Amicus Curiae Brief — Bituminous Coal Operators' Ass'n v. United Mine Workers of America ex rel. Rabbit

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| In the Supreme Court of the Attit v ter . 4

OcToBER TERM, 1990 - E

BITUMINOUS COAL OPERATORS’ ASSOCIATION, INC.,

PETITIONER

v.

UNITED MINE WORKERS OF AMERICA, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

vA UNITED STATES COURT OF APPEALS

cs FOR THE THIRD CIRCUIT

sie |

e: BRIEF FOR THE UNITED STATES

ere AS AMICUS CURIAE

By

z

3a

at KENNETH W. STARR

oe Solicitor General

om DAVID L. SHAPIRO :

S Deputy Solicitor General

4 CHRISTOPHER J. WRIGHT

a Assistant to the Solicitor General

2 Department of Justice

i Washington, D.C. 20530

ae. (202) 514-2217

rt ALLEN H. FELDMAN

A, Associate Solicitor

3 STEVEN J. MANDEL

B Deputy Associate Solicitor

NATHANIEL I. SPILLER

Senior Appellate Attorney

1% Department of Labor

n Washington, D.C. 20210

QUESTION PRESENTED

The trustees of the 1974 United Mine Workers Benefit

Plan and Trust denied coverage to a class of retired

miners. The question presented is whether, in applying

this Court’s decision in Firestone Tire & Rubber Co. v.

Bruch, 489 U.S. 101 (1989), the district court properly

reviewed the decision of the trustees under a de novo

standard.

09)

ET a a

eR ——

TABLE OF CONTENTS

I dike cko poctisaductibebacscsoneseds Se See er

|

TABLE OF A ORITIES

Cases:

Anderson V. Blue Cross/Blue Shield, 907 F.2d 1072

Pet I iB os cesienneitivetanion

Anderson Vv. Pittsburgh-D Moines Corp., 893

Ree re Se, MIO a iia cceecsen cee

Baker v. Big Star Div. of the Grand Union Co.,

i

Boyd v. Trustees of the UMW Health & Retire-

ment Funds, 873 F.2d 57 (4th Cir. 1989) .........

Brown Vv. Blue Cross & Blue Shield of Ala., Inc.,

898 F.2d 1556 (11th Cir. 1990), cert. denied,

pi BN | RD ee Sees or eee

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

134 (3d Cir. 1987), aff’d, 489 U.S. 101 (1989) ..

Cathey v. Dow Chemical Co. Medical Care Pro-

gram, 907 F.2d 554 (5th Cir. 1990)...

Crockett v. Vecellio & Grogan, Inc., No. 85-1448

(S.D. W. Va. Feb. 4, 1987)

Curtis v. Noel, 877 F.2d 159 (1st Cir. 1989) . Sr ee

De Nobel v. Vitro Corp., 885 F.2d 1180 (4th Cir.

weer eee eeen

DeWitt v. State Farm Ins. Companies Retirement

Plan, 905 F.2d 798 (4th Cir. 1990) —....002022 0.

District 17, UMW v. Allied Corp., 785 F.2d 121,

rev'd, 765 F.2d 412 (4th Cir. 1984), cert. denied,

a a ibialbbiibiibas

Page

11

9

10, 11

8

10, 13

.. 18,14

10, 12

IV

Cases—Continued : Page

District 29, UMW v. Royal Coal Co., 8 Employee

Benefit Cas. (BNA) 1556, aff’d, 826 F.2d 280

(4th Cir. 1987), cert. denied, 485 U.S. 935

SID seiceesesinepiasnsirinsnsnittsinpiniitatisemnibecienisiteal 4

District 29, UMW v. Royal Coal Co., 768 F.2d 588

(4th Cir. 1985) 38

District 29, UMW v. UMW 1974 Benefit Plan &

Trust, 826 F.2d 280 (4th Cir. 1987), cert. denied,

Re Be I a rite tecnica caricenbdaaceesttennse 4

Dzinglski v. Weirton Steel Corp., 875 F.2d 1075

(4th Cir.), cert. denied, 110 S. Ct. 281 (1989)... 18, 14

Exbom v. Central States Health & Welfare Fund,

900 F.2d 1188 (7th Cir. 1990) ..............0..0.......... 11

Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

SE FE eines rath icictthnrseanttincioes 6, 9, 10, 14, 15, 16

Fuller vy. CBT Corp., 905 F.2d 1055 (7th Cir.

I atibhiisiichitatidectictiteccdtecnbuliictionttict apes leccbesscbice 10, 12

Grubbs v. UMW, 723 F. Supp. 123 (W.D. Ark.

1989) 4

Heidgerd v. Olin Corp., 906 F.2d 903 (2d Cir.

p FEN 2 RES OS Se are e Bie eee 10

International Bhd. of Elec. Workers, Local 47 Vv.

Southern Cal. Edison Co., 880 F.2d 104 (9th Cir.

1068) 20. 13

International Union, UAW Vv. Yard-Man, Ine., 716

F.2d 1476 (6th Cir. 1983), cert. denied, 465 U.S.

1007 (1984) _..... 5

Johnson VY. Enron Corp., 906 F.2d 1234 (8th Cir.

| RR BE ARO «PR er 2 Meee PCr Ae Oe NN 10

Jones V. Laborers Health & Welfare Trust Fund,

906 F.2d 480 (9th Cir. 1990) .........2. ee. 10

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

cert. denied, 375 U.S. 964 (1964)... 18

Lowry Vv. Bankers Life & Casualty Retirement

Plan, 871 F.2d 522 (5th Cir.), cert. denied, 110

i Ce ND lewitnaehtsethiensectesetincidetnibtans 11, 13, 14

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

ED idibedlcsditicibieiensnsitaapanentininticte sh Spadadasateibinss Shdhtinlinadedibines 18

Michael Reese Hosp. & Medical Center v. Solo Cup

Employee Health Benefit Plan, 899 F.2d 639

3 8 Be Roe ed ee « 2, 38

Cases—Continued : Page

Moon Vv. American Home Assurance Co., 888 F.2d

my i 11

NLRB v. Amaz Coal Co., 453 U.S. 322 (1981)....2, 18, 19

Orozco V. United Air Lines, Inc., 887 F.2d 949 (9th

Cir. 1969) ............ 11

Perry v. Simplicity Engineering, 900 F. 2d 963 (6th

Cir. 1990) ......... 10

Richards v. UMW Health & Retirement Fund,

606 F.2d 188 (4th Cir. 1968) .....................:........ 17

Schifano v. UMW 1974 Benefit Plan & Trust, 655

FV. Cs Se te We a Ole BOE D sectedeciereccemssicssoeene 4

Sisters of the Third Order of St. Francis Vv.

SwedishAmerican Group Health Benefit Trust,

901 F.2d 1869 (7th Cir. 1990) .......22222.2..22---100-ee 12,15

Transportation-Communication Employees Union

v. Union Pacific R.R., 385 U.S. 157 (1966)........ 17

UMW Health & Retirement Funds vy. Robinson,

455 U.S. 562 (1982) ..2, 17, 18, 19

Van Bozxel v. Journal Co. Employees’ Pension

Trust, 836 F.2d 1048 (7th Cir. 1987) .................. 9,18

Statutes and rule:

Employee Retirement Income Security Act of

Ss Cr ee FI OO GG, sencctnrsnnnnecrnsiccsccnctesocee 2

a Se Eee PEGI secenensrmsrvnnctetsnnninesotmeens 2

Labor-Management Relations Act of 1947, 29

U.S.C. 181 et seq.:

§ 302 (c) (5), 29 U.S.C. 186 (c) (5)... 2, 18,19

§ 302 (c) (5) (B), 29 U.S.C. 186 (c) (5) (B) ....... 2,9

Fed. R. Civ. P. 23 (b) (2) ........ 5

Miscellaneous:

Restatement (Second) of Trusts (1959) ................. 10, 14

)

In the Suprenv Court of the United States

OCTOBER TERM, 1990

No. 90-464

BITUMINOUS COAL OPERATORS’ ASSOCIATION, INC.,

PETITIONER

Vv.

UNITED MINE WORKERS OF AMERICA, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE

This brief is submitted in response to the Court’s order

inviting the Solicitor General to express the views of the

United States.

STATEMENT

1. Petitioner, the Bituminous Coal Operators’ Asso-

ciation (BCOA), is a multi-employer bargaining associa-

tion. About every three years for the last 40 years, it has

negotiated a collective bargaining agreement with re-

spondent United Mine Workers of America (UMWA).

That agreement, known as the National Bituminous Coal

Wage Agreement (NBCWA), governs the terms and con-

ditions of employment of the coal miners employed by

members of the BCOA and the companies that sign “me

too” agreements with the UMWA. Pet. App. 11a-12a.

In 1950, the BCOA and the UMWA established in the

NBCWA the United Mine Workers Welfare and Retire-

(1)

2

ment Fund. Pet. App. 15a.‘ This Fund provided pension

and health benefits for active and retired miners

“throughout the life of the miner.” Jd. at 16a (district

court’s characterization). The Fund was governed by a

board of three trustees—a BCOA-appointed trustee, a

UMW4A-appointed trustee, and a mutually selected neu-

tral trustee. Under the terms of the 1950 Trust, the

trustees had complete discretion over eligibility require-

ments and the nature and level of benefits. Ibid.

In 1974, the BCOA and the UMWA agreed to restruc-

ture the Fund by creating four separate plans: the 1950

Pension Plan, the 1950 Benefit Plan, the 1974 Pension

Plan, and the 1974 Benefit Plan.? The 1974 Benefit Plan,

which is at issue in this case, was established to provide

health and other non-pension benefits to active miners

and to pensioners who retired after January 1, 1976, and

were eligible to receive pension benefits from the 1974

Pension Plan. Unlike the prior collective bargaining

agreements, the 1974 NBCWA set forth in specific terms

the eligibility requirements for the benefits to be pro-

vided to miners, pensioners, and their dependents. Pet.

App. 16a-17a; see Robinson, 455 U.S. at 566. The grant

of authority to the trustees was correspondingly limited

to “full authority * * * with respect to administration of

coverage and eligibility.” Pet. 17 (emphasis added) .*

1The Fund was created pursuant to Section 302(c) (5) of the

Labor-Management Relations Act of 1947, 29 U.S.C. 186(c) (5). See

UMW Health & Retirement Funds v. Robinson, 455 U.S. 562, 564-

566 (1982). Employees and employers must be equally represented

in the administration of a fund established under Section 302(c) (5),

but may agree upon one or more neutral representatives to serve as

trustees. 29 U.S.C. 186(c) (5)(B); NLRB v. Amaz Coal Co., 453

US. 322, 328-329 (1981).

2In part, the restructuring was designed to comply with the re-

cently enacted Employee Retirement Income Security Act of 1974

(ERISA), 29 U.S.C. 1001 et seq. Pet. App. 16a. The 1974 Benefit

Plan and Trust is an employee welfare benefit plan within the mean-

ing of Section 3(1) of ERISA. 29 U.S.C. 1002(1). Pet. App. 12a.

8 Article III of the trust document states:

Subject to the provisions of the 1974 Benefit Trust, the Trustees

shall have full authority, within the terms and provisions of

3

In 1978, following a 111-day strike in which the con-

tinuation of health benefits was the central issue (see Pet.

App. 17a-18a), the BCOA and the UMWA agreed that

health benefits for active miners and post-1975 retirees

would be provided by individual companies. The 1978

agreement also provided that the 1974 Benefit Plan would

continue to exist to provide benefits to “any retired miner

under the 1974 Pension Plan * * * who would otherwise

cease to receive the health and other non-pension benefits

provided herein because the signatory Employer (includ-

ing successors and assigns) is ng longer in business.”

Pet. App. 18a. The agreement aid not specify who would

provide benefits to persons who had retired from com-

panies that would become non-signatory employers by

UMWA.

2. After the 1978 restructuring, a number of courts

held that non-signatory employers were not obligated to

provide benefits to their retirees, but that the 1974 Bene-

fit Plan provides a “safety net” for those “orphaned” re-

tirees. Thus, in District 29, UMW v. Royal Coal Co.

(Royal I), 768 F.2d 588, 589 (1985), the Fourth Circuit

held that a company that had been signatory to the 1978

and 1981 agreements, but had ceased all mine operations

and did not sign the 1984 agreement, was not obligated

to pay the health benefits of its former employees beyond

the expiration of the earlier agreements, even though

they had retired during the terms of those agreements.

the Labor-Management Relations Act of 1947, and other applica-

ble law[,] with respect to administration of coverage and eligi-

bility, methods of providing or arranging for provisions for

benefits, investment of trust funds and all other related matters.

4 The 1981 agreement and subsequent agreements specify that “no

longer in business” means that the employer “has ceased all mining

operations” and “is financially unable * * * to provide health and

other non-pension benefits to its retired miners and surviving

spouses” either directly or through any successors, assigns, or re-

lated subsidiary or parent corporations. Pet. 6-7 & n.4; see Pet.

App. 21a-22a.

4

Accord District 17, UMW v. Allied Corp. (Allied I), 735

F.2d 121, 124, 133, rev’d on other grounds, 765 F.2d 412

(4th Cir. 1984) (en banc) (Allied II), cert. denied, 473

U.S. 905 (1985); Bow v. Coalite, Inc., 643 F. Supp. 709

(N.D. Ala. 1986). After a remand, the Fourth Circuit

held that “the 1974 Benefit Plan must provide health

benefits where the successor corporation of the former

employer is financially able to provide benefits, but is not

legally obligated to do so because it is not a signatory to

the wage agreement.” District 29, UMW v. UMW 1974

Benefit Plan & Trust (Royal II), 826 F.2d 280, 282

(1987), cert. denied, 485 U.S. 935 (1988). The court

concluded ‘‘that the intentions of the parties in providing

for retirement health benefits was to guarantee their pro-

vision for life.” 826 F.2d at 282.5 The Fourth Circuit

thus held that the 1974 Benefit Plan must assume health

and benefit obligations when the employer’s legal obliga-

tions nave ceased (as set forth in Royal I), even if its

parent or successor is financially able to pay and there-

fore is “in business” as defined in the wage agreement.

Id. at 283.°

5 The Fourth Circuit based this finding on the general description

in each of the succeeding wage agreements that “pensioners who

retire before the effective date of each coliective bargaining agree-

ment are entitled to health benefits ‘for life’ and their widows ‘until

death or remarriage.’” 826 F.2d at 282. Thus, “[d]espite the pat-

ent limitation of the liability o the 1974 Benefit Plan and Trust to

provide health benefits only ‘during the terms of this agreement,’

and only where the individual employer is ‘no longer in business’ ”

(ibid.), the court concluded that “[i]t is apparent from the record

that the parties, in moving from a system wherein the health bene-

fits were provided solely by the collective 1974 trust to a regime in

which individual employers assumed primary liability, intended to

change the method of providing health benefits, but they did not

intend to create new, latent loopholes to coverage.” Jd. at 283.

® A cord Grubbs v. UMW, 723 F. Supp. 123 (W.D. Ark. 1989);

Schifano v. UMW 1974 Benefit Plan & Trust, 655 F. Supp. 200

(N.D. W. Va. 1987); see District 29, UMW v. Royal Coal Co., 8

Employee Benefits Cas. (BNA) 1556, aff’d, 826 F.2d 280 (4th Cir.

1987), cert. denied, 485 U.S. 935 (1988).

5

3. This case arose out of a decision by the trustees of

the 1974 Benefit Plan to deny coverage to a class of re-

tired or disabled miners (or their dependents) whose

last coal mine employers were eight companies that had

been signatories to the NBCWA until either 1981 or

1984. Following their decisions not to sign the more re-

cent agreements, these companies either remained in the

coal business as non-union employers or otherwise were

financially able to provide the benefits either directly or

through a related division, parent cr subsidiary corpora-

tion, or through a successor or assign. Pet. App. 10a-

lla, 13a-15a.*

The district court stated that “[w]hether the pension-

ers at bar are entitled to health benefits as a vested, life-

time benefit depends on the intent of the parties to the

collective bargaining agreement.” Pet. App. 26a, citing,

e.g., International Union, UAW v. Yard-Man, Inc., 716

F.2d 1476 (6th Cir. 1983), cert. denied, 465 U.S. 1007

(1984). Characterizing the case as “a straight-forward

factual dispute,” the court extensively reviewed the col-

lective bargaining history and the resulting agreements

and plan documents from 1950 through 1988. Pet. App.

‘The courts below consolidated four separate actions. See Pet.

App. la-7a. Individuals who had been employed by one of the/eight

companies brought suit, along with their collective bargaining rep-

resentative, in three of the actions “seek[ing] injunctive relief to

compel the 1974 Benefit Plan to provide health and other non-pension

benefits, pay all unpaid medical bills and estabiish an escrow fund

to insure payment of such benefits.” Jd. at App. 12a; see id. at lla.

The trustees of the 1974 Benefit Plan filed the fourth action, seeking

a declaratory judgment to determine its responsibility to provide

health benefits to those individuals. Jd. at 14a. The BCOA inter-

vened and asked for class certification of the individual plaintiffs

under Fed. R. Civ. P. 23(b) (2). The district court certified a class

of more than 2,100 persons, defined as pensioners, retired or disabled

miners, and their spouses and dependents who are or were eligible

for benefits under the 1974 Pension Plan and who were employed by

non-signatory companies that had signed the NBWA of 1978, 1981,

or 1984. The class excludes persons whose last signatory employer’s

operations were principally within the jurisdiction of the Fourth

Circuit. Pet. App. 40a-42a, 53a-55a.

ee

6

10a; see id. at 15a-26a. It noted in particular that in

1978 “the BCOA proposed to eliminate the language con-

tained in the 1974 Agreement that pensioners and dis-

abled miners would retain a health services card ‘until

death’ or ‘for life,’ and widows ‘until death or remar-

riage,’”’ but the UMWA refused to eliminate the lan-

guage and substantially similar language was inserted

into the General Description of Plan Benefits in 1978,

1981, 1984, and 1988. Jd. at 19a. The court further

found that the parties were aware, when they negotiated

the 1988 NBCWA, of the judicial holdings in favor of

1974 Benefit Plan coverage for the pensioners of former

signatory employers. Jd. at 25a.°

In light of this Court’s decision in Firestone Tire &

Rubber Co. v. Bruch, 489 U.S. 101 (1989), the district

court held that “the appropriate standard of review of

the Trustees’ decision to deny benefits to these pension-

ers appears to be de novo review.” Pet. App. 30a. The

court reasoned that neither the collective bargaining

agreements nor the plan documents prescribe a different

standard; to the contrary, “[s]ince the restructuring of

the Funds in 1974, the Trustees are without discretion-

ary authority to establish eligibility standards or to con-

strue the terms of the trust.” bid.

Applying a de novo standard, but stating that applica-

tion of an ‘arbitrary and capricious” test would lead to

the same result (Pet. App. 30a), the court discerned a

consistent intent to provide lifetime health benefits to the

plaintiff class from the language of the past five wage

agreements, the 25-year history of lifetime benefits be-

fore 1974, and the testimony of the parties to the

NBCWA. The court found “no persuasive evidence that

8 The court observed that in 1988 the BCOA agreed to increase

its contribution to the 1974 Benefit Plan from five to eight cents an

hour, and promised that “additional money would be forthcoming if

necessary.” Pet. App. 25a. The court also observed that the parties

agreed in 1988 to require employers who ceased to contribute to the

1950 and 1974 Benefit Plans to pay withdrawal liability to the plans.

Id. at 25a-26a.

7

the parties intended to cause the forfeiture of benefits

or to create a gap in coverage where an employer is not

legally obligated to provide benefits to these pensioners.’

Id. at 27a.

The court also found that “the collective bargaining

agreements and the plan documents are ambiguous con-

cerning whether the employer or the 1974 Benefit Plan

is obligated to provide such benefits when the employer

is no longer a signatory to the collective bargaining

agreement.” Pet. App. 27a. However, it determined that

the parties never intended to divest pensioners of their

rights “in favor of a scheme that wouid condition receipt

of benefits upon the financial condition of an entity that

[as a non-signatory] has no obligation to pay benefits.”

Id, at 29a.° In addition, citing the Allied and Royal deci-

sions among others, the court noted that, “{w]ithout ex-

ception,” the courts had held that an individual employ-

er’s obligation to provide health benefits did not extend

beyond the term of the collective bargaining agreement

to which it was signatory, but that the 1974 Benefit Plan

was responsible for such benefits, regardless of the fi-

nancial status of the employer, where the employer was

no longer legally obligated to make payments. Jd. at 29a-

30a. The court concluded that “[t]he readoption of the

language in the 1988 Agreement confirms that the judi-

cial interpretations correctly represent the intent of the

parties.” Jd. at 30a.

®In response to petitioner’s argument that the 1974 Benefit Plan

was to provide benefits only to employees whose former employers

were “no longer in business,” the court observed that the language

of the agreement referred to “signatory employer[s]” who were no

longer in business. Pet. App. 28a. The court also noted that the

“no longer in business” language was amended in 1981, without

dissent from the union. The purpose of the amendment, the court

said, was “to prevent employers from avoiding their obligations to

their pensioners during the term of the agreement—not to deprive

pensioners of their benefits upon the happening of contingencies

entirely beyond their control.” Jbid. The court concluded that the

amendment was never intended to exclude any class of pensioners

from coverage, since the union would surely have objected to a

change of that magnitude.

8

The district court therefore held that the trustees had

erroneously interpreted the NBCWA and plan documents

“to preserve the corpus of the trust at the expense of the

intended beneficiaries.” Pet. App. 30a. It further held

that under the terms of the 1988 NBCWA (Art.

XX(h)), the signatory employers must “fully guarantee

the solvency of the 1974 Benefit Plan with appropriate

contributions.” Jd. at 3la. Accordingly, it ruled on the

merits in favor of the individual plaintiffs and the

UMWA. After further concluding that the plaintiffs

had shown that they otherwise would suffer irreparable

harm and that neither the BCOA nor the Plan would be

substantially harmed, the court granted permanent in-

junctive relief to the plaintiff class. See id. at 48a-51la.”

On the BCOA’s appeal, the court of appeals summarily

affirmed without opinion. Pet. App. la-8a."

DISCUSSION

Contrary to petitioner’s primary contention, there is no

conflict in the circuits on the appropriate standard of

review. Moreover, the district court correctly reviewed

the decision at issue under a de novo standard. Further

review by this court is therefore not warranted.

1. Petitioner (Pet. 14) asks this Court to “clarify

when and under what circumstances courts should defer

to eligibility determinations by plan trustees following

this Court’s Firestone decision.” To do so would be

carrying coals to Newcastle. The issue of when trustees

are entitled to deferential judicial review was precisely

the one decided less than two years ago in Firestone.

10 As an alternative holding with respect to the trustees, but not

the BCOA, the court determined (Pet. App. 32a, 34a) that the

trustees were collaterally estopped from relitigating the issue of

1974 Benefit Plan responsibility for employees of non-signatory em-

ployers, since that issue had been decided adversely to them in

Royal II, Schifano, and Crockett v. Vecellio & Grogan, Inc., No.

85-1448 (S.D. W.Va. Feb. 4, 1987).

11 The 1974 Benefit Plan trustees did not appeal from the district

court’s judgment.

9

What is more, we do not discern any state of confusion

among the courts of appeals that would warrant further

consideration at this time.

Before Firestone, a conflict existed among the circuits

as to the appropriate standard of review. 489 U.S. at

107-108. Most courts applied the “arbitrary and capri-

cious” standard of review; a few courts undertook

heightened review under that standard when fiduciaries

or administrators had some bias or adverse interest; and

others applied de novo review in such conflict-of-interest

cases. Id. at 107; see, e.g., Van Boxel v. Journal Co. Em-

ployees’ Pension Trust, 836 F.2d 1048, 1049-1050 (7th

Cir. 1987) (collecting cases); Bruch v. Firestone Tire &

Rubber Co., 828 F.2d 134, 138-140 (3d Cir. 1987)

(same), aff’d in relevant part, 489 U.S. 101 (1989).

This Court’s decision in Firestone significantly

changed the legal landscape. The Court held that “a de-

nial of benefits challenged under [29 U.S.C.] § 1132(a)

(1) (B) is to be reviewed under a de novo standard un-

less the benefit plan gives the administrator or fiduciary

discretionary authority to determine eligibility for bene-

fits or to construe the terms of the plan.” 489 U.S. at

115. The Court rejected as unwarranted “the wholesale

importation of the arbitrary and capricious standard”

into ERISA from analogous Labor-Management Rela-

tions Act (Section 302(c)(5)) cases. 489 U.S. at 109.

Instead, the Court stressed that, in determining the ap-

propriate standard of review, it was “guided by prin-

ciples of trust law.” Jd. at 111. Those principles pointed

toward a de novo standard, since courts would construe

trust agreements, like other contracts, without deferring

to either party unless the trust instrument gave the

trustee discretion to construe uncertain terms. ZId. at

111-113.

In this regard, the Court noted that, prior to ERISA,

courts reviewed employee benefit claims under a de novo

standard “by looking to the terms of the plan and other

manifestations of the parties’ intent,” and observed that

an arbitrary and capricious standard “would afford less

10

protection to employees and their beneficiaries than they

enjoyed before ERISA was enacted,” a result not likely

contemplated by Congress. 489 U.S. at 113, 114. Thus,

the Court concluded that in the absence of a grant of

discretionary authority to the trustees, a de novo stand-

ard “applies regardless of whether the plan at issue is

funded or unfunded [or] whether the administrator or

fiduciary is operating under a possible or actual conflict

of interest.” Jd. at 115.'* The Court noted, however, that

“if a benefit plan gives discretion to an administrator or

fiduciary who is operating under a conflict of interest,

that conflict must be weighed as a ‘facto[r] in determin-

ing whether there is an abuse of discretion.’” Jd. at 115,

citing Restatement (Second) of Trusts § 187, Comment

d (1959).

Since Firestone, there have been approximately 70

court of appeals’ decisions applying, and in many in-

stances discussing, the Firestone test; so far, all but the

District of Columbia and Tenth Circuits have had occa-

sion to invoke it.4* To our knowledge, no court has indi-

12 In response to the argument that a de novo standard would lead

to much higher administrative costs and increased litigation, the

Court stated that benefit denials are subject to judicial review in

any event, that parties can foreclose de novo review by agreeing on

a narrower standard, and that “as to both funded and unfunded

plans, the threat of increased litigation is not sufficient to outweigh

the reasons for a de novo standard.” 489 U.S. at 114-115.

13 See, e.g., Curtis Vv. Noel, 877 F.2d 159, 161 (1st Cir. 1989);

Heidgerd Vv. Olin Corp., 906 F.2d 903, 908 (2d Cir. 1990); Anderson

Vv. Pittsburgh-Des Moines Corp., 893 F.2d 638, 639 (3d Cir. 1990);

DeWitt v. State Farm Ins. Cos. Retirement Plan, 905 F.2d 798, 800-

801 (4th Cir. 1990); Cathey v. Dow Chemical Co. Medical Care

Program, 907 F.2d 554, 558-559 (5th Cir. 1990) ; Perry v. Simplicity

Engineering, 900 F.2d 963, 965 (6th Cir 1990); Fuller v. CBT

Corp., 905 F.2d 1055, 1058 (7th Cir. 1990) ; Johnson v. Enron Corp.,

906 F.2d 1234, 1237-1238 (8th Cir. 1990); Jones v. Laborers Health

& Welfare Trust Fund, 906 F.2d 480, 481 (9th Cir. 1990) ; Anderson

Vv. Blue Cross/Blue Shield, 907 F.2d 1072, 1075-1076 (11th Cir.

1990). Most, if not all, of these cases began before Firestone, and

many had been decided by the district courts under a pre-Firestone

standard. The courts have uniformly held, however, that Firestone

11

cated that the test is at all unworkable, unduly rigid, or

vague, or that it leads to irrational results. To the con-

trary, the general view appears to be that, on the cen-

tral issue of whether to apply a de novo standard or a

more deferential standard of review, Firestone conveys

“an admonition to courts that they refer to the common

law of trusts for guidance in ERISA decisions.” Exbom

v. Central States Health & Welfare Fund, 900 F.2d 1138,

1142 (7th Cir. 1990).

Nor have the courts of appeals diverged in applying

Firestone’s presumption in favor of de novo review. As

the Fifth Circuit has summarized, “[n]ot surprisingly,

post-[Firestone] litigation has focused upon the language

of ERISA-regulated plans and whether the instruments

vest discretionary authority concerning entitlements with

the fiduciary or administrator.” Cathey v. Dow Chem-

ical Co. Medical Care Program, 907 F.2d 554, 558 (5th

Cir. 1990). That court emphasized that courts have con-

sistently applied a de novo standard in the absence of

clear evidence showing that a more deferential standard

is warranted (id. at 559) :

applies to pending cases. See, e.g., Perry, 900 F.2d at 965 n.2;

Michael Reese Hosp. & Medical Center v. Solo Cup Employee Health

Benefit Plan, 899 F.2d 639, 641 (7th Cir. 1990); Orozco v. United

Air Lines, Inc., 887 F.2d 949, 952-954 (9th Cir. 1989) (per curiam).

14 The court in Exbom expressed uncertainty as to whether the

post-Firestone abuse of discretion standard is identical to the pre-

Firestone arbitrary and capricious standard. See 900 F.2d at 1142;

Lowry V. Bankers Life & Casualty Retirement Plan, 871 F.2d 522,

525 (5th Cir.) (per curiam), cert. denied, 110 S. Ct. 152 (1989).

The Eleventh Circuit has stated that it considers the two standards

to be interchangeable. Brown v. Blue Cross & Blue Shield of Ala.,

Inc., 898 F.2d 1556, 1558 n.1 (1990), cert. denied, 111 S. Ct. 712

(1991); see id. at 1560 n.4. Other subsidiary issues that have

elicited judicial comment in the aftermath of Firestone concern how

conflict of interest is to be considered under an abuse of discretion

standard, see, e.g., Brown, 898 F.2d at 1563 n.6, 1568, and whether

the reviewing court is limited to the facts before the trustees or

administrator in applying the de novo standard, see Perry, 900 F.2d

at 966-967; Moon v. American Home Assur. Co., 888 F.2d 86 (11th

Cir. 1989). None of those questions is presented here.

12

The courts of appeals that have considered, since

[Firestone], the discretion granted by ERISA instru-

ments consistently have rejected the argument that

discretionary authority can be implied from the in-

strument’s language. See, e.g., Moon v. American

Home Assur. Co., 888 F.2d 86, 88 (11th Cir. 1989) ;

Orozco [v. United Air Lines, Inc., 887 F.2d 949,]

952 [(9th Cir. 1989) (per curiam)]; Brown V.

Ampco-Pittsburgh Corp., 876 F.2d 546, 550 (6th

Cir. 1989). * * * Accordingly, ‘the circuit courts

which have found that particular ERISA plans

granted discretion to plan administrators or fidu-

ciaries, * * *, have uniformly rested this finding

upon express language of the ERISA plan before

them.’ Moon, 888 F.2d at 88.

Thus, when presented with express plan language that

unambiguously confers discretion to construe the terms

of a plan, courts have not hesitated to apply an abuse of

discretion standard. See, e.g., Fuller v. CBT Corp., 905

F.2d 1055, 1058 (7th Cir. 1990) (“The Board’s plan,

however, empowers the trustees ‘to construe and inter-

pret the plan.’ * * * [T]his language brings a plan

within Firestone’s exception for plans whose trustees are

- empowered to construe doubtful or contested terms—

what else could the language we have quoted mean?’’) ;

DeWitt v. State Farm Ins. Cos. Retirement Plan, 905

F.2d 798, 801 (4th Cir. 1990); see also Pet. 21-22 &

n.11 (citing cases).

The Firestone test is, of course, most easily applied

when the plan language is unambiguous. On the other

hand, courts confronted with ambiguous delegations of

authority have engaged in some fine line-drawing. “A

plan containing no provisions about construction accord-

ingly leads to de novo review, while a plan expressly

granting the trustee leeway yields deferential review.

Not surprisingly, most plans, drafted before Firestone,

are in between.” Sisters of the Third Order of St.

Francis v. SwedishAmerican Group Health Benefit Trust,

901 F.2d 1369, 1371 (7th Cir. 1990). The Seventh Cir-

13

cuit observed that “[cJourts predictably have divided

over the characterization of such ambiguous language.”

Ibid., comparing De Nobel v. Vitro Corp., 885 F.2d 1180,

1186-1187 (4th Cir. 1989) ; Curtis v. Noel, 877 F.2d 159,

161 (1st Cir. 1989) ; and Lowry v. Bankers Life & Casu-

alty Retirement Plan, 871 F.2d 522, 524-525 (5th Cir.),

cert. denied, 110 S. Ct. 152 (1989), treating similar plan

language as granting discretion sufficient to require defer-

ential review, with Baxter v. Lynn, 886 F.2d 182, 187-

188 (8th Cir. 1989); and International Bhd. of Elec.

Workers, Local 47 v. Southern Cal. Edison Co., 880 F.2d

104, 108 (9th Cir. 1989), construing similar language as

leading to de novo review.

The Seventh Circuit’s observation, however, falls far

short of the suggestion (Pet. 22) that Firestone has en-

gendered two distinct and divergent lines of cases.'* The

most that can be said is that various courts, applying the

same legal test to similar but not identical facts, have

occasionally reached different conclusions. That should

come as no surprise; indeed, that result is characteristic

of judicial construction of ambiguous contract language.

But the pertinent point is this: the cases do not reveal

the need for further illumination to guide the courts;

rather, the substantial outpouring of post-Firestone deci-

sions simply confirms that “the indicia of discretionary

authority granted to administrators or fiduciaries will

differ with each ERISA plan reviewed by a given court.”

Baker v. Big Star Div. of the Grand Union Co., 893 F.2d

288, 292 (11th Cir. 1990). Moreover, discretionary au-

thority over some matters does not connote equivalent au-

thority over all matters. Thus, a given fiduciary may

have the requisite discretionary authority “to determine

eligibility for benefits,” but not otherwise “to construe

15 By petitioner’s analysis, the alleged “confusion” (Pet. 20)

among the courts of appeals is as much intra-circuit as inter-

circuit, since petitioner characterizes the Fourth Circuit’s decision

in De Nobel as falling into one line of cases, and the Fourth Circuit’s

decision in Dzinglski v. Weirton Steel Corp., £75 F.2d 1075, cert.

denied, 110 S. Ct. 281 (1989), as falling into the other line.

|

14

the terms of the plan,” and vice versa.’® It is therefore

not inappropriate, as petitioner urges in describing a so-

called “second line of post-Firestone authority” (Pet. 22-

24), for a court to consider both the delegation language

itself and the nature of the particular trustees’ decision

in order to determine whether the decision falls within

the scope of broadly delegated authority."

Furthermore, any difficulty courts may have experi-

enced in applying Firestone to the universe of plan lan-

16 Tn addition, in determining the breadth of delegated authority,

a court may appropriately consider extrinsic evidence of intent when

construing ambiguous plan language. As this Court explained,

“(t]he terms of trusts created by written instruments are ‘deter-

mined by the provisions of the instrument as interpreted in light

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

the settlor with respect to the trust as is not inadmissible.’” Fire-

stone, 489 U.S. at 112 (quoting Restatement (Second) of Trusts

§ 4, Comment d (1959)).

17 Viewed in this light, petitioner’s two lines of cases are recon-

cilable, despite their different outcomes. In Baxter, 886 F.2d at 188,

which involved interpretation of the plan’s subrogation provision,

the court stated that “[l]anguage requiring trustees to make a final

determination of an employee’s eligibility under the plan does not

necessarily confer discretionary authority to render decisions with

regard to ambiguous provisions of the plan.” Although the plan in

question gave the trustees “final authority to determine all matters

of eligibility for the payment of claims” (court’s paraphrase), it

did not grant the authority to construe ambiguous terms; and the

court therefore held de novo review to be appropriate for the latter

function. Jbid. Similarly, in Dzinglski, 875 F.2d 1075, the court

applied de novo review because the trustees did not base their denial

of benefits on their admitted discretion to determine eligibility but

rather on an exercise of the employer’s management prerogative to

deny early retirement status—a matter over which the trustees had

no discretion. By contrast, in De Nobel, 885 F.2d at 1186 (emphasis

added), the court reviewed the administrators’ decision under a

deferential standard because the plan clearly gave the administra-

tors “broad discretion to pass on precisely the sort of ‘interpretive’

questions [regarding method of benefit payment] that led to the

present dispute.” And in Lowry, 871 F.2d at 524-525 (emphasis

added), the court said that “the unambiguous language in the Plans

mandates deference to the plan administrators wnder the circum-

stances of this case,” thus prompting deferential review.

15

guage is likely to abate. Courts thus far have construed

only plans written before Firestone made the precise

terms of the delegated authority determinative of the

standard of review for benefit denials. Sisters, 901 F.2d

at 1371. Since Firestone does not “foreclose[] parties

from agreeing upon a narrower standard of review” or,

for that matter, making explicit that they intend that

the decisions of trustees will be reviewed de novo, 489

U.S. at 115, that decision should encourage parties to

amend plan documents to clarify their intentions with

respect to the nature and scope of discretionary author-

ity. Thus, any uncertainty reflected in the cases may

simply be part of a transitional phase of post-Firestone

law.'®

2. The standard of review was not a primary focus of

the courts below. Nonetheless, the district court consid-

ered the relevant factors when it determined that Fire-

stone requires application of a de novo standard in this

case. The court looked to the collective bargaining agree-

ments and plan documents to discern whether they pro-

vided for a deferential standard. The court found no

such provision; rather, it found that “[s]lince the re-

structuring of the Funds in 1974, the Trustees are with-

out discretionary authority to establish eligibility stand-

ards or to construe the terms of the trust.” Pet. App.

30a. We cannot fault either the court’s mode of analysis

or its conclusion.

If the 1974 Benefit Plan trustees have the requisite

discretionary authority to invoke a deferential standard

of judicial review, it is to be found in Article III of the

trust document, which gives them “full authority * * *

with respect to administration of coverage and eligibility,

methods of providing or arrarging for provisions for

benefits, investment of trust funds and all other related

18 For that reason, it is at best premature to evaluate petitioner’s

claim (Pet. 27) that de novo review fosters excessive litigation of

benefit denials under ERISA plans, a consideration which in any

event this Court in Firestone deemed insufficient to justify a differ-

ent standard of review. 489 U.S. at 114-115.

16

matters.” See Pet. 17.'° This language, in our view, is

ambiguous. While “full authority” denotes broad discre-

tion, the explicit scope of that authority—administration

of coverage and eligibility, claims processing, and invest-

ment—is circumscribed.”” Moreover, the language is note-

worthy for the absence of any express authorization to

construe or interpret the terms of the plan.*!. This omis-

sion is critical because the denial of coverage to a large

class based on the construction of a contract provision

cannot fairly be described as a mere exercise of discretion

in administration. Cf. Firestone, 489 U.S. at 115 (char-

acterizing the denial of severance pay to group of em-

19 Petitioner invokes (Pet. 16) two other provisions to support

its position on discretion: Article XX(e) (4) and Article XX(g) (3)

of the NBCWA. ‘The one gives the trustees the right to sue on

behalf of the plan, and the other gives them the power to investigate

“the eligibility or ineligibility of any beneficiary.” Neither provi-

sion is as broad as Article IIT or as directly relevant to the ultimate

issue in this case.

20 Petitioner places little or no reliance on the phrase “all other

related matters” in Article Ili, see, e.g., Pet. 8 n.6, and any such

reliance would, in our view, be unwarranted. The phrase follows a

series of circumscribed items and refers to other “related” matters.

To read it as giving the trustees broad discretion to interpret

ambiguous language would be to strain the phrase to the breaking

point.

217In Allied I]—a pre-Firestone case in which the court auto-

matically applied the arbitrary and capricious standard—the Fourth

Circuit construed Article III as giving the trustees the power “to

interpret the provisions of the Trust.” 765 F.2d at 416. We

do not believe that after Firestone the Fourth Circuit would find

an exception to the de novo standard based on this determination,

since whatever authority the trustees possess to construe the plan

is certainly not express or unambiguous. In Michael Reese Hosp. &

Medical Center v. Solo Cup Employee Health Benefit Plan, 899 F.2d

639, 641 (1990), the Seventh Circuit construed strikingly similar

plan language, giving the named fiduciary “ ‘authority to control

and manage the operation and administration of the Plan’” (cita-

tion omitted), and held that “this provision does not give the admin-

istrator or fiduciary discretionary authority to determine eligibility

for benefits or to construe the terms of the Plan within the meaning

of the [Firestone} exception.” Ibid.

17

ployees based on the construction of a “reduction in work

force” provision as “turn[ing] on the interpretation of

terms in the plan at issue,” for which the trustees were

without fully delegated authority).

The district court aptly compared this ambiguous dele-

gation of authority to the trustees’ comprehensive pre-

1974 authority. Cf. Transportation-Communication Em-

ployees Union v. Union Pacific R.R., 385 U.S. 157, 161

(1966) (interpretation of collective bargaining agree-

ment requires consideration of “the scope of other related

collective bargaining agreements, as well as the practice,

usage and custom pertaining to all such agreements”).

Until 1974, the trustees of the unified 1950 Plan had

“full authority * * * with respect to questions of coverage

and eligibility, priorities among classes of benefits, [and]

amounts of benefits” (emphasis added). See Robinson,

455 U.S. at 565 n.2 (citing the 1950 NBCWA). In 1974,

however, the BCOA and the UMWA not only divided that

plan into four separate plans, but for the first time wrote

into the NBCWA specific eligibility criteria and benefit

amounts. Jd. at 566; see Pet. App. 16a-17a. This change

no doubt accounts for the simultaneous amendment of

the “full authority” language, substituting “administra-

tion” for “questions” of coverage and eligibility, and de-

leting altogether the previous reference to “priorities

among classes of benefits [and] amounts of benefits.”

Whatever else may be said about the post-1974 language,

it is obvious that the trustees enjoy full authority over

fewer matters relating to coverage and eligibility than

before. There was thus a solid basis for the court’s con-

clusion regarding the trustees’ limited post-1974 author-

ity. Cf. Robinson, 455 U.S. at 573 (“[t]he petitioner

22 Comparison to the 1974 Pension Plan, in which the trustees

make “full and final determinations as to all issues concerning

eligibility for benefits” and “are authorized to promulgate rules and

regulations to implement this Plan,” is also apt. See Richards V.

UMW Health & Retirement Fund, 895 F.2d 133, 135 (4th Cir.

1990); Boyd v. Trustees of the UMW Health & Retirement Funds,

873 F.2d 57, 59 (4th Cir. 1989). While petitioner contends (Reply

Br. 4) that there is no difference between this 1974 Pension Plan

_—E

18

teustees [of the post-1974 1950 Benefit Plan] were not

given ‘full authority’ to determine eligibility requirements

and benefit levels, for these were fixed by the 1974 col-

lective-bargaining agreement’’).

Petitioner appears to suggest (Reply Br. 2-3) that

Firestone’s presumption of de novo review is inapplicable

because the board of trustees is constituted, in accordance

with Section 302(c) (5) of the LMRA, as a tripartite

board with one neutral trustee. But this Court was

well aware in Firestone that the decisions of the trustees

of Section 302(c) (5) plans had been subject to review

under the arbitrary and capricious standard. 489 U.S.

at 109-110.** The Court described the “raison d’etre” of

such deferential review as “the need for a jurisdictional

basis in suits against trustees.” Jd. at 110. As with all

employee benefit plans, this need disappeared with

ERISA’s enactment, for that statute applies fully to Sec-

tion 302(c) (5) plans. Jbid.; see Robinson, 455 U.S. at

575; Amaxz, 453 U.S. at 332-334. The Court stressed in

its earlier cases that “in enacting § 302(c) (5) ‘Congress

authority and that granted the same trustees in the administration

of the 1974 Benefit Plan, there is a clear distinction in that under

the Pension Plan, the trustees have “final” authority as to “all is-

sues” of eligibility.

28 The arbitrary and capricious standard that prevailed before

Firestone has been described as “a range, not a point.” Van Bozel,

836 F.2d at 1052; see id. at 1051 (noting that the deference given

was less complete than that given to arbitrators “because courts of

equity traditionally exercise broad supervision over trustees”). In

applying this standard, there is no reason to believe that courts, as

a rule, gave greater deference to decisions of Section 302(c) (5)

trustees than to those of other fiduciaries. See, e.g., Kosty v. Lewis,

319 F.2d 744, 747 (D.C. Cir. 1963), cert. denied, 375 U.S. 964

(1964) (“the Trustees [of the UMWA Héalth and Retirement Fund

of 1950], like all fiduciaries, are subject to judicial correction in a

proper case upon a showing that they have acted arbitrarily or

capriciously”). In particular, the lengthy history of litigation involv-

ing challenges to eligibility determinations by the trustees of the

UMWA Health and Retirement Fund of 1950 reveals an increasing

tendency to subject those determinations to heightened review under

the arbitrary and capricious standard. See Maggard v. O’Connell,

671 F.2d 568, 570-572 (D.C. Cir. 1982).

19

intended to impose on trustees traditional fiduciary du-

ties’”’ as set forth in the common law of trusts. Robin-

son, 455 U.S. at 573 n.12, quoting Amaz, 453 U.S. at

330. Since the common law of trusts also provides the

underpinning of the Firestone holding, and since Fire-

stone does “not rest * * * on the concern for impartial-

ity” that is the hallmark of Section 302(c) (5), the Court

clearly meant what it said when it stated that “we need

not distinguish between types of plans or focus on the

motivations of plan administrators and fiduciaries.”

Firestone, 489 U.S. at 115. Thus, the same rules of con-

struction pertain to Section 302(c) (5) plans as to all

other plans.

Finally, the fact that application of a more deferential

standard of review might ultimately make no difference

in this case militates strongly against further review.

The district court stated that, “assuming that the appro-

priate test of trustee discretion is the ‘arbitrary and ca-

pricious’ standard, as urged by the Trustees, we find that

the decision to deny benefits to these pensioners was ar-

bitrary and capricious.” Pet. App. 30a. That conclusion

was based on a thorough analysis of the collective bar-

gaining history, from which the court deduced that the

trustees’ construction “would have the effect of defeating

the expressed intention of the parties to provide lifetime

benefits to these pensioners, and render the promise of

lifetime benefits illustory.” Jd. at 3la. Moreover, that

conclusion is in line with the consistent holdings of other

courts (such as the Fourth Circuit in Royal II), prior to

this Court’s decision in Firestone, that the denial of cov-

erage under similar circumstances was arbitrary and

capricious. [bid.**

24The government shares petitioner’s concern (Pet. 28) with

respect to the. long-term financial viability of the plan at issue.

Partly to address that concern, the Secretary of Labor is reviewing

the November 1990 final report of the Advisory Commission on the

United Mine Workers of America Retiree Health Benefits, which

addresses health care issues arising from the 1950 and 1974 UMWA

Benefit Plans and the effects of resolving those issues on the coal

industry as a whole.

20

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

DAVID L. SHAPIRO

Deputy Solicitor General

CHRISTOPHER J. WRIGHT

Assistant to the Solicitor General

ALLEN H. FELDMAN

Associate Solicitor

STEVEN J. MANDEL

Deputy Associate Solicitor

NATHANIEL I. SPILLER

Senior Appellate Attorney

Department of Labor

FEBRUARY 1991

WW G. 6. Goveanmant painting orice; 1991 282061 20356