Free Motion for Reconsideration - District Court of Arizona - Arizona

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David B. Rosenbaum, Atty. No. 009819 Dawn L. Dauphine, Atty. No. 010833 OSBORN MALEDON, P.A. 2929 North Central Avenue, Suite 2100 Phoenix, AZ 85012-2794 [email protected] [email protected] Telephone: (602) 640-9000 Michael L. Banks, Pro Hac Vice William J. Delany, Pro Hac Vice John Ferreira, Pro Hac Vice Amy Promislo Covert, Pro Hac Vice MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 [email protected] [email protected] [email protected] [email protected] Telephone: (215) 963-5000 Attorneys for Defendants IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

Barbara Allen, Richard Dippold, Melvin Jones, Donald McCarty, Richard Scates and Walter G. West, individually and on behalf of all others similarly situated, Plaintiffs, vs. Honeywell Retirement Earnings Plan, Honeywell Secured Benefit Plan, Plan Administrator of Honeywell Retirement Earnings Plan, and Plan Administrator of Honeywell Secured Benefit Plan, Defendants.

No. CIV 04-0424 PHX ROS

DEFENDANTS' MOTION FOR RECONSIDERATION AND CLARIFICATION AND ALTERNATIVE MOTION TO ALLOW INTERLOCUTORY APPEAL ORAL ARGUMENT REQUESTED

No. CIV 04-0424 PHX ROS
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I.

INTRODUCTION The Court's July 19, 2005 Order ("Opinion") brings order from chaos in many

respects, and enumerates some of the problems that courts have experienced in interpreting the relevant provisions of ERISA. However, Defendants ask for partial reconsideration under Local Rule 7.2(g), on the grounds that Michael v. Riverside Cement does not compel a determination that Defendants violated ERISA § 204(g)(1).1 Defendants ask that this Court reconsider whether the Ninth Circuit's decision in Michael is distinguishable from the instant case, inasmuch as: (i) the holding in Michael is based on ERISA § 204(g)(2), which is not implicated in this case, and (ii) the amendments Plaintiffs challenged, unlike those challenged in Michael (as well as in Heinz and Shaw), did not reduce or impair the pre-amendment value of Plaintiffs' accrued benefits. Defendants submit that there are several critical points that the Court did not discuss which support these conclusions. Alternatively, Defendants ask the Court to certify for interlocutory review the Court's Orders pursuant to 28 U.S.C. § 1292(b), so the Court of Appeals may assess whether Michael controls the outcome of the instant dispute, and if so, whether the Ninth Circuit should revisit the scope of its prior holding. Finally, Defendants ask the Court to clarify that its Order entering partial summary judgment in Plaintiffs' favor on certain legal claims does not preclude Defendants from developing a record and challenging such claims on an individual basis. Plaintiffs' motion for partial summary judgment was limited to certain narrow legal issues and it did not purport to address class certification or applicable individual defenses, such as the application of the statute of limitations or the effect of releases signed by some plan participants.
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Although Defendants disagree with the Court's holding regarding the inapplicability of the Secured Benefit Account offset to benefits calculated under the minimum formula, Defendants do not ask the Court at this juncture to reconsider its entry of summary judgment on that issue. Defendants do request, however, that the Court clarify its order to confirm that Defendants may assert affirmative defenses, develop a record and challenge the sufficiency of those claims on an individual basis. See discussion infra at 14.
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II.

THE COURT SHOULD RECONSIDER ITS HOLDING THAT MICHAEL APPLIES TO THIS CASE. This Court cautioned that if the holding in Michael v. Riverside Cement, 266 F.3d

1023 (9th Cir. 2001), is applied to all prospective changes to components of an existing pension formula, without regard to the overall impact on the bottom line dollar amount of pension benefits payable, the damage to pension plan sponsors and participants would be enormous and economically catastrophic. (Op. at 14-18.) As a practical matter, no employer would ever adopt or continue to maintain a pension plan if it could never alter, even on a purely prospective basis, any of the components of the plan's benefit formula. Although Defendants agree that the Michael decision is flawed in some respects, they submit that the holding is not quite as broad or draconian as this Court has suggested. Two critical distinctions make Michael different from the instant case (and other potential cases looming in the background): (1) Michael was decided under § 204(g)(2) of ERISA, 29 U.S.C. § 1054(g)(2), and does not apply to cases which involve mere changes in a pension accrual formula; and (2) Michael, unlike the instant case, addressed a reduction in those benefits that had accrued before the adoption of the challenged plan amendment. A. Michael and Heinz Involved Solely A Claim Under ERISA § 204(g)(2); This Case Involves An ERISA § 204(g)(1) Claim, Which Is Fundamentally Different.

There is a critical distinction between the instant case and Michael ­ and, for that matter, between the instant case and the Supreme Court's decision in Central Laborers Pension Fund v. Heinz, 541 U.S. 739 (2004). Both Heinz and Michael addressed the question of whether the amendments at issue violated ERISA § 204(g)(2)'s express prohibition of plan amendments that eliminate or reduce early retirement benefits. Here, there is no such challenge to an amendment that reduces or eliminates "early retirement benefit[s]," and, therefore, Heinz and Michael are inapposite. This Court correctly notes in its Opinion that § 204(g)(2) does not offer broader protection than § 204(g)(1). (Op. at 21.) However, § 204(g)(2) and § 204(g)(1) protect
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different benefits. More specifically, ERISA § 204(g) provides: (1) The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan . . . . (2) For purposes of paragraph (1), a plan amendment which has the effect of ­ (A) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations), or (B) eliminating an optional form of benefit with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. 29 U.S.C. § 1054(g) (emphasis added). 2 To determine whether an amendment violates § 204(g)(1), the proper analysis is whether the amendment caused a decrease to a participant's "accrued benefit."3 Id. By contrast, to determine whether an amendment violates § 204(g)(2), a court need not examine whether the amount of an annuity payable at normal retirement age has been reduced. Rather, under § 204(g)(2), the analysis is limited to whether the amendment reduces or impairs an early retirement benefit or retirement-type subsidy, or eliminates an optional form of benefit (i.e. a "(g)(2) Benefit"). If an amendment does reduce or eliminate a (g)(2) Benefit, then the analysis stops there, and the amendment "shall be treated as reducing accrued benefits." See 29 U.S.C. § 1054(g)(2). In other words, the amendment is deemed to reduce accrued benefits, even if it did not in fact reduce an "accrued benefit," as defined by ERISA § 3(23)(1), 29 U.S.C. § 1002(23)(1). This distinction is critical to understanding why the Ninth Circuit's
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An "optional form of benefit" under § 204(g)(2)(B) includes, for example, a lump sum payment of a participant's benefit. 3 As the Court noted in its opinion, "ERISA defines an `accrued benefit,' in the case of a defined benefit plan, as the `annual benefit commencing at normal retirement age," (Op. at 14, quoting 29 U.S.C. § 1002(23)(1)), which, "in turn, can sensibly mean nothing other than the dollar amount of the annuity at retirement ­ i.e., the product of the plan's benefit formula." (Id.) (emphasis in original.)
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holding in Michael and the Supreme Court's holding in Heinz are not dispositive of the instant case. The distinction between an accrued benefit protected by § 204(g)(1) and a form of benefit protected by § 204(g)(2) is apparent from the face of the statute and the legislative history. Prior to 1984, § 204(g) did not contain such a distinction. It protected only "accrued benefits," as opposed to early retirement or optional forms of benefits. Because accrued benefits were defined as the "annual benefit commencing at normal retirement age," 29 U.S.C. § 1002(23), many courts held that an employer was not precluded from eliminating alternative forms of benefits ­ such as early retirement and lump sum options ­ as long as the dollar value of an annuity payable at age 65 was not reduced. See, e.g., Bencivenga v. Western Pa. Teamsters and Employers Pension Fund, 763 F.2d 574, 577 (3d Cir. 1985). Congress filled the gap by adding (g)(2), which expanded ERISA protection beyond the bottom-line dollar value of the normal retirement annuity, to include a participant's right to elect to receive his or her benefits earlier, or in a different form, based upon the pre-amendment provisions of the plan (at least with respect to benefits that had accrued through the amendment date). Unfortunately, the courts that have addressed § 204(g) claims have not always carefully articulated this distinction in the statutory language and legislative history. In Michael, for example, the court sometimes referred to § 204(g), without citing the different subparts. Notwithstanding this somewhat loose citational form, however, the Michael court was clearly dealing with a (g)(2) case. Indeed, the Ninth Circuit specifically characterized plaintiff's claim as "aris[ing] in an unusual context," in that it involved a challenge to an amendment prohibited by § 204(g)(2): [Plaintiff's] claim, which we find meritorious, is that the terms of his second retirement under the amended plan impermissibly "eliminat[ed] or reduc[ed]" his earlier retirement benefits as they had been guaranteed by the plan prior to its amendment. See 29 U.S.C. § 1054(g)(2)(A). 266 F.3d 1023. In reaching its conclusion that the plan amendment violated ERISA's
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anti-cutback rule, the Michael court did not endeavor to determine whether any "accrued benefits," as defined by ERISA § 3(23), 29 U.S.C. § 1002(23), were reduced. Rather, it limited its analysis to determining whether plaintiff's early retirement benefit had been reduced or eliminated. The Michael court's emphasis on (g)(2) is readily apparent upon close inspection of the rationale it articulated in support of the decision. The court specifically defined the protected benefit as an early retirement benefit, the terms of which originally guaranteed that "the payments Michael received" upon his first retirement would not, if he were to be reemployed "cause a reduction in his second retirement benefit based on his total years of service." Id. at 1027. In other words, the unamended plan provided that plaintiff could return to work and, upon his second retirement, receive a pension benefit unreduced for the early retirement benefits he previously received. It was this early retirement benefit, as defined under the pre-amendment terms of the plan, that the court found was impaired when the plan was amended following plaintiff's initial retirement. The court concluded that by "requiring the deduction of the actuarial value of Michael's early retirement benefits, [which the pre-amendment plan had not done], the plan amendment clearly eliminated or reduced the early retirement benefits as they had existed under the [preamendment] plan." Id. The Michael court held that this impairment of the plaintiff's early retirement benefits violated ERISA's anti-cutback provision. Id. at 1026. The Court explained: The offset provision effectively eliminated five years worth of Michael's early retirement benefits that had not only been `promised, anticipated and accrued,' but paid under the condition that they would not have to be paid back if he was reemployed. The reduction . . . was the exact equivalent of requiring him to write out a check to the plan on the day he retired for the second time, in the amount of principal and interest received during his first retirement. Id. at 1027-28. That the Ninth Circuit limited its analysis to § 204(g)(2) is buttressed by its
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rejection of the district court's analysis, which focused on the net effect of the amendment under subsections (g)(1) and (g)(2). See id. at 1027. The Ninth Circuit explained that the elimination of the early retirement benefit "will not escape the reach of the anti-cutback rule simply because it is masked by a new benefit formula that leaves Michael with a net (but reduced) increase in annual retirement benefits." Id. at 1028-29. Thus, Michael holds that an amendment that reduces or eliminates early retirement benefits protected under § 204(g)(2) cannot be cured by a simultaneous amendment that increases accrued benefits under § 204(g)(1). The Michael decision, however, does not preclude an adjustment to a benefit formula that does not eliminate or otherwise impair an early retirement benefit or optional form of benefit protected under § 204(g)(2), and that does not reduce the overall dollar value of the pre-amendment benefit that was accrued under § 204(g)(1). By way of illustration, if "apples" are equivalent to benefits under § 204(g)(1), and "oranges" are equivalent to other benefits, rights and features under § 204(g)(2), in Michael, the Ninth Circuit held that no matter how many more apples you give to participants, you cannot take away any of their oranges. The instant case involves only apples and, at the end of the day, each participant is left with more apples (and just as many oranges) as he or she had before the amendment.4 In fact, Michael is not only distinguishable, but it supports Defendants' position that an amendment may change the discrete components of a benefit formula that are used Shaw v. Int'l Ass'n of Machinists & Aerospace Workers Pension Plan, 750 F.2d 1458 (9th Cir. 1995), is consistent with this interpretation of the anti-cutback rule and Michael. As noted below, Shaw involved an amendment that was a pure reduction of a § 204(g)(1) accrued benefit. Id. at 1460. The amendment at issue in Shaw reduced one component of the benefit formula (the automatic post-retirement "living pension" feature), with no offsetting increase in any other component of the benefit formula. Id. The result was a decrease in the dollar amount of the § 204(g)(1) accrued benefit payable to the participant at every point in time after the living pension feature would have been triggered under the pre-amendment terms of the plan. Id. Moreover, the plan in Shaw had no provision that protected the participants' pre-amendment accrued benefit level from reduction. Accordingly, the facts in Shaw are distinguishable from the facts before this Court, because the Honeywell plan increased the participants' net accrued benefit under § 204(g)(1) and, at a minimum, included a specific provision that protected participants' accrued benefits from reduction below pre-amendment levels.
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to determine a participant's accrued benefit under § 204(g)(1), so long as there is no reduction of a benefit or feature protected under § 204(g)(2) ­ either an early retirement benefit, a retirement-type subsidy or an optional form of benefit. In addressing the unique protections afforded to early retirement benefits, the Michael court acknowledged that other forms of offsets are permissible under ERISA: [T]here is no provision of ERISA that explicitly protects such additional "integrated" payments from reduction or elimination by plan amendment. But there is an explicit anti-cutback rule in § 1054(g) that protects early retirement benefits from elimination or reduction. That provision precludes an amendment that nullifies the condition on which the early retirement benefits were paid ­ the condition that they would not cause a reduction in benefits from a second retirement. Id. at 1028 (emphasis added). The protection described by the court, and at issue in Michael, is found exclusively in § 204(g)(2). Similarly, in Heinz, the Court analyzed a plan amendment that impaired early retirement benefits protected by § 204(g)(2). 541 U.S. at 739 ("Hence the question here: did the 1998 amendment to the Plan have the effect of `eliminating or reducing an early retirement benefit' that was earned by service before the amendment was passed?"). The challenged amendment in that case caused a reduction in the participant's early retirement benefits if he engaged in certain employment that had been permitted under the prior version of the plan. As a result, the Court found that a change in the condition for the receipt of retirement benefits violated § 204(g)(2). Here, unlike in Heinz and Michael, Plaintiffs do not contend that an amendment imposed a condition upon, or otherwise impaired, their early retirement benefits, retirement type subsidies or any other optional forms of benefits in violation of § 204(g)(2). Accordingly, Heinz and Michael are inapplicable to this Court's analysis of whether the amendment imposed an unlawful cutback under § 204(g)(1). Rather, the proper analysis under § 204(g)(1) remains whether the amendment
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reduces the participants' previously accrued benefit (i.e., the dollar amount of the accrued benefit expressed as an annuity commencing at normal retirement age), as determined under the plan's pre- and post-amendment benefit formula. As it is undisputed here that the challenged amendments did not reduce the dollar value of any participant's accrued benefits, the Court should deny partial summary judgment in favor of Plaintiffs, and enter judgment for Defendants on Plaintiffs' § 204(g) claims. Specifically, the Court should enter judgment against Plaintiffs on their claims that the merger of the Garrett Retirement Plan into the Signal Retirement Plan reduced or eliminated their accrued benefits under § 204(g) by: (i) retroactively increasing the interest rate used to project a portion of participants' Secured Benefit Accounts to age 65 for purposes of calculating the Secured Benefit Account offset; (ii) applying a Social Security offset attributable to years of service worked prior to the introduction of the offset; and (iii) eliminating a fractional reduction to the Secured Benefit Account offset for participants with more than 35 years of service. B. Unlike In Michael, Shaw and Heinz, The Amendments Challenged In This Case Did Not Reduce The Value of the Plaintiffs' Pre-Amendment Accrued Benefit; That Value Was Explicitly Preserved, As ERISA § 204(g)(1) Requires.

Another critical distinction between this case and Michael is that in the latter, as in Shaw and Heinz, the challenged amendments reduced benefits that had been promised to the participants attributable to their pre-amendment service. In Michael, for example, the plaintiff retired at a time when the plan gave him the right to return to work and retire again later without having his previously distributed early retirement benefits used as an offset against his future benefits. 266 F.3d at 1025. The challenged amendment stripped him of that pre-amendment right and, instead effectively required him "to write out a check to the plan on the day he retired for the second time, in the amount of principal and interest received during his first retirement." Id. at 1028. Similarly, the amendments challenged in Shaw and Heinz stripped the participants of benefits that had been promised before the plan amendments were adopted ­ the right to future "living pension"
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adjustments (Shaw) and the right to work for a participating employer in a management position without any benefit suspension (Heinz).5 See Shaw, 750 F.2d at 1459, and Heinz, 541 U.S. at 742, respectively. In all three cases, the amendments had the effect of diminishing benefits to which the participants had already become entitled. The instant case is fundamentally different from the others because, as the Court noted in its Opinion, the amendments challenged in this case (which only dealt with the plan formula for determining accrued benefits) expressly protected the participants' preamendment accrued benefits from any impairment: the "Accrued Benefit" as of December 31, 1983 of any Employee or Former Employee who was a participant in any plan which merged with this Plan effective January 1, 1984 shall not be less than his "Accrued Benefit" as of December 31, 1983 determined under the terms of such other plan . . . . (Op. at 25, quoting Signal Retirement Plan § 4.10(c); see also Op. at 8 (same).)6 The sine qua non of any ERISA § 204(g) violation is that some aspect of an amendment must reduce or otherwise impair the value of the pre-amendment benefit. The "failsafe" language in the Defendants' plan documents guaranteed that the benefits that had accrued before the challenged amendments could not be reduced or taken away. This is precisely the kind of protection that is discussed in the currently proposed Treasury regulations. See, e.g., Prop. Treas. Reg. § 1.411(d)-(3)(a)(4), Example 2. This Court suggested that the plan at issue in Michael contained similar failsafe language to the Honeywell plan. (Op. at 25). Although there was some prophylactic
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As this Court noted in its Opinion, the critical difference between Michael, on the one hand, and cases like Heinz and Shaw on the other, is that the amendment challenged in Michael contained offsetting future benefit improvements that made up for the impairment in pre-amendment value that Michael suffered. Under the analysis in the IRS's proposed regulations under Section 411(d)(6) of the Internal Revenue Code of 1986, this offsetting future benefit increase "cured" what would otherwise have been an impermissible cutback. 6 In fact, as the Court notes, Plaintiffs admit that no participant's accrued benefit was smaller or less valuable after the benefit formula was amended than it would have been under the pre-amendment formula. (Op. at 13.) Thus, unlike in Michael, Heinz and Shaw, here there was no impairment to benefits accrued before the amendment.
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language in Michael, the provision at issue there was not nearly as protective as the controlling provisions in the Honeywell plan. The amended plan in Michael did not specify that the pre-amendment benefit was preserved; it simply provided that the actual monthly pension amount paid to Michael after his second retirement would not be less than the dollar value of his former early retirement pension (after taking into account the new benefit formula and the newly added actuarial reduction for his previously paid benefits). See Michael, 266 F.3d at 1025, n. 3. Nothing in that language preserved for Michael the benefit that had been impaired by the amendment ­ the right to retain the full value of his prior early retirement benefits upon a subsequent retirement ­ and, not surprisingly, Riverside Cement did not rely on that language in defending against Michael's claim. The distinction between this case and the others noted above is best understood by recognizing that the anti-cutback rule sometimes protects more than just "dollars." What the anti-cutback rule protects, much more broadly, are certain enumerated categories of promised benefits: (1) in the case of § 204(g)(1), the participant's right to have his accrued benefit, at a minimum, calculated under the pre-amendment accrual formula, taking into account the applicable factors as of the amendment date (e.g., service and compensation); (2) in the case of § 204(g)(2), the right to retain, with respect to that preamendment accrued benefit, other valuable rights, features and options that are related to, though separate from, the accrued benefit itself (e.g., the right to receive the benefit early without an actuarial reduction, the right to be paid the benefit in a particular form such as a lump sum or the right to receive an early retirement benefit without reduction or suspension in the event of a return to employment). In this case, no pre-amendment promised benefits, measured as of the December 31, 1983 amendment date, were taken away. Thanks to the failsafe language, participants have been, and always will be, entitled, at a minimum, to the benefits they accrued as of December 31, 1983 under the pre-1984 plan provisions. Thus, if as the Court succinctly stated, the purpose of the anti-cutback rule is to prevent employers from pulling the rug
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out from under employees participating in a plan, no such violation has occurred and Michael does not control the instant dispute. III. IF THE COURT DENIES DEFENDANTS' REQUEST FOR RECONSIDERATION, THE COURT SHOULD GRANT INTERLOCUTORY APPEAL AND ALLOW THE NINTH CIRCUIT TO DECIDE WHETHER MICHAEL CONTROLS THIS DISPUTE AND, IF IT DOES, WHETHER MICHAEL SHOULD BE REVISITED, CLARIFIED OR NARROWED. Alternatively, Defendants ask the Court to certify its March 31 and July 19 Orders for interlocutory appeal,7 pursuant to 28 U.S.C. § 1292(b). Section 1292(b) certification is proper when a district court decision (1) involves a "controlling question of law," (2) as to

9 which there are "substantial grounds for difference of opinion," and (3) where an 10 immediate appeal may "materially advance the ultimate termination of the litigation." In 11 12 requirements is met here with respect to the Court's anti-cutback ruling. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A. The Application Of ERISA's Anti-Cutback Rule Is A "Controlling Question Of Law." re Cement Antitrust Litig., 673 F.2d 1020, 1026 (9th Cir. 1982).8 Each of these

"[A]ll that must be shown in order for a question to be `controlling' is that resolution of the issue on appeal could materially affect the outcome of the litigation in district court." Cement Antitrust Litig., 673 F.2d at 1026. A "controlling question need
7

Although the Court stated its rationale in the July 19 Order, it announced an intended ruling in its March 31 Order. Thus, certification of each is appropriate to ensure that the Ninth Circuit has jurisdiction over this interlocutory appeal. On August 8, 2005, 11 days after notice had already been sent of the July 19 Order, the District Court clerk's office issued an electronic notice of what appears to be a duplicate of the July 19 Order, this one dated July 8, 2005. It appears that the July 8 Order was filed in error and should be withdrawn.
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Section 1292(b) provides: When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order: Provided, however, that application for an appeal hereunder shall not stay proceedings in the district court unless the district judge or the Court of Appeals or a judge thereof shall so order.
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not be outcome determinative." Id. This Court has properly characterized its anti-cutback ruling as "the main issue in this case" (Op. at 48), and the most "financially significant issue." (Cf. Op. at 48 ("On the other financially significant issue....").) The anti-cutback ruling presents pure questions of law, making it ideal for resolution by interlocutory appeal. Further District Court proceedings would not facilitate appellate review at a later time. Quite to the contrary, if an appeal proceeds now, the Ninth Circuit will address the governing statute affecting the most significant claim in the case. A Ninth Circuit ruling in favor of Defendants will almost surely eliminate the most significant claims from Plaintiffs' case. Plaintiffs concede that the Signal Retirement Plan "gives them a greater net annual retirement benefit than the Garret Retirement Plan[]." (Op. at 13.) Defendants contend that a plan "amendment violates the anti-cutback rules [of § 204(g)(1)] only if the net dollar amount of the participant's period[ic] payment after the two amendments is lower than it would have been without the amendments." (Op. at 13-14.) If the Ninth Circuit agrees with Defendants, as this Court urges (Op. at 14), Plaintiffs' most significant claim will likely be eliminated from the case. B. There Are "Substantial Grounds For Difference Of Opinion."

There are substantial grounds to conclude that Michael is distinguishable, as discussed above. This Court has cogently articulated at least five independent reasons why Michael should not govern in this case. (Op. at 14-16.) These reasons are so compelling that this Court "would overrule ... Michael if it had the power" (Op. at 25), and other judges share this Court's view, e.g., Michael, 266 F.3d at 1029 (Paez, J., dissenting). Nevertheless, the Court felt constrained to apply Michael as an indistinguishable Circuit precedent on point. Section 1292(b) certification is properly used to give the Court of Appeals an opportunity to assess whether Circuit precedent is in fact controlling in a particular case. In Barnard v. Zapata Haynie Corp., 975 F.2d 919 (1st Cir. 1992), the First Circuit accepted § 1292(b) jurisdiction in a case ­ like this one ­ where the district court: (1) held
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that a prior Circuit opinion required denial of a motion to dismiss and (2) certified its order for interlocutory appeal. On appeal, the Circuit distinguished its prior opinion and reversed. Id. In this case, too, the Ninth Circuit may limit or revisit Michael, for all the persuasive reasons this Court has canvassed, as well as for those discussed above in this motion. Certification is also proper because there is a substantial basis to agree with Defendants that the Ninth Circuit has never addressed the application of the anti-cutback rule in a § 204(g)(1) case where the plan amendments produced an overall increase in the benefits payable to participants who had vested rights in the original plan. See discussion supra at 5-6, 9 n.5. The absence of Ninth Circuit authority on an issue is another factor favoring § 1292(b) certification. See Bassidji v. Goe, 413 F.3d 928 (9th Cir. 2005) (reviewing under § 1292(b) a district court order that raised an issue of first impression). C. An Immediate Appeal Will Materially Advance The Ultimate Termination Of The Litigation.

"By 28 U.S.C. § 1292(b), Congress provided a means by which, in appropriate circumstances and to further economy of litigation, full appellate review of important questions can be had prior to final judgment." Arthur Young & Co. v. United States District Court, 549 F.2d 686, 697 (9th Cir. 1977). In addition to its function in promoting judicial economy, § 1292(b) certifications are properly used to prevent "needless expense and delay...." Kuehner v. Dickinson & Co., 84 F.3d 316, 319 (9th Cir. 1996) (using "expense and delay" of district court proceedings as factors rendering a question of law "controlling" when it implicates the power of a forum to entertain a case). These considerations counsel certification here. This case is in its infancy, in that Defendants are this same date filing their Answer to the Complaint. The proper interpretation of § 204(g)(1)'s anti-cutback provision acutely affects Plaintiffs' most significant claim. If Defendants are right, that claim will likely fall out of the case, materially advancing termination of the litigation. By contrast, if this case proceeds in this Court, before the proper interpretation of § 204(g)(1) is addressed on appeal,
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substantial court time and party funds will be expended on matters such as class certification, discovery, and eventual trial. Among other issues, this Court will have to address in further proceedings: whether individual plan participants have claims that are time-barred; whether such participants suffered injury; and what remedies, if any, are available. If the Ninth Circuit accepts Defendants' position ­ a likely result for many of the reasons identified in this Court's July 19 Order ­ these proceedings and the expense involved can be avoided. Furthermore, any prospects for settlement will be greatly impaired as long as appellate proceedings are delayed. This Court has convincingly demonstrated why its anti-cutback ruling is unfair to Defendants and contrary to the language and logic behind ERISA. Until the Ninth Circuit speaks to the issues, the prospect for consensual resolution remains remote throughout the time appellate consideration of the anti-cutback ruling is stalled. In short, appellate resolution of the anti-cutback rule issue now will save significant Court and party resources. The issue is perfectly framed for appellate review now. If this Court denies Defendants' alternative motion for reconsideration, it should certify its Orders pursuant to § 1292(b). IV. THE COURT SHOULD CLARIFY ITS ORDER TO CONFIRM THAT IT IS LIMITED TO THE LEGAL ISSUES RAISED BY PLAINTIFFS' PARTIAL SUMMARY JUDGMENT MOTION AND THAT DEFENDANTS ARE NOT PRECLUDED FROM ASSERTING AFFIRMATIVE DEFENSES, DEVELOPING A RECORD AND CHALLENGING THE SUFFICIENCY OF PLAINTIFFS' CLAIMS ON AN INDIVIDUAL BASIS. Defendants seek clarification of the Court's July 19 Order. Specifically,

23 Defendants request that the Court confirm that, in granting partial summary judgment, the 24 Court ruled only that Defendants had breached 29 U.S.C. §§ 1054(g) and (h) by making 25 the challenged plan amendments, and did not intend to foreclose Defendants from taking 26 discovery on and asserting affirmative defenses related to individual putative class 27 members' claims. The July 19 Order, read literally, could be misconstrued to determine 28
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liability regardless of individual defenses. Plaintiffs' Amended Complaint was far from a model of clarity and left Defendants and the Court largely to guess at the claims Plaintiffs were raising. Similarly, Plaintiffs' Response to Defendants' Motion to Dismiss and Cross Motion for Partial Summary Judgment failed to articulate clearly the issues on which Plaintiffs were moving for summary judgment. In fact, in their brief, Plaintiffs did not even separate their arguments in support of the motion for partial summary judgment from their arguments in opposition to Defendants' Motion to Dismiss. Given the discrete albeit complicated legal issues addressed by the parties in their motions, it is evident that the sole issue before the Court was whether the 1984 and 1993 amendments violated ERISA and/or the terms of the Plan. Moreover, Plaintiffs purported to bring claims on behalf of "a large class of injured participants." (Id. at 4 n.2.) But when Plaintiffs moved for partial summary judgment, Defendants had not yet answered the complaint, the parties had not taken any discovery, and Plaintiffs had not filed a motion for class certification. Certainly, therefore, Plaintiffs' motion did not seek an adjudication of the many nuanced issues related to individual putative class members' claims. Although such factual issues may not have been relevant to the narrow legal questions Plaintiffs' motion presented, they are directly relevant to whether a class may be certified, whether individuals can establish a claim, and to the damages, if any, that individual putative class members can recover. For example, the applicable statute of limitations may bar part or all of some putative class members' claims for damages related to the breaches the Court found. Likewise, some putative class members may have executed releases of the claims at issue in this matter. Therefore, Defendants understand the Court's decision to hold only that Defendants breached 29 U.S.C. §§ 1054(g) and (h), without forestalling Defendants' ability to take discovery on and assert affirmative defenses (e.g., the statute of limitations and release) regarding individual putative class members. (Op. at 49-50.) Consistent with this understanding, Defendants are this same date filing their Answer to Plaintiffs' complaint. Accordingly, Defendants respectfully request that this Court clarify its July 19,
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2005 Order, and confirm that the Court's order resolved only those legal issues addressed therein and that the parties may otherwise proceed with litigation of this case. V. CONCLUSION For the reasons discussed above, Defendants respectfully request that this Court reconsider its grant of summary judgment for Plaintiffs on their legal argument that Defendants violated ERISA's anti-cutback rule, and instead enter judgment for Defendants on Plaintiffs' § 204(g) claims. In the alternative, Defendants respectfully request that the Court certify the issue for interlocutory appeal so that the Ninth Circuit may examine whether amendments of the type before the Court here that do not reduce or eliminate a participant's accrued benefit are barred by Michael, and, if so, whether the Ninth Circuit intends to narrow or reverse the Michael decision, as this Court invited it to do. In addition, Defendants respectfully request that the Court clarify its Order to confirm that it does not prevent Defendants from asserting affirmative defenses to, and taking discovery regarding, Plaintiff's individual claims that are impacted by the Court's disposition of certain legal issues in this lawsuit. Respectfully submitted this 10th day of August, 2005. OSBORN MALEDON, P.A. By: s/ David B. Rosenbaum_____ David B. Rosenbaum Dawn L. Dauphine Osborn Maledon, P.A. 2929 North Central Avenue, Suite 2100 Phoenix, AZ 85012-2794 Michael L. Banks (Pro Hac Vice) William J. Delany (Pro Hac Vice) John G. Ferreira (Pro Hac Vice) Amy Promislo Covert (Pro Hac Vice) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 Attorneys for Defendants
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CERTIFICATE OF SERVICE I do certify that on August 10, 2005, I electronically transmitted the attached

3 document to the Clerk's Office using the CM/ECF System for filing and transmittal of a 4 Notice of Electronic Filing to the following CM/ECF registrants: 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
1 Case 2:04-cv-00424-ROS Document 79 Filed 08/10/2005 Page 18 of 18

Susan J. Martin Jennifer Lynn Kroll Martin & Bonnett P.L.L.C. 3300 N. Central Avenue, Suite 1720 Phoenix, Arizona 85012-2517 Attorney for Plaintiff s/ Ann E. Blacketer Ann E. Blacketer