Savani v. Washington Safety Management Solutions LLC et al

Filing 228

ORDER AND OPINION denying 199 Motion for Partial Summary Judgment; granting 201 Motion for Judgment as a Matter of Law. The parties shall confer as to the manner, timing, and content of the notice to the Class and Subclass and report to the court their recommendations within thirty (30) days of the court's issuance of this order. Signed by Honorable J Michelle Childs on 3/29/2013.(asni, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
AIKEN DIVISION
Noorali “Sam” Savani and Robert P. Taylor, )
individually and on behalf of others
)
similarly situated,
)
)
Plaintiff,
)
)
v.
)
)
Washington Safety Management
)
Solutions, LLC, et al
)
)
Defendants.
)
____________________________________)

Civil Action No. 1:06-cv-02805-JMC

OPINION AND ORDER

Currently before the court are the parties’ cross motions for summary judgment [Dkt. Nos.
199 and 201] arising under the Employee Retirement Income Security Act of 1974 (“ERISA”), §
502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B) (2006). The parties seek a determination of whether
Defendants violated ERISA’s anti-cutback statute, § 204(g), 29 U.S.C. § 1054(g)(2010), in
amending the Westinghouse Safety Management Solutions, LLC (“WSMS”) Pension Plan (the
“Plan”) to “freeze benefit accruals” effective December 31, 2005, resulting in the elimination of a
Seven Hundred Dollar ($700) supplemental benefit payment to Plan members electing to take early
retirement thereafter. See Administrative Record, at 145 [Dkt. No. 77-5]. Upon consideration of
the written memoranda, the arguments of counsel, and the record, the court denies Defendants’
motion and grants Plaintiffs’ motion as provided herein.
FACTUAL AND PROCEDURAL BACKGROUND
This class action litigation arose out of several amendments to the Plan affecting the payment
of certain benefits, which Plaintiffs Noorali "Sam" Savani and Robert P. Taylor contend violated
ERISA's anti-cutback and notice provisions. Plaintiffs were initially employed with Westinghouse
Savannah River Company ("WSRC"), and were among a group of WSRC employees recruited to
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join WSMS when it was formed in 1997. Plaintiffs participated in WSMS’s defined benefit
pension plan. Savani participated in the Plan until his retirement in 2005. Taylor participated in the
Plan until his retirement in 2006.
Prior to amendments, the Plan defined “Accrued Benefit” to mean, “as of any date of
determination, the normal retirement Pension computed under Section 4.01(b) . . . less the WSRC
Plan offset as described in Section 4.13, plus any applicable supplements as described in Section
4.12 . . . .” Additionally, the Plan authorized early retirement benefits. Section 4.03(b) of the Plan
provided: “The early retirement Pension shall be a deferred Pension beginning on the first day
following the Member's Normal Retirement Date and . . . shall be equal to his Accrued Benefit.
However, the Member may elect to receive an early retirement Pension beginning before his Normal
Retirement Date . . . .” Furthermore, the Plan defined supplemental benefits in Section 4.12 as
follows:
4.12 Supplemental Benefits
(a) If a Member who:
(i) otherwise satisfies the requirements for a Pension under this Plan; and
(ii) has at least one year of service with WSMS; and
(iii) transferred to the Plan from an Affiliated Employer on or before January 1,
1998 or transfers to the Plan from WSRC; and
(iv) retires before his Normal Retirement Age from active service on or after
October 1, 1998,
he shall be entitled to a monthly supplement (which shall commence with the first
Pension payment made under the Plan on account of such retirement and the last
payment shall be in the month preceding the Member's attainment of Normal
Retirement Age) equal to the following: [omitted]

(b) If a Member who:
(i) otherwise satisfies the requirements for a Pension under this Plan;
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(ii) has at least one year of service with WSMS; and
(iii) transferred to the Plan from an Affiliated Employer on or before January 1,
1998 or transfers to the Plan from WSRC; and
(iv) either retires from active service on or after October 1, 1998 or dies on or after
October 1, 1998 and immediately prior to his death would be entitled to or is
receiving an early retirement Pension under the Plan,
he shall be entitled to a $200 monthly supplement commencing at his attainment
of Normal Retirement Age, which shall continue after such Member's death to such
Member's spouse, if then living, for such spouse's lifetime.
The Plan's benefits committee first amended the Plan on December 28, 2004, to eliminate
Section 4.12(a), which granted the $700 monthly supplemental benefit to Plan members electing to
take early retirement on or after January 1, 2005. On December 30, 2005, the WSMS Board of
Directors froze the Plan benefit accruals effective December 31, 2005, by amending, inter alia,
Section 1.01 of the Plan with the addition of the sentence “Notwithstanding anything to the contrary
in this Plan, a Member's accrued benefit shall be frozen as of December 31, 2005 and shall not
increase thereafter.” The 2005 amendment further modified Section 1.13 defining “Eligibility
Service” by adding the following sentence: “Although the Plan is frozen as of December 31, 2005,
an employee shall continue to earn Eligibility service (in accordance with the terms of the Plan for
purposes of determining eligibility) for certain benefits and eligibility for a vested Pension.”
The parties initially filed cross motions for summary judgment primarily concerning whether
the 2004 amendment eliminating § 4.12(a) violated ERISA’s anti-cutback and notice provisions.
In ruling on the parties’ cross motions for summary judgment, the district court determined that the
$700 monthly supplemental benefit was not an accrued benefit under the Plan and therefore, the
amendment eliminating the supplemental benefit under § 4.12(a) did not violate ERISA’s
anti-cutback provision, 29 U.S.C. § 1054(g)(1)(providing that “[t]he accrued benefit of a participant
under a plan may not be decreased by an amendment of the plan . . . .”).
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On appeal from the district court’s order, the United States Court of Appeals for the Fourth
Circuit reversed the district court’s decision, holding that the Plan provided for two supplemental
benefits – a $700 early retirement benefit1 in § 4.12(a) and a $200 lifetime supplement in § 4.12(b).
The Fourth Circuit further described both supplements as an “accrued benefit” defined by the plain
language in the Plan. See Savani v. Washington Safety Management Solutions, LLC et al, 474 F.
App’x 310, 316 (4th Cir. Mar. 20, 2012). The Court of Appeals noted that
Regardless of their classification as accrued or ancillary, welfare or pension benefits,
the supplements’ inclusion in the plain terms of the Plan's accrued benefit calculation
necessarily meant that any change to the amount or existence of a § 4.12 supplement
constituted a change to an "accrued benefit."
Id. Because the anti-cutback provision of ERISA generally prohibits the elimination or decrease of
an “accrued benefit,” the Fourth Circuit held that the elimination of the $700 monthly supplemental
benefit violated ERISA’s anti-cutback provision. Therefore, the Fourth Circuit found the 2004
amendment invalid, that Plaintiff Savani was entitled to receive the $700 monthly supplemental
benefit on this basis, and remanded the case for further proceedings in accordance with its opinion.
After remand, the case was certified into a class and a subclass. The Class represented by
Noorali “Sam” Savani, is defined as:
Employees of Washington Safety Management Solutions, LLC, formerly
Westinghouse Safety Management Solutions, LLC [collectively “WSMS”] who (1)
are members of the WSMS Plan, (2) have at least one year of service with WSMS,
and (3) transferred to the Plan from an Affiliated Employer as defined in §1.02 of the
Plan on or before January 1, 1998, or transferred to the Plan from Washington
Savannah River Company, LLC, formerly, Westinghouse Savannah River Company,
LLC.
The Subclass represented by Robert P. Taylor, Jr. is defined as:

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The order also notes that such supplements generally may be referred to as ancillary welfare
benefits. However, the Fourth Circuit held that such characterization was not applicable in this case
given the Plan’s inclusion of the supplements in the definition of an “accrued benefit.” Accordingly,
Defendants’ effort to redefine the $700 supplemental benefit in this manner has already been
rejected by the Fourth Circuit and cannot be used to sway the analysis of this court.
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All members of the Class defined above who, as of December 31, 2005, either (1) did
not have 15 total years of service with WSMS or an Affiliated Employer as defined
in §1.02 of the Plan, or (2) was not 50 years of age, or (3) did not meet the 25 years
of service and age 45 but less than 50 years of age requirements for an Optional
Retirement Pension as defined in §4.04 of the WSMS Plan.
The matter raised in the parties’ instant cross motions for summary judgment concern
Plaintiff Taylor and the subclass he represents. The parties now seek a determination of the validity
of the 2005 amendment freezing the accrual of benefits pursuant to ERISA’s anti-cutback statute
and whether Plaintiff Taylor and the subclass plaintiffs are entitled to collect the $700 monthly
supplemental benefits described in § 4.12(a). The court held a hearing on these motions on February
27, 2013.
LEGAL STANDARD
Summary judgment is appropriate when the pleadings, depositions, answers to
interrogatories, and admissions on file, together with affidavits, if any, show that “there is no
genuine dispute as to any material facts and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). To prevail on a motion for summary judgment, the movant must demonstrate
that: (1) there is no genuine issue as to any material fact; and (2) that he is entitled to judgment as
a matter of law. In determining whether a genuine issue has been raised, the court must construe
all inferences and ambiguities against the movant and in favor of the non-moving party. United
States v. Diebold, Inc., 369 U.S. 654, 655 (1962).
The party seeking summary judgment shoulders the initial burden of demonstrating to the
district court that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986). Once the movant has made this threshold demonstration, the non-moving party, to
survive the motion for summary judgment, may not rest on the allegations averred in his pleadings.
Rather, the non-moving party must demonstrate that specific, material facts exist which give rise to

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a genuine issue. Id. at 324. Under this standard, the existence of a mere scintilla of evidence in
support of the claimant’s position is insufficient to withstand the summary judgment motion. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Likewise, conclusory allegations or
denials, without more, are insufficient to preclude the granting of the summary judgment motion.
Ross v. Commc’ns Satellite Corp., 759 F.2d 355, 365 (4th Cir. 1985). “Only disputes over facts that
might affect the outcome of the suit under the governing law will properly preclude the entry of
summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.”
Anderson, 477 U.S. at 248.
DISCUSSION
On these cross motions for summary judgment, the parties seek a determination as to whether
the $700 monthly supplemental benefit, previously held by the Fourth Circuit to be part of the Plan’s
defined Accrued Benefits, may be eliminated for Plan members electing early retirement after
December 31, 2005, as a result of Defendants’ attempt to freeze the accrual of benefits under the
Plan through the 2005 amendment.
Congress established ERISA as “a comprehensive statute designed to promote the interests
of employees and their beneficiaries in employee benefit plans,” Shaw v. Delta Air Lines, Inc., 463
U.S. 85, 90 (1983). ERISA’s anti-cutback statute generally “prohibits any amendment of a pension
plan that would reduce a participant's ‘accrued benefit.’” Central Laborers' Pension Fund v. Heinz,
541 U.S. 739, 741 (2004). It provides that “[t]he accrued benefit of a participant under a plan may
not be decreased by an amendment of the plan . . . .” 29 U.S.C. § 1054(g)(1).2 A central objective

2

For purposes of clarification, benefit accrual refers to the rate at which an employee earns
benefits to put in his pension account, see 29 U.S.C. § 1054, whereas vesting refers to the process
by which an employee's already-accrued pension account becomes irrevocably his property, see 29
U.S.C. § 1053. See generally, Heinz, 541 U.S. at 739.
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of ERISA is to protect “employees' justified expectations of receiving the benefits their employers
promise them.” Heinz, 541 U.S. at 743.
“Nothing in ERISA requires employers to establish employee benefits plans. Nor
does ERISA mandate what kind of benefits employers must provide if they choose
to have such a plan. ERISA does, however, seek to ensure that employees will not
be left empty handed once employers have guaranteed them certain benefits. . . .
[W]hen Congress enacted ERISA, it ‘wanted to . . . mak[e] sure that if a worker has
been promised a defined pension benefit upon retirement – and if he has fulfilled
whatever conditions are required to obtain a vested benefit – he actually will receive
it.’ ”
Id. (quoting Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996) (alterations in original) (citations
omitted).
In the earlier appeal of this case, the Fourth Circuit held that the $700 monthly supplemental
benefit was an “accrued benefit” as defined by the Plan, and that Defendants’ elimination of this
early retirement benefit through the 2004 amendment was a violation of ERISA’s anti-cutback rule.
See Savani, 474 F. App’x at 315-16. Necessarily, the unlawful elimination of the $700 monthly
supplemental benefit was ineffective at the time of the 2005 amendment. The plain language of the
2005 amendment provided that “a Member's accrued benefit shall be frozen as of December 31,
2005 and shall not increase thereafter.” As the Fourth Circuit explained, “prior to the Plan's [2004]
amendment, a beneficiary's accrued benefit was calculated by an equation; the accrued benefit
equaled the retiree's pension, less a defined offset, plus applicable § 4.12 supplements.” Id. at 315.
Consequently, after the Fourth Circuit’s ruling invalidating the 2005 amendment, the calculation of
a Plan member’s accrued benefit remained unchanged.
It is undisputed that the § 4.12(a) monthly supplemental benefit amount was set at $700 at
the time of the 2005 amendment freezing future benefit accruals. It is further unchallenged that the
2005 amendment allowed employees to continue to earn Eligibility service for certain benefits and
eligibility for a vested Pension in the Plan. Therefore, in light of the Fourth Circuit’s prior decision

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invalidating the elimination of the $700 monthly supplemental benefit and the clear language of the
2005 amendment, the court finds that Taylor and the Plan members he represents electing early
retirement after December 31, 2005, are entitled to the $700 monthly supplemental benefit provided
in § 4.12(a).
Defendants argue that the court’s conclusion is inconsistent with recent case law addressing
a similar circumstance. See Cinotto v. Delta Air Lines Inc., 674 F.3d 1285 (11th Cir. 2012) cert.
denied, 133 S. Ct. 543 (2012). In Cinotto, a Delta employee brought a class action suit against her
employer for amending the way it calculated early retirement monthly benefits, arguing that the
change violated ERISA’s anti-cutback statute. Under Delta’s pension plan, participants who reached
the age of 52 could begin drawing benefits under an early retirement option, the monthly payments
of which were actuarially reduced based on a social security offset calculation. When the social
security offset calculation was changed under the amendment to the pension plan, employees who
had not reached the age of 52 at the time of the amendment could not take advantage of the more
favorable, prior social security offset calculation.
The Eleventh Circuit Court of Appeals addressed whether the Cinotto’s accrued benefits
included the right to claim the prior social security offset calculation. The court found that, based
on the terms of Delta’s plan, Cinotto’s right to the more favorable offset calculation was dependant
on her future service to Delta, i.e. continuing to work until she reached the age of 52 when the early
retirement option would be available to her. The court cited to the pension plan’s definition of
“accrued benefit,” which stated that “[n]o participant shall have an accrued benefit based on future
or projected service.” As a result, the court held that the amendment did not come within the scope
of ERISA’s anti-cutback rule because Cinotto only had a future expectation for how the social
security offset would work if she continued to work until age 52 and then retired from Delta. See

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id. at 1297 (explaining that the anti-cutback statute does not protect mere expectations based on
anticipated years of future employment).
Cinotto is distinguishable from the case at hand. The Eleventh Circuit’s result was largely
driven by Delta’s pension plan’s definition of “accrued benefit,” which is diametrically opposed to
the Plan definition currently before the court. Unlike the pension plan in Cinotto, Defendants’ Plan
clearly included language in the definition of “accrued benefit” that encompassed the supplement
Defendants now wish to refuse to Taylor. Furthermore, Defendants’ Plan specifically provided for
the continued accumulation of eligibility service credit in its freeze amendment – something that
Delta disallowed. As the Fourth Circuit noted in its earlier appeal in this case, “the drafters of a
retirement plan may choose to define any benefits as accrued or vested, and thereby trigger ERISA's
protections.” Savani, 474 F. App’x at 315 n.3.
Taylor alternatively argues that the $700 monthly supplemental benefit established in §
4.12(a) of the Plan is an early retirement benefit, and that several circuits have found that the anticutback statute, § 204(g), 29 U.S.C. § 1054(g), “extends to all participants the right to ‘grow into’
a benefit subsidy by satisfying the plan's pre-amendment eligibility requirements.” Bellas v. CBS,
Inc., 221 F.3d 517, 527 (3d Cir. 2000).
[A] plan may not be amended to eliminate or reduce an early retirement benefit or
a ‘retirement-type’ subsidy ‘with respect to benefits attributable to service before the
amendment.’ . . . The statute provides that in the case of a retirement-type subsidy,
the anti-cutback rule does not apply unless the participant “satisfies (either before or
after the amendment) the pre-amendment conditions for the subsidy.” Thus, if a plan
is amended to eliminate a subsidized early retirement benefit for employees who
have completed 30 years of service, the plan would not be required to provide the
benefit to an employee who never completes 30 years of service. . . . The courts of
appeals that have ruled on an employee's right to “grow into” early retirement
benefits have followed this reasoning and have uniformly held that as long as an
employee satisfies, or will be able to satisfy, the eligibility requirements of the early
retirement benefit in effect prior to the amendment, § 204(g) protects the benefit.

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Ahng v. Allsteel, Inc., 96 F.3d 1033, 1036 (7th Cir. 1996) (internal citations omitted) (citing other
circuit courts for similar proposition). Other courts have recognized that plan participants who have
not satisfied the plan conditions at the time of the amendment, must be given the opportunity to
“grow into” their early retirement benefits and can do so by satisfying the conditions after an
amendment to the plan takes effect. See Shaver v. Siemens Corp., 670 F.3d 462, 489 (3d Cir. 2012)
(recognizing that plan participants may grow into their early retirement benefits, but denying
plaintiffs’ claims on the grounds that an offer for continued employment meant they could never be
eligible for permanent job separation benefits); Arena v. ABB Power T & D Co., Inc., 2003 WL
21766568 (S.D. Ind. July 22, 2003) (embracing the reasoning set out in Bellas); Abels v. Titan Int'l,
Inc., 85 F. Supp. 2d 924, 939 (S.D. Iowa 2000) (amendments purporting to freeze accrual of service
credit deprived employees the opportunity to grow into eligibility for subsidized early retirement
benefits and/or retirement type subsidies).
The Third Circuit’s analysis in Bellas is instructive here. In that case, the employer provided
a special retirement provision for employees meeting stated age and eligibility service requirements
who were terminated as a result of a “Permanent Job Separation.” 221 F.3d at 519-20. In 1994, the
company amended the plan making it more difficult for an employee to qualify for the special
retirement benefits. Id. at 520-21. Bellas, who retired in 1997, would have qualified for the special
retirement provisions under the plan as it was written prior to 1994, but he did not qualify for the
special retirement provisions as it was amended. Id. at 521. The Third Circuit affirmed the district
court's ruling for Bellas, finding that the benefits were an early retirement benefit and a
retirement-type subsidy and thus were protected by ERISA’s anti-cutback statute. Id. at 540. The
court further determined that there “is nothing in the language of [section 1054(g)], or its legislative
history, to suggest that a contingent event benefit accrues only upon the occurrence of the
contingency. The plain language of the statute reveals that once a benefit is found to be a
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retirement-type subsidy, it is considered an accrued benefit.” Id (citing § 204(g); 29 U.S.C. §
1054(g)); accord, Hunger v. AB, 12 F.3d 118, 120 (8th Cir. 1993) (finding that the legislative history
of § 204(g); 29 U.S.C. § 1054(g) supported the proposition that the anti-cutback statute provides
plan participants the right to grow into a benefit subsidy by satisfying the plan’s pre-amendment
eligibility requirements)).
Although Defendants dispute whether the $700 monthly supplemental benefit established
in § 4.12(a) of the Plan is an early retirement benefit, the Fourth Circuit has already resolved this
matter in the affirmative. See Savani, 474 F. App’x at 315 (“Before the December 2004 amendment,
§ 4.12 included exactly two supplements: the $700 early retirement benefit described in § 4.12(a)
and the $200 lifetime supplement described in § 4.12(b).”) (emphasis added). Therefore, Taylor and
the prospective class members should have an opportunity to “grow into” eligibility for the
supplemental benefit when taking early retirement upon satisfying the eligibility requirements in
place at the time of the amendment – primarily attaining 15 years of service and the age of 50 or
older.

Accordingly, Taylor and the qualifying class members may collect the $700 monthly

supplemental benefits provided in § 4.12(a) of the Plan, provided that they meet the Plan eligibility
requirements.3
CONCLUSION
For the foregoing reasons, the court DENIES Defendants’ Cross-Motion for Partial
Summary Judgment [Dkt No. 199] and GRANTS Plaintiffs’ Robert P. Taylor, Jr. (And Putative
Subclass') Motion for Summary Judgment [Dkt. No. 201] as set forth herein. The parties shall

3

Defendants contend that Taylor’s remaining arguments concerning notice, breach of
fiduciary duty, and promissory estoppel are not properly before the court. Because the court has
resolved the matter in favor of Taylor and his representative class on other grounds, the court need
not address these issues.
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confer as to the manner, timing, and content of the notice to the Class and Subclass and report to the
court their

recommendations within thirty (30) days of the court’s issuance of this order.
IT IS SO ORDERED.

United States District Judge
March 29, 2013
Greenville, South Carolina

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