Frommert v. Conkright

• Decision Date: 17 November 2011
• Docket Number: No. 00–CV–6311L.,00–CV–6311L.
• Citation: 51 Employee Benefits Cas. 2909,825 F.Supp.2d 433
• Parties: Paul J. FROMMERT, et al., Plaintiffs, v. Sally L. CONKRIGHT, Xerox Corporation Pension Plan Administrator, et al., Defendants.
• Court: U.S. District Court — Western District of New York

51 Employee Benefits Cas. 2909

825 F.Supp.2d 433

Paul J. FROMMERT, et al., Plaintiffs,

v.Sally L. CONKRIGHT, Xerox Corporation Pension Plan Administrator, et al., Defendants.

No. 00–CV–6311L.

United States District Court, W.D. New York.

Nov. 17, 2011.

George A. Schell, Jr., Schell & Schell, Fairport, NY, Peter K. Stris, Stris & Maher LLP, Gardena, CA, Robert H. Jaffe, Robert H. Jaffe & Associates, P.A., Springfield, NJ, Amber M. Ziegler, John A. Strain, Law Offices of John A. Strain, Manhattan Beach, CA, Matthew J. Fusco, Chamberlain, D'Amanda, Oppenheimer & Greenfield, LLP, Rochester, NY, for Plaintiffs.

Margaret A. Clemens, Littler Mendelson, P.C., Rochester, NY, Robert A. Long, Jr., Robert D. Wick, Covington & Burling LLP, Washington, DC, for Defendants.

DECISION AND ORDER

DAVID G. LARIMER, District Judge.

INTRODUCTION

This case presents claims under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1101 et seq., by current and former employees of Xerox Corporation (“Xerox”), relating to their pension benefits. The plaintiffs in this action have all been employed by Xerox at various times, and they have all participated in the Xerox Retirement Income Guarantee Plan (“RIGP” or “Plan”). All the plaintiffs left Xerox's employ at some point, at which time they each received a lump-sum distribution of accrued pension benefits, and they later returned to work for Xerox. The basic issue in this case involves how to take those past distributions into account when calculating plaintiffs' current or future benefits, so that plaintiffs are neither shortchanged nor given a windfall.

Besides the instant case, five other related lawsuits are currently pending before the Court, involving similar claims and issues.¹ Various issues and motions are awaiting decision by the Court in all of these actions. This Decision and Order directly deals only with the Frommert action, although my rulings here may effectively dispose of, or at least have some bearing on, some of the issues in those other cases.

This action, Frommert, is now before the Court on remand from the Court of Appeals for the Second Circuit. That remand followed the United States Supreme Court's remand of this action to the Court of Appeals. Some background is necessary to understand the terms of those remands.

In 2007 this Court, on remand from the Court of Appeals from an earlier decision in this case, crafted a remedy to address ERISA violations that had been identified by the Second Circuit in a prior appeal. In doing so, I applied a de novo standard in interpreting the Plan, and I did not accept the Plan Administrator's proposed interpretation of the Plan, the substance of which will be discussed in more detail below. See 472 F.Supp.2d 452, 456–59. I also ruled that the written releases signed by some of the plaintiffs were unenforceable as to the ERISA claims at issue in this case. Id. at 461–62.

On appeal, the Second Circuit upheld my decision not to apply a deferential standard to the Administrator's interpretation, and affirmed as to the remedy portion of my decision. The court also vacated and remanded as to the issue concerning the releases, however, finding that the releases were enforceable. 535 F.3d 111, 120–22 (2d Cir.2008).

Defendants then successfully sought a writ of certiorari from the Supreme Court, a majority of which held that “[t]he Court of Appeals erred in holding that the District Court could refuse to defer to the Plan Administrator's interpretation of the Plan on remand, simply because the Court of Appeals had found a previous related interpretation by the Administrator to be invalid.” Conkright v. Frommert, 559 U.S. ––––, 130 S.Ct. 1640, 1651, 176 L.Ed.2d 469 (2010). The Supreme Court remanded the case to the Second Circuit, which in turn remanded to this Court for further proceedings. See Dkt. # 203. The Supreme Court did not address the Court of Appeals' holding concerning the enforceability of the release forms signed by some of the plaintiffs.

Following the Supreme Court's and Court of Appeals' remands, the Frommert plaintiffs filed a motion to reenter judgment (Dkt. # 204, # 205), and defendants filed a cross-motion (Dkt. # 211) for an order affirming the Plan Administrator's interpretation of the Plan, authorizing the Plan Administrator to calculate and pay benefits in accordance with that interpretation, and dismissing the complaint. On June 2, 2011, the Court met with counsel for all the parties in Frommert and the five other related cases, to discuss the various pending motions and how best to proceed. The following constitutes the Court's decision on the pending motions in Frommert. Written decisions on the pending motions in the other cases will be issued separately.

DISCUSSION

I. Procedural History

The Frommert action was the first of these cases to be filed, in June 2000. The factual background and history of the Frommert litigation (which were aptly described by the Supreme Court as “exceedingly complicated,” see Conkright, 559 U.S. at ––––, 130 S.Ct. at 1644), have been fully set forth in a number of decisions by this Court, by the Court of Appeals for the Second Circuit, and by the Supreme Court, familiarity with all of which is assumed.²

In general, the Frommert plaintiffs are all current or former employees of Xerox, each of whom worked for Xerox during two separate periods. During the original period of employment, each plaintiff was a participant in the RIGP. Upon the initial termination of employment, each plaintiff received a lump-sum distribution of his pension benefit. Each plaintiff was later rehired by Xerox and again became a participant in the RIGP.

“In order to avoid paying duplicative benefits to rehired employees who had previously received a lump sum distribution, the Plan has always contained provisions concerning the offset of prior distributions.” Frommert v. Conkright (“ Frommert I ”), 433 F.3d 254, 257 (2d Cir.2006).³ What is at issue here is the manner in which that offset has been calculated and applied, and whether plaintiffs were adequately notified in advance of that offset.

Again, the details of the offset, as it has been applied and made known to participants over the years, have been set forth elsewhere, see, e.g., id. at 257–61, but in short, the methodology by which the Administrator originally calculated plaintiffs' benefits involved the use of a so-called “phantom account.” Under the phantom-account formula, the Plan Administrator would calculate the hypothetical growth that the employees' past distributions would have experienced if the previously-distributed money had remained in Xerox's investment funds, and the Administrator would then reduce the employee's present benefits accordingly.

In 2004, this Court granted summary judgment for the Plan, applying a deferential standard of review to the Plan Administrator's interpretation. See 328 F.Supp.2d 420, 430–431. On appeal, the Second Circuit in Frommert I found, “as a matter of law, that the phantom account was not part of the Plan until 1998 when it was added by amendment of the Plan's text through its explanation in the 1998 SPD [summary plan description].” 433 F.3d at 263. Therefore, the court stated, “the phantom account may not be applied to employees rehired prior to the issuance of the 1998 SPD,” although it could be applied to employees rehired after that date, because the phantom account was adequately disclosed by the 1998 SPD to such employees when they joined the plan. Id. That holding was not affected by the Supreme Court's decision in this case, and the Administrator does not now contend that the phantom account should be utilized in calculating the benefits owed to any of the plaintiffs, other than those who have signed written release forms.

On remand to this Court from the Court of Appeals, the Administrator proposed a new interpretation of the Plan. That interpretation did not use the phantom-account formula, but it did take prior distributions into account, by expressing the participant's prior distribution as an annuity commencing at normal retirement age. See Dkt. # 121–2 ¶ 7. The Administrator explained that this approach would offset the participant's accrued benefit by the “actuarial equivalent” of the prior lump-sum distribution. Id. ¶ 11.

This Court, however, did not give any deference to that proposed interpretation. Instead, applying a de novo standard, the Court adopted an approach under which plaintiffs' present benefits were reduced only by the nominal, non-appreciated amount of their past distributions. See 472 F.Supp.2d at 457–458.

On appeal from that decision, the Second Circuit affirmed in relevant part, holding in Frommert II that this Court was correct not to apply a deferential standard on remand, and that my decision on the merits, concerning the proper remedy, was not an abuse of discretion. See Frommert II, 535 F.3d at 119. The court stated that there was no authority that a court must “afford deference to the mere opinion of the plan administrator in a case, such as this, where the administrator had previously construed the same terms and we found such a construction to have violated ERISA.” Id.

The Supreme Court, however, disagreed. It held that both this Court and the Court of Appeals erred with respect to the standard of review to be applied to the Administrator's new proposed interpretation of the Plan. By a 5–4 majority, the Supreme Court held that this Court should give deference to the Plan Administrator's interpretation of the Plan with respect to the treatment of prior distributions to employees who were rehired prior to the issuance of the 1998 SPD. The Court did not hold that the Administrator should necessarily prevail on the merits, but only that this Court should apply the standard of review established in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), and Metropolitan Life Ins. Co. v. Glenn, 554...