Opposition Brief — Moore v. Reynolds Metals Co. Retirement Program for Salaried Employees

SUPREME COURT OF THE UNITED $TATES=.

OCTOBER TERM, 1984

JUNE G. MOORE,

Petitioner,

vs.

REYNOLDS METALS COMPANY RETIREMENT

PROGRAM FOR SALARIED EMPLOYEES,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Sixth Circuit

BRIEF FOR RESPONDENT REYNOLDS METALS

COMPANY RETIREMENT PROGRAM FOR SALARIED

EMPLOYEES IN OPPOSITION

Michael S. Glassman

Dinsmore & Shohl

2100 Fountain Square Plaza

511 Walnut Street

Cincinnati, Ohio 45202

(513) 977-8200

Counsel of Record for Respondent

Of Counsel:

Rebecca Hanner White

Dinsmore & Shohl

2100 Fountain Square Plaza

511 Walnut Street

Cincinnati, Ohio 45202

(513) 977-8200

COT nO Ma ETH Ma Coe Coe =H em

QUESTIONS PRESENTED FOR REVIEW

1. Whether a federal court may rewrite the lawful

eligibility provisions of a non-contributory pension plan

unilaterally established by an employer?

2. Assuming arguendo a federal court’s authority to re-

write or to modify a non-contributory pension plan’s arbitrary

or capricious eligibility provisions, whether a requirement of

a waiting period as a condition to receipt of disability bene-

fits, a definition of disability identical to the rule established

by Congress for eligibility for Social Security disability

benefits, is arbitrary or capricious?

ut

TABLE OF CONTENTS

>

QUESTIONS PRESENTED FOR REVIEW —

TE CEM R MOM REMD 65 c ses cccccevdscoes IV

OPINIONS BELOW 1

JURISDICTION ........ Pay ae Ree eae 1

STATUTORY PROVISIONS INVOLVED ........... 1

COUNTER STATEMENT OF THE CASE 2

REASONS FOR DENYING THE WRIT ... 4

I. RECENT AMENDMENTS TO ERISA

RENDER MOOT THE FACTS OF THIS

SN 55 an eae yee Ae 4

Il. THE DECISION BELOW CORRECTLY

DETERMINED, IN ACCORDANCE WITH

ERISA AND WITH THE DECISIONS OF

THIS COURT, THAT FEDERAL COURTS

LACK JURISDICTION TO REVIEW FOR

REASONABLENESS LAWFUL PENSION

ELIGIBILITY REQUIREMENTS | ink 5

Ill. ASSUMING ARGUENDO THAT COURT

REVIEW OF ELICIBILITY PROVISIONS

MAY OCCUR, A DEFINITION OF DIS-

ABILITY IDENTICAL TO THAT ESTAB-

LISHED BY CONGRESS FOR ELIGIBIL-

ITY FOR SOCIAL SECURITY DISABILITY

BENEFITS MAY NOT BE DEEMED AR-

BITRARY,. CAPRICIOUS, OR UNREASON-

AD SS ie ean ey a ay ere 9

ES PO A ae eee 10

IV

TABLE OF AUTHORITIES

Cases: Page

Blazquez v. New York City District Council, 463

F. Supp. 727 (S.D. N.Y. 1979) | 6

Burroughs v. Board of Trustees of the Pension Trust

Fund for Operating Engineers, 398 F. Supp. 165

(N.D. Calif. 1975), affd, 543 F.2d 1128 (9th Cir.

1976), cert. denied, 429 U.S. 1096 (1977)

EEOC v. duPont Co., 445 F. Supp. 223 (D. Del. 1978)

Fase v. Seafarer’s Welfare and Pension Plan, 432 F.

Supp. 1037 (E.D. N.Y. 1977), affd, 589 F.2d 112

(2nd Cir. 1978) 6

Hurn vy. Retirement Trust Fund, 703 F.2d 386 (9th

Cir. 1983) ..... 8

Johnson v. Burroughs Corp., 24 FEP Cases 963

(S.D. Fla. 1980)

Knauss v. Gorman, 583 F.2d 82 (3rd Cir. 1978) 6

Kosty v. Lewis, 319 F.2d 744 (D.C. Cir. 1963), cert.

denied, 375 U.S. 964 (1964) 6

Moore vy. Reynolds Metals Co. Retirement Program For

Salaried Employees, 563 F. Supp. 1372 (S.D. Ohio

1983), reversed, 740 F.2d 454 (6th Cir. 1984) .... passim

Music v. Western Conference of Teamsters Pension

Trust Fund, 712 F.2d 413 (9th Cir. 1983) .......... 8

NLRB vy. Amax Coal Co., 453 U.S. 322 (1981) 5

Pete v. UMW Welfare and Retirement Fund, 517 F.2d

1275 (D.C. Cir. 1975) 6

ieee cmeenanaaaaiiaaiaaatal

UMW Health and Retirement Fund v. Robinson, 455 ial

FS 6g) ere reper Fer rr rari passim

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1

CUED as o-s'p ans so 40 Uaioe A aaah eee eas 9

Statutes:

28 U.S.C. § 1254(1) 1

29 U.S.C. § 302(a) (5) Se ete dn ue ee ee

29 U.S.C. § 1055 Pens Ae ee 1, 4

29 U.S.C. § 1104 1

42 U.S.C. § 423(a) (1) 2

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1984

No. 84-740

JUNE G. MOORE,

Petitioner,

vs.

REYNOLDS METALS COMPANY RETIREMENT

PROGRAM FOR SALARIED EMPLOYEES,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Sixth Circuit

BRIEF FOR RESPONDENT REYNOLDS METALS

COMPANY RETIREMENT PROGRAM FOR SALARIED

EMPLOYEES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 10a-15a)

is reported at 740 F.2d 454. The opinion of the district

court (Pet. App. la-9a) is reported at 563 F. Supp. 1372.

JURISDIC1ION

The judgment of the court of appeals (Pet. App. 10a-15a)

was entered on August 10, 1984. The petition for a writ of

certiorari was filed on November 3, 1984. The jurisdiction

of this Court is invoked under 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

This case involves 29 U.S.C. § 1104(a)(1), and 29 U.S.C.

§ 1055 as amended by the Retirement Equity Act of 1984,

P.L. 98-397 (August 23, 1984), pertinent provisions of which

are set forth in Appendix A.

2

COUNTERSTATEMENT OF THE CASE

Respondent Reynolds Metals Company Retirement Pro-

gram for Salaried Employees (the “Retirement Program”)

is an employee pension benefit plan unilaterally implemented

and maintained by Reynolds Metals Company (“Reynolds”).

Petitioner June G. Moore is the widow of Donald C. Moore,

a former employee of Reynolds who was a participant in the

Retirement Program.

The Retirement Program is a defined benefit pension plan

funded solely by contributions from Reynolds. The Retire-

ment Program is administered by the Salaried Pension Admin-

istration Committee, whose members are required to act in

conformance with the provisions of the Retirement Program.

At all times relevant hereto, the Retirement Program re-

quired as a condition for eligibility for disability benefits

that an employee be “eligible for and in receipt of benefits

under the Disability Insurance provisions of the Social Se-

curity Act.” To be eligible for disability benefits under the

Social Security Act, an individual must meet all of the re-

quirements specified in 42 U.S.C. § 423(a)(1), which include

completion of a five month waiting period. Accordingly, to

be eligible for disability benefits under the Retirement Pro-

gram, an employee must satisfy Social Security’s five month

waiting period requirement.

On May 15, 1981, after 28 years of employment with

“Reynolds, petitioner’s husband, Donald Moore, was placed on

sick leave status. He thereafter applied for Social Security

disability benefits. Mr. Moore, however, died of cancer on

September 27, 1981, before Social Security's five month waiting

period was completed. He thus was never eligible for nor in

receipt of Social Security disability benefits.

After her husband’s death, petitioner applied to the Re-

tirement Program for benefits, alleging, among other things,

that she was the surviving spouse of a “totally and perman-

ently disabled” employee. Her claim was denied, because

3

Mr. Moore, at the time of his death, was not “totally and

permanently disabled” as specifically defined by the Retire-

ment Program, since he was not eligible for and in receipt

of benefits under the Disability Insurance provisions of the

Social Security Act.

Fetitioner filed a complaint in federal district court, seek-

ing relief from the denial of benefits. While petitioner

acknowledged her husband plainly had not met the Retire-

ment Program’s definition of totally and permanently disabled,

she argued that establishment of the eligibility guidelines,

ie., completion of the statutory waiting period under the

Social Security Act, was arbitrary and capricious. The dis-

trict court agreed, finding this to be a case “in which a

particular employee falls between the cracks.” The district

court awarded benefits, despite petitioner’s confessed failure

to meet the Retirement Program’s eligibility requirements.

On appeal, the Sixth Circuit reversed. The appellate court

held that where, as here, a pension plan’s provisions are law-

ful, the substantive provisions themselves may not be reviewed

by a federal court for reasonableness, recognizing that courts

have not been authorized by Congress to impose upon em-

ployers their subjective beliefs concerning the relative

value of benefits employers have voluntarily chosen to con-

fer upon employees. The Sixth Circuit, however, emphasized

that under ERISA a denial of benefits still may be scrutinized

by federal courts to determine whether the denial was arbi-

trary or capricious under the terms of the plan. Because the

denial of benefits to this petitioner was in accordance with

and mandated by the plain, unambiguous, and lawful eligi-

bility provisions of the Retirement Program, the Sixth Circuit

upheld the denial cf benefits.

4

REASONS FOR DENYING THE WRIT

I. RECENT AMENDMENTS TO ERISA RENDER

MOOT THE FACTS OF THIS CASE.

provide the particular benefits sought by petitioner in this

case, nor was petitioner eligible for such benefits under the

clear and unambiguous terms of the Retirement Program.

Congress, however, recently has amended ERISA’s require-

ments to require defined benefit plans, such as the Retire-

ment Program, to provide surviving spouses of vested par-

ticipants automatic survivor benefits in the form of a qual-

ified preretirement survivor annuity. 29 U.S.C. § 1055,

Retirement Equity Act of 1984, P.L. 98-397 (August 23,

1984). This amendment becomes effective January 1, 1985.

Under this amendment to ERISA, surviving spouses in

circumstances similar to petitioner's henceforth will be en-

titled to some form of pension benefits if their spouses had

worked ten years (or less, if the plan so provides) for the

employer. Accordingly, had this amendment to ERISA been

in effect when Mr. Moore died, petitioner would have re-

ceived a pension benefit.?

Because of this amendment to ERISA, the denial of any

survivorship benefits to an individual in circumstances similar

to petitioner's, ic., a surviving spouse of a long term

ployee, will not occur in the future. Thus, the facts underly-

ing this case have been mooted by Congress, and the wri

accordingly should be denied.

2 Had this amendment been in effect, petitioner technically would

not have received benefits as the spouse of a “totally and permanently

disabled” employee because Mr. Moore was not totally and per-

-

Il. THE DECISION BELOW CORRECTLY DETER-

MINED, IN ACCORDANCE WITH ERISA AND

WITH THE DECISIONS OF THIS COURT, THAT

FEDERAL COURTS LACK JURISDICTION TO

REVIEW FOR REASONABLENESS LAWFUL

PENSION ELIGIBILITY REQUIREMENTS.

The Sixth Circuit simply and narrowly held that federal

courts are without a roving commission to rewrite a substan-

tive eligibility provision of a pension plan unilaterally im-

plemented and funded by an employer, when, as here, the

provision is consistent with federal and state law. Moore

v. Reynolds Metals Co. Retirement Program for Salaried

Employees, 740 F.2d 454 (6th Cir 1984). This decision is

in full accord with the dictates of ERISA, by which the

Retirement Program was governed, and with this Court's

recent decision in UMW Health and Retirement Fund v.

Robinson, 455 U.S. 562 (1982).

In Robinson, this Court held that Section 302(c)(5) of the

Labor Management Relations Act does not authorize federal

courts to review for reasonableness pension eligibility rules

established through collective bargaining. This Court found

Section 302’s language that a plan be operated “solely and

exclusively” for its beneficiaries to include “no general re-

quirement that the complex schedule of the various employee

benefits must withstand judicial review under an undefined

standard of reasonableness.” 455 U.S. at 574. So long as

lawful, said this Court in Robinson, the contents of eligibility

requirements are not for the courts to determine.

The Sixth Circuit logically and correctly applied the wis-

dom of Robinson here. At issue in the instant case was the

“exclusive benefit” language of ERISA, language petitioner

manently disabled as defined by the Retirement Program, but petitioner

still would have received benefits in the form of a qualified preretirement

survivor annuity because Mr. Moore had worked for Reynolds for more

than ten years.

incorrectly contends empowers a review for reasonableness

of eligibility provisions of an employer-established pension

plan. But ERISA, as this Court has recognized, “essentially

codified the strict fiduciary standards that a § 302(c)(5)

trustee must meet.” NLRB v. Amax Coal Co., 453 U.S. 322,

332 (1981). And just as this Court recognized in Robinson

that the exclusive benefit language of Section 302(c)(5)

“hardly embodies” a reasonableness requirement, 455 U.S. at

570, neither is such a requirement embodied in the exclusive

benefit language of ERISA. Such is the clear import of Rob-

inson.

Petitioner cites lower court cases in which she alleges

courts have indulged in a review for reasonableness of pension

eligibility rules, cases to which she contends the Sixth Cir-

cuit’s decision “runs contrary.” The bulk of these cases, how-

ever, were pre-Robinson; indeed, many were pre-ERISA. See

Pete v. UMW Welfare and Retirement Fund, 517 F.2d 1275

(D.C. Cir. 1975); Kosty v. Lewis, 319 F.2d 744 (D.C. Cir.

1963), cert. denied, 375 U.S. 964 (i964); Knauss v. Gorman,

583 F.2d 82 (3rd Cir. 1978); Burroughs v. Board of Trustees

of the Pension Trust Fund for Operating Engineers, 398 F.

Supp. 168 (N.D. Calif. i975), affd. 543 F.2d 1128 (9th Cir.

1976), cert. denied, 429 U.S. 1096 (1977); Blazquez v. New

York City District Council, 462 F. Supp. 727 (S.D. N.Y.

1979); Fase v. Seafarers Welfare and Pension Plan, 432 F.

Supp. 1037 (E.D. N.Y. 1977); aff'd. 589 F.2d 112 (2nd Cir.

1978). Thus, their support for petitioner's position is of lim-

ited value at best. Whatever may have been the weight of

authority before Robinson, Robinson has made clear that

federal courts may not disturb the substance of lawful eligi-

bility rules.

Petitioner contends that denying courts a right of review

of eligibility provisions leaves beneficiaries unprotected. Not

so. A plan’s eligibility rules must meet the “detailed and com-

prehensive” standards of ERISA. 455 U.S. at 575. Thus, it

is only when a provision is consistent with the stringent stric-

7

tures of ERISA that federal courts must adopt a “hands off”

approach to substantive eligibility provisions of an employee

benefit plan. UMW Health and Retirement Fund vy. Robin-

son, 455 U.S. 562 (1982); Moore v. Reynolds Metals Co. Re-

tirement Program For Salaried Employees, 740 F.2d 454 (6th

Cir. 1984).

That Congress, not the courts, is the appropriate entity to

monitor the substance of eligibility provisions in pension

plans is manifested by the recent amendment to ERISA de-

scribed in Section I supra. As this amendment demonstrates,

Congress maintains responsibility for establishing minimum

standards for pension plans. If eligibility rules lawful under

ERISA create results with which Congress is dissatisfied, Con-

gress, as it did in the Retirement Equity Act of 1984, can

and does alter the standards of ERISA to protect beneficiaries.

“Courts, however, have not been authorized by Congress

to impose upon employers the court's subjective beliefs con-

cerning the relative value of benefits which employers have

chosen voluntarily to confer upon employees.” Moore, 740

F.2d at 457. If substantive changes to eligibility rules are

to be mandated, it is up to Congress, not the courts, to act.

The Sixth Circuit correctly so recognized.

In addition, it is well-accepted that “courts may review

a decision by trustees to deny benefits.” 740 F.2d at 457.

Federal courts will review the fiduciaries’ administration, in-

terpretation and application of the plan’s provisions to ensure

that benefits are not arbitrarily or capriciously denied. This

review protects beneficiaries from atiy arbitrary or unreason-

able actions by plan fiduciaries.

Petitioner's further argument that only collectively-bar-

gained for eligibility provisions are insulated from court re-

view is untenable. There is no basis to assume that identical

rules in pension plans would or should be given different

treatment merely because such rules in one case were estab-

lished in a collective bargaining agreement while in another

case they were not. When, as here and as in Robinson, the

fiduciaries are given no authority to modify eligibility provi-

sions, the federal courts, too, are lacking this power. Both

must abide by the plan’s provisions.

Petitioner points to certain cases that have purported to

limit Robinson to the collective bargaining context by stating

that courts possess the power to review for reasonableness the

substance of provisions for which collective bargaining did

not occur, see, ¢.g., Music vy. Western Conference of Team-

sters Pension Trust Fund, 712 F.2d 413 (9th Cir. 1983);

Hurn v. Retirement Trust Fund, 703 F.2d 386 (9th Cir. 1983).

Close examination of such cases, however, as the Sixth Cir-

cuit recognized, reveals the trustees’ interpretation and/or ap-

plication of plan provisions actually was at issue, not the

substance of the provisions themselves. 740 F.2d at 456 n.4.

And there is no dispute but that courts may review fiduciaries’

administration, application or interpretation of plan provi-

sions. UMW Health and Retirement Fund vy. Robinson, 455

U.S. 562 (1982); Moore v. Reynolds Metals Co. Retirement

Program For Salaried Employees, 740 F.2d 454 (6th Cir.

1984). Thus, as any conflict within the lower courts is more

theoretical than real, no need for an exercise of this Court's

supervisory authority is present.

In summary, at issue here is whether a lawful eligibility re-

quirement of the Retirement Program, a requirement con-

cerning benefits this employer voluntarily chose to confer

upon its employees, may be refashioned to conform to a fed-

eral court’s sense of fairness. The Sixth Circuit correctly held

3Cf. EEOC vy. duPont Co., 445 F. Supp. 223, 248 (D. Del. 1978)

and Johnson vy. Burroughs Corp., 24 FEP Cases 963 (S.D. Fla. 1980),

in which the courts held the protection afforded to bona fide seniority

systems under Section 703(h) of Title VII applied equally to col-

lectively bargained seniority systems and to those that were unilaterally

implemented by an employer.

9

it could not be. Its decision in so holding, a decision com-

patible with, indeed, a decision compelled by this Court's

decision in Robinson, merits no review.

Ill, ASSUMING ARGUENDO THAT COURT RE-

VIEW OF ELIGIBILITY PROVISIONS MAY

OCCUR, A DEFINITION OF DISABILITY IDEN-

TICAL TO THAT ESTABLISHED BY CON-

GRESS FOR ELIGIBILITY FOR SOCIAL SE-

CURITY DISABILITY BENEFITS MAY NOT BE

DEEMED ARBITRARY, CAPRICIOUS, OR UN-

REASONABLE.

The eligibility provision at issue here defining “totally and

permanently disabled” is a definition of disability identical to

that established by Congress for receipt of Social Security

benefits. To strike this provision from the Retirement Pro-

gram would be to hold, anomalously, that the Retirement

Program may not establish the same rational requirement for

benefits that Congress imposed on all citizens as a matter of

law.

This Court must presume the acts of Congress are rational

and nonarbitrary. Usery v. Turner Elkhorn Mining Co., 428

U.S. 1, 15 (1976). Thus, to find irrational this plan provision

would result in the illogical position of a federal format that

is presumptively rational, while the Retirement Program’s

identical definition is held to be arbitrary and capricious.

Because this eligibility provision, i.e., a five month waiting

period for disability benefits, is patently rational, no need for

this Court's intervention is present. For even were this Court

to find authority to review the provision, the provision would

certainly be upheld. Thus, if there is a need to decide the

question of a right to review eligibility rules, this manifestly

is not the case in which to decide it.

10

CONCLUSION

For the reasons set forth above, Respondent Reynolds

Metals Company Retirement Program for Salaried Employees

respectfully submits that the writ be denied.

Respectfully WW

Michael S. Glassman

Dinsmore & Shohl

2100 Fountain Square Plaza

511 Walnut Street

Cincinnati, Ohio 45202

(513) 977-8200

Counsel of Record for Respondent

Of Counsel:

Rebecca Hanner White

Dinsmore & Shohl

2100 Fountain Square Plaza

511 Walnut Street

Cincinnati, Ohio 45202

(513) 977-8200

APPENDIX A

29 U.S.C. §1104(a)(1). Subject to sections 1103(c) and

(d), 1342, and 1344 of this title, a fiduciary shall discharge

his duties with respect to a plan solely in the interest of the

participants and beneficiaries and —

(A) for the exclusive purpose of:

(i) providing benefits to participants and their bene-

ficiaries; and

(ii) defraying reasonable expenses of administering

the plan:

(B) with the care, skill, prudence, and diligence under

the circumstances then prevailing that a prudent man acting

in a like capacity and familiar with such matters would use

in the conduct of an enterprise of a like character and with

like aims;

(C) by diversifying the investments of the plan so as to

minimize the risk of large losses, unless under the circum-

stances it is clearly prudent not to do so; and

(D) in accordance with the documents and instruments

governing the plan insofar as such documents and instruments

are consistent with the provisions of this subchapter or sub-

chapter III of this chapter.

29 U.S.C. § 1055.

Sec. 205.(a) Each pension plan to which this section ap-

plies shall provide that —

(2) in the case of a vested participant who dies before

the annuity s-arting date and who has a surviving spouse,

a qualified preretirement survivor annuity shall be provided

to the surviving spouse of such participants.

la