Amicus Curiae Brief — Sprague v. General Motors Corp.

Supreme Court, U.S.

No. 97-1639 (4 eit ED

In The MAY 6 1998

Supreme Court of the United Stratis _|

~>

October Term, 1997

ROBERT D. SPRAGUE, et ai.,

Petitioners,

— vs.

GENERAL MOTORS CORPORATION,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Sixth Circuit

BRIEF OF AMICI CURIAE DONALD ARMBRUSTER, ET

AL. AND THE REPUBLIC STEEL SALARIED RETIREES

ASSOCIATION IN SUPPORT OF PETITIONERS

CHARLES T. RIEHL ALAN M. SANDALS

CHRISTOPHER GIBBON Counsel of Record

WALTER & HAVERFIELD PL.L. SCOTT M. LEMPERT

1300 Terminal Tower SANDALS, LANGER

50 Public Square & TAYLOR, LLP

Cleveland, Ohio 441 !3 One Liberty Place

(216) 781-1212 50th Floor

Philadelphia, Pennsylvania 19103

WILLIAM T. PAYNE (215) 419-6500

SCHWARTZ, STEINSAPIR,

DOHRMANN & SOMMERS, LLP CHARLES GOTTLIEB

3600 One Oxford Centre GOTTLIEB AND GOREN, P.C.

Pittsburgh, Pennsylvania 15219 26261 Evergreen

(412) 456-2008 Suite 460

Southfield, Michigan 48076

(248) 352-1880

Attorneys for Amici Curiae Donald Armbruster, et al. and

the Republic Steel Salaried Retirees Association

146291 (800) 274-3321 + (800) 359-6859 Engels

A DIVISION OF COUNSEL PRESS STCSS, MC.

TABLE OF CONTENTS

Page

Interests of the Amici Curiae ..................... l

RN i fed a OS a ge ie 2

Reasons for Granting the Writ .................... 4

I. Review Of The Decision Below Is Necessary To

Resolve Inter-Circuit Conflicts And Restore

Adherence To The Fundamental Protective

eee. pnw te ck re 4

ce oe seg RE Te EN EEE SUITE DOE el atee 11

TABLE OF CITATIONS

Cases Cited:

Anger v. Bender, 31 Ill. App. 3d 877, 335 N.E. 2d 122

og i, We REET PEO R ES rhe Pag Sree Ree e 10

Armbruster, et al. v. K-H Corporation, No. 97-CV- 75792

WD Noob i oie ire ces ee |

Bird v. Connecticut Power Co., 144 Conn. 456, 133 A.2d

ee NG ROPE yb Sins bo ck bea 7

Blackwell v. International Union, 9 Ohio App. 3d 179,

458 N.E. 2d 1272 (Ohio Ct. Ws SUEE Sas hkwcas 6

Branch-+- White, 99 N.J. Super. 295, 239 A.2d 665 (N.J.

WS ON 60 se Kae pi eNeb bie Kic ge oe 10

Contents

Cantor v. Berkshire Life Ins. Co., 171 Ohio St. 405, 171

DED. 2B Sa CIS Fe 6 vnc bcndcccccivesevises

Carlsen v. Masters, Mates & Pilots Pension Plan Trust,

80 N.J. 334, 403 A.2d 880 (N.J. 1979) ..........

Central States, Southeast and Southwest Areas Pension

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

e*eewp eevee eweeeeeeeeeeeeeeeeeeeseeeeneeeeeeeeeeee

Christensen v. Minneapolis Municipal Employees

Retirement Board, 331 N.W. 2d 740 (Minn. 1983)

Davilla v. Court Employment Project, Inc., 86 Misc. 2d

552, 383 N.Y.S. 2d 140 (N.Y. Kings County 1976)

Dulany Foods, Inc. v. C.M. Ayers, 220 Va. 502, 260 S.E.

2. 2, %.. Se ea

Ehrle v. Bank Bldg. & Equip. Corp. of America, 530

S.W. 2d 482 (Mo. App. 1975) ..........-.22058-

Elby v. Livernois Engrg. Co., 37 Mich. App. 252, 194

N.W. 2d 429 (Mich. App. 1971) ..............5.

Erion v. Timken Co., 52 Ohio App. 2d 123, 368 N.E. 2d

93 Gibis bet. DO oss css

Feinberg v. The Pfeiffer Co., 322 S.W. 2d 163 (Mo. App.

RUED excnndtuscavddnes ctltcu be we ekeSekeneeekes

Page

10

10

8,9

ili

Contents

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101

fee se céus ES TRO EY as LOS ER” TCR EEA

Forrish v. Kennedy, 377 Pa. 370, 105 A.2d 67 (Pa. 1954)

TSeeC ae SPSASEDSHS OC EDA eOeee* ees e Cesceoesedv2e2eseas2es¢s

Franchise Tax Board v. Construction Laborers Vacation

EE Oo oe oe eS

Frank v. Day’s, Inc., 13 Wash. App. 401, 535 P.2d 479

NE IN NO as Sk Ch G hb dd ohne ace ee bs

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

App. 2d 705, 336 P.2d 589 (Cal. App. 1959) .....

Fuller v. Fruehauf Trailer Corp., 168 F.R.D. 588 (E.D.

Ns as deka 5 ca cab bb ae S55 ews kW ose so 0s

Hart v. United Brotherhood of Carpenters & Joiners of

America Local 626, 352 A.2d 423 (Del. Super. 1976)

eeeoevoeeescevoeeeseeeeeeseeeeseeeveeeeseeeeeeeeveeveeeevee

Hurd v. Hutnik, 419 F. Supp. 630 (D. N.J. 1976) ....

In re Matter of Erie Lackawanna Railway, 548 F.2d 621

I UN od oa ha a's sh wi wee 6S a 0s Kwa wes

Ingersoll-Rand Co. v. McLendon, 498 U.S. 133 (1990)

fis inte oe, ie ee ne ee Se se Se ee ee eT ee eee se eS ee | 2 oe oe

Page

10

iv

Contents

John Hancock Mut. Life Ins. Co. v. Harris Trust & Sav.

SUS Wits ee SED 0s hea eek ns bas cietiw

Landro v. Glendenning Motorways, Inc., 625 F.2d 1344

COREG Se aoe ek ee WA ie ae

Law Enforcement Labor Services, Inc. v. County of

Mower, 483 N.W. 2d 696 (Minn. 1992) ..........

Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S.

SOG CUR on awe CEN Seo on ee cnsan bbe Oobeeren

Moch v. Durkin, 31 A.D. 2d 995, 297 N.Y.S. 2d 865

CORD, Pe. TO is a vic tes ie tncsees eee ew

Paddock Pool Co. v. Monseur, 23 Ariz. App. 451, 533

Fiae S20B CAS. OK: FETE oe oon cist vans een ta

Panto v. Moore Business Forms, Inc., 130 N.H. 730 A.2d

Be MIRE: TEE 005 ia Khe hea eA eis

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 101 (1989) ..

Psutka v. Michigan Alkali Co., 274 Mich. 318, 264 N.W.

See CHUN: SHOE Sse hS sh bawes ceeess See ek years

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

eB ow ge Bt ME 2 ee er ee ee

Sheehy v. Seilon, Inc., 10 Ohio St. 2d 242, 227 N.E. 2d

BOO CY BOOED 8 RRR SER nak

Page

10

10

6,7

hpi HA AAS ee

axa

aC iis a oe

ig hilo ain crank Sytaiane 3 as tie 3 ch eet

Contents

Page

Sprague v. General Motors Corp., 133 F.3d 388 (6th

Ge SUE hakc co dtesy eea oe kaos ca be Se Al

Stopford v. Boonton Molding Co., Inc., 56 N.J. 169, 265

Pee Dat Seid. SOT os ha i ihc he ks Ce kk 7

United States v. Stuart, 489 U.S. 353 (1989) ........ 9

Varity Corporation v. Howe, 516 U.S. 489 (1996) ... 5, 11

Vastoler v. American Can Co., 700 F.2d 916 (3d Cir.

oa PRS COE err rey ge hr oee iene mre Sareea 7

West v. Hunt Foods, Inc., 101 Cal. App. 2d 597, 225

eae Dre Cee AO. 198 a i a a 7

Statute Cited:

We es PTO 6 GAN pA hoes eee teks 4

Rules Cited:

Pe RNONS WED BTS bis cove bok cv os oaks. 2

MNS CT Pe oh i Ci ink se kik l

Other Authorities Cited:

Corbin on Contracts, 1951, § 538 at 61............ 9

Restatement (Second) of Contracts, § 90, cmt. b, illus. 4

COPPER: a is bee oa eb 4 AA ae Soa g

vi

Contents

Page

Restatement (Second) of Contracts, § 201(2)(b) (1979)

C. Fisk, Lochner Redux: The Renaissance of Laissez-Faire

Contract in the Federal Common Law of Employee

Benefits, 56 Ohio St. L. J. 153 (ISDS) cc cccsccns 10, 11

G. Flint, ERISA: Extracontractual Damages Mandated

for Benefit Claims Actions, 36 Ariz. L. Rev. 611 (1994)

sa Saline hg 0A WAS OUR wierd Sa kiea eRare 1]

W. Payne, Lawsuits Challenging Termination or

Modification of Retiree Welfare Benefits: A Plaintiffs’

Perspective, 10 The Labor Lawyer 91 (1994) ..... 1]

INTERESTS OF THE AMICI CURIAE'

Amici Donald Armbruster, et al., are long-service former

employees of a major industrial employer who are now litigants

seeking relief for reduction and denial of medical benefits their

employer represented would cover them after retirement for their

and their spouses’ lifetimes.? Amici Armbruster, et al., are

representative of tens of thousands of retired employees in this

country who have suffered reductions in retiree benefits after

they retired, despite having been led by their employers to

believe that the benefits for which they labored were secure.

The problem they confront is not unique to retiree medical

benefits, but relates to all benefits that are not governed by

ERISA’s bright line vesting rules. In addition, amici Armbruster,

et al. have a special perspective on benefits practices and

protections before and after enactment of ERISA due to the

fact that several of them personally served as benefits executives

and other company managers who were responsible for

explaining retiree medical benefits to employees in their

companies. In this capacity, they were fully informed about

employer intentions, employee understandings of the benefits,

1. Pursuant to Supreme Court Rule 37.6, amici curiae and their

counsel disclose that no counsel for a party authored the brief in

whole or in part, and that no person or entity, other than amici, their

members or their counsel, have made a monetary contribution to the

preparation or submission of the brief.

2. Amici Donald Armbruster, John Gustke, Robert Rawlings,

William Varney, Robert Butler, and Maynard Brandt are individual

named plaintiffs and proposed representatives of a class of former

salaried employees of Fruehauf Corporation. Armbruster, et al. v.

K-H Corporation, No. 97-CV- 75792 (E.D. Mich.). In a predecessor

action, amici Armbruster, et al. were certified as representatives of a

class seeking relief for benefits reductions and fiduciary

misrepresentations. See Fuller v. Fruehauf aventer Corp., 168 F.R.D.

588 (E.D. Mich. 1996).

2

and the expected legal protections that would apply to these

benefits should any dispute arise about them.

Amicus Republic Steel Salaried Retirees Association

(“RSSRA”) is a not-for-profit Ohio corporation composed of

retired salaried employees of Republic Steel. The purpose of

RSSRA is to protect the rights and interests of the Republic

Steel retired salaried employees, particularly their rights and

interests in insurance and pension benefits. RSSRA was involved

in the dispute, and the resolution thereof, caused by LTV’s

reduction of health and life insurance benefits to its retirees and

has a continued interest in judicial decisions and legislation

related to post-retirement employer reductions of health, life

and other welfare benefits.

As the experiences of amici demonstrate, the decision of

the Sixth Circuit Court of Appeals in Sprague v. General Motors

Corp., 133 F.3d 388 (6th Cir. 1998) (en banc), severely impairs

the rights of retired employees to valuable benefits promised to

them by their employers, both before and at the time of their

retirements. The Sprague decision effectively holds that

misleading benefits promises that induce reasonable reliance

by employees are not binding on employers, and that employers

may invoke disclaimers that they did not clearly disclose to the

employees. The decision thus contravenes the fundamental

protective purposes of ERISA.’

INTRODUCTION

Amici wish to bring to the Court’s attention the stark

contrast between the legal protections that were available to

employees and retirees before enactment of ERISA and the

severely diminished protections that now would apply under

3. The written consent of each party has been filed with the

Clerk of the Court pursuant to Supreme Court Rule 37.3.

3

the decision below and other similarly-reasoned decisions. Amici

respectfully urge that the decision below is contrary to ERISA’s

fundamental purpose of strengthening the legal protections

available to employees and retirees to secure reasonably expected

benefits and deterring abusive practices by employers that

frustrate this statutory objective. As the Court has declared

previously, courts should avoid interpretations of ERISA that

afford less protection to employees and retirees than would have

applied under the state law principles applicable before ERISA’s

enactment. Yet the decision below follows the opposite approach

— replacing well-developed pre-ERISA state law protections

with a regime under which reasonable benefits expectations can

be frustrated and negated by hidden disclaimers and misleading

representations. This reversal of position has occurred despite

the repeated emphasis by the Congress and this Court to adhere

to ERISA’s fundamental protective purposes.

The ERISA statute has far-reaching affects on the daily

lives of virtually every working man and woman in this country.

The Sprague decision presents an exceptional opportunity for

the Court to instruct and resolve the analytic disarray in the

lower courts. Amici therefore strongly urge that the Court grant

the Petition for Writ of Certiorari so that these matters of

fundamental importance to employees, retirees, and employers

can be definitively addressed.

4

REASONS FOR GRANTING THE WRIT

I.

REVIEW OF THE DECISION BELOW IS

NECESSARY TO RESOLVE INTER-CIRCUIT

CONFLICTS AND RESTORE ADHERENCE TO THE

FUNDAMENTAL PROTECTIVE PURPOSES OF ERISA.

The Petition for Writ of Certiorari demonstrates the inter-

circuit conflicts and analytic disarray that prevails in the lower

courts. The analytic disarray in the lower courts is in part the

result of the relative infrequency with which this Court has had

an opportunity to address application of the substantive

protections of ERISA.

The Court has repeatedly emphasized ERISA’s fundamental

protective purposes. ERISA imposes “strict standards” on

benefits plan administrators and other fiduciaries. Central States,

Southeast and Southwest Areas Pension Fund v. Central

Transport, Inc., 472 U.S. 559, 570-72 & n.10 (1985). These

standards were enacted “[t]o help fulfill ERISA’s broadly

protective purposes,” which include safeguarding “the

continuing well-being and security of millions of employees

and their dependents.” John Hancock Mut. Life Ins. Co. v. Harris

Trust & Sav. Bank, 510 U.S. 86, 96 & n.5 (1993), quoting 29

U.S.C. § 1001(a). The Congress “repeatedly emphasized [the]

purpose to protect contractually defined benefits.” Massachusetts

Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985). ERISA

therefore includes “safeguards to prevent abuse and ‘to

completely secure the rights and expectations brought into being

by this landmark legislation.’ ” Ingersoll-Rand Co. v.

McLendon, 498 U.S. 133, 137 (1990) (quoting legislative

history).

Cin

he it aac i ted Wo Be hide alia arts ib

5

Consistent with the fundamental protective purposes of

ERISA, the Court also has made clear that ERISA should be

interpreted and applied to avoid results that “afford less

protection to employees and their beneficiaries than they

enjoyed before ERISA was enacted.” Firestone Tire & Rubber

Co. v. Bruch, 489 U.S. 101, 114 (1989). As explained in the

legislative history, the courts are to develop a “federal common

law of rights and obligations under ERISA-regulated plans.”

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 101, 110 (1989);

Franchise Tax Board v. Construction Laborers Vacation Trust,

463 U.S. 1, 24 at n.26 (1983). In Varity Corporation v. Howe,

516 U.S. 489, 513 (1996), the Court again referred to the

congressional statement of purpose and declared, “ERISA’s basic

purposes favor a reading of the third subsection [ERISA Section

502(a)(3)] that provides the plaintiffs with a remedy.”

The decision below, and those others for which it stands as

a vivid exemplar, contravene the Court’s directives to adhere to

the statute’s fundamental protective purpose — safeguarding

the benefits entitlements and income security of employees and

retirees who have given years of service to their employers. As

interpreted and applied in the court below, ERISA no longer

preserves the level of protections that prevailed under pre-

ERISA state law. Rather, ERISA has supplanted these state law

protections with a regime under which long-promised retirement

benefits can be evaded by means of sharp practices such as

secret disclaimers and misleading drafting.

There is no doubt that the employer conduct at issue in

this case would not have been permitted under the state law

protections that prevailed at the time of ERISA’s enactment.

Firestone instructs that claims for promised benefits should be

reviewed by a court “as it would have reviewed any other

contract claim — by looking to the terms of the plan and other

manifestations of the parties’ intent.” 489 U.S. at 112-13.

6

Whether analyzed pursuant to traditional contract principles,

the doctrine of promissory estoppel, or the strict trust law

fiduciary duties applicable to employers, courts applying pre-

ERISA law would have enforced the right to the medical benefits

General Motors promised to garner the loyal service of its

employees and encourage their early retirement.

Many of these federal and state decisions applying pre-

ERISA law relied on principles of consideration and contract.

See, e.g., Hoefel v. Atlas Tack Corp., 581 F.2d 1, 5-6 (1st Cir.

1978) (“even though the employer has reserved the right to

amend or terminate the plan, once an employee, who accepted

employment under such a plan, had complied with all the

conditions entitling him to participate in such a plan, his rights

become vested and the employer cannot divest the employee of

his rights thereunder”); Law Enforcement Labor Services, Inc.

v. County of Mower, 483 N.W. 2d 696, 701 (Minn. 1992)

(retired beneficiaries’ right to paid health care premiums for life

“cannot be altered absent the retiree’s express consent”); Panto

v. Moore Business Forms, Inc., 130 N.H. 730, 547 A.2d 260

(N.H. 1988) (promise of continuance of benefits for a period

of time after being laid-off constituted unilateral contract,

enforceable after employee completes service); Blackwell v.

International Union, 9 Ohio App. 3d 179, 181-82, 458 N.E.

2d 1272, 1275-76 (Ohio Ct. App. 1983) (where employee

repeatedly reassured of right to pension, offer of pension cannot

be withdrawn after many years of employment); Dulany Foods,

Inc. v. C.M. Ayers, 220 Va. 502, 512, 260 S.E. 2d 196, 202

(Va. 1979) (offer of severance pay plan not a gratuity, but “a

unilateral contract offer which is accepted if ti:e employee

continues in the employment”); Hart v. United Brotherhood of

Carpenters & Joiners of America Local 626, 352 A.2d 423,

426 (Del. Super. 1976) (promised pension benefits are

“consideration for continued employee service and loyalty;”

plan language to be construed in employee’s favor); Rose City

7

Transit Co. v. City of Portland, 271 Ore. 588, 593, 533 P.2d

339, 342 (Ore. 1975) (pension or disability plan is offer which

may be accepted by employee’s continued employment, which

“constitutes the underlying consideration for the promise”);

Ehrle v. Bank Bldg. & Equip. Corp. of America, 530 S.W. 2d

482, 491-92 (Mo. App. 1975) (program of disability benefits

became enforceable contract when employees acted in reliance

thereon); Frank v. Day’s, Inc., 13 Wash. App. 401, 405, 535

P.2d 479, 482 (Wash. App. 1975) (a vested employee cannot

have his pension benefits “altered to his detriment without

corresponding benefit to him”); Stopford v. Boonton Molding

Co., Inc., 56 N.J. 169, 184, 265 A.2d 657, 664 (N.J. 1970)

(employee’s satisfaction of requirements for retirement benefits

“constituted adequate consideration and brought about a vesting

of the right to the lifetime benefits as prescribed by the plan”);

Sheehy v. Seilon, Inc., 10 Ohio St. 2d 242, 243, 227 N.E. 2d

229, 230 (Ohio 1967) (“through the inducements and actions

of the employer these employees, upon retirement, acquired a

vested right” to promised medical benefits); Cantor v. Berkshire

Life Ins. Co., 171 Ohio St. 405, 409, 171 N.E. 2d 518, 521

(Ohio 1960) (retirement plans “will give rise to contractual rights

enforceable by the employee who has complied with all the

conditions of the plan;” “[a] retirement program has become a

basic part of an employee’s remuneration . . . and a consideration

flows to the employer”); Bird v. Connecticut Power Co., 144

Conn. 456, 463, 133 A.2d 894, 897 (Conn. 1957) (“the

employer may not defeat the employees’ reasonable expectations

of receiving the promised reward”); West v. Hunt Foods, Inc.,

101 Cal. App. 2d 597, 603, 225 P.2d 978, 982 (Cal. App.

1951) (employee who continues employment with knowledge

of plan offered by employer may enforce right to a pension).

Other decisions rested on the doctrine of promissory

estoppel. See, e.g., Vastoler v. American Can Co., 700 F.2d

916, 918 (3d Cir. 1983) (promise to include past service in

8

pension benefit when asked to transfer from hourly to

supervisory position enforced under principle of promissory

estoppel); Landro v. Glendenning Motorways, Inc., 625 F.2d

1344, 1353-55 (8th Cir. 1980) (ambiguity in pension plan

construed against employer-drafter; principle of promissory

estoppel required employer’s promise of pension benefits to be

enforced); Jn re Matter of Erie Lackawanna Railway, 548 F.2d

621, 627 (6th Cir. 1977) (“Clearly, under our economic system,

an employer cannot offer a retirement system as an inducement

to employment and, after an employee has accepted employment

under such circumstances, withdraw or terminate the program

after an employee has complied with all the conditions entitling

him to retirement rights thereunder”); Hurd v. Hutnik, 419 F.

Supp. 630, 637 (D. N.J. 1976) (“where employers have given

other assurances of a lifetime pension and employees elect to

retire in reliance thereon, the doctrine of promissory estoppel

bars such a later termination of the fund”); Christensen v.

Minneapolis Municipal Employees Retirement Board, 331 N.W.

2d 740, 749 (Minn. 1983) (under doctrine of promissory

estoppel, after employee met original service requirement,

promise of pension benefits cannot be amended to delay benefits

until beneficiary reaches a prescribed age); Feinberg v. The

Pfeiffer Co., 322 S.W. 2d 163, 168-69 (Mo. App. 1959)

(although promise of pension benefits did not consist of

contractual obligation and plaintiff admitted that she would have

continued to work regardless of promise of pension benefits,

court, citing Section 90 Rest. of Contracts, illus. 2, found that

retirement based on reliance of promise of pension precluded

employer from later rescinding offer).*

4. The conclusion that an employee or retiree has an

enforceable contractual right to promised benefits inducing action

or forbearance was so unexceptionable under pre-ERISA law that

the Restatement (Second) of Contracts set forth this Illustration:

(Cont'd)

9

Still other decisions invoked the law of trusts and fiduciaries

to require full and accurate disclosure of benefits information

and to preclude employer invocation of undisclosed terms. See,

e.g., Carlsen v. Masters, Mates & Pilots Pension Plan Trust,

80 N.J. 334, 341, 403 A.2d 880, 884 (N.J. 1979) (adverse

disqualifying rule “should have been disclosed explicitly and

unmistakably”); Erion v. Timken Co., 52 Ohio App. 2d 123,

132, 368 N.E. 2d 312, 317 (Ohio App. 1976) (employer had

fiduciary duty to bring pertinent points about benefits to

(Cont'd)

A has been employed by B for 40 years. B promises to

pay A a pension of $200 per month when A retires. A

retires and forbears to work elsewhere for several years

while B pays the pension. B's promise is binding.

Restatement (Second) of Contracts, § 90, cmt. b, illus. 4 (1979).

According to the Reporter's Note, the illustration is based on

Feinberg v. Pfeiffer Co., 322 S.W. 2d 163 (Mo. App. 1959).

Even without resort to the doctrine of promissory estoppel,

familiar contract principles governing “manifestations of the parties’

intent”, Firestone, likewise would direct enforcement of the promise

to pay medical benefits. Where the parties have attached different

meanings to a promise,

it is interpreted in accordance with the meaning attached

by one of them if at the time the agreement was made

(b) that party [the employee] had no reason to know of

any different meaning attached by the other [the

employer], and the other had reason to know the meaning

attached by the first party.

Restatement (Second) of Contracts, § 201(2)(b) (“Whose Meaning

Prevails”) (1979); see also Corbin on Contracts, 1951, § 538 at 61.

This is “hornbook contract law.” United States v. Stuart, 489 U.S.

353, 367 at n.7 (1989) (quoting same section of Restatement).

10

attention of employees, even if no specific questions posed by

employees); Moch v. Durkin, 31 A.D. 2d 995, 297 N.Y.S. 2d

865, 867 (N.Y. App. 1969) (plan fiduciaries had “affirmative

duty” to notify employees about plan procedures); Branch v.

White, 99 N.J. Super. 295, 307, 239 A.2d 665, 671 (N.J. Super.

1968) (plan fiduciaries “under a duty to fully inform the

beneficiaries of the trust of all facts relating to the subject matter

of the trust which were essential for the protection of the

beneficiaries’ interests”); Davilla v. Court Employment Project,

Inc., 86 Misc. 2d 552, 555-56, 383 N.Y.S. 2d 140, 142 (N-Y.

Kings County 1976) (employer may not avoid liability for

benefits on “theory that plaintiff is bound by something he has

no notice of and which is more restrictive than the notice actually

given him”).

Finally, courts adopted rules of construction mandating that

benefits promises be construed most strongly in favor of

employees. See, e.g., Paddock Pool Co. v. Monseur, 23 Ariz.

App. 451, 453, 533 P.2d 1188, 1190 (Ariz. App. 1975); Anger

v. Bender, 31 Ill. App. 3d 877, 880, 335 N.E. 2d 122, 125 (Il.

App. 1975); Elby v. Livernois Engrg. Co., 37 Mich. App. 252,

253, 194 N.W. 2d 429, 430 (Mich. App. 1971); Frietzsche v.

First Western Bank & Trust Co., 168 Cal. App. 2d 705, 707,

336 P.2d 589, 590 (Cal. App. 1959); Forrish v. Kennedy, 377

Pa. 370, 376, 105 A.2d 67, 70 (Pa. 1954); Psutka v. Michigan

Alkali Co., 274 Mich. 318, 320, 264 N.W. 385, 386 (Mich.

1936) (death benefit plan’s ambiguities are to be construed

against employer; provision in plan allowing employer to

change benefits not applicable to employees or their dependents

who are receiving benefits).

Commentators have also noted that there was a well-

developed body of protective state law in existence at the time

of ERISA’s enactment. See C. Fisk, Lochner Redux: The

Renaissance of Laissez-Faire Contract in the Federal Common

1]

Law of Employee Benefits, 56 Ohio St. L. J. 153, 230-34

(1995); G. Flint, ERISA: Extracontractual Damages Mandated

for Benefit Claims Actions, 36 Ariz. L. Rev. 611, 649-56 (1994);

W. Payne, Lawsuits Challenging Termination or Modification

of Retiree Welfare Benefits: A Plaintiffs’ Perspective, 10 The

Labor Lawyer 91, 93-97 (1994).

The Court has repeatedly noted the general guiding

principles of ERISA interpretation and enforcement, including

the charge to be at least as protective as the pre-ERISA

protections discussed above. But what is the actual status of

enforcement of ERISA’s “broadly protective purposes” in this,

its 25th year? Under the Sprague decision, courts will provide

no remedy to employees who gave years of service to their

employer and retired in reliance on promises of valuable medical

benefits that they reasonably expected to be secure. Under the

lower court’s application of ERISA, fundamental benefits rights

can be frustrated by hidden disclaimers in documents never

disclosed to employees, and benefits can be misrepresented in

order to retain and later retire thousands of employees. Although

this type of conduct would “create[ ] liability even among

strangers,” Varity, 516 U.S. at 506, and General Motors would

not tolerate it in its own commercial dealings, the lower court’s

misapplication of ERISA permits the company to escape its

ERISA fiduciary and contractual responsibilities and creates a

safe harbor for this conduct. Under pre-ERISA law, this outcome

would be inconceivable. It is not the result intended by ERISA.

CONCLUSION

Without intervention by the Court, the decision in Sprague

will be heralded and followed in the lower courts as authorizing

a decisional approach that is contrary to ERISA’s remedial goals.

For the foregoing reasons, amici curiae support and respectfully

urge the Court to grant the petition for certiorari.

12

Respectfully submitted,

ALAN M. SANDALS

Counsel of Record

SCOTT M. LEMPERT

SANDALS, LANGER

& TAYLOR, LLP

One Liberty Place

50th Floor

Philadelphia, Pennsylvania 19103

(215) 419-6500

CHARLES GOTTLIEB

GOTTLIEB AND GOREN, P.C.

26261 Evergreen

Suite 460

Southfield, Michigan 48076

(248) 352-1880

CHARLES T. RIEHL

CHRISTOPHER GIBBON

WALTER & HAVERFIELD P.L.L.

1300 Terminal Tower

50 Public Square

Cleveland, Ohio 44113

(216) 781-1212

WILLIAM T. PAYNE

SCHWARTZ, STEINSAPIR,

DOHRMANN & SOMMERS, LLP

3600 One Oxford Centre

Pittsburgh, Pennsylvania 15219

(412) 456-2008

Attorneys for Amici Curiae

Donald Armbruster, et al. and

the Republic Steel Salaried

Retirees Association