Durand v. Hanover Ins. Grp., Inc.

• Decision Date: 16 February 2018
• Docket Number: CIVIL ACTION NO. 3:07–CV–00130–HBB
• Citation: 294 F.Supp.3d 659
• Parties: Jennifer A. DURAND, on behalf of herself and on Behalf of all others similarly situated, Plaintiffs v. The HANOVER INSURANCE GROUP, INC., and the Allmerica Financial Cash Balance Pension Plan, Defendants
• Court: U.S. District Court — Western District of Kentucky

294 F.Supp.3d 659

Jennifer A. DURAND, on behalf of herself and on Behalf of all others similarly situated, Plaintiffs

v.The HANOVER INSURANCE GROUP, INC., and the Allmerica Financial Cash Balance Pension Plan, Defendants

CIVIL ACTION NO. 3:07–CV–00130–HBB

United States District Court, W.D. Kentucky, Louisville Division.

Signed February 16, 2018

Albert Huang, Eli Gottesdiener, Steven D. Cohen Gottesdiener Law Firm, PLLC, Brooklyn, NY, E. Douglas Richards, E. Douglas Richards, PSC, Lexington, KY, for Plaintiffs.

Alan S. Gilbert, Kristen C. Rodriguez, Jeffery S. Davis, Dentons US LLP, Christopher Q. King, Redgrave, LLP, Chicago, IL, Angela Logan Edwards, Lira A. Johnson, Lisa D. Hughes, Richard H.C. Clay, Dinsmore & Shohl LLP, Louisville, KY, Stephen J. O'Brien, Dentons US LLP, St. Louis, MO, for Defendants.

MEMORANDUM OPINION AND ORDER

H. Brent Brennenstuhl, United States Magistrate Judge

Before the Court are the following related motions: Defendants motion to enforce the scheduling order and for a protective order regarding untimely additional privilege challenges¹ (DN 235 SEALED); Plaintiffs' motion to update and amend the Court's December 17, 2013 class certification order² (DN 239, 240); and Plaintiffs' motion for in camera review of 218 additional documents that Defendants are withholding on privilege grounds (DN 242 SEALED). Plaintiffs have responded to Defendants' motion (DN 238 SEALED); Defendants have responded to Plaintiffs' motions (DN 246 SEALED, DN 250 SEALED); and Plaintiffs have filed replies in support of their motions (DN 253 SEALED, DN 257 SEALED). These matters are ripe for determination.

Procedural History and Nature of the Motion

The facts of this case have been fully recited on a number of occasions. Accordingly, the Court will only summarize the facts necessary to adequately address the pending motions. Plaintiff Jennifer A. Durand filed the original class action complaint that named as Defendants: the Hanover Insurance Group, Inc. ("Hanover") and the Allmerica Financial Cash Balance Pension Plan ("Plan") (DN 1 PageID # 8). The complaint alleges that Hanover (formally known as Allmerica Financial Corporation) was the sponsor, administrator, and a named fiduciary of this employee pension benefit plan (Id. ).

The Plan belongs to a subset of "defined benefit plans" that is known as "cash-balance" plans. Durand v. Hanover Ins. Group, Inc., 560 F.3d 436, 437 (6th Cir. 2009) (citing ERISA § 3(35), 29 U.S.C. § 1002(35) ) (" Durand I"). When an employee who is vested in such a plan, leaves his or her employment with such a plan sponsor, the employee has the option of choosing whether the benefit will be distributed in the form of a single-life annuity, under which payments begin when the departing employee reaches retirement age, or a lump sum payment, made at the time of the employee's departure. Durand I, 560 F.3d at 438 (citation omitted).

The original complaint alleges that Hanover or one of its affiliates employed Durand from October 17, 1995 until April 30, 2003, and she accrued pension benefits under the Plan throughout the approximately seven and a half years of her employment (Id. PageID # 8–9). It asserts that after ending her employment with Hanover, Durand elected to receive her fully-vested Plan benefits in the form of a lump-sum payment (DN 1 PageID # 9–12). Durand claims that the projection rate in the Plan's whipsaw calculation methodology violated ERISA because it understated the present value of her accrued benefit and, as a result, she suffered a partial forfeiture of her vested, accrued benefits³ (Id. PageID # 9–14).

Specifically, the complaint alleges that the Plan used a 401(k)-style investment menu to determine the interest earned by members' hypothetical accounts (Id. PageID # 9–14). Instead of using the interest credit rate that Durand selected from the 401(k)-style investment menu, Hanover and the Plan purportedly used the lower 30–year Treasury bond rate "("GATT") as the projection rate in the Plan's "whipsaw" calculation, in violation of 29 U.S.C. §§ 1053(e) and 1055(g) (ERISA §§ 203(e) and 205(g) ) (Id. ). Durand v. Hanover Ins. Group, Inc., 806 F.3d 367, 369 (6th Cir. 2015) (" Durand II"). The Plan again applied the GATT rate to discount the projected amount of Durand's benefit at normal retirement age back to its present value in 2003, thereby nullifying the effect of the projection-forward and resulting in a wash because the lump sum Durand received was identical to the amount in her hypothetical account at the time. Id. at 372.

The complaint sets forth a broad definition of class membership at paragraph 30 (DN 1 PageID # 12). However, other allegations in the complaint made clear that class membership was contingent upon the Plan participant being vested and receiving a lump-sum distribution that understated the present value of his or her accrued benefit as a result of the Plan using the above described whipsaw calculation methodology that allegedly violated ERISA (Id. PageID # 9–14). Durand II, 806 F.3d at 372–73.

The Sixth Circuit concluded that the original complaint focused on the lump-sum calculation and asserted only a whipsaw claim under 29 U.S.C. §§ 1053(a), (e) and 1055(g), 26 U.S.C. §§ 411(a) and 417(e). Durand II, 806 F.3d at 372–73. Further, the Sixth Circuit explained "[a] whipsaw claim alleges that a departing employee's lump-sum distribution understates the present value of her accrued benefit because of the use of a calculation methodology—in this case, a projection rate—that violates ERISA requirements." Id. (citation omitted).

In the amended complaint, filed December 15, 2009, Walter Wharton and Michael Tedesco joined Durand as individual plaintiffs and representatives of a putative class, seeking relief under ERISA § 502(a), 29 U.S.C. § 1132(a) (DN 46). The amended complaint named Durand as a member of the Class and the Pre–2004 Distribution Subclass; Wharton⁴ as a member of the Class and the 2004–2006 Distribution Subclass; and Tedesco⁵ as a member of the Class and the Post–2006 Distribution Subclass (Id. PageID # 616–18). The amended complaint again named the Hanover Insurance Group, Inc. and the Allmerica Financial Cash Balance Pension Plan as Defendants (Id. PageID # 617).

The amended complaint joined Wharton in Durand's original whipsaw claim (Id. PageID # 636–37). All three Plaintiffs asserted a new claim that challenged the method of crediting interest, sometimes referred to as an "interest crediting floor claim" (Id. PageID # 638, 640, 643; DN 71 PageID # 1234). Wharton and Tedesco claimed that the 2004 Plan amendment, that eliminated investment-experience interest crediting, constituted an impermissible cut-back of accrued benefits, in violation of ERISA § 204(g), 29 U.S.C. § 1054(g) (DN 46 PageID # 636, 640–45). Additionally, Wharton and Tedesco asserted that the Plan did not provide proper notice of the 2004 Plan amendment (Id. PageID # 629, 642, 644). The amended complaint, on behalf of all putative class members, also asserted claims that Hanover and the Plan had breached their fiduciary duties, under ERISA, to plan members in their administration of the Plan (DN 46 PageID # 645–48).

Hanover and the Plan moved to dismiss the additional claims in the amended complaint on several grounds, including the statute of limitations (DN 51). The Court ruled that the following claims in the amended complaint were time-barred: (1) the interest crediting floor claim (challenged the method of crediting interest); (2) the cutback claim; (3) the improper notice claim, arising under § 204(h), in connection with the 2004 Plan amendment; and (4) all of the breach of fiduciary duty claims (DN 71 PageID # 1248–54). The Court observed "[t]he claims remaining in this action, therefore, are the original whipsaw claims of the plaintiff Durand with the joinder of the plaintiff Wharton" (Id. PageID # 1254).

Durand, Wharton, and Tedesco moved the Court for reconsideration and/or clarification of its order dismissing certain claims as time-barred (DN 73). The Court concluded its timeliness analysis remained valid as to all of the previously addressed claims in the amended complaint, except the whipsaw-related fiduciary claim (DN 78 PageID # 1362–69). The Court noted that Defendants' motion had not challenged the timeliness of the whipsaw-related fiduciary claim and that such a determination was premature (Id. PageID # 1369). Further, the Court indicated it would defer ruling on the viability of the whipsaw-related fiduciary claim until full presentation of the issue on proper motion (Id. PageID # 1369–70). The Court indicated the "remaining claims are those of Durand and Wharton for benefits and breach of fiduciary duty arising from the alleged illegal methodology for calculating lump-sum distribution " (Id. PageID # 1371, emphasis added).

The parties litigated the merits of Wharton's whipsaw benefits claim and whipsaw-related breach of fiduciary duty claim through a motion for partial summary judgment filed by Defendants (DN 82, 83). Hanover and the Plan argued, as a result of the 2004 Plan amendment, Wharton had no legally cognizable claims because the lump sum distribution to Wharton was within a safe harbor recognized by the IRS and the courts as not violating ERISA (Id. PageID # 1382–85). The Court agreed with Defendants and granted their motion for partial summary judgment as to Wharton's whipsaw and whipsaw-related breach of fiduciary duty claims (DN 102 PageID # 1589–90). Further, the Court expressly ordered "the claims of plaintiff Walter J. Wharton, and the prospective class members he represents, are DISMISSED with prejudice, there being no genuine issue of material fact and the defendants being entitled to judgment as a matter of law" (Id. PageID # 1600).

Notably, in this same memorandum opinion and order, the Court addressed Plaintiffs' motion for class certification (DN 97, 102). Defendants opposed some, but not all, of Plaintiffs' proposals (DN 82, 99). The...