# LUCIANO v. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA - COLLEGE RETIREMENT EQUITIES FUND (TIAA-CREF)

> District Court, D. New Jersey · July 26, 2023

URL: https://www.frixlaw.com/law-library/cases/10277356

## Case

- **Court:** District Court, D. New Jersey
- **Decided:** July 26, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10277356

## How later opinions describe it (automated extraction)

- stating, in the context of a Federal Arbitration Act claim, that “while a state statute of limitations may be ‘borrowed’ for a federal claim, federal, not state, law governs as to when the cause of action accrues”
- holding that “the federal common law under ERISA . . . does not incorporate the principles of waiver and estoppel’’

## Opinion text

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

LORRAINE H. LUCIANO, on behalf of
herself and all others similarly situated,
Plaintiff, Civil Action No. 15-6726 (RK) (DEA)
v. OPINION
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA —
COLLEGE RETIREMENT EQUITIES
FUND (TIAA-CREF), et al.,
Defendants.

KIRSCH, District Judge
THIS MATTER comes before the Court upon a Motion to Amend the ETS 401(a)
Retirement Plan (the “Plan’”’), filed by Defendants Educational Testing Service (“ETS”) and
Educational Testing Service Employee Benefits Administration Committee (“EBAC”). (ECF No.
167.) Defendants College Retirement Equities Fund (“CREF”) and Teachers Insurance and
Annuity Association of America (“TIAA”) joined the motion (ECF No. 170), Plaintiff Lorraine
H. Luciano opposed (ECF No. 176), and Defendants replied (ECF No. 186). The Court has
carefully considered the parties’ submissions and decides the matter without oral argument
pursuant to Local Civil Rule 78.1. For the reasons set forth herein, Defendants’ motion to reform
is GRANTED.
I. BACKGROUND
The following facts are derived from the multiple prior Opinions in this case. See ECF Nos.
59, 83, 111, & 136. The Court assumes the parties’ familiarity with the background and procedural
history of this matter and recites only the facts necessary to resolve the instant motion.

Plaintiff is the surviving spouse of James Rosso, who was employed by ETS from 1979
until 1993. During his employment, Mr. Rosso participated in two of ETS’s retirement plans: a
401(a) Plan and a 403(b) Match Plan. Both plans are governed by the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001, et seq. These plans were administered
by TIAA-CREF, which provides retirement and savings plan design, consultation, and
administration for employee benefit plans. Notably, for purposes of the instant dispute, Section 7.3
of the 401(a) Plan provided for a Qualified Preretirement Survivor Annuity (‘QPSA”), defined as
follows:
If a married Participant dies before benefits have commenced, then
the Participant’s Account Balance shall be applied toward the
purchase of an annuity (or any other form of benefit determined by
the Administrator) for the life of the Surviving Spouse (a “Qualified
Preretirement Survivor Annuity’) unless any other Beneficiary has
been designated pursuant to a Qualified Election.
Mr. Rosso’s initial beneficiary designation forms dating back to 1980 listed several family
members as the beneficiaries under each account. They did not include Ms. Luciano, Plaintiff,
whom Mr. Russo married decades later in 2004. When Mr. Rosso died in 2014, the beneficiary
designation form for the 401(a) Plan listed only his sister, Lucille Rosso, as the sole beneficiary.
This designation was made prior to his marriage to Plaintiff.
In 2015, Plaintiff filed an administrative claim with TIAA-CREF seeking to recover the
entirety of her deceased husband’s annuities (i.e., a 100% QPSA benefit). TIAA denied her claim
and EBAC affirmed, finding that Section 7.3 of the 401(a) Plan and Section 8.4 of the 403(b) Plan
— construed in conjunction with Plan communications issued to participants throughout the

relevant time period — provided only a 50% QPSA benefit to Plaintiff as the surviving spouse.
The other half would go to Mr. Rosso’s sister and pre-marriage beneficiary, Lucille Rosso.!
On or about October 1, 2015, Plaintiff thereafter filed her Amended Complaint,
challenging, on behalf of a putative class, the 50% QPSA determination under the 401(a) and
403(b) Plans. The District Court, in an Opinion and Order by the Honorable Michael A. Shipp,
U.S.D.J., compelled arbitration as to the 401(a) Plan and stayed the 403(b) claims pending the
resolution of the arbitration.? (ECF Nos. 59-60.) The case was administratively terminated on July
29, 2016, pending the conclusion of the arbitration.
On April 30, 2018, Ira F. Jaffe, Esq. (the “Arbitrator’) held 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[.]” (Arbitrator Initial Op. at 83, Ex.
A to Pl’s Opp. Br., ECF No. 176-1.)° Because the Arbitrator found the Plan to be unambiguous on
its face, he declined to consider any extrinsic evidence in reaching his determination. (/d. at 81—
83.)
On July 27, 2018, Defendants filed a Motion to Vacate the Arbitration Award and for
Equitable Reformation of the subject Plan. (ECF No. 85.) Following oral argument on October 24,
2019, the Court entered its decision on the record, holding that Defendants’ motion was premature
because the Arbitrator had not yet issued his final award. “In the interest of judicial economy and

Ms. Rosso, who intervened in this case, died during the pendency of the proceedings. The executrix of
her estate, Josephine Mercantini Bocci, has since been substituted for her as a party. Ms. Bocci has not
taken a position on the instant motion.
* As the instant motion only pertains to the 401(a) Plan, the Court will not discuss the terms and litigation
surrounding the 403(b) Plan.
? The page numbers referencing the Arbitrator’s opinion and court filings correspond to those in the ECF
docket number, not those in the actual submission or opinion.

to avoid piecemeal litigation,” the Court dismissed the motion without prejudice and allowed the
motion to be refiled once the final award had been entered. (Oral Arg. Tr. 39:3-9, ECF No. 101.)
The Arbitrator issued the subject award on April 30, 2020, and Plaintiff thereafter filed a
Motion to Confirm Arbitration Award and Reopen the Case. (ECF No. 103.) Defendants opposed
the motion, arguing that the Arbitrator “manifestly disregarded the applicable law requiring that
the EBAC be afforded significant deference” in its analysis of the Plan documents and the
establishment of extrinsic ambiguity. (Defs.’ Opp’n Br. at 13, ECF No. 108.) Defendants also
requested permission to renew their motion for equitable reformation of the ETS plans. (/d. at 40.)
On April 28, 2021, the Court issued a written decision confirming the Arbitrator’s award in its
entirety and reopened the case. (ECF No. 111.) In a footnote, the Court also granted Defendants’
request to renew their motion for equitable reformation. /d. at 10 n.5.
On December 29, 2022, in accordance with the District Court’s Opinion, Defendants again
filed another motion seeking to reform the 401(a) Plan. In the motion presently before the Court,
Defendants seek to correct a scrivener’s error which occurred in the 2002 Restatement to the Plan
and which led to the Arbitrator’s ultimate interpretation that the Plan provided for a 100% QPSA
benefit.* Specifically, Defendants assert that when outside counsel was hired to assist in amending
the Plan to conform with laws unrelated to the QPSA benefit, counsel inadvertently removed a
parenthetical reference in Section 7.3 to two exhibits. Those exhibits — a CREF annuity certificate
and a TIAA annuity contract — each provided for a 50% surviving spouse benefit. The omission
of these express references “had the unintended consequence of an arbitrator interpreting Section

* As described in greater detail herein, the language at issue was amended in a subsequent Plan Restatement
issued on February 26, 2016. (Def. Ex. 4, Decl. of John Basehore, J 28, ECF No. 167-4.) Accordingly,
Defendants’ motion to reform pertains only to the version of the 401(a) Plan in effect from 2002 to February
26, 2016.

7.3 as providing for a QPSA benefit for a surviving spouse in the amount of 100% of the
accumulated balance instead of 50%.” (Defs. Supp. Br. at 4, ECF No. 167-1.)
Plaintiff opposes the motion on several grounds. First, Plaintiff argues that Defendants’
motion is barred by New Jersey’s six-year statute of limitations for reformation of contract claims.
Opp. Br. at 16, ECF No. 176.) Second, Plaintiff argues that Defendants waived the argument
for equitable reformation as they failed to raise it during the administrative proceedings or during
arbitration. (/d. at 16-24.) Finally, on the merits, Plaintiff argues that the “law of the case” has
already established that the annuity contracts do not set forth a 50% annuity (id. at 30); that all
versions of the 401(a) Plan establish a 100% QPSA (id. at 31); and that Defendants misstate the
law of equitable reformation and cannot make the requisite showing of either mutual mistake or
fraud (id.).
Il. LEGAL STANDARD
ERISA is designed to “protect[] employees’ justified expectations of receiving the benefits
their employers promise them.” Cent. Laborers’ Pension Fund v. Heinz, 541 U.S. 739, 743 (2004).
]hen Congress enacted ERISA, it ‘wanted to... mak[e] sure that if a worker has been promised
a defined pension benefit upon retirement —- and if he has fulfilled whatever conditions are
required to obtain a vested benefit — he actually will receive it.’” Id. (quoting Lockheed Corp. v.
Spink, 517 U.S. 882, 887 (1996)) (additional citations and quotations omitted). In light of ERISA’s
goal to protect an employee’s settled expectations, allowing a party to equitably and retroactively
reform a retirement plan creates a “tension with the statutory purpose of ERISA[.]” Cent. Pa.
Teamsters Pension Fund vy. McCormick Dray Line, Inc., 85 F.3d 1098, 1104 (3d Cir. 1996).
“Despite this potential tension with a statutory purpose of ERISA,” the Third Circuit held
that the scrivener’s error doctrine may be invoked to modify ERISA plans under certain limited
circumstances. Jnt’l Union v. Murata Erie N. America, Inc., 980 F.2d 889, 907 (3d Cir. 1992). In

Murata, the Third Circuit addressed the issue, holding: “the mistake of a scrivener in drafting a
document may be reformed based upon parol evidence, provided the evidence is clear, precise,
convincing and of the most satisfactory character that a mistake has occurred and that the mistake
does not reflect the intent of the parties.” Jd. at 907 (citation and quotations omitted). There, an
employer sought to reform its pension plan to include a reversion clause that would allow it to
recoup unforeseen excess funds that remained in the company’s pension plan after all annuities
had been purchased. /d. at 895. Notwithstanding the Plan’s language that expressly prohibited the
company from amending the Plans, the Third Circuit found that the scrivener’s error doctrine
permitted retroactive revision because the employees’ “reasonable reliance on the [] Plan
documents would probably not have led them to believe that there would be any excess funds
remaining upon termination” or that the “excess would be distributed to them.” Jd. at 907.
Four years later, in McCormick, the Third Circuit reiterated the application of equitable
reformation of an ERISA plan in certain circumstances. Citing Murata, McCormick provided, in
pertinent part:
The central holding of Murata’s scrivener’s error discussion is that
in circumstances where a court can establish that no plan
participants were likely to have relied upon the scrivener’s error in
question in determining their rights and obligations under the plan,
allowing reformation of the scrivener’s error does not thwart
ERISA’s statutory purpose of ensuring that plan participants can
rely upon the language.
McCormick Dray Line, Inc., 85 F.3d at 1105 n.2. Under the facts of McCormick, the Court found
that the employer could not use the scrivener’s error doctrine to reform the collective bargaining
agreement at issue, and that its holding did not “gut” Murata’s holding “in any way.” Id.
Subsequent district courts in our Circuit to consider the equitable reformation of ERISA claims
have relied expressly on the instructions set forth by Murata and McCormick. See, e.g., Stanford

v. Foamex L.P., No. 07-4225, 2010 WL 3488651 (E.D. Pa. Aug. 31, 2010); Waters v. Wells Fargo
& Co. Cash Balance Plan, No. 18-16832, 2020 WL 7841163 (D.N.J. Dec. 30, 2020).
UI. DISCUSSION
Before considering Defendants’ equitable reformation claim, the Court first addresses
Plaintiff's arguments that the Court should not reach the merits.
A. STATUTE OF LIMITATIONS
Plaintiff first argues that Defendants’ Motion to Reform is barred by New Jersey’s six-year
statute of limitations for contract actions because Defendants’ claim accrued in 2002, the date the
alleged scrivener’s error occurred. (ECF No. 176 at 22-23.) Plaintiffs argument is predicated on
two tenuous assertions: that Defendants’ motion is subject to a statute of limitations, and that the
Court should apply New Jersey law to the claim accrual analysis. As set forth below, Defendants’
reliance on the doctrine of equitable reformation, whether as an affirmative defense or de facto
counterclaim, is not barred by a statute of limitations.
The procedural history of this case does not indicate that Defendants’ motion is in fact a
“claim” subject to a statute of limitations. Defendants have presented their reformation argument
as an affirmative defense. (See Ans. at 22, ECF No. 129 (the sixth affirmative defense in its
responsive pleading, that “[t]o the extent that the plan documents of the 401(a) Plan and the 403(b)
Plan may appear to require that Plaintiff be awarded the benefits she claims . . . each such plan
document contains a scrivener’s error which is subject to being reformed by the Court to conform
it to the intent of the Plan’s sponsor.”).) Affirmative defenses are generally not subject to statutes
of limitations. See United States v. W. Pac. R.R. Co., 352 U.S. 59, 72 (1956) (“To use the statute
of limitations to cut off the consideration of a particular defense in the case is quite foreign to the
policy of preventing the commencement of stale litigation.”); City of Saint Paul, Alaska v. Evans,
344 F.3d 1029, 1033 (9th Cir. 2003) (“[C]ourts generally allow defendants to raise defenses that,

if raised as claims, would be time-batred.”); Wells v. Rockefeller, 728 F.2d 213, 214 (3d Cir. 1984)
(“To the extent that the claims made .. . in [the] answer were in the nature of recoupment or
affirmative defenses, they were not barred by the statute of limitations[.]’’).
Plaintiff does not suggest — and the Court does not find — that an equitable reformation
argument may not be raised as an affirmative defense. See Waters v. Wells Fargo & Co. Cash
Balance Plan, No. 18-16832, 2020 WL 7841163 (D.N.J. Dec. 30, 2020) (raising equitable
reformation as an affirmative defense [see ECF No. 19 at 8]). However, other courts have
construed motions to reform an ERISA plan as a counterclaim, which would indeed be subject to
a statute of limitations. See, e.g., Young v. Verizon’s Bell Atl. Cash Balance Plan, 615 F.3d 808,
816-17 (7th Cir. 2010) (evaluating counterclaim for equitable reformation); Stanford v. Foamex
L.P., No. 07-4225, 2010 WL 3488651, at *1 (E.D. Pa. Aug. 31, 2010) (same).
Even assuming, arguendo, that the Court evaluated Defendants’ motion as a counterclaim,
the Court finds that the statute of limitations did not run because the claim did not accrue until it
was well within the applicable statute of limitations period.
There is no dispute that were equitable reformation of an ERISA plan viewed as a
counterclaim, the statute of limitations period would be six (6) years.” The Court disagrees,
however, with Plaintiff's conclusory assertion that the Court must also apply New Jersey claim
accrual analysis. Even where federal courts borrow a state’s analogous statute of limitations, the
date of accrual for federal claims is typically governed by federal law. See Romero, 404 F.3d at

5 As ERISA does not provide the statute of limitations, the Court must identify the state statute of limitations
for the most analogous state claim. Romero v. Allstate Corp., 404 F.3d 212, 221 (3d Cir. 2005) (“The first
step in borrowing a local time limitation is to determine the ‘state claim most analogous to the ERISA claim
pursued.’” (quoting Gluck v. Unisys Corp., 960 F.3d 1168, 1179 (3d Cir. 1992))). Here, the parties and the
Court agree that New Jersey’s six-year statute of limitations for “recovery upon a contractual claim or
liability, express or implied” would govern the instant claim. N.J.S.A. § 2A:14-1(a).

221 (discussing ERISA non-fiduciary duty claims); PaineWebber Inc. v. Faragalli, 61 F.3d 1063,
1066-67 (3d Cir. 1995) (stating, in the context of a Federal Arbitration Act claim, that “while a
state statute of limitations may be ‘borrowed’ for a federal claim, federal, not state, law governs
as to when the cause of action accrues”); see also Bamgbose y. Delta-T Group, Inc., 638 F. Supp.
2d 432, 438 (E.D. Pa. 2009) (the “accrual date for federal claims is governed by federal law,
irrespective of the source of the limitations period . . . [and] federal law uses a ‘discovery rule’ to
determine the accrual date of a federal claim”). As the Seventh Circuit explained in a case with the
precise posture as this one, “[t]he general federal common law rule is that an ERISA claim accrues
when the plaintiff knows or should know of conduct that interferes with the plaintiff's ERISA
rights.” Young, 615 F.3d at 817 (citations omitted). Applying the rule, the Court then considered
when the defendant “should have known that the scrivener’s error in the [Plan], if left unreformed,
would impede its rights under the Plan.” Jd.
Murata also suggests that the instant reformation claim would accrue when Defendants
had actual knowledge of the error. There, the Third Circuit rejected the proposition that a claim
arising under ERISA § 413 accrued on the date of amendment, because there was no evidence that
“a controversy over the reversion of excess funds” yet existed. 980 F.2d at 901. Instead, the Court
looked to the date when the parties learned there was an actual dispute. Id.; see also Young, 615
F.3d at 817 (citing Murata for the proposition that the “ERISA claim did not accrue when plan
sponsor amended [the] plan absent evidence that participants knew of any potential controversy
over amended language”).
Here, Plaintiff provides no evidence in support of her assertion that the claim accrued in
2002, and the record plainly reflects that neither ETS, TIAA, nor EBAC believed that Section 7.3
at any time prior to the instant litigation provided for a 100% QPSA benefit. (See ECF No. 176-1

at 90-103.) Evidence provided in connection with Defendants’ motion to reform (discussed further
infra) indicates that all correspondence with plan participants communicated that spouses would
receive a 50% QPSA benefit. (Defs. Ex. 4, Decl. of John Basehore, J§ 16-28, ECF No. 167-4.)
Defendants further represented that “[s]ince at least 1985, other than Plaintiff, no participant or
beneficiary has challenged the longstanding interpretation of the Plan’s QPSA requirements by
TIAA or the EBAC, and no surviving spouse other than Plaintiff has asserted a claim for 100% of
a participant’s benefits.” (ECF No. 85 at J 83.) Under these circumstances, the Court cannot find
that Defendants had knowledge of the mistake in 2002, much less that the mistake might give rise
to a controversy requiring Defendants to raise an equitable reformation claim.
At the earliest, Defendants’ claim might have accrued on June 18, 20 14, the date Plaintiff
sent a letter to TIAA-CREF indicating her contestation of the 50% benefit and intent to claim a
100% QPSA benefit. (See ECF No. 176-1 at 95 n.2.) Even then, it is dubious that Defendants could
be said to have had knowledge that the amendment in Section 7.3 would give rise to an actual
controversy. (This will be expounded further herein on the topic of waiver, see Section III.B(i).) □
Yet even if the Court were to accord the Plaintiff all the benefits of the doubt, Defendants’ first
motion for equitable reformation, filed approximately four years later on July 27, 2018 (ECF No.
85), falls well within New Jersey’s six-year statute of limitations.
Accordingly, regardless of whether Defendants’ motion is construed as an affirmative
defense or as a counterclaim, the motion is not barred by a statute of limitations.
B. WAIVER
Plaintiff's remaining argument contending that this Court should not reach the merits is
that ETS waived its equitable reformation argument by failing to raise it during the administrative
proceedings or arbitration. (ECF No. 176 at 23.)

10

1. Failure to Raise During the Administrative Proceedings
Plaintiff characterizes Defendants’ motion as a “post-hoc rationalization” that only arose
after their other arguments failed (ECF No. 176 at 24). “[W]hether post hoc rationales may be
considered in a de novo review remains an open question within the Third Circuit, although most
district courts have held that post hoc arguments may not be considered.” Locklear v. Sun Life
Assur. Co., No. 14-401, 2015 WL 1964675, at *6 (M.D. Pa. May 1, 2015) (citing Nair v. Pfizer,
Inc., No. 07-5203, 2009 WL 1635380, at *10 (D.N.J. June 10, 2009)), On a broader level, it is also
unsettled whether the doctrine of waiver applies at all in the context of an ERISA claim. See Lauder
v. First Unun Life Ins. Co., 284 F.3d 375, 381 (2d Cir. 2002) (noting the circuit split); White v.
Provident Life & Accident Ins. Co., 114 F.3d 26, 29 (4th Cir. 1997) (holding that “the federal
common law under ERISA . . . does not incorporate the principles of waiver and estoppel’’). That
said, courts in our circuit have interpreted the Third Circuit’s decision in Pacconi v. Trustees of
the United Mine Workers of Am., 264 F. App’x 216, 217 (3d Cir. 2008), as advising district courts
against considering an administrator’s post hoc rationale in ERISA benefits cases. See Locklear,
2015 WL 1964675 at *6; Becknell v. Severance Pay Plan of Johnson & Johnson, No. 13-4622,
2014 WL 1577723, at *4 (D.N.J. Apr. 21, 2014),
Pacconi emphasized that in evaluating whether a rationale is post hoc, “a reviewing court
must focus on the ‘evidence available to the plan administrators at the time of their decision.’”
Pacconi, 264 F, App’x at 217 Gd Cir. 2008) (quoting Flinders v. Workforce Stabilization Plan,
491 F.3d 1180, 1190 (10th Cir. 2007)). Indeed, a review of the few district court decisions in this
circuit to have found an administrator’s claim or defense waived shows that knowledge of the
argument was readily apparent during the administrative proceedings. See, e.g., Becknell at *6
(denying Defendants’ untimeliness argument as waived where Plaintiff’s claim was filed four

11

years after the alleged severance event and Defendants never raised it during the administrative
proceedings); Nair, 2009 WL 1635380, at *9 (denying Defendant’s timeliness argument as
waived); Locklear, 2015 WL 1964675, at *7 (noting in its waiver analysis that “the factual record
was entirely developed at the administrative level, and neither party has referenced any facts
beyond the administrative record”); see also Glista v. Unum Life Ins. Co. of America, 378 F.3d
113, 132 (1st Cir. 2004) (noting as a basis for finding waiver that Defendant “has taken the position
that it had sufficient information to raise the Symptoms Clause during the claims review process”),
Here, the administrative record does not demonstrate sufficient indicia of Defendants’
knowledge of the drafting error, much less to support a viable equitable reformation argument.
The minor changes made to Section 7.3 in the 2002 Restatement do not so plainly evince a drafting
error, or that the change could ultimately lead an arbitrator to conclude that a surviving spouse was
entitled to a 100% benefit. It was only when the Arbitrator interpreted Section 7.3 as it pertained
to Counts I through II of the Amended Complaint without relying on any extrinsic evidence that
Defendants’ drafting error became not only apparent but potentially determinative. Moreover, and
critically for purposes of the case law referenced herein, it appears that only upon engaging in
discovery in connection with the subsequent litigation that Defendants realized that a drafting error
had been committed. Indeed, the record presently before the Court in connection with the equitable
reformation motion consists of evidence gathered by Defendants during discovery conducted in
connection with the present litigation between 2018 and 2022, several years after the
administrative proceedings. (See ECF No, 167-4 at 7, 34, 38, 48, 223.)
Plaintiff places much reliance on the First Circuit’s decision in Glista for the proposition
that Defendants waived their equitable reformation argument by failing to raise it during the
administrative proceedings. 378 F.3d 113 (1st Cir. 2004). In Glista, the Court ruled that “plan

12

administrators [who] have available sufficient information to assert a basis for denial of benefits”
may not subsequently “choose to hold that basis in reserve rather than communicate it to the
beneficiary. Such conduct prevents ERISA plan administrators and beneficiaries from having a
full and meaningful dialogue regarding the denial of benefits.” Jd. at 129 (citing Juliano v. The
Health Maint. Org. of N.J., Inc., 221 F.3d 279, 288 (2d Cir. 2000). Glista is inapposite here,
however, because it appears that the plan administrators did not “have available sufficient
information” to assert the scrivener’s error argument as a basis for denial of benefits. Defendants’
equitable reformation argument cannot be deemed the sort of bait-and-switch or post hoc
justification in the vein of Glista and Pacconi. Accordingly, because the record appears to have
been too undeveloped at that time to support an equitable reformation motion, the Court finds that
ETS did not waive its motion to reform for failing to raise it during administrative review.®
il. Failure to Raise During Arbitration
The Court is similarly unpersuaded by Plaintiffs contention that Defendants waived their
equitable reformation argument by failing to raise it during arbitration. Quite simply, it appears
that neither the parties, the Arbitrator, nor the District Court considered such a claim to lie within
the initial scope of the arbitration.’ The Arbitrator’s April 30, 2018 Decision reveals much about
the parties’ understanding of the limited scope of the proceedings:
The District Court ordered arbitration of the first three counts of the
Amended Complaint insofar as they relate to the Section of the
401(a) Plan. The Parties addressed in some detail the question of the
proper interpretation and application of the Plan provisions in this
case, but did not address in any significant way any other questions
regarding the appropriate relief. The briefs contained no arguments
© The Court also notes that even by Plaintiff’s acknowledgement, the plan administrator would lack the
power to grant the relief of equitable reformation had Defendants brought the claim during the
administrative proceedings. (ECF No. 176 at 22 (noting that Defendants, Plaintiff, and the Arbitrator all
agreed that a plan administrator cannot equitably reform an ERISA Plan).)
7 The Court does not credit the parties’ self-serving arguments in their briefs that they believed the equitable
reformation motion to be within or outside the scope of the arbitration.
13

regarding whether this arbitration was limited to a traditional plan
claims appeal determination as to whether the denial of benefits was
proper or whether the direction to arbitration by the District Court
of Counts 1, 2, and 3, required that this arbitration address additional
questions of the appropriate relief that is due pursuant to ERISA as
a result of the improper denial of Qualified Preretirement Survivor
benefits in this case. Given the failure of the parties to address this
question of arbitral authority, as well as the related questions of the
appropriate relief that should be awarded in the event that authority
to decide fully Counts 1, 2, and 3, of the Amended Complaint was
submitted for ruling in this arbitration, no ruling on these questions
will be made herein at this time.
(ECF No. 86-11 at 35-36.) The Arbitrator also noted that after some initial confusion regarding
the scope of the arbitration, the “the Parties agreed to proceed with this arbitration on an individual
rather than a class basis.” (ECF No. 86-11 at 14-15.) In short, the scope of the arbitration — as
reflected in the Arbitrator’s understanding of the limited scope of his authority — was confined to
interpreting the plan terms and those terms alone, and with respect to Plaintiff only. A motion to
equitably reform the ERISA plan, which would affect the entire putative class, was simply not
within the contemplated ambit of the arbitration.
The record also reflects that the District Court did not consider equitable reformation to be
within the scope of the arbitration proceedings. Following oral argument on Defendants’ motion
for equitable reformation — which was filed shortly after the initial arbitration Decision was
rendered — Judge Shipp dismissed Defendants’ motion to equitably reform the 401(a) Plan as
“premature” because the proceedings were still ongoing before the Arbitrator. (ECF No. 101 at
39:36.) The Court added that “[t]he parties may re-file a renewed motion after the arbitrator issues
a final award.” (Ud. at 39:8—9.) After the arbitrator issued its final award, Defendants again
attempted to equitably reform the Plan to clarify the 2002 amendments to Section 7.3. (ECF No.
108 at 43-45.) Plaintiff opposed, asserting that “ETS has waived any scrivener’s error argument.”
(ECF No. 109-1 at 18-20.) In its Opinion dated April 28, 2021, Judge Shipp “grant[ed]

14

Defendants’ request to renew their [equitable reformation] motion.” (ECF No. 111 at 10 n.5.)
Defendants, in compliance with J udge Shipp’s instructions, filed the instant motion pending before
the Court.
In summary, the record indicates that neither the Arbitrator nor the District Court
considered a motion for equitable reformation to be within the scope of the arbitration, Instead,
Defendants repeatedly sought the District Court to equitably reform the Plan and filed the instant
motion once more when the District Court authorized the refiling. The Court will not penalize
Defendants for abiding by Judge Shipp’s instruction, or for not raising an argument where the
scope of the underlying proceedings was limited. For these reasons, the Court does not find
Defendants’ argument waived for failing to raise it during the arbitration proceedings.
Having found Plaintiffs statute of limitations and waiver arguments unavailing, the Court
proceeds to the merits of Defendants’ equitable reformation motion.
C. EQUITABLE REFORMATION
As stated previously herein, the doctrine of equitable reformation of an ERISA plan is
authorized as follows: “a court may correct a scrivener's error “based upon parol evidence,
provided the evidence is clear, precise, convincing and of the most satisfactory character that a
mistake has occurred and that the mistake does not reflect the intent of the parties.’” Stanford,
2010 WL 3488651 at *9 (quoting Murata, 980 F.2d 889, 907-08 (3d Cir. 1992)),
In support of the merits of their motion, Defendants provided a voluminous record
evidencing that the language in question was a drafting error and that Defendants never intended
for the 2002 amendment to provide for a 100% QPSA benefit. The record, which is summarized
below, draws from several decades of Plan restatements, supporting documents, communications
to participants, declarations of in-house and outside counsel assigned to draft the 2002 amendment,

15

and the declaration of the former ETS Vice President who participated in the Board meetings
which discussed the instant amendments.
Beginning with the drafting history, prior to the 2002 Restatement, Section 7.3 of the Plan
read as follows:
Qualified Preretirement Survivor Annuity. If a married Participant
dies before benefits have commenced then the Participant’s account
balance shall be applied toward the purchase of an annuity (or other
form of benefit provided under Exhibits A or B) for the life of the
Surviving Spouse unless any other Beneficiary has been designated
pursuant to a Qualified Election.
(Defs. Ex. A, ECF No. 167-4 at 65.) Exhibits A and B referenced in Section 7.3 refer to TIAA and
CREF annuity contracts, each of which provided that a spousal survivor death benefit amounted
to “the actuarial equivalent of one-half of the portion of the Accumulation.” (ECF No. 167-1 at 7—
8.) The Plan further stated that the TIAA and CREF annuity contracts “are considered to be an
integral part of this plan.” (/d. at 9.)
In 2002, ETS hired outside counsel to amend and restate its 401(a) Plan to comply with a
set of laws collectively referred to as “GUST” and to comply with the Economic Growth and Tax
Relief Reconciliation Act of 2001 (“EGTRRA”). (/d. at 9.) Both in-house and outside counsel
charged with amending the 401(a) Plan stated that the revisions were intended to comply with the
changes required by GUST and EGTRRA and nothing more. (Decl. of Michael Randall, Ex. 2 at
{{ 4-5, ECF No. 167-4; Decl. of Joseph Mark Poerio, Ex. 3 at Jf 9-10.) Neither declarant, nor the
parties in the instant litigation contend that GUST or EGTRRA affected the requirements for the
QPSA benefit. Despite the limited scope, however, outside counsel mistakenly altered Section 7.3,
removing the parenthetical reference to “Exhibits A or B”, and inserting the phrase “determined
by the Administrator.” (ECF No. 167-1 at 15.)

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Both before and after the 2002 Restatement of the 401(a) Plan, all Plan documents and
communications describing the Plan consistently presented a 50% QPSA benefit. These
documents include the TIAA/CREF annuity contracts and certificates, endorsements further
describing those certificates, and a summary plan description (“SPD”) which EBAC was required
by law to provide to each Plan participant. (Defs. Ex. 4, Decl. of John Basehore, 16-28, ECF
No. 167-4.) These communications, particularly the SPDs, were amended several times over the
years — including in 1991, 2005, 2010, 2013, and 2015 — and uniformly and consistently
contained the 50% QPSA language. Ud. at Jf 18-28; see also ECF No. 167-1 at 17-25.)
The record further shows that only the communications, but never the Plan itself, were
distributed to participants. John Basehore, who was employed by ETS and was a member of the
EBAC from 2002 to 2021, stated that during his employment with ETS from 2002 to 2021, “at was
not the practice of ETS, the EBAC, or TIAA to distribute copies of any Plan Documents to
participants and beneficiaries in the absence by a specific written request of a participant or
beneficiary.” (Defs. Ex. 4, ECF No. 167-4 at 41, { 10.) After the litigation commenced, ETS
conducted a search to determine how many people requested the Plan documents. The search
revealed that “[a]side from that one instance involving Ms. Luciano’s claim for benefits, we did
not identify in that search a single case in which a copy of the 401(a) Plan Document was
distributed to a Plan participant or a Plan beneficiary or a lawyer for either a Plan participant or
beneficiary.” Ud. at J 13.)
On February 26, 2016, approximately one year after Plaintiff filed her administrative action
before the EBAC, the EBAC held a meeting and amended the 401(a) Plan. (/d. at § 28.) The EBAC
noted that it sought “to amend the 401(a) Plan to clarify that the [QPSA] payable under ERISA. .

. has a value equal to 50 percent of the deceased participant’s vested account balance, as has been

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the case at all times since the Retirement Equity Act of 1984 first took effect with respect to the
401(a) Plan.” Ud.) Accordingly, that day, the EBAC made an amendment to Section 7.4 of the
401(a) Plan, which stated in pertinent part: “In the event that a married Participant dies prior to his
Annuity Starting Date, 50 percent of his Account Balance shall be applied to provide a Qualified
Preretirement Survivor Annuity to his Surviving Spouse... .” Ud.)
Upon review of the record, the Court finds that the evidence is clear and convincing that a
drafting error occurred in the 2002 Restatement of Section 7.3 of the 401(a). Further, the evidence
is clear and convincing that no plan participants were likely to have relied on the drafting error. In
fact, it appears that no participant or beneficiary — including Mr. Rosso (see ECF No. 167-4 at
254-57) — saw the Plan language containing the error. Rather, it appears that all participants
construed their benefits through communications which have consistently provided for a 50%
QPSA benefit. Accordingly, allowing reformation of the scrivener’s error would not thwart
ERISA’s statutory purpose of ensuring that plan participants can rely on their expected entitlement.
See McCormick, 85 F.3d at 1105 n.2.
With regard to Plaintiff, who appears to be the only participant or beneficiary to have seen
the 2002 Plan and did so after the fact (as did the now deceased Ms. Rosso, the initial intervener
in this case), it is beyond a stretch to conclude that Ms. Luciano “relied” on the drafting mistake
in the Plan language in believing that she was entitled to a 100% QPSA. (See Am. Compl. at □□
(construing entirely different language in Section 7.3 to argue her entitlement toa 100%
QPSA); Basehore Decl., ECF No. 167-4 at 254-258 (noting that a copy of the 401(a) Plan was
never sent to any Plan participant or beneficiary, other than the referenced copies sent to the
lawyers for Ms. Luciano and Ms. Rosso” (emphasis added)).) Nonetheless, the Arbitrator awarded
Plaintiff a 100% QPSA benefit under the 401(a) Plan, (ECF No. 103-3 at 36) and that award was

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confirmed in its entirety by the District Court (ECF No. 112). Those decisions are unaffected by
this Court’s decision here, and accordingly Plaintiff shall remain entitled to a 100% QPSA benefit.
Plaintiff, in opposition, does not cite evidence which contradicts Defendants’ proofs
regarding the Plan, the drafting history, the communications, and the likelihood that participants
relied on the error. Instead, Plaintiff argues that the drafting error was unilateral on the part of
Defendants and that a unilateral mistake may not be reformed through the scrivener’s error doctrine

_ unless it was founded in fraud. (ECF No. 176 at 38.) The Court disagrees that Third Circuit
precedent requires mutuality or fraud as a prerequisite to an equitable reformation claim under
ERISA. Murata, in announcing this Court’s rule on equitable reformation of ERISA claims, made
no reference to either mutual mistake or fraud. McCormick restated Murata’ “central holding” as
allowing equitable reformation as long as one party establishes that “no plan participants were
likely to have relied upon the scrivener’s error in question.” 85 F.3d at 1105 n.2 (emphasis added).
Thus, again, the Third Circuit did not incorporate a mutuality or fraud requirement. Subsequent
courts to interpret Murata and McCormick have either expressly or impliedly rejected the finding
that mutuality or fraud are a prerequisite to an equitable reformation claim. See Stanford, 2010 WL
3488651, at *9 (finding Plaintiff's imputation of mutuality as a precondition “incorrect under
Murata and McCormick’); Waters, 2020 WL 7841163, at *5 (considering only Defendants’ intent
and Plaintiff's likelihood of reliance on the error but not mutuality or fraud).
Plaintiffs argument that the “law of the case” established that the communications did not
provide for a 50% QPSA is also unavailing. The Arbitrator’s decision made very clear that it did
not consider any evidence outside the Plan language. (ECF No. 176-1 at 81-83.) Judge Shipp,
when confirming the Arbitrator’s decision, merely observed that “the Arbitrator set forth in detail
the reason why prior practice and administration, extrinsic ambiguity, and donative intent were not

19

applicable to the instant matter.” (ECF No. 111 at 8.) Neither decision has any bearing on
Defendants’ equitable reformation claim, which inherently must rely on “parol evidence” outside
the Plan to substantiate its claim. Murata, 980 F.2d at 907-08 (considering evidence outside the
Plan documents and noting that the “rigorous test for establishing a scrivener’s error” would
require “additional evidence” and factfinding on remand); Stanford, 2010 WL 3488651, at *10—
11 (considering communications between the parties, meeting minutes, and deposition testimony);
Waters, 2020 WL. 7841163, at *5 (considering internal memoranda, several years of restatements,
and SPDs).
Accordingly, the Court finds that Defendants have met their burden of showing by clear
and convincing evidence that a drafting error occurred in Section 7.3 of the Plan and that no Plan
participants were likely to have relied on the error in construing their benefits. Therefore, the Court
will allow Defendants to equitably reform Section 7.3 of the 2002 Restatement of the 401(a) Plan
to more clearly reflect an intent to provide a 50% QPSA benefit. The Court reiterates that this
ruling does not disturb the Arbitrator’s decision to award Plaintiff a 100% QPSA benefit under the
401(a) Plan. (ECF No. 103-3 at 36.) That award entered by the Arbitrator was confirmed in its
entirety by the District Court on April 28, 2021 (ECF No. 112) and remains in full force.

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Iv. CONCLUSION
For the reasons set forth herein, Defendants’ motion to reform the ETS 401(a) retirement
plan is GRANTED. An appropriate Order accompanies this Opinion.

f 4 % ue
— - mg
ROBERT KIRSCH at
UNITED STATES DISTRICT JUDGE
Dated: July 26, 2023

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10277356. Public record. Not legal advice.