Amicus Curiae Brief — Firestone Tire & Rubber Co. v. Bruch

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In the Supreme Court of the

OCTOBER TERM, 1988

FIRESTONE TIRE AND RUBBER

COMPANY, ET AL., PETITIONERS

RICHARD BRUCH, ET AL., ETC.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING RESPONDENTS

CHARLES FRIED

Solicitor General

DONALD B. AYER

Deputy Solicitor General

CHRISTOPHER J, WRIGHT

Assistant to the Solicitor General

Department of Justice

Washington, D.C. 20530

(202) 633-2217

GEORGE R. SALEM

Solicitor of Labor

CHARLES I. HADDEN

Deputy Associate Solicitor

JEFFREY A. HENNEMUTH

Ailtorney

Department of Labor

Washington, D.C. 20210

QUESTIONS PRESENTED

1. Whether the court of appeals correctly concluded

that in reviewing denials of benefits under Section

502(a)(1)(B) of the Employee Retirement Income Security

Act of 1974 (ERISA), 29 U.S.C. 1132(a)(1)(B), a court

should interpret the terms of the relevant employee benefit

plan without deference to the employer’s construction in

cases involving unfunded plans administered by

employers.

2. Whether former employees are entitled to obtain in-

formation about employee benefit plans maintained by

their former employer pursuant to Section 104(b)(4) of

ERISA, 29 U.S.C. 1024(b)(4).

(1)

TABLE OF CONTENTS

Page

Ee cece cess ee reccscecccons l

TE 2

ee oe weecseevceecees 6

Argument:

1. Benefit denials by employer-controlled administrators

of unfunded employee benefit plans should be reviewed

without deference to the administrator’s interpretation

as ones ache ps ttvssecscess 8

A. Congress’s purposes in enacting ERISA are ad-

vanced if unfunded, employer-controlled em-

ployee benefit plans are interpreted as contracts

bargained at arms’ length ..................... 8

B. Neither the common law of trusts nor experience

with LMRA trusts supports the use of the arbitrary

and capricious standard in this case............. 12

C. ERISA itself does not mandate deference to an

employer’s interpretation of the terms of an un-

funded employee benefit plan ................. 18

D. A “flexible” arbitrary and capricious standard is

not a viable alternative to de novo review of

benefit decisions made by biased administrators of

Te selec eeceesns 21

Il. Former employees who were plan participants are en-

titled to obtain copies of plan documents upon request . 23

EE 30

TABLE OF AUTHORITIES

Cases:

Adams v. New Jersey Brewery Employees’ Pension Trust

Fund, 670 F.2d 387 (3d Cir. 1982) .................. 17

Allied Chemical & Alkali Workers v. Pittsburgh Plate

BE 10

Anderson v. Ciba-Geigy Corp., 759 F.2d 1518 (11th Cir.),

cert. denied, 474 U.S. 995 (1985) ................... 13

Bayles v. Central States, Southeast & Southwest Areas

Pension Fund, 602 F.2d 97 (Sth Cir. 1979) ........... 13

Berry v. Ciba-Geigy Corp., 761 F.2d 1003 (4th Cir.

Te cc ccccceseese re:

Cases — Continued:

Blau v. Del Monte Corp., 748 F.2d 1348 (9th Cir. 1984),

cert. denied, 474 U.S. 865 (1985) ...................

Brink v. DaLesio, 667 F.2d 420 (4th Cir. 1981) ..........

Brock v. Self, 632 F. Supp. 1509 (W.D. La. 1986) .......

Bueneman vy. Central States, Southeast & Southwest

Areas Pension Fund, 572 F.2d 1208 (8th Cir. 1978) ....

Calamia v. Spivey, 632 F.2d 1235 (Sth Cir. 1980) ........

Central Hardware Co. v. Central States, Southeast &

Southwest Areas Pension Fund, 770 F.2d 106 (8th Cir.

1985), cert. denied, 475 U.S. 1108 (1986) .............

Central States, Southeast & Southwest Areas Pension

Fund v. Central Transp., Inc., 472 U.S. 559 (1985) ....

Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837

SE 5. h.cbk 40460 Kees Enea edeetné sacks

Dennard v. Richards Group, Inc., 681 F.2d 306 (Sth Cir.

RE . 2506-00-06 64 3400) <u AL asec

Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208 (8th

Cir.), cert. denied, 454 U.S. 968 and 1084 (1981) ......

Dockray v. Phelps Dodge Corp., 801 F.2d 1149 (9th

Si Se 6 ocak Ve eubanbnwhieteteéeeseel eens 12,

Donovan v. Bierwirth, 680 F.2d 263 (2d Cir.), cert.

Ce es ED Wicdcc bas deededecccasss

Donovan v. Cunningham, 716 F.2d 1455 (Sth Cir. 1983),

cert. denied, 467 U.S. 1251 (1984) ..................

Eaton v. D’Amato, 581 F. Supp. 743 (D.D.C. 1980) .....

Ellis v. Emhart Mfg., 150 Conn. 50, 191 A.2d 546

SE dn nnnk due teak edtsees ok anitensashcan dauness

Elser v. [AM National Pension Fund, 684 F.2d 648 (9th

Cir. 1982), cert. denied, 464 U.S. 813 (1983)..........

Erich v. GAF Corp., 110 N.J. 230, 540 A.2d 518

SD cis saulteue nes anabeda te dasa PaaS Pee as

Fogarty v. United States, 340 U.S. 8 (1950) .............

Franchise Tax Bd. v. Construction Laborers Vacation

eh I Ce ain a Wh bbs so web eeSe Ain 48s

Frietzsche v. First Western Bank & Trust Co., 168 Cal.

po *) »} &: |S ) | eer eres

Garner v. Girard Trust Bank, 442 Pa. 166, 275 A.2d

SPEED oc b cu cacde seb ehckccesi ee cineilueie.

Page

13,

21,

Cases — Continued:

Gitelson v. Du Pont, 17 N.Y.2d 46, 215 N.E.2d 336, 268

Lt a eeeaen ee vanes

Going v. Southern Mill Employees’ Trust, 281 P. 2d

ee Ce OL waceeesa bane

Golden v. Kentile Floors, Inc., 512 F.2d 838 (Sth Cir.

CR A ee ee ee even ee eet a

Inland Steel Co. v. NLRB, 170 F.2d 247 (7th Cir. 1948),

cert. denied, 336 U.S. 960 (1949) ...................

Jackson v. Sears, Roebuck & Co., 648 F.2d 225 (Sth Cir.

Re ee as ao a seeonen ee

Jacoby v. Grays Harbor Chair & Mfg., 77 Wash. 2d 911,

i a dn whee eee

Jestings v. New England Tel. & Tel. Co., 757 F.2d 8

RO coer e a ard ee beeeet vee es

Jung v. FMC Corp., 755 F.2d 708 (9th Cir. 1985) ..... 14, 21,

Katsaros v. Cody, 744 F.2d 270 (2d Cir.), cert. denied,

Ne ete eee ea wes

Kloman v. Doctors Hospital, Inc., 76 A.2d 782 (D.C.

BGR Spe Gey. Puy aha p rere a rece

Kuntz v. Reese, 785 F.2d 1410 (9th Cir.), cert. denied,

ee ee ee cas ocbdeeceiateses

Mackey v. Lanier Collections Agency & Service, Inc.,

Oh, Se I te I gon wv vesccwenneccssescs

Maggard v. O’Connell, 671 F.2d 568 (D.C. Cir. 1982) .... 13,

Miles v. New York State Teamsters Conference Pension

& Retirement Fund, 698 F.2d 593 (2d Cir.), cert. denied,

eds bul cig h 66 bee's 0s eke ¥ ss

Moore v. Reynolds Metals Co. Retirement Program for

Salaried Employees, 740 F.2d 454 (6th Cir. 1984), cert.

Dee, Gr ee SUPE oc wc cece cccicccccceeses

Music v. Western Conference of Teamsters Pension

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

Nachman Corp. v. Pension Benefit Guaranty Corp.,

ee So ee a cubed s oa eee s sete

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

NLRB vy. United Food & Commercial Workers Union,

Pe, Se Oe ED cb ccc caseceeeccue cues

Nugent v. Jesuit High School, 625 F.2d 1285 (Sth Cir.

Rs De Sas 7 5 oe, RY ts ey ae Ok a ee Par

Page

Cases — Continued: Page

Peckham v. Board of Trustees, 653 F.2d 424 (10th Cir.

DY <i bs Deedee eedees uudecee sepeeuce baeKeuenss 13

People ex rel. Alpha Portland Cement Co. v. Knapp,

230 N.Y. 48, 129 N.E. 202 (1920), cert. denied, 256

2 RS re ee gee ee 12

Phelps Dodge Corp. v. Brown, 112 Ariz. 179, 540 P.2d

cho Sales os dnb eeuk Ouse eee ianeaeese< 10

Pierce v. Underwood, No. 86-1512 (June 27, 1988) ...... 19

Pilot Life Ins. Co. v. Dedeaux, No. 85-1043 (Apr. 6,

titinsvekie dines hOUPeee sata aR eeee Cena cs 9

Pokratz v. Jones Dairy Farm, 771 F.2d 206 (7th Cir.

PN cbevcecveegtGanenwee ss addasb Seek owe eaeees 12

Red Lion Broadcasting Co. v. FCC, 395 U.S. 367

SE ai eh Ua beck ee eo 60k ekss koe VaeeT ees 19

Reese v. Administrative Comm. of the Profit Sharing

Trust, 218 Cal. App. 2d 646, 32 Cal. Rptr. 818

PE Gate us ck bbe eddaacmeenn Gh ndeade thaawnu hoe 11

Riley v. MEBA Pension Trust, 570 F.2d 406 (2d Cir.

DE Suuiiuwes tuts uevnGee hdd ded ukesese es euuens 13

Rose City Transit Co. v. City of Portland, 271 Or. 588,

og Ee e+ ae 11

Rosen v. Hotel & Restaurant Employees & Bartenders

Union, 637 F.2d 592 (3d Cir.), cert. denied, 454 U.S.

EY tics 6a b4 GE 4 oa cake ocean aah we nee ens 12

Rueda v. Seafarers International Union, 576 F.2d 939

ES o-6 Dida ose bbe Wh bed ROS CEEMS AS D0 17

Saladino v. ILGWU National Retirement Fund, 754 F.2d

CE Rs ee cer cpl eea cee vce oa us 24

Shull v. State Machinery Co. Employees Profit Sharing

Pian, 836 F.2d 306 (ith Cir. 1967) ............00005- 13

Sigman v. Rudolph Wurlitzer Co., 57 Ohio App. 4, 11

I og ka Pd pce diadekdctsdeewi0sse nce: 11, 20

Strickland v. American Bakery & Confectionery Workers

Union, 527 P.2d 10 (Okla. 1974) ................... 11

Struble v. New Jersey Brewery Employees’ Welfare Trust

fo Mm OB ee ee 16-17

Tennessee Coal, Iron & R.R. Co. v. Muscoda Local No.

Se ee es ED 6 vo Se aC sees ce cestccceeeees 25

Textile Workers Union v. Lincoln Mills, 353 U.S. 448

PCD Ge Oe ee ee te ou taal ack Ghia au eae Go hae 8,9

Vil

Wardle v. Central States, Southeast & Southwest Areas

Pension Fund, 627 F.2d 820 (7th Cir. 1980), cert.

CE, GP, SUED 6 oo cess scccsconscens 13, 22,

Weiss v. Sheet Metal Workers Local No. 544 Pension

Trust, 719 F.2d 302 (9th Cir. 1983), cert. denied, 466

Cases — Continued: Page

Udall v. Tallman, 380 U.S. 1(1965) ...............5... 30

United States v. Price, 361 U.S. 304 (1960) ............. 19

Van Boxel v. Journal Co. Employees’ Pension Trust,

Be Te: GD 5 ccc ccc ceescessccccs 13, 21, 22

Van Pelt v. Berefco, Inc., 60 Ill. App. 2d 415, 208 N.E.2d

DGD cis eck eke sy uaaaepess cbs eee peeases 11

Varhola v. Doe, 820 F.2d 809 (6th Cir. 1987) ........... 13, 14

Vorpahl, In re, 695 F.2d 318 (8th Cir. 1982) ............ 22, 23

AIR SR ee ine prep eae 24

Statutes and regulations:

Employee Retirement Income Security Act of 1974, 29

Tf Eom FR UF FF ererrriere ree l

SE 8 a ETT TERT Ce Te eee ee )

fee eee ee 3, 7, 24

e & — bf tl =6—)6 6ST CUTTER CE ee a 19

§§ 101-111, 29U.S.C. (& Supp. IV) 1021-1031 ...... y

F —% | ff i 0 RP ECPTT eer eee e eee ee 28

at kT 0 PETE EEE eee 27, 28

§ 104(b)(1), 29 U.S.C. 1024(b)1) 2.2... bi ofrntack 27, 29

§ 104(b)(2), 29 U.S.C. 1024(b)(2) .............-.-. 29

§ 104(b)(3), 29 U.S.C. 1024(b)(3) .............. 27, 28, 29

§ 104(b)(4), 29 U.S.C. 1024(b)(4) ................ ie eS

23, 26, 27, 28, 29

§§ 401-414, 29 U.S.C. (& Supp. [V) 1101-1114...... 9

Se Eo kad n nav ccacsessewss 19, 20

Fe Lb S| Ree 10, 20

ES oi: b6 6600s 6scewnns ses 15

§ 403(c)(1), 29 U.S.C. 1103(c)QI) ..... ... ote 16

BS GRGREOD, Be OLB... COGIIINOD «ec cee ee ccess 10, 16

ey % Ok SY ol TTT ere eee ee 16

Vill

Statutes and regulations — Continued: Page

i es cc Uaaueeceteeoeee s 16

a I, EE iv abe duccceadeeee sues 15

I, SE ee vce akécs cocacekeeacuaws l

PL Ps DU. Socecnccsocdoccuncces 12

SD Py AP Pate BEMIEED occ ccccccccccees 3

§ 502(a)(1)(A), 29 U.S.C. 1132(a)(I(A) .. 2.2.2... 29

§ 502(a)(1)(B), 29 U.S.C. 1132(a)(1(B)..... 22.2... 8, 9,

19, 20, 25

§ $02(a)(3), 29 U.S.C. 1132(a)(3) ..... 2.2. eee. 28

A Ms ID ok in wn b's sin ws be edes 26

Fw BE Ea eee 28

ee I Ms osc os pe coe caer avesvenecks 2

i Meese we se se lcee ee Gua oe 28

Labor-Management Relations Act, 1947, Tit. Ill, 29

U.S.C. 301 ef seq.:

PT er rere re ee 8,9

§ 302(c)(5), 29 U.S.C. 186(c)(5) ....... See wae Ce 4, 13, 18

Welfare and Pension Plans Disclosure Act, Pub. L. No.

85-836, 72 Stat. 997:

ee Se ee ar has bet 26

ec ee ri SE id ee 26

ERIE SEE yay ne ga A ee 26

29 C.F.R.:

ES EEE PPE rare een, ae em 28-29

ee ob eee ee 28

ee 8) ee 28

SED SPD oc ccc c ce cccecinccecnces 27

Miscellaneous:

G. Bogert & G. Bogert, The Law of Trusts and Trustees

re A he Oo a ae De ay ae 14, 15, 16

120 Cong. Rec. (1974):

GR ibaa ne egies 5 geet aey Ear eee ey mS ne oa 20

el hate gh pe SERED APL OD are Petar tO 9

i I on ee er eee Oa 28, 29

44 Fed. Reg. (1979):

ee A Gg ee et ie kt os 15

Miscellaneous — Continued: Page

H.R. Conf. Rep. 93-1280, 93d Cong , 2d Sess. (1974) .... 8, 20

H.R. Rep. 93-533, 93d Cong., Ist Sess. (1973) .......... 15, 17,

18, 26, 27

Note, Pension Pians and the Rights of the Retired

Worker, 70 Colum. L. Rev. 909 (1970) ......-....... 11

Restatement (Second) of Trusts (1959) .......... 14, 15, 16, 23

S. Rep. 93-127, 93d Cong., Ist Sess. (1973) ............. i, Wy,

18, 26, 27

In the Supreme Court of the Gnited States

OCTOBER TERM, 1988

No. 87-1054

FIRESTONE TIRE AND RUBBER

COMPANY, ET AL., PETITIONERS

Vv.

RICHARD BRUCH, ET AL., ETC.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING RESPONDENTS

INTEREST OF THE UNITED STATES

The Secretary of Labor, along with participants and

beneficiaries of employee benefit plans, enforces the

fiduciary standards and the reporting and disclosure re-

quirements imposed by the Employee Retirement Income

Security Act of 1974 (ERISA), 29 U.S.C. (& Supp. IV)

1001 et seq. 29 U.S.C. 1132(a). This case requires the

Court to determine, first, the appropriate standard of

judicial review of benefit determinations made by ERISA

fiduciaries and, second, who is entitled to obtain informa-

tion about a plan covered by the statute. Because these

issues implicate the Secretary’s ability to ensure fair and

impartial plan administration and compliance with

ERISA’s requirements, the Secretary has a substantial in-

terest in this case.

(1)

STATEMENT

1. In November 1980, petitioner Firestone Tire & Rub-

ber Company sold five of its plants, together comprising

its Plastics Division, to the Occidental Petroleum Corpo-

ration’s Hooker Chemical Division. Occidental acquired

the five plants as going concerns, and most of the approxi-

mately 500 salaried employees at those plants continued in

their same positions as Occidental employees, without in-

terruption and at the same rates of pay.' Pet. App. A4,

A45. Construing its termination pay plan, which provided

severance pay to employees out of Firestone’s general

assets rather than from a separate fund, Firestone denied

severance pay to the employees who transferred to Oc-

cidental. It reasoned that no “reduction in work force”

(which triggered severance pay under Firestone’s plan) oc-

curred when the Plastics Division was sold as an ongoing

operation. /d. at A4, A26-A27, A48.? In addition, some of

Firestone’s former employees requested but were denied

information concerning Firestone’s employee benefit plans

on the ground that they were no longer participants in the

plans (id. at AS, A71).

2. Six former Firestone (now Occidental) employees

filed this class action in the United States District Court

for the Eastern District of Pennsylvania, alleging that

Firestone improperly withheld severance pay due under

the termination pay plan (Pet. App. A4, A45-A46).3 Three

' There is an unresolved disagreement as to whether the benefits

provided by Occidental are comparable to the benefits provided by

Firestone (Pet. App. A30).

? Unaware that its termination pay plan was governed by ERISA,

Firestone did not have in place a formal “claims procedure” as man-

dated by 29 U.S.C. 1133, and did not comply with the Act’s reporting

and disclosure requirements (Pet. App. A26).

> The plaintiffs also asserted claims with respect to Firestone’s vaca-

tion, retirement, and stock purchase plans, which have been resolved

(Pet. App. AS-A6 n.2, A46).

of the named plaintiffs also alleged that Firestone’s ad-

ministrators unlawfully failed to disclose benefit plan in-

formation upon request (id. at A3, AS, A39, A46, A69).

The suits were brought pursuant to Section 502(a)(1) of

ERISA, 29 U.S.C. 1132(a){1), which provides that a par-

ticipant or beneficiary of an employee benefit plan may

bring a civil action “(A) for the relief provided for in

subsection (c) of this section,” which provides a penalty of

up to $100 a day for failure to provide requested informa-

tion, and “(B) to recover benefits due to him under the

terms of his plan.”

The district court granted Firestone’s motion for sum-

mary judgment (Pet. App. A45-A73). The court limited its

review of the denial of termination benefits “to determin-

ing whether the administrator’s actions were arbitrary and

capricious” (id. at A47), and concluded that Firestone’s

decision not te pay termination benefits satisfied this test

(id. at A56). The district court also denied the named

plaintiffs’ claims that Firestone had improperly refused to

provide the information they had requested (Pet. App.

A70-A72). It recognized that “Section 104(b)(4) of

ERISA, 29 U.S.C. § 1024(b)(4), imposes a duty on a plan

administrator to respond to written requests for informa-

tion about the plan” (id. A70). But, the court noted, under

Section 104(b)(4) the plaintiffs were entitled to informa-

tion only if they were participating in the plan, and a “par-

ticipant” is “any employee or former employee * * * who

is or may become eligible to receive a benefit of any type

from an employee benefit plan” (29 U.S.C. 1002(7)). The

court concluded that the three employees were not partici-

pants because they did not work for Firestone at the time

that they requested the information and were not entitled

to benefits (Pet. App. A71-A72).

3. The court of appeals reversed on both issues, and

remanded for further proceedings (Pet. App. Al-A44). It

concluded that Firestone’s decisions that the terms of its

termination pay plan did not require it to pay benefits to

its former employees should not be reviewed under the ar-

bitrary and capricious standard, but rather should be re-

viewed de novo by the court.* Acknowledging that most

courts have reviewed ERISA benefit determinations under

the limited arbitrary and capricious standard (id. at

A8-A9), the court noted that some courts actually applied a

more rigorous test (though retaining the “arbitrary and

capricious” label) when the plan administrator possessed an

interest adverse to the benefit claimants (id. at Al1-A13).

The court of appeals also observed that the arbitrary and

capricious review standard derived from cases involving

employee benefit trusts established under Section 302(c)(5)

of the Labor-Management Relations Act of 1947 (LMRA),

29 U.S.C. 186(c)(5), which in turn followed common-law

trust principles (Pet. App. Al4-A21). The court found

those precedents inapposite because trust law limits judicial

review of trustee actions only if no conflict of interest or

improper motive exists and because the LMRA more con-

cretely assures impartial administration by requiring equal

numbers of labor and management trustees to manage

employee benefit plans (id. at Al5, A21). By contrast, the

Firestone termination pay plan was both unfunded and

wholly controlled by company nominees (id. at A21), so

that “every dollar saved by the administrator on behalf of

his employer is a dollar in Firestone’s pocket” (id. at A22).

In those circumstances, the court concluded “that both

common sense and the principles of trust law” precluded

application of a “presumption that the plan administrator

was impartial” (id. at A24).

Since the benefits were part of the bargain in return for

which employees provided their services to Firestone, the

court concluded that Firestone’s decision not to pay termi-

* The court also rejected the former employees’ contention that am-

biguous plan terms should be construed strictly against the employer

and in favor of plan beneficiaries (id. at A3, A24-A25). It thus con-

cluded that “there should be deference to neither the plan

administrator’s nor the participants’ construction of plan terminology”

(id. at A3).

nation benefits should be reviewed under “the principles

governing construction of contracts between parties

bargaining at arms’ length” (id. at A25). Under that ap-

proach, the court explained, a reviewing court should

utilize the traditional rules of contract interpretation to

determine, from common trade usage, past practice under

the benefit plan at issue, and other relevant evidence, the

contracting parties’ intention as to the issue at hand and, if

that intention is not discernible, “the court should adopt

the most reasonable understanding of the term’ (id. at

A28-A31 (footnote omitted)). Because the district court

had not approached the question in that way,’ but had in-

stead deferred to Firestone’s interpretation, the court of

appeals remanded.

The Third Circuit also rejected the district court’s con-

clusion that respondents were not “participants” entitled

to request benefit plan information and recover damages

for nondisclosure (Pet. App. A39-A43). The court ob-

served that limiting participant status to persons presently

covered by a plan or actually entitled to benefits equates

Standing to claim benefits with ultimate entitlement to

receive those benefits (id. at A41). Such an interpretation,

in the court’s opinion, conflicts with Congress’s intent to

provide claimants with enough information “to make their

own decisions on how best to enforce their rights” (id. at

A43). The court therefore concluded that the right to re-

quest anc receive information about an employee benefit

plan “most sensibly extend[s}] both to people who are in

fact entitled to a benefit under the plan and to those who

claim to be but in fact are not” (id. at A42).

* The court of appeals noted, in particular, that it was not clear

whether common trade practice favored Firestone’s interpretation or

that of its former employees, that the parties disputed what Firestone’s

past practice had been and what it had previously told employees, and

that the district court had not determined whether there was a signifi-

cant difference in the employees’ compensation from Occidental (Pet.

App. A30).

SUMMARY OF ARGUMENT

I. Congress in ERISA did not specify the standard of

review in benefit claims disputes, but instead directed the

federal courts to develop a body of federal common law

governing those claims. In a case involving an unfunded

employee benefit plan administered by the employer, the

objectives of the statute are best served by resolving ques-

tions of plan interpretation under established principles of

contract interpretation, rather than by affirming decisions

of the employer-administrator unless arbitrary and

capricious. That approach comports with two of ERISA’s

primary objectives —insulating benefit decisions from the

self-interest of employers and ensuring that employees

who qualify for benefits actually receive them.

Where benefits are paid out of the employer’s general

assets, it is unfair to employees to defer to the employer’s

interpretation of the terms of the plan. Firestone, like the

courts that have reviewed employers’ decisions under the

arbitrary and capricious standard, nevertheless contends

that it is appropriate to borrow common law trust rules, as

was done in cases involving LMRA trusts, and defer to its

interpretation even though it is biased. Trust analogies are

plainly inapposite here, however, since Firestone estab-

lished no separate body of trust assets to pay severance

benefits, and the common law of trusts does not support

application of the arbitrary and capricious standard to ad-

ministrators’ decisions in that instance. ERISA’s own

reliance on trust principles is selective, and in no way sug-

gests that Congress intended that a highly deferential

standard be applied here. Cases arising under Section

302(c)(S) of the LMRA are doubly inapposite, since,

besides the presence of a trust in those cases, the LMRA

mandates impartial administrators.

Firestone’s arguments that ERISA itself compels review

under the arbitrary and capricious standard are wholly

without merit. Nothing in ERISA grants administrators

;

complete discretion in making benefits decisions. Further-

more, review under the arbitrary and capricious standard

in cases involving unfunded plans administered by

employers would be ironic in that employees would be

worse off than they were before ERISA was enacted.

Nor is it appropriate to apply a “flexible” arbitrary and

capricious standard, whose rigor varies on an ad hoc basis

with the appearance of bias on the part of the ad-

ministrator. That approach would only create confusion

as to the proper standard of review. Since there is no good

reason to defer to an employer’s construction of the terms

of an employee benefit plan when it is paying benefits out

of its own pocket, this Court should not endorse the ar-

bitrary and capricious standard at all in cases involving

unfunded plans administered by employers.

Il. The court of appeals also correctly concluded that

Firestone should have given the three named plaintiffs the

information they requested, since Section 104(b)(4) states

that information about employee benefit plans must be

provided “upon written request of any participant.” The

Statutory definition of “participant,” 29 U.S.C. 1002(7), as

including present and former employees who are or may

become eligible for benefits, is broadly encompassing. We

agree with the court of appeals that it makes sense to read

Section 104(b)(4) to allow any employee or former

employee who “claims to be” entitled to benefits to obtain

information upon request. That construction fulfills Con-

gress’s intent in enacting ERISA’s disclosure provisions,

which are meant to provide access to complete informa-

tion about the terms of employee benefit plans. In con-

trast, Firestone’s construction—which allows plan ad-

ministrators to deny access to information based solely on

the administrator’s determination that the individual is not

entitled to benefits—plainly undermines Congress’s pur-

pose in enacting the disclosure provisions.

There is no basis for Firestone’s contention that a broad

construction of “participant” will impose costly burdens

on employee benefit plans. Section 104(b)(4) expressly

provides that plan administrators may make a “reasonable

charge” for providing information. In addition, the

Secretary of Labor has by regulation distinguished be-

tween Section 104(b)(4) and ERISA’s provisions requiring

automatic disclosure of information about employee

benefit plans without charge and without request. The

Secretary has reasonably determined that plan ad-

ministrators need not provide such automatic disclosure to

former employees whom plan administrators determine to

have no vested right to benefits, while also concluding that

former employees are entitled under Section 104(b)(4) to

certain information upon request.

ARGUMENT

I. BENEFIT DENIALS BY EMPLOYER-CONTROLLED AD-

MINISTRATORS OF UNFUNDED EMPLOYEE BENEFIT

PLANS SHOULD BE REVIEWED WITHOUT DEFERENCE

TO THE ADMINISTRATOR'S INTERPRETATION OF THE

TERMS OF THE PLAN

A. Congress’s Purposes In Enacting ERISA Are Advanced If

Unfurded, Employer-Controlled Employee Benefit Plans

Are Interpreted As Contracts Bargained At Arms’ Length

Section 502(a)(1)(B) of ERISA, 29 U.S.C.

1132(a)(1)(B), authorizes any particpant in or beneficiary

of an employee benefit plan covered by the Act to bring a

civil action “to recover benefits due to him under the terms

of his plan.” Although the statute does not specify the ap-

plicable standard of review or otherwise set substantive

standards for the resolution of disputes over benefits, the

Conference Report explained that “{a]ll such actions * * *

are to the regarded as arising under the laws of the United

States in similar fashion to those brought under section

301 of the Labor-Management Relations Act of 1947.”

H.R. Conf. Rep. 93-1280, 93d Cong., 2d Sess. 327 (1974).

This Court, in Textile Workers Union v. Lincoln Mills,

353 U.S. 448, 456 (1957), construed Section 301 to require

—

the federal courts to “fashion from the policy of our na-

tional labor laws” a federal common law governing the in-

terpretation of collective bargaining agreements. We sub-

mit, therefore, that the Report’s reference to Section 301

of the LMRA, 29 U.S.C. 185, was a direction to the courts

to fashion a body of federal common law to govern review

of benefit claim denials. Other portions of “ERISA’s

legislative history indicate[{] that * * * ‘a body of Federal

substantive law will be developed by the courts to deal

with issues involving rights and obligations under private

welfare and pension plans’ ” (Franchise Tax Bd. v. Con-

struction Laborers Vacation Trust, 463 U.S. 1, 24 n.26

(1983), quoting 120 Cong. Rec. 29942 (1974) (remarks of

Sen. Javits)), and this Court has recognized that federal

courts are to develop a “federal common law of rights and

obligations under ERISA-regulated plans” (Pilot Life Ins.

Co. v. Dedeaux, No. 85-1043 (Apr. 6, 1987), slip op. 15).

Thus, the task of determining the appropriate standard of

review in benefit actions under Section 502(a)(1)(B) has

been assigned to the courts. This Court’s decision should

be determined “by looking at the policy of the legislation

and fashioning a [standard] that will effectuate that

policy” (Textile Workers Union v. Lincoln Mills, 353 U.S.

at 457).

One of Congress’s primary goals in enacting ERISA was

to assure that every employee who becomes eligible for a

benefit under an employee benefit plan “actually will

receive it.” Nachman Corp. v. Pension Benefit Guaranty

Corp., 446 U.S. 359, 375 (1980). To that end, the Act

* While Nachman Corp. involved a pension plan, ERISA’s rules on

reporting, disclosure, and fiduciary responsibility, which are designed

to ensure that participants receive the benefits they have earned, apply

to all “employee benetit plans,” including welfare plans as well as pen-

sion plans. Central States, Southeast & Southwest Areas Pension

Fundy. Central Transp. Inc., 472 U.S. 559, 569 n.9 (1985): 29 U.S.C.

(& Supp. [V) 1002(3), 1021-1031, 1101-1114. And Section 502(a)(1)(B)

does not distinguish between pension plans and welfare plans in

authorizing suits “to recover benefits” due to employees.

imposes on benefit plan fiduciaries, who “control and

manage” the plan (29 U.S.C. 1102(a)(1)), strict standards

of loyalty and care. Central States, Southeast & Southwest

Areas Pension Fund v. Central Transp., Inc., 472 U.S.

559, 570 (1985). These fiduciary standards include, most

notably, a duty to act “solely in the interest of the par-

ticipants and beneficiaries” for the “exclusive purpose” of

paying benefits and defraying administrative costs “in ac-

cordance with the documents and instruments governing

the plan” (29 U.S.C. 1104(a)(1)). They are intended to

“specifically insulate the [plan] from the employer’s in-

terest.” NLRB v. Amax Coal Co., 453 U.S. 322, 333

(1981).

As the court of appeals concluded, in the context of an

unfunded benefit plan administered by the employer, a

standard of review that focuses de novo on the terms of

the plan best achieves the statutory goals of insulating

employee benefit plans from employers’ interests and en-

suring that employees who become eligible for benefits

receive them. Testing the issue in this manner, as one

would any matter of contractual interpretation, is also

consistent with federal labor policy, under which

employee benefits are viewed as “ ‘wages * * * or other

conditions of employment’ ” to be negotiated in a labor-

management contract. See Inland Steel Co. v. NLRB, 170

F.2d 247, 253-254 (7th Cir. 1948) (citation omitted), cert.

denied, 336 U.S. 960 (1949) (holding that such benefits are

a mandatory subject of collective bargaining under the

National Labor Relations Act); see generally Allied

Chemical & Alkali Workers v. Pittsburgh Plate Glass Co.,

404 U.S. 157 (1971).’

’ Before ERISA was passed in 1974, employee benefit plans, other

than those administered as trusts at common law or under the LMRA,

were generally treated as contract obligations on the part of the

employer. See, e.g., Phelps Dodge Corp. v. Brown, 112 Ariz. 179, 540

P.2d 651 (1975); Frietzsche v. First Western Bank & Trust Co.,

It is illogical to assume that the administrator of an un-

funded plan whose benefits are paid from the employer’s

assets will function with the same impartiality as a neutral

trustee of a funded plan, since the administrator’s

employer will sustain a financial loss with every award of

168 Cal. App. 2d 705, 336 P.2d 589 (1959); Ellis v. Emhart Mfg., 150

Conn. 50, 191 A.2d 546 (1963); Sigman v. Rudolph Wurlitzer Co., 57

Ohio App. 4, 11 N.E.2d 878 (1937); Strickland vy. American Bakery &

Confectionery Workers Union, 527 P.2d 10 (Okla. 1974); Rose City

Transit Co. v. City of Portland, 271 Or. 588, 533 P.2d 339 (1975);

Jacoby v. Grays Harbor Chair & Mfg., 77 Wash. 2d 911, 468 P.2d 666

(1970). Accord Erich v. GAF Corp., 110 N.J. 230, 540 A.2d 518, 522

(1988) (observing that the “ ‘principles of contractual construction’ ”

applied by the Third Circuit in this case are “similar to the standard of

review that would be applicable under state law” (citation omitted)).

See also Note, Pension Plans and the Rights of the Retired Worker, 70

Colum. L. Rev. 909, 910, 916-922 (1970). In such cases, the reviewing

court examined the employee’s benefit claim as it would any other

contract allegation, looking to the terms of the plan and other

manifestations of the parties’ intent and deciding whether benefits

were payable without deferring to either party’s construction of the

terms of the contract.

Firestone maintains (Br. 25 n.22) that pre-ERISA decisions applied

an arbitrary and capricious standard, but many of the cases they cite

involved trusts and are therefore inapposite. See Van Pelt v. Berefco,

Inc., 60 Ill. App. 2d 415, 208 N.E.2d 858 (1965); Reese v. Ad-

ministrative Comm. of the Profit Sharing Trust, 218 Cal. App. 2d

646, 32 Cal. Rptr. 818 (1963); Going v. Southern Mill Employees’

Trust, 281 P.2d 762 (Okla. 1955); Kloman v. Doctors Hospital, Inc.,

76 A.2d 782 (D.C. 1950). While the other cited decisions concerned

unfunded plans, the terms of the plans that the courts sought to en-

force gave the employers or their handpicked administrators “sole and

exclusive” power to determine benefit eligibility; there is no such pro-

vision in Firestone’s plan, and such a provision would not be en-

forceable under ERISA (see note 11, infra). Moreover, to avoid un-

conscionable results courts sometimes construed the plans in cases

where administrators had unbounded discretionary authority to per-

mit claims that particular benefit denials were unreasonable or in bad

faith. See, e.g., Gitelson vy. Du Pont, 17 N.Y.2d 46, 215 N.E.2d 336,

268 N_Y.S.2d 11 (1966); Garner v. Girard Trust Bank, 442 Pa. 166,

275 A.2d 359 (1971).

benefits. Despite Firestone’s insistence (Br. 31) that self-

interest played no role in its denial of respondents’ claims,

and whether or not it did in this case, the members of this

Court need not “close [their] eyes as judges to what [they]

must perceive as men.” People ex rel. Alpha Portland Ce-

ment Co. v. Knapp, 230 N.Y. 48, 63, 129 N.E. 202, 208

(1920), cert. denied, 256 U.S. 702 (1921). Accordingly, the

Court should decide, in exercising its federal common law

powers under Section 502(a), to require courts to resolve

questions about the meaning of the terms of employee

benefit plans without deferring to the employer’s construc-

tion in such cases. ®

B. Neither The Common Law Of Trusts Nor Experience With

LMRA Trusts Supports The Use Of The Arbitrary And

Capricious Standard In This Case

In applying the arbitrary and capricious standard in

ERISA benefits cases,® the federal courts of appeals have

* Firestone argues (Br. 29) that there should be evidence that a par-

ticular decision in fact resulted from bias before the courts question an

administrator’s interpretation of the terms of a plan. But instances of

biased intent may not always be subject to proof. Moreover, the

standard of review is the means by which the employer’s decision is to

be evaluated, not the conclusion to be drawn upon determining that

the employer acted improperly.

* See, e.g., Jestings v. New England Tel. & Tel. Co., 757 F.2d 8 (ist

Cir. 1985); Miles v. New York State Teamsters Conference Pension &

Retirement Fund, 698 F.2d 593 (2d Cir.), cert. denied, 464 U.S. 829

(1983); Rosen v. Hotel & Restaurant Employees & Bartenders Union,

637 F.2d 592 (3d Cir.), cert. denied, 454 U.S. 898 (1981); Berry v.

Ciba-Geigy Corp., 761 F.2d 1003 (4th Cir. 1985); Dennard v.

Richards Group, Inc., 681 F.2d 306 (Sth Cir. 1982); Moore v.

Reynolds Metals Co. Retirement Program for Salaried Employees, 740

F.2d 454 (6th Cir. 1984), cert. denied, 469 U.S. 1109 (1985); Pokrarz

v. Jones Dairy Farm, 771 F.2d 206 (7th Cir. 1985); Central Hardware

Co. v. Central States, Southeast & Southwest Areas Pension Fund,

770 F.2d 106 (8th Cir. 1985), cert. denied, 475 U.S. 1108 (1986);

Dockray vy. Phelps Dodge Corp., 801 F.2d 1149 (9th Cir. 1986);

typically relied uncritically on standards developed for

reviewing trustee action at common law or in connection

with employee benefit funds established under Section

302(c)(5) of the LMRA.!'° By contrast, the court of appeals

Peckham vy. Board of Trustees, 653 F.2d 424 (10th Cir. 1981); Ander-

son v. Ciba-Geigy Corp., 759 F.2d 1518 (11th Cir.), cert. denied, 474

U.S. 995 (1985); Maggard v. O’Conneli, 671 F.2d 568 (D.C. Cir.

1982).

'© See, e.g., Music v. Western Conference of Teamsters Pension

Trust Fund, 712 F.2d 413, 418 (9th Cir. 1983); Dennard v. Richards

Group, Inc., 681 F.2d 306, 313 (Sth Cir. 1982); Wardle v. Central

Staies, Southeast & Southwest Areas Pension Fund, 627 F.2d 820, 824

(7th Cir. 1980), cert. denied, 449 U.S. 1112 (1981); Bayles v. Central

States, Southeast & Southwest Areas Pension Fund, 602 F.2d 97,

99-100 (Sth Cir. 1979); Bueneman v. Central States, Southeast &

Southwest Areas Pension Fund, 572 F.2d 1208, 1209 (8th Cir. 1978);

Riley v. MEBA Pension Trust, 570 F.2d 406, 410 (2d Cir. 1977).

Some recent decisions from other circuits have called into question

the appropriateness of the “arbitrary and capricious” standard under

ERISA. See, e.g., Van Boxel v. Journal Co. Employees’ Pension

Trust, 836 F.2d 1048, 1052 (7th Cir. 1987) (noting that the courts bor-

rowed rules developed in cases involving LMRA trusts “apparently

without the courts’ noticing that employers often held the whip hand

in ERISA trusts,” and that “[t}ransposed to the ERISA setting, the ar-

bitrary and capricious standard may be inapt, a historical mistake, or

a mechanical application from different settings”); Shul/ v. State

Machinery Co. Employees Profit Sharing Plan, 836 F.2d 306, 307 (7th

Cir. 1987) (noting “a growing restiveness in cases where the trustees

seem not to be true neutrals in the disputes they are called on to

resolve”); Varhola v. Doe, 820 F.2d 809, 813 (6th Cir. 1987) (“[w]ere

we writing On a clean slate, we might well be persuaded that [a] stricter

standard of review should apply”). And at least one appellate decision

has left open the possibility of a different standard of review when an

administrator’s overall actions display hostility to the statutory

scheme. Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th Cir. 1984)

(“[w]e do not decide that [the arbitrary and capricious standard] is the

only applicable standard of review when ERISA’s provisions ave

been flouted in such a wholesale and flagrant manner”), cert. denied,

474 U.S. 865 (1985). Notwithstanding this questioning, none of these

courts has actually abandoned the arbitrary and capricious standard,

in this case, for the first time, evaluated the theoretical and

practical underpinnings of the arbitrary and capricious

standard in light of the statutory objectives. As the court

concluded, that standard has no place in actions brought

to recover benefits under unfunded, employer-

administered plans. Neither the rationales of earlier courts

nor petitioners’ arguments justify a standard according

deference to the employer’s construction of the terms of a

plan in such circumstances.

The trust analogies on which other courts and Firestone

so heavily rely (Br. 11-12) are wholly inapt to an unfunded

benefit plan.'' To begin with, there is no historical reason

finding the issue too “well-settled” in precedent. See, e.g., Varhola,

820 F.2d at 813; Jung v. FMC Corp., 755 F.2d 708, 711i (9th Cir.

1985).

'! Petitioners’ basic assumption (Br. 12, 28-29) that traditional trust

law principles always require judicial deference to a trustee’s inter-

pretation of trust terms is not well founded. While trust principles

make a deferential standard appropriate for review of a trustee’s exer-

cise of discretionary powers (Restatement (Second) of Trusts (1959)

§ 187; G. Bogert & G. Bogert, The Law of Trusts and Trustees § 560

at 193-208 (rev. 2d ed. 1980) [hereinafter Bogert]), the trustee has only

those powers, discretionary or otherwise, that the trust instrument or

operation of law confers (Restatement §§ 186, 187 comment a; Bogert

§ 551). Ordinarily, the courts interpret trust instruments “in the light

of all the circumstances and such other evidence of the intention of the

settlor * * * as is not inadmissible” (Restatement § 4 comment d;

Bogert § 182 at 255). Although a particular trustee may be granted

power to construe disputed or doubtful terms, and such interpreta-

tions will not be disturbed if reasonable (Bogert § 559 at 169-171), a

trustee lacking such authority may be obliged to seek judicial instruc-

tions to avoid committing a breach of trust (id. at 162-168; Restate-

ment § 201 comment b). And, as the court of appeals noted (Pet.

App. AIS, citing Restatement § 187, comment g), even where a matter

has been committed to a trusteé’s discretion, a court will not defer to

the trustee’s judgment if it appears that the trustee’s decision resulted

from bias.

In any event, language in a plan document purporting to give biased

administrators unbounded discretion to decide what the terms of a

plan mean (and there appears to be no such language in Firestone’s

ee Om oe

to apply a trust-law standard to a plan like Firestone’s

because it is Obviously nor a trust since no source of

benefit payments exists separately from the employer’s

own Operating funds. See, e.g., Dependahl v. Falstaff

Brewing Corp., 653 F.2d 1208, 1214 (8th Cir.) (“[f]unding

implies the existence of a res separate from the ordinary

assets of the corporation”), cert. denied, 454 U.S. 968 and

1084 (1981). As a result, there is no identifiable and

segregated trust property and, perforce, no trustee with

both legal title and an equitable duty to deal with such

property for the benefit of others. Without these incidents,

a trust relationship does not exist. Restatement (Second) of

Trusts (1959) § 2; Bogert, supra note 11, §§ 1, 111. The

unfunded plan sponsor has only a contractual obligation

to pay benefits from any available source. See Restate-

ment §§ 13, 74 comment a; Bogert § 17.'? An employer

termination pay plan) would not be enforceable under ERISA. Ex-

culpatory language in plan documents “purport{ing}] to relieve a

fiduciary from responsibility or liability” is expressly “void as against

public policy” (29 U.S.C. 1110(a)). Similarly, language granting

biased administrators unfettered discretion to determine who would

receive benefits would be in tension with ERISA’s judicial review and

disclosure provisions. The disclosure provisions are designed so that a

plan participant will know “exactly where he stands” (S. Rep. 93-127,

93d Cong., Ist Sess. 27 (1973); H.R. Rep. 93-533, 93d Cong., Ist Sess.

11 (1973)), and participants cannot really know where they stand if

biased administrators have discretionary authority, to which courts

must defer, to construe plan terms.

'2 Firestone’s reliance (Br. 12 & n.9) on Section 403(a) of ERISA, 29

U.S.C. 1103(a), to blur the distinction between funded and unfunded

plans is misplaced. Although that section provides that the assets of

employee benefit plans “shall be held in trust by one or more trustees,”

the provision assumes that a particular plan Aas assets. Where the plan

benefits are payable (as in the case of Firestone’s severance pay plan)

from the sponsoring employer’s own general assets, no “plan assets”

exist. See 44 Fed. Reg. 50363, 50365 (1979) (preamble to proposed

regulations relating to definition of plan assets and to establishment of

trust). Accordingly, ERISA has imposed no “trust” on the source of

Firestone’s severance pay benefits.

who has set up a segregated fund devoted exclusively to

the payment of benefits feels no direct effect from each

specific benefit payment decision, whereas unfunded plans

draw their benefits, dollar for dollar, from the employer’s

funds.'? Only the existence of a distinct trust fund tangibly

insulates the benefits decisions of a plan administrator

who is controlled by the employer from the employer’s or-

dinary business decisions. '4

___— The loose standard of review is also inappropriate

because the absence of a separate, identified source of

benefits fundamentally alters the trustee’s task under a

funded plan of “provid{ing] benefits to as many intended

employees as is economically possible while protecting the

financial stability of the [plan].” See Elser v. IAM Na-

tional Pension Fund, 684 F.2d 648, 656 (9th Cir. 1982),

cert. denied, 464 U.S. 813 (1983). Unlike a funded plan’s

trustee, whose decision must “balance[] the interests of

present claimants against the interests of future claimants”

(see Struble v. New Jersey Brewery Employees’ Welfare

'’ Establishment of a trust also imposes on the plan administrator a

duty to preserve and protect that benefit fund for the special purposes

of the trust. See Restatement § 176; Bogert § 582. ERISA’s require-

ment that all plan administrators act “solely in the interest of the par-

ticipants and beneficiaries” (29 U.S.C. 1104(a)(1)) does not require the

administrator of an unfunded plan to devote any part of the

employer's moneys exclusively to the payment of benefits. Also, the

statute's prohibition against inurement of plan assets to the employer’s

benefit (29 U.S.C. 1103(c)(1)), and the prohibitions against certain

conflict-of-interest transactions involving the plan and its assets (29

U.S.C. 1106, 1107), have no meaning if a plan does not acquire or

hold any assets.

‘* If an employer has seriously underfunded a benefit trust, or a

particular interpretation of the plan could require the employer to

make additional contributions, a trustee subject to control by the

employer might not have adequate insulation from the employer's

financial interest. The proper standard of review in such a situation is

not presented by this case, however.

Trust Fund, 732 F.2d 325, 333 (3d Cir. 1984)),'* the ad-

ministrator of an unfunded plan necessarily chooses be-

tween the interests of individual plan beneficiaries on the

one hand and the employer’s desire to hold down business

expenses on the other. This latter choice has little in com-

mon with an unbiased trustee’s making of tradeoffs be-

tween various interests of different plan beneficiaries.'®

Although Congress in enacting ERISA manifested an

intent to “codif[y] and make[] applicable * * * certain

principles developed in the evolution of the law of trusts”

(emphasis added), ERISA’s drafters also understood that

ordinary trust principles are often “insufficient to ade-

quately protect the interests of plan participants and

beneficiaries.” S. Rep. 93-127, 93d Cong., Ist Sess. 29

(1973); H.R. Rep. 93-533, 93d Cong., Ist Sess. 11-12

(1973).'’ Recognizing that employee benefit plans,

'S See also Adams v. New Jersey Brewery Employees’ Pension Trust

Fund, 670 F.2d 387, 397 (3d Cir. 1982) (“[p]artly because of these con-

flicting obligations, trustees are given broad discretion to act”); Rueda

v. Seafarers International Union, 576 F.2d 939, 942 (ist Cir. 1978)

(“we review for arbitrariness in light of the trustees’ responsibility to

all potential beneficiaries”).

'© In cases challenging the apparently self-serving decisions of

employer-fiduciaries on non-benefit issues, the courts have accorded

those decisions no deference, considering de novo whether the

fiduciaries’ actions violated ERISA’s strict standard of fiduciary loyal-

ty to plan participants and beneficiaries. E.g., Struble v. New Jersey

Brewery Employees’ Welfare Trust Fund, 732 F.2d at 333 (employer-

appointed trustees vote to give refunded health insurance premiums to

the employers so as to reduce their future contributions to the plan);

Donovan v. Cunningham, 716 F.2d 1455 (Sth Cir. 1983), cert. denied,

467 U.S. 1251 (1984) (corporate directors serving as plan ad-

ministrators purchase corporation stock for more than adequate con-

sideration); Donovan v. Bierwirth, 680 F.2d 263 (2d Cir.), cert.

denied, 459 U.S. 1069 (1982) (corporate officers serving as plan

trustees reject, during a takeover bid, a tender offer for corporation

stock held by the plan but instead purchase more stock).

'’ Firestone also notes (Br. 17-19) that the legislative histories of the

LMRA and the Welfare and Pension Plans Disclosure Act (WPPDA)

exhibit congressional reliance on traditional fiduciary principles to

covering hundreds or thousands of participants, are “quite

different from the [customary private] trust both in pur-

pose and in nature,” the drafters expected the courts to in-

terpret fiduciary principles “bearing in mind the special

nature and purposes of employee benefit plans intended to

be effectuated by the Act” (ibid.). Thus, Congress con-

templated only selective adoption of trust rules “with

modifications appropriate for employee benefit plans” (id.

at 13).

Judicial experience with employee benefit trusts under

Section 302(c)(S) of the LMRA is also totally inapposite.

First, LMRA plans are necessarily cast in “trust” form,

thus insulating sponsoring employers from the cost of

each benefit payment. Second, such trusts are managed

not by employer nominees, but by a board consisting of

equal numbers of labor and management representatives

with an impartial umpire to decide matters when the two

trustee groups are deadlocked. See NLRB v. Amax Coal

Co., 453 U.S. at 328-329. These structural arrangements

provide participants in LMRA plans with tangible and

realistic guarantees against biased decisionmaking that are

totally absent in the case of an unfunded, employer-

administered ERISA plan.

C. ERISA Itself Does Not Mandate Deference To An

Employer’s Interpretation Of The Terms Of An Unfunded

Employee Benefit Plan

Firestone claims (Br. 9-11, 15-17) that the conferral of

decision-making authority on plan fiduciaries, and Con-

safeguard employee benefit plans. This is irrelevant, however, because

ERISA’s drafters thought those statutes inadequate in important re-

spects. See S. Rep. 93-127 at 4 (the LMRA was “not intended to estab-

lish nor does it provide standards for * * * fiduciary conduct,” and the

WPPDA was “wholly lacking in substantive fiduciary standards”);

H.R. Rep. 93-533 at 4 (same). Indeed, ERISA’s drafters viewed the

Act as a “major departure” from existing law. H.R. Rep. 93-533 at 3;

see also S. Rep. 93-127 at 35 (ERISA “remove{s] jurisdictional and

procedural obstacles which in the past appear to have hampered effec-

tive enforcement of fiduciary responsibilities”); H.R. Rep. 93-533 at

17 (same).

_s_

gress’s rejection of proposals to impose federal agency

review and arbitration procedures as limits on that

authority, require deferential judicial review of the mean-

ing of employee benefit plans in reviewing benefit denials

pursuant to Section 502(a)(1)(B).'* Firestone argues from

Section 402(a) of ERISA, 29 U.S.C. 1102(a), Stating that a

plan must list “one or more named fiduciaries who * * *

shall have authority to control and manage the operation

and administration of the plan,” and from 29 U.S.C.

1002(21), stating that “a person is a fiduciary with respect

to a plan to the extent * * * he exercises any discretionary

authority,” for the proposition that administrators of

employee benefit plans have discretionary authority to

make benefit decisions. It does not follow, however, that

because persons exercising discretionary authority are

fiduciaries, fiduciaries always exercise discretion. ERISA

did not grant administrators unbounded discretionary

authority over benefits decisions, but rather sought to

make them substantially accountable for their decisions.

'* Firestone further contends (Br. 19-20) that Congress’s failure, in

1982, to enact legislation to require de novo review in all ERISA

benefit cases somehow demonstrates its adherence to the arbitrary and

capricious standard. This overlooks the well-established rule that

“ ‘the views of a subsequent Congress form a hazardous basis for in-

ferring the intent of an earlier one.’ ” Mackey v. Lanier Collections

Agency & Service, Inc., No. 86-1387 (June 17, 1988), slip op. 13 (cita-

tion omitted); United States v. Price, 361 U.S. 304, 313 (1960). See

also Pierce v. Underwood, No. 86-1512 (June 27, 1988), slip op. 13

(“it is the function of the courts and not the Legislature * * * to say

what an enacted statute means”). Indeed, since the bill in question was

never even reported from the committee, its failure is an even less

reliable indicator of Congress’s views. See Red Lion Broadcasting Co.

v. FCC, 395 U.S. 367, 381-382 n.11 (1969); Fogarty v. United States,

340 U.S. 8, 13-14 (1950).

To whatever extent the failure to enact an across-the-board de novo

review standard may be deemed relevant, it does not Suggest that Con-

gress then viewed such a standard as always inappropriate. It is just as

plausible to assume that Congress was not persuaded to impose a

single standard of review applicable in all cases, but instead left the

matter for common law development by the courts, and that the com-

mittee failed to report the bill for that reason.

Section 402(a)(1) provides: “Every employee benefit plan

shall be established and maintained pursuant to a written

instrument. Such instrument shall provide for one or more

named fiduciaries who jointly or severally shall have

authority to control and manage the operation and admini-

stration of the plan.” The Conference Report explained the

purpose of Section 402(a) by stating that “[a] written plan is

to be required in order that every employee may, On ex-

amining the plan documents, determine exactly what his

rights and obligations are under the plan” and that fidu-

ciaries must be named “so the employees may know who is

responsible for operating the plan” (H.R. Conf. Rep.

93-1280 at 297).

As noted above (note 7, supra), pre-ERISA courts gener-

ally reviewed benefit decisions under contract principles.

Given ERISA’s fundamental goal of correcting “the abuses

and shortcomings * * * found to exist in the private [em-

ployee benefit] system” (120 Cong. Rec. 29928 (1974) (re-

marks of Sen. Williams)), it would be ironic indeed to con-

Sstrue its adoption of fiduciary standards to somehow

diminish the accountability that already existed for employ-

ers Operating unfunded employee benefit plans. Thus, the

overall purposes of the Act are better served by permitting

reviewing courts to apply contract principles in determin-

ing, under Section 502(a)(1)(B), whether “benefits are due

* * * under the terms of the plan.”!9

'? We would caution, however, against applying contract principles

that might undermine other statutory objectives. For example, the

plaintiffs have argued that employer-drafted benefit plans should be

treated as contracts of adhesion, with ambiguities construed strictly

against the drafter. Although this rule finds some support in pre-ERISA

case law (see, e.g., Frietzsche, 168 Cal. App. 2d at 706-707, 336 P.2d at

590; Sigman, 57 Ohio App. at 5-7, 11 N.E.2d at 879), the Third

Circuit’s treatment of the unfunded plan as a contract negotiated at

arms’ length adequately protects benefit rights, while at the same time

avoiding an incentive to litigation that could exhaust plan resources

and, indeed, defeat ERISA’s intent to encourage the establishment of

employee benefit plans. That approach is also consistent with national

labor policy, which, as noted (page 10, supra), views employee benefits

D. A “Flexible” Arbitrary And Capricious Standard Is Not A Viable

Alternative To De Novo Review Of Benefit Decisions Made By

Biased Administrators Of Unfunded Plans

Firestone contends (Br. 30-32) that a “flexible” arbitrary

and capricious standard provides adequate protection

against improprieties in plan administration. They rely on

Seventh and Ninth Circuit decisions in which those courts,

while adhering to the arbitrary and capricious rubric, have

permitted more searching review when there is reason to

Suspect partiality in plan benefit determinations.2° These

cases suggest “[t]he existence of a sliding scale in judicial

review of ERISA trustees’ decisions * * * [that] give[s] less

deference to a decision the more the trustees’ impartiality can

fairly be questioned” (Van Boxel v. Journal Co. Employees’

Pension Trust, 836 F.2d 1048, 1053 (7th Cir. 1987)). By ex-

panding the judicial inquiry in the face of obvious “danger

signals,” this more elastic standard seeks to avoid the more

absurd results that may occur if the decisions of blatantly

biased administrators are examined under the arbitrary and

capricious standard. See, e.g., Blau v. Del Monte Corp., 748

F.2d 1348, 1353 (9th Cir. 1984), cert. denied, 474 U.S. 865

(1985) (employer’s denial of benefits “made in the course of :

and could have been infected by,” its flagrant and wholesale

violations of ERISA).

At the outset, it is unclear what is meant by a “flexible”

arbitrary and capricious standard, if it is not the imposi-

as mandatory subjects of collective bargaining and establishes a frame-

work for arms’-length negotiation between employers and employees.

2° See, e.g., Van Boxel, 836 F.2d at 1053 (“careful judicial scrutiny”

appropriate when company-appointed trustees denied a pension claim

that was predicated on the claimant’s years of work for an adversary

union); Dockray v. Phelps Dodge Corp., 801 F.2d at 1152 (less deference

due to a company administrator’s denial of benefits to employees in-

volved in a long and unusually bitter strike against the company); Jung v.

FMC Corp., 755 F.2d at 711-712 (employer’s denial of severance pay to

the salaried employees of a former division is entitled to “less deference”

because it “avoids a very substantial Outlay”). See also Maggard v.

O'Connell, 671 F.2d 568, 571-572 (D.C. Cir. 1982) (judicial review of

benefit denial requires a “stern hand and flinty eye” when there are

“ ‘danger signals’ rebutting ‘the presumption of agency regularity’ ”).

tion of a more rigorous standard of review —in the manner

of the court below — based on existing conflicts of interest.

The Seventh Circuit’s formulation allows the reviewing

court to eliminate deference altogether in some cases. Van

Boxel v. Journal Co. Employees’ Pension Trust, 836 F.2d

at 1052-1053 (when trustees “have a serious conflict of in-

terest, the proper deference to give their decisions may be

slight, even zero,” and the court will interpret the plan

documents for itself). The Ninth Circuit accords “less

deference” when the circumstances of the benefit decision

impose a significant conflict of interest on the plan admin-

istrator. Dockray v. Phelps Dodge Corp., 801 F.2d 1149,

1152 (1986); Jung v. FMC Corp., 755 F.2d 708, 711-712

(1985). Since the propriety of the decision is the issue to

which the standard of review must be applied, it must be

the appearance of such a conflict of interest rather than the

conclusion that a decision resulted from bias that triggers

closer judicial scrutiny. And any presumption of correct-

ness to benefit decisions made in the face of a disincentive

to paying benefits runs the risk of upholding decisions in

which the interests of plan participants and beneficiaries

were sacrificed to the employer’s self-interest.

The inherent nature of the conflict faced by the employ-

er-administrators of unfunded plans entails an unqualified

rule of no deference in cases involving unfunded plans ad-

ministered by employers. Any alternative would sow confu-

sion in the courts and foster inconsistent enforcement of

benefit rights under these plans; principles of contract inter-

pretation are a well-established and clearly-developed body

of law.?!

2! Firestone suggests (Br. 27 n.26) that use of a contract standard of

review would conflict with appellate decisions holding that a jury trial is

not available in ERISA benefit actions. The two issues, however, are

not directly linked. While some courts have observed that a jury trial

may be incompatible with the application of trust principles under

ERISA, and with the arbitrary and capricious standard in particular

(see Berry v. Ciba-Geigy Corp., 761 F.2d at 1006-1007 (4th Cir.); /n re

Vorpahl, 695 F.2d 318, 321 (8th Cir. 1982); Calamia v. Spivey, 632 F.2d

1235, 1237 (Sth Cir. 1980); Wardle, 627 F.2d at 829-830 (7th Cir.)), the

ee oe eee

’

Il. FORMER EMPLOYEES WHO WERE PLAN PARTICI-

PANTS ARE ENTITLED TO OBTAIN COPIES OF PLAN

DOCUMENTS UPON REQUEST

The court of appeals also reached the correct result when

it held that Firestone should have provided information

about its employee benefit plans to the three named plain-

tiffs upon request, pursuant to Section 104(b)(4) of ERISA,

29 U.S.C. 1024(b)(4). That provision states that “upon

written request of any participant,” the plan administrator

shall furnish various specified information, including,

among other items, the plan description, the latest annual

report, and “instruments under which the plan is estab-

lished or operated.” 2? Firestone refused to provide infor-

mation about its termination pay plan to two of the named

plaintiffs, Smolinski and Schade, on the ground that they

were no longer Firestone employees when they requested

the information and hence were not “participants” in that

plan. Similarly, Firestone denied Bruch’s request for infor-

mation about its stock purchase plan on the ground that it

principal focus of the jury trial decisions has been on the equitable

nature of the relief sought, not the standard of review involved (see,

e.g., Katsaros v. Cody, 744 F.2d 270, 278 (2d Cir.), cert. denied, 469

U.S. 1072 (1984) (“plaintiffs seek equitable relief in the form of removal

and restitution as distinguished from damages for wrongdoing or non-

payment of benefits”)). In addition, some courts have suggested that a

legal remedy (with a right to jury trial) may exist even under trust law

when the trustee has an immediate and unconditional obligation to pay

all the claimed benefits. See Jn re Vorpahl, 695 F.2d at 322 n.6; Wardle,

627 F.2d at 829 (both citing Restatement (Second) of Trusts § 198(1)).

Whether a jury trial is available in a benefit denial case is not a question

presented here.

?? Section 104(b)(4) provides: “The administrator shall, upon written

request of any participant or beneficiary, furnish a copy of the latest

updated summary plan description, plan description, and the latest an-

nual report, any terminal report, the bargaining agreement, trust agree-

ment, contract, or other instruments under which the plan is established

or operated. The administrator may make a reasonable charge to cover

the cost of furnishing such complete copies. The Secretary may by

regulation prescribe the maximum amount which will constitute a

reasonable charge under the preceding sentence.”

had paid him his vested interest in the plan and his unvested

interests were forfeited when Occidental purchased the

Plastics Division and he went to work for it. Pet. App.

A71-A72.

Section 3(7), 29 U.S.C. 1002(7), broadly defines “partici-

pant” as “any employee or former employee * * * who is or

may become eligible to receive a benefi: of any type from

an employee benefit plan which covers employees of such

employer.” Contrary to Firestone (Br. 34-37), this language

does not limit participant status to individuals who have a

vested interest in the plan or whose employment status

assures them of future benefits. Firestone confuses partici-

pation in a plan with entitlement to benefits. Moreover, the

Statutory definition specifically includes individuals who

“may become eligible” for benefits. And employees present-

ly covered by a plan are plainly participants even if they

have no legal right to benefits until their interest vests or the

specified contingency for benefit payment actually occurs.

Congress’s inclusion of present and former employees

who are or may become eligible for benefits?} was an effort

?3 There is no basis in the language of Section 3(7) for the Fifth Cir-

cuit’s conclusion that “the ‘may become eligible’ language was intended

to apply only to current employees” (Nugent v. Jesuit High School, 625

F.2d 1285, 1287 (1980); see Jackson v. Sears, Roebuck & Co., 648 F.2d

225, 228 (1981)), a position Firestone endorses (Br. 33 n.30). Since the

Statute provides that “any employee or former employee of an

employer, or any member or former member of an employee organiza-

tion, who is or may become eligible to receive a benefit” is a “partici-

pant,” it is plain that the phrase “may become eligible,” which is

separated by 19 words (including “former employee”) from the word

“employee,” does not relate only to the word “employee.”

The Second and Ninth Circuits have taken the position that a former

employee remains a “participant” if he “may become eligible” for bene-

fits as a result of returning to covered employment in the future. See

Kuntz v. Reese, 785 F.2d 1410, 1411 (9th Cir.), cert. denied, 479 U.S.

916 (1986); Saladino v. ILGWU National Retirement Fund, 754 F.2d

473, 476 (2d Cir. 1985); Weiss v. Sheet Metal Workers Local No. 544

Pension Trust, 719 F.2d 302, 304 (9th Cir. 1983), cert. denied, 466 U.S.

972 (1984). Those courts, however, require that the former employee

demonstrate a “reasonable expectation” or “significant probability” of

returning to work under the plan. That additional burden is not sensible

ge ee

to be broadly encompassing in defining the class of plan

“participants.” As a comprehensive remedial statute en-

acted to protect employee benefit rights, ERISA should be

construed liberally to effectuate its purposes. Brink v.

DaLesio, 667 F.2d 420, 427 (4th Cir. 1981); Brock v. Self,

632 F. Supp. 1509, 1520 (W.D. La. 1986); Eaton v.

D’Amato, 581 F. Supp. 743, 746 (D.D.C. 1980). See Ten-

nessee Coal, Iron & R.R. Co. v. Muscoda Local No. 123,

321 U.S. 590, 597 (1944) (legislation protecting the rights of

working people “must not be interpreted or applied in a

narrow, grudging manner”). Thus, we agree with the court

of appeals that the definition of “participant” should be

construed to encompass those who claim eligibility for pres-

ent or future benefits. Any former employee who requests

information about an employee benefit plan in which he

participated because he thinks he might be entitled to bene-

fits must be given the information even if a return to work

for the former employer is not possible.24 As the court of

appeals stated (Pet. App. A41-A42), that is how “partici-

pant” must be read in other provisions of ERISA, such as

Section 502(a)(1)(B), which authorizes participants to bring

suit claiming entitlement to benefits. It is undisputed that

the plaintiffs were authorized to bring suit under Section

502(a)(1)(B) seeking benefits under Firestone’s termination

pay plan because they claimed to be entitled to benefits,

even though the provision authorizes “participants” to

since a former employee may not be able to determine whether it is in

his economic interest to resume his former employment unless he knows

the extent of his rights under the plan. Therefore, in the absence of in-

formation about the plan, it would be impossible to know whether there

was a significant probability that he would attempt to return to his

former employer.

*4 There may be former employees whose claimed entitlements to

benefits have no connection with their past employment. For example,

a former employee who had never participated in a stock plan might re-

quest information about that plan because he thought he might be owed

benefits. None of the present plaintiffs fall in that category, however,

and the Court need not here determine what obligations, if any, would

be owed to such a person.

bring suit rather than persons who “claim to be par-

ticipants.”

ERISA’s drafters considered effective communication of

plan contents to affected employees an “important issue” to

be addressed in the Act (S. Rep. 93-127 at 11; H.R. Rep.

93-533 at 8). The drafters found the “generalized” disclo-

sure requirements of the predecessor Welfare and Pension

Plans Disclosure Act (WPPDA) to be “insufficient” and

that “[c]hanges * * * in scope and detail” would be needed

(S. Rep. 93-127 at 27; H.R. Rep. 93-533 at 11).25 The

resulting legislation established “a more particularized form

of reporting” that would enable an individual to know “ex-

actly where he stands with respect to the plan—what

benefits he may be entitled to, what circumstances may

preclude him from obtaining benefits, what procedures he

must follow to obtain benefits, and who are the persons to

whom the management and investment of his plan funds

have been entrusted” (ibid.). Thus, by design, ERISA’s

disclosure requirements supplement the statute’s fiduciary

standards by arming individuals “with enough information

to enforce their own rights as well as the obligations owed

by the fiduciary to the plan in general” (ibid.).

Access to information is at least as important to a former

employee who is unclear about the impact of his change in

employment on current or future benefit rights as it is for

either a current employee or an individual whose rights

have vested. If mandatory disclosure of plan terms and con-

2’ While “participant” was defined by the WPPDA in virtually the

same terms as in ERISA (see Welfare and Pension Plans Disclosure

Act, Pub. L. No. 85-836, § 3(a)(6), 72 Stat. 998 (1958)), the WPPDA’s

disclosure requirements and enforcement provisions applied only to

participants and beneficiaries “covered under the plan” (§§ 5(a), 9(b),

72 Stat. at 999, 1002), thereby providing a limitation not found in Sec-

tions 104(b)(4) and 502(c), the corresponding provisions of ERISA. The

Fifth Circuit based its limited view of ERISA disclosure rights (see note

23, supra)) on its prior decision in Golden v. Kentile Floors, Inc., 512

F.2d 838, 849-850 (1975), which arose under the WPPDA, without

noting the difference in the language or that Congress had found the

WPPDA’s disclosure provisions deficient.

ae iia

ditions is as limited as Firestone contends, a Significant

number of workers who have participated in employee bene-

fit plans may forever remain in the dark about their

“stand[ing] with respect to the plan” (S. Rep. 93-127 at 27;

H.R. Rep. 93-533 at 11) solely because of their change in em-

ployment status. Most importantly, those individuals will be

left at the mercy of the plan administrators who, by refusing

to provide requested information based on the administra-

tors’ view of former employees’ rights, can effectively

deprive them of the means of ascertaining for themselves the

extent of their rights and, if necessary, pursuing enforcement

action in the courts. Nothing could be farther from Con-

gress’s intent in enacting ERISA’s disclosure requirements. *°

Firestone contends (Br. 40-42) that a broad reading of

“participant” will impose costly burdens on employee bene-

fit plans. That fear is not justified. In providing that former

employees may obtain information upon request, Section

104(b)(4) expressly provides that administrators may make

a “reasonable charge.” 2’ As to the requirements of Sec-

tions 104(b)(1) and (3), 29 U.S.C. 1024(b)(1) and (3), that

there be periodic distribution of various sorts of informa-

tion, without charge and without request,?* those “auto-

spond to former employees’ requests for information about employee

benefit plans because they may “obtain a far broader range of informa-

tion in the course of any ensuing litigation” (Br. 42) obviously misses

the mark. Congress enacted Section 104(b) so that an employee would

know “where he stands” (S. Rep. 93-127 at 27: H.R. Rep. 93-533 at 11)

without filing suit.

*’ The Secretary has promulgated a regulation providing that a

charge “is reasonable if it is equal to the actual cost per page to the plan

for she least expensive means of acceptable reproduction, but in no

event "ay such charge exceed 25 cents per page” (29 C.F.R.

2520.104b-30(b)).

?® Section 104(b)(1) requires administrators to provide participants

with a copy of the summary plan description and a summary of any

material modification of the plan terms. Section 104(b)(3) requires ad-

ministrators to send copies of annual statements describing the pian’s

assets and liabilities, along with a summary of the plan’s receipts and

disbursements from the prior plan year.

matic” disclosure requirements have been construed by the

Secretary of Labor not to apply to every person defined as a

“participant” by Section 3(7) of the Act.?® By June 1975,

less than a year after ERISA was enacted, the Secretary had

promulgated proposed disclosure regulations and received

comments on them.3® The Secretary noted fears that ad-

ministrators would be required to provide information

“without charge and without written request” to many per-

sons, such as “former employees who had no vested bene-

fits when they left the employment.” 40 Fed. Reg. 24649

(1975). Observing that the language of Section 101(a), 29

U.S.C. 1021(a), which governs the Section 104(b) auto-

matic disclosure requirements, refers not to “participants”

but to “participants covered under the plan,” the Secretary

concluded that “Congress provided a ground for distin-

guishing between the .class of all participants included

within the meaning of section 3(7) of the Act and the class

of participants who are entitled to receive copies of plan

documents without charge and without request” (40 Fed.

Reg. 24649 (1975)).3! The Secretary drew such a distinction

in the regulations. Under 29 C.F.R. 2520.104b-1(c), distri-

bution of plan documents without charge and without re-

quest need only be made to a narrower group of “partici-

pants covered under the plan.” As defined in 29 C.F.R.

29 Moreover, an annual summary report as required by Section

104(b)(3) need not be distributed to participants in a “totally unfunded

welfare plan” such as Firestone’s termination pay plan (29 C.F.R.

2520.104b-10(g)(1)).

30 The Secretary of Labor has authority to prescribe regulations that

“Is}he finds necessary or appropriate to carry out the provisions of [Ti-

tle | of ERISA],” including its reporting and disclosure requirements. 29

1J.S.C. 1135.

3! In Section 502(c\(1), 29 U.S.C. 1132(c)(1), Congress authorized a

penalty of up to $100 per day for failure “to comply with a request tor

any information which such administrator is required by this sub-

chapter to furnish to a participant.” It thus created a penalty for viola-

tions of Section 104(b)(4), involved here, but not for failure to comply

with Section 104(b)’s automatic disclosure provisions, although it pro-

vides for equitable relief (see 29 U.S.C. 1132(a)(3)).

2510.3-3(d)(2)(i), an individual ceases to be a participant

covered by a welfare benefit plan when he becomes “ineli-

gible to receive any benefit under the plan even if the con-

tingency for which such benefit is provided should occur”

and he is “not designated by the plan as a participant.”

Thus, plan administrators need not automatically provide

plan documents to former employees whom plan ad-

ministrators determine not to be eligible for benefits.

At the same time that the Secretary narrowed the class of

participants who must be provided information without

charge and without request, he noted that other partici-

pants would be entitled to inspect plan documents pursuant

to Section 104(b)(2), 29 U.S.C. 1024(b)(2), and obtain doc-

uments “upon written request at a reasonable charge under

section 104(b)(4) of the Act and proposed § 2520.104b-30”

(40 Fed. Reg. 24649 (1975)). Indeed, anticipating this case,

the Secretary noted that the broader class of participants —

which he had just noted included former employees like the

three named plaintiffs — would be able to obtain informa-

tion about the plan “in the event of a dispute between an

employee of an employer maintaining the plan and plan of-

ficials as to the employee’s status as a participant covered

under the plan” (ibid.).

The statutory interpretations contained in the Secretary

of Labor’s regulations, adopted contemporaneously with

the legislation, are entitled to “controlling weight” so long

as they are reasonable and not inconsistent with the plain

language of the statute. Chevron U.S.A. Inc. v. NRDC,

*? Firestone misunderstands the regulations when it cites (Br. 35-36)

the definition in Section 2510.3-3(d)(2)(i) in support of its contention

that it did not have to provide information to the three named plain-

tiffs. Under the distinction drawn by the regulations, Firestone was not

required to send them the information described in Section 104(b)(1)

and (3), such as any material change in the terms of the plan, because

they are not “participants covered under the plan.” However, they are

“participants” and are entitled to information upon request pursuant to

Section 104(b)(4) and may enforce that right under Section 502(a)(1)(A)

and obtain the penalty (up to $100 per day) provided in Section

502(c\(1).

Inc., 467 U.S. 837, 843-844 (1984); see NLRB v. United

Food & Commercial Workers Union, No. 86-594 (Dec. 14,

1987), slip op. 10 n.20, 12; Udallv. Tallman, 380 U.S. 1, 16

(1965). The narrower regulatory definition of “participants

covered under the plan” to whom automatic disclosure is

required, which the Secretary adopted soon after ERISA

went into effect, is a reasonable accommodation of

ERISA’s competing interests in providing access to infor-

mation, on the one hand, and avoiding excessively burden-

some administrative requirements, on the other. Therefore,

the Third Circuit’s approach to respondents’ requests for

plan information, which is consistent with the Secretary’s

authoritative interpretation of the Act, should be upheld.

CONCLUSION

The judgment of the court of appeals should be af-

firmed.

Respectfully submitted.

CHARLES FRIED

Solicitor General

DONALD B. AYER

Deputy Solicitor General

CHRISTOPHER J. WRIGHT

Assistant to the Solicitor General

GEORGE R. SALEM

Solicitor of Labor

CHARLES |. HADDEN

Deputy Associate Solicitor

JEFFREY A. HENNEMUTH

Altorney

Department of Labor

AUGUST 1988

wy U.S. GOVERNMENT PRINTING OFFICE: 1988— 202-037/60605

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