Kunsman v. Conkright

• Decision Date: 16 October 2013
• Docket Number: No. 08–CV–6080L.,08–CV–6080L.
• Citation: 977 F.Supp.2d 250
• Parties: Bruce D. KUNSMAN, Plaintiff, v. Sally L. CONKRIGHT, et al., Defendants.
• Court: U.S. District Court — Western District of New York

977 F.Supp.2d 250

Bruce D. KUNSMAN, Plaintiff,

v.Sally L. CONKRIGHT, et al., Defendants.

No. 08–CV–6080L.

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

Oct. 16, 2013.

Amber M. Ziegler, John A. Strain, Law Offices of John a Strain, Manhattan Beach, CA, Mark B. Watson, Robert H. Jaffe, Robert H. Jaffe & Associates, P.A., Springfield, NJ, Matthew J. Fusco, Chamberlain, D'Amanda, Oppenheimer & Greenfield, LLP, Rochester, NY, for Plaintiff.

Margaret A. Clemens, Patrick James Simpson, Littler Mendelson, P.C., Rochester, NY, for Defendants.

DECISION AND ORDER

DAVID G. LARIMER, District Judge.

This action is one of several before the Court involving similar 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 the manner in which plaintiffs' pension benefits have been calculated.¹ The details of the claims in this action will be explained below, but in short, they relate to the treatment of prior distributions of plaintiffs' accrued benefits when calculating plaintiffs' current or future benefits.

Currently pending before the Court is a motion to dismiss filed by defendants, as well as a motion to stay filed by one of the plaintiffs, Joseph McNeil. The following constitutes the Court's decision on those motions.

BACKGROUND

As stated, this action is one of a set of related cases. In general, these cases involve plaintiffs who worked for Xerox and were members of Xerox's pension plan (“Plan”), who left Xerox's employ, at which time they received lump-sum distributions of retirement benefits earned up to that point, and who were later rehired by Xerox.

After the plaintiffs were rehired, a question arose as to how to account for the past distributions to them when calculating the benefits owed to those plaintiffs upon their eventual retirement. The Plan Administrator initially interpreted the Plan to call for an approach that has come to be known as the “phantom account” method. Essentially, that method calculated the hypothetical growth that the plaintiffs' past distributions would have experienced if the money that had been distributed to them had remained in Xerox's investment funds, and reduced their present benefits accordingly.

Some of the affected employees took issue with that approach, and in 2000, a number of them commenced a lawsuit in this Court, Frommert v. Conkright, 00–CV–6311.²Frommert has an especially tortuous history, but in short, on appeal from a decision of this Court, which held that the phantom account could be applied to the plaintiffs in that case, the Court of Appeals for the Second Circuit held that the Plan Administrator's interpretation was unreasonable, and 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 254, 263 (2d Cir.2006). The court also held that “the phantom account may not be applied to employees rehired prior to the issuance of the 1998 SPD,” because those employees had not been adequately notified that the phantom account method would be used to calculate their benefits. However, the court added, “for employees rehired subsequent to the amendment of the Plan through the 1998 SPD, the phantom account is a component of the Plan that they joined and thus may permissibly be applied to them.” Id.

The quoted language from the Second Circuit effectively encapsulates the Second Circuit's ruling. The phantom account was not added to the Plan until the issuance and distribution of the 1998 SPD. It may not be applied to employees rehired prior to their receipt of the 1998 SPD, but it may be applied to employees rehired thereafter.

The Court of Appeals remanded the Frommert action to this Court, with directions to craft a remedy for those employees rehired prior to 1998. On remand, this Court adopted an approach put forward by the Frommert plaintiffs. 472 F.Supp.2d 452 (W.D.N.Y.2007). The details of that approach are not significant here, because after the Second Circuit affirmed this Court's decision in relevant part, 535 F.3d 111, the United States Supreme Court granted review, and reversed the Court of Appeals' decision. The Supreme Court 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....” 559 U.S. 506, 522, 130 S.Ct. 1640, 1650, 176 L.Ed.2d 469 (2010). The Court added that “[a]pplying a deferential standard of review does not mean that the plan administrator will prevail on the merits. It means only that the plan administrator's interpretation of the plan ‘will not be disturbed if reasonable.’ ” Id., 130 S.Ct. at 1651 (quoting Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 111, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)).

On remand from the Supreme Court, this Court then issued another decision, adopting the Plan Administrator's new interpretation of the relevant portions of the Plan. 825 F.Supp.2d 433 (2011). That interpretation involves calculating each plaintiff's benefit as an annuity beginning at the plaintiff's normal retirement age, i.e., age sixty-five, and incorporating into that calculation an offset of the participant's accrued benefit by the “actuarial equivalent” of the prior distribution. Id. at 439–40. The plaintiffs in Frommert have appealed from that Decision and Order, and the appeal is now pending before the Second Circuit.

After the Frommert action began, several other similar lawsuits were filed, both by individual plaintiffs and by groups of plaintiffs. The instant case, Kunsman, was filed by eighty-three current and former Xerox employees on February 21, 2008. The complaint is explicitly based on the various decisions in Frommert and other cases concerning the Xerox Plan.

The complaint in Kunsman asserts four causes of action: (1) for benefits under 29 U.S.C. § 1132(a)(1)(B)³ and for injunctive relief under 1132(a)(3) ⁴; (2) under 29 U.S.C. § 1104 for breach of fiduciary duty; (3) under § 1104, based on defendants' alleged failure to administer the Plan for the benefit of participants; and (4) a state law claim for conspiracy to defraud.

DISCUSSION

I. Timeliness

Defendants' motion to dismiss is based in part on their assertion that plaintiffs' claims are time-barred. An analysis of this issue requires some familiarity with the limitations periods applicable to the various types of ERISA claims presented here.

A. Claims under § 1132: General Principles

Section 1132(a)(1)(B) creates a cause of action for beneficiaries of an ERISA plan to “recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan....” ERISA does not contain a specific limitations period for actions brought under this statute. See Burke v. PriceWaterHouseCoopers LLP Long Term Disability Plan, 572 F.3d 76, 78 (2d Cir.2009). Instead, the controlling limitations period is generally provided by the “most nearly analogous state limitations statute.” Id. In cases brought in New York, courts use the six-year period for breach of contract claims. See Muto v. CBS Corp., 668 F.3d 53, 57 (2d Cir.2012); Miles v. New York State Teamsters Conf. Pension and Retirement Fund Employee Pension Benefit Plan, 698 F.2d 593, 598 (2d Cir.1983).

The plan itself may provide for a shorter limitations period, however. See Epstein v. Hartford Life and Accident Ins. Co., 449 Fed.Appx. 46, 47 (2d Cir.2011); Burke v. PriceWaterHouseCoopers LLP Long Term Disability Plan, 572 F.3d 76, 78 (2d Cir.2009). In the case at bar, the Plan sets forth a limitations period of one year, a fact that was disclosed in the 1998 SPD. See Dkt. # 6–3 at 73 (participant must bring any action “within one year after the cause of action accrued”).

With respect to the commencement of the limitations period, the Court of Appeals for the Second Circuit has held, in the context of a claim under § 1132(a)(1)(B), that “a cause of action under ERISA accrues upon a clear repudiationby the plan that is known, or should be known, to the plaintiff—regardless of whether the plaintiff has filed a formal application for benefits.” Carey v. International Broth. of Elec. Workers Local 363 Pension Plan, 201 F.3d 44, 49 (2d Cir.1999). “[A]ccrual is triggered by either actual knowledge or constructive knowledge of a clear repudiation.” Id. at 48 n. 4. That standard has its roots in the law of trusts, under which the limitations period governing a claim against a trust fiduciary begins to run when there has been a clear repudiation by the fiduciary of his responsibility to properly administer the trust. See In re Barabash's Estate, 31 N.Y.2d 76, 79–80, 334 N.Y.S.2d 890, 286 N.E.2d 268 (1972) (quoted in Valle v. Joint Plumbing Indus. Bd., 623 F.2d 196, 202 n. 10 (2d Cir.1980)).

Since a clear repudiation of a participant's claim for benefits does not necessarily require a formal application for benefits, it follows that it also does not require a formal denial of a claim. The Second Circuit has held that the issuance of a summary plan description (“SPD”) that clearly spells out how benefits will be calculated can constitute a clear repudiation of claims or understandings that are inconsistent with its terms, and thereby trigger the commencement of the limitations period with respect to such claims. See Hirt v. Equitable Retirement Plan, 285 Fed.Appx. 802, 803 (2d Cir.2008) ( “distribution of the ... SPD constituted a clear repudiation” of plaintiffs' entitlement to benefits and triggered the statute of limitations); see also Winnett v. Caterpillar, Inc., 609 F.3d 404, 410 (6th Cir.2010) (notice of changes to benefit plan, “especially the notice provided by the SPD, ... provided the ‘clear repudiation’ necessary for the subclass's claims to accrue”).

In its 2006 Frommert decisio...