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Covington Supreme Court Victory Good News for ERISA Plan Administrators

May 7, 2010

WASHINGTON, DC, May 7, 2010 — Covington & Burling LLP represented the prevailing parties in Conkright v. Frommert, a significant case in the U.S. Supreme Court concerning the Employee Retirement Income Security Act (ERISA). The Court’s ruling in favor of the Xerox Corporation pension plan and the plan’s administrator has implications for many other ERISA plans. Covington secured the victory despite vigorous opposition from the Solicitor General, the Department of Labor, and the Internal Revenue Service.

The case presented the question whether a court is required to defer to an ERISA plan administrator's interpretation of the terms of an ERISA plan after the plan administrator's initial interpretation has been found to violate ERISA. The Court’s ruling, issued April 21, holds that a court must defer to the plan administrator's interpretation so long as (1) the plan grants the plan administrator authority to interpret the terms of the plan, and (2) the plan administrator's original, erroneous interpretation was adopted in good faith.

The Court’s opinion, written by Chief Justice Roberts for a 5-3 majority, begins with a simple observation: “People make mistakes. Even administrators of ERISA plans.” This “should come as no surprise,” the Court explains, because ERISA is “an enormously complex and detailed statute.” Based on its review of the purposes of ERISA, as well as the plan’s terms and trust law principles, the Court concluded that “a single honest mistake in plan interpretation” does not provide a basis for stripping the administrator of deference “for subsequent related interpretations of the plan.”

The Court’s opinion articulates a clear vision of the role that judicial deference to plan administrators plays in ensuring the rational and orderly administration of ERISA plans. More broadly, the opinion continues a trend in which the Supreme Court recognizes plan administrators’ need for uniformity and predictability. It also recognizes the central importance of the time value of money in benefit calculations.

Covington’s appellate chair Robert Long argued the case before the high court with assistance from partner Robert Wick and associate Chris Pistilli (ERISA & employee benefits litigation). Also on the team were employee benefits partners Richard Shea, Robert Newman, and John Vine, and appellate of counsel Jonathan Marcus, special counsel Eric Sonnenschein, and associates Brian Foster, Josh Greenberg, and David Zionts*.

*Not yet admitted to practice.

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