Testa v. Becker

• Decision Date: 30 October 2013
• Docket Number: No. 10–CV–6229L.,10–CV–6229L.
• Citation: 979 F.Supp.2d 379
• Parties: Robert TESTA, Plaintiff, v. Lawrence BECKER, as plan administrator of the Xerox Corporation Retirement Income Guarantee Plan, Xerox Corporation Retirement Income Guarantee Plan, an Employee Pension Benefit Plan, Defendants.
• Court: U.S. District Court — Western District of New York

979 F.Supp.2d 379

Robert TESTA, Plaintiff,

v.Lawrence BECKER, as plan administrator of the Xerox Corporation Retirement Income Guarantee Plan, Xerox Corporation Retirement Income Guarantee Plan, an Employee Pension Benefit Plan, Defendants.

No. 10–CV–6229L.

United States District Court,

W.D. New York.

Oct. 30, 2013.

Amber M. Ziegler, John A. Strain, Law Offices of John A. Strain, Manhattan Beach, CA, Matthew J. Fusco, K. Wade Eaton, Chamberlain, D'Amanda, Oppenheimer & Greenfield, LLP, Rochester, NY, for Plaintiff.

Richard J. Pautler, Thompson Coburn LLC, St. Louis, MO, Margaret A. Clemens, Pamela S.C. Reynolds, Littler Mendelson, P.C., Rochester, NY, for Defendants.

DECISION AND ORDER

DAVID G. LARIMER, District Judge.

INTRODUCTION

Plaintiff Robert Testa brings this action against the Xerox Corporation Retirement Income Guarantee Plan (“RIGP”) and the administrator of the RIGP, alleging that his pension benefits have been reduced in violation of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1101 et seq. Testa brought this action in the United States District Court for the Central District of California in January 2010, and the action was transferred to this Court in April 2010, based upon a forum selection clause in one of the relevant documents. That clause was added to the RIGP in July 2008.

Testa worked for Xerox Corporation over several periods from 1972 until his retirement in 2008. While he worked at Xerox, Testa was a participant in the RIGP. When he left Xerox's employ in 1983, plaintiff took a lump-sum distribution of the then-present value of his pension benefit. Testa returned to work for Xerox in 1985, and ultimately retired from Xerox in August 2008. Complaint ¶ 53.

After Testa retired, defendants calculated his pension benefit. Plaintiff alleges that his benefit is significantly lower than it should be, due to the application of a “phantom account” offset to his benefit. That offset is so called because it involves defendants' deduction from a participant's pension benefit, not only of the amount of the lump sum that the participant received when he first left Xerox, but also a sum representing the hypothetical interest that the lump sum would have earned had it remained in the pension plan until the employee's retirement at the end of his final period of employment with Xerox.

In his complaint, plaintiff asserts four causes of action. The first two claims are for pension benefits, under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). The first is based on the text of the RIGP, and the second on disclosures contained in the summary plan description (“SPD”). The third and fourth claims allege a breach of defendants' fiduciary duties, pursuant to ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3). The third cause of action seeks “to enforce [the] Ninth Circuit order” in Miller, and the fourth seeks unspecified “other appropriate relief.” Plaintiff seeks benefits, injunctive relief and attorney's fees.

Defendants have moved to dismiss the complaint, mostly on the ground that plaintiff's claims are time-barred. Defendants also contend that plaintiff's claims under § 502(a)(3) are barred because plaintiff is essentially seeking benefits under the Plan, which can only be sought under § 502(a)(1)(B).

BACKGROUND

This is not the only case in this Court involving these issues; in fact, it is one of several related cases presenting similar claims by current and former employees of Xerox, relating to their pension benefits and the application of the phantom account. Some of those cases have also been presented to and addressed by the Courts of Appeals for the Second and Ninth Circuits, and the United States Supreme Court.¹

For purposes of this Decision and Order, familiarity with those cases and with the relevant decisions in those cases is assumed, but of particular importance here is the Frommert case. In 2006, the Second Circuit ruled that Xerox's phantom account mechanism was not properly added to the RIGP until the issuance of the 1998 SPD, and that it would violate § 204 of ERISA for the plan administrator to apply the phantom account to employees rehired by Xerox prior to the issuance of the 1998 SPD. Frommert v. Conkright, 433 F.3d 254, 263 (2d Cir.2006).

The Court of Appeals remanded the Frommert action to this Court, with directions to craft a remedy for 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 (2d Cir.2008), the 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).

On remand from the Supreme Court, this Court then issued another decision, adopting the Plan Administrator's new interpretation 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.

Since this case was initially brought in California, another case, Miller v. Xerox Corp. Retirement Income Guarantee Plan, is also relevant here, particularly since it is expressly cited and relied on in the complaint. See Dkt. # 1 ¶ 66, 86–91. The same year that the Second Circuit issued its Frommert decision, the Ninth Circuit issued a decision in Miller, 464 F.3d 871 (9th Cir.2006), cert. denied,549 U.S. 1280, 127 S.Ct. 1829, 167 L.Ed.2d 321 (2007). The Ninth Circuit held that the phantom-account methodology itself violates ERISA, and that “[t]he benefit properly attributable to the [prior] distributions is simply the ... annuity amount that those distributions would have provided.” Id. at 875.

On remand in Miller, the district court “order[ed] the application of an offset equal to the actuarial equivalent of the prior ... lump sum distributions....” See Frommert, 825 F.Supp.2d at 441 (citing Miller v. Xerox Corp. Retirement Income Plan, No. 98–10389, Frommert Dkt. 134 at 8, 2010 WL 9517288 (C.D.Cal. Sept. 22, 2010)). In so doing, the court found that “the RIGP Plan Administrator's proposal is reasonable and reaches as nearly as possible the actuarial equivalent of the prior lump sum distribution.” Id. at 441. I essentially adopted the same approach in my 2011 Frommert decision. See id. at 442–47.²

DISCUSSION

I. Limitations Periods under ERISA

Because ERISA contains no statute of limitations for non-fiduciary claims, such claims are generally subject to the most analogous state statute of limitations. Guilbert v. Gardner, 480 F.3d 140, 148–49 (2d Cir.2007); Miles v. New York State Teamsters, 698 F.2d 593, 598 (2d Cir.1983). In New York, courts typically apply the six-year limitations period for contract actions set forth in N.Y. C.P.L.R. § 213. See, e.g., Burke v. PriceWaterHouseCoopers LLP Long Term Disability Plan, 572 F.3d 76, 78 (2d Cir.2009); Bilello v. JPMorgan Chase Retirement Plan, 607 F.Supp.2d 586, 594 (S.D.N.Y.2009); Miele v. Pension Plan of New York State Teamsters Conference Pension & Retirement Fund, 72 F.Supp.2d 88, 98 (E.D.N.Y.1999). “New York permits contracting parties to shorten a limitations period, however, if the agreement is memorialized in writing.” Burke, 572 F.3d at 78 (citing C.P.L.R. § 201).

Whichever period applies—statutory or contractual—such claims accrue “when a plan clearly and unequivocally repudiates the plaintiff's claim for benefits and that repudiation is known, or should be known, to the plaintiff.” Carey v. International Bhd. of Elec. Workers Local 363 Pension Plan, 201 F.3d 44, 50 (2d Cir.1999). That rule applies “regardless of whether the plaintiff has filed a formal application for benefits.” Id. at 49.

ERISA claims for breach of fiduciary duty are governed by § 413 of ERISA, 29 U.S.C. § 1113, which sets forth a limitations period for breach of fiduciary duty claims of six years from the date of the last action constituting a part of the breach, or three years from the earliest date on which the plaintiff had actual knowledge of the breach, whichever period ends first. The statute also provides, however, that “in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.” Id.

II. Timeliness of Plaintiff's Claims in this Case

In this Court's recent decision in Kunsman, I held that Xerox's 1998 SPD constituted “a clear repudiation of plaintiffs' claims that the phantom account should not have been applied to them,” since it “made it quite clear that benefits would be reduced based on the hypothetical growth of the employee's prior lump-sum distribution.” 977 F.Supp.2d at 258, 2013 WL 5631027, at *4. I reach the same conclusion here.

I will not repeat here everything contained in the Kunsman decision, but this Court stated there that

[t]he Second Circuit has made clear that “the details of the phantom account offset functions were set out in full in the 1998 Summary Plan Description (‘SPD’),” Frommert, 433 F.3d at 260, and that “the phantom account was fully explained” in that SPD, id. at 262. The court went on to state that “the 1998 SPD amended the text of the Plan to include the phantom account and comparative methodology by fully setting out how they are used to calculate rehired employees' benefits,” and that “the 1998 SPD adequately describes the offset...