY:

R. Stern, E. Gressman & S. Shapiro, Supr

Court Pra Pieg (Gth ed. LOSG )

Hide

> >

JURISDICTION

The judgment of the United States Court of Appeals

for the Seventh Cireuit (“Seventh Cirevit”) was entered

on June 23, 1988. The Petition seeks to invoke the juris-

diction of this Court to review the judgment under 28

U.S.C. § 1254(1). It is unclear whether the Petition meets

the 90-day jurisdictional limitation provided by 28 U.S.C.

§ 2101(¢c). The only affidavit of mailing served by coun-

sel for petitioners on the respondents was prepared and

served in advance of the mailing of the petition and does

not comply with the requirements of Supreme Court Rule

28.2. See R. Stern, E. Gressman & 8S. Shapiro, Supreme

Court Practice at pp. 305-06 (6th ed. 1986).

STATEMENT OF THE CASE

A. Proceedings Below.

This action was commenced on October 11, 1983 by

four of the petitioners in the Cireuit Court for Madison

County, Indiana, alleging a wrongful denial of severance

benefits under a benefit plan maintained by respondents

Amoco Oil Company (“Amoco”) and Standard Oil (In-

diana) (“Standard”). Amoco and Siandard removed the

action to the United States District Court for the South-

ern District of Indiana on the ground that the severance

plan was a welfare benefit plan within the coverage of

f the Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. §§ 1001 et seg., and, therefore, the

claims alleged necessarily arose under that federal stat-

ute! Petitioners thereafter filed a second amended com-

plaint which alleged claims under ERISA and added the

other petitioners as plaintiffs.

On February 28, 1986, after extensive discovery by

the parties, Amoco and Standard moved for summary

‘See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987).

1

)

a

judgment on all claims alleged by the second amended

complaint. After five extensions of time granted hy the

District Court, petitioners filed their response in opposi-

tion to the motion on October 14, 1986. The District

Court had an extensive evidentiary record before it on

the motion, consisting primarily of affidavits, excerpts

from discovery depositions and deposition exhibits filed

by the parties pursuant to S.D. IND. R. 15(c). After a

hearing on the motion on April 16, 1987, the District Court

entered an order setting forth extensive determinations of

uncontested facts and conclusions of law, and granted

summary judgment in favor of Amoco and Standard. (Pet.

App. at Al eft seg.) On appeal, the Seventh Cireuit af-

firmed the District Court’s judgment in all respects. (Pet.

App. at A25 et seq.)

B. Statement Of Facts

For a number of years prior to 1983, Amoco owned

and operated a Fertilizer & Pesticides Division (the “FE

& P Division’’). The F & P Division had over 800 em-

ployees and facilities in 14 States, including several fer-

tilizer processing plants, ammonia terminals and soil lab-

oratories, Torch Chemical (which operated agricultural

chemical distributorships), Trekker Chemical (which form-

ulated and manufactured specialty products) and more

than 350 retail fertilizer outlets.

Hach of the retail outlets in the I’ & P Division was

managed by an employee called a ‘*crop guide manager.’’

Some of the retail outlets also had a second full-time em-

,

ployee called a ‘helper’? or ‘*secondman.,’

,

Petitioners

were each employed in a retail outlet, either as a erop

guide manager or helper, in various locations in Indiana,

Minnesota and Ohio.

3

Because of an unsatisfactory return on investment,

due principally to changing supply and market conditions,

Amoco decided in 1982 to try to divest the F & P Division.

An initial effort to sell the Division as a going concern

through an investment banking firm was unsuccessful.

Thereafter, in July, 1982, Amoco’s management considered

and approved a proposal for Amoco to divest the F & P

Division and withdraw from the business. The proposal

in order of priority was (1) to try to sell the business as an

entity; (2) to try to sell the business in segments; and

(3) if and to the extent that sales were not possible, to

shut down the operations. Standard (Amoco’s corporate

parent) approved the divestiture proposal on July 20,

1982.

Over a period of several years prior to 1981, Standard

and Amoco had implemented a number of different sev-

erance policies. Effective April 1, 1981, Standard adopted

for itself and its subsidiaries the Severance Allowance

Policy of Standard Oil Company and Participating Com-

panies (the ‘1981 Severance Policy’’). The 1981 Sever-

ance Policy provided that it would apply only when a

company’s ‘‘management elects to apply [it] to a particen-

lar employee-reduction situation.’’ It also conferred

authority on management to designate categories of em-

ployees who would not be eligible to participate in situa-

tions where the Policy was otherwise implemented. The

1981 Severance Policy further provided that:

3. Even though the Policy may be in effect for a par-

ticular employee-reduction situation, an employee

will not qualify for a severance allowance under

the following circumstances:

+

g. Sale of facilities when the new owner offers

to the employee comparable employment as

determined by the Company.

(Pet. App. at A5)

During the spring of 1982, when divestiture of the

F & P Division was initially being considered, Amoco’s

management also began considering the possible implemen-

tation of the 1981 Severance Policy in connection with

such a divestiture. The cost of doing so was estimated

under several alternatives, including the petential exeln-

sion of employees at the retail outlets (pursuant to man-

agement authority to designate categories of eligible

employees under the Policy).

On August 2, 1982, after Standard’s approval of the

final Amoco proposal with respect to the Division (which

included selling and shutting dewn the Division in seg-

ments, if sale as an entity was not possible), Amoco sought

permission from Standard to create a different severance

policy to apply to the F & P divestiture:

The Severance Allowance Poliey currently in effeet

states that severance will not be payable if ‘tthe new

owner offers to the employees comparable employ-

ment as determined by the company.’* Because of

the nature of the fertilizer and pesticides business,

it is unlikely that potential buyers would provide

wages or the level of benefits comparable to those

presently offered by Amoco Oil. Under these condi-

tions, all present Fertilizer & Pesticides employees

would probably quality for severance benefits, regard-

less of employment opportunities with the new own-

ers. Such payments would amount to approximately

$6,200,000, In addition, it is conceivable that many

different new owners will be involved, making it dif-

fienlt to determine comparable employment and in

Viting possible litigation in the determination of com

parable employment.

4)

Acomo Oil recommends that a special Severance Al-

lowance Policy be adopted for the Fertilizer & Pesti-

cides divestiture as follows:

1.

Any present Amoco employee who is) offered

a position with a new owner will forfeit

severance consideration, regardless of salary,

benefits, or position.

Severance payments will be given to current

employees who are not offered employment

with the new owner, and to employees when

facilities are not sold and operations are dis-

continued.

Consent Retirement will be available to cur-

rent employees with 20 or more years of Re-

tirement Plan participation even if they do

not qualify for a severance allowance.

(Pet. App. at A6-A7)

After Standard agreed with this recommendation to

adopt a special severance policy for the F & P divestiture,

the Severance Allowance Policy of the Fertilizer & Pesti-

cides Division of Amoco Oil Company (‘‘F & P Severance

Policy’’) was created, effective August 1, 1982. It pro-

vided, inter alia, that:

B. Qualifications—Severance Allowance

5

An employee will qualify for a severance al-

lowance provided all of the following condi-

tions are met:

a. The employee becomes unemployed be-

cause: —

(1) The Company does not sell the facil-

ity and the operations are discon-

tinued, or

(2) The facility is sold by the Company

but the buyer does not offer employ-

ment to the individuals.

6

2. An employee will not qualify for a severance

allowance under the following circumstances:

a. Offered a job by the new owner of the

facility.

(Pet. App. at A7)

Amoco then promptly informed the F & P employees,

both orally and in writing, of the anticipated divestiture

and of the conditions under which severance would be paid.

Amoco said in a letter dated August 3, 1982, addressed

to all employees of the Division, that:

Amoco Oil Company will announce publicly tomorrow

that it plans to offer for sale its entire fertilizer and

pesticides marketing and supply system....

. Barring sale of the system as a whole, Amoco

plans to sell the system in regional segments....

If the system is sold as a whole or in regional seg-

ments, current employees may be offered employment

by the purchaser. Should such sales not occur or em-

ployees are not offered employment by the new own-

ers, Amoco will provide severance and if eligible, re-

tirement benefits to regular full-time employees who

must leave the company.

(Pet. App. at A8) Amoco also distributed to its employees

a press release, dated August 4, 1982, which stated in part:

‘*Amoco will provide severance and appropriate retire-

ment benefits to regular, full-time employees who are not

offered employment by the new owners and must leave

the company because of the sale.’’? (/d.)

In addition, in August, 1982, the Division employees

were provided copies of ‘*Questions and Answers About

Fertilizer and Pesticides Sale.’? This document stated,

inter alta:

3. Does this mean that the Wertilizer & Pesticides

facilities will be shut down?

7

Answer: Finding a suitable purchaser for a

business this large requires a lot of

time and effort. Active, profitable

fertilizer and pesticides operations will

not be shut down at this time. Ulti-

mately, we plan to get out of the busi-

ness.

6. Should a purchaser for the system, or parts of it,

be found and the purchaser offered Amoco Oil

employees jobs, would Amoco Oil provide the

regular full-time employees with severance?

Answer: If a purchaser is found and elects to

hire Amoco Oil’s current regular, full-

time employees, they would not be

eligible for severance pay.

7. If I reject a job offer from the new owner, will I

forfeit my severence benefits?

Answer: Yes. Severance benefits will be avail-

able only to regular, full-time em-

ployees, who are not offered a job.

(Pet. App. at A7-A8) Amoco also held meetings with the

F & P employees in early August, 1982 to discuss the di-

vestiture and the conditions under which severance would

be paid. The employees were told at these meetings that

severance would not be paid if they were offered employ-

ment by any purchaser of the facilities where they worked.

After further efforts to sell the Division as an entity

were unsuccessful, Amoco began selling and shutting down

the Division in regional segments. In early 1983, Amoco

(1) sold the processing plant in Rochelle, Georgia to

Chemical Enterprises, Ine. and sold or shut down the re-

tail outlets in Georgia; (2) sold the Brunswick, Missouri

processing plant and all retail outlets in Missouri and

Kansas to SCF, Inc.; and (3) sold the processing plant at

|

8

Mt. Carmel, Illinois and the retail outlets served by that

facility to Triple T, Ine.

Amoco thereafter received an offer for the remainder

of the F & P Division from The Scoular Company and,

on June 15, 1983, entered into a purchase and sale agree-

ment with Scoular and The Cropmate Company (a sub-

sidiary created by Scoular). The sale agreement pro-

vided, inter alia, that the sale would he closed on August

31, 1983, and that before the closing Cropmate would pro-

vide Amoco with a list of those Ff & P employees to whom

Cropmate would offer employment. (Pet. App. at A9-

A10)

By letter dated June 20, 1983, Amoco told the remain-

ing & P employees of the sale agreement wita Seoular

and Cropmate, that the sale closing would be August 31,

1985, and that ‘‘the effective date of employment for those

employees who are offered and accept employment’’ with

Cropmate would be September 1, 1983. (Pet. App. at

All) In July, 1983, Amoco held termination benefit

meetings with the remaining F & P employees. The em-

ployees were again told that severance benefits would not

be paid to employees who were offered a job. The em-

ployees were also told how severance benefits fer eligible

employees would be computed according to the benefit

schedule set forth in the fF & P Severance Poley. (Pet.

App. at A12)

Seoular’s original intention, as communicated to

Amoco, was that it would offer employment toe most of

the k & P employees, and that it would also offer most

existing crop guide managers the opportunity to purchase

from and lease back to Cropmate the retail outlets where

they were presently employed. After the purehase and

9

sale agreement was executed, Cropmate reviewed the cur-

rent crop guide managers to determine which ones Crop-

mate wanted to be part of the new organization. Those

crop guide managers and existing helpers that Cropmate

wanted to become crop guide managers for Cropmate were

then invited to meetings in July, 1983.

Petitioners made numerous allegations regarding what

was said at these meetings about employment with Crop-

mate and the proposed terms of the retail outlet purchase

and leaseback. In view of the undisputed facts regarding

petitioners’ employment with Cropmate after the sale, the

courts below held the factual disputes regarding what was

said at these meetings to be immaterial to the legal issues

presented. (Pet. App. at Al11-A12, A40-A41)

The sale closing between Amoco, Scoular and Crop-

mate was held on August 31, 1983. All of the petitioners

except Moldstad became employees of Cropmate on Sep-

tember 1, 1983, in the same positions, at the same salary,

and without any agreement to purchase and lease back a

retail outlet as a condition to that employment. (Pet. App.

at A12-A13) Moldstad refused to work for Cropmate.

(Pet. at 7)?

Cropmate terminated no one who did not want to buy

a retail-outlet as of September 1, 1983. Petitioners claimed,

2Six of the petitioners were still employed by Cropmate

when they were deposed in this action. Another testified that

he quit his job with Cropmate after two weeks to accept other

employment. The other testified that he left employment with

Cropmate five months later when Cropmate found a “potential’”’

purchaser for his retail outlet and that he returned to full-time

farming as he had already planned to do. After beginning em-

ployment with Cropmate, three of the petitioners later decided

to purchase and lease back their retail outlets (in November,

1983 and February and April, 1984, respectively). (Pet. App. at

A12-A13)

10

however, and Amoco and Standard accepted as true for

purposes of their summary judgment motion, that a crop

guide manager who did not purchase and lease back his

retail outlet was at risk that Cropmate would later sell

it to another buyer who might, in turn, decide not to re-

tain the existing manager.

ray

Vv

REASONS FOR DENYING THE WRIT

The Petition claims that this case “raises many of the

same basic questions under ERISA concerning the stan-

dard of review for ‘welfare benefits’” that are before this

Court in Firestone Tire & Rubber Co. v. Bruch, No. 8T-

1054, cert. granted, 56 U.S.L.W. 3682 (U.S. 1988). (Pet.

at 11) That is not so. This ease and Firestone both in-

volve a denial of severance benefits in a “sale of business”

situation where the plan participants were employed by

the purchaser of the business. However, the similarity

between this ease and Firestone begins and ends at that

puint. Regardless how this Court decides the issue pre-

sented in Firestone, that would not affect the result here.

Firestone presents the issue whether the plan partici-

pants are entitled to severance under the terms of the

benefit plan and the proper standard for judicial review

of that issue. In this case, by contrast, petitioners are

not eligible for benefits unless they may override the

terms of the benefit plan—e.g., unless they may challenge

3Of the 265 retail outlets purchased by Cropmate from

Amoco, no more than six were resold to third parties other than

employees.

The extensive undisputed facts regarding the severance bene-

fit claims petitioners filed with Amoco and the plan adminis-

trator’s and fiduciary’s processing of those claims are accurately

summarized in the District Court's opinion and will not be re-

peated here. (See Pet. App. at A13-A16)

. .

11

the “job offer” term of the F & P Severance Policy as

substantively “unreasonable” or prevail on claims that

ERISA did not permit the establishment of the I) & P

Severance Policy in place of the 1981 Severan-e Policy

to govern this divestiture. The Seventh Circuit’s decision

on these quite different issues is correct, conforms with

the decisions of other cireuits, and does not warrant fur-

ther review.

I. This Case Will Not Be Affected By And Should

Not Be Held For The Court’s Decision In Fire-

stone v. Bruch.

ERISA creates a cause of action for a plan partici-

pant or beneficiary “to recover benefits due to him under

the terms of his plan... .” 29 U.S.C. § 1132(a) (1) (B)

(emphasis added). In Firestone Tire d& Rubber Co. v.

Bruch, No. 87-1054, this Court has granted certiorari to

consider the proper standard for judicial review under

that sectron. Specifically, the issue in Firestone is the

proper standard for review of the plan fiduciary’s denial

of benefits based upon an interpretation of ambiguous or

uncertain plan provisions. In contrast to other circuits

which have applied a deferential “arbitrary and caprici-

ous” standard of review, the Third Cireuit in Firestone

held that ordinary principles “governing construction of

contracts” should apply. Bruch v. Firestone Tire and Rub-

ber Co., 828 F.2d 134, 138, 145 (3d Cir. 1987). Although

the Seventh Circuit here, following its earlier precedent,

said that the “arbitrary and capricious” standard governs

review of denials of benefit claims under ERISA, a con-

trary conclusion by this Court in Firestone would not

alter the result in this ease.

Firestone, as well as many other cireuit court of ap-

peals decisions involving severance benefit claims, all in-

12

volved benefit plans which generally provided that sev-

erance would be paid when employment with the company

was terminated; those plans did not specifically address

the sale-of-business situation and make clear whether bene-

fits would be paid if a participant continued to be em-

ployed by a-purchaser of the business. E.g., Bruch v. Fire-

stone, S28 F.2d at 146; Simmons v. Diamond Shamrock

Corp., 844 F.2d 517, 522-25 (Sth Cir. 1988): Adcock v. Fire-

stone Tire & Rubber Co., 822 F.2d 623, 624, 626-27 (6th

Cir. 1987): Blakeman v. Mead Containers, T79 F.2d 1146,

1148-49 (Gth Cir. 1985); Holland v. Burlington Indus.,

Inc., 772 F.2d 1140, 1144 n.2, 1149 (4th Cir. 1985), aff'd,

477 U.S. 901, cert. denied, 477 U.S. 903 (1986); Jung v.

FMC Corp., 755 \'.2d 708, 712-13 (9th Cir. 1985). Thus,

the issue in those cases was whether the fiduciary had

erroneously interpreted the plan in determining that bene-

fits would not be paid to employees who continued their

employment with the new owner of the business. In such

situations involving uneertain or ambiguous plan provi-

sions, the difference between an “arbitrary and capricious”

standard and a standard less deferential to the plan fi-

duciary’s interpretation of the plan may well lead to a

different result.

However, no such issue is fairly presented in this

case. The IF & P Severance Policy here explicitly ad-

dresses the “sale-of-business” situation and explicitly pro-

vides that an employee who is “offered a job by the new

owner of the facility” is ineligible for benefits. (Pet. App.

at AT) There is no ambiguity or uncertainty in that lan-

evuage and its plain meaning cannot be avoided regardless

of the standard of review applicable to claims to recover,

in the words of the statute, “benefits due .. . wander the

terms of [the] plan... 2% 29 U.S.C. $1152(a)(1)(B)

13

(emphasis added). Indeed, the District Court expressly

stated that “no issue of plan ‘interpretation’ is presented

here; the I’ & P Severance Policy expressly provides that

employees are not eligible for severance if they are ‘[o]f-

fered a job by the new owner of the facility.’” (Pet. App.

at A22) While it does not repeat that statement verbatim,

the Seventh Cireuit’s opinion also shows that no issue

of plan interpretation is presented here. (See id. at A40-

A42)4

Rather, although the Petition frequently confuses or

obscures the issues in an effort to relate this case to Fire-

stone, the question in this case is whether petitioners may

avoid or override the terms of the benefit plan. As they

repeatedly argued in the courts below, and as is demon-

strated by those courts’ opinions, petitioners could recover

henefits only by prevailing on claims that:

(a) ERISA or a “federal common iaw of con-

tracts” prevents an employer from amending a bene-

fit plan with respeet to unaecrued and contingent fu-

ture benefits:

4Petitioners claim there is a “disputed” issue of fact ““wheth-

er any employment offers were made by Cropmate.” (Pet. at

23) That contention is incredible given the undisputed facts

that eight of them were employed by Cropmate immediately

following the sale (in the same jobs, at the same salary, and

without any agreement to purchase and lease back their retail

facilities) and the ninth admits he refused to work for Cropmate.

So far as petitioners mean by that contention that they were

not offered “secure” or “permanent” employment with Crop-

mate, this is not a disputed “fact’’ issue but rather, as the

Seventh Circuit held, an attack on the substantive reasonable-

ness of the terms of the severance policy. See Part III, infra.

And even if there were some disputed issue of fact, Firestone

v. Bruch does not, as the Third Circuit noted, involve the issue

of the proper standard of review under ERISA of ‘‘a determina-

tion of fact by a plan administrator.” 828 F.2d at 144 n.9.

14

(b) ERISA permits judicial review of the terms

of welfare benefit plans for substantive “unreason-

ableness” or “arbitrariness”; or

(ce) plan participants may recover benefits con-

trary to the terms of the plan based on “procedural”

ERISA violations which caused no prejudice to any

benefit right or any other substantive harm.

None of these issues was decided or is presefhted in

Firestone v. Bruch. The Seventh Cireuit decided each of

them correctly and in conformity with other cireuit court

of appeals decisions, and none warrants further review

by this Court.

II. ERISA Does Not Prevent An Employer From

Amending A Benefit Plan With Respect To Un-

accrued And Contingent Future Benefits.

Although it is now confusingly intertwined with other

issues in the Petition, the core of petitioners’ claim in the

District Court was simply this: (1) their jobs with Crop-

mate were not secure unless they agreed to purchase and

lease back their retail outlets; (2) they therefore (alleged-

ly) would have qualified for benefits under the 1981 Sev-

erance Policy’s provision that severance would be paid to

employees who were not offered “comparable employ-

ment”; and (3) respondents acted illegally in establishing

the F & P Severance Policy to delete the condition that

the offered employment be “comparable.”

It is undisputed that the F & P Severance Policy was

established in August, 1982, long before the sale of the

portion of the Division to Scoular and Cropmate and more

than a vear before petitioners’ employment with Amoco

SNo such “plan amendment” issue was presented or de-

cided in Bruch v. Firestone, as the Third Circuit specifically

noted. See 828 F.2d at 144.11

15

was terminated. When that new Policy was established,

petitioners were not entitled to benefits under the plain

terms of the 1981 Severance Policy, and it was unknown

whether they would in the future qualify for benefits un-

der the terms of either the 1981 Policy or the IX & P Pol-

icy. In particular, no one knew whether the F & P Divit

sion would be sold as an entity, sold in segments, shut

down or some combination of the latter two possibilities.®

It is equally clear that ERISA permitted respondents

to establish the I & P Policy with its altered criterion for

any future severance benefits. There is no basis in the

statute or other law for holding the new Policy retro-

actively invalid based on events which occurred there-

after and particular facts pertaining to these particular

employees’ Jobs with Cropmate.

As the courts below noted, ERISA divides employee

benefits into two eategories: (1) “retirement” benefits;

and (2) “welfare” benefits, such as medical and disability,

and including severance benefits of the type at issue here.

29 U.S.C. § 1002(1)-(2); 29 C.FLR. § 2510.3-2. For most

retirement benefits, ERISA imposes minimum require-

ments for the accrual, vesting and non-forfeitability of

benefits under pension plans, as well as for the funding

of such plans. 29 U.S.C. §§ 1051-1061, 1081-1086. How-

ever, Congress expressly exempted welfare benefits from

these aecrual, vesting and funding requirements. 20 U.S.C.

1051, 1081(a)(1). Thus, welfare benefits (as well as

so-called “ancillary” retirement benefits such as early re-

tirement) may be made entirely “eoutingent™ and need

not be acerued, vested and made non-forfeitable. Aecord

ingly, ail emiplovee’s inchoate “interest” in such contingent

Accordingly, petitioners’ assertion that the benefit plan

changes” here were “retroactive” (Pet. at 28) is simply wron

>

on the undisputed tacts of this case

16

benefits may be lost if his employment is terminated or

the benefit plan is amended or terminated before he be-

comes eligible under the plan’s terms for the payment of

such benefits. E.g., Sutton v. Weirton Steel Div. of Nat.

Steel Corp., 724 F.2d 406 (4th Cir. 1983), cert. denied, 467

U.S. 1205 (1984); Bencivenga v. Western Pa. Teamsters

and Employers Pension Fund, 763 F.2d 574 (3d Cir. 1985).

Petitioners’ various contentions that Amoco and Standard

acted illegally in creating the IX & P Severance Policy to

govern the divestiture simply attempt to extend to welfare

benefit plans the sorts of accrual, vesting and non-for-

feitability requirements which Congress determined to re-

quire only of retirement plans.

Petitioners’ primary contention is that Amoco and

Standard breached a “fiduciary duty” in changing the eli-

gibility condition for future benefits. However, an em-

ployer does not act in a fiduciary capacity or owe a fi-

duciary duty in creating, amending or terminating a bene-

fit plan. As the Fourth Circuit held in rejecting claims that

the employer had breached a fiduciary duty by amending

plans to reduce severance and early retirement benefits

for employees who continued to work for the purchaser in

a sale-of-business context, “[t]he aecrued benefits secured

by ERISA do not encompass unfunded, contingent early

retirement benefits or severance payments. The Act was

not designed to prohibit modification of these ancillary

benefits.” Sutton v. Weirton Steel Div. of Nat. Steel Corp.,

724 F.2d at 410. Accordingly, although the employer in that

case, as in this one, was the plan fiduciary:

National, in its capacity as a fiduciary, did not violate

ERISA. Congress authorized an employer to admin-

ister its pension plan, and in the discharge of its

duties with respect to the plan, the employer must

satisfy the exacting fiduciary standards imposed by

17

ERISA. Congress, however, has not prohibited an

employer who is also a fiduciary from exercising the

right accorded other employers to renegotiate or

amend, as the case may be, unfunded contingent bene-

fits payable before normal retirement age. The

changes, accomplished in this manner, are not to be

reviewed by fiduciary standards.

Id. at 410-11 (emphasis added).

Other decisions by the circuit courts of appeals, in-

eluding the Seventh Circuit in this ease (Pet. App. at A36-

A37), have uniformly followed the decision in Sutton.

E.g., Anderson v. John Morrell & Co., 830 F.2d 872, 875-

76 (8th Cir. 1987); West v. Greyhound Corp., 813 F.2d

951, 954-55 (9th Cir. 1987); Phillips v. Amoco Oil Co., 799

I'.2d 1464, 1471 (11th Cir. 1986), cert. denied, 107 S. Ct.

1893 (1987); Stanton v. Gulf Oil Corp., 792 F.2d 432, 435

(4th Cir. 1986); United Ind. Flight Officers, Inc. v. United

Air Lines, Inc., 756 F.2d 1262, 1268-69 (7th Cir. 1985).

See also Dougherty v. Chrysler Motors Corp., 840 F.2d

2, 3-4 (6th Cir. 1988); Hickman v. Tosco Corp., 840 F.2d

064, 566 (Sth Cir. 1988). As the Eleventh Circuit reiterated

in Phillips v. Amoco Oil:

ERISA simply does not prohibit a company from

eliminating previously offered benefits that are nei-

ther vested nor accrued. Moreover, ... ERISA...

envisions that employers will act in a dual capacity

as both fiduciary to the plan and as employer. ERISA

does not prohibit an employer from acting in accor-

dance with its interests as employer when not admin-

istering the plan or investing its assets.

799 F.2d at 1471.

If the contrary were true, an employer could never

amend or terminate a benefit plan to reduce or eliminate

contingent future benefits. Indeed, every business deei-

sion arguably affecting future benefits would have to be

aaa

18

made solely in the interest of plan participants and bene-

ficiaries. See Dhayer v. Weirton Steel Div. of Nat. Steel

Corp., 571 F. Supp. 316, 328-29 (N.D. W. Va.), aff’d, 724

F.2d 406 (4th Cir. 1983), cert. denied, 467 U.S. 1205 (1984).

There is no basis in the statute for courts to pick and

choose among plan amendments and terminations under

a ‘fiduciary’? theory, upholding some and disallowing

others. Where fiduciary duties are owed under ERISA,

all actions must be taken ‘‘solely in the interest of the

participants and beneficiaries ... .’’? 29 U.S.C. § 1104(1)

(emphasis added). If lines are to be drawn in this area

and particular types of amendments and terminations for

future benefits to be disallowed, that is a task for Con-

gress.

The Petition seeks to confuse the legal issues, arguing

in favor of the Third Cireuit’s decision in Firestone and

for a ‘‘good faith’’ rather than an ‘‘arbitrary and capri-

cious’’ standard. (See, e.g., Pet. at 15-17) As stated -

above, however, whether an ‘‘arbitrary and capricious,”’

‘good faith’’ or any other standard is the proper one, that

issue involves only judicial review of a denial of benefits

under the terms of a plan. It is simply inapplicable to

the issue whether an employer may amend a plan with

respect to future benefits.

For example, petitioners assert that one factor to be

considered under the supposed ‘‘good faith’’ test is

‘‘fw]hat has been the past practices of the employer in

interpreting and implementing the benefit plan.’’ (Pet. at

16) While prior practices and interpretations of a given

plan are relevant to judicial review of a denial of benefits

under that same plan (under either an ‘‘arbitrary and

capricious’’ or a more stringent standard for review, com-

pare Bruch v. Firestone, 828 F.2d at 147 with, e.g., Sim-

19

mons v. Diamond Shamrock, 844 F.2d at 523; Adcock v.

l'irestone Tire, 822 F.2d at 626), it is patently irrelevant

to the issues of the legality of amending the plan or an

entitlement to benefits under the plan as amended. The

very point of a plan amendment is to change the terms

under which benefits will be provided in the future.’

Petitioners also assert that Amoco and Standard were

barred by a ‘‘federal common law’’ of contracts and/or

estoppel from establishing the F & P Severance Policy in

place of the 1981 Severance Policy. (See Pet. at 19-20)

As shown by petitioners’ leading (but consistently mis-

cited) authority for that proposition, Adcock v. Firestone

Tire & Rubber Co., 616 F. Supp. 409 (M.D. Tenn. 1985),

rev'd m relevant part and aff’d in part, 822 F.2d 623 (6th

Cir. 1987), that contention, like the discredited ‘‘fiduciary’’

theory, seeks to impose on welfare benefits the vesting

and aeceural requirements which Congress decided to re-

quire only for core retirement benefits. See 616 F. Supp.

7Petitioners assert that “[n]umerous circuits have expanded

the good faith/bad faith issue not only in the area of admin-

istration of plans but amendments and terminations thereof,”

but none of the cases cited to support that proposition in fact

does so. (See Pet. at 16 and cases cited) Some cases cited at

other points in the Petition did involve plan amendments but

are inapposite here because they involved both pension plans

and amendments promulgated by plan fiduciaries acting in

their capacities as such. E.g., Argo v. Joint Plumbing Industry

Bd., 623 F.2d 207 (2d Cir. 1980); Northeast Dept. ILGWU Health

and Welfare Fund v. Teamsters Local Union No. 229 Welfare

Fund, 764 F.2d 147 (3d Cir. 1985); Deak v. Masters, Mates and

Pilots Pension Plan, 821 F.2d 572 (11th Cir. 1987), cert. denied,

108 Sup. Ct. 698 (1988). Without noticing that crucial distinc-

tion, the court in Baker v. Lukens Steel Co., 793 F.2d 509 (3d

Cir. 1986), did apply the analysis in Argo to a plan amendment

by the employer. However, the result reached in Baker is fully

consistent with the result in this and the other cases following

Sutton. See 793 F.2d at 513-14.

20

at 413-19, 423-24.8 Judicial creation of a ‘‘federal common

law of contracts’’ to bar terminations and amendments of

welfare benefit plans eliminating or reducing future bene-

fits would contravene both the statutory scheme and the

settled rule that ‘‘[a]n employer may change such bene-

fits ....’? Sutton v. Weirton Steel Div. of Nat. Steel

Corp., 724 F.2d 406, 410 (4th Cir. 1983), cert. denied, 467

U.S. 1205 (1984). See Anderson v. John Morrell & Co.,

830 F.2d 872, 876-77 (Sth Cir. 1987); United Elec., Radio

and Mach. Workers v. Amcast Indus. Corp., 634 F. Supp.

1135, 1142-43 (S.D. Ohio 1986) (rejecting both ‘‘fiduciary”’

and ‘‘federal common law of contracts’’ theories as in-

consistent with the statute); cf. Dougherty v. Chrysler

Motors Corp., 840 F.2d 2, 3-4 (6th Cir. 1988) (holding a

similar contention inconsistent with the statute and im-

plicity an attempt to assert a state law claim that is pre-

empted by ERISA).

Moreover, petitioners would not be entitled to bene-

fits here even if plan amendments or terminations with

respect to unaccrued future benefits were controlled by

a ‘‘federal common law of contracts.’* The 1981 Sever-

ance Policy (like each of the preceding severance policies)

provided that:

The Company reserves the right to amend, modify,

suspend, or discontinue the Policy and any such action

shall apply to existing as well as future employees.

(Pet. App. at A20) Where this power to amend or abolish

is reserved in the plan, there is no basis in ‘‘contract law’’

or ‘‘estoppel’’ for holding that the employer may not

exercise it. Cattin v. General Motors Corp., 641 F. Supp.

8On appeal in Adcock, the Sixth Circuit reversed this por-

tion of the district court decision on other grounds, stating that

if it were to reach the issue on the merits, the “district court’s

contract analysis’ would “likely . .. be reversed ... .” 822

F.2d at 627 & n.13 (citation omitted).

21

991, 595-96 (E.D. Mich. 1986); see also Anderson v. John

Morrell & Co., 830 F.2d 872, 876-77 (8th Cir. 1987); In re

White Farm Equip. Co., 788 F.2d 1186, 1190-93 (6th Cir.

1986) .°

III. Under ERISA, Plan Participants May Not Chal-

lenge Welfare Plan Provisions As Substantively

‘‘Unreasonable’’ or ‘‘Arbitrary’’.

In the courts below, petitioners argued that they

should receive severance benefits because their jobs with

Cropmate were ‘‘temporary’’ and not sufficiently seeure—

i.e., if they did not later purchase their retail outlet and

lease it back to Cropmate, there was a risk that Cropmate

might find another buyer who would in turn decide not to

retain the existing crop guide manager. The Petition ap-

parently advances the same contention in the guise of

claiming that petitioners were really not ‘‘offered jobs”’

by Cropmate. (The contention is otherwise unintelligible

given the undisputed fact that they were employed by

Cropmate.) Petitioners also advance a similar contention

in claiming that judicial review of the denial of severance

should consider whether ‘‘the sale contract between the

seller and purchaser binds the purchaser to offer con-

tinued benefits including severanee.’’ (Pet. at 17)

°Even apart from this reserved power to amend or abolish

the 1981 Severance Policy, petitioners’ ‘“contract’’ contention

ignores that there was no unilateral entitlement to severance

benefits under that Policy in any event. Rather, benefits under

the 1981 Policy depended upon a management decision to im-

plement the policy “for a particular employment reduction sit-

uation,” and further gave management discretion to designate

the eligible categories of employees if the Policy were imple-

mented. (Pet. App. at A5) While the F & P Policy changed the

eligibility criterion in the sale-of-facility situation to delete the

requirement that the job offered be ‘‘comparable,” it at the

Same time guaranteed severance to all employees who were not

offered jobs whereas there was no such guarantee under the

1981 Policy.

22

However, under the express terms of the F & P Sev-

erance Policy here, the applicable trigger for benefits is

only whether the individual employee was ‘‘offered a job’’

by a purchaser of his facility. The Policy’s criteria do

not include an analysis of the relative ‘‘security’’ of a

given job, nor the length of time the employee keeps a

new job, nor for what reasons an employee might subse-

quently choose to leave, or be forced to leave, the new job.

It contains no requirement that Amoco re-determine a

former employee’s right to severance benefits if his em-

ployment with the purchaser did not endure, or do so if

the cause of a subsequent employment termination was

not the result of the employee’s fault or choice.'

In these circumstances, petitioners’ ‘‘job security”’

contentions simply amount to a substantive attack on the

terms of the severance policy itself, implicitly claiming

that it ought to be more ‘‘finely tuned’’ to take such fac-

tors into account. However, ERISA does not require sev-

erance plans to include such additional factors and con-

siderations. The statute simply does ‘‘not regulate the

True, given the “unemployment compensation’ purpose

of severance pay, windfall gains and losses can occur in individ-

ual cases. A particular employee not offered a job by the pur-

chaser of his facility might have alternative employment already

arranged by the time of his termination with Amoco, or secure

alternative employment promptly thereafter, thus receiving sev-

erance pay but not really “needing” it in light of its purpose.

By contrast, another employee, although offered a job by the

purchaser, might lose the job for any number of reasons and

thus have a “need” for severance pay within a short time after

the sale. Such possibilities in particular cases notwithstanding,

however, Amoco chose and implemented an administratively

simple policy that did not require it to police the employees’

subsequent employment relationships with other employers or

to re-determine severance eligibility based upon future events.

Under the F & P Severance Policy, severance benefits are pay-

able or not depending upon a single fact at the time of sale

and termination of the employment relationship with Amoco—

whether the employee was offered a job by the purchaser.

23

substantive content of welfare-benefit plans.’’ Metropoli-

tan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 732 (1985).

The general ‘‘arbitrary and capricious”’ standard of

review employed by most circuits has frequently led plan

participants to challenge as ‘‘arbitrary’’ plan provisions

which result in ineligibility for benefits in particular cir-

cumstances. Such contentions misapprehend the role of

the courts and judicial review under ERISA. ERISA pro-

vides only for judicial review of the denial of a benefit

claim (whether under an ‘‘arbitrary and capricious’’ or

any other standard of review) given the terms of the bene-

fit plan. 29 U.S.C. §11382(a)(1)(B). Except in areas

where the statute imposes substantive requirements for

plans—and it contains no such requirements for welfare

benefit plans—participants may not challenge the terms

of the plan itself as ‘‘arbitrary’’ or ‘‘unreasonable.’’

Courts are not authorized to redraft plan eligibility re-

quirements to provide benefits for particular employees

based on claims of ‘‘unfairness,’’ to ‘‘better accomplish

the purpose’”’ of the benefit plan, or to avoid ‘‘harsh re-

sults’? caused by the application of an eligibility rule to

individual circumstances.

There is no disagreement among the circuits on these

principles. For example, in Moore v. Reynolds Metals

Co. Ret. Program, 740 F.2d 454 (6th Cir. 1984), cert. de-

nied, 469 U.S. 1109 (1985), a plan provision requiring a

five-month waiting period for disability retirement result-

ed in a loss of all retirement benefits by a dependent

spouse of an employee who became disabled but died before

the end of the waiting period. The court held that the

spouse eould not attack the plan provision as illegally

‘‘arbitrary and capricious’’:

24

[O]nce a plan is established and is governed by the

requirements of ERISA, courts may review a deci-

sion by trustees to deny benefits .... Such review,

however, is limited to a determination of whether the

trustees’ actions in administering or interpreting a

plan’s provisions are arbitrary and capricious... .

Courts ... have not been authorized by Congress to

impose upon employers the court’s subjective beliefs

concerning the relative value of benefits which em-

ployers have chosen voluntarily to confer upon em-

ployees.

740 F.2d at 457 (emphasis added; citations omitted). <Ac-

cord, e.g., Norman v. United Mine Workers of America

Health and Ret. Funds, 755 F.2d 509, 510 (6th Cir. 1985) ;

Sharron v. Amalgamated Ins. Agency Services, Inc., 704

F.2d 562, 569 (11th Cir. 1983); Torimino v. United Food

and Com. Workers Int’l Union Indus. Pension Fund, 548

F. Supp. 1012, 1014-15 (E.D. Mo. 1982), aff’d, 712 F.2d

882 (8th Cir. 1983); cf. United Mine Workers of America

Health & Ret. Funds v. Robinson, 455 U.S. 562, 573-76

(1982) (court has no authority under 29 U.S.C. § 186 to

review for substantive reasonableness terms of pension

plan created pursuant to collective bargaining agreement).

Accordingly, the courts below correctly rejected peti-

tioners’ contentions which implicitly challenge the substan-

tive content of the severance policy here. (Pet. App. at

A20-A21, A42) Claims by petitioners that their employ-

ment with Cropmate was ‘‘insecure’’ are legally imma-

terial under ERISA. Because they were in fact employed

by Cropmate, they are not eligible for severance under the

express terms of the Policy, notwithstanding any claim

that the plan’s term is ‘‘unreasonable”’ or ‘‘arbitrary”’ in

application to their ind: vidual situations.

Petitioners’ argument that they should receive sever-

ance from Amoco because Cropmate did not have a sever-

25

ance plan of its own suffers the same legal deficiencies.

Under the F & P Severance Policy, the criterion for sev-

erance is—and is only—whether the employee is offered

a job by a purchaser of the facility. There is no term pro-

viding that severance will be paid if the purchaser has no

severance plan and the employee loses his job in the future.

Under ERISA, that is the end of the matter. There is no

requirement that a benefit plan contain such additional

criteria.

IV. Plan Participants Are Not Entitled To Benefits

Contrary To The Terms Of The Plan Based On

Procedural ERISA Violations Which Caused No

Prejudice To Any Benefit Right Or Any Other

Substantive Harm.

Petitioners’ final argument, albeit confusingly inter-

spersed with their other contentions, is that they should

receive severance benefits because respondents violated

disclosure and other ‘‘procedural’? ERISA requirements.

This argument is based upon numerous ‘‘factual’’ asser-

tions contrary to the undisputed evidence of record and

is refuted by uniform case law from all cireuits which have

considered the issue.

The Petition asserts that ‘‘Respondents totally ig-

nored the ERISA mandates of disclosure and all other

applicable procedures, especially the provision of a mean-

ingful claims procedure as mandated in 29 U.S.C. § 1133.’

(Pet. at 17) This contention regarding the ‘‘claims pro-

cedure’? and ‘‘29 U.S.C. 4 1133’’ is squarely contradicted

by the terms of the F & P Severance Policy which, al-

though not quoted in the District Court’s opinion, estab-

lished the required procedure. It is also refuted by the

uncontradicted evidence, detailed in the District Court’s

opinion, demonstrating that petitioners’ claims for sever-

26

ance benefits were processed properly and in the ordinary

course. (See Pet. App. at A14-A16)

Petitioners also urge that they were not given a sum-

mary plan description for severance benefits as required

by 29 U.S.C. §§ 1022, 1024. However, the undisputed evi-

dence establishes that in early August, 1982, within days

after the divestiture plan was approved and the F & P

Severance Policy was created, petitioners were repeatedly

told, both orally and in writing, of the material facts—.e.,

that Amoco would try to sell the F & P Division and in

any event planned eventually to leave the business, that

severance benefits would be paid to employees who were

not offered employment by any purchaser of their facility,

and that severance would not be paid to employees who

were offered a job. See pp. 5-7, supra.

Amoco and Standard disagree with the Seventh Cir-

cuit’s statement that:

[T]he employees were not made aware that they were

now ineligible for benefits if they received any offer

of employment from a potential purchaser rather than

an offer of comparable employment, as previously set

forth in the 1981 severance policy. Nor did a iater

press release or a “Question and Answer” brochure

make this clear.

(Pet. App. at A29; emphasis in original). The written

documents specifically stated the material terms of the

F & P Severance Policy using the identical words: That

severance (1) would be paid to employees who were “not

offered employment” by a purchaser and (2) would not

be paid to employees who were “offered a job.” See pp.

5-7, supra. And as one of the petitioners testified, the em-

ployees were also orally told that:

[I}f you were offered a job with the new company

you wouldn’t receive severance, if you’re not offered

27

a job, you would receive. You wouldn’t receive if you

were offered a job, you would receive if you weren't.

In any event, petitioners’ submitted no evidence that,

after these oral and written disclosures in August, 1982,

any of them “misunderstood” the “job offer” rule and

believed that he would receive severance if he was not

offered a “comparable” job. Nor is there evidenee that

petitioners’ benefit rights were in any way prejudiced by

such a misunderstanding, or even that they continued their

employment with Amoco rather than leaving the eom-

pany based upon such a misunderstanding. Nor is there

evidence of any substantive harm or prejudice to peti-

tioners’ benefit rights based upon a failure to deseribe

the severance policy in a document entitled “summary plan

description.” (See Pet. App. at A21) In sueh cireum-

stances, the circuit courts of appeals have repeatedly and

consistently held that “procedural” defects in creating or

disclosing a severance benefit plan do not create a sub-

stantive entitlement to benefits. E.9., Simmons v. Diamond

Shamrock Corp., 844 F.2d 517, 524-25 (Sth Cir. 1988);

Adcock v. Firestone Tire & Rubber Co., 822 F.2d 623, 627

n.10 (6th Cir. 1987); Holland v. Burlington Indus., Inc.,

772 F.2d 1140, 1149-50 (4th Cir. 1985), aff'd, 477 U.S. 901,

cert. denied, 477 U.S. 903 (1986); Anderson v. Ciba-Geiay

Corp., 759 F.2d 1518, 1521 (11th Cir.), cert. denied, 474

U.S. 995 (1985) ; Pabst Brewing Co. v. Anger, 610 F. Supp.

214, 216 (D. Minn. 1985), aff'd on basis of district court

opinion, 784 F.2d 338 (Sth Cir. 1986) ."!

"Because the cases cited above involved severance plans

which did not expressly address the ‘sale-of-business/subsequent

employment with the purchaser” situation, one issue presented

was whether the plan had been erroneously interpreted (i.e.,

(Continued on following page)

28

Petitioners argue the contrary based on Blau v. Del

Monte Corp., 748 F.2d 1348 (9th Cir. 1984), cert. denied,

474 U.S. 865 (1985), but that case is inapposite and there

is no circuit split on this issue. First, in Blau, the em-

ployer had ‘‘flouted in... a wholesale and flagrant man-

ner’’ ‘‘virtually every applicable mandate of ERISA.’’

Id. at 1353. Among other things, the employees were

never told of the severance policy or its terms and it was

‘‘actively concealed’’ from them, they were never informed

of the decision to deny benefits, they were never told of a

procedure for filing a claim for benefits, and the plan in

fact had no such procedures. /d. at 1351-53. Not one of

those factors is presented in this case, let alone all of them.

Subsequent circuit decisions (including one by the

Ninth Cireuit which decided Blau) have confined the hold-

ing in Blau to such ‘‘wholesale and flagrant’’ violations of

ERISA. In Holland v. Burlington Indus., for example,

employees who were given a ‘‘general statement of [the

severance] policy’’ and ‘‘promptly informed .. . that sev-

erance pay was not available’’ when the business was sold,

were not entitled to severance benefits on the basis of

“procedural violations.” 772 F.2d at 1149-50. Accord,

(Continued from previous page)

whether the participants were entitled to benefits under the

terms of the plan). In that context, certain of those cases con-

sidered whether “procedural” ERISA violations justified depart-

ure from the “arbitrary and capricious” standard of review. See

Holland, 772 F.2d at 1149; Anderson, 759 F.2d at 1521. The

latter issue is similar to the one before this Court in Firestone

v. Bruch, No. 87-1054. For the reason stated in Part |, supra,

no such issue is fairly presented in this case. Here, the F & P

Severance Pclicy expressly addresses the “sale-of-business” sit-

uation and expressly provides that employees who are offered

a job by a purchaser are ineligible for severance. Hence, peti-

tioners here are not entitled to benefits unless a procedural

ERISA violation which causes no prejudice or injury permits

plan participants to override the terms of their benefit plan.

29

e.g., Simmons v. Diamond Shamrock, 844 F.2d at 524-25;

Anderson v. Ciba-Geigy, 759 F.2d at 1521-23; Jung v.

FMC Corp., 755 F.2d 708, 714-15 (9th Cir. 1985).

Second, in Blau, the severance policy did not address

the ‘‘sale of business’’ situation and bar benefits to em-

ployees who went to work for a purchaser. Hence the issue

was whether the plan administrator had erroneously in-

terpreted the policy to ‘‘impose[] ... standards not re-

quired [by its terms]. 748 F.2d at 1354-55. In this case,

by contrast, the ‘‘job offer’’ eligibility condition appears

on the face of the F & P Severance Policy.

Nothing in Blau (or any other case) suggests that

procedural ERISA violations which cause no substantive

harm permit plan participants to override the express

terms of the benefit plan. To the contrary, the Blau court

noted that under ERISA, a court on review ‘‘has no au-

thority to [re|draft the substantive content of [welfare

benefit] plans.’’ Jd. at 1353. See also, id. at 1354 n.2.

And as that same court held in a later case, under ERISA:

Procedural defects do not necessarily require sub-

stantive remedies. A substantive remedy would be

appropriate only if the procedural defects caused a

substantive violation or themselves worked a substan-

tive harm.

Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1096 (9th Cir.

1985) (citations omitted).

i)

30

CONCLUSION

The decision below is correct and conforms with the

uniform view among the circuits on each of the issues

fairly presented by this case. The Petition for a writ of

certiorari should be denied.

Respectfully submitted,

STaNn ey C. Fickie*

CuHar.es E. Bruess

OF

Barnes & THORNBURG

1313 Merchants Bank Building

11 South Meridian Street

Indianapolis, Indiana 46204

Telephone: (317) 638-1313

*Counsel of Record for Respondents