No. 08-810

AN~ICE OF THE CLERK

IN THE

SALLY L. CONKRIGHT, ET AL.,

V.

PAUL J. FROMMERT, ET AL.,

Petitioners,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARITO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

RESPONDENTS’ BRIEF IN OPPOSITION

ROBERT H. JAFFE, ESQ.*MARK B. WATSON, ESQ.ROBERT H. JAFFE & ASSOCIATES, P.A.8 Mountain AvenueSpringfield, New Jersey 07081(973) 467-2246

GEORGE A. SCHELL, ESQ.SCHELL & SCHELL410 Perinton Hills Office ParkFairport, New York 14450(585) 377-2682

JOHN A. STRAIN, ESQ.LAW OFFICES OFtIOHN A. STRAIN1611 S. Catalina Avenue- Suite 212Redondo Beach, California 90277(310) 944-3670Attorneys for the Respondents

*Counsel of Record

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TABLE OF CONTENTS

TABLE OF APPENDICES ..................-ii-

TABLE OF CITED AUTHORITIES ...........-iii-

INTRODUCTION ......................... -1-

BACKGROUND OF THE CASE .............-2-

REASONS FOR DENYING THE WRIT ......-11-

THE ISSUES PRESENTED BYTHE~ P ETITIONE RSMISCHAR/~CTERIZE THEHISTORY OF THIS CASE ......- 11-

II. THE PETITIONERS DISTORTTHE OPINION OF THIS COURTIN GLENN .................. - 12-

III. THE DECISION IN FROMMERT2008 IS ENTIRELYCONSISTENT WITH THISCOURT’S DECISION INGLENN ..................... - 14-

PETITIONERS IMPROPERLYIGNORE THE LAW OF THECASE REGARDING THE TERMSOF THE PLAN ................-17-

CONCLUSION .......................... -24-

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TABLE OF APPENDICES

Appendix A " Excerpts of the SummaryPlan Description Describing the 1989Restatement of the Xerox RetirementIncome Guarantee Plan ...............la

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TABLE OF CITED AUTHORITIES

Cases

Administrative Committee of Wal-MartHealth & Welfare Plan v. Willard

393 F.3d 1119 (10th Cir. 2004) ..............-19-

Bergt v. Rot. Plan for PilotsEmployed by Mark Air

293 F.3d 1139 (9th Cir. 2003) ................-9-

Chiles v. Ceridian Corp.95 F.3d 1505 (10th Cir. 1996) ...............-9-

Edwards v. State Farm Mutual Automobile Ins. Co.851 F.2d 134 (6th Cir. 1988) ................. -9-

Firestone Tire & Rubber Co. v. Brueh489 U.S. 101 (1989) ........... -12-,-15-,-19-, -22-

Frommert v. Conkright433 F.3d 254 (2d Cir. 2006) ...............passim

Frommert v. Conkrjght472 F.Supp.2d 452 (W.D.N.Y. 2007) ........passim

Frommert v. Conkright535 F.3d 111 (2d Cir. 2008) ..............passim

Glenn v. Metropolitan Life Ins. Co.461 F.3d 660 (6th Cir. 2006) ................-16-

Hansen v. Continental Ins. Co.940 F.2d 971 (5th Cir. 1991) .................-9-

Hartev. Bethlehem ~tee] Corp.214 F.3d 446 (3d Cir. 2000) .................-20-

Hunter v. Caliber System, Inc.220 F.3d 702 (6th Cir. 2000) ................-20-

Jensen y. SIPCO, Inc.38 F.3d 945 (8th Cir. 1994) ..................-9-

Layaou v. Xerox Corp.238 F.3d 205 (2d Cir. 2001) ...................-4-

Mathews v. Sears Pension Plan144 F.3d 461 (7th Cir. 1998) .................-9-

MeNight v. Southern Life & Heath Co.758 F.2d 1566 (llth Cir. 1985) ..............-10-

Metropolitan Life Ins. Co. v. Glenn128 S.Ct. 2343 (2008) ...................passim

Ollver v. Coca-Cola Co.546 F.3d 1353 (llth Cir. 2008) ..............-19-

Varity v. Howe516 U.S. 489 (1996) ....................... -17-

Worthy v. New Orleans Steamship Association342 F.3d 422 (Sth Cir. 2003) ................-20-

Statutes

29 U.S.C. 1104(a) ......................... -3-

29 U.S.C. § 1054(h) ........................ -6-

29 U.S.C. § 1108(c)(3) .................-13-,-17-

29 U.S.C. § l132(a)(1)(B) ..................-13-

29 U.S.C. §1022 ........................... -4-

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INTRODUCTION

The pending petition for certiorari hopefullyconstitutes the last chapter in the playbook ofPetitioners-Appellants Sally L. Conkright, Patricia M.Nazemetz, Lawrence M. Becker, and XeroxCorporation Retirement Income Guarantee Plan(hereinafter sometimes referred to as "petitioners" or’"Xerox") to manipulate the legal process to delaypayment of retirement benefits rightly due under theXerox pension plan to the Respondents-Appellees(hereinafter sometimes referred to as "the plaintiffs").Since this case was filed nearly ten years ago, threedecisions of the Second Circuit have conclusivelyestablished that Xerox cannot properly use a "phantomaccount," consisting of the hypothetical appreciatedvalue of the distribution received by the rehired Xeroxemployee when previously separated fromemployment, to reduce the retirement benefits earnedby employees who were rehired prior to the publicationand distribution of the 1998 Summary PlanDescription ("SPD") for such plan.

The issues raised in Xerox’s petition do not actuallyrelate to the recent holding of the Second Circuit -which simply upheld the trial court’s exercise ofdiscretion specifically remanded to it - and areentirely without merit.1

On the other hand, during the course of such remand,Xerox raised an entirely new issue, claiming that ageneral release document signed by some plaintiffswho retired during this litigation, though notmentioning this case, waived the claims thoseplaintiffs were litigating. The recent Second Circuitdecision sided with Xerox on that claim. The cross-

1On or about October 20, 2008, this Court deniedXerox’s request for a stay of judgment pending a decision onthe instant petition for certiorari.

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petition for certiorari filed by those plaintiffs who areaffected raises important and broad issues that shouldbe addressed by this Court.

BACKGROUND OF THE CASE_

In 1989, Xerox Corporation implemented acomprehensive redesign of its retirement program tobe effective January 1, 1990. Frommert v: Conkright,433 F.3d 254, 258 (2d Cir. 2006) ("Froml~ert 2006’).Among key changes made, Xerox ceased makingcontributions to the Xerox Profit Sharing Plan, adefined contribution plan which had been the source ofdistributions made to rehired Xerox emp]oyees whenthey were previously separated from employment. Id.If the rehired employee had any balance left in hisProfit Sharing account as of January 1, 1990, it wastransferred to a new account established by theredesigned Plan as the Transitional Retirement

ccount ( TRA ). Id. Subsequent to January 1, 1990,this account would increase (or theoretically decrease)based on the investment results of funds in which theemployee’s Profit Sharing account had been invested.Id. at 257.

The redesigned Plan added an alternative benefitknown as the Cash Balance Retirement Account("CBRA"), which also was established by the transferof the balance the rehired Xerox employee had in hisProfit Sharing account, if any, as of January 1, 1990.Id. Thereafter, the balance of the CBRA wouldincrease each year by five percent of the employee’ssalary, and the overall CBRA balance would becredited for interest at a rate of one percent above theone year Treasury Bill rate. Id. at 257.

Critically, the basic Xerox retirement plan formula(’~hereinafter the RIGP Plan formula") was establishedin the redesigned Plan to be calculated by multiplyingyears of service, up to thirty, by 1.4 percent (it was1.67 percent before January 1, 1990) of the

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highest-average yearly pay, a figure arrived at bycalculating the average of the employee’s fivehighest-paying calendar years with Xerox. Id. As foundby the Second Circuit in its comprehensive analysis ofthe redesigned plan: "For employees rehired by Xerox,the number of years of service includes the total timethe employee worked for Xerox, not iust the period ofemployment following rehire." Id.

In an SPD captioned "Planning For A SecureRetirement," excerpts of which are included inAppendix A to this brief, Xerox represented that thepension benefit promised Xerox employees who qualifyas plan participants "can never be less than thatspecified by the RIGP formula -- a real advantage,particularly to long service employees, because theformula is very sensitive to years of service." Page la.

Having made this representation and similarstatements in 1990 personal annual statements withthe knowledge that Xerox employees, both newly hiredand rehired, would likely rely upon suchrepresentations in contemplating and planning a"secure retirement," petitioners the very personscharged under ERISA Section 404(a), 29 U.S.C. §1104(a), with a duty of loyalty to the plaintiffssurreptitiously launched a campaign to deny rehiredXerox employees the pension promised based in parton length of service through the devious device of the"phantom account offset."

The SPDs and annual reports sent to plan participantsdescribing the alternative retirement benefit programscontained in the redesigned Plan (sometimes describedas the pre-amendment Plan by the Second Circuit inits opinions) also made reference to a deduction inaggregate benefits for participants who had receivedprior distributions. As found by the Second Circuit ina related case: "The only relevant language in Xerox’sSPD states that ’IT]he amount you receive may also bereduced if you previously left the Company and

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received a distribution at that time.’" Layaou v. XeroxCorp., 238 F.3d 205, 210 (2d Cir. 2001) ("Layaou2oo ’9.

The foregoing disclosure was the only informationregarding a potential offset that was provided by thepetitioners prior to the publication and distribution ofthe September 1998 SPD. Xerox’s interpretation ofPlan terms to allow for implementation of the phantomaccount offset was found to be unreasonable due tonondisclosure. As set forth by the Second Circuit inLayaou 2001:

The SPD [available to plaintiff JohnLayaou] does not mention the term"phantom account," describe the"phantom account concept, or evenindicate that the choice among the threemethods of calculating future benefitswill be made by first adding on, and thenlater offsetting, not the amount of theprior distributions but instead anappreciated value of the prior lump sumdistributions. Nor does the SPD offerany example of how to calculate benefitsfor individuals who had received priorlump -sum distributions.

Id.

The Second Circuit thereafter concluded that thepetitioners had violated ERISA Section 102, 29 U.S.C.§1022, stating as follows:

Because we find that Xerox’s SPD failedto provide adequate notice to Layaou thathis retirement formula would bedetermined by adding to the CBRA andTRA an appreciated value of his priordistributions and then offsetting theoutcome by that amount, we find that the

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plan administrator’s interpretation of theSPD as permitting application of the"phantom account" offset to Layaou’sbenefits is unreasonable under either anarbitrary and capricious or de novostandard of review.

Id. at 211.

In Frommert 2006, the Second Circuit, consistent withthe decision in Layaou 2001, determined that "[t]heprolonged absence of any mention of the phantomaccount from Plan documents, most notably SPDs,likely, and quite reasonably, led plan participants tobelieve that it was not a component of the Plan.Rather, rehired employees likely believed that theirpast distributions would only be factored into theirbenefits calculations by taking into account theamounts they had actually received." Frommert 2006,433 F.3d at 267.

The Second Circuit thereafter held:

It is clear that the application of thephantom account reduced the amount ofbenefits on which the employees hadjustifiably relied. The district court’sconclusion that the phantom accountserves only to allow a comparisonbetween the TRA and CBRA accountsand the RIGP benefit, while perhapscorrect in a hyper-technical sense,overlooks the ultimate effect of thatcomparison. By including a large amountof hypothetical growth in a nonexistentaccount, the comparison among the threeaccounts is skewed in favor of selectingeither the TRA or CBRA over the RIGPas the basis for payment. However, onceeither the TRA or CBRA is selected asproviding the highest amount of benefits,

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the phantom account value is taken out,leaving a benefit amount significantlyless than what the RIGP [Plan formula]would provide. Thus, although theapplication of the phantom account doesnot directly deplete an employee’spension account, by alt.ering thecomparative process, it imposes acondition on the payment of benefits thatleads just as surely to a decrease.

Id. at 268 (citations omitted).

The Second Circuit thereafter found that the"petitioners’ reduction of justified expectations ofbenefits took the form of a retroactive cut-back inviolation of [ERISA Section 204(g), 29 U.S.C. 1054(g)]."Id. Having previously found that the petitioners hadviolated ERISA Section 204(h), 29 U.S.C. § 1054(h),which "clearly required the plan administrators toprovide fifteen days advance notice of any amendmentcreating ’a significant reduction in the rate of futurebenefit accrual,’" id. at 266, the Second Circuit thendirected the District Court to craft a remedy:

On remand, the remedy crafted by thedistrict court for those employees rehiredprior to 1998 should utilize anappropriate pre-amendment calculationto determine their benefits. We recognizethe difficulty that this task poses becauseof the ambiguous manner in which thepre-amendment terms of the Plandescribed how prior distributions were tobe treated. As guidance for the districtcourt, we suggest that it may wish toemploy equitable principles whendetermining the appropriate calculationand fashioning the appropriate remedy.

Id. at 268.

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Having fully considered the direction of the SecondCircuit excerpted above, the trial court began itsanalysis of how to craft a remedy for the statutoryviolations of the petitioners as follows:

This Court’s task on remand is madeeasier in many respects by the breadth ofthe Second Circuit decision. The Circuitresolved many issues and has clearlyestablished the law of the case in manyrespects. For example, it can no longer bedisputed that employees were not givenproper notice in either the Plan or therelevant SPD as to the nature of thephantom account and its operation.Utilization of this phantom account oranything similar to it has been soundlyrejected by the Court of Appeals in thiscase as well as a previous case involvingthe same Plan, Layaou v. XeroxCorporation, 238 F.3d 205 (2d Cir. 2001).Other courts have reached the sameconclusion. Miller v. Xerox Corp. Ret.Income Guarantee Plan, 464 F.3d 871(gth Cir. 2006), Berger v. Xerox Corp.Ret. Income Guarantee Plan, 338 F.3d755 (Tth Cir. 2003). [2] It is clear, then,that Xerox may not lawfully use thephantom account mechanism, as to eitherthe named plaintiffs in this lawsuit, oranyone else who was rehired by Xeroxprior to 1998, after having previouslyreceived a distribution of pensionbenefits. The Second Cireui~ has

2 In Berger v. Xerox Ret. Inc. Gust. Pla~, 338 F.3d 755(7th Cir. 2003), the Seventh Circuit held that the Xerox RIGPPlan violated ERISA substantive benefit accrual and vestingrequirements with respect to the way that the Plan determinedlump sum benefits payable in connection with the CBRA.

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addressed this issue more than once, andXerox may not continue to utilize thisrejected formula.

Frommert v. Con.k,,z,~ght, 472 F.Supp.2d 452, 456-457(W.D.N.Y. 2007) ( I~rommert 2007’).

The trial court then commented on the directions itreceived from the Second Circuit, stating that"Describing the procedure to be utilized prior to the1998 amendments as ’ambiguous’ is generous. In fact,virtually nothing is set forth in either the Plan or theSPD as to the precise mechanism for taking intoaccount a prior distribution in calculating anemployee’s present benefits after a rehire." Id. at 457.

The trial court then referenced the fact that it hadreviewed testimony concerning the appropriatemethods of treating prior distributions and reached thefollowing conclusion:

[T]he best course is to do what I didpreviously in La.yaou involving a similarremand from the Court of Appeals.Layaou v. Xerox Corporation, 330~.Supp.2d 297 (W.D.N. Y. 2004) ["Layaou2004’]. In Layaou, I directed theadministrator "to recalculate plaintiffsretirement benefit, ... and to pay plaintiffa lump sum in the amount of thedifference between the amount ofbenefits that plaintiff has received, andthe amount of the recalculated benefit,without any consideration of a ’phantomaccount.’" Id. at 305 (footnote omitted). Iadded that "[i]t would not; beunreasonable ... for the administrator tosubtract out the amount of the priordistribution," in order to avoid giving theplaintiff a windfall, but left it to the Planadministrator to perform the actual

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calculation of the plaintiffs benefits inthe first instance, stating that "[i]fplaintiff believes that the administrator’scalculation is erroneous, and the mattercannot be resolved between the parties,he can seek further relief in this Court."Id. at 304.

The same process should apply here. Thisprocess is straightforward; it adequatelyprevents employees from receiving awindfall, and I believe it most clearlyreflects what a reasonable employeewould have anticipated based on the not-very-clear language in the Plan and SPD.

Id. at 458. The methodology outlined by the trial courtin Frommert 2007hereinafter will be referred to as"the La~vaou 2004 methodology." Indeed, the La~v~ou2004 methodology is the very method described in the1989 SPD "Planning For A Secure Retirement"asconstituting the manner by which a retiring employeecan calculate his pension entitlement. See infr~ at pp.3a-4a. Accordingly, the decision of the trial court inFromrnert 2007is totally consistent with the conceptwhich permeates Frommert 2006. namely, that in theevent of any conflict between the SPD and the terms ofthe plan or the plan administrator’s interpretation ofthe plan, the SPD controls. Frommert 2006, 433 F.3dat 265.2

3 The concept that the SPD controls in the event of aconflict has been consistently applied outside the SecondCircuit. See Han~en v. ContinentalIn~. Co., 940 F.2d 971, 981"83 (5th Cir. 1991); Edward~ v. State Farm Mutual AutomobileIn~. Co., 851 F.2d 134, 136 (6th Cir. 1988); Mathew~ v. Sear~Pension Plan, 144 F.3d 461, 466 (7th Cir. 1998); Jen~en wSIPCO, Inc., 38 F.3d 945, 952 (8th Cir. 1994); Bergt v. Ret.Plan £or Pilot~ Employed by Mark AL,, 293 F.3d 1139 (9th Cir.2003); Chile~ v. Ceridian Corp., 95 F.3d 1505, 1518-19 (10th

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The district court rendered judgment on two points: (1)that the Lajzaou 2004 methodology should be theappropriate relief for the statutory violations of thepetitioners/appellants and (2) that the execution of theXerox general release form in consideration of thereceipt of severance pay was unenforceable as a bar tothe ERISA claims of the respondents/appellees. Xeroxappealed these rulings to the Second Circuit.4

More than a year after the decision in Frommert 2007,on July 24, 2008, the Second Circuit held that adecision of the District Court determining that theLayaou 2004 methodology was the appropriate methodto calculate the retirement benefits of Xeroxemployees rehired prior to the September 1998 SPDwas within scope of the District Court’s discretion.5

Cir. 1996); McNight v. Southern Li£o & Heath Co., 758 F.2d1566 (llth Cir. 1985).

4 It is very important to note that the petitioners didnot challenge the Second Circuit’s direction in Frommort 2006to the trial court that it should craft appropriate reliefemploying equitable principles, if necessary. Moreover, theysubmitted to an evaluation whereby the trial court waspresented with and considered alternative methodologies,including the Lajzaou 2004 methodology, the new hiremethodology, and the plan administrator’s approach. Onlywhen the trial court rendered its decision in favor of theLa~yaou 2004 methodology did Xerox too late decide tochallenge the decision of the Second Circuit to have the trialcourt craft a remedy for Xerox’s statutory violations.

5Notwithstanding the fact that the petitioners had beenfound to be serial violators of ERISA statutes designed toprotect pensioners, the Second Circuit vacated the ruling of thetrial court that the Xerox general release form wasunenforceable due its ambiguous content and the failure of theplan administrators to demonstrate that the severancepayments received were in excess of the ERISA claims deemed

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Frommort v. Conkright, 535 F.3d 111, 119 (2d Cir.2008) ("Frommert 2008’).

REASONS FOR DENYING THE WRIT

THE ISSUES PRESENTED BYTHE PETITIONERSMISCHARACTERIZE THEHISTORY OF THIS CASE

The two challenges presented by Xerox have little orno relevance to the decision (i.e., Frommert 2008)being appealed. Petitioners mischaracterize theremand as if the District Court had been directed tointerpret and apply the Plan. It was not, but ratherwas directed to exercise equitable powers in craftingan appropriate remedy after Xerox’s position regardingthe interpretation of the plan (including the relatedSPD) had been soundly rejected. Xerox effectively asksthis Court to negate the law of the case, as establishedin earlier Second Circuit holdings.

Xerox’s first issue asserts that the Second Circuit erredby holding that the District Court had "no obligation todefer to an ERISA plan administrator’s reasonableinterpretation of the terms of [a pension] plan if theplan administrator arrived at its interpretationoutside the context of an administrative claim forbenefits." The Frommert 2008 decision simply did notinvolve a review of an interpretation of the plan, butrather upheld the trial court’s choice of the Layaou2004 methodology as a means of allowing Xerox someequitable credit for prior payments from its ProfitSharing Plan, where prior decisions had determined

to be waived. This ruling is the subject of a separate petitionfor certiorari by the plaintiffs which we believe merits beinggranted by this court.

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that applicable plan and SPD terms did not provide foran offset.

Xerox’s second assertion, that the Court of Appealsshould have looked at the matter de nero, againignores the history and law of the case. Where theCourt of Appeals had specifically remanded the case tothe District Court to "craft" an appropriate remedy, itis absurd to claim that the Second Circuit should thenbrush that remand aside and craft such remedy itselfde nero. Again, Frommert 2008 was not aboutdetermining the meaning of a plan, but rather theequitable determination of a proper final remedy.

In F~ommert 2008, the Second Circuit in fact held thatthe Layaou 2004 methodology did not exceed theDistrict Court’s allowable discretion since the prioropinion of the Second Circuit "presumed that theDistrict Court would craft the remedy itself."Frommert 2008, 535 F.3d at 118. Accordingly, thisCourt should forthwith reject the petition ibr certiorarifiled by petitioners as raising issues not relevant to theanalysis and ruling of the court below.

II. THE PETITIONERS DISTORTTHE OPINION OF THIS COURTIN GLENN

The petitioners cite Metropolitan Life Ins. Co. v.Glenn, 128 S.Ct. 2343 (2008), as holding that when apension plan grants a plan administrator the authorityto interpret its terms, the administrator!sinterpretation of the plan language is entitled todeference. Petitioners’ brief at 12. In fact, in Glennthis Court did not amplify the deference that should begiven to an interpretation of plan documents by a planadministrator. Rather, it expanded the "fourthprinciple" under Firestone Tire & Rubber Co. v. Bruch,489 U.S. 101 (1989) ("Brueh’), which holds that a planadministrator’s conflict of interest with planbeneficiaries is a factor that should be considered in

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judicial review of a benefits determination by afiduciary or administrator under 29 U.S.C. §l132(a)(1)(B). ,See in/~s at pp. 19-20 for furtherdiscussion of the four principles referenced in G]enn.

The first question posed by the Sixth Circuit decisionin G]enn was whether the fact that a planadministrator both evaluates claims for benefits andalso pays those same claims creates the kind of conflictof interest where this fourth principle should apply.The answer given in Glenn is that where, as here, theemployer both funds the plan and evaluates theclaims, it creates the type of clear conflict of interestthat judges must take into account as a factor whenthey review the discretionary acts of a planadministrator. Glenn, 128 S.Ct. at 2343.

In response to MetLife’s contention that, among otherthings, ERISA Section 408(c)(3), 29 U.S.C. §1108(c)(3), specifically allows employers to administertheir own ERISA plans, this Court held that thisstatutory provision was outweighed by "Congress’decision to offer employees enhanced protection fortheir benefits." Id. Turning to the question of how aconflict such as the one identified in Glenn, whichparallels the conflict of interest circumstances in theinstant case, should be taken into account on judicialreview of a discretionary benefits determination, thisCourt held that such conflict should be "weighed as afactor in determining whether there is an abuse ofdiscretion." Id. It then cautioned that conflicts ofinterest are but one factor among many that areviewing judge must take into account. Id.

If this case actually involved interpretation of terms ofthe applicable plan, the now long history of litigationover Xerox’s plan would need to be taken into account.Despite repeated losses in the Courts of Appeals, Xeroxstubbornly fights on. There could hardly be a clearercase to apply the principles set forth in Glenn so as to

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preclude any deference to Xerox’s latestinterpretations.

However, it is simply unnecessary to reach any Glennfactors. As discussed above, the holding in Frommert2008 affirming the trial court’s choice of the Layaou2004 methodology to allow Xerox some offset is theculmination of holdings reached in several priordecisions constituting the law of this case. This choicewas based on many facts and equitable factors,including key holdings that the SPD violated ERISASection 102.

The petitioners’ contention that deference should begiven to the decision of the Xerox Plan Administratorsto utilize the phantom account offset or a differentequivalent approach can be described as chutzpalh inextremis. The creative attempt by the petitioners toturn this case into one raising the question of whetherthe Second Circuit failed to give appropriate deferenceto the opinion of the Xerox Plan Administratorsoutside the context of a benefits determination must bedenied and their petition for certiorari rejected.

III. THE DECISION IN FROMMERT2008 IS ENTIRELYCONSISTENT WITH THISCOURT’S DECISION IN GLENN

Nothing in this case is at odds with this Court’s recentpronouncement in G]en~ or with its predecessorBruch. In G]e~n, "this Court warned against the useof ’talismanic’ rules and formulas as a substitute forthe art of judging." Gle~n, 128 S. Ct. at 2353. Inaddressing how the trial court should take conflicts ofinterest into account, this Court in G]en~r~ stated:

Benefits decisions arise in too manycontexts, concern too manycircumstances, and can relate in toomany different ways to conflicts - which

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themselves vary in kind and in degree ofseriousness - for us to come up with aone-size-fits-all procedural system that islikely to promote fair and accuratereview.

Id. at 2351.

The petitioners assert that the Second Circuit carvedout a broad exception to the deference principleenunciated in Bruch and Glenn when it held that nodeference is due to a plan administrator’sinterpretation of plan language when theadministrator interprets the plan outside of the plan’sadministrative claims process. See Petition at 12.Elsewhere, the Petition cites Frommert 2007for theproposition that the deference due to a planadministrator applies only when a plan administratoroffers its interpretation of the plan in the course of anadministrative determination of a participant’sbenefit.

Contrary to the spin placed upon G]en~ by thepetitioners, the decision in G]e~ did not expand theconcept of deference due to a plan administrator, butrather expanded the concept of what constitutes aconflict of interest from a brief reference to this conceptin Bruct~, 489 U.S. 101 (1989). As stated in Gle~n:

We here decide that this dual role [ofbeing both the employer and payor ofbenefits of a pension plan] creates aconflict of interest; that a reviewing courtshould consider that conflict as a factorin determining whether the planadministrator has abused its discretionin denying benefits; and that thesignificance of the factor will dependupon the circumstances of the particularcase. See Fire~tone Tire & Rubber Co. v.tlrueh, 489 U.S. 101 (1989).

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G]enn, 128 S. Ct. at 2346.

In accordance with the expanded concept of whatconstitutes a conflict, this Court affirmed the SixthCircuit decision in Glenn v. Metropolitan Life InB. Co.,461 F.3d 660 (6th Cir. 2006), holding that where aplan administrator both evaluates and pays claims, he"operates under a conflict of interest when makingdiscretionary benefit determinations." Glenn, 128 S.Ct. at 2347.

The opinion in Glenn goes on to state that the SolicitorGeneral suggested that this Court also consider "how"any such conflict should be taken into account onjudicial review of the discretionary benefitdetermination. This Court gave a four part response.First, it determined that a plan administrator holds aposition analogous to a trustee of a common law trustand should consider a benefits determination to be afiduciary act to which the administrator owes a specialduty of loyalty to the plan beneficiaries. Id. at 2347.Second, this Court held that principles of trust lawrequire courts to review a denial of trust benefitsunder a de hOVe standard unless the plan provides tothe contrary. Id. at 2348. Third, where the planprovides the administrator discretionary authority todetermine eligibility for benefits, trust principles makea deferential standard of review appropriate. Id.Fourth and last, this Court held that where a benefitplan gives discretion to an administrator operatingunder a conflict of interest, that conflict must beweighed as a factor in determining whether there is anabuse of discretion. Id. The Glenn decision thenfocused on the fourth principle and held there clearlyis a conflict of interest "where [as here] it is theemployer that both funds the plan and evaluates theclaims." Id. "In such a circumstance, ’,every dollarprovided in benefits is a dollar spent by . . . theemployer; and every dollar saved.., is a dollar in [the

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employer’s] pocket." Id. (citing Brueh v. Firestone Tire& Rubber Co., 828 F.2d 134, 144 (3d Cir. 1987)).

This Court then further reviewed the heightenedconsideration that should be given to a planadministrator operating under a conflict of interest,finding that ERISA is consistent with trust law incircumstances where a court approves a trustee’sconflict. These circumstances "[do] not change thelegal need for a judge to take account of that conflict inreviewing the trustee’s discretionary decision making.Glenn, 128 S. Ct. at 2349 (internal citations omitted).

In response, Metropolitan Life contended in Glenn thatto find a conflict in a situation where the planadministrator has discretionary authority wasinconsistent with an ERISA provision specificallyallowing employers to administer their own plans. See29 U.S.C. § 1108(c)(3). Continuing to cite trustprinciples where a court must approve a trustee’sconflicted decision making, this Court found thestatutory exception was outweighed by "Congress’desire to offer employees enhanced protection from theenefits. Id. (citing Varltjz v. Howe, 516 U.S. 489, 497

(1996) (discussing "competing congressional purposes"in enacting ERISA)).

IVo PETITIONERS IMPROPERLYIGNORE THE LAW OF THECASE REGARDING THETERMS OF THE PLAN

As the District Court noted in Frommert 2007. "TheCircuit resolved many issues and has clearlyestablished the law of the case in many respects."Frommort 2007, 472 F.Supp.2d at 456. By the timethis case had been remanded back to the DistrictCourt, it had already been determined that theapplicable terms of the Plan itself did not provide forany offset of Plan benefits for prior distributions fromthe predecessor of the CBRA and the TRA. In

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Frommert 2006, the Second Circuit determined that"under either an arbitrary or capricious standard or asa matter of law, that the Plan administrator’sconclusion that the Plan always included the phantomaccount is unreasonable." Frommert 2006, 433 F.3dat 265-66. In Frommert 2006, the Second Circuit alsorejected the contention that separate non-duplicationterms (under Section 9.6 of the Plan) applied withrespect to the prior distributions involved in this case,which had been made from Xerox’s previous ProfitSharing Plan:

As the defendants conceded at oralargument, as well as in their submissionto the court, the 1989 Restatement didnot specify how the Plan would accountfor the prior distributions of the newlycreated CBRA and TRA accounts, and,more significantly, made no mention ofthe phantom account offset or the factthat the hypothetical increased value ofthe prior distribution would be factoredinto the calculation of a rehiredemployee’s benefits.

Id. at 258.

Having reached these conclusions, the Second Circuitremanded the case, pointing out "the ambiguousmanner in which the pre-amendment terms of thePlan described prior distributions" and "suggest[ing]that [the District Court] may wish to employ equitableprinciples when determining the appropriatecalculation and fashioning the appropriate remedy."Id. at 268.

The District Court then did exactly as it had beendirected to do. It fashioned an equitable remedy withthe stated goal of providing the plaintiffs only whatthey might reasonably have expected and thusavoiding an employee "windfall." The offset that was

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allowed in this case the actual amount of thedistribution previously received was not based onexisting Plan terms at all, but on the court’s inherentequitable authority (and the specific directions madeon remand to that court). In other words, the fact thatany offset was permitted did not result from applicable"terms of the plan" but from equitable notions thatlimited the recovery due to plaintiffs under literalterms of plan documents.

The second leg of Xerox’s petition, asserting that theCourt of Appeals should have reviewed the trial court’s"interpretation of the plan" de nero ignores all of theforegoing history of this case. Moreover, nothing inBrueh and Glenn remotely suggests that the court’sequitable authority should have been transferred tothe Plan Administrator, and the Circuit Court casescited in Xerox’s Petition do not hold otherwise. Forexample, Oliver v. Coea-Cola Co., 546 F.3d 1353 (11thCir. 2008), involved a denial of long term disabilitybenefits. When the Circuit Court determined that theplaintiff qualified for such benefits, no determinationhad been made about how those benefits should becalculated under the terms of the company’s plan.Thus, the Circuit Court called for the case to beremanded to the plan administrator to make an initialapplication of the plan.

To briefly comment on the other cases cited by thepetitioners, the decision in Administrative Committeeof Wal-Mart Health & Welfare Plan v. Willard, 393F.3d 1119 (10th Cir. 2004), dealt with a situationwhere the plan administrators filed suit forreimbursement of medical expenses from a tortsettlement. In these circumstances, the deferencegiven to the plan administrator was intimately relatedto the benefits paid for which reimbursement wassought. As such, the court gave deference to the planadministrator’s interpretation of the plan’ssubrogation provision. This interpretation certainlywas related to a previous administrative

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determination that the participant was entitled tomedical benefits under the plan.

In Worthy v. New Orleans Steamship Association, 342F.3d 422 (Sth Cir. 2003), the court determined whethera union local was entitled to a position on the Board ofTrustees of a union association. Until the courtreached a decision on that issue, no deference wasgiven to the plaintiff union local. This is a far cry fromthe situation in this case, where the trial court, actingwithin the discretion granted to it by the SecondCircuit, chose the methodology to be utilized tocalculate a rehired Xerox employee’s pensionentitlement without implementation of the phantomaccount offset.

The petitioners also cite Hunter v. Caliber System,Inc., 220 F.3d 702 (6th Cir. 2000), as an exception tothe rule that deference should be paid to a planadministrator’s benefit determination. However, theprecise holding in Hunter is that "this case is aboutbenefits, and Fire, tone [Bruch] requires application ofthe arbitrary and capricious standard if required bythe language of the plan." Hunter, 220 F.3d at 711.Here, the Second Circuit concluded that, in the eventof a conflict between an SPD and the plan or the planadministrator’s interpretation of the plan, the SPDcontrols; the trial court was bound by that concept.

Finally, the decision in Harte v. Bethlehem SteelCorp., 214 F.3d 446 (3d Cir. 2000), clearly deals witha denial of benefits where the opinion of the planadministrator ordinarily would be entitled todeference. As found by the Harte court, the plaintiffwas "days short of being eligible for pensions whichwould provide greater benefits than the deferredvested pension to which he is currently entitled."Harte, 214 F.3d at 449. This holding is clearlyinapposite to the essential holding here, where theSecond Circuit found as a matter of law that thephantom account offset, the devious device employed

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by Xerox to retroactively reduce the plaintiffs’ pensionentitlement, violated ERISA Section 204(~g),., Frommert2006, 433 F.3d at 265-266 (observing that [i]t is clear,under either an arbitrary or capricious standard or asa matter of law, that the Plan administrator’sconclusion that the Plan always included the phantomaccount is unreasonable").

The portion of the Yrommert 2008 decision addressedin Xerox’s Petition involves Xerox’s "challenge [to] theDistrict Court’s remedyfor the ERISA violations [theSecond Circuit] identified in [its] prior decision."_Y~omme~t 2008, 535 F. 3d at 117 (emphasis added).Accordingly, the question of whether the District Courtwas required to remand determinations to the PlanAdministrator was resolved by the decision inY~ommert 2006 and was the law of the case by thetime of the appeal in Frommert 2008. AlthoughFrommert 2006 "did not prohibit the District Courtfrom remanding the case to the plan administrator,the language in [the Second Circuit’s] prior opinionpresumed that the District Court would craft theremedy itself." Id. at 118. Thus, in Frommert 2008,the Second Circuit declared that it "would review theDistrict Court’s decision to fashion a remedy itselfinstead of remanding to the plan administrator for anexcess of allowable discretion." Id.

As determined by the Second Circuit in Frommert2008, the trial court did not ignore the remedysuggested by the Plan Administrator, which has beendesignated as "the Plan Administrator’s Approach."The Second Circuit noted that the District Courtconsidered expert testimony regarding which of thevarious proposed remedies was most fair andequitable. Indeed, the Plan Administrator’s Approachwas deemed to be a potential alternative to the "newhire methodology" advocated by the petitioners onappeal as a substitute for the phantom account offset.It was not a determination by the Plan Administrator

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to which deference should be given in accordance withthe four principles stipulated in Glenn.

As cogently observed by the Second Circuit, theDistrict Court "had no decision to review because theplan administrator never rendered any decision otherthan the original benefit determinations, all of whichwere premised on the now-impermissible ’phantomaccount’ offset mechanism." Frommert 2008, 535 F.3dat 119. Notwithstanding, petitioners make theoutrageous suggestion that deference should be givento the same administrator who violated the law whenhe recommends a remedy for his violation. To use anold saw, the petitioners seek not only to have the foxguard the chickens but also decide how to cook them.

Xerox’s Petition cannot contend that the District Courtshould have remanded this case to the PlanAdministrator for a new benefit determination afterthe case was remanded to the District Court. Thatclaim would be inconsistent with the terms of theremand. Moreover, Frommert 2008 points out thatany such claim was waived, since it was not made atthe level of the District Court. Id. at 118. The basis forthe claims in Xerox’s Petition instead is that Bruct~and Glenn required the District Court to favor thelitigation position of the Plan Administrator or Plansponsor over that of plan participants when usingequitable powers to craft a remedy. Of course, nothingin Brueh or Glenn suggests any such thing.

A basic tenet of Glenn is that the District Court mustbe able to consider factors relevant to the particularcontext in which the question arose. Thus, Xeroxapparently is claiming that Frommert 2008 carved outa "broad exception" as a result of the conclusionexpressed in the following single sentence of Frommert2008:

Defendants-Appellants have identified noauthority in support of the proposition

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that a district cour~ must afforddeference to the mere opinion of the planadministrator in a case, such as this,where the administrator had previouslyconstrued the same terms and we foundsuch a construction to have violatedERISA.

Id. at 119.

That statement does not say that a trial court mustadopt a "talismanic" refusal to consider deference in a’~itigation context." It merely recognizes that anappropriate consideration of relevant factors, includingconflicts that are indisputably here in this case, wasleft to the District Court to determine on remand. Toreiterate, the District Court made an appropriateapplication of its equitable discretion as it was directedto do.

Moreover, the Second Circuit concluded (based on citedauthorities) that it would have been futile to "remand"such a determination to plan administrators that notonly were acting under a conflict but had obviouslyshown over a decade of litigation that they had dug inand were committed to defeating the claims of planparticipants made in this case. As set forth in the"Background of the Case" portion of this brief, threeseparate decisions of the Courts of Appeal havedetermined - for three separate reasons - that thebenefit determinations made by the PlanAdministrator substantially shortchanged PlanParticipants in the circumstances of the plaintiffs inthis case.

When trrommert was remanded to the District Court,Xerox still insisted that Plan Participants’ benefitsshould be reduced by the "phantom account." Indeed,such resistance continues today, as evidenced by theopinion in _Frommert 2008. ~ee Frommert 2008, 535F.3d at 122 ("eounseI for Defendants-Appellants

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represented to this Court at oral argument thatseveral of these Plaintiffs-Appellees had alreadyreceived pension benefits, albeit calculated under the’phantom account" offset method’) (emphasis added).This intransigence was certainly a factor which theDistrict Court considered in exercising on remand theequitable authority given to it by the Second Circuit.The District Court undoubtedly understood that theprolongation of this litigation effectively deniesbenefits to Plan participants who are aging (and insome eases have died). Xerox’s position on this appeal-- that the District Court must always defer to thePlan Administrator (and thus to the plan sponsor)where, as here, a conflict of interest clearly exists andwhere petitioners have been found to have violatedERISA statutes designed to protect pensioners -- isunsound and provides no reason for review by thisCourt.

CONCLUSION

Based on the foregoing, Respondents respectfullyrequest that the Supreme Court decline to review thequestions presented by the Petitioners.

Dated: January 28, 2009

Respectfully submitted,Robert H. Jaffe, Esq.Mark B. Watson, Esq.ROBERT H. JAFFE & ASSOCIATES, P.A.8 Mountain AvenueSpringfield, New Jersey 07081(973) 467-2246

George A. Schell, Esq.SCHELL & SCHELL410 Perinton Hills Office ParkFairport, New York 14450(585)377-2682

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John A. Strain, Esq.LAW OFFICES OF JOHN A. STRAIN1611 S. Catalina Avenue - Suite 212Rodondo Beach, California 90277(310) 944-3670