Clemons v. Norton Healthcare Inc., s. 16-5063

• Decision Date: 10 May 2018
• Docket Number: Nos. 16-5063,Nos. 16-5124,s. 16-5063,s. 16-5124
• Citation: 890 F.3d 254
• Parties: Elizabeth A. CLEMONS, David R. Khaliel, and Larry W. Taylor, on behalf of themselves and all other similarly situated individuals, Plaintiffs-Appellees/Cross-Appellants, v. NORTON HEALTHCARE INC. RETIREMENT PLAN, Defendant-Appellant/Cross-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

890 F.3d 254

Elizabeth A. CLEMONS, David R. Khaliel, and Larry W. Taylor, on behalf of themselves and all other similarly situated individuals, Plaintiffs-Appellees/Cross-Appellants,

v.NORTON HEALTHCARE INC. RETIREMENT PLAN, Defendant-Appellant/Cross-Appellee.

Nos. 16-5063

Nos. 16-5124

United States Court of Appeals, Sixth Circuit.

Argued: June 22, 2017

Decided and Filed: May 10, 2018

Rehearing En Banc Denied June 18, 2018

ARGUED: Keith L. Pryatel, KASTNER WESTMAN & WILKINS, LLC, Akron, Ohio, for Appellant/Cross-Appellee. Michael D. Grabhorn, GRABHORN LAW OFFICE, PLLC, Louisville, Kentucky, for Appellees/Cross-Appellants. ON BRIEF: Keith L. Pryatel, Kenneth M. Haneline, KASTNER WESTMAN & WILKINS, LLC, Akron, Ohio, Lira A. Johnson, Michael P. Abate, DINSMORE & SHOHL LLP, Louisville, Kentucky, for Appellant/Cross-Appellee. Michael D. Grabhorn, Andrew M. Grabhorn, GRABHORN LAW OFFICE, PLLC, Louisville, Kentucky, William T. Payne, Joel R. Hurt, FEINSTEIN DOYLE PAYNE & KRAVEC, Pittsburgh, Pennsylvania, for Appellees/Cross-Appellants.

Before: SILER, McKEAGUE, and WHITE, Circuit Judges.

McKEAGUE, J., delivered the opinion of the court in which SILER, J., joined, and WHITE, J., joined in part. WHITE, J. (pp. 282–85), delivered a separate opinion concurring in part and dissenting from Part III and Part IV. C. 3.

OPINION

McKEAGUE, Circuit Judge.

This appeal is the latest installment in an ERISA litigation saga that has spanned almost ten years. At the risk of oversimplifying their case, the Plaintiff–Retirees claim that Defendant Norton Healthcare, Inc. Retirement Plan ("Norton") underpaid them under the terms of the plan. The district court found that the plan was unambiguous in the Retirees' favor. We agree with the district court on most issues. However, because the Plan is ambiguous in one crucial respect and may not comply with ERISA in another, we VACATE the district court's summary judgment order and REMAND for further examination of those issues. Consequently, we also VACATE the district court's damages order, including its certification of a class under Rule 23(b)(1)(A) and (b)(2) during the damages stage. In doing so, we mean no slight to the district judges and their staff, who ought to be praised for their commitment to this case and for their patience with the complex issues it presents.

I

Plaintiffs Elizabeth A. Clemons, David R. Khaliel, and Larry W. Taylor ("the Retirees") were employed by Norton Healthcare. They are covered by a plan ("the Plan") established to benefit former Norton employees. In January 2008, the Retirees brought a putative class action under ERISA, alleging Norton underpaid retirees who elected to take their pension as a lump-sum payment. The district court certified a class in 2011 and eventually granted summary judgment to the Retirees. Damages have not been reduced to a sum certain, but the district court adopted the Retirees' formula for calculating damages, awarded pre-judgment interest at a fixed rate, and entered a final judgment for the Retirees. Collateral proceedings indicate that the total amount at issue is between sixty and seventy million dollars.

Both sides appealed the judgment. Norton (technically, the appellant) disputes the district court's interpretation of the Plan, the standard of review employed by the district court, class certification, and the district court's adoption of the Retirees' proffered damages formula. The Retirees (technically, the cross-appellants), ask us to apply a longer statute of limitations and quibble with the appropriate rate of prejudgment interest, in addition to disagreeing with Norton's arguments on appeal. After the Retirees filed their cross-appeal, Norton balked, asserting that we lack jurisdiction over the entire case because the district court's last order was not final under 28 U.S.C. § 1291.

A

The facts relevant to this appeal are straightforward and undisputed. In 1991, Norton merged two predecessor plans (the "MEH Plan" and the "NKC Plan") into one Plan, which is the defendant here. The Plan is a single-employer plan governed by ERISA, funded by Norton, and maintained under a written document (the "Plan Document"). Although the initial Plan was established in 1991, the most recent, restated Plan Document became effective January 1, 1997. Since then, it has been amended multiple times.

As of January 1, 1997, the Plan used two basic formulas for pension benefits. First, it included a traditional defined-benefit formula applicable only to members of the predecessor plans from MEH and NKC. It also included a cash-balance formula applicable to all other plans. See Norton Plan § 4.03. In 2004, the Plan was amended to tie off the predecessor plans; that is, to end accruals under the defined-benefit formulas and allow further accruals only under the cash-balance benefit formula established in the merged Plan.

In all its iterations, the Plan provides for benefits for "normal" retirement at age 65, late retirement, early retirement, and disability retirement §§ 4.03–4.07. The Plan allows participants who are at least 55 years old and have at least 10 years of service to retire early. §§ 2.22, 4.05(a). The Plan allows retirees to take their benefit in the "Basic Form" or in one of six alternative forms. § 4.02(a)–(b). One of those alternative forms is a lump-sum payment received on the date of retirement. § 4.02(b)(6).

B

The Retirees here are all former Norton employees who (a) retired after the 2004 amendments became effective and (b) elected the lump-sum benefit. On January 30, 2008, they filed their first Class Action Complaint. The case was assigned to Judge Jennifer B. Coffman.

After two years of motion practice and class-certification discovery, the Retirees filed the operative complaint on May 10, 2010. Explaining the core of their allegations, the Retirees stated:

On behalf of themselves and others similarly situated, Plaintiffs challenge the calculation of their pension benefits as follows:

a. the Defendant Plan's failure to include the value of the "increasing monthly income" ("cost-of-living") in the calculation of participant lump sum benefits and in the calculation of participant "cash balance" starting balances;

b. the Defendant Plan's failure to include the value of early retirement subsidies in the calculation of participant lump sum benefits and in the calculation of participant "cash balance" starting balances; and/or

c. the Defendant Plan's failure to calculate participant lump sum benefits according to the contra[c]tual formula.

On May 17, 2010, the Retirees filed a motion for class certification. They sought certification under Rule 23(b)(1)(A), (b)(2), and (b)(3), defining their proposed class as:

All participants in the Norton Healthcare, Inc. Retirement Plan, its predecessors and successors, whose contractual lump sum pension benefits:

(1) did not include the value of the basic form of benefit—an "increasing monthly retirement income" (annual cost-of-living adjustment)—when election of such basic form would have yielded the highest value for the participant; and/or

(2) did not include the value of the "alternative" lump sum benefit where the basic form of benefit is multiplied by 212, when election of such alternative form would have yielded the highest value for the participant; and/or

(3) did not include the value of the early retirement subsidy.

The district court granted the motion and certified the class under Rule 23(b)(1)(A) and (b)(2), finding Norton's counterarguments to be improperly merits-based. It also appointed Khaliel and Taylor as class representatives, but rejected Clemons, reasoning that the Retirees had not satisfied the typicality requirement as to her. The district court defined the class as requested by the Retirees. In April 2011, the parties began merits discovery. Meanwhile, Norton petitioned for interlocutory review of the certification order. We denied the petition.

Back in the district court, Norton moved for partial summary judgment. The basis for the motion was that Kentucky's five-year statute of limitations for statutory claims applied, and that all claims related to benefits paid before January 30, 2003 should be dismissed. See Ky. Rev. Stat. Ann. § 413.120(2). The Retirees countered that their claims were timely because Kentucky's fifteen-year statute of limitations for claims based on a written contract should apply. See Ky. Rev. Stat. Ann. § 413.090(2). The district court denied the motion. The court reasoned that the dispute "centers around the plaintiffs' rights under their contract with [Norton]," and that the Retirees were not seeking to enforce any statutory rights created by ERISA.

After we denied interlocutory appeal of the class certification decision, the Supreme Court decided Wal-Mart Stores, Inc. v. Dukes , 564 U.S. 338, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011). On July 24, 2012, Norton attacked the existing class certification, citing Dukes and West v. AK Steel Corp. , 484 F.3d 395 (6th Cir. 2007). Norton asked the district court to decertify the class entirely because the highly individualized nature of pension calculations forestalled a finding of commonality. Norton also attacked the merits of Khaliel's and Taylor's individual claims and argued that certification under Rule 23(b)(2) was improper in light of Dukes and West .

The district court denied the motion. The court found Dukes inapplicable, reasoning that the commonality requirement was satisfied because Norton "stipulated that its actuaries used a consistent methodology when they calculated benefits," and "the crux of the Plaintiffs' claims" was whether that methodology was correct. The district court also concluded that even if certification under Rule 23(b)(2) was improper, the class "would remain properly certified under Rule 23(b)(1)(A)."

While Norton's motion to decertify was pending, the parties completed merits discovery and filed cross-motions for summary judgment. Shortly after briefing on these motions was completed, Judge...