Curtiss-Wright Corp. v. Schoonejongen

Decision Date06 March 1995
Docket Number931935
Citation131 L.Ed.2d 94,514 U.S. 73,115 S.Ct. 1223
PartiesCORPORATION, Petitioner, v. Frank C. SCHOONEJONGEN, et al
CourtU.S. Supreme Court
Syllabus *

Petitioner Curtiss-Wright Corp. amended its employee benefit plan to provide that the postretirement health care coverage it had maintained for many years would cease for retirees upon the termination of business operations in the facility from which they retired. In ruling for respondent retirees in their ensuing suit, the District Court found, among other things, that the new provision constituted an "amendment" to the plan; that the plan documents nowhere contained a valid "procedure for amending [the] plan, and for identifying the persons who have authority to amend the plan," as required by § 402(b)(3) of the Employee Retirement Income Security Act of 1974 (ERISA); and that the proper remedy for this violation was to declare the provision void ab initio. The Court of Appeals affirmed, holding that the standard reservation clause contained in Curtiss-Wright's plan constitution which states that "[t]he Company reserves the right . . . to modify or amend" the plan—is too vague to be an amendment procedure under § 402(b)(3).

Held:

1. Curtiss-Wright's reservation clause sets forth a valid amendment procedure. Pp. __.

(a) The clause satisfies the plain text of § 402(b)(3)'s two requirements. Since ERISA's general definitions section makes quite clear that the term "person," wherever it appears in the statute, includes companies, the clause appears to satisfy § 402(b)(3)'s identification requirement by naming "[t]he Company" as "the perso[n]" with amendment authority. This outright identification necessarily indicates a procedure for identifying the person as well, since the plan, in effect, says that the procedure is to look always to the company rather than to any other party. The reservation clause also contains a "procedure for amending [the] plan." Section 402(b)(3) requires only that there be an amendment procedure, and its literal terms are indifferent to the procedure's level of detail. As commonly understood, a procedure is a "particular way" of doing something, and a plan that says in effect it may be amended only by "[t]he Company" adequately sets forth a particular way of making an amendment. Principles of corporate law provide a ready-made set of rules for deciding who has authority to act on behalf of the company. But to read § 402(b)(3) as requiring a plan to specify on its face who has authority to act on the company's behalf might lead to the invalidation of myriad amendment procedures that no one would think would violate the statute. Pp. __.

(b) There is no support for respondents' argument that Congress intended amendment procedures to convey enough detail to serve beneficiaries' interest in knowing their plans' terms. Section 402(b)(3)'s primary purpose is to ensure that every plan has a workable amendment procedure, while ERISA's goal of enabling plan beneficiaries to learn their rights and obligations under the plan at any time is served by an elaborate scheme, detailed elsewhere in the statute, which specifies that a plan must be written, meet certain reporting and disclosure requirements, and be made available for inspection at the plan administrator's office. Pp. __.

2. On remand, the Court of Appeals must decide whether Curtiss-Wright's valid amendment procedure was complied with in this case. The answer will depend on a fact-intensive inquiry, under applicable corporate law principles, into who at Curtiss-Wright had plan amendment authority and whether they approved the new provision. If the new provision was not properly authorized when issued, the question would arise whether any subsequent actions served to ratify it ex post. P. 12.

18 F.3d 1034, (CA3 1994), reversed and remanded.

O'CONNOR, J., delivered the opinion for a unanimous Court.

Lawrence Reich, Newark, for petitioner.

Richard P. Bress, Washington, DC, for U.S., as amicus curiae by special leave of the Court.

Thomas M. Kennedy, New York City, for respondents.

Justice O'CONNOR delivered the opinion of the Court.

Section 402(b)(3) of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 875, 29 U.S.C. § 1102(b)(3), requires that every employee benefit plan provide "a procedure for amending such plan, and for identifying the persons who have authority to amend the plan." This case presents the question whether the standard provision in many employer-provided benefit plans stating that "The Company reserves the right at any time to amend the plan" sets forth an amendment procedure that satisfies § 402(b)(3). We hold that it does.

I

For many years, petitioner Curtiss-Wright voluntarily maintained a postretirement health plan for employees who had worked at certain Curtiss-Wright facilities; respondents are retirees who had worked at one such facility in Wood-Ridge, New Jersey. The specific terms of the plan, the District Court determined, could be principally found in two plan documents: the plan constitution and the Summary Plan Description (SPD), both of which primarily covered active employee health benefits.

In early 1983, presumably due to the rising cost of health care, a revised SPD was issued with the following new provision: "TERMINATION OF HEALTH CARE BENEFITS. . . . Coverage under this Plan will cease for retirees and their dependents upon the termination of business operations of the facility from which they retired." App. 49. The two main authors of the new SPD provision, Curtiss-Wright's director of benefits and its labor counsel, testified that they did not think the provision effected a "change" in the plan, but rather merely clarified it. Id., at 70-71, 79. Probably for this reason, the record is less than clear as to which Curtiss-Wright officers or committees had authority to make plan amendments on behalf of the company and whether such officers or committees approved or ratified the new SPD provision. In any event, later that year, Curtiss-Wright announced that the Wood-Ridge facility would close. Shortly thereafter, an executive vice president wrote respondents a series of letters informing them that their post-retirement health benefits were being terminated.

Respondents brought suit in federal court over the termination of their benefits, and many years of litigation ensued. The District Court ultimately rejected most of respondents' claims, including their contention that Curtiss-Wright had bound itself contractually to provide health benefits to them for life. The District Court agreed, however, that the new SPD provision effected a significant change in the plan's terms and thus constituted an "amendment" to the plan; that the plan documents nowhere contained a valid amendment procedure, as required by § 402(b)(3); and that the proper remedy for the § 402(b)(3) violation was to declare the new SPD provision void ab initio. The court eventually ordered Curtiss-Wright to pay respondents $2,681,086 in back benefits.

On appeal, Curtiss-Wright primarily argued that the plan documents did contain an amendment procedure, namely, the standard reservation clause contained in the plan constitution and in a few secondary plan documents. The clause states: "The Company reserves the right at any time and from time to time to modify or amend, in whole or in part, any or all of the provisions of the Plan." App. 37; see also 2 Pension Coordinator ¶ 13,181, p. 13,276R-124 (1994) (reproducing IRS's prototype employee benefits plan, which contains similar language). In Curtiss-Wright's view, this clause sets forth an amendment procedure as required by the statute. It says, in effect, that the plan is to be amended by "[t]he Company. "

The Court of Appeals for the Third Circuit rejected this argument, as well as all other arguments before it, and affirmed the District Court's remedy. See 18 F.3d 1034 (1994). It explained: "A primary purpose of § 402(b)(3) is to ensure that all interested parties [including beneficiaries] will know how a plan may be altered and who may make such alterations. Only if they know this information will they be able to determine with certainty at any given time exactly what the plan provides." Id., at 1038. And the court suggested that § 402(b)(3) cannot serve that purpose unless it is read to require that every amendment procedure specify precisely "what individuals or bodies within the Company c[an] promulgate an effective amendment." Id., at 1039. In the court's view, then, a reservation clause that says that the plan may be amended "by the Company," without more, is too vague. In so holding, the court distinguished a case, Huber v. Casablanca Industries, Inc., 916 F.2d 85 (CA3 1990), in which it had upheld a reservation clause that said, in effect, that the plan may be amended "by the Trustees." "By the trustees," the court reasoned, had a very particular meaning in Huber; it meant "by resolutio[n] at a regularly constituted board [of trustees] meeting in accordance with the established process of the trustees." 18 F.3d, at 1039 (citation omitted).

In a footnote, the court related the concurring views of Judge Roth. Id., at 1039, n. 3. According to the court, Judge Roth thought that the notion of an amendment "by the Company" should be read in light of traditional corporate law principles, which is to say amendment "by the board of directors or whomever of the company has the authority to take such action." Ibid. And read in this more specific way, "by the Company" indicates a valid amendment procedure that satisfies § 402(b)(3). She concurred rather than dissented, however, because, in the court's words, "neither [Curtiss-Wright's] board nor any other person or entity within [Curtiss-Wright] with the power to act on behalf of 'the Company' ratified [the new SPD provision]." Ibid.

Curtiss-Wright petitioned for certiorari on the...

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