COTTILLION et al v. UNITED REFINING COMPANY et al
Filing
223
MEMORANDUM AND ORDER. Plaintiffs' Motion for Class Certification (Doc. 192 ) is GRANTED, as described; Plaintiffs' Motion Proposing Final Remedy (Doc. 203 ) is GRANTED IN PART AND DENIED IN PART, as described; Defendants' Motion for Judgment on the Pleadings (Doc. 194 ) is GRANTED, and Counts I, II and III of the Amended Complaint, only, are DISMISSED WITH PREJUDICE. By 12/6/13, the parties shall file written reports/stipulations regarding class composition and payment amounts. See Memorandum and Order filed herewith for further details and instructions. Signed by Judge Cathy Bissoon on 11/5/13. (dcd)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
JOHN COTTILLION, et al., on behalf
of themselves and all others similarly
situated,
Plaintiffs,
v.
UNITED REFINING COMPANY,
et al.,
Defendants.
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Civil Action No. 09-140E
Judge Cathy Bissoon
MEMORANDUM AND ORDER
I. MEMORANDUM
For the reasons that follow, Plaintiffs’ Motion for Class Certification (Doc. 192)
will be granted, Defendants’ Motion for Judgment on the Pleadings (Doc. 194) will be granted,
and Plaintiffs’ Motion Proposing Final Remedy (Doc. 203) will be granted in part and denied
in part.
BACKGROUND AND PROCEDURAL HISTORY
Plaintiffs John Cottillion (“Cottillion”) and Beverly Eldridge (“Eldridge”) (collectively,
“Plaintiffs”) are former employees of the United Refining Company (“United Refining”)
who participate and have vested interests in the United Refining Pension Plan for Salaried
Employees (“the Plan”). See Cottillion v. United Refining Co., 2013 WL 1419705, *1 (W.D. Pa.
Apr. 8, 2013). Cottillion and Eldridge are referred to by the Plan as “terminated vested
participants” because their employment with United Refining ended after they had satisfied the
Plan’s vesting requirement, but prior to the “Early Retirement Date.” Id.
Prior to 2005, the Plan administrator consistently interpreted the relevant Plan documents
as providing unreduced early retirement benefits for terminated vested participants such as
Cottillion and Eldridge. Id. at *2-4. In 2005, however, the Plan administrator began issuing
letters to terminated vested participants informing them that their prior benefits calculations had
been incorrect and that their monthly pension amounts should, in fact, have been actuarially
reduced. Id. at *4-6. Consistent with this new interpretation of the Plan, the Plan administrator
petitioned the Internal Revenue Service (“IRS”) to allow the Plan to recoup the purported
overpayments to members of the class. Id. Cottillion and Eldridge responded by filing the
instant action asserting: a claim for benefits pursuant to ERISA § 502(a)(1)(B), 29 U.S.C.
§ 1132(a)(1)(B); a claim for declaratory relief under §§502(a)(1)(B), 502(a)(3), 29 U.S.C.
§§ 1132(a)(1)(B), 1132(a)(3); a breach of fiduciary duty claim pursuant to § 404, 29 U.S.C.
§ 1104; and a claim alleging a violation of ERISA’s anti-cutback provision, § 204(g), 29 U.S.C.
§1054(g)(2).
On April 8, 2013, District Judge Sean J. McLaughlin issued a Memorandum Opinion and
Order granting summary judgment in favor of Plaintiffs on their anti-cutback claims and
dismissing the remaining claims without prejudice. Id. at *15. In that Opinion, the Court
concluded that the Plan administrator’s prior interpretation of the Plan as providing unreduced
early retirement benefits had produced an “accrued benefit” within the meaning of ERISA
Section 204(g)(2). Id. at *12 (citing 29 U.S.C. § 1054(g)(2)). Consequently, according to
Judge McLaughlin, the Plan administrator’s reinterpretation of the Plan in 2005 and 2006
to eliminate that benefit ran afoul of ERISA’s anti-cutback rules. Id.
Plaintiffs now seek to certify a class consisting of all terminated vested participants who,
like Cottillion and Eldridge, vested under either the 1980 or 1987 Plan Documents and accrued a
2
right to unreduced early retirement benefits. The putative class consists of approximately
30 individuals who, like Cottillion, already have begun receiving unreduced monthly benefits,
and approximately 150 individuals who, like Eldridge, have not yet elected to commence
receiving benefits payments. See Libman Report (Doc. 203-1). Plaintiffs also seek to clarify and
reduce to final judgment those remedies appropriately flowing from Judge McLaughlin’s
summary judgment ruling. For their part, Defendants oppose each of the instant Motions and
further request that the Court dismiss with prejudice the three counts of the Amended Complaint
that Judge McLaughlin declined to reach.
ANALYSIS
A.
Motion for Class Certification
Pursuant to Federal Rule of Civil Procedure 23, Plaintiffs have moved to certify the
following settlement class:
All terminated vested participants in the United Refining Company
Pension Plan for Salaried Employees (“Plan”), who were employed by
United Refining Company at any time between January 1, 1987
and March 18, 2003, and their beneficiaries under the Plan.
See Plaintiffs’ Motion for Class Certification (Doc. 192).
In order to warrant certification, a class action proponent must satisfy the threshold
requirements of Fed. R. Civ. P. 23(a) and demonstrate that the action is maintainable under one
of the subsections of Rule 23(b). Rule 23(a) provides that:
One or more members of a class may sue or be sued as representative
parties on behalf of all members only if: (1) the class is so numerous
that joinder of all members is impracticable; (2) there are questions of
law or fact common to the class; (3) the claims or defenses of the
representative parties are typical of the claims or defenses of the class;
3
and (4) the representative parties will fairly and adequately protect the
interests of the class.
Fed. R. Civ. P. 23(a). These four threshold requirements commonly are referred to as
numerosity, commonality, typicality and adequacy of representation. See, e.g., Bernhard v. TD
Bank, 2009 WL 3233541, *3 (D. N.J. 2009).
1.
Numerosity
The first element, numerosity, requires that “the class be so numerous that joinder of all
class members is impracticable.” Rule 23(a)(1). While there is no talismanic number required to
satisfy numerosity, courts typically have held that classes of around 40 or more members are
sufficient. See Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001) (“Generally, if the
named plaintiff demonstrates that the potential number of plaintiffs exceed 40, the first prong of
Rule 23(a) has been met.”); see also Moore’s Federal Practice ¶ 23.05[1], at 23-150 (1982)
(“[W]hile there are exceptions, numbers in excess of forty, particularly those exceeding one
hundred or one thousand have sustained the [numerosity] requirement.”). Here, the class
proposed by Plaintiffs includes approximately 178 proposed members, a number sufficient to
meet the requirements of numerosity.
2.
Commonality
The element of commonality is satisfied if “the class members have suffered the same
injury and . . . the claim depends upon a common contention that is capable of class-wide
resolution.” See Savani v. Washington Safety Mgmt. Solutions, LLC, 2012 WL 3757239, *3
(D. S.C. Aug. 28, 2012) (citing Wal-Mart Stores, Inc. v. Dukes, -- U.S. --, 131 S. Ct. 2541
(2011)). In Wal-Mart, the United States Supreme Court addressed the commonality requirement
4
in the context of a sex discrimination suit alleging that 1.5 million current and former female
employees of Wal-Mart stores had been systematically disfavored for promotions and pay as
compared to male co-employees. Id. at 2547. The Court held that the commonality requirement
had not been satisfied because, although each female employee generally alleged that she had not
been promoted because of her gender, the plaintiffs had failed to demonstrate that the allegedly
discriminatory employment decisions were “glued” together by “[s]ignificant proof that [the]
employer operated under a general policy of discrimination.” Id. at 2253 (quoting Gen. Tel. Co.
of Sw. v. Falcon, 457 U.S. 147, 159 n.15 (1982)). The Court emphasized that “[w]hat matters to
class certification . . . is not the raising of common ‘questions’ – even in droves – but, rather the
capacity of a classwide proceeding to generate common answers apt to drive the resolution of the
litigation.” Id. at 2551 (quoting Richard A. Nagareda, Class Certification in the Age of
Aggregate Proof, 84 N.Y.U.L. Rev. 97, 132 (2009)). In other words, the common contention
shared by the putative class must be such that “determination of its truth or falsity will resolve an
issue that is central to the validity of each one of the claims in one stroke.” Id.
In the instant case, the Court concludes that a single common policy – the “cutback” –
binds each of the putative class members’ claims together. Prior to 2005, each member of the
putative class was uniformly instructed that they would receive unreduced early retirement
benefits upon reaching their early retirement date if they elected to enter into pay status at that
time. When the Plan altered its position and announced that early retirement benefits should
have been actuarially reduced, that decision also was universally applied to each putative class
member in precisely the same fashion. Although the particular harm suffered by each Plaintiff
as a result of that decision varies, the source of that harm – the legal determination by the Plan
that the provision of unreduced benefits had been in error – is the same for each Plaintiff.
5
Unlike in Dukes, there is no suggestion in the record that individual departments, units,
managers or plan administrators determined, on an individualized basis, whether or not a
particular plaintiff was entitled to unreduced benefits. Rather, this lawsuit targeted a single
decision that was universally applied and affected each putative class member in the same
fashion.
Defendants heavily contest the commonality and typicality elements, noting the existence
of several distinctions which, in their view, counsel against class certification. For example,
they note that there are two versions of plan documents at issue (1980 and 1987), that one group
of Plaintiffs (represented by Cottillion) has entered into pay status while another (represented by
Eldridge) has not, and that various Plaintiffs might be subject to unique defenses (such as
exhaustion). Each of these is insufficient to render the class unviable. As an initial matter,
with respect to exhaustion, Judge McLaughlin already held that each Plaintiff was excused from
exhausting their claims because it would be futile to do so. Cottillion, 2013 WL 1419705
at *14-15. Moreover, Judge McLaughlin granted summary judgment in favor of both named
Plaintiffs despite the fact that Cottillion had vested under the 1980 Plan and had already entered
pay status, while Estridge had vested under the 1987 Plan and had not yet begun to receive
benefits payments. This holding provided the “common answer” required by Dukes to “drive the
resolution of the litigation” by binding Plaintiffs together in a single class. See id. at 2551.
In light of the common legal and factual issues between proposed class members, the element of
commonality is satisfied here.
Recent caselaw concerning ERISA’s anti-cutback provision supports this conclusion.
In Savani, for example, the district court addressed the commonality requirement in the context
of an anti-cutback claim as follows:
6
Rule 23(a)(2) requires that the resolution of common questions affect all
or a substantial number of the class members. See Brown v. Nucor
Corp., 576 F.3d 149, 153 (4th Cir.2009). As the Supreme Court recently
clarified, in order to satisfy the commonality requirement, the plaintiff
must demonstrate that the class members have suffered the same injury
and that the claim depends upon a common contention that is capable of
class-wide resolution. See Wal–Mart Stores, Inc. v. Dukes, -- U.S.--,
131 S. Ct. 2541, 180 L.Ed.2d 374 (2011).
All of the claims of the [c]lass members arose from the same acts and
conduct of [the d]efendants, namely [their] elimination of § 4.12(a) early
retirement supplemental benefits. The theory of liability of each member
is identical, i.e. [the d]efendants violated the . . . ERISA anti-cut back
rule. 29 U.S.C. § 1054(g). The parties do not dispute that [the
p]laintiffs’ claim fulfills the commonality requirement. The court finds
that the issue of whether there was a denial of supplemental benefits in
violation of the anti-cut back rule is a common question of law
applicable equally to [the p]laintiffs and all members of the [c]lass and
[s]ubclass.
Savani, 2012 WL 3757239, *3. Similarly, in Mezuk v. U.S. Bank, 2011 WL 601653 (S.D. Ill.
Feb. 11, 2011), the district court reached the same conclusion:
There is clearly a common nucleus of operative facts and law at issue
with respect to the putative classes. The [p]lan has engaged in a
standardized course of conduct toward all members of the proposed
classes by calculating the opening cash balance of each putative class
member’s account using the methodology set forth in the [p]lan.
With respect to each calculation made under the same methodology,
the legal issue is whether using this methodology complied with the anticutback and anti-discrimination provisions of ERISA.
Mezuk, 2011 WL 601653 at *6; see also Barnes v. AT&T Pension Benefit Plan, 273 F.R.D. 562,
569-70 (N.D. Cal. 2011) (allowing plaintiffs to amend the class definition in an anti-cutback case
to include deferred annuitants in a class composed of lump-sum benefit recipients because
defendant’s construction of the plan documents was identical with respect to each group);
Titus v. Burns & McDonnell, Inc. Employee Stock Ownership Plan, 2010 WL 3713666, *3
7
(W.D. Mo. Sept. 13, 2010) (certifying a class in an anti-cutback case because “[a]ll potential
class members were ESOP participants whose ESOP accounts were affected by the [alleged
cutback]”); Pender v. Bank of America Corp., 269 F.R.D. 589, 597 (W.D. N.C. Aug. 25, 2010)
(finding commonality in an anti-cutback case based on the prevalence of issues common to the
entire class).
3.
Typicality
Somewhat overlapping the commonality requirement, the typicality element assesses
whether “the named plaintiffs have incentives that align with those of absent class members so as
to assure that the absentees’ interests will be fairly represented.” Baby Neal v. Casey, 43 F.3d
48, 56 (3d Cir. 1994). Typicality requires an inquiry into whether “the named plaintiff’s
individual circumstances are markedly different or . . . the legal theory upon which the claims are
based differs from that upon which the claims of other class members will perforce be based.”
Id. at 57 (quoting Hassine v. Jeffes, 846 F.2d 169, 177 (3d Cir. 1988)). Although they are
distinct factors under Rule 23(a), courts have noted that “[t]he concepts of commonality and
typicality are broadly defined and tend to merge.” Id. at 56. Thus, as with commonality,
“even relatively pronounced factual differences will generally not preclude a finding of typicality
where there is a strong similarity of legal theories.” Id. at 57 (citing De La Fuente v. StokelyVan Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983)). As discussed above, the legal theories
shared between Plaintiffs and the prospective class members are identical, and there is nothing to
indicate that the named Plaintiffs’ interests are inconsistent with those of the prospective class.
Thus, the typicality requirement is satisfied.
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4.
Adequacy of Representation
The final Rule 23(a) element, adequacy of representation, encompasses “two distinct
inquiries designed to protect the interests of absentee class members.” In re Prudential Ins. Co.
America Sales Practice Litigation Agent Actions, 148 F.3d 283, 312 (3d Cir. 1998).
Specifically, the adequacy of representation inquiry “tests the qualifications of the counsel to
represent the class” and “serves to uncover conflicts of interest between named parties and the
class they seek to represent.” Id. (quoting In re Gen. Motors Corp. Pick-Up Truck Fuel Tank
Prod. Liab. Litig., 55 F3d 768, 800 (3d Cir. 1995) and Amchem Prods. v. Windsor, 521 U.S.
591, 594 (1997)). Based upon the qualifications set forth in Exhibit 1 to Plaintiffs’ Motion for
Class Certification (see Doc. 191-1), the Court concludes that class counsel is sufficiently
qualified and experienced to represent the proposed class throughout this litigation.1 Moreover,
as discussed above, Cottillion and Eldridge share an identical interest with the proposed class
members in correcting the anti-cutback violation that resulted from Defendants’ decision to
actuarially reduce their accrued early retirement benefits. See, e.g., Mezyk, 2011 WL 601653,
*7 (concluding that plaintiffs were adequate class representatives because they “possess[ed] the
same interest and suffer[ed] the same injury as the class members”) (quoting East Tex. Motor
Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403, 97 S. Ct. 1891 (1977)). As such, the Court
concludes that Plaintiffs are adequate class representatives.
1
Defendants do not contest the adequacy of class counsel’s qualifications. See Defendants’
Memorandum in Opposition to Plaintiffs’ Motion for Class Certification (Doc. 210) at 9.
9
5.
Rule 23(b) Requirements
In addition to satisfying numerosity, commonality, typicality and adequacy of
representation, a proposed class action suit also must satisfy one of the three Rule 23(b)
subsections. Rule 23(b) provides:
(b) A class action may be maintained if Rule 23(a) is satisfied and if:
(1)
prosecuting separate actions by or against individual class
members would create a risk of: (A) inconsistent or varying
adjudications with respect to individual class members that would
establish incompatible standards of conduct for the party opposing
the class; or (B) adjudications with respect to individual class
members that, as a practical matter, would be dispositive of the
interests of the other members not parties to the individual
adjudications or would substantially impair or impede their ability
to protect their interests;
(2)
the party opposing the class has acted or refused to act on
grounds that apply generally to the class, so that final injunctive
relief or corresponding declaratory relief is appropriate respecting
the class as a whole; or
(3)
the court finds that the questions of law or fact common to
the class members predominate over any questions affecting only
individual members, and that a class action is superior to other
available methods for fairly and efficiently adjudicating the
controversy.
Fed. R. Civ. P. 23(b). Here, Plaintiffs primarily seek certification of a mandatory class under
sub-parts (b)(1) and/or (b)(2). See Fed. R. Civ. P. 23(c)(2).
Rule 23(b)(1) is satisfied where separate actions by or against individual class members
would risk establishing incompatible standards of conduct for party opposing the class or where
individual adjudication would prejudice the class members themselves. See Fed. R. Civ. P.
23(b)(1); Savani, 2012 WL 3757239, *4 (citing Zimmerman v. Bell, 800 F.2d 386, 389 (4th Cir.
1986)). Application of this sub-section is most appropriate where the defendant is obligated to
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treat all members of the class alike as a matter of law or other necessity. See Amchem, 521 U.S.
at 614. As such, certification pursuant to Rule 23(b)(1) is “especially helpful in ERISA cases
where a defendant provides unitary treatment to all members of a putative class and where
litigation of some class members’ rights could be implicated in suits brought by other class
members.” Mezyk, 2011 WL 601653, *9 (citing Thomas v. SmithKline Beecham Corp.,
201 F.R.D. 386, 396-97 (E.D. Pa. 2001)); Savani, 2012 WL 3757239, *4 (noting that “ERISA
cases where plaintiffs challenge the computation of benefits are often certified under Rule
23(b)(1)(A)”); Pender, 269 F.R.D. at 598 (same).
In the instant case, it is clear that inconsistent adjudications with respect to different class
members would establish incompatible standards of conduct for the Plan. For example, if relief
were granted in favor of some terminated vested participants and not others, the Plan would be
faced with the impossible task of distributing benefits to similarly situated plan participants
pursuant to two conflicting standards. In order to avoid this impracticality and establish a single
standard of conduct, consistent with the underlying goals of ERISA, class certification pursuant
to Rule 23(b)(1) is appropriate. See, e.g., Thomas, 201 F.R.D. 396-97 (noting that ERISA
obligates plan administrators to provide uniform treatment to similarly situated plan
participants); Mezyk, 2011 WL 601653, *9 (same).
Certification similarly is warranted pursuant to Rule 23(b)(2) because “defendant’s
conduct . . . was generally applicable to the class and . . . final injunctive or declaratory relief
with respect to the entire class [is] the appropriate remedy.” Mezyk, 2011 WL 601653, *9
(citing Retired Chicago Police Ass’n v. City of Chicago, 7 F.3d 584, 596 (7th Cir. 1993)).
Courts routinely have certified classes pursuant to this sub-section where, as in the instant case,
an ERISA plan administrator makes a uniform decision about administering the Plan as it applies
11
to the putative class members. Id. at *9-10; see also Pender, 269 F.R.D. at 599 (certifying a class
pursuant to Rule 23(b)(2) where the plan administrator imposed an improper method of
calculating benefits upon the entire class and where the appropriate remedy consisted primarily
of declaratory relief).
In sum, Plaintiffs have satisfied all four provisions of Rule 23(a) and two provisions of
Rule 23(b). Consequently, the Court concludes that certification of a mandatory class pursuant
to Rule 23 is appropriate. However, in order to more accurately reflect the scope of Judge
McLaughlin’s prior summary judgment motion, the class definition should be amended to
include:
All terminated vested participants in the United Refining Company
Pension Plan for Salaried Employees (“Plan”), who were employed by
United Refining Company [and vested under either the 1980 or 1987
version of the Plan] at any time between January 1, 1987 and March 18,
2003, and their beneficiaries under the Plan.
See Plaintiffs’ Motion for Class Certification (Doc. 192).
B.
Remedy
Having determined that class certification is warranted, the Court now turns to the issue
of remedy. In their Motion Proposing Final Remedy, Plaintiffs essentially seek three types of
relief. First, they seek a declaratory judgment stating that all class members have accrued an
unreduced early retirement benefit under the 1980 or 1987 Plan Document and that Defendants’
attempt to actuarially reduce this benefit violated ERISA. Similarly, they request that
Defendants be enjoined from applying the improper actuarial reduction to any future payments
of their early retirement benefits. Finally, for those class members who already have reached
12
their early retirement date, they seek monetary reimbursement in the form of equitable restitution
and/or surcharge in order to restore the pension benefits that Defendants wrongfully withheld.
ERISA § 502(a)(3) authorizes a plan participant to bring a civil action “to enjoin any act
or practice which violates any provision of this subchapter or the terms of the plan” and to obtain
other appropriate equitable relief . . . to redress such violations or [] to enforce . . . the terms of
the plan.” 29 U.S.C. § 1132(a)(3). It is well-established that § 502(a)(3)’s reference to
“equitable relief” refers to “those categories of relief that were typically available in equity.”
Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 209-10 (2002). Such remedies
include injunction, mandamus, restitution, surcharge, reformation and equitable estoppel.
Mertens v. Hewitt Assoc., 508 U.S. 248, 257 (1993); CIGNA Corp. v. Amara, -- U.S. --,
131 S. Ct. 1866, 1878 (2011).
As an initial matter, Plaintiffs’ request for declaratory and injunctive relief is readily
granted. Such relief is well within the scope of available remedies under ERISA § 502(a)(3)
and clearly is supported by the summary judgment ruling previously issued by
Judge McLaughlin. See, e.g., Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 53 (1987) (stating that
available relief under ERISA § 502(a)(3) includes “a declaratory judgment on entitlement to
benefits” and “an injunction against a plan administrator’s improper refusal to pay benefits”);
Cottillion, 2013 WL 1419705, *12-14 (concluding that Plaintiffs had established an accrued right
to unreduced early retirement benefits and that Defendants’ attempt to reduce that accrued right
amounted to an anti-cutback violation); see also Pell v. E.I. Dupont De Nemours & Co. Inc.,
539 F.3d 292, 305-08 (3d Cir. 2008) (affirming an injunction that required defendant to use a
specific service date to re-calculate and pay pension benefits going forward); In re Unisys Corp.,
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Retiree Medical Benefit “ERISA” Litig., 57 F.3d 1255, 1269 (3d Cir. 1995) (upholding an
injunction restoring future benefits under an ERISA plan).
With respect to monetary relief, Plaintiffs seek reimbursement for employees who fall
into several different groups. First, for those employees, such as Cottillion, who reached early
retirement age and began receiving early retirement benefits prior to the cutback, all parties agree
that equitable restitution and/or surcharge is appropriate in the amount of the difference between
the unreduced benefits they should have been paid and the amount of the benefits payments they
actually received, plus interest.2
For employees such as Eldridge, who have reached their early retirement age but have
not yet applied for benefits, Plaintiffs seek monetary relief based upon their contention that each
of these class members would have elected to commence receiving benefits upon reaching age
59½ had the Plan not improperly informed them that those benefits would be actuarially reduced.
See Libman Report ¶¶ 10-11. According to Plaintiffs, “there is no economic incentive for a
terminated vested participant to delay commencing an unreduced monthly benefit past his or her
Early Retirement Date.” See Plaintiff’s Brief in Support of Motion Proposing Final Remedy
(Doc. 203) at 12; Libman Report ¶ 11. Consequently, Plaintiffs contend that this group of
individuals is entitled to compensation for the benefits that were wrongfully withheld from them,
despite that they each elected not to commence receiving any benefits at that time. In the
alternative, Plaintiffs request that Defendants be ordered to send an election form to each of these
class members giving them the option to “immediately commence a benefit that is actuarially
equivalent to the unreduced benefit they should have been eligible to receive at their Early
2
The Court’s determination as to the appropriate interest rate is set forth below.
14
Retirement Date, or . . . wait and receive the same benefit amount at age 65.” See Plaintiff’s
Reply Brief (Doc. 219) at 10.
On balance, the Court concludes that an award of monetary relief for this group of
participants would be entirely speculative. As noted by Defendants, Plaintiffs have failed to
supply any evidence indicating that any or all of those class members elected not to commence
receiving benefits on the basis of the cutback. Plaintiffs’ position further is undermined by the
fact that several of the plan participants within this group failed to apply for benefits even upon
reaching age 65, at which time they would have been entitled to non-actuarially reduced benefits
under any interpretation of the Plan. Rather than award restitution based upon the supposition of
Plaintiffs’ expert, the Court will adopt Plaintiffs’ alternative request and order Defendants to
provide each class member who has reached their early retirement date with the opportunity to
immediately commence receiving an unreduced benefit if they choose to do so.
Finally, with respect to those employees who vested under the 1980 or 1987 version of
the Plan but have not yet reached their early retirement date, the declaratory and injunctive relief
awarded herein is sufficient. There is no need for the Court to direct specific payment amounts
for such members when the Plan is perfectly capable of calculating their early retirement
benefits, consistent with the language of the declaratory judgment order, at the time that those
class members become eligible to commence receiving benefits.
One final issue pertaining to remedy concerns the appropriate rate of interest. It is wellsettled that “interest is presumptively appropriate when ERISA benefits have been delayed.”
Fotta v. Trustees of the UMWA Health & Retirement Fund, 165 F.3d 209, 214 (3d Cir. 1998).
Apropos to the instant dispute, Section 1.2 of the governing Plan Document provides that,
when comparing two or more benefits under the Plan, “the assumed interest rate shall be seven
15
and one-half percent (7-1/2%), compounded annually.” See Defs.’ Ex. D (Doc. 215-04) at § 1.2.
The Plan administrator utilized this 7.5% interest rate in the Plan’s 2006 submission to the IRS to
calculate the amount that the Plan intended to recoup from those terminated vested participants
who allegedly had been overpaid prior to the cutback. See Libman Report ¶¶ 6-7. Plaintiffs
suggest that the same rate should be utilized when returning those improperly recouped benefits
to the affected Plan participants.
Defendants respond that the appropriate interest rate is the lesser one set forth in Section
1.2(c)(i) of the governing Plan Document. That section provides that, in situations where
“single-sum cash settlements” are made pursuant to “Sections 6.6 and 11.6” of the Plan,
the “annual rate of interest on 30-year Treasury securities as specified by the Internal Revenue
Service . . . for the second month preceding the Plan Year in which the distribution is made”
should be utilized. See Defs.’ Ex. D (Doc. 215-04) at § 1.2(c)(i). Application of subsection
1.2(c)(i) would result in an interest rate of approximately 3.7%. See Altman Decl. (Doc. 212)
¶ 11.
After reviewing each of the pertinent subsections, the Court concludes that a rate of 7.5%
is appropriate. Although the plain language of Section 1.2 would appear, by its own terms,
to apply only when determining whether “two or more benefits” are of “equivalent value as
determined actuarially,” Defendants, in their corrective submission to the IRS, explained that
“Plan Section 1.2 provides that a rate of 7.5% will be used when no other rate is specified.”
See Ex. C to IRS Submission (Doc. 203-4) at 3. Neither of the sections cross-referenced in
Section 1.2(c)(i) concern the calculation of restorative payments to correct an improper benefit
reduction; rather, section 6.6 addresses lump sum payments to participants who hold very small
retirement accounts, and Section 11.6 addresses lump sum payments to participants in the event
16
that the Plan is terminated. See Defs.’ Ex. D (Doc. 215-04) at §§ 6.6, 11.6. Consequently,
the 7.5% default rate that applies “when no other rate is specified” is the appropriate rate here.
See Ex. C to IRS Submission (Doc. 203-4) at 3. Indeed, as noted by Plaintiffs, it would be
inequitable for Defendants to apply the 7.5% rate when attempting to recoup perceived
overpayments to beneficiaries, but apply a much smaller rate when forced to restore those
wrongfully recovered amounts.
C.
Motion for Judgment on the Pleadings
In Judge McLaughlin’s summary judgment Order, the Court held that “Plaintiffs’ anticutback claim provides a full and complete remedy for the violations alleged in the Amended
Complaint.” Cottillion, 2013 WL 1419705, *15. As such, the Court found it “unnecessary to
address the alternate theories of recovery advanced in the Amended Complaint” and dismissed
each of those remaining claims without prejudice. Id. Defendants now seek judgment on the
pleadings and dismissal with prejudice as to each of those unaddressed claims.
By way of background, Count I of the Amended Complaint asserted a claim for benefits
under ERISA Section 502(a)(1)(B). Count II asserted a claim for declaratory relief pursuant to
ERISA Sections 502(a)(1)(B) and 502(a)(3). Count III asserted a claim for breach of fiduciary
duty pursuant to ERISA Section 502(a)(3). With respect to each, Plaintiffs sought the same
relief that they are entitled to receive pursuant to their anti-cutback claim, namely, a declaratory
judgment and injunction establishing their right to unreduced early retirement benefits,
and monetary relief in the form of restitution and/or surcharge.
It is well-settled that an ERISA plaintiff may not receive duplicative relief under both
Section 502(a)(3) and Section 502(a)(1)(B). See, e.g., Varity Corp. v. Howe, 516 U.S. 489, 515
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(1996); Mondry v. Am. Family Mut. Ins. Co., 557 F.3d 781, 805 (7th Cir. 2009) (noting that
“a majority of the circuits” have interpreted Varity as holding that “if relief is available to a plan
participant under subsection (a)(1)(B), then that relief is unavailable under subsection (a)(3)”);
Twomey v. Delta Airlines Pilots Pension Plan, 328 F.3d 27, 32 (1st Cir. 2003); Frommert v.
Conkright, 433 F.3d 254, 269 (2d Cir. 2006) (same), rev’d on other grounds, 559 U.S. 506
(2010). Pursuant to this Memorandum and Order, Plaintiffs will receive full and complete relief
for the violations alleged in the Amended Complaint. Consequently, any relief that could be
awarded pursuant to Counts I-III would be entirely redundant and duplicative. Those claims,
therefore, will be dismissed with prejudice.
Consistent with the foregoing, the Court enters the following:
II. ORDER
It is hereby ORDERED that:
A.
Plaintiffs’ Motion for Class Certification (Doc. 192) is GRANTED.
The following litigation class is certified pursuant to Federal Rule of Civil
Procedure 23(a) and 23(b)(1) and (b)(2):
All terminated vested participants in the United Refining Company
Pension Plan for Salaried Employees (“Plan”), who were
employed by United Refining Company and vested under either
the 1980 or 1987 version of the Plan at any time between January
1, 1987 and March 18, 2003, and their beneficiaries under the Plan.
B.
The Court hereby approves Plaintiffs John Cottillion and Beverly Eldridge
as representative plaintiffs of the class pursuant to Rule 23(a)(3) and (a)(4).
C.
The Court hereby appoints Tybe A. Brett, Ellen M. Doyle, Joel R. Hurt,
and Feinstein Doyle Payne & Kravec, LLC as class counsel pursuant to Rule
23(g).
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D.
Plaintiffs’ Motion Proposing Final Remedy (Doc. 203) is GRANTED
IN PART AND DENIED IN PART, as set forth below.
E.
Consistent with the Memorandum Opinion and Order issued by Judge
Sean J. McLaughlin on April 8, 2013 (Doc.186), it is hereby declared that all
members of the certified class had accrued an unreduced early retirement benefit
under the 1980 and/or 1987 Plan Document and that Defendants’ reinterpretation
of the 1980 and 1987 Plan Documents in 2005 and 2006 as providing an
actuarially reduced early retirement benefit violated the anti-cutback rules
contained in ERISA § 204(g), 29 U.S.C. § 1054(g).
F.
Defendants are enjoined from applying any actuarial reduction for early
commencement to the unreduced early retirement benefits that class members
accrued under the 1980 and/or 1987 Plan Documents.
G.
With respect to those class members who have reached their early
retirement date and have commenced receiving their benefits, judgment is entered
for the difference between the amount of the unreduced benefit payments they
should have been paid and the amount of the benefit payments they actually
received, plus interest at 7.5 percent. The parties are directed to meet and confer
to agree upon payment amounts for each of these class members and submit those
amounts to the Court by December 6, 2013.
H.
With respect to those class members who have reached their early
retirement date but have not yet commenced receiving benefits, it is hereby
ORDERED that Defendants must provide each class member so situated with the
opportunity to immediately elect to commence receiving an unreduced benefit if
they so choose.
I.
The parties are ordered to meet and confer to determine the final
composition of the certified class. The parties shall file a joint stipulation to the
Court, by December 6, 2013, identifying the final composition of the class.
Any disputes as to the composition of the class or the amount of restitution owed
to any individual class member shall be submitted, in a joint report to the Court,
by December 6, 2013.
J.
Defendants’ Motion for Judgment on the Pleadings (Doc. 194)
is GRANTED, and Counts I, II and III of the Amended Complaint are
DISMISSED WITH PREJUDICE.
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IT IS SO ORDERED.
November 5, 2013
s\Cathy Bissoon
Cathy Bissoon
United States District Judge
cc (via ECF email notification):
All counsel of record
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