Wednesday, April 21, 2010

Xeron Wins ERISA Section 502(a)(1)(B) Supreme Court Case (Unfortunately)

4United States Supreme Court 112904 I am not going to  try to be unbias in this post.  I am dismayed that the conservatives on the Supreme Court still do not get how ERISA remedies work (or that they do, but choose to side with business interests regardless).  I, along with some other law profs, had filed an amicus brief in support on Xerox employees to receive their proper pensions in Conkirght v. Frommert, 08-810 (U.S. Apr. 21, 2010). Back in November, Jeff posted on that amicus brief we filed:

One of the Supreme Court's labor and employment cases this term is Conkright v. Frommert, which addresses the question of whether a court must continue to give deference to a plan administrator's interpretation of a pension plan after the first interpretation has been found to be arbitrary and capricious under Firestone.

In reviewing the oral argument transcript back in January (the employees were ably represented by good friend and Whittier Law Prof Peter Stris), I actually predicted a 5-4 decision for Xerox (didn't realize that Sotomayor had recused herself), because I thought the majority would continue to defer to the interpretation of the plan administrator.

Unfortunately, I was right. In a nutshell, the case came down to Chief Justice Robert's (and his fellow conservatives') belief that Xerox had made "just one honest mistake" in interpreting the plan unreasonably in the first place.  It then follows that Xerox should get a second bite at the apple in saying how the plan should be interpreted, because after all their arbitrary and capricious first go at it was made in good faith.

I call BS.  The evidence clearly established, and Peter strongly argued during oral argument, that this was anything but an "honest mistake" on Xerox's part.  It was a well-thought out plan of denying these employees their pension benefits.  And with business allies on the court forming a majority, Xerox was able to prevail. 

Using my cultural cognition theory here, and applying my theory of psychological realism in labor law, I might say that the cultural background of these five conservative justices did not permit them to believe that a company like Xerox would set out to screw its employees.  I am not similarly constrained by that worldview.

In any event, not only was justice not served today, but as we wrote in our law professor amicus brief:

[Xerox’s] approach in this case is an example par excellence of giving the plan administrator a second bite at the apple. In fact, based on the [Xerox's] theory in this case, they appear to contemplate serial attempts of interpreting the plan until they can convince a court that their interpretation is no longer arbitrary and capricious. Amici believe strongly that such a race-to-the-bottom not only disserves employees like Respondents in this case, but is also contrary to the very purposes of ERISA - to protect “employees’ justified expectations of receiving the benefits their employers promise them.”

[This case] also takes place against a background where employees who are retired or close to retirement do not have the luxury to wait until the plan administrator finally gets it right. In this case alone, many of the original Respondents have already passed away during
the now ten years of this litigation.

In all, what a shanda.


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It was a well-thought out plan of denying these employees their pension benefits. And with business allies on the court forming a majority, Xerox was able to prevail.

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Posted by: milakunis | Apr 21, 2010 9:58:32 PM

The Court got off on the wrong foot with Firestone and the trust law framework. The court won't change this framework. I'm looking for a one liner amendment that would set this on the right course. Ok professor, the ball is in your court!

Posted by: Mike Hughes | Apr 22, 2010 5:55:37 PM

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