Opposition Brief — White v. Sundstrand Corp.

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oa NOV

No. 01-578

In The

Supreme Court of the United States

7 -_

WILLIAM R. WHITE, JOHN G. GREENWOOD,

RICHARD H. SCHLOBOHM, ROBERT D. SAMPSON,

DAVID E. DAUM, MARTIN A. GRANO, WILLIAM M.

VANDERSLICE, and BORJE H. VAGENIUS,

individually and on behalf of others,

Petitioners,

versus

SUNDSTRAND CORPORATION, SUNDSTRAND

CORPORATION RETIREMENT PLAN-

INDUSTRIAL, BARBARA J. KRAMER, DOUGLAS

EBLEN, PLAN BENEFIT COMMITTEE, JAMES F.

RICKETTS, KENNETH EITENMILLER, HAZEN TUCK,

PLAN APPEAL REVIEW COMMITTEE,

Respondents.

e en

- On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

- -

BRIEF IN OPPOSITION

— oe —

Peter M. Ketry

Counsel of Record

OGLeTREE, DEAKINS, NASH,

SMOAK & Stewart, P.C.

Two First National Plaza, Suite 2500

Chicago, Illinois 60603-1891

Telephone: (312) 558-1220

Counsel for Respondents

COCKLE LAW BRIEF PRINTING Cé

OR CALL COPLEC T 402) 42

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29(6) of the Rules of the Supreme

Court of the United States, Respondents respectfully sub-

mit this Corporate Disclosure Statement.

During the pendency of this case, Sundstrand Corpo-

ration was acquired by United Technologies Corp (a

NYSE Listed company) and its name was changed to

Hamilton Sundstrand Corporation.

The United Technologies SEC Form 10K for 2000

includes the following information as Exhibit 21 thereof:

“Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

The companies listed below are direct or indirect subsid-

iaries of the Registrant. Their names and jurisdictions of

incorporation are as follows:

State/Country

Entity Name of Incorporation

Ardco, Inc. Illinois

Cade Industries, Inc. Wisconsin

Carrier Air Conditioning Pty.

Limited Australia

Carrier Corporation Delaware

Carrier Ltd. South Korea

Carrier Mexico S.A. de C.V. . Mexico

Carrier S.A. France

Carrier S.p.A. Italy

Carrier Singapore (PTE) Limited Singapore

Carrier-Espana, SA Spain

CEAM Srl Italy

CORPORATE DISCLOSURE STATEMENT - Continued

China Tianjin Otis Elevator

Company, Ltd.

Eagle Services Asia Private

Limited

Elevadores Otis Ltda.

Empresas Carrier, S.A. De C.V.

Evans Lifts Limited

Generale Frigorifique

Hamilton Sundstrand Corporation

Hamilton Sundstrand Pacific

Aerospace, Inc.

Hamilton Sundstrand Power

Systems, Inc.

Helicopter Support, Inc.

Homogenous Metals Inc.

ICP International Holdings Inc.

Johns Perry Lifts Holdings

LG-Otis Elevator Company

Microtecnica SRL

Milton Roy Company

Miraco Development Services &

Trading Company, S.A.E.

Nevada Bond Investment Corp II

Nippon Otis Elevator Company

Otis FranceOtis Elevator

Company (H.K.) Limited

Otis Elevator Company

[New Jersey]

Otis Elevator Company Pty. Ltd.

Otis G.m.b.H. & Co. OHG

Otis Investments Plc

Otis S.p.A. ItalyPratt & Whitney

Canada Corp.

Pratt & Whitney Component

Solutions, Inc.

China

Singapore

Brazil

Mexico

United Kingdom

France

Delaware

Singapore

Delaware

Connecticut

New York

Cayman Islands

South Korea

Italy

Pennsylvania

Egypt

Nevada

Japan

Hong Kong

New Jersey

Australia

Germany

United Kingdom

Canada

Michigan

3 ETI,

ill

CORPORATE DISCLOSURE STATEMENT - Continued

Pratt & Whitney Compressor

Airfoil Holdings, Inc.

Pratt & Whitney Engine Services,

Inc.

Pratt & Whitney Export, Inc.

Pratt & Whitney Holdings LLC

Pratt & Whitney Power Systems,

Inc. |

Pratt & Whitney Services, Inc.

Profroid Industries S.A.

Ratier Figeac S.A.

Sikorsky Aircraft Corporation

Sikorsky Export Corporation

Sikorsky International Operations,

Inc.

Sirius (Korea) Ltd.

Springer Carrier S.A.

Sullair Corporation

Sundstrand Pacific Acquiring PTE

Ltd.

Sundyne Corporation

The Carmel Forge Limited

The Express Lift Company

Limited

The Falk Corporation

Turbine Overhaul Services PTE

LTD

Tyler Refrigeration Corporation

United Technologies Electronic

Controls, Inc.

United Technologies International

Operations, Inc.

Zardoya Otis, S.A.

Delaware

Cayman Islands

Delaware

France

Delaware

United Kingdom

Brazil

Indiana

Singapore

Delaware

Israel

United Kingdom

Delaware

Singapore

Delaware

Spain

CORPORATE DISCLOSURE STATEMENT - Continued

Other subsidiaries of the Registrant have been omitted

from this listing since, considered in the aggregate as a

single subsidiary, they would not constitute a significant

subsidiary.”

en ee ee

TABLE OF CONTENTS

Page

CORPORATE DISCLOSURE STATEMENT .......... i

SE AA SGOT i hich a kg hbk ead nak oxdbancas Vv

RAE OR AUTTRIIT OS oi icc iccacccccnsscncacss Vii

I. RESPONDENTS’ STATEMENT OF THE CASE... 1

OT ee Ont MET ee nee nee 1

GS. Relevant Non-Parties...............0.005. 1

C. The Claims Below .................0...00, 2

1. Benefit Claims (Count I)............... 2

2. Other Claims (Counts II-IV)........... 3

D.. District Court Decisions................... 3

1. FRCP 12 Dismissals & Related Ruling... 3

& Gleee Cartitication, .........6sccsaacsces -

3. Relevant Evidentiary Rulings.......... 4

4. Summary Judgment................... 4

ioe MIO. SOE I anos oc codinnnawdada 5

ee eS | eee ee 6

E. Seventh Circuit Affirmance................ 6

II. REASONS FOR DENYING THE WRIT........ 7

A. Decisions Below Do Not Raise the Issues

Presented When Petitioners’ Misstatements

PF I 8 6 5h Riv ask cb ba kde c cous 7

TABLE OF CONTENTS - Continued

Page

1. Contrary To Petition, The Courts Con-

sidered The Plan Provisions And Found

They Supported The Committee Profit

Sharing And ESOP Offset Interpreta-

Contrary To Petition, Attorney Advice

Evidence Was Available To Petitioners

And Considered Below, But Did Not

Support Petitioners’ Contentions ...... 10

3. Contrary To Petition, The Courts Prop-

erly Considered Whether To Apply A

Sliding Scale Modification To Firestone

EI sb vcccevaedss4cundueiennees 13 i

4. Fiduciary Claim De Novo Review...... 14

5. PRO TOM. ive cddsccsvescnsteepus 16

B. The Decisions Below Do Not Present a Con-

BOE ckccavicsevtccceessedsscessueeunaane 16

C. The Decisions Below Were Correct........ 17

1. ESOP Offset Interpretation, With Which

The Seventh Circuit Expressed Plenary

Agreement, Was Correct............... 17

2. Profit Sharing Exclusion Interpretation, |

Which Both Courts Found Consistent

With Explicit Plan Provisions, Was Cor-

WO i cccsndccedsonetecenesagettsess tes 23

3. Refusal To Extend Rand's Pro Rata

Approach Appropriately Avoids A Leg-

Pe re ae 24

D. This Case Has No Far-Reaching Implica-

BOOS oicc ke cuusseddckebeoeniseeeae 28

FT Pe ere a 29

Vii

TABLE OF AUTHORITIES

Page

CAsEs

Adusumilli v. City of Chicago, 164 F.3d 353 (7th Cir.

00465 0555504005665006k0Nsbbnsseecedusdeceds 11

Alexander v. Sandoval, 532 U.S. 275, __, 121 S.Ct.

ME Ns Adan nabs binaen500ys enkmieestiaseas es 15

Blair v. Equifax Check Services, Inc., 181 F.3d 832

ae WH Oso 02 tndedacdountusdsanvadcennancaet 25

Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S.

ee GUN a och nn cnksdncsgusenssbushdcdeteasssar 26, 27

Finley v. Special Agent's Mutual Benefit Ass‘n, Inc.,

See Dame Gas Gomes Gary Th 6d bn cg ih dnccscdancsceds 16

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

PE A 005b ob sha nasadsddenedaadeainebas 13, 14, 15, 28

Jefferson v. Ingersoll International, Inc., 1999

U.S.App. LEXIS 26775 (7th Cir. 1999) .............. +

Kalis v. Colgate-Palmolive Co., 231 F.2d 1049 (7th

Gan SY 49.56606008 0060050848606 008es0sabERdaeees 11

M.T. Bonk Co. v. Milton Bradley Co., 945 F.2d 1404

ae i. Seetahaviued thuabebenesassteken dae sates 24

Massachusetts Mutual Life Insurance Co. v. Russell,

Pe Ss Bee I i860 bd ecakde denne ceesueuese tes 15

In re Palmisano, 70 F.3d 483 (7th Cir. 1995).......... 25

Pettit v. Retrieval Masters Creditors Bureau, Inc., 211

F.3d 1057, 2000 WL 558945 (7th Cir. 2000)......... 12

Rand v. Monsanto Co., 926 F.2d 596 (7th Cir. 1991)

Oe CE Pe ee re re ee tena. 5, 6, 24, 25, 26

Vili

TABLE OF AUTHORITIES - Continued

Page

STATUTES AND Court RULES |

ee, ks rice cnnsieac scccaeks 24, 26, 27 |

A I occ dc tansakescacdeae eis 15 |

SS FI rss daguceenassi cnn iia te 15 |

DUES SI cae aes 15

TEE © I oo sik cdcddnwncaunier 5, 14 t

0 tine. 4 mes... i oi 15 |

2 OEE. STs ssc eee 14, 15 |

te 3 EE enC eer ry he ne. mon 5, 29 |

Pe On a. ncciatiic co ee 3,5 :

8 aa as vances ek ons bede eek 3 :

HA Weegee nig MMe rte a) gh 24, 25, 26, 27

ee ie eta oe a 25

gk ARR engi rege hop lar pi tiePnees Rap eR 4

Re bien ees vs aes 24, 26, 27

I NR hha dascsaess fe ea ae 6

ise os a: A Sar ee 6

A _ ERR apepeter plement ale Ean. eo Pt 4

eee Meech ott ree 30

ee a

TABLE OF AUTHORITIES - Continued

OTHER AUTHORITIES

Attorney Investment in Class Litigation: The Agent

Orange Example, 45 Case W.Res. 291 (1994) .....

Developments In The Law — The Paths of Civil Litiga-

tion: V. Class Auctions: Market Models for Attor-

ney's Fees in Class Action Litigation, 113

BOAMPRE TI, BURT CHOU) 6 on cnnds cecdeuvaccouscss

Macey, Jonathan R. & Miller, Geoffrey P., Auction-

ing Class Action and Derivative Lawsuits: A

Rejoinder, 87 Nw.U.L.Rev. 458 (1993)............

Thomas, Randall S. & Hansen, Robert G., Auction-

ing Class Action and Derivative Lawsuits: A Criti-

cal Analysis, 87 Nw.U.L.Rev. 423 (1993).........

http://www.dol.gov/dol/pwba/public/pro-

grams/opr/bullet97/table__b4.htm............

http:/ /www.dol.gov/dol/pwba/public/pro-

grams/opr/bullet97/cht__el.htm ..............

Page

vee

I. RESPONDENTS’ STATEMENT OF THE CASE

A. Parties. Petitioners, former Sullair senior executives,

sued Sundstrand Corporation (“Sundstrand”), its Pension

Plan (the “Plan”), two plan committees (the “Commit-

tees”) and present or former Sundstrand employees who

served on the Committees.

B. Relevant Non-Parties. Sullair Corporation (“Sullair”)

began the Plan in 1981. After it was acquired by Sund-

strand in November 1984, Sullair remained a separate

corporation and continued as plan sponsor with Commit-

tee appointment authority until 1994 when Sundstrand

assumed such responsibilities. Sullair appointed the

Committee that made the pivotal 1985 ESOP Offset inter-

pretation challenged by Petitioners. Compensation pay-

ments at issue were paid by Sullair before the acquisition.

Until 1986, the Plan was funded through Bankers Life

(“Bankers”) and Bankers performed benefit calculations

and other actuarial services, including preparation of

annuity rate tables. In early 1985 Bankers initiated a

review of the methodology to be used in calculating the

ESOP Offset. Bankers raised the issue as a case of first

impression after it reviewed the first internal calculations

of deferred vested benefits under the Plan (actuarial cal-

culations for 1984). Bankers concluded its internal staff

had utilized an improper immediate annuity rate table

for ESOP Offset calculations related to deferred vested

benefits.1 As part of this interpretive process, Bankers

prepared the deferred annuity rate table that was

approved by the Plan Benefit Committee in May of 1985.

1 Vested benefits payable in the future to participants who

have not yet attained retirement age are referred to as “deferred

vested” benefits, as contrasted to retirement benefits that are

immediately payable.

Fenner a a

The Committee is expressly authorized to rely on such

actuarial advice and tables under the terms of the Plan.

C. The Claims Below. Petitioners asserted four catego-

ries (and numerous subcategories) of claims, most as class

claims. At heart, this action challenged pension calculations.

1. Benefit Claims (Count I). Petitioners claimed: (i)

Five categories of Plan compensation were under-

counted; (ii) a flawed methodology was used for an

ESOP Offset; and (iii) a higher interest rate should apply

to certain corrections. In pre-litigation ERISA claims

deliberations, the Committees denied some claims (a

claim that profit sharing payments count as compensa-

tion under the pre-1984 version of the Plan, an ESOP d

Offset claim and an interest rate claim) and granted the

other compensation claims (except a phantom stock claim

not asserted under the Plan’s ERISA claim procedures).

Benefit records were corrected to reflect the areas of

agreement.? Despite approval of many claims and these

7S Arianne eeencnceeensser

2 Count I alleged undercounting of: (i) profit sharing paid

to participants terminating after 1983 (in addition to the

pre-1984 Plan issue described below); (ii) relocation allowances;

(ili) mortgage assistance or moving expenses; (iv) directors’

fees; and (v) phantom stock. Count I also alleged unspecified

other FICA earnings were excluded.

3 Corrections agreed to for the eight Petitioners resulted in

an average of a 343 percent upward adjustment in their

pensions. An average lump sum correction payment of $55,052

was paid to the four Petitioners whose benefits were already in

pay status. The prior corrections were not limited to the

Petitioners. The record reflects there was an extensive, and

successful, effort to correct the records inherited from non-party

Sullair to recapture data regarding compensation paid over 15

years previously, and the resulting pre-litigation upward

adjustment of the benefits of hundreds of participants.

corrective actions, Petitioners filed a complaint including

both disapproved and approved claims.

2. Other Claims (Counts II-IV). Petitioners also

asserted: (i) various breaches of fiduciary duties (Count

II) relating to the determinations of their benefits that

were the subject of Count I; (ii) a Committee decision

regarding one participant was retaliation under 29 U.S.C.

§1140 for statements that he would encourage others to

pursue similar claims (Count III); and (iii) various report-

ing or disclosure obligations were performed in a tardy

or incomplete fashion (Count IV).

D. District Court Decisions.

1. FRCP 12 Dismissals & Related Ruling. The Dis-

trict Court dismissed the Appeal Review Committee and

it members from Count IV and accepted Petitioners’ rep-

resentations that various Counts were not actually

directed at all Respondents. These rulings were not

appealed. This ruling left the following categories of

claims pending:

Defendant Benefit Fiduciary Retaliate Reporting

Count Count Count Count

Sundstrand X X X

Plan X

Plan Com., X X X

Kramer & ;

Eblen

Appeal Com.., X X

Ricketts,

Eitenmiller,

& Tuck

2. Class Certification. FRCP 23(b)(2) Classes were

certified with respect to only one compensation claim

(Class A solely regarding the pre-1984 Plan Profit Sharing

claim) and the ESOP Offset claim (Class B). All other class

proposals were rejected. Pet. App., pp. 72a-73a. This rul-

ing was not appealed.

3. Relevant Evidentiary Rulings. The District Court

denied Respondents’ motions aimed at excluding evi-

dence concerning the advice of attorneys G. William Por-

ter (“Porter”) and David Ellis (“Ellis”). R. 79; Pet. App.,

pp. 30a-3la.

4. Summary Judgment. In granting a comprehen-

sive summary judgement, the District Court held: (i)

Count I compensation claims (except the pre-1984 Plan

Profit Sharing Class A claim) were moot (uncontroverted

evidence of pre-litigation concurrence and corrections

regarding directors’ fees, mortgage assistance, moving

expenses and profit sharing under post-1983 Plan ver-

sions) or were waived (vague and unspecified nature of

the allegations relating to phantom stock and other FICA

compensation); (ii) there was no material issue regarding

the reasonableness of the Committees’ interpretations

regarding pre-1984 Plan Profit Sharing claims (Class A),

4 During a status conference the parties agreed with the

District Court that notice to absent class members was not

required by Jefferson v. Ingersoll International, Inc., 195 F.3d 894

(7th Cir. 1999), because the remedies sought were exclusively

equitable. R.127. As permitted by S.Ct. Rule 12(7), Respondents

refer herein to the Record by reference to the number on the

District Court’s official Docket. Thus for example, “R.127”

refers to item 127 in the Record.

the ESOP Offset claims (Class B) and the corrective inter-

est rate claims of Count I (interpretation not unreasonable

and thus not arbitrary and capricious); (iii) the fiduciary

claims of Count II were benefit claims not maintainable

under the 29 U.S.C. §1132(a)(3) under Varity Corp. v.

Howe, 516 U.S. 489, 515 (1996) (because of opportunity to

assert the claims under 29 U.S.C. §1132(a)(1)(B)); (iii) the

29 U.S.C. §1140 retaliation claim of Count III (failure to

exhaust administrative remedies and because the claim

failed to implicate an employment relationship as

required by controlling precedents); (iv) material issue

found regarding one defense to the reporting and dis-

closure claims of Count IV insufficient because no mate-

rial issue regarding Petitioners’ inability to demonstrate

that the violations, if proven, would be technical and

(under prevailing precedents) not a basis for the mone-

tary relief being sought (uncontroverted evidence that

_any violations were without bad faith or detrimental

reliance and did not involve active concealment). Pet.

App., pp. 33a-53a.

In weighing the ESOP Offset claim, the District Court

expressly considered evidence relating to the advice of

Porter and Ellis despite Respondents’ privilege objec-

tions, but concluded that the evidence failed to support

the claim. Pet. App., pp. 44a-46a.

5. Taxation Of Costs. The Court awarded taxable

costs, but reduced Respondents’ claim from $45,291.97 to

$17,893.55. The Court rejected an argument that Rand v.

Monsanto Co., 926 F.2d 596 (7th Cir. 1991), prevents

assessment of the entire award against the named Plain-

tiffs and rejected a contention that failure to pursue

absent class members constituted a waiver of cost claims

against the named Plaintiffs. Pet. App., pp. 16a-18a.

6. Motion To Vacate. The Court refused to vacate

the judgment under FRCP 60(b)(2)&(3). R. 244.

E. Seventh Circuit Affirmance. De novo, the Seventh

Circuit held that the District Court correctly applied the

arbitrary and capricious standard and went further, in

dictum, to state that on this record it would have reached

the same interpretation of the ESOP Offset Plan provision

if a deferential standard were not applicable. Pet. App., p.

9a. That Court also held that the pre-1984 Plan explicitly

excluded profit sharing, as the Committees and the Dis-

trict Court had also concluded. Pet. App., p. 10a.

In an opinion by Judge Easterbrook, the author of

Rand, the Circuit Court held that Rand is limited to FRCP

Rule 23 and has no bearing on the allocation of taxable

costs. The Court found it an illogical application of the

entirely separate taxable costs statute to expect prevailing

defendants to absorb their own expenses simply because

a no-notice class was certified. The Court also agreed

there was no waiver. Pet. App., pp. 1la-13a.

The refusal to vacate was also upheld. Pet. App., p.

10a.

Il. REASONS FOR DENYING THE WRIT

A. Decisions Below Do Not Raise The Issues Pre-

sented When Petitioners’ Misstatements Are Disre-

garded.

1. Contrary To Petition, The Courts Considered The

Plan Provisions And Found They Supported The Com-

mittee Profit Sharing And ESOP Offset Interpretations.

Petitioners assert the Courts below upheld the Committee

interpretations of the ESOP Offset and the exclusion of

profit sharing under the pre-1984 Plan without consider-

ing the Plan language.> Pet., pp. i, 10, 11. Petitioners

assert that the lower courts failed to find the language

ambiguous and therefore should have accepted Peti-

tioner’s version of the “plain meaning” of the contested

provisions. Pet., pp. i, 10, 11.

To the contrary, the District Court explicitly found

the ESOP Offset provision ambiguous. In deferring to the

Committees’ interpretation of an ambiguity, the Court

stated:

Plaintiffs argue the ESOP offset amount has

been improperly calculated because defendants

are valuing the portion of the benefit provided

by the Sullair ESOP by using a deferred annuity

rate, in the case of deferred vested participants,

> Petitioners also allege the Committees did not consider

the Plan language, Pet., p. 13, an unfounded allegation directly

contradicted by the Record. R.115, 4104-05, 125-26, 197-200,

202-05 & 209-221; R.130, 9104, 125-26, 199-200, 202, 209-10,

212-19 & 221; R.102-2, Tab.C-2, Exs.30-32, Tab.C-3, p. 000005,

Exs.5, 8 & 13; R.102-1, Tab.B-1, p. 177, ll. 6-24, 174-84, p. 185, Il.

1-8, Tab.B-10, p. 65, ll. 5-16, p. 66.

instead of using an immediate annuity rate, as is

used for participants who start getting their

benefits immediately. . . . It is clear from section

4.02(c) that the Pension Plan documents (both

the 1981 and 1984 versions) are silent on this

issue; in other words, section 4.02(c) does not

use either “immediate” or “deferred.” See, e.g.,

Def. Exh. C(3), Eitenmiller dep. exh. 13, Bates

No. 002518-20 (noting Plan documents do not

specify use of immediate or deferred annuity

factors). In these circumstances, plaintiffs face a

formidable hurdle in trying to show the inter-

pretations of the Plan Benefit Committee and

Appeal Review Committee are downright

unreasonable... .

Pet. App., pp. 40a-4la (some Record and all case law

citations omitted).

The Seventh Circuit went further. After reviewing the

general purpose and function of Floor-Offset plans and

affirming the finding that the Committees’ interpretive

decisions regarding the ESOP Offset was not arbitrary

and capricious, the Court added in dictum: “and we

would have reached the same construction as an indepen-

dent matter if review were plenary.” Pet. App., p. 9a.

Both Courts found the same plain meaning of the

pre-1984 Plan Profit Sharing exclusion as did the Com-

mittees. The District Court’s opinion set forth verbatim

and discussed the profit sharing exclusion provision that

Petitioners now claim it did not consider. Pet. App., pp.

36a-39a. That Court concluded that:

Plaintiffs also argue the Appeal Review Com-

mittee acted unreasonably in rejecting White’s

explanation that the 1981 Plan’s exclusion of

bonus payments under Sullair’s cash profit

sharing plan meant bonus payments Sullair’s

President paid at his discretion, but did not

mean profit sharing paid out quarterly accord-

ing to an established formula. (Compl. P 31;

LR56.1(a) P 100). However, plaintiffs have com-

pletely failed to produce any evidence showing

the Appeal Review Committee acted unreasona-

bly in rejecting this interpretation. On the con-

trary, the plain language of the 1981 Plan

supports the committee’s ratiocination. The 1981

Plan excludes “any bonus payments” under Sul-

lair’s “cash profit sharing plan,” which is broad,

exclusionary language... .

Pet. App., p. 39a.

The Seventh Circuit agreed:

Plaintiffs did receive some profit-sharing pay-

ments and contend that these should be

included in the base used to calculate the

defined-benefit amount, but the plan documents

explicitly exclude this possibility, as the district

court correctly held.

Pet. App., p. 10a.

In their first “Question” and in subsequent discus-

sions of the standard of review, Petitioners allude to a

related argument advanced below. Pet., pp. i & 13-14.

They argued below that the Sullair-appointed commit-

tee’s 1985 ESOP Offset interpretation was a change in the

Plan by Sundstrand which could only be made by a

formal Plan amendment because the alleged inconsis-

tency between that interpretation and Petitioner White’s

version of the prior intent of the Plan. If these allusions

are a restatement of this argument, it suffers from the

fatal flaw that it presumes the plain meaning of the ESOP

Offset provision is both evident and contrary to the

meaning consistently assigned to that provision by the

Committee with the advice of its actuary. Moreover, this

discredited argument rests upon the Petition’s misstate-

ment that the Courts below failed to at least find the

provision ambiguous. Pet., p. 10.

2. Contrary To Petition, Attorney Advice Evidence Was

Available To Petitioners And Considered Below, But

Did Not Support Petitioners’ Contentions. Petitioners

assert that the Courts below failed to consider evidence

offered by Petitioners regarding the legal advice of attor-

neys Porter and Ellis. Pet., pp. i & 10-12. They offer two

inconsistent explanations for the alleged failure to prop-

erly weigh this evidence. In portions of the Petition they

suggest the Porter Letter and information about Ellis

were not available to them.’ Pet., pp. 7-8 & 12. Elsewhere

6 The Plan expressly authorizes the Committees to rely on the

Plan's actuary. R.115, 9205; R.74, Ex.A, §8.01; R.11, Ex.B, §8.01.

? Petitioners also repeat a discredited claim they were not

warned in advance that Porter himself disagreed with their

interpretation of the Porter Letter. The Porter affidavit was

responsive to the new issues raised when Petitioners introduced

the Porter Letter as the centerpiece of their Summary Judgment

Response. Before Petitioners filed this response they were given

fair warning in a formal offer of proof filed by Respondents and

in statements made by counsel in open court (prior to

Petitioners’ use of the Porter Letter) that Porter disagreed with

Petitioners’ interpretation of his letter and would be a witne&s.

R.121, 416; R.139, pp. 5-9 & Ex.J; R.177, [99-25; R.156, pp. 3-15 &

Exs.A-G. Petitioners also misstated the record regarding the

disclosure of the Porter Letter and the timing and circumstances

of Porter being identified as a potential witness. See arguments

reflected in R.177, {49-25 (incorporated herein by reference).

they imply that the Courts below improperly treated such

evidence as beyond the administrative record when they

evaluated the Committees’ interpretive decisions. Pet.,

pp. i & 10-12.

In fact Petitioners had the Porter Letter they quote

from and they deposed Ellis and reviewed his notes as

well as the chronology they prefer to utilize. They offered

this evidence to the District Court with their Summary

Judgment Response filings and quoted from them liber-

ally in those submissions. Moreover, although Respon-

dents attempted to persuade the District Court to exclude

evidence concerning Porter and Ellis as attorney client

privilege, both these items of evidence were considered

for purposes of the summary judgment rulings even

though Respondents persist in their belief they were

By admitting the Porter Affidavit, the Court gave

recognition to the fact that Respondents’ bona fide claim of

privilege prevented earlier preparation and submission of an

affidavit. This was particularly the case since it was not known

when the Summary Judgment motion was filed that Porter

could be a witness and Respondents had provided Petitioners

with the “heads up” regarding the substance of Porter’s views

before Petitioners chose to use the Porter Letter in their

response filed six months later. Having defeated Respondents’

claim of privilege regarding Porter, in a sharply contested

motion, it is unseemly for Petitioners to suggest his affidavit

was somehow barred by his decades old representation of

Sullair, a non-party. In any event, the District Court’s admission

of the Porter Affidavit (part of an extensive evidentiary ruling

that excluded a quantity of other evidence offered by

Respondents) was not arbitrary and capricious. Kalis v. Colgate-

Palmolive Co., 231 F.2d 1049, at 1055 (7th Cir. 2000); Adusumilli v.

City of Chicago, 164 F.3d 353, at 369 (7th Cir. 1988).

beyond the scope of the administrative record of the

Committees’ decisions.

The District Court admitted the Porter Letter, con-

cluding there was an issue of fact whether the Committee

was aware of the letter when it made its 1985 decision

interpreting the ESOP Offset provision. Pet. App., p. 31a.

However, after considering the letter as a part of the

administrative record, the Court concluded that it did not

even speak to the interpretive issue Petitioner relied upon

it to support:

Plaintiffs assert, without support, that Porter’s

letter addresses the use of deferred versus

immediate annuity rates, and is disagreeing

with Bankers’ Life’s recommendation. However,

this is not apparent from a reading of the letter.

Pet. App., p. 46a.

The District Court also considered evidence offered

by Petitioner about Ellis’ advice in the form of the chro-

nology draft by an in-house attorney quoted in the Peti-

tion but concluded that:

plaintiffs offer absolutely no evidence what a

vague reference to “all issues discussed” or

“claims” meant. White won the bulk of his

claims, and Ellis could have been referring to

those claims. Plaintiffs’ argument is based on

sheer speculation and is ‘rejected. Pettit v.

Retrieval Masters Creditors Bureau, Inc., 211 F.3d

1057, 2000 WL 558945, at *3 (7th Cir. 2000) (at

summary judgment stage nonmoving party

must do more than merely speculate).

AC A RAT ENTRAR BR eI ne

Pet. App., p. 46a.

ener iaiel

In support of this conclusion, the Seventh Circuit

opined that the Plan’s terms and the Committees’ discre-

tionary judgments were controlling regarding the ESOP

Offset issue “not who said (or wrote) what to whom

many years ago.” Pet. App., p. 10a (referring to the 1985

Porter Letter). Thus, this case does not actually present

this court with a lower court's refusal to consider legal

advice evidence beyond the administrative record as Peti-

tioners assert, although Respondents persist in their

belief that excluding such evidence would have been

entirely proper. |

3. Contrary To Petition, The Courts Properly Consid-

ered Whether to Apply a Sliding Scale Modification to

Firestone Deference. Petitioners ask for a review of “con-

flict of interest” or “actual bias” case law. Petitioners

argue the Courts below failed to consider or properly

apply these “sliding scale” cases to alter the Firestone Tire

& Rubber Co. v. Bruch, 489 U.S. 101 (1989) deferential

standard. Specifically, they contend the Courts should

have applied a more skeptical standard in response to

Petitioners’ allegations of an animus towards Petitioner

White, based upon two uncomplimentary documents

dated from the year after the final interpretations. Pet.,

pp. 8-9 & 12-14.

In fact the District Court considered this bias evi-

dence, but found it irrelevant and insufficient to trigger a

sliding scale shift:

Plaintiffs point to a memo Eblen wrote and a

memo Quick wrote as evidence of bias.

(LR56.1(b)(3)(B) P 3, 29) The court finds neither

is sufficient to raise a question of material fact

about whether defendants’ interpretation of the

Pension Plan is arbitrary and capricious. Eblen’s

memo was written in 1997, approximately two

years after the Plan Benefit and Appeal Review

Committees decided his claim. As for Quick’s

memo, although he states White was “carping,”

he also acknowledges White won the bulk of his

pension appeal. The memo simply is not evi-

dence of actual bias under these circumstances.

Pet. App., p. 47a.

Not only did the District Court properly consider

and reject the “actual bias” sliding scale modifications to

the Firestone deferential standard, but the Seventh Circuit

made it clear the deferential standard of review was not

even critical to the outcome. That Court expressly stated

i it would have reached the same interpretation of the

ESOP Offset as did the Committees even in a plenary de

novo review. Pet. App., p. 9a. No form of reduced sliding

scale deference could be more skeptical than a full blown

de novo review. A fortiori, remand for application of a

sliding scale deferential standard would achieve nothing.

Moreover, the Courts below did in fact apply the

sliding scale approach correctly when they considered the

bias evidence and determined that it did not change the

outcome.

4. Fiduciary Claim De Novo Review. Petitioners

assert their fiduciary claims were not addressed de novo.

Pet., pp. i & 14-15. They ask this Court to ignore the

actual basis for the dismissal of their fiduciary claims

(Count II), the impropriety of using 29 U.S.C. §1132(a)(3)

to assert a benefit claim where 29 U.S.C. §1132(a)(1)(B) is

fully available. Pet. App., p. 49a. This is a backdoor

attempt to continue asserting benefit claims under the

guise of a fiduciary claim in a manner contrary to Varity.

516 U.S. at 515.

In proceedings below, Petitioners used an alternative

- approach towards this same goal of circumventing the

Varity limitations. In their reply brief before the Seventh

Circuit, Petitioners asserted they had the right to seek

individual benefits in a fiduciary breach action under 29

U.S.C. §1132(a)(2) or under 29 U.S.C. §1104 standing

alone. Reply p. 13. This argument runs directly contrary

to other express guidance from this Court in Russell and

Varity, in which this Court expressly stated that 29 U.S.C.

§1132(a)(2) is not available for the recovery of individual

benefits because limiting language in 29 U.S.C. §1109

makes it clear that 29 U.S.C. §1132(a)(2) only functions as

a jurisdictional basis for fiduciary actions relating to the

plan’s financial integrity. Massachusetts Mutual Life Insur-

ance Co. v. Russell, 473 U.S. 134, 144 (1985); Varity, 516 U.S.

at 509 & 515.

Either approach, if adopted, would not only jettison

the 29 U.S.C. §§1132(a)(2) & (a)(3) limitations this Court

has recognized, but would effectively overturn the defer-

ential review required by Firestone. Either approach

would eliminate the distinction between benefit and

fiduciary claims. Given the carefully designed and inter-

related structure of 29 U.S.C. §1132, this would be an

astounding and unjustified usurpation of the role of Con-

gress. Alexander v. Sandoval, 532 U.S. 275, __, 121 S.Ct.

1511, 1519-20 (2001); Russell, 473 U.S. at 144 & 146-47. If

such judicial legislating is ever warranted (which is

doubtful), this is not the case.

5. Phantom Stock. Petitioners seek to survey class

members to uncover phantom stock claims. Petitioners

imply there is such a class and Petitioners are the repre-

sentatives. Pet., pp. i & 18.

No such class was certified. Thus, the named Peti-

tioners’ phantom stock claims were individual claims.

They failed to even allege they had received relevant

phantom stock payments. Respondents doubt anyone has

such a claim. Only compensation in 1980 and later years

counted and Respondents believe (based upon the

records from non-party Sullair) that no Sullair employees

received such payments during the years in question.

R.115, (7183-87; R.130, { 18-87; R.102-1, Tab.B-7, p. 43, ll.

12-17; R.102-2, Tab.B-17, p. 28, ll. 12-15; R.102-2, Tab.B-16,

p. 27, ll. 12-18, p. 70, ll. 12-24, p. 71, Il. 1-24; R.102-2,

Tab.B-20, p. 27, ll. 10-17; R.102-1, Tab.A-2, {8. In any

event, the demise of Petitioners’ individual phantom

stock claims has no bearing on the claims of others.

B. The Decisions Below Do Not Present a Conflict.

Petitioners assert that the decisions below conflict with

various cases or new theories they urge on this Court.

Pet., pp. 12-15. However, each such ‘conflict contention

rests upon the misstatements described above.

If this Court were to examine the Record it would

find that, contrary to these conflict claims: (i) even if

Finley v Special Agent's Mutual Benefit Ass'n, Inc., 957 F.2d

617, 620 (8th Cir. 1992) is given the suggested reading,

Pet., p. 13, there is no conflict because the Committees

and the Courts below in fact based their decisions on the

terms of the Plan and acted in a manner consistent with

the plain meaning of the profit sharing exclusion and did

not act unreasonably in resolving ambiguities under the

ESOP Offset provision; (ii) even under the sliding scale

view advanced by Petitioner, Pet., p. 14, the District

Court properly concluded that the bias evidence was

irrelevant and insufficient to establish actual bias; (iii)

whether or not the District Court’s review of materials

beyond the administrative record regarding Porter and

Ellis was proper, considering such evidence was in accor-

dance with, not in conflict with, the gloss Petitioners urge

this Court to place upon the administrative record cases

they cite, Pet., p. 12; (iv) the findings that such legal

_advice material fails to support Petitioners, that the profit

sharing exclusion provision explicitly supports the Com-

mittees’ interpretations, that the ESOP Offset provision is

ambiguous and that the Committees’ interpretation of

that language was consistent over time, consistent with

actuarial advice, consistent with the general function and

purpose of Floor-Offset plans and generally was not oth-

erwise unreasonable demonstrate that the decisions

below in no way conflict with the standard of review

cases cited by Petitioners, Pet., pp. 13-14; and (v) in the

face of controlling precedents from this Court described

above, the de novo review of statute or law interpretation

cases cited by Petitioners, Pet., p. 15, can have no bearing

on simple Plan benefit interpretations.

C. The Decisions Below Were Correct.

1. ESOP Offset Interpretation, With Which The Sev-

enth Circuit Expressed Plenary Agreement, Was Correct.

The Plan was established in 1981 as a defined benefit

Floor-Offset plan under which participants’ pension ben-

efits, if any, would supplement their benefits from a

preexisting employee stock ownership plan (“ESOP”).§

This coordination between the two plans was accom-

plished through the ESOP Offset feature. The relevant

ESOP Offset provision of the 1981 and the 1984 Plans

stated that:

could be provided on a straight life annuity

basis by application of an amount equal to

the fair market value as of such specified

date of the Participant’s vested interest in

the balances credited to his accounts under

the Suliair Corporation Employee Stock

Ownership Plan [of SULLAIR CORPORA-

TION,] and for this purpose, such amount

of monthly pension shall be determined on

the basis of the annuity purchase rates in

effect as of such specified date under and

as set forth in the Group Contract.

R.74, §4.02; R.11, §4.01 (bracketed phrase in 1984 version;

first reference to Sullair all caps in the 1984 version).?

8 It was anticipated that the ESOP would serve as the

primary retirement plan and that some participants would have

a zero benefit under the Plan due to the offset. R.115, 4193;

R.130, 9193; R.102-2, Tab.B-22, p. 43, ll. 7-24, pp. 44-46, p. 47, ll.

1-18, pp. 108-112, p. 113, ll. 1-20.

9 Although the wording has changed slightly in subsequent

versions of the Plan, all named Plaintiffs are covered by the 1981

and 1984 versions and the subsequent changes have not altered

the language in a manner which has significance to this dispute,

even as to class members covered by later versions of the Plan.

The parties agree the ESOP Offset calculations math-

ematically convert a participant’s ESOP account balance

as of his or her employment termination date to an equiv-

alent annuity amount beginning at the time the partici-

pant’s pension benefits are scheduled to be paid. This

hypothetical, ESOP-funded, annuity is the amount that

can be purchased with the ESOP account using an annu-

ity rate table. It is at this point in the calculation that the

agreement ends.

Petitioners contend “annuity purchase rates” must be

read to refer to immediate annuity rates, not deferred

annuity rates, regardless of when the participant's pen-

sion benefit is scheduled to commence. Respondents con-

tend that the annuity amount that can be purchased with

the ESOP account balance is determined using an imme-

diate annuity rate table only if the participants’ pension

can begin at employment termination (e.g., in the case of

early or normal retirement). If the pension is not sched-

uled to begin until a deferred vested benefit commence-

ment date, then Respondents contend the annuity that

can be purchased with the ESOP account balance is deter-

mined using a deferred annuity rate table provided by

Bankers.

This disagreement and the precise methodology actu-

ally employed may be simply described as follows:?°

10 Petitioners’ expert agreed with these steps other than the

use of a deferred annuity rate table when actual benefit

entitlement is deferred (Step 7). He agreed the ESOP Offset is

designed to determine the annuity that could actually be

purchased as of the participant’s employment termination date

with the balance in his or her ESOP account and this provision

Step 1: Monthly Average Compensation.!!

Step 2: Base Monthly Compensation and Excess

Monthly Compensation. Monthly average com-

pensation is divided into base average compen-

sation (the first $400) and excess average

compensation (the excess over $400).

Step 3: Sum of Base Accrual And Excess Accrual. The

$400 Base Average Compensation Amount is

multiplied by 1.0% and the Excess Average

Compensation Amount is multiplied by 1.5%.

Gross accrual amount is the sum.

Step 4: Credited Service.

Step 5: Gross Monthly Benefit Accrual Before ESOP

Offset. Gross monthly accrued benefit before

the ESOP Offset is the product of Steps 3 and 4.

Step 6: ESOP Balance. Participant’s ESOP balance is

determined at employment termination date.

Step 7: ESOP Offset Annuity Factor.12 The annuity fac-

tor is determined at employment termination.

“means” you “take into account the fair market value of the

ESOP as of the date of his termination” and it is correct to say

that provision then requires a determination of “what annuity it

would buy.” R.121, Ex.H, p. 111, ll. 18-24, p. 112-114, p. 115, Il.

1-21, p. 120, ll. 2-24, p. 121, ll. 1-4.

11 As described above, the parties disagree over whether or

not profit sharing payments should be counted under the 1981

version of the Plan.

12 As described above, while the parties agree that the

annuity rate is priced at the date of employment termination

and that an immediate annuity rate used at that time for persons

who are retiring at normal or early retirement, the parties

disagree concerning the use of deferred annuity rates at such

date in the case of deferred vested participants.

The annuity rate is priced at the date of employ-

ment termination by using: (i) immediate annu-

ity rate table at that time for persons who are

retiring at normal or early retirement; and (ii)

deferred annuity rate table is used at that time in

the case of deferred vested participants (i.e.,

whose benefit cannot begin to be paid currently

because, although vested, they do not qualify

for immediate benefit commencement on

account of early retirement).

Step 8: ESOP Offset. ESOP Offset is product of Step 6

(ESOP Balance) divided by Step 7 (ESOP Offset

Annuity Factor from appropriate table).

Step 9: Net Monthly Benefit. Net monthly benefit pay-

able in the normal form commencing at sched-

uled benefit commencement date is the

difference (not less than zero) resulting from

subtracting ESOP Offset (Step 8) from Gross

Monthly Benefit Before ESOP Offset (Step 5).

E.g, R.102-1, Tab.A-1, 119-10 & Exs.C-Q.

As described above, the issue of the appropriate

annuity rate table was first raised by Bankers in connec-

tion with a review of its own actuarial procedures under

the Plan when the Plan was new. Bankers raised this issue

of first impression and recommended that deferred annu-

ity rates were appropriate since the pension being offset

was a deferred annuity beginning years in the future not

an immediate annuity beginning soon. R.115, {{195-97;

R.102-1, Tab.A-1, {49-10 & Exs.C-E. Bankers advised that

using immediate rates for deferred annuities would pro-

duce an unintended windfall since the marketplace uses

different rates in currently pricing future (or deferred)

annuities than are used for currently pricing immediate

annuities. R.102-1, Tab.A-1, Exs.E & H; R.115, 7197-200;

R.130, 9199-200.

After an exchange of correspondence seeking clari

fication of Bankers’ recommendation and seeking (and

receiving) a set of deferred annuity rate tables prepared

by Bankers for the purpose, the Plan Benefit Committee

met to decide the issue in May of 1985. After considering

the advice of Bankers, including the deferred annuity

tables prepared by Bankers for this purpose, the Plan

Benefit Committee decided on May 2, 1985 that the refer-

ence to purchase rates in the case of benefits commencing

in the future requires the use of the deferred annuity

tables.15

Contrary to the District Court’s consideration of the

Porter Letter, there is no evidence to suggest that the

Committee was aware of the Porter Letter. In any event,

as Porter himself has testified, Petitioner misstates his

letter when they claim he opined about the immediate

versus deferred rate issue. In an affidavit, Porter testified

the language from the Porter Letter relied upon by Peti-

tioner merely refers to the “entirely separate issue” of the

timing of determination of the participant’s ESOP

13 The Committee reviewed the Plan language, relied on

the advice of the Plan’s actuary, Bankers, and relied upon the

annuity rate tables and methodologies issued by Bankers under

the Annuity Contract. R.115, {9197-200 & 202-05; R.130,

11199-200 & 202; R.102-1, Tab.B-1, p. 177, ll. 6-24, 174-84, p. 185,

ll. 1-8; R.102-1, Tab.B-10, p. 65, ll. 5-16, p. 66; R.102-2, Tab.C-2,

Exs.30-32. The Plan expressly authorizes the Committees to

“rely upon all tables, valuations, certificates and reports

furnished by the consultant or actuary appointed by the Plan

Administrator.” R.115, {205; R.74, Ex.A, §8.01; R.11, Ex.B, §8.01.

account balance date of determination issue (Step 6), not

the immediate versus deferred annuity rate issue (Step 7).

R.154, Tab. F, 8.

This methodology has been applied consistently

since, including in the 1995 deliberations a decade later

which are the subject of this case. R.115, {{206-21; R.130

11206, 208-10, 212-19 & 221; R.102-1, Tab.A-1, {9-10 &

Ex C-Q, Tab.B-10, p. 65, ll. 5-16, p. 66, Tab.B-1, p. 178, ll.

14-19, 180, ll. 14-23, p. 183, ll. 10-24, p. 184; R102-2,

Tab.C-3, Exs.5, 8 & 13.

2. Profit Sharing Exclusion Interpretation, Which Both

Courts Found Consistent With Explicit Plan Provisions,

Was Correct. Before 1984, the Plan read:

. . . AVERAGE COMPENSATION. . . . Pay as

used in this definition means the amount of

compensation subject to tax for Social Security

benefits without regard to the dollar limitation

on such compensation subject to FICA taxes,

excluding any bonus payments under the

Employer's cash profit sharing plan... .

R. 74, §1.02 (emphasis added).

The Appeal Review Committee expressly based its

rejection of the pre-1984 Plan profit sharing claims on the

italicized phrase. That Committee noted that this provi-

sion “had consistently been taken to mean any and all

payments from the profit sharing plan” and that the

interpretation was consistent with “Plan communica-

tions” and “consistent administration.” R.115, [{104-05,

125-26; R.130, 7104, 125-26; R.102-2, Tab.C-3, p. 000005.

3. Refusal To Extend Rand’s Pro Rata Approach Appro-

priately Avoids a Legislative Intrusion. Petitioners sug-

gest it is unduly burdensome to impose joint and several

liability on them for approximately $18,000 in taxable

costs. Yet Petitioners passed up the opportunity afforded

them under 28 U.S.C. §1920 to offer the District Court

evidence of an extreme inability to pay those taxable

costs. Absent such evidence, that Court was without any

evidence upon which to base such a finding in variance

from the presumptive operation of 28 U.S.C. §1920. M.T.

Bonk Co. v. Milton Bradley Co., 945 F.2d 1404, 1410 (7th Cir.

1991) (prevailing parties benefit from a “strong presump-

tion” that they are entitled to have the Court assess their

fair and reasonable taxable cost).

Instead the Petitioners chose to claim a spurious enti-

tlement to avoid the bulk of the taxable expenses assess-

able by the operation of 28 U.S.C. §1920 by operation of a

previous Seventh Circuit interpretation of FRCP 23. Rand,

926 F.2d at 598-601. Respondents submit that their failure

to assert an inability to pay reflects what has been

obvious to all parties throughout this litigation. As

retired former top executives of a public company, the

named Petitioners are well able to bear the modest tax-

able cost award entered in this action. In any event, 28

U.S.C. §1920 and FRCP 54(d) specify a procedure for

variance from the presumptive outcome of 28 U.S.C.

§1920, and Petitioners utterly failed to avail themselves of

this procedure in mistaken reliance on an entirely differ-

ent, but unsupportable procedural defense based on

Rand.

Rand restricted the extent to which named plaintiffs

can be required to agree to bear their own side’s cost of

prosecuting their claims in order to qualify as appropriate

class representatives under FRCP Rule 23(a). Petitioners’

reliance on Rand was misplaced. The sole issue in that

case was the meaning of the adequate representative

requirement of FRCP Rule 23. Rand, 926 F.2d at 598-99.

The issue was whether-the named plaintiffs were per se

disabled from serving as representative Plaintiffs because

they were unwilling to agree to pay all of the costs of

prosecuting the class claims. Id. at 599 & 601. The issue of

responsibility for defense costs was not before the court

in Rand. The entire point of Rand is that it is acceptable

for a class action to be maintained where Plaintiff’s coun-

sel accepts the risk that they may not fully recover their

own fees and costs from the named plaintiffs. Id. at -

598-600. Accord Blair v. Equifax Check Services, Inc., 181

F.3d 832, 834 (7th Cir. 1999);-Jn re Palmisano, 70 F.3d 483,

487 (7th Cir. 1995). See generally Note, Developments In The

Law — The Paths of Civil Litigation: V. Class Auctions: Market

Models for Attorney's Fees in Class Action Litigation, 113

Harv.L.Rev. 1827 (2000); Note, Attorney Investment in Class

Litigation: The Agent Orange Example, 45 Cast W.Res. 291

(1994); Thomas, Randall S. & Hansen, Robert G., Auction-

ing Class Action and Derivative Lawsuits: A Critical Anal-

ysis, 87 Nw.U.L.Rev. 423 (1993); Macey, Jonathan R. &

Miller, Geoffrey P., Auctioning Class Action and Derivative

Lawsuits: A Rejoinder, 87 Nw.U.L.Rev. 458 (1993).

Further, the discussions in Rand centered upon a

named plaintiffs “agreement” to expend funds and “will-

ingness” to expend funds. These are concepts that make

sense in the context of consensual dealings between a

client and his or her counsel, but make no sense in the

context_of the involuntary imposition of narrow catego-

ries of costs incurred by the opposing party after conclu-

sion of a case. Rand, 926 F.2d at 598-601.

Thus, nothing about Rand compels this Court to

apply that case to this action. Despite the important dis-

tinctions between Rand and this action, Petitioners ask

this Court to extend Rand to this case and in so doing

they ask this Court: (i) to ignore the very different poli-

cies that underlay FRCP 23 on the one hand and 28 U.S.C.

§1920 and FRCP 54(d) on the other; (ii) to ignore the

important procedural and factual differences between

Rule 23 and §1920 and Rule 54(d); (iii) to usurp the role of

Congress by adding to 28 U.S.C. §1920 qualifying lan-

guage not present in the plain and unambiguous lan-

guage of that provision; and (iv) in adopting such a

misshapen interpretation of 28 U.S.C. §1920, to ignore

applicable cannons of interpretation which would require

the opposite result if properly applied.

This Court has considered the extent to which the

Federal Rules may be used to affect an outcome other-

wise required by §1920 before. In Crawford Fitting Co. v.

].T. Gibbons, Inc., 482 U.S. 437, 442-45 (1987), this Court

refused to permit provisions of the Federal Rules to be

used to add to or subtract from the plain meaning of 28

U.S.C. §1920. In that case, the discretionary authority

granted by FRCP 54(d) was given effect precisely because

it was consistent with 28 U.S.C. §1920. Id. at 442. To

~extend Rand's interpretation of the adequate representa-

tion requirement of FRCP 23 to change 28 U.S.C. §1920 by

adding to its plain language a qualification serving the

objectives of FRCP 23 violates the statutory interpretation

guidelines spelled out in Crawford Fitting, 482 U.S. at

442-45.

Abrogation of Congress’ authority would grant to

FRCP 23 (dealing with an entirely different subject matter

than does 28 U.S.C. §1920) greater force and effect to vary

the Congressionally enacted language of 28 U.S.C. §1920

than the Crawford Fitting Court was willing to grant FRCP

54(d) (concerning the same subject matter as 28 U.S.C.

§1920).

As pointed out above, when Congress recodified the

taxable cost provision as 28 U.S.C. §1920, the class action

device already existed. Congress knew how to refer to

class actions because the Federal Rules already in place

included a version of FRCP 23 with the “adequate repre-

sentation” requirement. There is nothing in 28 U.S.C.

§1920 that says “except as provided in FRCP 23” or

“except as provided in future judicial interpretations of

FRCP 23.” The only possible reading of the statute is that

28 U.S.C. §1920 applies equally to the claims asserted by

the Petitioners which were certified as class claims as it

does to the balance of their claims which were not so

certified and would be fully subject to 28 U.S.C. §1920

even under Petitioners’ approach. The special interpreta-

tions of FRCP 23 that permit plaintiffs’ attorneys to

accept the risk they may not be paid or reimbursed for

costs, have absolutely nothing to do with the presump-

tive right of a prevailing defendant to have a small por-

tion of its defense expenditures, taxable costs,

automatically assessed as taxable costs, subject only to

procedurally proper exercises of judicial discretion con-

sistent with 28 U.S.C. §1920 and FRCP 54(d).

neem.

Petitioners’ alternative waiver theory presupposes an

answer favorable to them on their Rand argument, since it

presupposes that absent class members have a propor-

tionate obligation that Respondents are able to waive.

Therefore, both arguments rest upon Petitioners’ mis-

placed reliance on Rand. |

In any event, even if this Court agrees with Peti-

tioners, remand would be necessary to distinguish

between costs associated with class and non-class claims

and to prorate costs associated with class claims.

D. This Case Has No Far-Reaching Implications.

This case offers little to recommend it as a vehicle for

explaining the sliding scale modification to Firestone def-

erence. The Courts below have made it clear in dicta that

the level of deference, while procedurally relevant, will

not affect the outcome of the two issues before this Court

that relate to the sliding scale issue. Both Courts made it

clear the plain language of the Plan supported the Com-

mittee profit sharing exclusion interpretation. The Sev-

enth Circuit made it clear that if it were reviewing the

ESOP Offset issue as a plenary matter it would reach the |

same interpretive conclusion as did the Committees.

Declining to address Petitioners’ fiduciary de novo

review contentions will have little impact. The contention

is so far out of bounds, that passing on this argument is

unlikely to foster uncertainty below.

The only novel aspect of this case is Petitioners’

attempt to extend Rand to taxable cost awards. This issue

may warrant this Court’s attention at a later date if

conflicts develop among the Circuits. There is no such

conflict now and this issue is in its infancy. The issue

could benefit from further lower court thought before this

Court considers the issue.

Ill. CONCLUSION

The Profit Sharing exclusion provision plainly sup-

ports the decision below. Petitioners failed to raise a

material issue of fact below regarding the reasonableness

of the Committees’ interpretation of the ESOP Offset,

which the District Court found to be ambiguous. The

Courts below explained why this interpretation was rea-

sonable and why Petitioners’ efforts to raise doubts about

the reasonableness of that decision failed to raise a mate-

rial issue of fact.

Petitioners seek to shift the rules of the game previ-

ously established by this Court in several significant

ways in hopes of convincing this Court of the unrea-

sonableness of the Committee decisions under the

relaxed tests they advocate.

These shortcuts, if adopted, would cause grave harm

to our voluntary employer sponsored retirement system.

There are more than 700,000 ERISA plans covering almost

95 million participants. http:/ /www.dol.gov/dol/pwba/

public/programs/opr/bullet97/table__b4.htm; http: //

www.dol.gov /dol/pwba/public/programs/opr/bul-

let97 /cht__el.htm.

All these plans must operate under ERISA claims

procedures which comply with 29 U.S.C. §1133. Fiduci-

aries with discretionary interpretive authority perform

thousands, if not tens of thousands of benefit calculations

on a daily basis. The burden-shifting change advocated

by Petitioners would encourage plan participants to rou-

tinely seek judicial second opinions.

To be sure, this Court and the Courts whose decisions _

you are reviewing play an important role in keeping this

benefit calculation process honest and setting standards

of behavior to be followed by plan fiduciaries. But that

role does not, and must not, require the Courts below to

second guess reasonable plan interpretations that cannot

objectively be viewed as contrary to the plain meaning of

the provisions being construed.

This Court does not address a blank slate. This Court

and the Department of Labor have issued guidelines for

plan fiduciaries describing reasonable decision making

practices. Committees properly vested with discretionary

authority of the type described in Firestone that

exercise that discretionary authority in a careful, consci-

entious and reasonable fashion (as the Committees have

in this case), are entitled to expect this Court to follow its

own previously enunciated standards.

On these facts, this Court should either deny the

Petition outright or issue a summary affirmance under

S.Ct. Rule 16.1 if it wishes to provide guidance regarding

the taxable costs issue.

Respectfully submitted,

Peter M. Ke ty, Counsel of Record

Oc eTREE, DEAKINS, NasH, SMOAK & Stewart, P.C.

Two First National Plaza, Suite 2500

Chicago, Illinois 60603-1891

Telephone: (312) 558-1220

Counsel for Respondents

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.