Johnson v. Meriter Health Servs. Emp. Ret. Plan
| Decision Date | 03 July 2014 |
| Docket Number | No. 10–cv–426–wmc.,10–cv–426–wmc. |
| Citation | 29 F.Supp.3d 1175 |
| Parties | Phyllis JOHNSON, et al., on behalf of themselves and all others similarly situated, Plaintiffs, v. MERITER HEALTH SERVICES EMPLOYEE RETIREMENT PLAN and Meriter Health Services, Inc., Defendants. |
| Court | U.S. District Court — Western District of Wisconsin |
Eli Gottesdiener, Matthew Clark Norgard, Steven D. Cohen, Albert Huang, Gottesdiener Law Firm, PLLC, Brooklyn, NY, for Plaintiffs.
Charles Clark Jackson, Christopher J. Boran, Jeffrey Joseph Kmoch, Matthew Allen Russell, Morgan, Lewis & Bockius LLP, Chicago, IL, David A. Gomez, Jeffrey Alan Sturgeon, Jeremy Blumenfeld, Morgan Lewis & Bockius LLP, Philadelphia, PA, Todd Gregory Smith, Godfrey & Kahn, S.C., Madison, WI, for Defendants.
This class action under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., was filed on behalf of former or current employees of defendant Meriter Health Services, Inc., who were participating in defendant Meriter Health Services Employee Retirement Plan, as well as other beneficiaries of the Plan. Plaintiffs allege that defendants violated ERISA over a twenty-three year period in multiple respects. The court previously certified a class—really eleven subclasses—pursuant to Federal Rule of Civil Procedure 23(b)(2). Before the court are cross motions for summary judgment. (Dkt. 300, 302.)
Plaintiffs filed this lawsuit in July 2010, challenging administration of an employee pension plan dating back to 1987, with the most crucial developments to plaintiffs claims occurring in 2002 and 2003. Not surprisingly based on this timeline, defendants statute of limitations defense is the pivotal issue presented by the parties' motions for summary judgment. For the reasons that follow, the court will deny plaintiffs' motion in its entirety and grant in part defendants' motion. Defendants' motion is denied with respect to plaintiffs' breach of fiduciary duty claim premised on alleged failures to act for the exclusive purpose of plan participants by concealing defendants' failure to pay lump sum distributions as required under IRC § 417(e) from the Plan's inception on October 1, 1987, to December 31, 2002. In all other respects, the court will grant defendants' motion based on their statute of limitations defense.
At all times relevant to this action, defendant Meriter Health Services Employee Retirement Plan was an “employee benefit plan” and, more specifically, a “defined benefit plan” within the meaning of ERISA §§ 3(2)(A) and 3(35), 29 U.S.C. §§ 1002(2)(A) and 1002(35). Similarly, defendant Meriter Health Services, Inc., was the sponsor of the Plan and the “employer” defined in the Plan. Meriter was formed in 1987 as the result of a merger between Methodist and Madison General. The Meriter Plan, in turn, was the result of a merger of the Madison General defined benefit plans and Methodist defined contribution plan. The Plan was designed by Meriter's actuarial consultants Towers Perrin and labeled as a “pension equivalent reserve credit” plan or “PERC”. Defendants do not dispute that Meriter acted as a fiduciary to the Plan in certain respects but disputes the proposition that Meriter was a “general fiduciary.” (Pls.' Reply to Pls.' PFOFs (dkt. # 377) ¶¶ 16a, 16b.)
Plaintiffs are former and current employees of Meriter and participants in the Plan or other beneficiaries of the Plan. The court previously certified eleven subclasses pursuant to Federal Rule of Civil Procedure 23(b)(2). (Dkt. 186, 245) Subclass A is comprised of all persons who received a lump sum distribution from October 1, 1987, to December 31, 2002. Subclass B is comprised of persons who received their lump sum distribution between 1987 and 2002 having not yet attained age 65. Subclass C consists of all persons who terminated their employment with Meriter prior to January 1, 2002, and whose benefits did not commence prior to January 1, 2003. Subclass D consists of participants who commenced receipt of their benefit in an annuity form between October 1987 and December 31, 2002, and who were between the ages of 55 and 65 when the benefit commenced. Subclass E1 is comprised of all persons who accrued benefits both before and after January 1, 2003, terminated their employment during 2002, and who received a lump sum distribution after January 1, 2003, but before July 30, 2004. Subclass E2 is the same as E1, except the members received a lump sum after July 30, 2004, but before August 17, 2006. Subclass F is the same as E1, but its members received lump sum distributions after August 17, 2006. Subclass G consists of individual who accrued benefits both before and after January 1, 2003, who commenced annuity payments on or after January 1, 2003, and who were between the ages of 55 and 65 on the date their benefit payments commenced. Subclass H is comprised of persons who accrued benefits both before and after January 1, 2003, who have terminated employment with Meriter, but who have not yet received a distribution from the Plan. Subclass I consists of persons who accrued benefits both before and after January 1, 2003, who are currently employed with Meriter, and who have not yet received a distribution from the Plan. Finally, Subclass J consists of persons who entered the Plan on or after January 1, 2003.
On October 1, 1987, Meriter created the Plan. Between 1987 and December 31, 2002, the Plan was governed by three different Plan documents. The court will refer to the first of the three pre–2003 Plan documents as the “1988 Plan.” (Declaration of Steven D. Cohen (“Cohen Decl.”) (dkt. # 304), Ex. 17 (dkt. # 309).) The 1988 Plan was signed by then-Meriter President William E. Johnson on September 30, 1988, and has an effective date of October 1, 1987. The second Plan document is the “1993 Plan.” (Cohen Decl., Ex. 18 (dkt. # 310).) The 1993 Plan was signed on October 18, 1993, by Meriter's then-Director of HR William L. Morgan and has an effective date of October 1, 1987. The third, pre–2003 Plan document is the “February 2002 Plan.” (Cohen Decl., Ex. 22 (dkt. # 312–2).) This document was signed on February 26, 2002, also by Morgan, and also with an effective date of October 1, 1987.
Under these Plan documents, Meriter had the discretionary authority and responsibility for appointing the Plan's administrator and named fiduciaries. Since October 1, 1987, the Plan Administrator has been the “Pension Committee” also known as the Executive Compensation & Pension Committee (or “ECPC”).
The pre-amendment Plan documents all expressed participants' benefits in terms of an indexed annuity consisting of yearly accruals increased each year by an “indexing rate.” The yearly accrual equaled 0.75% of a participant's annual salary; for those participants with at least ten years of service, the yearly accrual equaled 0.935%. The Plan adopted a constant factor of 8.0 to convert this annuity into a lump sum distribution. Defendants communicated the annual accrual benefit to participants as an annual “pay credit” or “contribution credit” of 6% of wages for employees with less than 10 years of service and 7.5% for those with 10 or more years of service. These annuity accruals multiplied by the factor of 8.0 were then communicated annually to participants as their accrued benefit.
In 2002, a Meriter management group called the “Pension Design Committee” was convened to conduct a multi-month study of Meriter's retirement benefits program. After reviewing various options, the Pension Committee of the Board of Directors recommended certain changes to the full board in August 2002. On August 28, 2002, the Board of Directors adopted a resolution, accepting the recommendation of the Pension Committee, directing amendment of the retirement plans, and requiring that the plans be kept on file once fully executed and approved by the IRS. (Defs.' PFOFs (dkt. # 316) ¶ 54.) The adopted changes were reflected in an operating plan document prepared by Meriter's attorney. (Declaration of Thomas A. Hoffner (“Hoffner Decl.”), Ex. T (“2003 Operating Plan”) (dkt. # 314–20).) That document, however, was unsigned and had handwritten on the cover: “5/2003 DRAFT.” Material to plaintiffs' challenges, the operating plan document: (1) set an annual interest rate at the greater of 4% or equal to the annual yield on 10–year Treasury Constant Maturities; and (2) removed the 8.0 conversion factor in calculating a participant's annual pay credit.
Through its counsel, Meriter notified the Department of Labor and the IRS that the Plan had been amended effective January 1, 2003. Plan participants were also required to attend mandatory meetings in late 2002 regarding the amended plan and the roll-out of a 401(k) savings plan. Brochures and a 204(h) notice were also provided to plan participants. The Plan was administered consistent with the operating plan document. Until January 23, 2009, however, defendants still did not formally sign a written instrument that contained the amendments purportedly adopted in 2003.
Section 502 of ERISA, 29 U.S.C. § 1132, provides a civil remedy for participants or beneficiaries for violations of ERISA, either to recover benefits (§ 502(a)(1)(B)) or to obtain appropriate equitable relief (§ 502(a)(3)). Plaintiffs' § 502 claims can be roughly grouped into the following three categories: (1) administration of the Plan pre-amendment; (2) amendment of the Plan, including providing proper notice of that amendment; and (3) post-amendment administration of the Plan.
In the First Amended Complaint, plaintiffs allege the following claims concerning the administration of the Plan before its amendment (the date of which remains in disputed):
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