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Friday, August 13, 2010

Telephony in the News - A Little Bit o' Mel Gibson, and a Big Scrivener's Error by Verizon


Sometimes, every now and then, something is just so (and I don't mean in the Rudyard Kipling sense). Maybe not very often, but sometimes. We can all posture and argue and contend and angle and position and claim regarding every little thing, but, sometimes . . . it simply is what it is. Cf. Jacobellis v. Ohio, 378 U.S. 184, 197 (1964) (Stewart, J., concurring) (". . . I know it when I see it . . . ." (referring to hard-core pornography)).

For example, regardless of whether people do things behind closed doors that they might or might not regret from time to time, can we at least agree that Mel Gibson wishes he had back those, er, a bit over-the-top phone calls? That seems like an inexorable and immutable truth, no?

With that underlying perspective regarding absolute truths in the realm of telephony, a recent telecommunications case seems to address the question of whether there is some sanity in the rules governing the ERISA world in which we live. The question at issue essentially boiled down to - when it comes to basic drafting, does it really have to be one big game of Gotcha, where everyone tries to find some linguistic nuance or error that unexpectedly confers or denies a payment or benefit, regardless of the obviously "right" answer? Or, maybe, just maybe, when a result is clearly right, the lawyers and judges won't muck it all up?

Well, the unanimously decided case of Young v. Verizon's Bell Atlantic Cash Balance Plan, Nos. 09-3872, 09-3965 (7th Cir. Aug. 10, 2010), shows that the idealists among us may not always be tilting at windmills - windfalls for silly little mistakes aren't always the rule of the day. Sometimes, I guess, someone can indeed look at a set of facts and say something along the lines of, "Hey, here, there's an obviously right answer, and we're gonna go with it."

A Drafting Error

In Verizon, echoing what will I suspect become quite apocryphal words from the recent case of Conkright v. Frommert, 130 S. Ct. 1640 (2008), the court in Verizon began by reminding us that, "People make mistakes. Even administrators of ERISA plans."* From that seminal and unassailable premise, the court declined to heap bunches and bunches o' money on plan participants that deserved not a penny of it. Hooray.

So, what happened in Verizon? Without getting into the nuances, a plain, simple and not-seriously-disputed drafting error (boy, do I feel for the guy who missed a stray clause here) would have, if propagated, caused a cash-balance benefit to be subject to an extra upwards multiplier. Intent was clear, as were all communications, that only one adjusting multiplier was to be applied. Frankly, I give the participant, or someone acting on her behalf, quite a lot of credit for finding this gaffe-y glitch. And, I guess, in this world, if you have an opportunity to take some poor soul - or company - to the cleaners, regardless of what's right or reasonable, ya go for it. (sigh)

Predictably, this little exercise in attempted flagellation then grew into a (ominous music, please) class action worth over a billion (!!) dollars. Easy case? An obvious grab for an unintended benefit based on manifest error. I guess it was easy, if you consider a "four-year, multi-phase litigation" easy. (sigh, again)

To the Seventh Circuit, the basic question became whether the courts are bound to follow plan language that is clearly nothing more complicated than a flat-out error. As indicated in Verizon, courts have long held open the possibility that common sense might somehow prevail "in the rare case where literal application of a text would lead to absurd results or thwart . . . obvious intentions . . . ."

And not only was the error in Verizon obvious, but it was also an error on which no one relied. "Prior to [this] lawsuit, no employee complained that opening balances should have been increased by an additional transition factor. For her part, [the named plaintiff] admitted that she never relied on the [errant] transition factor language . . . prior to [the Verizon] litigation." Well, she was honest about it, anyway.

Equitable Reformation

In light of all of this, the Seventh Circuit was inclined to allow the plan in Verizon to be reformed to its evident intent. There were several impediments to their getting there, though.

I don't know why, but the following struck me as particularly funny in its circularity: ". . . Seventh Circuit precedent provides less guidance on the accrual of a claim for equitable reformation under ERISA . . . - understandably so, since the cognizance of such a claim is an issue of first impression for [the Seventh Circuit]." Geez, funny or not, it seems like they came dangerously close to holding that the plaintiff's claim was not time-barred, but that the company's action to fix the error that gave rise to the claim was time-barred. They did not, however, reach that potentially odd and disconcerting whipsaw result. Whew.

Another potential impediment to the use of the equitable-reformation approach involved the good faith and clean hands, or lack thereof, of the plan sponsor. Now, if the basics of the case are not enough to send chills down your spine, wait till you get a load of this**: "[The plan sponsor] charged a single in-house attorney . . . with revising a critical provision of a multi-billion-dollar pension plan, apparently without critical review by another ERISA expert. It is baffling that a major corporation would not invest greater resources to ensure accuracy in the drafting of such an important document." (shud-DER)

Wow. There-but-for-the-grace, and all that rot. But, then, the sigh of relief (at least for the sponsor and, to be sure, the drafter) comes as the court continues, "Still, we cannot agree . . . that this institutional failure showed a lack of good faith."


The final lucid, almost elegant, summary sentence in Verizon? - "ERISA's rules for written plans are strictly enforced, but they are not so strict as to prevent equitable reformation of a plan that is shown, by clear and convincing evidence, to contain a scrivener's error that is inconsistent with participants' expected benefits." Hooray, again. Hip hip, even.

I guess we can hope that employers don't make the courts sorry for this appropriately common-sense approach. It would be unfortunate if the courts became reticent to do the right thing in the face of efforts to overuse the case where it doesn't belong. Having said that,*** Verizon seems to be obviously correct on its own facts, and its reasoning seems most appropriate in the context of obvious and gross errors leading to manifestly inappropriate results.
* I'm brought back to the time when Pacino reminded us in ". . . And Justice for All" (albeit in an admittedly quite different context) that, "They're people. They're just people."

** To be spoken with the tone used by Jack for his Batman line, "Wait till they get a load of me."

*** Yes, I watch "Curb Your Enthusiasm."

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