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Matz v. Household International Tax Reduction Investment Plan

December 19, 2005

ROBERT J. MATZ, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF
v.
HOUSEHOLD INTERNATIONAL TAX REDUCTION INVESTMENT PLAN, DEFENDANT.



The opinion of the court was delivered by: Judge Joan B. Gottschall

MEMORANDUM OPINION AND ORDER

Robert Matz ("Matz"), on behalf of himself and others similarly situated, sued Household International Tax Reduction Investment Plan ("Plan") under the Employee Retirement Income Security Act ("ERISA"). Matz made contributions to an employee benefit pension plan which were matched by contributions from Household. These matching contributions were subject to a vesting schedule, and Matz was terminated before these contributions had fully vested. Matz claims that the plan was partially terminated and that he should have received the forfeited amounts under a plan provision that provides for full vesting if the plan is partially terminated. Matz now moves for class certification. The motion for class certification is granted in part and denied in part.

I. Background

This case has a lengthy procedural history which the court will summarize. Matz was employed at Hamilton Investments, Inc. ("Hamilton") and made contributions to the Plan. His employer made matching contributions which were subject to a vesting schedule. When Matz was terminated on September 1, 1994, the unvested portion of the matching contributions was forfeited.

On March 20, 1995, Matz submitted a letter to Household's Administrative and Investment Committee to file a claim for vesting, and on April 5, 1995, Household sent Matz a letter denying full vesting. In February 1996, Matz filed the present action seeking the amounts forfeited under the Plan when he was terminated.

In 1997, the Plan moved for summary judgment on the issue of whether Matz exhausted his administrative remedies prior to filing this action. Specifically, the Plan argued that Matz' original letter did not give the Plan notice of his partial termination claim and that Matz did not appeal the Plan's denial of his claim. This court rejected both arguments, holding that Matz had given the Plan sufficient notice of his partial termination claim by stating, "the plan was terminated for myself and all other Hamilton employees," and that Matz was excused from appealing because the Plan did not comply with its own procedures in denying Matz' claim.

The parties next asked the court to determine whether employees terminated after September 30, 2005 could be counted as part of the partial termination analysis and whether they could be members of the plaintiff class, given that the plan was amended so that employees terminated after September 30, 2005 received full vesting. This court held that vested employees could be counted to determine whether a partial termination occurred but that employees terminated after September 30, 2005 could not be included in the plaintiff class.

The parties then asked the court to determine whether the plaintiff could aggregate multiple plan years to determine whether a partial termination occurred. This court held that the plaintiff could aggregate multiple plan years to determine if a partial termination occurred. The court then certified both orders for interlocutory appeal.

The Seventh Circuit affirmed this court's orders, but the Supreme Court vacated and remanded to the Seventh Circuit for further consideration in light of United States v. Mead Corp., 533 U.S. 218 (2001), which clarified when an administrative agency's decision is entitled to Chevron deference. On remand, the Seventh Circuit held that "only non-vested participants should be counted in determining whether partial termination of a pension plan has occurred" and that multiple plan years can be aggregated.

The parties then filed cross-motions for summary judgment on the issue of whether a partial termination occurred. In determining the formula that should be used to make that determination, this court read the Seventh Circuit's opinion to mean that vested participants should be excluded from both the numerator and denominator of the equation. Because under that formula the case was "borderline" as to whether Matz could prove a partial termination, the court denied the motions for summary judgment. Again, this court certified the issue of the formula for determining whether a partial termination occurred. The Seventh Circuit reversed, eliminating the distinction between vested and non-vested participants and holding that, to determine whether a partial termination occurred, the court should divide the number of participants who lost coverage by the total number of participants. The Seventh Circuit also created a rebuttable presumption that a twenty percent or greater reduction in plan participants is partial termination but that a smaller reduction is not. If the percentage is ten to forty percent, the presumption can be rebutted by evidence showing that tax motives were behind the termination of participants. Below ten percent or above forty percent, the presumption is conclusive. Given these determinations, the Seventh Circuit remanded the case to this court.

Matz has now moved for certification of the following class: All former employees of Household International, Inc. and its subsidiaries, including but not limited to Hamilton Investments, Inc.; Household Mortgage Services Inc.; Household Bank F.S.B.; and Alexander Hamilton Life Insurance Co. (collectively "Household"), who: (a) were involuntarily terminated or constructively discharged from their employment with Household as a result of the Reorganization (as that term is defined below); (b) had participated in the Plan prior to their termination from employment; and (c) suffered forfeitures of part or all of their account balances in the Plan as a result of the employment termination. The "Reorganization" is defined as that event at Household which occurred during the period beginning about August 1994 and continuing through about June 1996 whereby Household International, Inc., as part of a plan, sold, divested itself or otherwise discontinued certain businesses, including but not limited to its mortgage, thrift banking, retail securities brokerage, and life insurance businesses.

II. Legal Standard

Federal Rule of Civil Procedure 23 governs class certification. For class certification, the class must satisfy all of the requirements of Rule 23(a) and one of the categories in Rule 23(b). Rule 23(a) requires that: "(1) the class is numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class." Matz argues that the class satisfies two of the Rule 23(b) categories: 23(b)(1)(A) and 23(b)(3). Under Rule 23(b)(1)(A), the plaintiff must show that "the prosecution of separate actions by or against individual members of the class would create a risk of inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class." Under Rule 23(b)(3), the plaintiff must ...


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