Laurenzano v. Blue Cross and Blue Shield of Mass.

• Decision Date: 27 March 2001
• Docket Number: No. CIV.A. 99-11751-WGY.,CIV.A. 99-11751-WGY.
• Citation: 134 F.Supp.2d 189
• Parties: James G. LAURENZANO, M.D., individually, and on behalf of all others similarly situated, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF MASSACHUSETTS, INC. RETIREMENT INCOME TRUST, Defendant.
• Court: U.S. District Court — District of Massachusetts

134 F.Supp.2d 189

James G. LAURENZANO, M.D., individually, and on behalf of all others similarly situated, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF MASSACHUSETTS, INC. RETIREMENT INCOME TRUST, Defendant.

No. CIV.A. 99-11751-WGY.

United States District Court, D. Massachusetts.

March 27, 2001.

Allen C. Engerman, Law Offices of Allen C. Engerman, P.A., Northbrook, IL, Edward F. Haber, Shapiro, Grace & Haber, Boston, MA, Steven A. Katz, Karr, Korein, Tillery, Kunin, Montroy, Cates & Glass, Belleville, IL, Christine E. Morin, Shapiro, Grace, Haber & Urmy, Boston, Douglas A. Sprong, Carr, Korein, Tillery, Kunin, Montroy, Cates & Glass, Belleville, IL, for Plaintiffs.

Anthony A. Bongiorno, McDermott, Will & Emory, Boston, MA, Joseph D. Halpern, Blue Cross and Blue Shield of Mass., Boston, MA, Laura McLane, McDermott, Will & Emery, Boston, MA, James A. Paretti, Jr., McDermott, Will & Emergy, Boston, MA, Brian W. Robinson, McDermott, Will & Emery, Boston, MA, Nancy G. Ross, McDermott, Will & Emery, Chicago, IL F. Dennis Saylor, IV, Goodwin Procter LLP, Boston, MA, for Defendants.

MEMORANDUM AND ORDER

YOUNG, Chief Judge.

If a defined benefit pension plan normally provides retirement benefits in the form of a life annuity that includes a cost-of-living adjustment ("COLA"), must a lump sum distribution in lieu of the annuity include the present value of the projected COLA payments? This Court holds that it must, and that each participant in a plan that does not has approximately six years from the date of his distribution to seek redress.

I. Background

A. Summary of Complaint

James G. Laurenzano, M.D. ("Laurenzano") is a former employee of Blue Cross and Blue Shield of Massachusetts, Inc. During his employment, Laurenzano enrolled in a defined benefit pension plan (the "Plan") administered by Blue Cross and Blue Shield of Massachusetts, Inc. Retirement Income Trust ("Blue Cross").

Under the Plan, a participant's normal retirement benefit is a life annuity beginning at age sixty-five. This life annuity is increased every year to include a COLA payment that reflects changes in the Consumer Price Index.

Rather than receive a life annuity, Laurenzano elected to receive the present value of his pension in a single, lump sum distribution. When Laurenzano received his lump sum distribution, however, it did not include the present value of the projected COLA payments.

B. Procedure

Laurenzano filed a class action complaint on August 19, 1999. This Court exercised jurisdiction over the case, 28 U.S.C. § 1331; 29 U.S.C. § 1132(e), and on February 3, 2000 certified a class comprising "[a]ll former participants in the [Plan] who received a lump sum distribution from the [Plan] which did not take into account a cost of living adjustment in calculating the lump sum distribution." Pl.'s Assented-to Mot. for Class Certification at 2. Now the parties have moved for judgment on the written record with respect to the question of liability, but not the question of damages or the effect of releases allegedly signed by certain class members. See Sched. Order at 1 (citing Boston Five Cents Sav. Bank v. Sec'y of Dep't of Hous. & Urban Dev., 768 F.2d 5, 10-12 [1st Cir.1985]).

In effect, judgment on the written record is a bench trial without any witnesses. This highly-efficient procedural device allows a court to resolve factual disputes and enter judgment in one fell swoop. Garcia-Ayala v. Lederle Parenterals, Inc., 212 F.3d 638, 643-45 (1st Cir. 2000); Smart v. Gillette Co. Long-Term Disability Plan, 887 F.Supp. 383, 384 (D.Mass.), aff'd, 70 F.3d 173 (1st Cir.1995). In this case the facts are straightforward and the only dispute concerns the application of the law to the facts. The facts consist of (i) an affidavit by the Blue Cross Director of Employee Benefits, Debra Weafer; (ii) written documents that speak for themselves; and (iii) opposing expert reports.

II. Facts

A. The Plan

Section 1.1 of the Plan defines "Accrued Benefit" as "the amount determined in accordance with the applicable formula specified in Section 5.1," Pl.'s Ex. 1, § 1.1, and Section 5.1 of the Plan provides a formula for the "monthly Normal Retirement Benefit" based on the participant's (i) final average compensation, (ii) Social Security benefit, and (iii) length of employment, id. § 5.1. Section 5.7 of the Plan, however, adds a COLA to certain Accrued Benefits while excluding the COLA from lump sum distributions:

A Participant's "Pre-1995 Accrued Benefit" shall be subject to an annual [COLA] as of each January 1, beginning with the January 1 next following the date benefit payments commence. A Participant's "Post-1994 Accrued Benefit" shall not be subject to any [COLA] under this Section 5.7. For purposes of this Section 5.7, a Participant's "Pre-1995 Accrued Benefit" is any portion of the benefit payable to the Participant under the Plan (other than a lump sum benefit) that is attributable to such Participant's Accrued Benefit determined as of December 31, 1994 on the basis of the Participant's Final Average Compensation and Credited Service determined as of December 31, 1994 and the provisions of the Plan in effect on said date[,] and a Participant's "Post-1994 Accrued Benefit" is the remainder of the benefit payable to the Participant under the terms of the Plan (other than a lump sum benefit).

Id. § 5.7.

Under the Plan, the default form of payment is a "Single Life Annuity" for unmarried participants and an "Automatic Joint and Survivor Annuity" for married participants. Id. § 6.1. The Plan allows for other forms of annuities but provides that all annuities shall be "the Actuarial Equivalent of the benefit which would otherwise be payable as a Single Life Annuity." Id. § 6.2.

The Plan provides the option of a lump sum distribution in certain circumstances. Section 4.4 of the Plan states: "A Participant with five (5) or more years of Continuous Service whose employment is terminated on or after January 1, 1989 for reasons other than retirement or death shall be eligible for a Deferred Vested Benefit ...." Id. § 4.4. Section 5.4 of the Plan defines "Deferred Vested Benefit" as the amount of the participant's Accrued Benefit as of the participant's date of termination. Id. § 5.4. Section 6.4 of the Plan states: "A Participant who terminates his or her employment under Section 4.4 and to whom Section 6.3 ["Mandatory Payment of Small Amounts"] does not apply may elect to receive the Actuarial Equivalent of his Deferred Vested Benefit in a lump sum." Id. § 6.4.

B. Laurenzano's Complaint

Laurenzano was employed by Blue Cross and Blue Shield of Massachusetts from May 1992 through December 1997. Weafer Aff. ¶ 5. Laurenzano participated in and accrued benefits under the Plan. Compl. ¶ 6; Answer ¶ 6. Upon separation of his employment, rather than receive a life annuity, Laurenzano elected to receive a lump sum distribution. Compl. ¶ 6, Answer ¶ 6. This lump sum distribution did not include the present value of projected COLA payments. Compl. ¶ 9, Answer ¶ 9.

On July 14, 1998, Laurenzano sent a letter to Blue Cross requesting additional benefits. Def.'s Ex. F. Pursuant to the language of Section 5.7, Blue Cross denied his claim for additional benefits on October 9, 1998, id. Ex. G, and denied his appeal on February 19, 1999, id. Ex. H. Laurenzano filed his class action complaint with this Court on August 19, 1999.

C. History of the Plan

The Plan initially provided both COLA payments and the option of a lump sum distribution. Id. Ex. I. The 1976 version of the Plan, effective January 1, 1976, and every version after 1976 until the time of Laurenzano's termination, excluded COLA payments from the calculation of the lump sum distribution. Id. Exs. K (July 1, 1978); L (Jan. 1, 1981); M (Jan. 1, 1984); N (Jan. 1, 1985); P (Jan. 1, 1989); D (Dec. 3, 1997). On January 19, 1998, the Plan was amended to include COLA payments in the calculation of the lump sum distribution. Id. Ex. R.

Since at least 1976, the Plan has been funded solely by contributions made by Blue Cross; employees have not been required or permitted to make contributions to the Plan. Weafer Aff. ¶ 3. The Plan has been a "qualified" pension plan since at least 1983, Def.'s Exs. A-C, and thus has been subject to both the Employee Retirement Income Security Act ("ERISA") and the Internal Revenue Code ("IRC").

III. Discussion

A. COLA Payments

ERISA enumerates nine types of civil actions that may be brought to enforce its provisions. Laurenzano relies on two of these nine types:

(a) Persons empowered to bring a civil action

A civil action may be brought —

(1) by a participant or beneficiary —

. . . . .

(B) 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;

. . . . .

(3) by a participant, beneficiary, or fiduciary

(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan[.]

ERISA § 502(a).¹

1. Standing

Blue Cross challenges Laurenzano's standing to sue. Def.'s Mem. I at 2-3.² This question implicates this Court's jurisdiction, and can therefore be raised at any time. Crawford v. Lamantia, 34 F.3d 28, 32 (1st Cir.1994). Blue Cross argues that Laurenzano has received his lump sum distribution, so he no longer participates in or is a beneficiary of the Plan, and that because only participants and beneficiaries have standing, Laurenzano does not have standing to question the amount of his lump sum distribution. Def.'s Mem. I at 2-3. The argument is too clever by half.

If Laurenzano has a "colorable claim to vested benefits," then he has standing to sue for those vested benefits. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 109...