Frommert v. Conkright
| Decision Date | 24 July 2008 |
| Docket Number | Docket No. 07-0418-cv. |
| Citation | 535 F.3d 111 |
| Parties | Paul J. FROMMERT, Alan H. Clair, Donald S. Foote, Thomas I. Barnes, Ronald J. Campbell, Frank D. Commesso, William F. Coons, James D. Gagnier, Brian L. Gaita, William J. Ladue, Gerald A. Leonardo Jr., Frank Mawdesley, Harold S. Mitchell, Walter J. Petroff, Richard C. Spring, Patricia M. Johnson, F. Patricia M. Tobin, Nancy A. Revella, Anatoli G. Puschkin, William R. Plummer, Michael J. McCoy, Larry J. Gallagher, Napoleon B. Barbosa, Alexandra Spearman Harrick, Janis A. Edelman, Patricia H. Johnston, Kenneth P. Parnett, Joyce D. Cathcart, Floyd Swaim, Julie A. McMillian, Dennis E. Baines, Ruby Jean Murphy, Matthew D. Alfieri, Kathy Fay Thompson, Mary Beth Allen, Craig R. Spencer, Linda S. Bourque, Thomas Michael Vasta, Frank C. Darling, Clark C. Dingman, Carol E. Gannon, Joseph E. Wright, David M. Rohan, David B. Ruddock, Charles Hobbs, Charles Zabinski, Charles J. Maddalozzo, Joyce M. Pruett, William A. Craven, Maureen A. Loughlin Jones, Kenneth W. Pietrowski, Bonnie Cohen, Lawrence R. Holland, Gail A. Nasman, Steven D. Barley, Donna S. Lipari, Andrew C. Matteliano, Michael Horrocks, Candice J. White, Dennis E. Bains, Kathleen E. Hunter, John L. Crisafulli, Deborah J. Davis, Brenda H. McConnell, Kathleen A. Bowen, Robert P. Caranddo, Terence J. Kurtz, William J. Cheslock, Thomas E. Dalton, Lynn Barnsdale, Bruce D. Craig, Gary P. Hardin, Claudette M. Long, Dale Platteter, Mary Ann Sergeant, Molly White Kehoe, Irshad Quershi, David K. Young, Leslie Ann Wunsch, Eugene H. Updyke, Michael R. Benson, Alvin M. Adams, Ronnie Kolniak, James J. Farrell, Robert L. Brackhahn, Benjamin C. Roth, Richard C. Carter, Carmen J. Sofia, Kathleen W. Levea, Frederick Scacchitti, Paul Defina, James G. Walls, Gail J. Levy, John A. Williams, Crystal Thorton, Charles R. Drannbauer, William M. Burritt, and Janice Ross Heiler, Plaintiffs-Appellees, v. Sally L. CONKRIGHT, Xerox Corporation Pension Plan Administrator, Patricia M. Nazemetz, Xerox Corporation Pension Plan Administrator, Lawrence M. Becker, Xerox Corporation Plan Administrator, Xerox Corporation Retirement Income Guarantee Plan, and Xerox Corporation, a New York Corporation, Defendants-Appellants, Xerox Corporation, Defendant. |
| Court | U.S. Court of Appeals — Second Circuit |
Robert H. Jaffe (Mark B. Watson, Robert H. Jaffe & Associates, Springfield, NJ; George A. Schell, Schell & Schell, Fairport, NY; John A. Strain, Rodondo Beach, CA, on the brief), Robert H. Jaffe & Associates, Springfield, NJ, for Plaintiffs-Appellees.
Brendan S. Maher, Stris & Maher LLP, Dallas, TX, for Plaintiffs-Appellees.
Margaret A. Clemens, Nixon Peabody LLP, Rochester, NY, for Defendants-Appellants.
Maria Ghazal, Business Roundtable, Washington, DC; Jeffrey A. Lamken, Rachel M. McKenzie, Baker Botts LLP, Washington, DC; Allyson N. Ho, Baker Botts LLP, Dallas, TX, for Amicus Curiae Business Roundtable.
Before: STRAUB and RAGGI, Circuit Judges, and SESSIONS, District Judge.*
Plaintiffs-Appellees asserted claims under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., against their current or former employer, Xerox Corporation ("Xerox"),1 the pension plan administered for the benefit of its employees, and various individuals associated with the administration of that plan. On remand from our first decision in this litigation, see Frommert v. Conkright, 433 F.3d 254 (2d Cir. 2006), the District Court crafted a remedy to address the ERISA violations we had identified and concluded that the release forms signed by several Plaintiffs-Appellees did not bar their ERISA claims, see Frommert v. Conkright, 472 F.Supp.2d 452, 456-59 (W.D.N.Y.2007). Defendants-Appellants challenge both aspects of the District Court's decision. For the reasons set forth below, we reject Defendants-Appellants' first challenge and agree with the second. Accordingly, we vacate a portion of the District Court's order and remand the case to the District Court for proceedings consistent with this opinion.
We presume familiarity with the facts and procedural history of this case as set forth in our prior decision, see Frommert, 433 F.3d at 257-62, and we repeat them here only as relevant to the issues presented in this appeal. In that decision, we concluded that Defendants-Appellants had impermissibly amended the ERISA plan at issue through their method of determining retirement benefits for those beneficiaries who had previously left the company only to be rehired later. Id. at 264-68. When these beneficiaries left Xerox, they all received lump-sum distributions of their then-accrued pension benefits. Id. at 257.
The pension benefits of those who were subsequently rehired by Xerox were governed by a set of ambiguous provisions in the pension plan documents. The 1989 Xerox Retirement Income Guarantee Plan ("RIGP" or "Plan") provided that, "[i]n the event any part or all of a Member's accrued benefit is distributed to him prior to his Normal Retirement Date, ... and such member at any time thereafter recommences active participation in the Plan, the accrued benefit of such Member based on all Years of Participation shall be offset by the accrued benefit attributable to such distribution." 1989 RIGP § 9.6. The 1997 version of the Plan provided both that "[n]o credit shall be given [to a participating employee] for any period with respect to which a lump sum payment has been made ..." and that "Credit for Years of Participation preceding [such a payout] will be reinstated in the event that such an employee returns to Xerox." Frommert, 433 F.3d at 260. Thus, in determining these employees' benefits, the plan administrator was required to account, in a manner unspecified to employees, for both an employee's total years of service at Xerox and the fact that the final benefits must be "offset by" an amount "attributable" to a prior lump sum distribution.
The plan administrator resolved this difficulty by utilizing a so-called "phantom account" offset mechanism. The phrase "phantom account" refers to the calculation of the current value of the employee's prior, lump-sum distribution by adjusting that amount for "hypothetical investment gains and/or losses attributable to the prior distribution, as if the money had been left in [the employee's] account[ ]" instead of being distributed to the employee upon first leaving Xerox. Id. at 259 (quoting 1995 "Benefits Update"). In estimating the pension benefit to which that employee would be entitled upon his or her future retirement (and thus second separation) from Xerox employment, the plan administrator would both account for the employee's total years of service and deduct an amount based on the prior, lump-sum distribution, as augmented by the "phantom account" offset method. See id. at 259-61.
In our first decision, we concluded that the "phantom account" offset mechanism constituted a "retroactive cut-back" of anticipated pension benefits in violation of 29 U.S.C. § 1054(g), and that Defendants-Appellants had impermissibly amended the ERISA Plan to include that mechanism in violation of 29 U.S.C. § 1054(h). See id. at 266-68. We remanded to the District Court to fashion a remedy for these violations. See id. at 268. Specifically, we instructed the District Court as follows:
On remand, the remedy crafted by the district court for those employees rehired prior to 1998 should utilize an appropriate pre-amendment calculation to determine their benefits. We recognize the difficulty that this task poses because of the ambiguous manner in which the pre-amendment terms of the Plan described how prior distributions were to be treated. As guidance for the district court, we suggest that it may wish to employ equitable principles when determining the appropriate calculation and fashioning the appropriate remedy.
Id. In addition, we recognized that the District Court could apply the "phantom account" offset mechanism to employees hired after the 1998 amendment to the Plan because those individuals were on notice as to the mechanism's existence. Id. at 268-69. But see Miller v. Xerox Corp. Retirement Income Guarantee Plan, 464 F.3d 871 (9th Cir.2006) (), cert. denied, ___ U.S. ___, 127 S.Ct. 1829, 167 L.Ed.2d 321 (2007).
Acknowledging our guidance to employ "equitable principles" and reviewing the language of the Plan materials, the District Court concluded that the appropriate remedy for employees hired before the 1998 amendment was to direct the plan administrator to pay each of these individuals "a lump sum in the amount of the difference between the amount of benefits that [an employee] has received, and the amount of the recalculated benefit, without any consideration of a `phantom account.'"1 Frommert, 472 F.Supp.2d at 458 (internal quotation marks omitted). The District Court also stated that "it would not be unreasonable for the administrator to subtract out the amount of the prior distribution" in order to prevent such employees from receiving windfalls. Id. (alterations and internal quotation marks omitted).
In addition, the District Court concluded that the release forms signed by several Plaintiffs-Appellees in exchange for their receiving severance pay from Xerox did not release Defendants-Appellants from the ERISA-based claims asserted in this litigation. See id. at 460-65. Other matters addressed by the District Court on remand are not relevant to this appeal, which timely followed.
On appeal, Defendants-Appellants raise two challenges to the District Court's decision. First, Defendants-Appellants argue that the District Court fashioned an improper remedy for the ERISA violation associated with the implementation of the "phantom account offset" mechanism. Second, Defendants-Appellants argue that the District Court...
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Conkright v. Frommert
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Kunsman v. Conkright
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