Amicus Curiae Brief — Cagna v. Weirton Steel Corp. Retirement Plan-Plan 001

(2) VWUTIVN FILEU

DEC 2 9 2003

No. 03-771

In the

Dupreme Court of the United tates

ELLINORA V.CAGNA, in her capacity as Executrix of the

Estate of Leo Cagna, deceased and in her own right

Petitioner,

v.

WEIRTON STEEL CORPORATION RETIREMENT PLAN-

PLAN 001; RETIREMENT COMMITTEE OF THE

WEIRTON STEEL CORPORATION RETIREMENT PLAN-

PLAN 001; WEIRTON RETIREMENT PROGRAM-PLAN

056; RETIREMENT COMMITTEE OF THE WEIRTON

STEEL CORPORATION RETIREMENT PROGRAM-PLAN-

056; NATIONAL STEEL CORPORATION WEIRTON

RETIREMENT PROGRAM; RETIREMENT

ADMINISTRATIVE BOARD OF THE NATIONAL STEEL

CORPORATION WEIRTON RETIREMENT PROGRAM,

Respondents.

On Writ of Certiorari to the United States Court of Appeals for

the Third Circuit

BRIEF OF THE WOMEN’S INSTITUTE FOR A SECURE

RETIREMENT AS AMICUS CURIAE IN SUPPORT OF

PETITIONER

Lawrence E. Bolind, Jr., Esq.

(Counsel of Record)

238 Main Street

Imperial, PA 15126

(724) 695-8620

Attorney for Amicus Curiae

MOTION FOR LEAVE OF COURT BY THE

WOMEN’S INSTITUTE FOR A SECURE

RETIREMENT TO FILE AN AMICUS CURIAE BRIEF

Pursuant to Rule 37 of the Supreme Court of the

United States, Motion is hereby made to file the foregoing

Brief of the Women’s Institute for a Secure Retirement

(“WISER”) as amicus curiae in support of Petitioner:

1. WISER desires file an amicus curiae brief in the

foregoing matter

2. By the letter dated December 19, 2003, legal

counsel for amicus has sought the consent of all the parties to “

file an amicus curiae brief in accordance with Rule 37 of the

Supreme Court of the United States.

3. Petitioner has consented in writing to the filing of

such brief which letter dated December 23, 2003 has been

filed with the Clerk of this Court.

4. Neither Respondent has consented to the filing of

the amicus curiae brief.

5. The undersigned has filed his application to this

Honorable Court on December 23, 2003, which application is

pending.

WHEREFORE, the undersigned on behalf of WISER,

hereby respectfully requests that the attached Brief of the

-

Women’s Institute for a Secure Retirement as Amicus Curiae

in Support of Petitioner be accepted.

Respectfully submitted,

Na —~E Rot J

Lawrence E. Bolind, Jr.

238 Main Street

Imperial, PA 15126

TABLE OF CONTENTS

pages

TABLE OF AUTHORITIES .............. 11,i1i

INTEREST OF AMICUS CURIAE .........64.

REASONS FOR GRANTING THE WRIT....... 3

A. Certiorari Should Be Granted to

Resolve the Existing Circuit Splits

on the Two Questions Raised in the

Petition and to Establish Nationwide

Uniformity on Issues Directly

Affecting a Surviving Spouses 7

Rights Under ERISA............. S

B. ERISA Requirements Underlying A

Valid Waiver Of A QJSA Should Be

Strictly Enforced And Proof Of

Detrimental Reliance Should Never

Be Required Of A Surviving Spouse

To Recover A Share Of The QJSA

Since Detrimental Reliance is a Standard

developed under Contract Principles |

Rather than Trust Principles......... 7

NT cio Fh ree dietiewasedenedas 11

7

TABLE OF AUTHORITIES ~

Cases pages |

|

Boggs v. Boggs, 520 U.S. 833, 839 (1997)........ 6

Burke v. Kodak Retirement Income Plan and

Kodak Retirement Income Plan Committee

336 F.3d 103 (2d Cir. 2003), petition for cert.

filed, October 17, 2003 (No. 03-565) ........... 3,5

Daniels v. Thomas & Betts Corp., |

263 F.3d 66, 73 (3d Cir.2001).................. 9

Edwards v. State Farm Mutual Ins. Co. ;

852 F2d. at 134, 137 (6" Cir. 1988)............. 5

Egelhoff v. Egelhoff, 532 U.S. 141, 147-148 (2001). .6

Fort Halifax Packing Co. v.- Coyne,

oe et , Se er ee ee re 6

Gilbert v. United States, 370 U.S. 650, 655 (1962). . .9

Lorillard v. Pons, 434 U.S. 575, 580-81 (1978)..... 9

Manganaro v. Welfare Fund of Local 771,

21 F. Supp. 2d 284, 296 (S.D.N.Y. 1998).......... 11

Meinhard v. Salmon, 249 N.Y. 458,

ek ee eee 10

NLRB v. Amax Coal Co., 453 U.S. 322, 329-30 (1981).9

Zinermon v. Burch, 494 U.S. 113, 123 (1990)..... 8

Statutes and Regulations

BP Seb @ CURR Sica dae Rea Ce 2, 5,7,8,9

29 USK OR che tasee eee +

mo UD. GOO ooo ven eee t

muse. $417. ee ee +

20 C.F R.§ LATIN 6 oc once ccevccccu., 8

Miscellaneous

Blostin, Payment Options under Retirement Plans,

Bureau of Labor Statistics, April 28, 2003 atl....... 2

Forman, Pension Benefits for Widows, The Journal

Record, January 5, 1999 at5..................04. 3

The Charleston Gazette, October 22, 2003 at l,col.1..2

BRIEF OF THE WOMEN’S INSTITUTE FOR A

SECURE RETIREMENT AS AMICUS CURIAE IN —

SUPPORT OF PETITIONER

The Women’s Institute for a Secure Retirement

(“WISER”) respectfully submits this amicus curiae bref in

support of the Petitioner Ellinora V. Cagna. Correspondence

reflecting the Petitioner’s consent to the filing of amicus

curiae brief has been filed with the Clerk of Court.’

However, neither Respondent has consented to the filing of

this brief, thus, a Motion for Leave of Court to File an Amicus

Curiae Brief has been included herewith.

INTEREST OF AMICUS CURIAE

WISER is a nonprofit organization founded in 1996

which focuses exclusively on increasing awareness of the

structural barriers that prevent women from fair participation

in the nation’s retirement systems. WISER strives, through

education, to improve women’s opportunities to achieve a

secure retirement. WISER is a national organization which

was created by The Teresa and H. John Heinz III Foundation.

Since 1996, WISER has received financial support from

numerous individual donors and a host of charitable

foundations. In 1998, WISER was awarded a highly

competitive grant from the U.S. Administration on Aging.

WISER is an outgrowth of the Women’s Retirement

Initiative. The Women’s Retirement Initiative is part of the

Philanthropies’ continuing effort to raise the profile of critical

issues relating to pensions and retirement savings, particularly

with respect to women. WISER is the nation’s only nonprofit

organization wholly devoted to providing women with the

critical skills and information needed to improve their

' Pursuant to Rule 37.6, amicus states that no counsel for a party authored

this brief in whole or in part. No person or entity has made any monetary

contribution to the preparation and submission of this brief.

2

economic circumstances and plan for a financially sound

retirement.

Under a defined benefit plan, employees are given the

option of various payment methods at retirement. According

to data on benefits from the National Compensation Survey,

in 2000 virtually all employees covered by a defined benefit

plan were given the option of a joint and survivor annuity.’

Blostin, Payment Options under Retirement Plans, Bureau of

Labor Statistics, April 28, 2003 at 1.

Surviving spouses across the -United States have a

vital interest in the issues raised in this case given the

tremendous number of women who, at sometime during their

lives, will become a surviving spouse of an American worker

covered by a privately maintained pension plan. During

2003, approximately 20 million American workers were

covered by private pension plans containing the ERISA

mandated qualified joint and survivor annuity (“QJSA”).

Employee Benefits Survey, Incidence of Defined Benefit

Pension, United States Department of Labor, Bureau of

Statistics. The Weirton Steel Corporation Retirement Plan,

one of the respondents in this case, covers approximately

3,500 active employees and 10,000 retirees and their

dependents. The Charleston Gazette, October 22, 2003 at 1,

col. 1. The number of American workers and their spouses

affected by the issues in this case is unquestionably

substantial. Furthermore, women are especially affected by

the issues raised in the petition because women tend to live

longer than men and men tend to marry younger women.

Moreover, women are five times more likely to become

2 Under ERISA § 1055, defined benefit plans must make a qualified joint

and survivor annuity the normal form of benefit payment for married

participants. This method of payment provides the surviving spouse at

least one-half of the amount-of the employee’s benefit during the course

of the lifetime.

3

widowed than men. Forman, Pension Benefits for Widows,

The Journal Record, January 5, 1999 at 5.

Because of the importance of these issues to WISER

and to surviving spouses across the United States, WISER

respectfully submits this brief urging the Court to grant the

petition for certiorari, reverse the decision below, and require

pension plans to comply with the Employee Retirement

Insurance Security Act of 1974 (“ERISA”), the Internal

Revenue Code of 1986, as amended (the “IRC’’) and the

implementing treasury regulations, especially providing a

written explanation as to the financial effects of waiving a

QJSA.

REASONS FOR GRANTING THE WRIT

The petition in this case presents two vital questions

of importance to American workers who participate in

privately operated employee benefit plans. Is a pensioner’s

waiver and a spouse’s consent to such waiver valid if the

ERISA fiduciary fails to comply with the disclosure

requirements contained under ERISA? Is it necessary for a

surviving spouse to prove she detrimentally relied on the

inaccurate financial information provided by the ERISA

fiduciary in order to succeed in her claim for a share of the

ERISA-mandated Qualified Joint and Survivor Annuity??

The decision below is fundamentally at odd with ERISA, the

IRC and the governing regulations as they apply to

pensioner’s waiver of, and a spousal consent to, a QJSA

offered by a private pension plan. In order to ensure full

> It should be noted the second question presented in the petition for

certiorari is virtually the same as the question presented in Burke v. Kodak

Retirement Income Plan and Kodak Retirement Income Plan Committee ,

336 F.3d 103 (2d Cir. 2003), petition for cert. filed, October 17, 2003 (No.

03-565). Thus, even the current petitions pending before this Court

evidence the fact that this issue will continue to recur unless resolved by

this Court.

4

disclosure of spousal rights to benefits, federal statutory and

regulatory requirements must be strictly applied.

The Third Circuit decision below not only goes far

beyond that of any other circuit that has addressed both issues

raised in the petition, it also directly contravenes the purpose

of REA. Congress intended a surviving spouse automatically

receive a 50% share of the QJSA unless certain rigorous

requirements were met in obtaining a participant’s waiver of

the QJSA and spousal consent thereto. See ERISA § 1055(c)

and IRC § 417. It is inconceivable that Congress and the

Treasury intended that a surviving spouse meet any standard

of proof when an ERISA fiduciary fails to follow the federal

requirements for validly effectuating a waiver of the ERISA

mandated QJSA and certainly not a strict standard such as the

detrimental reliance standard invoked by the Third Circuit

decision below. There is no indication in the text or history

of the REA amendments to ERISA that any modicum of

proof be imposed on a surviving spouse to succeed in a claim

for a share of the QJSA. The Court should grant this Petition

to resolve the sharp conflict among the circuits, to confirm

the spousal rights intended under REA and to make clear that

detrimental reliance is not a prerequisite to a spouse’s

recovery of her share of the QJSA. :

A. Certiorari Should Be Granted to Resolve the

Existing Circuit Splits on the Two Questions

Raised in the Petition and Establish Nationwide

Uniformity on Issues Directly Affecting a

Surviving Spouses Rights Under ERISA

The petition clearly demonstrates the sharp division

among the circuits on the two questions presented in this

case. The first question is addressed at length in the petition

and will be only briefly discussed here. At least nine circuits

have addressed the second question presented in the petition

applying an array of different legal standards.

The inconsistency among the circuits on the question

of an ERISA fiduciary’s failure to comply with the disclosure

requirements specified in ERISA § 1055, IRC §§ 401(a)(11),

417 and the governing treasury regulations flagrantly ignores

the congressional and treasury mandate in providing a spouse

with protection from an unwitting consent to a waiver of the

QJSA. After being on the books for nearly 20 years, the

breadth and scope of the spousal rights created under the

Retirement Equity Act of 1984 is now squarely before the

Court. WISER submits that the need for Court review in this

case is amplified, since most surviving spouses lack the

financial means or knowledge to enforce their nghts under

ERISA in the federal courts. The Court may not have the

opportunity again to confirm the Congressional and Treasury

mandate contained in ERISA § 1055, the IRC and the

governing regulations intended by REA.

The inconsistency among the circuits on the second

petition auvestion of whether detrimental reliance or the

prejudiciai standard should apply to a beneficiary’s claim will

clearly repeat itself unless this Court resolves the conflict. See

Burke v. Kodak Retirement Income Plan and Kodak

Retirement Income Plan Committee , 336 F.3d 103 (2d Cir.

2003), petition for cert. filed, October 16, 2003 (No. 03-565).

While. the answer to this federal question lacks a clear

congressional mandate, applying the detrimental reliance

standard to a surviving spouse’s claim for her share of the

QJSA is illogical. This Court should ensure the circuits do

not undermine the legislative command and treasury efforts

by imposing technical requirements on participants and their

spouses which requirements are virtually impossible to meet.

See Edwards v. State Farm Mutual Ins. Co. 852 F2d. at 134,

137 (6" Cir. 1988).

This Court has acknowledged the unique importance

of ensuring uniformity and certainty under ERISA, given “the

comprehensive nature of the statute, the centrality of pension

and welfare plans in the national economy, and their

importance to the financial security of the Nation’s work

force.” Boggs v. Boggs, 520 U.S. 833, 839 (1997). ERISA

was enacted specifically to supplant the common-law system

of varying state-by-state regulation of employee benefit plans

with a single federal regulatory scheme, to provide

beneficiaries of such plans a measure of stability and security

in the enforcement of the laws governing employee benefit

plans. As this Court advised:

An employer that inakes a commitment systematically

to pay certain benefits undertakes a host of obligations, such

as determining the eligibility of claimants, calculating benefit

levels, making disbursements, monitoring the availability of

funds for benefit payments, and keeping appropriate records

in order to comply with applicable reporting requirements.

The most efficient way to meet these responsibilities is to

establish a uniform scheme, which provides a set of standard

procedures to guide processing of claims and disbursement of

benefits. Such a system is difficult to achieve, however, if a

benefit plan is subject to differing regulatory requirements in

differing States.

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 9 (1987).

ERISA thus reflects a “congressional mandate for the

uniform and comprehensive regulation” of employee benefit

plans. Boggs, 520 U.S. at 836. Ensuring a system of

“nationally uniform plan administration” is a core...

concern” of the statute. Egelhoff v. Egelhoff, 532 U.S. 141,

147-148 (2001).

This case has the unique quality of proposing two

separate questions upon which the circuits are in disarray.

The current stark inconsistencies among the circuits as to the

breadth and scope of a surviving spouses rights under ERISA

ignores the congressional and regulatory mandate and the

chief concerns congress contemplated when it adopted REA.

Given the severe financial restrictions on most surviving

spouses, we will never know how many surviving spouses

have been unable to enforce their ERISA rights, since many

surviving spouses do not have the financial means to bring

and maintain a case in the federal courts. Further, absent a

mandate by this Court, pension plan fiduciaries will continue

to be careless about the financial disclosures made to a

participant and spouse at the time of retirement, since some of

the circuits are not strictly enforcing the ERISA § 1055

required disclosures. A surviving spouse’s success in-

recovering a share of the QJSA may depend upon which

circuit the spouse lives or where the spouse elects to sue.

This is patently unfair.

The split among the circuits on the second question

presented in the petition is even wider and deeper, as virtually

every circuit has had an opportunity to issue its own rule of

law. Suffice it to say that review in this case is especially

urgent given substantial number of Americans affected by the

issues raised in this case upon which the circuits are in sharp

divergence.

B. ERISA Requirements Underlying A Valid

Waiver Of A QJSA Should Be Strictly Enforced

And Proof Of Detrimental Reliance Should Never

Be Required Of A Surviving Spouse To Recover A

Share Of The QJSA Since Detrimental Reliance is

a Concept Under Contract Principles Rather than

Fiduciary Trust Principles

As the Petition correctly states, the Third Circuit

decision below takes the unprecedented step of extending the

detrimental reliance standard to a surviving spouse’s claim

for her ERISA-mandated QJSA. The detrimental reliance

standard usually is applied to a plaintiff seeking to obtain

benefits on the basis of statements or omissions in the

summary plan description, and usually in the context of a

conflict with the underlying plan documents. Under the Third

Circuit’s novel interpretation of the REA amendments to

ERISA, few, if any, surviving spouses could recover a share

of the ERISA mandated QJSA which has been unwittingly

waived by a pensioner.

The Third Circuit decision below fails to appreciate

the REA amendments to ERISA in a manner incompatible

with the statutory and regulatory scheme specified in ERISA,

the IRC and the governing regulations. At a minimum, the

surviving spouse should be given a written explanation of the

benefits that are being waived. If this does not occur, any

waiver of the QJSA, and consent to such waiver is not an

informed one. This Court and well as federal courts across

the country has a plethora of precedent in other areas of the

law requiring sufficient explanation and disclosure to enable a

person to make an knowing and intelligent decision. See for

example Zinermon v. Burch, 494 U.S. 113, 123 (1990).

Further, the Treasury regulations contemplate that a

participant’s consent be knowing by requiring the written

explanation the Third Circuit concluded was lacking. 26

C.F.R. § 1.417(e)-1(2)(i) provides in pertinent part, that “No

consent is valid unless the participant has received a general

description of the material features, and an explanation of the

relative values of, the optional forms of benefit available

under the plan...”

The equitable principle of promissory estoppel and the

use of the detrimental reliance standard may be appropriate

for extra plan benefits promised under a summary plan

description, but certainly that standard is not applicable to

spousal benefits guaranteed under ERISA § 1055. The

conclusion that, in enacting REA, Congress intended a

surviving spouse must detrimentally rely on the plan

fiduciaries’ failure to provide a written explanation in a

“pensioner’s retirement election form is fundamentally at odds

with the congressional judgments reflected in ERISA and the

IRC. This is not a case of extra-plan benefits based upon a

summary plan description, but survivor income benefits

mandated under ERISA. These survivor income benefits are

automatic under ERISA unless a knowing waiver and consent

is obtained from a participant and spouse.

With specific regard to the case at bar, no tnal

occurred since the case was decided on summary judgment

by the district court and affirmed by the Third Circuit. Thus,

no finding of fact was ever made with respect to whether

petitioner relied on the fiduciaries incomplete disclosures or

whether petitioner would have refused to consent to a waiver

of the QJSA had complete disclosure be made.

The most glaring defect in the Third Circuit’s

reasoning is its application of contract principles rather than

trust principles to govern whether a surviving spouse is

entitled to her share of the QJSA. Detrimental reliance has its

genesis in the promissory estoppel area of contract law.

However, the genesis of ERISA’s fiduciary standards is in the

common law of trusts, Congress plainly intended the courts to

apply under ERISA the same standard of review that prevails

under trust law. NLRB v. Amax Coal Co., 453 U.S. 322, 329-

30 (1981); see Lorillard v. Pons, 434 U.S. 575, 580-81

(1978); Gilbert v. United States, 370 U.S. 650, 655 (1962).

The Third Circuit decision below improperly places the

burden of proof on the surviving spouse, rather than on the

ERISA fiduciary. In the case at issue, the pension plans

never complied with the federal statutory and regulatory

requirements of a clear and comprehensible written

explanation of the effects of a waiver of a QJSA. The

fiduciary prepared and presented the form containing the

retirement options. The Third Circuit’s failure to discuss the

other federal cases decided under ERISA § 1055 and its

reliance on Daniels v. Thomas & Betts Corp., 263 F.3d 66, 73

No ee taatA MACK en em

ot ¥

10

(3d Cir.2001), a case which did not involve ERISA§ 1055 is

not only absurd, but also patently unfair.

The importance of the fiduciary duties under ERISA

when presenting retirements to a retiree - and the

nonparticipant spouse is without question. Justice Cardozzo’s

now famous articulation of the fiduciary obligation captures

the essence of the duty owed to retirees and their spouses:

Many forms of conduct permissible in a

workaday world for those acting at arm’s

length, are forbidden to those bound by

fiduciary ties. A trustee is held to something

stricter than the morals of the marketplace.

Not honesty alone, but the punctilio of an

honor the most sensitive, is then the standard

of behavior. © .

Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545, 546

(1928).

It cannot be clearer that fiduciary obligations require

ERISA fiduciaries, at a minimum, to follow the federal

statutory and regulatory guidelines in disclosing retirement

benefit options to retirees and their nonparticpant spouses.

_~ The option form prepared and presented to Leo and

Ellinora by the Weirton Steel and National Steel plan is faulty

as a matter of law and, therefore, Leo’s waiver and Ellinora’s

consent is ineffective under ERISA § 1055. However, if as

the Third Circuit suggests, it is relevant for Ellinora to prove

what Leo would have elected to do had full disclosure been

made, to require a showing of detrimental reliance imposes an

insurmountable burden on a surviving spouse. Because Leo

has died, Ellinora cannot ask him whether he relied on the

faulty form to show detrimental reliance. When detrimental

reliance cannot be proven, possible or probable prejudice is

11

the standard. See, e.g. Manganaro v. Welfare Fund of Local

771,21 F. Supp. 2d 284, 296 (S.D.N.Y. 1998).

The current inconsistencies evidenced by the circuits

in enforcing spousal rights disserves REA, the implementing

treasury regulations and the entire body of work which has

evolved. Allowing the circuits to inconsistently enforce

spousal nights to a share of the QJSA will result in

undeserved windfalls to privately maintained pension plans at

the expense of unwitting participants and their spouses.

CONCLUSION

For these reasons, the petition for a writ of certiorari

should be granted.

Respectfully submitted,

cRL/

eee

awrence E. Bolind, Jr., Esq.

238 Main Street

Imperial, Pennsylvania 15126

December 26, 2003