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Firestone Tire and Rubber Co. v. Bruch
United States Supreme Court
489 U.S. 101 (1989)
Firestone Tire and Rubber Company (Firestone) (defendant) was the administrator and fiduciary of three employee benefit plans under the Employee Retirement Security Income Act (ERISA). Firestone served as the sole funding source for the termination, retirement, and stock-purchase plans and had not set up separate trust funds to pay out the plan benefits. The termination plan provided termination pay if employees’ service was discontinued before the employees were eligible for pension benefits. Termination pay could trigger if employees were released due to a reduction in force. In 1980, Firestone sold its plastics division to Occidental Petroleum Company. Richard Bruch and other plastics-division employees (plaintiffs) filed claims with Firestone for severance benefits under the termination plan. Firestone denied the benefits, stating that the sale of the plastics division did not constitute a reduction in force. The employees filed a class-action suit in federal district court against Firestone under ERISA. The district court granted summary judgment for Firestone, finding that the company met its ERISA fiduciary duty because the denial of benefits was not arbitrary or capricious. The employees appealed to the United States Court of Appeals for the Third Circuit, which reversed the district court’s ruling. The court of appeals found that a denial of benefits should not be reviewed under the arbitrary-and-capricious standard. Instead, the court of appeals found that de novo review was the appropriate standard of review. Firestone appealed to the United States Supreme Court.
Rule of Law
Holding and Reasoning (O’Connor, J.)
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