Opposition Brief — Borst v. Chevron Corp.

eee es! eer oe |

FILED

MAR 2/7 1995

—E Ur ite CLERK

Jn the Supreme Court of the Gnited States

OCTOBER TERM, 1994

No. 94-1464

DEAN BORST, HARRY S. BACK, ET AL.,, AND THE

CLASSES THEY HAVE BEEN CERTIFIED TO REPRESENT,

PETITIONERS,

V.

CHEVRON CORPORATION, CHEVRON U.S.A., INC., ET AL.,

RESPONDENTS

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Fifth Circuit

BRIEF FOR THE RESPONDENTS IN OPPOSITION

STEPHEN M. SHAPIRO

Counsel of Record

KENNETH S. GELLER

JAMES D. HOLZHAUER

TIMOTHY S. BISHOP

Mayer, Brown & Platt

190 South LaSalle Street

Chicago, Illinois 60603

(312) 782-0600

Counsel for Respondents

® BESTAVAILABLE COPY |

a

QUESTIONS PRESENTED

1. Whether the Fifth Circuit and the district court

correctly held, in agreement with every other court of

appeals to consider the issue, that petitioners’ claim for

disgorgement of “surplus” assets under section

502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B),

should be decided by the court, and not a jury.

2. Whether the Fifth Circuit and the district court

correctly held that the language of the pension plan and

the summary plan descriptions was not in conflict and

did not prohibit an amendment permitting the employer

to recoup any residual assets attributable to employer

contributions following the complete termination of the

plan and the satisfaction of all liabilities to participants

and their beneficiaries.

3. Whether the language of the pension plan

required the distribution of “surplus” assets to a class of

participants upon the partial termination of the plan.

-ii-

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ............... i

eo: rr a 2

By st rr er ae 2

rrr er ne 2

REASONS FOR DENYING THE PETITION... 7

I. The Courts Of Appeals Unanimously Have

Held That There Is No Right To A Jury Trial

For Claims Under ERISA Section

po ee er ee 7

II. There Was No Conflict Between The Summa-

ry Plan Descriptions And The Terms Of The

P38, Pe a, Ae 12

III. Nothing In The A&B Pian Or In ERISA

Requires Distribution Of Surplus Assets Upon

A Partial Termination Of The Plan ........ 15

CAMULGAMEMIE 0 cin bo 045 Ge eee 18

-ili-

TABLE OF AUTHORITIES

Cases: Page

Albedyll v. Wisconsin Porcelain Co. Revised

Retirement Plan, 947 F.2d 246 (7th Cir.

ee ea a eh ek ee 8 17

0 a a ee 9

Blake v. Unionmutual Stock Life Ins. Co., 906

ee ES | ere 9

Borst v. Chevron Corp., 36 F.3d 1308 (Sth Cir.

a a a BR Aes A 8 6 8s 8

Bowles v. U.S. Army Corps of Engineers, 841

F.2d 112 (5th Cir.), cert. denied, 488 U.S.

Te eet ee ee EET eee 8

Brasher v. Prudential Ins. Co., 771 F. Supp. 280

a re 9

Central States Pension Fund v. Central Transport,

Se UE M.S, . re 11

Chait v. Bernstein, 835 F.2d 1017 (3d Cir.

ee ae ee ee 17

Cox v. Keystone Carbon Co., 894 F.2d 647 (3d

Cir.), cert. denied, 498 U.S. 811 (1990) ...... )

-jV-

TABLE OF AUTHORITIES—Continued

Page

Curtiss-Wright Corp. v. Schoonejongen, No. 93-

Spas Cer. es Dy, FO nee Sea ee ees 11

Deringer v. Columbia Transp. Div. , 866 F.2d 859

ee ek ge es ee ee 8

Enserch Corp. v. Shand Morahan & Co., 952

eR ee | 11

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

EN ch oe aks eo 6, 7, 8, 10, 11

Gangitano v. NN Investors Life Ins. Co., 733 F.

Supp. 342 (S.D. Fla. 1990) ............. 10

Garrett v. Merchant’s, Inc., 27 F.3d 563, 1994

U.S. App. LEXIS 14962 (4th Cir. 1994) ..... 8

Goodman v. Lukens Steel Co., 482 U.S. 656

EE ines Ge a me es ee 13

Granfinanciera, S.A. v. Nordberg, 492 U.S. 33

Ee a aie ak bce a Oke oe ae 12

Graver Mfg. Co. v. Linde Co., 336 U.S. 271

(1949), rev’d in part on other grounds upon

rehearing, 339 U.S. 605 (1950) .......... 13

Hansen v. Continental Ins. Co., 940 F.2d 971

ee Ge, ee 4 = sas 0 ace ee eee 6, 13, 14

—_™~-~-~S—:—~<=:;S;:;l

-V-

TABLE OF AUTHORITIES—Continued

Page

Houghton v. Sipco, Inc., 38 F.3d 953 (8th Cir.

| PERRET TTC e Teo, ee SOM 8

International Union, UAW v. Midland Steel Prods.

Co., 771 F. Supp. 860 (N.D. Ohio 1991) ..... 9

Kirk v. Provident Life & Accident Ins. Co., 942

oe Fe | eae 9

Laskaris v. Thornburgh, 733 F.2d 260 (3d Cir.),

cert. denied, 469 U.S. 886 (1984) .......... 8

McDonald v. Artcraft Electric Supply Co., 774 F.

UD. BP Gs TPE) oo oe onc He ew eee an 9

Mead Corp. v. Tilley, 490 U.S. 714 (1989) ..... 17

Mertens v. Hewitt Associates, 113 S. Ct. 2063

EE sae ete a ack ets ee a ee eer 11

Morales v. Pan American Life Ins. Co., 718 F.

Supp. 1297 (E.D. La. 1989), aff'd, 914 F.2d

Oe ec ne eo a es ee 17

Padilla de Higgenbotham v. Worth Publishers,

Inc., 820 F. Supp. 48 (D.P.R. 1993) ........ 9

Pane v. RCA Corp., 868 F.2d 631 (3d Cir.

Se ek ae ee eee 9

-VIi-

TABLE OF AUTHORITIES—Continued

Page

Resnick v. Resnick, 763 F. Supp. 760 (S.D.N.Y.

| Serer See ye a ee 9

Rhodes v. Piggly Wiggly Alabama Distributing

Co., 741 F. Supp. 1542 (N.D. Ala. 1990) ... 10

Senkier v. Hartford Life & Accident Ins. Co., 948

fF 8 ty, Ce ee | rr ee 15

Spinelli v. Gaughan, 12 F.3d 853 (9th Cir.

| Seer ere fee ee ee 9

Steeples v. Time Ins. Co., 139 F.R.D. 688 (N.D.

| ee es ee eee 9

Sullivan v. LTV Aerospace & Defense Co., 850 F.

Supp. 202 (W.D.N.Y. 1994) ............. 9

Teamsters v. Terry, 494 U.S. 558 (1990) ...... 6, 11

Van Orman v. American Ins. Co., 608 F. Supp.

1 GS. Tae 6 6 uv ee eR ees 17

Vicinanzo v. Brunschwig & Fils, Inc., 739 F.

Supp. G52 G.D.N.Y. WD oc cece wess 9

Walsh v. Great Atl. & Pac. Tea Co., 96 F.R.D.

632 (D.N.J.), aff'd, 726 F.2d 956 (3d Cir.

BOGS) oc eee eds ee eee eae 17

-Vii-

TABLE OF AUTHORITIES—Continued

Page

Statutes:

Employee Retirement Income Security Act of

1974, 29 U.S.C. §§ 1001 et seq.:

Section 403(c)(1),

yo Bik ome 8). | | rr 14

Section 502(a)(1)(B),

29 U.S.C. § 1132(a)(1)(B) ....... 3, 7, 8,9

section 510, 79 U.S.C.§1140 ........... 9

Section 4044(d)(1),

ee Sr ELD 8k ce ee ae 5, 14

Miscellaneous:

W. DeFuniak, Handbook of Modern Equity (2d

ee ne ee 11

Much, “Pension Liabilities: Now You See ’Em,

Now You Don’t!,” Industry Week, Nov. 16,

Ry RE ee fea ee er era 16

Jereski, “The Surplus Vanishes,” Forbes, Nov.

50, SR as 4s fe a ee ee 16

Jn the Supreme Court of the United States

OCTOBER TERM, 1994

No. 94-1464

DEAN BoRST, HARRY S. BACK, ET AL.,, AND THE

CLASSES THEY HAVE BEEN CERTIFIED TO REPRESENT,

PETITIONERS,

v.

CHEVRON CORPORATION, CHEVRON U.S.A., INC., ET AL.,

RESPONDENTS

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Fifth Circuit

BRIEF FOR THE RESPONDENTS

IN OPPOSITION

Respondents Chevron Corporation, Chevron,

U.S.A., Inc., Gulf Oil Corporation, Chevron Corpora-

tion Retirement Plan, Pension Plan of Gulf Oil Corpora-

tion, Benefits Committee of the Pension Plan of Gulf Oil

Corporation and each of its members, and Pension

Committee of the Pension Plan of Gulf Oil Corporation

2

and each of its members submit this brief in opposition

to the petition for a writ of certiorari in this case.'

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. A-1

to A-36) is reported at 36 F.3d 1308. The district court’s

opinion (Pet. App. A-39 to A-183) is reported at 764 F.

Supp. 1149. The order of the district court striking

petitioners’ demand for a jury trial (Pet. App. A-184 to

A-185) is unreported.

JURISDICTION

The court of appeals entered its judgment on October

21, 1994, and denied petitioners’ petition for rehearing

on December 1, 1994. Petitioners filed their petition for

a writ of certiorari on March 1, 1995. The jurisdiction

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

STATEMENT

Petitioners, former participants of the Pension Plan

of Gulf Oil Corporation (the “Gulf Pension Plan” or the

“Plan”), brought this case as a class action under the

Employee Retirement Income Security Act of 1974, 29

U.S.C. §§ 1001 et seg. (“ERISA”), against Chevron

Corporation (“Chevron”), Gulf Oil Corporation

(“Gulf”), the Chevron Corporation Retirement Plan

(“Chevron Plan”), the Gulf Pension Plan, and several

affiliated entities. The dispute arose out of the merger of

Chevron and Gulf in 1984, and the subsequent merger

of the pension plans of the two companies in 1986.

' In compliance with Rule 29.1, respondents state that they

have no parent companies or non-wholly owned subsidiaries.

3

In a carefully-reasoned opinion the court of appeals

unanimously affirmed the district court’s judgment on

each of the three issues presented by the petition:

(1) whether participants seeking equitable relief under

ERISA section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B),

are entitled to a jury trial; (2) whether the language of

summary plan descriptions of the Gulf Pension Plan

prohibited the reversion of surplus assets to the employer

following the satisfaction of all liabilities under the Plan;

and (3) whether the terms of the Gulf Pension Plan

required the payment of surplus assets to the participants

upon a partial termination. Only the first of these issues

involves a legal question of any general application, and

this Court’s review of that question is unnecessary

because every court of appeals to consider it has agreed

that participants are not entitled to jury trials. The

remaining two issues are completely fact-bound, and

dependent on the particular pension plan documents here

involved. The district court and the court of appeals

reviewed these documents with painstaking care and

correctly decided those issues.

1. In 1975, the Gulf Oil Corporation formed the

Gulf Pension Plan to administer three pension plans that

had been in effect at the company for many years. The

largest of those plans—the Annuities and Benefits Plan

(“A&B Plan”)—was a defined benefit plan funded

entirely through contributions made by Gulf. Two

smaller defined benefit plans—the Contributory

Retirement Plan (“CRP”) and the Supplemental Annuity

Plan (“SAP”)—contained employer and employee

contributions. The issues raised by the petition relate

solely to the allocation of what petitioners characterize

as the “surplus assets” of the A&B Plan, and thus solely

to funds contributed by Gulf to finance the defined

4

pension benefits of its employees. The parties settled all

claims related to the CRP and SAP plans before this case

went to the court of appeals. There is also no issue as to

whether petitioners will receive all of the defined

pension benefits under the A&B Plan; those benefits are

fully guaranteed and secured. Pet. App. A-2 to A-6.

In March 1984, Chevron and Gulf agreed to merge.

The companies operated separately under a standstill

agreement with the Federal Trade Commission until

1985, when the merger was approved and completed. In

July 1986, the Gulf Pension Plan and the Chevron

Corporation Annuity Plan were combined to create the

Chevron Plan. Section 18.d of the Chevron Plan

provided that the employer would be entitled to any

residual] assets left over after all of the benefits under the

Plan had been paid to participants and their beneficia-

ries. Pet. App. A-4.

2. Petitioners filed this suit in November 1986,

claiming, inter alia, that a partial termination of the Gulf

Plan had occurred as a result of reductions in the

workforce. They further contended that, as a conse-

quence, participants were entitled not only to a guarantee

of their pension benefits (which Chevron agreed to

confer), but also to a pro rata share of the “surplus”

assets of the Gulf Plan. Pet. App. A-4 to A-6, A-8. The

district court granted Chevron’s motion to strike petition-

ers’ demand for a jury trial. Jd. at A-184. The court

subsequently found that a partial termination had

occurred but—after conducting an exhaustive review of

plan documents prepared over the course of more than

40 years—held that petitioners were not entitled to any

distribution of plan assets and that those assets could

eventually revert to the employer in the event that the

plan was completely terminated and all of the benefits

5

due to the participants were satisfied. Jd. at A-51 to

A-114, A-6 to A-8.

3. The court of appeals affirmed, rejecting petition-

ers’ claim that they were entitled to a distribution of

surplus assets upon partial termination.? The court

explained that section 4044(d)(1) of ERISA, 29 U.S.C.

§ 1344(d)(1), plainly permits reversion to the employer

of residual assets attributable to employer contributions

following termination of the plan and satisfaction of all

liabilities to participants and their beneficiaries. The

language of the A&B Plan—which states that “/ajll of

the assets held in trust, after provision for any properly

chargeable expenses, shall be used solely for the [partici-

pants] until all liabilities under the Plan shall have been

satisfied in full” (Pet. App. A-17 (emphasis

added))—also permits a reversion to the employer after

the satisfaction of all liabilities. References in the Plan

documents to the “irrevocability” of the trust merely

paraphrased the requirements of the 1939 Internal

Revenue Code and did not preclude a reversion of

surplus assets after the trust purpose had been fulfilled.

Because the Tax Code and ERISA require that plan

assets be used for the “exclusive benefit” of participants

and permit reversion to employers after liabilities have

been satisfied, the repetition of “exclusive benefit”

language in the Plan documents cannot be read to

preclude a reversion. Pet. App. A-10 to A-31.

* Because the court of appeals held that petitioners were

not entitled to a distribution of surplus assets upon partial

termination, it declined to consider whether or not a partial

termination had taken place. Pet. App. A-9 to A-10 & n.11.

6

In a footnote (Pet. App. A-30 n.25), the court of

appeals rejected the argument that language in the

summary plan descriptions (“SPD”) of the A&B Plan

prohibited any reversion to the employer. The court

recognized that under its decision in Hansen v. Conti-

nental Ins. Co., 940 F.2d 971, 982 (Sth Cir. 1991), the

language of the SPD governs if there is a conflict

between the SPD and the Plan terms, but there was no

conflict among the Plan documents in this case that

would call that rule into play:

We do not consider the language of the A&B

Plan to be ambiguous, nor do we find any con-

flict between its terms and those of the summary

plan descriptions. Indeed, the summary descrip-

tions of the A&B Plan, in the portions concern-

ing changes to the plan, track the language of the

Plan itself * * *.

Pet. App. A-30 n.25 (emphasis added).

The court of appeals also rejected petitioners’ claim -

that they were entitled to a jury trial. The court observed

(Pet. App. A-35 n. 29) that “no issues of fact remain to

be decided by a jury,” making the jury demand an

irrelevance in this proceeding. In addition, the court of

appeals explained that the claim had no legal basis. The

court applied the analysis called for by Teamsters v.

Terry, 494 U.S. 558, 565 (1990), examined this Court’s

ruling in Firestone Tire & Rubber Co. v. Bruch, 489

U.S. 101 (1989), and held that no jury trial was required

because the nature of petitioners’ cause of action was

closely analogous to an equitable proceeding under the

law of trusts and because the remedy petitioners

sought—distribution of trust assets—was analogous to

equitable restitution. Pet. App. A-33 to A-35.

7

REASONS FOR DENYING THE PETITION

Petitioners’ argument that actions under ERISA sec-

tion 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), should be

tried to a jury has no relevance in a case such as this one

which turns exclusively on legal issues, and was, in any

event, properly rejected by the district court and the

court of appeals. By repetitiously citing a few obsolete

district court decisions, petitioners attempt to portray the

federal courts as divided on the issue, but petitioners

pointedly ignore the uniform line of court of appeals

authority (including decisions in six circuits since

Firestone) rejecting their jury trial argument. Petitioners’

other two arguments are fact-bound in nature, resting

entirely on the particular language of the pension plans

and related plan documents, and were correctly resolved

by the district court and the court of appeals. There was

no dissent from the panel ruling below and no vote in

favor of panel rehearing or rehearing en banc. Review

by this Court is unwarranted.

I. The Courts Of Appeals Unanimously Have

Held That There Is No Right To A Jury Trial

For Claims Under ERISA Section 502(a)(1)(B)

Petitioners’ argument that they are entitled to a jury

trial on their “surplus” claims is meritless because, as

we explain below, every court of appeals to consider the

issue has concluded that there is no right to a jury trial

in these circumstances, and this Court’s opinions directly

support those recent rulings. We note at the outset,

however, that the jury trial issue is not properly raised

here, because, as the court of appeals explained (Pet.

App. A-35 n.29), by the time it decided this case most

issues had been settled and “no issues of fact remain to

be decided by a jury.” The district court likewise found

8

specifically (id. at A-134 n.55) that questions surround-

ing petitioners’ claim to surplus assets “are all questions

of law.” Thus, any conceivable error in denying petit- |

ioners’ jury demand was harmless, and could not be the

basis for a new trial or other relief. Deringer v. Colum- |

bia Transp. Div., 866 F.2d 859, 864 (6th Cir. 1989) |

(any error in the district court’s denial of a jury trial was

harmless when the determinative issue was properly

decided by the court); Bowles v. U.S. Army Corps of

Engineers, 841 F.2d 112, 117 (Sth Cir.), cert. denied,

488 U.S. 803 (1988); Laskaris v. Thornburgh, 733 F.2d

260, 264 (3d Cir.), cert. denied, 469 U.S. 886 (1984).

Beyond this, petitioners’ argument that they were

entitled to a jury trial is utterly baseless. Petitioners

assert that this Court’s passing reference to contract law

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

112 (1989), “changed the iaw” and nullified sub silentio

a long line of court of appeals’ authority holding that

claimants under ERISA section 502(a)(1)(B) are not

entitled to jury trials. Pet. 10-11 & n.3. To support this

argument, petitioners cite a handful of district court

decisions that have allowed jury trials’ in

section 502(a)(1)(B) cases in highly dissimilar circum-

stances. Pet. 14.

What petitioners fail to inform the Court, however,

is that in addition to the uniform line of court of appeals’

authority predating Firestone, six circuits have consid-

ered the issue subsequent to Firestone, and each has held

that plaintiffs are not entitled to jury trials. Houghton v.

Sipco, Inc., 38 F.3d 953, 957 (8th Cir. 1994); Borst v.

Chevron Corp., 36 F.3d 1308 (Sth Cir. 1994) (this

case); Garrett v. Merchant’s, Inc., 27 F.3d 563, 1994

U.S. App. LEXIS 14962 (4th Cir. 1994) (unpublished

9

opinion); Kirk v. Provident Life & Accident Ins. Co.,

942 F.2d 504, 506 (8th Cir. 1991); Blake v. Union-

mutual Stock Life Ins. Co., 906 F.2d 1525, 1525-1527

(11th Cir. 1990); Bair v. General Motors Corp., 895

F.2d 1094, 1096-1097 (6th Cir. 1990); Cox v. Keystone

Carbon Co., 894 F.2d 647, 649-650 (3d Cir.), cert.

denied, 498 U.S. 811 (1990); Pane v. RCA Corp., 868

F.2d 631 (3d Cir. 1989). See generally Spinelli v.

Gaughan, 12 F.3d 853, 855-858 (9th Cir. 1993) (in a

case under ERISA section 510, the court of appeals held

that “jury trials are generally unavailable under ERISA”).°

3 Spinelli is not directly on point because it arose under

ERISA section 510, 29 U.S.C. § 1140, not under section

502(a)(1)(B). Three of the ten district court decisions cited

by petitioners are also section 510 cases and are thus also not

analogous to this case. McDonald v. Artcraft Electric Supply

Co., 774 F. Supp. 29, 35-36 (D.D.C. 1991); Vicinanzo v.

Brunschwig & Fils, Inc., 739 F. Supp. 882, 882-883

(S.D.N.Y. 1990); International Union, UAW v. Midland

Steel Prods. Co., 771 F. Supp. 860, 862-863 (N.D. Ohio

1991).

None of the other district court cases cited by petitioners

involved a claim for disgorgement of surplus pension plan

assets or anything of a similarly equitable nature. Sullivan v.

LTV Aerospace & Defense Co., 850 F. Supp. 202, 203

(W.D.N.Y. 1994) (action to collect unpaid severance

benefits); Padilla de Higgenbotham v. Worth Publishers,

Inc., 820 F. Supp. 48, 49 (D.P.R. 1993) (suit claiming

negligence and intentional misconduct resulting in denial of

disability benefits); Steeples v. Time Ins. Co., 139 F.R.D.

688 (N.D. Okla. 1991) (action to obtain medical benefits);

Brasher v. Prudential Ins. Co., 771 F. Supp. 280 (W.D.

Ark. 1991) (suit to recover death benefits); Resnick v.

(continued...)

10

Four of the ten district court cases cited by petition-

ers are from the Sixth, Eighth and Eleventh Circuits;

those courts of appeals have all rejected jury trial

demands in similar ERISA cases after Firestone. The

Third, Fourth and Fifth Circuits have also rejected jury

trial claims since Firestone, and no court of appeals to

consider the issue has reached a contrary result. When

this unanimous court of appeals authority is considered

along with the equally uniform authority prior to Fire-

stone, petitioners’ assertion (Pet. 15) that “the Fifth

Circuit is out of step with the growing weight of deci-

sional law in this area” rings hollow indeed.

We disagree with petitioners’ premise that the

Firestone decision, which did not decide or even discuss

whether ERISA plaintiffs are entitled to jury trials,

somehow “changed the law” regarding jury trials. To

the contrary, at the core of the Firestone decision is the

recognition that “ERISA abounds with the language and

3(.. .continued)

Resnick, 763 F. Supp. 760, 763 (S.D.N.Y. 1991) (action to

recover vested accrued pension benefits); Rhodes v. Piggly

Wiggly Alabama Distributing Co., 741 F. Supp. 1542 (N.D.

Ala. 1990) (suit to obtain health benefits); Gangitano v. NN

Investors Life Ins. Co., 733 F. Supp. 342 (S.D. Fla. 1990)

(action to recover medical insurance benefits).

Although we question the correctness of these decisions,

even if a jury trial were required in an ordinary denial of

benefits case it would not follow that a jury trial would also

be required in a case seeking the dismantlement of a $650

million trust and the equitable distribution of trust assets to

participants who have already been guaranteed all of the

benefits they were promised. Claims of this kind are exclu-

sively equitable in character. See page 11 n.4, infra.

SN ee

11

terminology of trust law” (489 U.S. at 110) and that

principles of trust law should be applied in developing

federal law under ERISA. See also Curtiss-Wright Corp.

v. Schoonejongen, No. 93-1935, slip op. at 11 (U.S.

Mar. 6, 1995) (ERISA “follows standard trust law

principles”); Central States Pension Fund v. Central

Transport, Inc., 472 U.S. 559, 568-569 (1985)

(ERISA’s duties “are based” on the “law of trusts”). As

the court of appeals held in this case (Pet. App. A-34),

“the law of trusts [is] an area within the exclusive

jurisdiction of the courts of equity,” and trust cases are

typically tried to the court. Petitioners argue (Pet. 10)

that their claim for surplus assets must be regarded as a

legal claim because they seek a monetary recovery, but

as the court of appeals held, monetary relief of the type

sought by petitioners “sounds in equity, and thus does

not guarantee a jury trial, when it is restitutionary in

nature of is intertwined with claims for injunctive

relief.” Pet. App. A-35, citing Teamsters v. Terry, 494

U.S. at 570-571. See also Mertens v. Hewitt Associates,

113 S. Ct. 2063, 2068-2069 (1993).*

4 Petitioners’ complaint made absolutely clear the equitable

nature of the relief sought. Petitioners requested rescission of

the Chevron-Gulf Plan merger, “disgorge[ment]” of trans-

ferred Plan assets, and “reformation” of Plan documents.

Prayer for Relief 4{ (k), (g) and (m). All of those remedies

are equitable. E.g., Teamsters v. Terry, 494 U.S. at 570

(disgorgement); Enserch Corp. v. Shand Morahan & Co.,

952 F.2d 1485, 1502 (5th Cir. 1992) (reformation); W.

DeFuniak, Handbook of Modern Equity 231-235 (2d ed.

1956) (rescission and reformation). Moreover, it is incon-

ceivable that surplus Gulf Plan assets could be allocated

without an accounting, another distinctively equitable

(continued. . .)

12

II. There Was No Conflict Between The Summ-

ary Plan Descriptions And The Terms Of The

A&B Plan

Petitioners’ second claim (Pet. 15-19) is that the

r court of appeals’ holding that reversion of surplus assets

was not prohibited by language of the summary plan

descriptions conflicts with a prior decision of the Fifth

Circuit and decisions in other circuits holding that in the

event of a conflict between the language of the SPD and

the terms of the plan, the SPD prevails.* Petitioners

assert that there is a conflict between the language of the |

summary plan descriptions and the terms of the A&B |

Plan regarding the reversion of surplus assets; that the |

court of appeals held that the language of the SPDs is |

relevant only if the pension plan is ambiguous; and that |

in so holding the court below disregarded its previous |

*(.. .continued)

remedy. See Prayer for Relief { (0) (demanding “an actuarial

evaluation” of the Gulf Plan); Granfinanciera, S.A. v.

Nordberg, 492 U.S. 33, 44-47 (1989).

5

The petition falsely implies that Chevron has taken a

reversion of the surplus assets of the A&B Plan: “Petitioners

and Chevron fought at trial and on appeal over who is

entitled under the Plan to the approximately $650 million in

surplus assets from the A&B Plan that Chevron reverted to

itself.” Pet. 15 (emphasis added). To the contrary, Chevron

has not taken any reversion of A&B Plan assets, and, as the

court of appeals and the district court both recognized (Pet.

App. A-14, A-132), under ERISA, the Internal Revenue

Code, and the terms of the Chevron Plan, no reversion is

possible prior to the complete termination of the Plan and the

satisfaction of all liabilities to participants and their beneficia-

ries.

a

13

decision in Hansen v. Continental Ins. Co., 940 F.2d

971 (Sth Cir. 1991), and created a conflict with other

circuits.° This claim is based entirely on a misstatement

of the court of appeals’ decision. See Pet. App. A-30

n.25.

Petitioners neglect to mention that the court of

appeals, in the remainder of the footnote they partially

describe (Pet. 17), expressly held that there was no

conflict between the SPDs and the terms of the Plan:

We do not consider the language of the A&B

Plan to be ambiguous, nor do we find any con-

flict between its terms and those of the summary

plan descriptions. Indeed, the summary descrip-

tions of the A&B Plan, in the portions concern-

ing changes to the plan, track the language of the

Plan itself * * *.

Pet. App. A-30 n.25 (emphasis added). There is no

reason why this Court should reconsider that factual

issue, which was decided the same way by both the

district court (Pet. App. A-112 to A-113) and the

unanimous court of appeals. See Graver Mfg. Co. v.

Linde Co., 336 U.S. 271, 275 (1949) (the Court does

not grant certiorari “for correction of errors in fact

finding,” especially where there are “concurrent findings

of fact by two courts below”); Goodman v. Lukens Steel

Co., 482 U.S. 656, 665 (1987).

6 Two of the three judges on the panel in this case—Chief

Judge Politz and Judge Garwood—were also on the panel that

decided Hansen, the case petitioners claim they have now

ignored.

li

Moreover, the decision of the courts below that there

is no conflict between the Plan and SPDs is plainly

correct. Petitioners’ claim of “conflict” is based on the

recitation in the SPDs of the “exclusive benefit rule”

language of ERISA section 403(c)(1), 29 U.S.C.

§ 1103(c)(1)—language that is found in both the Plan

and the SPDs. As the court of appeals (Pet. App. A-24

to A-26) and the district court (id. at A-106 to A-109)

held, because ERISA requires plans to abide by the

exclusive benefit rule and at the same time expressly

permits the residual assets of a defined benefit plan to

revert to the employer after all liabilities have been

satisfied (ERISA section 4044(d)(1), 29 U.S.C.

§ 1344(d)(1)), recitation of the “exclusive benefit”

language in an SPD cannot be read to preclude rever-

sion.

When the holding of the court of appeals that there

is no inconsistency between the terms of the Plan and the

SPDs is taken into consideration, any semblance of a

conflict among the circuits vanishes. The Fifth Circuit in

this case and in Hansen expressly agreed with other

courts which have held that, in the event of a conflict

between SPD language and plan language, the SPD

language governs. But that rule is not triggered where,

as here, there is no conflict. As Judge Posner explained

in one of the decisions petitioners cite:

[An ERISA plan participant} is protected by

the fact that, in the event of a discrepancy be-

tween the coverage promised in the summary

plan document and that actually provided in the

policy, he is entitled to claim the former. * * *

But only if there is a contradiction between the

summary plan document and the policy. There is

15

not in a case such as this where the policy

clarifies rather than contradicts the summary.

Senkier v. Hartford Life & Accident Ins. Co., 948 F.2d

1050, 1051 (7th Cir. 1991) (emphasis added).

In sum, the court of appeals correctly held that there

was no conflict between the SPD language and the terms

of the A&B Plan: the court’s observation that the terms

of the A&B Plan were not “ambiguous” thus has no

independent significance.’ In the absence of a conflict

between the SPD and plan terms, all of the courts of

appeals cited by petitioners would have reached the same

conclusion as the Fifth Circuit and the district court: that

neither the SPDs nor the terms of the A&B Plan prohib-

ited a reversion to the employer.

Ill. Nothing In The A&B Plan Or In ERISA

Requires Distribution Of Surplus Assets

Upon A Partial Termination Of The Plan

Petitioners’ final claim is that the court of appeals

“misapplied ERISA law” (Pet. 19) in deciding that

petitioners were not entitled to a pro rata share of

“surplus” assets upon partial termination of the A&B

Plan.* This claim, again rejected by both the district

’ As explained on pages 5-6, supra, and in the opinion of

the court of appeals (Pet. App. A-16 to A-31), there was no

ambiguity in the Plan or SPDs.

8 The petition incorrectly suggests that as a result of its

finding that there had been a partial termination of the Plan,

the district court held that “Petitioners are therefore entitled

to a pro rata share of the surplus assets in the Plan,” and

that “[t]he Fifth Circuit disagreed” with the district court on

(continued. . .)

16

court (Pet. App. A-103 to A-114) and the court of

appeals (id. at A-10 to A-31), is based entirely on the

language of the various plan documents and does not

present any issue of general importance that might

possibly warrant Supreme Court review.

In concluding that petitioners were not entitled to any

share of “surplus” assets upon partial termination, the

court of appeals recognized (Pet. App. A-14 to A-15, A-

30 to A-31) that the concept of a “surplus” prior to the

complete and final termination of a plan is meaningless

as a matter of statutory construction (because the exis-

tence and amount of a surplus cannot be determined untii

after all liabilities have been satisfied), and, if accepted

by the courts, would seriously undermine statutory

policy. The “actuarial surplus” of an ongoing plan is a

highly artificial concept based on any number of assump-

tions about the participants (when will they retire, how

long will they live) and about the plan assets (particular-

ly about the anticipated earnings on those assets). Any

distribution of “surplus” assets before final plan termina-

tion would deprive the employer and other employees of

the safety cushion built up through employer contribu-

tions and diminish the security of the benefits of the

remaining participants. See Jereski, “The Surplus

Vanishes,” Forbes, Nov. 17, 1986, at 94; Much,

“Pension Liabilities: Now You See ’Em, Now You

Don’t!,” Industry Week, Nov. 16, 1981, at 72.

8. .continued)

that point. Pet. 19. Both the district court (Pet. App. A-103

to A-114) and the court of appeals (id. at A-10 to A-31) held

that petitioners were not entitled to surplus assets.

SEE na woe

17

Petitioners have not pointed to a single federal court

decision requiring distribution of surplus assets upon

partial termination, and to our knowledge no federal

court has ever reached that result. The asserted conflict

with the Seventh Circuit’s decision in Albedyll v.

Wisconsin Porcelain Co. Revised Retirement Plan, 947

F.2d 246 (7th Cir. 1991), is imaginary. As the Fifth

Circuit pointed out (Pet. App. A-19), Albedyll dealt with

a complete and final plan termination, not a partial

termination. In addition, the language of the pension

plan involved in Albedyll, as well as an early outline of

the plan, expressly provided that surplus assets would be

distributed to the participants. bid.

On the other hand, federal courts consistently have

held that plan participants have no claim to surplus

assets at partial termination. See, e.g., Chait v.

Bernstein, 835 F.2d 1017, 1021 (3d Cir. 1987) (the

partial termination vesting rule “should not be extended

to apply to surplus assets”); Walsh v. Great Atl. & Pac.

Tea Co., 96 F.R.D. 632, 652 (D.N.J.) (“a right to

excess assets is not a benefit which can accrue to an

individual participant during the life of the plan”), aff'd,

726 F.2d 956 (3d Cir. 1983); Van Orman v. American

Ins. Co., 608 F. Supp. 13, 25 (D.N.J. 1984); Morales

v. Pan American Life Ins. Co., 718 F. Supp. 1297,

1303-1304 (E.D. La. 1989) (“[e]ven if the facts support-

ed finding a partial termination, plaintiffs would not be

entitled to the alleged ‘surplus benefits’”), aff'd, 914

F.2d 83 (5th Cir. 1990). See also Mead Corp. v. Tilley,

490 U.S. 714, 718 (1989) (“[i]f funds remain after ‘all

liabilities of the plan to participants and their beneficia-

ries have been satisfied,’ they may be recouped by the

employer”).

18

The language of the A&B Plan clearly envisioned

that upon final termination, and “satisfaction of all

liabilities under the Plan” (Pet. App A-17), surplus

assets contributed by the employer would revert to the

employer. Nothing in that language even remotely

suggests that upon partial termination surplus assets

should be distributed to a subset of participants, and

nothing in ERISA or federal pension policy could

support such a windfall.°

CONCLUSION

The petition for a writ of certiorari should be denied.

° As the district court explained (Pet. App. A-113 to

A-114):

This construction of the Gulf Plan is consistent

with the policies underlying ERISA. It guarantees

that the plaintiffs will receive all benefits accrued

under the A&B Plan and the Gulf Plan. However, it

also allows the employer, which made all of the plan

contributions, to recover any remaining surplus after

all plan liabilities have been satisfied. A contrary

construction could deter employers from fully

funding plans, or from erring on the side of plan

members in making funding projections, out of fear

that the penalty for making a mistake in funding

calculations would be to forego an eventual right to

receive any surplus upon termination of the plan.

This consideration should not be understated.

Underfunded pension plans can seriously prejudice

members’ rights to receive benefits provided to them

by the plan and, even when those benefits are

insured, can require the Pension Benefit Guaranty

Corporation, and ultimately the taxpayers, to assume

responsibility for them.

19

Respectfully submitted.

STEPHEN M. SHAPIRO

Counsel of Record

KENNETH S. GELLER

JAMES D. HOLZHAUER

TIMOTHY S. BISHOP

Mayer, Brown & Platt

190 South LaSalle Street

Chicago, Illinois 60603

(312) 782-0600

Counsel for Respondents

MARCH 1995