Amicus Curiae Brief — CBS, Inc. v. Bellas

MOTION FILED

NOV 1 2000 @

No. 00-581

IN THE

Supreme Court of the United States

October Term, 2000

CBS, INC.; WESTINGHOUSE PENSION PLAN,

Petitioners,

V.

HARRY BELLAS,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Third Circuit

MOTION FOR LEAVE TO FILE AND BRIEF AMICUS CURIAE

OF THE ERISA INDUSTRY COMMITTEE AND THE

AMERICAN BENEFITS COUNCIL IN SUPPORT OF THE

PETITION FOR A WRIT OF CERTIORARI

MICHAEL S. HORNE

Counsel of Record

JOHN M. VINE

CAROLINE M. BROWN

COVINGTON & BURLING

1201 Pennsylvania Ave., N.W.

Washington, D.C. 20044

(202)662-6000

Counsel for Amici Curiae

November 15, 2000

if ee oe

In The

SUPREME COURT OF THE UNITED STATES

October Term, 2000

No. 00-581

CBS, INC.; WESTINGHOUSE PENSION PLAN,

Petitioners,

Vs

HARRY BELLAS,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Third Circuit

MOTION OF THE ERISA INDUSTRY COMMITTEE

AND THE AMERICAN BENEFITS COUNCIL TO

FILE A BRIEF AMICUS CURIAE IN SUPPORT OF

THE PETITION FOR A WRIT OF CERTIORARI

The ERISA Industry Committee (“ERIC”) and the

American Benefits Council (“the Council”) hereby move,

pursuant to Rule 37.2, for leave to file the attached brief

i

amicus curiae in support of the petition for writ of certiorari

in this case. Both ERIC and the Council are associations

whose members sponsor and maintain pension and other

employee benefit plans governed by the Employee

Retirement Income Security Act of 1974 (“ERISA”), as

amended, 29 U.S.C. § 1001 et seg. While the petitioner has

consented to the filing of this brief, respondent Harry Bellas

has declined to consent. Correspondence reflecting the

consent of the petitioner has been lodged with the Clerk.

ERIC is a nonprofit organization representing

America’s largest employers that maintain ERISA-covered

pension and other employee benefit plans. All of ERIC’s

members do business in more than one state, and many have

employees in all fifty states.

The Council, formerly the Association of Private

Pension and Welfare Plans, is a broad-based nonprofit trade

association founded in 1967 to protect and foster the growth

of this Nation’s private employer-sponsored employee

benefit plans system. The members of the Council include

both small and large employer sponsors of employee benefit

plans, including many Fortune 500 companies, as well as

numerous plan support organizations, such as consulting and

actuarial firms, investment firms, banks, insurers and other

professional benefit organizations.

Together, ERIC and the Council have over 350

members that sponsor, administer or advise pension plans

covering tens of millions of employees nationwide. The

member companies of ERIC and the Council have a strong

interest in this case, which will have far-reaching effects on

employee pension plan design and administration. Many

employer-members of ERIC and the Council have or have

had plant shutdown provisions or other job separation

benefits in their pension plans, and many other member

employers may consider adding or enhancing such benefits

in the future, whether as a result of collective bargaining or

otherwise. These employers are now subject to sharply

conflicting guidance from the lower courts and from the U.S.

li

Treasury Department as to the applicability of ERISA’s

“anti-cutback” rule to plant shutdown benefits. This

conflicting guidance and the resultant unpredictability

undercuts one of ERISA’s primary goals — nationwide

uniformity in pension plan administration — and works to the

detriment of both employers and employees.

Unless it is reviewed and clarified by this Court, the

decision below is sure to cause uncertainty in the

administration of plans, interfere with the collective

bargaining process (whereby companies and _ unions

negotiate changes to plant shutdown benefits), generate new

uncertainty in other contexts regarding the anti-cutback

provision, and cause inconsistent administration of plans

from Circuit to Circuit.

Because of the importance of these issues to ERIC,

the Council, and their members, they respectfully move for

leave to file the attached brief amicus curiae to assist the

Court in evaluating the petition for certiorari in this case.

Respectfully submitted,

Michael S. Horne

Counsel of Record

John M. Vine

Caroline M. Brown

COVINGTON & BURLING

1201 Pennsylvania Ave., N.W.

Washington, D.C. 20044

(202)662-6000

Counsel for Amici Curiae

Dated: November 15, 2000

ill

TABLE OF CONTENTS

Page

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REASONS FOR GRANTING THE WRIT..................:c:0008 5

I. _ERISA’s Goal of National Uniformity Cannot

Be Met As Long As Employers Are Subject to

Conflicting Standards With Respect to

Modifying or Eliminating Plant Shutdown or

Other Job Separation Benefits ...............cccccsssssoscsesescseess 5

II. This Court Should Address the Proper Degree of

Deference That Should be Accorded by the

Courts to Treasury and I.R.S. Interpretations of

Complex, Technical Provisions of ERISA and

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ere tI ciccicctich cate ccluns nts abtecabtrailaeouiccasiaplaipcaabnoaakas 9

iv

TABLE OF A S

Page

FEDERAL CASES

Harms v. Cavenham Forest Industries, 984 F.2d

Se In Nts MP nidichad tha lakS acssdiiesch ndeancatbacsinduceiasent 6

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133

SE eitaieeisiepicesetenashukaniclinsh touciatiidcidicbisaccktitiasincviiedhntaniats 6

McDaniel v. Chevron Corp., 203 F.3d 1099

ts la cathe iat cantyentc inchs Nis bidsecsansecbsidceens 3

Mertens v. Hewitt Associates, 508 U.S. 248 (1993) ..........08. 9

Pittway Corp. v. United States, 102 F.3d 932

kL 8 ARR eae DRC eee ane mer Nee One Sartre 9

Roper v. Benton, 859 F.2d 1472 (11th Cir. 1988)..........000000... 6

Ross v. Pension Plan for Hourly Employees of

SKF Industries, Inc., 847 F.2d 329 (6th Cir.

| SRG TRRRIR GER Rta Rtcb et eA SRN APO ER 6, 7

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983).........00.0000 6

FEDERAL STATUTES AND REGULATIONS

Employee Retirement Income Security Act of

ig Bee ARs Ne OOO vskencciinesatnsictasrancserenin li

Retirement Equity Act of 1984, Pub. L. No. 98-397,

ee A eR hill ch cscsessisebines bncdnkcnsamaniciotinnaabicdel 2,6

Fa cs Ae A ID senichciespsisitvaitcleinbialiguiendsicenseitchabiaaiasieen 2,3,4

29 U.S.C. § NOMI ie lei nacsscssseiss 2,3

29 U.S.C. © WS clia cian erecta asrahivsvickerssnsceisciavnns 7

29 U.S.C. & UR caine aia atetdad wo etsdaansarscsienccaictniniss 3

26 C.F.R. § UAE ea ieee 3

53 Fed. Rew. DOGS E Clipe p swntevssrsicnnsnsesstbsshixtscrarsstaenasaierareeans 3

I.R.S. General Counsel Memorandum

No. 39669 GAME Ws Fee sicintirssrsecnsssrssinnssseiens passim

vi

In The

SUPREME COURT OF THE UNITED STATES

October Term, 2000

No. 00-581

CBS, INC.; WESTINGHOUSE PENSION PLAN,

Petitioners,

V.

HARRY BELLAS,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Third Circuit

BRIEF OF THE ERISA INDUSTRY COMMITTEE

AND THE AMERICAN BENEFITS COUNCIL

AS AMICI CURIAE IN SUPPORT OF THE

PETITION FOR WRIT OF CERTIORARI

The ERISA Industry Committee (“ERIC”) and the

American Benefits Council (“the Council”) respectfully

submit this brief amicus curiae in support of the petition for

a writ of certiorari in this case.’

INTERESTS OF AMICI CURIAE

The interest of ERIC, the Council, and their members

are set forth in the foregoing Motion for Leave to File.

STATEMENT

The “anti-cutback” rule is found in ERISA Section

204(g) and in a parallel provision to the Internal Revenue

Code, I.R.C. Section 411(d)(6). It provides that the “accrued

benefit” of a participant under a pension plan “may not be

decreased by an amendment of the plan.” 29 U.S.C.

§ 1054(g)(1).2_ In 1984, in the Retirement Equity Act

(“REA”), Pub. L. No. 98-397, Congress extended the anti-

cutback rule to early retirement benefits and other

retirement-type subsidies. As amended, the rule provides

that a plan amendment will be treated as impermissibly

reducing accrued benefits if the plan amendment has the

effect of “eliminating or reducing an early retirement benefit

Pursuant to Rule 37.6, amici state that no counsel for any

petitioner or respondent authored this brief in whole or in part. No

person or entity, other than amici curiae and their respective

members, made a monetary contribution to the preparation or

submission of this brief.

: The case law generally focuses on the ERISA version of

the anti-cutback rule, doubtless because private lawsuits such as

this one may be brought to enforce various requirements of ERISA

but not the corresponding provisions of the Internal Revenue

Code. The Treasury Department and the I.R.S., from which

administrative guidance and any pertinent regulations would

emanate, typically refer to the Code version of the rule. For

convenience, we use the terin anti-cutback rule to refer to the two

statutory provisions interchangeably.

or a retirement-type subsidy (as defined in regulations).” 29

U.S.C. § 1054(g)(2)(A).?

Despite the statute’s anticipation that “retirement-

type subsidies” would be “defined in regulations,” to date the

Treasury Department has not proposed or promulgated

regulations defining that term. Instead, the Treasury has

issued a regulation in which it describes certain benefits that

should not be treated as accrued benefits for purposes of

LR.C. § 411(d)(6). 26 C.F.R. § 1.411(d)-4. Those

regulations do not define early retirement benefits or

retirement-type subsidies, and expressly fail to “address the

extent to which a plant closing or shutdown benefit under a

plan constitutes an early retirement benefit or a retirement-

type subsidy.” 53 Fed. Reg. 26051 (1988).

The only general guidance from the Treasury

Department as to what constitutes a “retirement-type

subsidy” for purposes of the anti-cutback rule is found in

I.R.S. General Counsel Memorandum No. 39869 (April 6,

1992) (hereinafter “GCM 39869”). Pet. App. 9la. GCM

39869 responds to a request by the Director of the I.R.S.’s

Employee Plans Technical and Actuarial Division for

guidance on the subject of “shutdown benefits.” Jd It

broadly defines shutdown benefits as those that “become

available to plan participants upon the occurrence of a

specific event described in the plan that causes the

, Any such regulations would be promulgated by the

Treasury Department pursuant to Reorganization Plan No. 4,

reprinted in 1978 U.S.C.C.A.N. 9814, in which President Carter

transferred the authority of the Department of Labor to issue

regulations under certain ERISA sections to the Department of the

Treasury. See also 29 U.S.C. § 1202(c); McDaniel v. Chevron

Corp., 203 F.3d 1099, 1115 (9th Cir. 2000) (explaining that

Treasury regulations pursuant to I.R.C. § 411 are considered

controlling wih regard to the corresponding provisions of ERISA

Section 204).

participants’ employment to terminate as a result of a change

in the organization or operation of the employer.” Pet. App.

93a. GCM 39869 addresses the broad question “whether

qualified pension plans may generally provide for shutdown

benefits and, if so, whether shutdown benefits are protected

benefits under section 411(d)(6).” Pet. App. 93a. It advises

that some but not all shutdown benefits should be considered

“retirement-type benefits” (Pet. App. 99a), and that

shutdown benefits that are retirement-type benefits “become

an accrued benefit and therefore protected under section

411(d)(6) upon the occurrence of the event that triggers the

right to the benefits (i.e., thé contingent event).” Pet. App.

10la (emphasis added). This language has been widely

understood to mean that such benefits may safely be

eliminated or modified prospectively, that is, before the

shutdown, job loss or other triggering event occurs.

In 1994, under the authority of GCM 39869, the

Westinghouse Pension Plan was amended by, its employer

sponsor, now Viacom, Inc., to modify and then eliminate a

plan provision that provided “shutdown benefits” (as broadly

defined in GCM 39869) to employees who met certain age

and service requirements and who were terminated as a

result of a permanent job separation. The amendment

eliminating these benefits received a favorable determination

letter from the I.R.S. Despite GCM 39869, the I.R.S.

determination letter, and at least two circuit court decisions

to the contrary, the Third Circuit in the decision below

concluded that the amendment violates the anti-cutback rule.

Plant shutdown provisions such as the one at issue

here are not uncommon. ERIC and the Council have

member employers whose defined benefit pension plans

include or have included a provision for benefits contingent

on some future event such as a plant shutdown, job

relocation, or other permanent job separation. Such benefits

may take a variety of forms, such as monthly payments for

specified periods or life annuities, and may be triggered by

any one of a variety of contingent events that result in

4

employment loss. How many employers might consider

adding such benefits in the future — as a result of collective

bargaining or otherwise — cannot be known, although it is

certainly safe to assume that most employers would resist

adding or expanding such benefits if the anti-cutback rule

prevented the employer from eliminating or curtailing those

benefits in the future.

REASONS FOR GRANTING THE WRIT

I. ERISA’s Goal of National Uniformity Cannot

Be Met As Long As Employers Are Subject to

Conflicting Standards With Respect to Modifying

or Eliminating Plant Shutdown or Other Job

Separation Benefits.

Amici urge the Court to grant the petition for

certiorari. Employers are currently subject to different and

conflicting standards with respect to the propriety of plan

amendments that modify or eliminate shut-down or similar

job separation benefits as part of defined benefit pension

plans.

As Congress recognized when it enacted ERISA,

employers cannot fairly and effectively negotiate and

administer employee benefit plans with multi-state coverage

unless questions concerning the rights of plan participants

and beneficiaries are resolved under uniform principles of

federal law. Prior to ERISA, employee benefit plans were

regulated by a patchwork of state statutes and state common-

law rules. An employer who sought to maintain a uniform

employee benefit plan for a multi-state work force

encountered severe administrative difficulty and expense in

complying with rules that differed from state to state.

Employers were often prevented from providing their

employees with the best possible benefits at the most

reasonable cost.

This Court has repeatedly stated that one of the

primary purposes behind ERISA’s enactment was to achieve

5

uniformity in pension plan regulation. J/ngersoll-Rand Co. v.

McClendon, 498 U.S. 133, 142 (1990) (holding that

ERISA’s preemption provision “was intended to ensure that

plans and plan sponsors would be subject to a uniform body

of benefits law” and that “[o]therwise, the inefficiencies

created could work to the detriment of plan beneficiaries”);

Shaw vy. Delta Air Lines, Inc., 463 U.S. 85, 107 (1983) (“By

establishing benefit plan regulation ‘as exclusively a federal

concern, Congress minimized the need for interstate

employers to administer their plans differently in each State

in which they have employees.”) (citation omitted).

On the question presented in this case, the patchwork

system of regulation that Congress sought to avoid with

ERISA’s enactment is continuing, not because of varying

state laws but because of different interpretations of federal

law advanced in the federal circuit courts. As the Third

Circuit candidly acknowledges, its conclusion that Section

204(g) precludes an employer from amending a pension plan

to eliminate or modify job separation benefits on a

prospective basis, while supported by the Fifth Circuit is in

direct conflict with decisions by the Sixth and Eleventh

Circuits. Pet. App. 30a, 31a.

In Ross v. Pension Plan for Hourly Employees of

SKF Industries, Inc., 847 F.2d 329 (6th Cir. 1988), the Sixth

Circuit reviewed the language and history of the anti-cutback

rule as amended by the Retirement Equity Act and held that

plant shutdown benefits do not “fall within the category of a

retirement-type subsidy.” /d. at 333. Similarly, in Roper vy.

Benton, 859 F.2d 1472 (11th Cir. 1988), the U.S. Court of

Appeals for the Eleventh Circuit cited Ross approvingly and

held that the anti-cutback rule does not apply at all to “plant

shutdown plans.” Jd. at 1473.

In Harms v. Cavenham Forest Industries, 984 F.2d

686 (Sth Cir. 1993), on the other hand, the court held that a

severance plan that promised benefits “calculated similarly

to retirement subsidies” and that were payable for life was

protected from cutback under Section 204(g). The court

6

distinguished Ross as being limited to “plant shutdown

benefits,” and not severance payments generally. Jd. at 692.

In the decision below, the Third Circuit, unlike the Fifth,

draws no distinction between plant shutdown and permanent

job separation benefits and appears to hold that many

benefits designed to “bridge” a separated employee to the

benefits available at normal retirement age cannot be

modified or eliminated by an employer without allowing

current employees to age into those benefits. Presumably

this would hold true even for employees who would not

qualify for the contingent benefit for thirty or more years,

and even if the employer may have eliminated the benefit in

return for granting other benefits, or replaced it with other

severance benefits.

The importance of national uniformity in ERISA plan

regulation is acute. Without it, employers cannot provide a

uniform system of benefits to their workforce. Until this

Court resolves the conflict among the lower courts, an

employer with a shutdown or job separation provision can

amend it in some jurisdictions and not in others, and no

employer, in any federal jurisdiction, is likely to risk adding

or improving such benefits under a pension plan without

being confident as to whether the benefits can subsequently

be modified or eliminated.

The conflict among the Circuits is only exacerbated

by ERISA’s venue provision, which permits suit to be

brought in any district where a defendant resides or may be

found, or where the alleged breach took place, or where the

plan is administered. 29 U.S.C. § 1132(e)(2). It is not

uncommon for an employer to find itself sued in a judicial

district where it has never done business, simply because a

former employee has moved or retired there. ERISA’s

permissive venue provision therefore invites forum shopping

when the Circuits apply different interpretations of the

statute, as they have here.

II. This Court Should Address the Proper Degree of

Deference That Should be Accorded by the Courts

to Treasury and I.R.S. Interpretations of

Complex, Technical Provisions of ERISA and the

Tax Code.

This case also presents the Court with the opportunity

to consider the propriety of the Third Circuit’s failure to

accord any deference to GCM 39869, the only generally

applicable guidance issued by the Treasury Department as to

whether and when plant shutdown or job separation benefits

should be treated as accrued benefits for purposes of the anti-

cutback rule. The court below approached the issue by

relying almost exclusively on its own reading of the

legislative history of the highly technical anti-cutback rule.

It paid little attention to the text of the critical statutory

phrase, “an early retirement benefit or retirement-type

subsidy,” and ignored completely the statutory command

that retirement-type subsidies were to be “defined in

regulations” by the Treasury Department.

As the Third Circuit recognized, the Treasury has

never issued any such regulations, and it further

acknowledged that, in the absence of such regulation,

employers such as CBS have “relied reasonably” on GCM

39869 as the next best source of administrative guidance.

Pet. App. 44a. In those circumstances, it was wholly

inappropriate for the Third Circuit to impose retroactive

liability on the plan and potentially subject both employers

and employees to “significant adverse tax consequences,”

unless relief could be obtained from unspecified “others.”

Pet. App. 43a. As the Seventh Circuit has recognized, when

a Statute is less than clear on its face and depends on

regulations for clarification, the “failure to promulgate

regulations as Congress orders could result in a provision not

enforceable due to the Secretary’s failure.” Pittway Corp. v.

United States, 102 F.3d 932, 936 (7th Cir. 1996).

This Court has repeatedly stated that ERISA is an

“enormously complex and detailed” statute, Mertens v.

Hewitt Assocs., 508 U.S. 248, 262 (1993), compliance with

which requires constant attention and judgment from

employees, plan administrators, and their advisors. In the

absence of implementing Treasury regulations, employers

and their advisers must look to other sources of guidance,

including, as in this case, GCM 39869 and the determination

letter issued to Westinghouse. In the decision below, the

Third Circuit makes clear that they do so at their peril, for

the court believed itself under no obligation to give any

weight to these sources of administrative guidance.

Amici respectfully ask the Court to grant certiorari in

this case to resolve the split among the Circuits and to

provide the lower federal courts with greater direction as to

their ability to second-guess the administrative guidance on

which employers and plan administrators must, by necessity,

rely.

CONCLUSION

The petition for certiorari should be granted.

Respectfully submitted,

Michael S. Horne

Counsel of Record

John M. Vine

Caroline M. Brown

COVINGTON & BURLING

1201 Pennsylvania Ave., N.W.

Washington, D.C. 20044

(202)662-6000

Dated: November 15, 2000 Counsel for Amici Curiae