Not what you're
looking for? Try an advanced search.
Buy This Entire Record For
BERGER v. XEROX RETIREMENT INCOME GUARANTY PLAN
September 30, 2002
DAVID BERGER, ET AL., PLAINTIFFS,
XEROX RETIREMENT INCOME GUARANTY PLAN, ET AL., DEFENDANTS
The opinion of the court was delivered by: David R. Herndon, District Judge
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lump sum distributions the Plan originally made.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).
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
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,
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
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
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 ...