Conkright v. Frommert

• Decision Date: 21 April 2010
• Docket Number: No. 08–810.,08–810.
• Citation: 176 L.Ed.2d 469,130 S.Ct. 1640,559 U.S. 506
• Parties: Sally L. CONKRIGHT, et al., Petitioners, v. Paul J. FROMMERT et al.
• Court: U.S. Supreme Court

559 U.S. 506
130 S.Ct. 1640
176 L.Ed.2d 469

Sally L. CONKRIGHT, et al., Petitioners,
v.
Paul J. FROMMERT et al.

No. 08–810.

Supreme Court of the United States

Argued Jan. 20, 2010.
Decided April 21, 2010.

Robert A. Long, Jr., Washington, DC, for Petitioners.

Peter K. Stris, Costa Mesa, CA, for Respondents.

Matthew D. Roberts, for the United States as amicus curiae, by special leave of the Court, supporting the Respondents.

Ivy Thomas McKinney, Michael D. Ryan, Xerox Corporation, Norwalk, CT, Margaret A. Clemens, Littler Mendelson, Rochester, NY, Robert A. Long, Jr., Robert D. Wick, Richard C. Shea, Robert S. Newman, Jonathan L. Marcus, Christian J. Pistilli, Covington & Burling LLP, Washington, DC, for Petitioners.

Shaun P. Martin, University of San Diego, School of Law, San Diego, CA, Peter K. Stris, Costa Mesa, CA, John A. Strain, Law Offices of John A. Strain, Manhattan Beach, CA, Brendan S. Maher, Stris & Maher LLP, Dallas, TX, for Respondents.

Michael D. Ryan, Xerox Corporation, Norwalk, CT, Margaret A. Clemens, Nixon Peabody LLP, Rochester, NY, Robert A. Long, Jr., Robert D. Wick, Richard C. Shea, Robert S. Newman, Jonathan L. Marcus, Christian J. Pistilli, Covington & Burling LLP, Washington, DC, for Petitioners.

Opinion

CHIEF JUSTICE ROBERTS delivered the opinion of the Court.

559 U.S. 509

People make mistakes. Even administrators of ERISA plans. That should come as no surprise, given that the Employee Retirement Income Security Act of 1974 is “an enormously complex and detailed statute,” Mertens v. Hewitt Associates, 508 U.S. 248, 262, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993), and the plans that administrators must construe can be lengthy and complicated. (The one at issue here runs to 81 pages, with 139 sections.) We held in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), that an ERISA plan administrator with discretionary authority to interpret a plan is entitled to deference in exercising that discretion. The question here is whether a single honest mistake in plan interpretation justifies stripping the administrator of that deference for subsequent related interpretations of the plan. We hold that it does not.

I

As in many ERISA matters, the facts of this case are exceedingly complicated. Fortunately, most of the factual details are unnecessary to the legal issues before us, so we cover them only in broad strokes. This case concerns Xerox Corporation's pension plan, which is covered by ERISA, 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq. Petitioners are the plan itself

130 S.Ct. 1645

(hereinafter Plan), and the Plan's current

559 U.S. 510

and former administrators (hereinafter Plan Administrator). See § 1002(16)(A)(i); App. 32a. Respondents are Xerox employees who left the company in the 1980's, received lump-sum distributions of retirement benefits they had earned up to that point, and were later rehired. See 328 F.Supp.2d 420, 424 (W.D.N.Y.2004); Brief for Respondents 9–10. The dispute giving rise to this case concerns how to account for respondents' past distributions when calculating their current benefits—that is, how to avoid paying respondents the same benefits twice.

The Plan Administrator initially interpreted the Plan to call for an approach that has come to be known as the “phantom account” method. 328 F.Supp.2d, at 424. Essentially, that method calculated the hypothetical growth that respondents' past distributions would have experienced if the money had remained in Xerox's investment funds, and reduced respondents' present benefits accordingly. See id., at 426–428; App. to Pet. for Cert. 146a. After the Plan Administrator denied respondents' administrative challenges to that method, respondents filed suit in federal court under ERISA, 29 U.S.C. § 1132(a)(1)(B). See 328 F.Supp.2d, at 428–429. The District Court granted summary judgment for the Plan, applying a deferential standard of review to the Plan Administrator's interpretation. See id., at 430–431, 439. The Second Circuit vacated and remanded, holding that the Plan Administrator's interpretation was unreasonable and that respondents had not been adequately notified that the phantom account method would be used to calculate their benefits. See 433 F.3d 254, 257, 265–269 (2006).

The phantom account method having been exorcised from the Plan, the District Court on remand considered other approaches for adjusting respondents' present benefits in light of their past distributions. See 472 F.Supp.2d 452, 456–458 (W.D.N.Y.2007). The Plan Administrator submitted an affidavit proposing an approach that, like the phantom account method, accounted for the time value of the money that respondents

559 U.S. 511

had previously received. But unlike the phantom account method, the Plan Administrator's new approach did not calculate the present value of a past distribution based on events that occurred after the distribution was made. Instead, the new approach used an interest rate that was fixed at the time of the distribution, thereby calculating the current value of the distribution based on information that was known at the time of the distribution. See App. to Pet. for Cert. 147a–153a. Petitioners argued that the District Court should apply a deferential standard of review to this approach, and accept it as a reasonable interpretation of the Plan. See Defendants' Pre–Hearing Brief Addressed to Remedies in No. 00–CV–6311 (WDNY), pp. 7–8; Defendants' Pre–Hearing Reply Brief Addressing Remedies in No. 00–CV–6311 (WDNY), p. 2.

The District Court did not apply a deferential standard of review. Nor did it accept the Plan Administrator's interpretation. Instead, after finding the Plan to be ambiguous, the District Court adopted an approach proposed by respondents that did not account for the time value of money. Under that approach, respondents' present benefits were reduced only by the nominal amount of their past distributions—thereby treating a dollar distributed to respondents in the 1980's as equal in value to a dollar distributed today. See 472 F.Supp.2d, at 457–458. The Second Circuit affirmed in relevant part, holding that the District Court was correct not to apply a deferential standard on remand, and that the District Court's decision on

130 S.Ct. 1646

the merits was not an abuse of discretion. See 535 F.3d 111, 119 (2008).

Petitioners asked us to grant certiorari on two questions: (1) whether the District Court owed deference to the Plan Administrator's interpretation of the Plan on remand, and (2) whether the Court of Appeals properly granted deference to the District Court on the merits. Pet. for Cert. i. We granted certiorari on both, 557 U.S. ––––, 129 S.Ct. 2860, 174 L.Ed.2d 575 (2009), but find it necessary to decide only the first.

559 U.S. 512

II

A

This Court addressed the standard for reviewing the decisions of ERISA plan administrators in Firestone, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80. Because ERISA's text does not directly resolve the matter, we looked to “principles of trust law” for guidance. Id., at 109, 111, 109 S.Ct. 948. We recognized that, under trust law, the proper standard of review of a trustee's decision depends on the language of the instrument creating the trust. See id., at 111–112, 109 S.Ct. 948. If the trust documents give the trustee “power to construe disputed or doubtful terms, ... the trustee's interpretation will not be disturbed if reasonable.” Id., at 111, 109 S.Ct. 948. Based on these considerations, we held that “a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Id., at 115, 109 S.Ct. 948.

We expanded Firestone's approach in Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008). In determining the proper standard of review when a plan administrator operates under a conflict of interest, we again looked to trust law, the terms of the plan at issue, and the principles of ERISA—plus, of course, our precedent in Firestone. See 554 U.S., at ––––, 128 S.Ct., at 2347–48, 2348–49, 2350–51. We held that, when the terms of a plan grant discretionary authority to the plan administrator, a deferential standard of review remains appropriate even in the face of a conflict. See id., at ––––, 128 S.Ct., at 2350–51.

It is undisputed that, under Firestone and the terms of the Plan, the Plan Administrator here would normally be entitled to deference when interpreting the Plan. See 328 F.Supp.2d, at 430–431 (observing that the Plan grants the Plan Administrator “broad discretion in making decisions relative to the Plan”). The Court of Appeals, however, crafted an exception to Firestone deference. Specifically,

559 U.S. 513

the Second Circuit held that a court need not apply a deferential standard “where the administrator ha[s] previously construed the same [plan] terms and we found such a construction to have...