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BERGER v. XEROX RETIREMENT INCOME GUARANTY PLAN

September 30, 2002

DAVID BERGER, ET AL., PLAINTIFFS,
V.
XEROX RETIREMENT INCOME GUARANTY PLAN, ET AL., DEFENDANTS



The opinion of the court was delivered by: David R. Herndon, District Judge

    MEMORANDUM AND ORDER
I. Introduction
On July 27, 2001, the Court entered partial summary judgment against the Xerox Retirement Income Guaranty Plan ("RIGP" or "the Plan"), holding that the RIGP violated ERISA (Doc. 126). Berger v. Nazametz, 157 F. Supp.2d 998 (S.D. Ill. 2001), citing Esden v. Bank of Boston, 229 F.3d 154 (2d Cir. 2000); Lyons v. Ga.-Pacific Corp., 221 F.3d 1235 (11th Cir. 2000); I.R.S. Notice 96-8, 1996-1 C.B. 359-61. The Court directed Plaintiffs to submit to the Court a report indicating the amount of additional benefits owed to the Class members calculated "by projecting his or her CBRA to normal retirement age at the Interest Crediting Rate in effect as of the date of distribution and then discounted in accordance with Internal Revenue Code § 417(e) discussed below." Berger, 157 F. Supp.2d at 1010. Additionally, the Court granted Plaintiffs leave to file an amended complaint joining as a party defendant the current administrator of the RIGP (Doc. 126).

This matter is now before the Court on the Class Plaintiffs' Motion for Summary Judgment as to the amount of the additional benefits owed (Doc. 136). Plaintiffs prepared and have submitted to the Court spreadsheets recalculating the benefits for all Class members for whom the RIGP has produced sufficient recalculation information,*fn1 the affidavit of an enrolled actuary, Douglas D. Ritter, regarding the preparation of the spreadsheets, the affidavit from the data entry coordinator, Sandra Howell, and legal argument as to both the calculation of the additional benefits owed and the appropriate amount of prejudgment interest for those Class members entitled to additional benefits.

Plaintiffs request that the Court enter a judgment in this case awarding equitable restitution in the amount of the difference between the lump sum distributions as calculated by the Class Plaintiffs and the lump sum distributions the Plan originally made. These amounts are set forth in the Spreadsheets. Plaintiffs also ask the Court to award prejudgment interest on the principal amount of the under-payments to the Class at the prime rate for the period beginning on the date of the withholding of the Class members' respective benefits to the date of the entry of a final judgment and order. In addition, Defendant Conkright, who Plaintiffs added as the purported Plan administrator, has moved for summary judgment on the ground that she was not the Plan administrator at any time during the pendency of this litigation (Doc. 146).
On September 6, 2002, the Court heard oral argument on Plaintiffs' Motion and Defendant Conkright's Motion. The Court has carefully reviewed and considered the briefs and exhibits submitted by the parties, including the benefit calculations shown on the spreadsheets submitted by Plaintiffs. For the following reasons, the Court grants Plaintiffs' Motion for Summary Judgment (Doc 136). The Court also grants Defendant Conkright's Motion for Summary Judgment in her individual capacity, as the parties do not dispute she has not acted as the Plan's administrator at any point during the pendency of this case (Doc. 146).
II. Background

RIGP is a form of pension plan commonly referred to as a cash balance plan. When it paid lump-sum distributions to Class members, the RIGP failed to project the participants' cash balance accounts*fn2 to age sixty-five at an interest rate designed to approximate the future value of the interest credits otherwise provided by the Plan. The "projection" of accounts, coupled with the "discounting" applicable to determining the present value of lump-sum payments, is sometimes pejoratively referred to as the "whipsaw" requirement. The "whipsaw" requirement can result in larger benefit payments. See Esden v. Bank of Boston, 229 F.3d 154, 159 & n. 7 (2d Cir. 2000). This is precisely what the parties are arguing over in this case.

The Plan provides for interest credits equal to the average rate for one-year Treasury bills as of the first business day of each month of the prior year, plus one percent ("Interest Crediting Rate"). Instead of projecting at the Interest Crediting Rate or a rate based on that rate, the RIGP projected the accounts at rates based on the prevailing interest rate used by the Pension Benefit Guaranty Corporation ("PBGC") for the calculation of lump sum payments. These PBGC rates were typically lower than the corresponding Interest Crediting Rates. Because the PBGC rates used for the projection were also the maximum rates allowed by ERISA for "discounting" to determine the amount of a lump sum payment,*fn3 the "whipsaw" calculation as performed by the RIGP always produced the same number from whence it started, and the Plan simply paid lump sums equal to the cash balance account.*fn4
II. Analysis
A. Summary Judgment
Summary judgment is proper where the pleadings and affidavits, if any, "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c); Oates v. Discovery Zone, 116 F.3d 1161, 1165 (7th Cir. 1997) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). The movant bears the burden of establishing the absence of fact issues and entitlement to judgment as a matter of law. Santaella v. Metro. Life Ins. Co., 123 F.3d 456, 461 (7th Cir. 1997) (citing Celotex, 477 U.S. at 323). The Court must consider the entire record, drawing reasonable inferences and resolving factual disputes in favor of the non-movant. Regensburger v. China Adoption Consultants, Ltd., 138 F.3d 1201, 1205 (7th Cir. 1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)).
In response to a motion for summary judgment, the non-movant may not simply rest upon the allegations in his pleadings. Rather, the non-moving party must show through specific evidence that an issue of fact remains on matters for which he bears the burden of proof at trial. Walker v. Shansky, 28 F.3d 666, 670-71 (7th Cir. 1994), aff'd, 51 F.3d 276 (citing Celotex, 477 U.S. at 324). In reviewing a summary judgment motion, the Court does not determine the truth of asserted matters, but rather decides whether there is a genuine factual issue for trial. Celex Group, Inc. v. Executive Gallery, Inc., 877 F. Supp. 1114, 1124 (N.D.Ill. 1995). The "mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient to show a genuine issue of material fact." Weeks v. Samsung Heavy Indus. Co., Ltd., 126 F.3d 926, 933 (7th Cir. 1997) (citing Anderson, 477 U.S. at 252). No issue remains for trial "unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not sufficiently probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted). Accord Starzenski v. City of Elkhart, 87 F.3d 872, 880 (7th Cir. 1996), cert. denied, 519 U.S. 1055 (1997); Tolle v. Carroll Touch, Inc., 23 F.3d 174, 178 (7th Cir. 1994).
Because this case is brought under ERISA, federal common law principles govern. GCIU Employer Retirement Fund v. Chicago Tribune Co., 66 F.3d 862, 864-65 (7th Cir. 1995) (citing Phillips v. Lincoln Nat. Life Ins. Co., 978 F.2d 302, 307 (7th Cir. 1992). These principles direct a court to construe terms of ERISA plans "in an ordinary and popular sense as would a person of average intelligence and experience." Swaback v. Ameritech, 103 F.3d 535, 540-41 (7th Cir. 1996). In addition, a court reviews questions of law de novo, regardless of whether the plan vests the plan administrator with discretion. E.g., Williams v. Midwest Operating Eng'rs Welfare Fund, 125 F.3d 1138, 1140 (7th Cir. 1997), overruled on other grounds, Mers v. Mariott Int'l Group Accidental Death and Dismemberment Plan, 144 F.3d 1014 (7th Cir. 1998). The issues presented in this case involve questions of law and not plan interpretation. This Court's review of those issues is de novo and not under an arbitrary and capricious standard.
B. Factual Findings with Respect to the Recalculated Benefits.
Plaintiffs loaded the Class members' benefit information onto an Excel spreadsheet designed by its consulting actuary. The Plan provided all of the information loaded onto the spreadsheet either in the form of hard copies of "Actual RIGP Calculation" worksheets for 1990-1997, or in the form of a data spreadsheet and/or other imaged data files for 1998-1999 (Affidavit of Sandra Howell). In addition, Class counsel obtained from the Plan's trustee, State Street Bank & Trust, via subpoena copies of the Forms 1099 filed for the lump sum payments made during the years 1994-1999, allowing them to cross-check data and to supply payment information where the worksheets were incomplete.

Plaintiffs recalculated the normal retirement benefit derived from the Class members' CBRAs using the Plan's Interest Crediting Rate in effect as of the year that each participant received his or her distribution (Affidavit of Douglas D. Ritter, ¶ 5). The recalculated normal retirement benefit attributable to the CBRA was then offset by the age sixty-five annuity attributable to the participants Transitional Retirement Accounts ("TRAs"),*fn5 if any, in accordance with the procedures the Plan claims it used during the Class period to determine such annuities (Id. at ¶ 6). The present value of the remaining annuity, if any, was then determined using the required actuarial assumptions as of the date of the original lump sum distribution (Id.). For some, but not all, Class members, this recalculation resulted in substantial additional benefits. For others, such as Plaintiff David Berger, the recalculations produced no additional benefits because the Class member's projected CBRA did not exceed his projected TRA offset.*fn6

With respect to the RIGP Plus Accounts, Plaintiffs recalculated the normal retirement benefit attributable to the accounts again using the Plan's Interest Crediting Rate in effect as of the year that each participant received a distribution of the RIGP Plus benefit (Affidavit of Douglas D. Ritter, ¶ 7). The present value of the recalculated normal retirement benefit attributable to the RIGP Plus was then determined using the required actuarial assumptions as of the date of the original lump sum distribution (Id.). Because the RIGP Plus Accounts were not offset by the projected TRAs, this recalculation resulted in additional benefits for all Class members entitled to a RIGP Plus Account benefit.
The RIGP raised a variety of procedural and legal arguments challenging whether the Court can or should enter a final judgment in this action. These are discussed in greater detail below. However, the RIGP has not disputed the mechanics employed by the Class Plaintiffs in gathering the data used for the recalculations, and loading that data into the spreadsheet. This is not to say that the RIGP does not dispute that any additional benefits are due (it does). However, Defendant's disputes concern the actual rates and discounts used in calculating benefits due.
C. RIGP's Procedural Arguments Raised Against Entry of Final Judgment
The Plan raises what it terms procedural objections to the entry of a final judgment in this matter. It contends that the Court cannot grant the relief sought by the Class Plaintiffs against the RIGP because an order requiring the payment of benefits from a pension plan can only be directed to the plan administrator. The Plan also contends that the Court cannot enter a final judgment in this case because absent class members cannot appeal its entry. Finally, the RIGP renews its argument that the relief sought by the Class members is barred by the holding in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002). The Court finds the Plan's procedural objections without merit. No reason exists for this Court to delay entry of a final judgment.
1. Entry of Judgment Against the Plan
The first procedural argument rests on the premise that the Class Plaintiffs are seeking an "injunction" requiring the Plan to pay plan benefits. From this premise, the RIGP argues that the Court can only enter such relief against the administrator of the RIGP, and not the Plan itself, citing the decisions in Hall v. Lhaco, Inc., 140 F.3d 1190 (8th Cir. 1998), and Hunt v. Hawthorne Assoc., Inc., 119 F.3d 888 (11th Cir. 1997). As an initial matter, the Court notes that the Seventh Circuit has held that an ERISA action to recover plan benefits from an employee benefit plan can only be brought against the plan. See Holy Cross Hosp. v. Bankers Life & Cas. Co., No. 01C1505, 2002 WL 1822916, *1 (N.D.Ill. Aug. 7, 2002); see also Riordan v. Commonwealth Edison Co., 128 F.3d 549, 551 (7th Cir. 1996). Thus, the premise underlying the Plan's argument is not the law in this Circuit.
Hall is of no help to Defendants in this case. The court in Hall concluded that Hall, by seeking prospective injunctive relief, injunctive relief to correct past behavior, and an accounting, sought "an effective injunction, and for that matter an effective accounting," which "could be had only against the Plan or the current Plan Administrator." Hall, 140 F.3d at 1196 (emphasis added). Thus, even the Hall court found that the plan itself was a proper party defendant under § 502(a)(3).

However, Hunt explains that, in an action to recover benefits owed under a plan brought pursuant to ERISA § 502(a)(1)(B),*fn7 the only proper relief is an injunction directed against the plan administrator. See; 119 F.3d at 908 & n. 54. Even assuming, arguendo, that Hunt was the law in this circuit, which it is not, Hunt's holding is irrelevant in this case, because Plaintiffs seek equitable relief from the Plan as expressly authorized by ERISA § 502(a)(3), rather than under ERISA § 502(a)(1)(B). As the Supreme Court has instructed, § 502(a)(3) contains no restrictions on who can be sued. See Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 246 (2000) (ERISA § 502(a)(3) "admits of no limit . . . on the universe of possible defendants"). See also Trs. of Cent. State S.E. & S.W. Areas Health & Welfare Fund v. State Farm Mut. Auto. Ins. Co., No. 89C0435, 1990 WL 7181, at *2 (N.D.Ill. Jan. 17, 1990).

2. Entry of Final Judgment

The RIGP also contends that the Court cannot enter a "final judgment" within the meaning of FEDERAL RULE OF CIVIL PROCEDURE 54 because absent members of the Class cannot appeal from a final Order in this case. As a general principle, a judgment in a class action is binding as to absent class members. See In re VMS Sec. Litig., No. 89C9448, 1992 WL 203832, at *3 (N.D.Ill. Aug. 13, 1992); Wagner v. Lehman Bros. Kuhn Loeb Inc., 646 F. Supp. 643, 660 (N.D.Ill. 1986) (quoting Hansberry v. Lee, 311 U.S. 32, 45 (1940)). It is likewise the well-established rule that a decision is final, and thus appealable, when it "ends the litigation on the merits and leaves nothing for the court to do but ...


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