Free Response in Opposition to Motion - District Court of Arizona - Arizona

OSBORN MALEDON
A PR O FESSI O NA L A SSO CIA TI O N A T T O R N E Y S A T LA W

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The Phoenix Plaza 21st Floor 2929 North Central Avenue Phoenix, Arizona 85012-2793 P.O. Box 36379 Phoenix, Arizona 85067-6379 Telephone Facsimile 602.640.9000 602.640.9050

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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 Telephone: (602) 640-9000 [email protected] [email protected] Michael L. Banks, Pro Hac Vice Azeez Hayne, Pro Hac Vice MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 Telephone: (215) 963-5000 [email protected] [email protected] Howard Shapiro, Pro Hac Vice PROSKAUER ROSE LLP 909 Poydras Street, Suite 1100 New Orleans, LA 70112-4017 Telephone: (504) 310-4088 [email protected] Amy Covert, Pro Hac Vice PROSKAUER ROSE LLP One Newark Center, 18th Floor Newark, NJ 07102 Telephone: (973) 274-3258 [email protected]

Christopher Landau, P.C., Pro Hac Vice Craig S. Primis, P.C., Pro Hac Vice Eleanor R. Barrett, Pro Hac Vice KIRKLAND & ELLIS LLP 655 Fifteenth Street, N.W. Washington, DC 20005-5793 Telephone: (202) 879-5000 [email protected] [email protected] [email protected]

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. CV04-0424 PHX ROS

DEFENDANTS' OPPOSITION TO PLAINTIFFS' MOTION TO FILE SUR-REPLY

Case 2:04-cv-00424-ROS

Document 391

Filed 01/29/2008

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This Court should deny plaintiffs leave to file their proposed sur-reply brief, because they already have had more than a full and fair opportunity to respond to defendants' motion for reconsideration on the anti-cutback claims. Indeed, plaintiffs sought (and obtained) extensions of both time and pages to respond to that motion. See Order (12/10/07) (Docket #336); Order (12/28/07) (Docket #362). In addition, plaintiffs filed ancillary motions regarding discovery, see Motion (12/22/07) (Docket #357), and supplemental briefs, see Motion (1/3/08) (Docket #363), in which they also advanced merits arguments. Plaintiffs are not entitled to file a new brief every time they think of a new argument. Indeed, their ostensible justification for their motion--that defendants raised new arguments for the first time in their reply brief--is groundless. The first issue that plaintiffs address, whether the Treasury Regulations interpreting ERISA are entitled to Chevron deference, has been in this case for years. Indeed, this Court held years ago that the 2005 Treasury Regulation, if it applied here, would be entitled to Chevron deference, see Order (11/18/05) (Docket #138) at 7-8, and defendants' motion for reconsideration simply noted that the Treasury Letter establishes that what is true for the 2005 Treasury Regulation is also true for the 1977 Treasury Regulation. Plaintiffs thus err by suggesting that the Chevron issue was raised for the first time in defendants' reply brief: the very premise of defendants' reconsideration motion is that "[u]nder basic principles of administrative law articulated in Chevron ..., and Brand X, Michael poses no impediment to deferring to the 1977 Regulation, just as it imposes no impediment to deferring to the 2005 Regulation." Recon. Mot. (Docket #323) at 12. What is really afoot here is that plaintiffs have apparently decided to raise a new argument against Chevron deference that they failed to raise in their response to the reconsideration motion. But they are not entitled to do that, and in any event their new argument is wrong. Plaintiffs seem to think that labeling a particular regulation as "interpretive" or "legislative" is dispositive for Chevron purposes. But, as this Court previously explained, even interpretive regulations "can be relied upon as authoritative
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law," Order (11/18/05) at 10, and to that extent are entitled to Chevron deference, see, e.g., United States v. Mead Corp., 533 U.S. 218, 229 (2001) (Chevron deference warranted when "Congress would expect the agency to be able to speak with the force of law"); Long Island Care at Home, Ltd. v. Coke, 127 S. Ct. 2339, 2349-51 (2007) (Chevron deference warranted where interpretive regulation is "a binding application of [the agency's] rulemaking authority"). And in any event, regardless of whether fullblown Chevron deference applies, there can be no question that the 1977 Treasury Regulation is entitled to at least some judicial deference, but did not receive any such deference from the Ninth Circuit in Michael because no party brought that Regulation to the Court's attention. Accordingly, Michael presents no barrier to deferring to the 1977 Regulation here. See, e.g., Omohundro v. United States, 300 F.3d 1065, 1067 (9th Cir. 2002) (per curiam).1 The second issue that plaintiffs address in their proposed sur-reply relates to the "`net effect' of the challenged amendments." Proposed Sur-Reply 2. But plaintiffs already addressed that issue at great length in their opposition to the reconsideration motion and in the supporting declaration of Claude Poulin. Plaintiffs are not entitled to yet another bite at the apple on this score.

Plaintiffs further err by arguing that the 1977 Treasury Regulation is "not ... entitled to Chevron deference because the notice and opportunity to comment when the 1977 regulation was proposed in 1975 would have been legally deficient under the APA." Proposed Sur-Reply (Docket #382) at 2. Putting aside the fact that this is an attack on the validity of the 1977 Regulation (as opposed to the level of judicial deference due that regulation), and the incongruity of a challenge to the validity of a regulation adopted more than thirty years ago, cf. Long Island Care, 127 S. Ct. at 235152 (rejecting notice-and-comment challenge where there was "no indication that anyone objected to [the agency's] explanation at the time"), this argument is meritless. Plaintiffs complain that the "1975 proposed regulation ... did not include the sentence Defendants contend embodies an alleged `net effect rule' in the 1977 regulation." Proposed SurReply 2-3. But whether the 1975 proposed regulation included a particular sentence is immaterial, as long as that proposed regulation put interested parties on notice of the subject matter of the regulation so that they could comment. See, e.g., Arizona Pub. Serv. Co. v. EPA, 211 F.3d 1280, 1299 (D.C. Cir. 2000); Trans-Pac. Freight Conf. v. Fed. Mar. Comm'n, 650 F.2d 1235, 1248 (D.C. Cir. 1980). That standard is easily met here, given that the Treasury Department gave notice that the proposed regulation was about the scope of the "[p]rohibition against accrued benefit decrease[s]" under ERISA. 40 Fed. Reg. 51445, 51466 (Nov. 5, 1975) (proposed § 1.411(d)-3(c)).
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What plaintiffs are really trying to do here is to mischaracterize defendants' position. According to plaintiffs, defendants are arguing "that the Court should look at the alleged plan-wide aggregate net dollar value of benefits paid by the Signal Plan" to determine if there was a violation of the anti-cutback rule. Proposed Sur-Reply at 4 (emphasis added). But defendants are arguing nothing of the sort. Rather, defendants are arguing that the challenged amendments overall did not decrease the accrued benefits of any individual plan participant, and the saving clause ensured that the accrued benefits of every individual plan participant were not reduced as a result of the plan merger. See, e.g., Recon. Reply (Docket #368) at 6; Denlinger Decl. (Docket #368-2) ¶¶ 8-9. Defendants' actuary simply noted the aggregate dollar value of the benefit increases attributable to the challenged amendments to underscore the fundamental irony here that the Signal Plan vastly increased the accrued benefits paid by the Garrett Plan. Id. ¶¶ 5-6. Plaintiffs' proposed sur-reply also seeks to reargue plaintiffs' position (already argued at length in their opposition to the reconsideration motion) that accrued benefits "are required to be measured" as of the effective date of a challenged amendment. Proposed Sur-Reply 6. But, as defendants noted in their reply brief, that position makes no sense in the context of a floor-offset plan like the amended Signal Plan, where accrued benefits cannot be determined until retirement. Recon. Reply 11. Indeed, plaintiffs themselves emphasized this very point in the statute of limitations briefing. See Pls.' S.J. Opp. (Docket #375) at 3 (insisting that accrued benefits "cannot be determined until retirement" in arguing that statute of limitations did not begin running until then) (emphasis added). Needless to say, plaintiffs cannot have it both ways: they cannot on the one hand argue that they suffered a dramatic reduction in accrued benefits on the very day the challenged amendments took effect, while on the other hand arguing that whether the challenged amendments reduced their accrued benefits at all could not be determined until they retired.

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Finally, plaintiffs reiterate their attacks on the Signal Plan's saving clause. See Proposed Sur-Reply 7-10. Putting aside the irony of plan participants seeking to defend a ruling that the Plan unlawfully reduced their benefits by attacking the very clause that prevented the Plan from reducing their benefits, plaintiffs' arguments present nothing new. Plaintiffs already made these arguments in their opposition to the reconsideration motion, Opp. to Recon. Mot. (Docket #352) 15-17, and defendants addressed those arguments in their reply brief, Recon. Reply 6-10. Plaintiffs may want the last word on the reconsideration motion, but they are not the movants, so they are not entitled to the last word. CONCLUSION For the foregoing reasons, this Court should deny plaintiffs' motion to file a surreply brief regarding defendants' motion for reconsideration on the anti-cutback claims. Respectfully submitted this 29th day of January, 2008. OSBORN MALEDON 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 Azeez Hayne MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 Howard Shapiro PROSKAUER ROSE LLP 909 Poydras Street, Suite 1100 New Orleans, LA 70112-4017 Amy Covert PROSKAUER ROSE LLP One Newark Center, 18th Floor Newark, NJ 07102-5211

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Christopher Landau, P.C. Craig S. Primis, P.C. Eleanor R. Barrett KIRKLAND & ELLIS LLP 655 Fifteenth Street, N.W. Washington, DC 20005-5793

CERTIFICATE OF SERVICE I do certify that on January 29, 2008, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to all CM/ECF registrants.

s/Kelly Dourlein

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