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Curtiss-Wright Corp. v. Schoonejongen

Supreme Court of the United States
514 U.S. 73, 131 L. Ed. 2d 94, 1995 U.S. LEXIS 1807 (1995)
ELI5:

Rule of Law:

A standard reservation clause in an employee benefit plan stating that 'The Company' reserves the right to amend the plan satisfies ERISA § 402(b)(3)'s requirement to provide a procedure for amendment and to identify the persons with amendment authority. The identity of the specific corporate actors with authority to amend is determined by applying ordinary principles of corporate law.


Facts:

  • Curtiss-Wright Corporation maintained a voluntary postretirement health plan for its employees, including the respondents who were retirees from its Wood-Ridge, New Jersey facility.
  • The plan documents contained a reservation clause stating: '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.'
  • In early 1983, Curtiss-Wright issued a revised Summary Plan Description (SPD) that included a new provision terminating health benefits for retirees if the facility from which they retired ceased business operations.
  • The Curtiss-Wright employees who drafted the new provision testified they believed it was a clarification of the existing plan, not a formal amendment.
  • Later in 1983, Curtiss-Wright announced the closure of the Wood-Ridge facility.
  • Following the closure announcement, an executive vice president at Curtiss-Wright sent letters to the respondents informing them that their post-retirement health benefits were being terminated pursuant to the new SPD provision.

Procedural Posture:

  • Respondents, a group of retirees, filed suit against Curtiss-Wright Corporation in the U.S. District Court, challenging the termination of their health benefits.
  • The District Court ruled in favor of the retirees, holding that the plan's reservation clause did not constitute a valid amendment procedure under ERISA § 402(b)(3) and declared the amendment terminating benefits void.
  • Curtiss-Wright, as appellant, appealed the decision to the U.S. Court of Appeals for the Third Circuit.
  • The Third Circuit affirmed the District Court's judgment, agreeing that a clause naming only 'the Company' was too vague to satisfy § 402(b)(3)'s requirements.
  • The U.S. Supreme Court granted Curtiss-Wright's petition for a writ of certiorari.

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Issue:

Does a provision in an employer-sponsored benefit plan stating that 'The Company reserves the right at any time to amend the plan' satisfy the requirement under ERISA § 402(b)(3) to provide 'a procedure for amending such plan, and for identifying the persons who have authority to amend the plan'?


Opinions:

Majority - Justice O’Connor

Yes. A standard reservation clause stating that 'The Company' reserves the right to amend an employee benefit plan satisfies the requirements of ERISA § 402(b)(3). The statute's plain text requires a procedure for identifying the amending authority, and since ERISA defines 'person' to include a corporation, naming 'The Company' is sufficient. This clause also establishes a 'procedure for amending'—namely, a unilateral decision by the company, as opposed to amendment by a union or third party. To determine what it means for 'the Company' to act, courts should look to established principles of corporate law, which provide rules for identifying who has the authority to make decisions on behalf of a corporation. Requiring greater specificity would lead to the invalidation of countless standard plan provisions and is not supported by the statutory text or ERISA's broader scheme, which relies on reporting and disclosure requirements to inform beneficiaries of their rights.



Analysis:

This decision provides significant clarity and flexibility for employers managing ERISA welfare benefit plans by validating a widely used standard reservation clause. It prevents the potential invalidation of numerous plan amendments that could have resulted from the lower court's more stringent interpretation. The Court's reliance on corporate law principles to interpret 'the Company' avoids the need to create new federal common law for ERISA and shifts the focus of litigation from the facial validity of the amendment procedure to a fact-intensive inquiry into whether the proper corporate authority was exercised. This preserves employees' ability to challenge improperly adopted amendments while protecting employers from challenges based solely on the generality of their plan language.

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