Amicus Curiae Brief — Kodak Retirement Income Plan v. Burke

NOV 17 200

ICE OF THE CLERK

No. 03-565

IN THE

Supreme Court of the Anited States

KODAK RETIREMENT INCOME PLAN AND

KODAK RETIREMENT INCOME PLAN COMMITTEE,

Petitioners,

Vv.

SALLY J. BURKE,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Second Circuit

BRIEF OF THE ERISA INDUSTRY COMMITTEE

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

ROBERT N. ECCLES

(Counsel of Record)

JONATHAN D. HACKER

MARTHA DYE

O’MELVENY & MYERS LLP

1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300

Attorneys for Amicus Curiae

TABLE OF CONTENTS

Page

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REASONS FOR GRANTING THE WRIT.......... eee 2

A. Certiorari Should Be Granted To Resolve The

Circuit Split And Establish Nationwide Uni-

formity On An Issue Directly Affecting Em-

ployee Benefit Plan Administration...............:ceeeee: 4

B. Proof Of Detrimental Reliance Should Be

Required In All Actions Seeking To Recover

Extra-Plan Benefits On The Basis Of State-

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TABLE OF AUTHORITIES

Page(s)

CASES

Black & Decker Disability-Plan v. Nord, 123 S.

Ce Se Ee insane eeaaaaneennd l

Boggs V. Boggs, S20 US. SES (IFFT) vvvccnsnsesvrvsvonsvcenssennsees 4,5

Edwards v. State Farm Mut. Auto. Ins. Co., 851

Fe BI GAA, Fo iirsvtceenieaceecintesmniereoos 9

Egelhoff v. Egelhoff, 532 U.S. 141 (2001) uu... cee eeeeeees 5

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

RE 6 FO siciiccedctensinticaatacdadatata bee ce 1,8

Fort Halifax Packing Co. v. Coyne, 482 U.S. 9

PINT F sisicvsiecsietcicannda todmminnscabaabadbuseniiaian ateiatehaumeaiiaiaas 5,6

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

COG... PIPE Bini cee nde naaeaatdecauns y

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

DIF UPTER x'sscinioneivnecensiiciteanteeartaseteade aliases Aa acacia tee 9

Herrman v. Cencom Cable Assocs., Inc., 978

ae ee a HE ccc tuntnaniasreeeieearenoinuanisacnsietiices 6

Hughes Aircraft Co. v. Jacobson, 525 U.S. 432

Ever a svscncohicescccasiniececonaunaeencedaasiaaei ainda cebladtuadanctile l

Lockheed Corp. v. Spink, 517 U.S. 882 (1996)...........00000 1,8

Lorenzen v. Employees Ret. Plan of the Sperry

& Hutchinson Co., 896 F.2d 228 (7th Cir.

BNI cs \:ssnccatesbnenstsaacbiecdbiiadadesteoceienneiiaiiaiaAicsiie hs hacteeaibiatnenpeavinaes 6

McKnight v. Southern Life & Health Ins. Co..

Fe Ae Ue Cr Fee oeentiencersesieninstneascccsceies 9

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

Se RD retain incancmnecaardnDainaiaenidlaibintensannsuin 8

ill

Metropolitan Life Ins. Co. v. Massachusetts, 471

aah sin casi Goicsichmsabiiakilopaphekewiosnnchoesaninepwesn 8

Metropolitan Life Ins. Co. v. Taylor, 481 U.S.

Rael ieiiastcerscctnene syne sadiosdobbusitasnaivereneaeseusvebuedes l

STATUTES AND REGULATIONS

Be Pe WE BAI BO iii vcneesevnsevcsncsvserssonasseovevossepeassevenssoes 7

ie © BOM BREE OD sissessveecessseccvesssnstovevensvesvsnsveneposvonvn 5

OTHER AUTHORITIES

Stanley D. Henderson, Promissory Estoppel and

Traditional Contract Doctrine, 78 Yale L.J. 343

eben si iene biNclskdesisekestticigsbiieneseniossensoiiuncsecianes 10

Restatement (Second) of Contracts © FOF CEBE D vecicssvevesseess 10

BRIEF OF THE ERISA INDUSTRY COMMITTEE AS

AMICUS CURIAE IN SUPPORT OF PETITIONERS

The ERISA Industry Committee (“ERIC’’) respectfully

submits this brief amicus curiae in support of the petition for

a writ of certiorari in this case. Letters from petitioners and

respondent indicating consent to file have been filed with the

Clerk.

INTEREST OF AMICUS CURIAE

ERIC is a nonprofit organization representing America’s

largest private employers. These are companies that main-

tain ERISA-covered pension, healthcare, disability, and other

employee benefit plans, providing benefits to millions of ac-

tive workers, retired persons, and their families nationwide.

All of ERIC’s members do business in more than one State,

and many have employees in all fifty States. ERIC fre-

quently participates as an amicus in cases with the potential

for far-reaching effects on employee benefit plan design or

administration.

ERIC and its member companies have a vital interest in

this case, which deepens an existing circuit split and allows

participants of ERISA plans to recover benefits based on the

terms of a Summary Plan Description (“SPD”), rather than

the terms of the applicable Plan Document, without demon-

strating that they detrimentally relied on the SPD. If allowed

to stand, the decision below will upset the delicate balance

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

thored this brief in whole or in part. No person or entity, other than

ERIC and its members, made a monetary contribution to the preparation

and submission of this brief.

See, e.g., Black & Decker Disability Plan v. Nord, 123 S. Ct. 1965

(2003); Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (1999); Lockheed

Corp. v. Spink, 517 U.S. 882 (1996); Firestone Tire & Rubber Co: v.

Bruch, 489 U.S. 101 (1989); Metropolitan Life Ins. Co. v. Taylor, 481

U.S. 58 (1987).

-

that Congress struck, in enacting ERISA, between encourag-

ing employers to sponsor employee benefit plans and pro-

tecting employees via appropriate disclosures. The Second

Circuit’s ruling has the effect of creating unpredictable li-

abilities for ERISA plans and, if allowed to stand, will cause

additional expense in the administration of plans and under-

mine their financial viability, to the detriment of both the

employers and the employees whose contributions fund the

plans.

Because of the importance of these issues to ERIC and

its members, ERIC respectfully submits this brief urging the

Court to grant the petition for certiorari, reverse the decision

below, and require that participants seeking benefits based

on an error or omission in an SPD first establish that they

detrimentally relied on the SPD.

REASONS FOR GKANTING THE WRIT

The petition in this case presents a question of unusual

importance to employers throughout the nation who sponsor

employee benefit plans: whether an employee who seeks

benefits based not on the terms of the plan itself, but on the

basis of a statement or omission in a document summarizing

and describing the plan (the “Summary Plan Description” or

SPD), must show that he or she detrimentally relied on the

SPD’s statement or omission in order to obtain the addi-

tional, extra-plan benefit. As explained below, infra at 6-11,

although this question is nominally framed as a simple ques-

tion of the evidentiary proof required to recove; benefits un-

der ERISA § 502(a)(1)(B), identifying the correct answer to

that question implicates issues of the most fundamental order

concerning the nature and scope of the protection ERISA

confers on the benefits provided under the terms of employee

welfare and health plans.

Certiorari should be granted to answer that question for

two reasons. First, whatever the ultimate answer may be, a

conclusive resolution by this Court would be an improve-

3

ment over the current state of the law, which is in utter disar-

ray. As matters stand now — and as they will continue to

stand unless and until this Court intervenes — almost all of

the circuits have addressed the issue. The rule in some is

that the SPD can create benefit rights that trump the plan as a

matter of law; in others it is that the SPD can trump the plan

only if the SPD is deemed “prejudicial”; still others hold that

the SPD will trump the plan only if the employee actually

and reasonably relied to her detriment on the description of

benefits contained in the SPD. This is not a recipe for the

effective and efficient administration of employee benefit

plans, especially those with nationwide reach. It is instead a

guaranteed prescription for inequity, as well as increased

costs and, therefore, increased pressure to reduce overall

benefits.

Second, certiorari should be granted because the decision

below is wrong and must be reversed, if this Court is to hold

ERISA true to its promise of protecting the contractual bene-

fit rights afforded under the terms of benefit plans while still

preserving the right of employers and other plan sponsors to

decide for themselves what benefits those plans should pro-

vide. It is one thing to say that, even though ERISA protects

only those rights afforded under the plan itself, a court may

enforce additional rights stated in or implied from an SPD,

where the employee actually and reasonably relied on the

SPD’s description of plan benefits. It is another thing en-

tirely to say that the SPD can create extra-plan rights even

where the plaintiff has not acted in reliance on the SPD.

Courts allow rights to be derived from the SPD because they

think it unfair to deny recovery to an employee or benefici-

ary who was misled by a deficient SPD. But if the employee

did not rely on the SPD then she necessarily was not misled

by it, and there is thus no warrant for granting the employee

benefits unavailable under the terms of the plan itself.

This Court should grant certiorari to resolve the deep and

intolerable split in the circuits and to make clear that detri-

4

mental reliance is a prerequisite to any recovery of extra-plan

benefits based on statements and omissions in an SPD.

A. Certiorari Should Be Granted To Resolve The

Circuit Split And Establish Nationwide Uniform-

ity On An Issue Directly Affecting Employee

Benefit Plan Administration

The petition amply demonstrates the division among the

circuits on the question presented in this case. The circuit

conflict is acknowledged in the decision below, in other de-

cisions and in the treatises, and need not be restated here. It

suffices to say that nine of the circuits have addressed this

issue, and that among them they have adopted four different

rules of law applicable to actions seeking benefits on the ba-

sis of statements or omissions. See Pet. 8-19.

A circuit split that wide and deep would be more than

sufficient reason to grant certiorari in a case of any kind.

Amicus ERIC and its members submit, however, that the

need for review is even more pressing here, because the issue

that has so sharply divided the circuits is an issue that di-

rectly and materially affects the administration of nationwide

employee benefit plans.

This Court has acknowledged the unique importance of

ensuring uniformity and certainty under ERISA, given “the

comprehensive nature of the statute, the centrality of pension

and welfare plans in the national economy, and their impor-

tance to the financial security of the Nation’s work force.”

Boggs v. Boggs, 520 U.S. 833, 839 (1997). ERISA was en-

acted specifically to supplant the common-law system of

varying state-by-state regulation of employee benefit plans

with a single federal regulatory scheme, to provide both the

sponsors and the beneficiaries of such plans a measure of

stability and security in the enforcement of the laws govern-

ing benefit plans. As this Court has explained:

An employer that makes a commitment systematically

to pay certain benefits undertakes a host of obliga-

ss siaseeereeereniinieaiaiiiail

5

tions, such as determining the eligibility of claimants,

calculating benefit levels, making disbursements,

monitoring the availability of funds for benefit pay-

ments, and keeping appropriate records in order to

comply with applicable reporting requirements. The

most efficient way to meet these responsibilities is to

establish a uniform administrative scheme, which pro-

vides a set of standard procedures to guide processing

of claims and disbursement of benefits. Such a system

is difficult to achieve, however, if a benefit plan is

subject_to differing regulatory requirements in differ-

ing States.

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

ERISA thus reflects a “congressional mandate for the[] uni-

form and comprehensive regulation” of employee benefit

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

tionally uniform plan administration” is a “core . . . concern”

of the statute. Egelhoff v. Egelhoff, 532 U.S. 141, 147-48

(2001).

The current disuniformity and inconsistency among the

circuits on the question of what a plaintiff must prove to re-

cover benefits on the basis of statements or omissions in an

SPD directly flouts the congressional mandate and core con-

cems underlying ERISA. Allowing that controversy to per-

sist would have numerous adverse effects on plans and their

beneficiaries. For instance, large benefit plans currently face

the risk that some plan beneficiaries will be entitled to re-

cover benefits unavailable to others in the same plan based

simply on where the beneficiary is located or elects to sue.

There is nothing sensible or fair about that result. Further, to

avoid the inconsistent adjudication of challenges based on

SPDs, plan administrators may be tempted to “load up” the

SPD with extensive nuance to avoid all such challenges,

even though the entire point of the SPD is to speak in plain

and understandable terms without all the technical Getail that

is inherent in formal plan documents. See 29 C.F.R.

|

6

§ 2520.102-2(a); Herrman v. Cencom Cable Assocs., Inc.,

978 F.2d 978, 984 (7th Cir. 1992) (“Larding up the summary

with minutiae would defeat that document’s function: to

provide a capsule guide in simple language for employees.’’);

Lorenzen v. Employees Ret. Plan of the Sperry & Hutchinson

Co., 896 F.2d 228, 236 (7th Cir. 1990) (law should not be

construed to result in SPDs that are “choked with detail and

hopelessly confusing”). There is nothing sensible or fair

about that result either. And, of course, inconsistency in the

laws governing plans with nationwide scope creates unpre-

dictable plan liabilities, which necessarily increases the costs

of providing benefits, which in turn leads inevitably to de-

creased benefits. See Fort Halifax, 482 U.S. at 11 (“A

patchwork scheme of regulation would introduce consider-

able inefficiencies in benefit program operation, which might

lead those employers with existing plans to reduce benefits,

and those without such plans to refrain from adopting

them.”). There most certainly is nothing fair or sensible

about that result. .

While this Court’s certiorari jurisdiction exists in part to

ensure nationwide uniformity of federal law on any issue,

Congress has made clear that such nationwide uniformity is

especially important in cases involving the administration of

employee benefit plans. This is such a case. Certiorari

should be granted to resolve the costly and unproductive

conflict among the circuits over the question whether a plain-

tiff seeking to recover extra-plan benefits based on

representations in an SPD must prove reliance on the SPD.

B. Proof Of Detrimental Reliance Should Be Re-

quired In All Actions Seeking To Recover Extra-

Plan Benefits On The Basis Of Statements Or

Omissions In SPDs

The petition for certiorari accurately and effectively

summarizes the principal doctrinal reasons that any plaintiff

seeking to obtain benefits on the basis of statements or omis-

sions in the SPD should be required to demonstrate that he or

Le

5

she relied to his or her detriment on those statements or

omissions. ERIC endorses that analysis and will not repeat it

here. Instead we briefly set forth the broader legal context in

which this issue is situated — a context which confirms the

conclusion that reliance on the SPD must be required in

cases of this nature.

Analysis of the question whether a plaintiff seeking to

obtain benefits based on an SPD must have relied on that

SPD must begin with the recognition that the plaintiff's right

to such benefits is not protected by ERISA itself. As elabo-

rated below, ERISA protects only benefits provided under

the terms of the plan. See 29 U.S.C. § 1132(a)(1)(B). What-

ever protections may exist for “rights” created by an SPD are

entirely the product of judicial decisions, which have im-

posed such protections for equitable reasons.

This case illusirates the distinction between true “plan

benefits” and “SPD benefits” of the type at issue here. It is

undisputed that respondent in this case is not eligible for sur-

vivor income benefits under the terms of the Kodak Income

Retirement Plan (“the Kodak Plan”). Specifically, respon-

dent failed to submit a joint affidavit required by the Kodak

Plan to establish “domestic partner” status and thus entitle-

ment to survivor benefits as a domestic partner. The Second

Circuit nevertheless held that respondent is entitled to survi-

vor income benefits, on the ground that the SPD distributed

to Kodak employees omitted the joint affidavit requirement.

When an SPD “conflicts” with the terms of a plan, the Sec-

ond Circuit held, “the SPD controls” the benefits available

under a plan, Pet. App. 10a, at least insofar as it is “likely”

that a plan participant or beneficiary was “harmed” by a mis-

statement or omission in the SPD, id. at 16a.

Thus, in allowing respondent to recover benefits on the

basis of an omission in the SPD without requiring reliance,

the Second Circuit presupposed that there are any circum-

stances in which an SPD can create enforceable rights to ex-

_ tra-plan benefits. Even if that premise is correct, it is impor-

8

tant at least to recognize that the “right” to recover extra-plan

benefits is a judge-made right that is not conferred by ERISA

itself.

ERISA does not create substantive rights to benefits of

any kind. “Nothing in ERISA requires employers to estab-

lish employee benefits plans. Nor does ERISA mandate

what kind of benefits employers must provide if they choose

to have such a plan.” Lockheed Corp. v. Spink, 517 U.S.

882, 887 (1996); see Metropolitan Life Ins. Co. v. Massachu-

setts, 471 U.S. 724, 732 (1985) (ERISA “does not regulate

the substantive content of welfare-benefit plans”). The rights

protected by ERISA are, rather, exclusively contractual in

nature. That is, an employer may or may not choose to cre-

ate an employee benefit plan, but if it does create one,

ERISA treats the rights conferred under the plan as contrac-

tual and establishes a federal scheme for regulating and en-

forcing those contractual rights. See Massachusetts Mut.

Life Ins. Co. v. Russell, 473 U.S. 134, 147 (1985) (describing

plan as “contract” and plan benefits as “contractually author-

ized”). In accordance with that scheme, an action to recover

benefits under § 502(a)(1)(B) is regarded as “a suit to re-

cover benefits due under the plan, to enforce rights under the

terms of the plan, and to obtain a declaratory judgment of

future entitlement to benefits under the provisions of the plan

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

101, 108 (1989) (emphasis added).

Inasmuch as ERISA itself only protects benefits provided

under the terms of the “plan contract,” it follows that any

“right” to benefits beyond those provided by the terms of the

plan contract must have its source elsewhere. In the case of

rights resulting from misstatements or omissions in an SPD,

that source has been equity. It is simply “unfair,” many

courts have held, for an employer to distribute an SPD to

employees for the purpose of explaining plan benefits, and

then to favor an inconsistent plan provision over the SPD’s

9

description of the plan when the employee has relied on the

SPD. As the leading case for this principle put it:

It is of no effect to publish and distribute a plan sum-

mary booklet designed to simplify and explain-a vo-

luminous and complicated document, and then pro-

claim that any inconsistencies will be governed by the

plan. Unfairness will flow to the employee for rea-

sonably relying on the summary booklet.

McKnight v. Southern Life & Health Ins. Co., 758 F.2d 1566,

1570 (11th Cir. 1985) (emphasis added); see Heidgerd v.

Olin Corp., 906 F.2d 903, 908 (2d Cir. 1990) (quoting

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

982 (Sth Cir. 1991) (same); Edwards v. State Farm Mut.

Auto. Ins. Co., 851 F.2d 134, 136 (6th Cir. 1988) (same).

It is thus evident that a requirement of reasonable reli-

ance is presumed by, and inherent in, the very reason that

plan participants have been allowed to recover extra-plan

“SPD benefits” in the first place. The point can be put two

ways. First, one can say that absent reasonable reliance, the

basic unfairness that justifies recovery for an SPD misstate-

ment or omission is simply lacking. That is, while it may be

unfair to deny recovery to an employee who was misled by

an SPD, if the employee did not see or otherwise rely on the

SPD, it is impossible to say that he or she was misled by it.

It is thus not unfair, in any way, to deny recovery of benefits

on the basis of an SPD error on which the employee did not

rely.

Second, as a more formal matter, one can say that absent

reasonable reliance, the employee cannot satisfy the legal

requirements for recovery of a right established not by the

plan contract, but by equity. The judge-made “right” to an

extra-plan “SPD benefit” is tantamount to an application of

the equitable principle of promissory estoppel: even though

a “promise” contained in or inferred from an SPD is not en-

forceable as part of the plan contract, courts will enforce the

10

promise if the employee relied to his or her detriment on it.

See generally Stanley D. Henderson, Promissory Estoppel

and Traditional Contract Doctrine, 78 Yale L.J. 343, 344

(1969) (“the basic elements of promissory estoppel doctrine

have been fashioned in the context of the explicit assumption

that the doctrine properly operates outside the bargain rela-

tionship”). Proof of detrimental reliance is, of course, inher-

ent in any claim of promissory estoppel. See Restatement

(Second) of Contracts § 90 (1981). It follows that a court

has no legal basis for enforcing a “promise” suggested in an

SPD in the absence of reasonable reliance.

However the point is made, what matters is that any right

to obtain extra-plan benefits pursuant to an SPD misstate-

ment or omission necessarily presupposes reasonable reli-

ance by the employee asserting such a nght. Without such

reliance, there is no legal principle that would allow an em-

ployee to recover benefits beyond what the employer chose

to provide in the terms of the plan. To the contrary, this

Court has repeatedly made clear that under ERISA, employ-

ers remain free to decide for themselves what substantive

benefits to provide. See supra at 8.

It is no answer to say, as the Second Circuit did in this

case, that requiring reliance would be inconsistent with

“ERISA’s objective to protect the employee against inade-

quate SPDs,” Pet. App. 14a, and that “[t]he consequences of

an inaccurate SPD must be placed on the employer” rather

than the employee, who is “less equipped to absorb the fi-

nancial hardship of the employer’s errors,” id. at 15a. These

formulations do nothing more than reiterate the fairness

point already discussed, and thus do not respond to the ob-

servation that a rule based on fairness presupposes a reliance

requirement. In other words, there is no need to “protect the

employee against [an] inadequate SPD[]” if the employee

never relied on the SPD; there are no “consequences” of an

inaccurate SPD when nobody has relied on the SPD; and

11

there will be no “financial hardship” resulting from errors in

an SPD when there is no reliance on the errors.

In short, as matter of both logic and law, it is impossible

to avoid requiring a plaintiff who seeks to obtain benefits not

on the basis of the plan contract, but on the basis of a state-

ment or omission in the SPD, from demonstrating that he or

she acted in reasonable reliance on the SPD’s representa-

tions.

CONCLUSION

For the foregoing reasons, the petition for a writ of cer-

tiorari should be granted.

Respectfully submitted,

ROBERT N. ECCLES

(Counsel of Record)

JONATHAN D. HACKER

MARTHA DYE

O’MELVENY & MYERS LLP

1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300

Attorneys for Amicus Curiae

November 17, 2003