Luciano v. Teachers Ins. & Annuity Ass'n of Am.

• Decision Date: 07 April 2022
• Docket Number: Civil Action 15-6726 (ZNQ) (DEA)
• Parties: LORRAINE H. LUCIANO, on behalf of herself and all others similarly situated, Plaintiff, v. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA - COLLEGE RETIREMENT EQUITIES FUND, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

LORRAINE H. LUCIANO, on behalf of herself and all others similarly situated, Plaintiff, v. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA - COLLEGE RETIREMENT EQUITIES FUND, et al., Defendants.

Civil Action No. 15-6726 (ZNQ) (DEA)

United States District Court, D. New Jersey

April 7, 2022

NOT FOR PUBLICATION

OPINION

ZAHID N. QURAISHI UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court upon a Motion to Strike Class Allegations from Plaintiff's First Amended Complaint by Defendants Teachers Insurance and Annuity Association of America - College Retirement Equities Fund, Teachers Insurance and Annuity Association of America, and College Retirement Equities Fund (collectively “Defendants” or “TIAA-CREF”). (“Motion, ” ECF No. 117.) Defendants filed a brief in support of the Motion. (“Moving Br., ” ECF No. 125-1.) Lorraine H. Luciano (“Plaintiff”) opposed the Motion, (“Opp'n Br., ” ECF No 124), to which Defendants replied, (“Reply, ” ECF No. 126). The Court has carefully considered the parties' submissions and decided the Motion without oral argument pursuant to Federal Rule of Civil Procedure 78 and Local Civil Rule 78.1. For the reasons set forth below, the Court will deny the Motion.

1. BACKGROUND AND PROCEDURAL HISTORY^[1]

This matter arises from Defendants' treatment of defined-contribution pension benefits allegedly payable to Plaintiff. TIAA-CREF provides retirement and savings plan design, consultation, and administration for employee benefit plans governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq. (July 29, 2016 Mem. Op. At 2, ECF No. 59.) Plaintiff's husband, James Rosso (“Mr Rosso”), was employed by Educational Testing Service (“ETS”) and was a participant in the ETS Retirement Plan (“40l(a) Plan”) and the ETS 403(b) Match Plan (“403(b) Plan”) (collectively, the “Plans”). (Id.) Mr. Rosso originally designated his parents and sister, Intervenor Lucille Rosso (“Intervenor”), as his beneficiaries under the Plans. (Id.) Mr. Russo later changed his designated beneficiary to only his sister. (Id.) Thereafter, Plaintiff and Mr. Rosso married in February 2004, and Mr. Rosso passed away in April 2014. (Id.)

After her husband's death, Plaintiff informed TIAA-CREF that she was his surviving spouse. (Id. at 3.) TIAA-CREF informed Plaintiff that as the surviving spouse, she was entitled to a death benefit of $119, 253.33, half of Mr. Rosso's account balance. (Id.) TIAA-CREF informed Plaintiff that the other half of the benefit would be paid to Intervenor. (Id.) Plaintiff first filed an injunction application in the Superior Court of New Jersey to prevent TIAA-CREF from paying out any of the funds to Intervenor. (Id.) The state court action was voluntarily dismissed following an agreement that no funds would be disbursed until the outcome of the formal plan procedures and any related litigation. (Id.) Plaintiff then filed a claim for benefits with TIAA- CREF, which was denied by written decision on March 13, 2015. (Id.) Plaintiff appealed the denial, which ETS affirmed on July 8, 2015. (Id.) Defendants interpreted Section 7.3 of the 40l(a) Plan and Section 8.4 of the 403(b) Plan to entitle a surviving spouse to a qualified pre-retirement survivor annuity (“QPSA”) of 50% of a participant's account balance. (Id.)

Plaintiff subsequently filed this putative class action challenging Defendants' fifty-percent benefit determination and the 401(a) Plan's mandatory arbitration provision through six counts: (1) failure to make payments pursuant to 29 U.S.C. § 1132(a)(1) and (3); (2) declaratory judgment regarding payments pursuant to 28 U.S.C. § 2201 and 29 U.S.C. § 1132(a)(3); (3) breach of fiduciary duty pursuant to 29 U.S.C. § 1104; (4) declaratory judgment regarding the arbitration clause pursuant to 28 U.S.C. § 2201, 29 U.S.C. §§ 1132(a)(3), 1133(2), and 29 C.F.R. § 2560.503-1; (5) enjoinment of the arbitration clause pursuant to 29 U.S.C. § 1132(a)(3); and (6) breach of fiduciary duty regarding the arbitration clause pursuant to 29 U.S.C. § 1104. (See generally Am. Compl., ECF No. 3.)

Defendants filed motions to dismiss, and the Court determined that the 40l(a) Plan contained a mandatory arbitration provision. (July 29, 2016 Mem. Op. at 9.) The Court determined that the mandatory arbitration provision was enforceable and dismissed Counts Four, Five, and Six of Plaintiff's Amended Complaint, which sought relief from the 40l(a) Plan's mandatory arbitration provision. (Id. at 9-13.) The Court further compelled arbitration pursuant to the mandatory arbitration provision with respect to Counts One, Two, and Three of Plaintiff's Amended Complaint as they related to the 401(a) Plan. (Id.) The Court, however, declined to compel arbitration with respect to the 403(b) Plan because it did not contain a mandatory arbitration provision. (Id.) Accordingly, the Court stayed Counts One, Two, and Three as they related to the 403(b) Plan pending arbitration with respect to the 40l(a) Plan. (Id. at 12-13.)

In 2017, Plaintiff and the ETS Employee Benefits Administration Committee (“EBAC”) conducted an arbitration to resolve Plaintiff's individual claim under the 40l(a) Plan. On April 30, 2018, the Arbitrator held that the terms of the 401(a) Plan required payment of 100% of Mr. Rosso's account balance to Plaintiff, not 50% as previously determined. (Alison Douglas Decl., Ex C, ECF No. 117-2.) The Arbitrator found that the terms of the 401(a) Plan were “clear and unambiguous and require[d] payment to [Plaintiff] of a . . . benefit based upon the full Account Balance value of Mr. Rosso's account . . . .” (Id.)

Plaintiff then filed a Motion to Confirm the Arbitration Award and Reopen the Case, which the Court granted. (April 28, 2021, Mem. Op., ECF No. 111.) At this juncture, Plaintiff's putative TIAA-CREF Plan Arbitration Class and the ETS Plan Arbitration Sub-Class are no longer viable. (See July 29, 2016 Mem. Op. 9-13.) Therefore, Defendants challenge the two remaining putative classes: the TIAA-CREF Plan Class and the ETS Plan Sub-Class. Plaintiff's Amended Complaint proposes the following classes:

The TIAA-CREF Plan Class: Any Plan Participant or current or surviving spouse of a Plan Participant who participates or participated in a “qualifying” Plan under ERISA, which Plan's account or assets were invested with or managed or administered by TIAA-CREF, or applied toward the purchase of TIAA or CREF Contracts and which Plan had or has a Plan Document^[2] that provides for a QPSA at a level above 50% of the Account Balance, in language identical to or substantially similar to that in the Plan Documents under which the Plaintiff is claiming relief.

The ETS Plan Sub-Class: Any Plan Participant or current or surviving spouse of a Plan Participant who participates or participated in a “qualifying” plan under ERISA, which was sponsored by ETS and which Plan's account or assets were invested with or managed or administered by TIAA-CREF, or applied toward the purchase of TIAA or CREF Contracts and which Plan had or has a Plan Document that provides for a QPSA at a level above 50% of the Account Balance, in language identical to or substantially similar to that in the Plan Documents under which the Plaintiff is claiming relief.

(Am. Compl. ¶ 89(a)-(b).) For clarity, Plaintiff alleges that the Plans are subject to ERISA as amended by the Retirement Equity of 1984 (“REACT”), which views a marital relationship as a partnership and the retirement benefits derived therefrom as result of the efforts of both spouses. (Am. Compl. ¶ 12.) She alleges that “ERISA establishes certain minimum requirements for all private-employer-sponsored retirement plans, ” including “the right of a surviving spouse to receive an annuity if the Plan Participant dies before the spouse does.” (Id. ¶ 13.) Specifically, REACT provides the surviving spouse a death benefit known as the QPSA when the Plan Participant dies before retirement. (Id. ¶ 15.) The QPSA of a defined-contribution plan must be in the form of an annuity, “the actuarial value of which is not less than 50% of the vested accumulated account value” (“Account Balance”). (Id. ¶ 18.) Notably, “REACT permits the Plan Participant to waive the QPSA benefits[] or designate anyone other than the spouse as beneficiary of Plan death benefits, only with written spousal consent.” (Id. ¶ 16.)

Plaintiff alleges that “TIAA-CREF permits alienation of up to ‘one half' of the Account Balance without the spouse's consent, ” in violation of ERISA. (Id. ¶ 32.) Plaintiff claims that:

[U]pon receiving notice of a Plan Participant's death, TIAA-CREF sends out a form letter advising the surviving spouse of the precise monetary value of 50% of the Account Balance, stating that this is the amount payable to the surviving spouse. The letter does not state that the amount is, in fact, only 50% of the Account Balance or that, if the surviving spouse has not executed a waiver, he or she may be entitled to more than 50%.

(Id. ¶ 36.) Plaintiff alleges “many TIAA-CREF Plans require QPSAs of more than 50%” of the Account Balance, and TIAA-CREF employs this uniform practice regardless of the language in the Plan Document. (Id. at 33, 37.) According to Plaintiff, even where the terms of a plan require the QPSA to be funded with more than 50% of the Account Balance, TIAA-CREF pays the surviving spouse only 50% of the Account Balance, contrary to the provisions of its plans and ERISA. (Id. ¶ 38.) Thus, the parties dispute whether the 40l(a) Plan, the 403(b) Plan, and other similar TIAA-CREF plans provide for a QPSA funded with either 100% or 50% of the Account Balance. (Opp'n Br. at 4.) Plaintiff seeks compensation for surviving spouses who have been denied the QPSA to which they are...