Novella v. Westchester County

09-4061-cv(L)

Novella v. Westchester County

1 UNITED STATES COURT OF APPEALS

2 FOR THE SECOND CIRCUIT

3 August Term, 2010

4 (Argued: March 11, 2009 Final Submission: June 22, 2011

5 Decided: November 3, 2011)

6 Docket Nos. 09-4061-cv(L), 09-3826-cv(XAP)

7 -------------------------------------

8 CARLO NOVELLA, on his own behalf

9 and on behalf of all similarly situated,

10 Plaintiff-Appellee-Cross-Appellant,

11 - v -

12 WESTCHESTER COUNTY, NEW YORK CARPENTERS' PENSION FUND and BOARD

13 OF TRUSTEES OF WESTCHESTER COUNTY, NEW YORK,

14 Defendants-Appellants-Cross-Appellees.*

15 -------------------------------------

16 Before: WALKER and SACK, Circuit Judges, KOELTL, District

17 Judge.**

18 Appeal from four decisions of the United States

19 District Court for the Southern District of New York (Michael B.

20 Mukasey, then-Chief Judge and Barbara S. Jones, Judge), and

21 related judgments, (1) granting the plaintiff Novella's motion

22 for summary judgment, (2) certifying a class action, (3) granting

23 the plaintiff class's motion for summary judgment on the class

*

The Clerk of Court is directed to amend the caption as set

forth above.

**

The Honorable John G. Koeltl, of the United States

District Court for the Southern District of New York, sitting by

designation.

1 claims, and (4) awarding prejudgment interest to the named

2 plaintiff and the class members. We agree with the district

3 court that the defendants' interpretation of certain plan

4 language was arbitrary and capricious. Accordingly, we affirm

5 the district court's award of summary judgment to plaintiff

6 Novella on his individual claims for miscalculation of pension

7 benefits. However, we conclude, contrary to the district court,

8 that the six-year statute of limitations applicable to the

9 plaintiff's and each other putative class member's Employee

10 Retirement Income Security Act claims began to run when each

11 pensioner knew or should have known that the defendants had

12 miscalculated the amount of his pension benefits, and that he was

13 being underpaid as a result. We therefore vacate the district

14 court's judgments certifying the plaintiff class, granting

15 summary judgment to the class, and granting prejudgment interest

16 to the class members. We remand for further factfinding with

17 regard to when each putative class member became, or should have

18 become, aware of his alleged injury so as to begin the running of

19 the statute of limitations as applied to him.

20 AFFIRMED in part; VACATED and REMANDED in part.

21 EDGAR PAUK, New York, NY, for Plaintiff-

22 Appellee-Cross-Appellant.

23 JOHN H. BYINGTON III, Archer, Byington,

24 Glennon & Levine LLP (Robert T.

25 McGovern, of counsel), Melville, NY, for

26 Defendants-Appellants-Cross-Appellees.

2

1 SACK, Circuit Judge:

2 This appeal and cross-appeal concern the pension

3 benefits owed to plaintiff Carlo Novella, a retired carpenter,

4 and members of a class he purports to represent. During

5 Novella's three-decade career, he performed jobs for which his

6 employers were obligated, under collective bargaining agreements,

7 to pay into the defendant pension fund on his behalf. But there

8 were multi-year periods -- principally from 1982 to 1986 --

9 during which Novella did not perform any work requiring his

10 employer to make such a contribution. In 1995, when Novella was

11 nearing his sixty-second birthday, he became disabled as a result

12 of injuries sustained while he was on the job. He applied for,

13 and received, a pension ("Disability Pension"); however, he was

14 disappointed to learn that his benefits were not calculated using

15 the pension rate in effect in 1995, but rather using two

16 different rates for Novella's two periods of service. The rate

17 applicable in 1995 was applied to benefits for work performed

18 between 1987 and 1995, and the lower rate in effect in 1981 was

19 applied to benefits for work performed between 1962 and 1981.

20 The use of the 1981 rate for the earlier period resulted in a

21 lower aggregate monthly pension payment.

22 After unsuccessfully seeking administrative redress

23 from the pension fund, Novella filed suit in the United States

24 District Court for the Southern District of New York on his own

25 behalf and on behalf of a class of pensioners whose benefits also

26 were allegedly miscalculated. He asserted that the fund was

3

1 guilty of seven violations of the Employee Retirement Income

2 Security Act ("ERISA") and sought declaratory and injunctive

3 relief. On cross-motions for summary judgment, the district

4 court agreed with Novella that the defendants -- the pension fund

5 and its trustees -- had erred in calculating his Disability

6 Pension at two different rates. The court did not reach

7 Novella's other claims.

8 Novella then moved to certify a class action on behalf

9 of either of two classes: one including recipients of various

10 types of pensions whose benefits were calculated using multiple

11 per-credit rates, and the other limited to disability pensioners

12 whose benefits were affected by the same practice. The district

13 court concluded that in light of Novella's success on his

14 individual claims, only the narrower class of disability

15 pensioners was eligible for certification. The court determined

16 that the statute of limitations for the absent class members'

17 claims did not accrue until each class member affirmatively

18 challenged the defendants' two-rate benefit calculation, and was

19 rebuffed. The court found twenty-four putative class members

20 whose claims were timely and determined that this number met the

21 numerosity requirement of Rule 23(a)(1) of the Federal Rules of

22 Civil Procedure. Finding the other requirements of Rule 23(a)

23 and (b) to have been met, the court certified this narrower class

24 of disability pensioners.

25 The parties then cross-moved for summary judgment on

26 the class claims, which motions the district court referred to a

4

1 magistrate judge. The magistrate judge recommended granting the

2 plaintiff class's motion on the merits and denying the

3 defendants', the latter of which the magistrate judge

4 characterized as an untimely motion for reconsideration of the

5 decision certifying the class. The district court reviewed the

6 magistrate judge's recommendation, adopted it, and entered

7 judgment in favor of the class. The court also awarded

8 prejudgment interest at the fund's assumed annual rate of return

9 to both Novella and the members of the plaintiff class. Both

10 parties appealed.

11 We agree with the district court that the defendants'

12 use of two rates in calculating disability pensions finds no

13 support in the language of the fund's controlling documents --

14 the Summary Plan Description and the Rules of the Pension Plan.

15 We therefore affirm the district court's judgment in Novella's

16 favor on his individual claims. We also affirm its award of

17 prejudgment interest to Novella, and its setting of the rate and

18 date of accrual for the award. However, we conclude that the

19 district court erred in identifying the time at which a claim for

20 miscalculation of benefits accrues. In light of our view that

21 such a claim accrues when the pensioner knew or should have known

22 that his benefits were miscalculated, we vacate the certification

23 of the class, the judgment in favor of the class, and the award

24 of prejudgment interest to the class members, and remand the case

25 for further proceedings before the district court. These

26 proceedings may include a case-by-case inquiry into when each

5

1 putative class member knew or had sufficient information so that

2 he should have known that the defendants were using two different

3 rates to calculate his pension.

4 BACKGROUND

5 Factual History

6 The relevant facts are not in dispute.

7 The plaintiff, Carlo Novella, is a 78-year-old former

8 carpenter. From 1962 through 1995, he worked in Westchester

9 County, New York, and in New York City, and participated in both

10 the defendant Westchester County, New York Carpenters' Pension

11 Fund (the "Westchester Fund" or the "Fund")1 -- which is

12 administered by the defendant eight-member Board of Trustees of

13 the Fund -- and the New York City District Council of Carpenters

14 Pension Plan. It is Novella's pension under the Westchester Fund

15 -- which is an employer-funded employee pension benefit plan

16 within the meaning of ERISA, see 29 U.S.C. § 1002(2)(A) -- that

17 is at issue in this appeal. Novella's pension benefits under the

18 Fund are determined by the Pension Fund Rules (the "Plan") and

19 Summary Plan Description (the "SPD")2, which have been in effect

1

In approximately 1998, the Westchester Fund "merged with

and into the Suburban New York Regional Council Pension Fund,

which is now known as the Empire State Carpenters Pension Fund."

J.A. 57. The Westchester Fund no longer exists as a distinct

entity.

2

The SPD is the simplified explanation of the Plan that

must be provided to participants under ERISA. According to the

Department of Labor, "[t]he summary plan description . . . tells

participants what the plan provides and how it operates. It

provides information on when an employee can begin to participate

in the plan, how service and benefits are calculated, when

6

1 and unchanged since January 1, 1986. The Plan creates six

2 classes of benefits, four of which are pension-type allowances:

3 "Regular Pension" benefits, governed by sections 3.02-3.03 of the

4 Plan; "Early Retirement Pension" benefits, governed by sections

5 3.04-3.05 of the Plan; "Deferred Pension" benefits, dictated by

6 sections 3.06-3.07 of the Plan; and "Disability Pension"

7 benefits, as set forth in sections 3.08-3.11 of the Plan.3 See

8 J.A. 151-54.4 Each participant is entitled to only one type of

9 benefit, "except that a Disability Pensioner who recovers [from

10 his disabling injury] may be entitled to a different type of

11 pension." Id. at 155.

12 Fund participants earn pension credits based on the

13 number of hours they serve in jobs that are covered by the Plan.

14 A job constitutes "Covered Employment" if the employer is

benefits becomes vested, when and in what form benefits are paid,

and how to file a claim for benefits." U.S. Dep't of Labor,

ERISA - Plan Information,

http://www.dol.gov/dol/topic/health-plans/planinformation.htm

(latest visit Sept. 5, 2011); see also Wilkins v. Mason Tenders

Dist. Council Pension Fund, 445 F.3d 572, 580-81 (2d Cir. 2006)

("Among other things, an SPD must set out the 'circumstances

which may result in disqualification, ineligibility, or denial or

loss of benefits.' 29 U.S.C. § 1022(b)."). The defendants

printed the SPD and Plan together in one booklet, which they then

provided to Plan participants. Although there are some

differences between the SPD and the Plan, they are not material

to our resolution of this appeal.

3

The other two allowances provided for in the Plan are

lump-sum benefits: the "Death Benefit" and the "Termination

Benefit." See J.A. 154-55.

4

For reasons described infra at, all citations to the

parties' submissions on appeal, including briefs, refer to

documents filed in connection with an earlier appeal in this

case, docketed as numbers 08-0788-cv(L) and 08-0807-cv(XAP).

7

1 "obligated by its [collective bargaining] agreement to contribute

2 to the Fund" on behalf of the relevant Plan participant. Id. at

3 146. Novella has had two periods of covered employment: from

4 1962 through 1981,5 during which time he earned 13.20 pension

5 credits, and from 1987 to 1995, during which time he earned an

6 additional 6.30 pension credits.6 In the years between 1982 and

7 1986, Novella performed work in New York City, which was covered

8 by the New York City Fund -- not a party to this action -- but he

9 did not perform any work covered by the defendant Westchester

10 Fund.

11 On March 22, 1995, Novella, then sixty-one years old,

12 suffered a disabling accident while at work, for which he

13 immediately began to receive workers' compensation. He also

14 applied to the Fund for pension benefits. To calculate the

15 amount of Novella's monthly pension, the defendants used two

16 different rates: They applied a rate of $17 per credit to the

17 13.20 pension credits Novella earned between 1962 and 1981, and a

18 second rate of $40 per credit for the credits he earned between

19 1987 and 1995.

20 Immediately after receiving notice in fall 1995 that

21 his pension would be calculated using two different rates,

5

According to the plaintiff's Local Rule 56.1 statement, he

did not perform any work covered by the Plan between 1965 and

1975 because there were no jobs available to him. See J.A. 220.

This break in service is not at issue in this appeal.

6

The Plan sets out various schedules for the accumulation

of pension credits, which depend on the year in which the credits

were earned. See J.A. 130-34.

8

1 Novella asked the Fund trustees for an explanation of his

2 benefits. The defendants explained to him that the two-rate

3 calculation was appropriate because of the break in his covered

4 service from 1982 through 1986, during which time he performed no

5 work covered under the Westchester Plan.

6 The defendants denied Novella's repeated appeals from

7 the two-benefit rate calculation, referring Novella to section

8 3.07 of the Westchester Plan, which applies to Deferred Pensions.7

9 By letter dated August 28, 1997, the defendants explained that

10 under that section of the Plan,

11 a Deferred Pension is calculated based on the

12 rate in effect on the last day you worked in

13 Covered Employment prior to the accumulation

14 of three One-Year Breaks in Service. . . .

15 Since each of the years you were not working

16 in covered employment was a Break in

17 Service,[8] the credits you had accumulated up

18 to 1981 when you left covered employment

7

That section reads:

Section 3.07 Deferred Pension -- Amount

The Deferred Pension shall be calculated in the

same manner as the Regular or Early Retirement

Pension but shall be based on the benefit level

that was in effect on the last day he Worked

prior to accumulation of three One-Year Breaks

in Service. If additional units of credit were

earned after the period in which he accumulated

three consecutive One-Year Breaks in Service,

the benefit amount for such additional units of

credit shall be based on the benefit level in

effect when the additional units were earned.

J.A. 152.

8

Any calendar year "after 1974 in which [the participant]

fails to complete 100 hours of Covered Employment" constitutes a

one-year Break in Service. J.A. 163.

9

1 under the Plan (13.20) were calculated at the

2 1981 rate ($17.00).

3 Section 3.07 also provides that if any

4 additional credits were earned after the

5 Break in Service, the benefit amount for the

6 additional credits shall be calculated on the

7 rate that was in effect at the time of

8 termination. The credits you earned after

9 the Break in Service (6.30) were calculated

10 at the rate in effect when you terminated

11 ($40.00).

12 J.A. 194. Although Novella was awarded a Disability Pension, not

13 a Deferred Pension, the letter did not cite the sections of the

14 Plan governing Disability Pensions: sections 3.08 to 3.11. The

15 letter also failed to cite section 3.16 of the Plan, entitled

16 "Application to Benefit Increases," on which the defendants would

17 later rely in this litigation. Id. at 156. Section 3.16

18 provides that a Fund participant is entitled to a Pension in an

19 amount to be "determined under the terms of the Plan and [at] the

20 benefit level as in effect at the time the Participant last

21 separates from Covered Employment." Id. Under section 3.16, "[a

22 Plan p]articipant shall be deemed to have last separated from

23 Covered Employment on the last day of Work which is followed by

24 three consecutive calendar years of less than 1,000 hours of

25 Covered Employment in each year." Id.

26 Procedural History

27 On March 19, 2002, having contested the two-rate

28 calculation through the Fund's administrative review process and

29 having failed to obtain relief, Novella filed suit in the United

30 States District Court for the Southern District of New York

31 against the defendant Fund and its Board of Trustees, asserting

10

1 violations of ERISA, and seeking declaratory and injunctive

2 relief.9 He filed an amended complaint on October 27, 2003. His

3 suit was brought on behalf of himself and a class of "[a]ll

4 [others s]imilarly [s]ituated." J.A. 24.

5 The amended complaint asserted seven claims falling

6 into two categories: Claims One and Two challenged the

7 defendants' failure to accord Novella credit for the workers'

8 compensation hours he received; Claims Three through Seven

9 contested the defendants' calculation of Novella's (and the class

10 members') pensions using two different rates because of a break

11 in service. As relevant to this appeal, Claim Six asserted that

12 the defendants' practice of applying section 3.07 of the Plan,

13 which governs Deferred Pensions, to recipients of Disability

14 Pensions violated the Plan's terms, and Claim Seven alleged that

15 because the Plan "does not contain any provision describing the

16 application of two benefit rates when a participant suffers a

17 three-year interruption in service," the defendants had violated

18 ERISA in calculating Novella's pension using two rates. Id. at

19 31-32.

20 In early 2004, before moving for class certification,

21 Novella moved for summary judgment on his individual claims. The

22 defendants cross-moved for the same. The district court (Michael

23 B. Mukasey, then-Chief Judge) granted Novella's motion in part.

9

Subject matter jurisdiction was premised upon the

questions of federal law that underlie this dispute. See 28

U.S.C. § 1331(a).

11

1 The court dismissed as unexhausted10 Novella's claims (styled as

2 Claims One and Two) regarding the "defendants' refusal to credit

3 him with hours of service, and therefore pension credits, during

4 the time he received workers' compensation benefits."11 Novella

5 v. Westchester County, N.Y. Carpenters' Pension Fund (Novella I),

6 No. 02-cv-2192, 2004 WL 1752820, at *6, 2004 U.S. Dist. LEXIS

7 15152, at *16 (S.D.N.Y. Aug. 4, 2004); see id. at *6-*7, 2004

8 U.S. Dist. LEXIS 15152, at *16-*22.

9 With regard to Novella's challenge to the two-rate

10 pension calculation (Claim Six), the court concluded that the

11 defendants had acted arbitrarily and capriciously12 by using two

10

Although "ERISA does not contain an explicit exhaustion[-

]of[-]remedies requirement . . . this Circuit has inferred

[one]." Burke v. PriceWaterHouseCoopers LLP Long Term Disability

Plan, 572 F.3d 76, 79 n.3 (2d Cir. 2009); see also id. at 79

(noting that "an ERISA action may not be brought in federal court

until administrative remedies are exhausted").

11

After exhausting these claims, Novella again filed suit

asserting Claims One and Two against the same defendants in the

United States District Court for the Southern District of New

York. On March 26, 2009, the district court (Barbara S. Jones,

Judge) granted the defendants' motion for summary judgment and

denied Novella's cross-motion. See Novella v. Empire State

Carpenters Pension Fund, No. 05-cv-2079, 2009 WL 812271, at *1,

2009 U.S. Dist. LEXIS 25245, at *1-*2 (S.D.N.Y. Mar. 26, 2009);

see also id. at *1 n.1, 2009 U.S. Dist. LEXIS 25245, at *2 n.1

(explaining the history of Novella's litigation against the Fund

and its successor, the Empire State Carpenters Pension Fund).

Novella appealed from the district court's judgment. On November

18, 2009, another panel of this Court affirmed the judgment in

favor of the defendants. See Novella v. Empire State Carpenters

Pension Fund, 353 F. App'x 596 (2d Cir. 2009) (summary order).

12

The court noted that there was some question regarding

whether the arbitrary-and-capricious or de novo standard of

review was appropriate to the circumstances of this case, but

concluded that the defendants' interpretation of the Plan failed

under either standard. See Novella I, 2004 WL 1752820, at *3,

2004 U.S. Dist. LEXIS 15152, at *8.

12

1 different rates to calculate Novella's pension because "their

2 decision was based on an interpretation of the Westchester Plan

3 that is inconsistent with the plain words of that Plan." Id. at

4 *3, 2004 U.S. Dist. LEXIS 15152, at *8. Citing sections 3.03 and

5 3.10 of the Plan, the court reasoned that the "Plan plainly

6 provides that a participant who collects a Disability Pension

7 should be entitled to the amount of a Regular Pension, which is

8 calculated at one benefit rate." Id., 2004 U.S. Dist. LEXIS

9 15152, at *9. The court rejected the defendants' argument that

10 they were entitled to rely on the provisions governing Deferred

11 Pensions -- section 3.07 -- because, at the time of his

12 disability, Novella was not eligible for a Regular Pension as a

13 result of his break in service. See id. at *4, 2004 U.S. Dist.

14 LEXIS 15152, at *10-*13. The court concluded instead that

15 "[n]othing in [the section of the plan] . . . describ[ing] the

16 eligibility requirements for a Disability Pension . . . states

17 that a [P]lan participant must satisfy the eligibility

18 requirements for a Regular Pension . . . in order to collect a

19 Disability Pension." Id., 2004 U.S. Dist. LEXIS 15152, at *12.

20 The court explained that section 3.10's "use of the word

21 'eligible' in the phrase 'the Regular Pension amount for which

22 the Employee would have been eligible,' . . . refer[red] to a

23 'Regular Pension amount,' rather than simply to a 'Regular

24 Pension.'" Id. (emphasis in Novella I) (quoting the Plan).

25 The court also addressed the defendants' theory, raised

26 for the first time after commencement of this lawsuit, that

13

1 section 3.16 of the Plan supported their decision to use two

2 different rates because it "authorizes [P]lan administrators to

3 apply multiple benefit levels when calculating the pension of a

4 [P]lan participant who has had a break in service." Id. at *5,

5 2004 U.S. Dist. LEXIS 15152, at *14, *15. The court concluded

6 that the defendants' reliance on section 3.16 was misplaced

7 because that section "does not reasonably allow [for the]

8 interpretation" urged by the defendants. Id. In sum, the court

9 rejected each of the defendants' arguments, concluding that the

10 defendants were not entitled under the terms of the Plan to use

11 two different rates to calculate Novella's Disability Pension.

12 Having granted Novella's motion on the basis of his

13 challenge to the two-rate calculation, the district court

14 "dismissed as moot" Novella's other claims regarding the amount

15 of his Disability Pension (Claims Three, Four, Five, and Seven),

16 which were argued "in the alternative," and were "premised on the

17 assumption that the terms of the . . . Plan support [the]

18 defendants' decision." Id. at *2, 2004 U.S. Dist. LEXIS 15152,

19 at *6. Although the district court granted summary judgment to

20 Novella on the merits of Claim Six, it did not award final relief

21 at that time.

22 Following the district court's decision in Novella's

23 favor on his individual claims, Novella moved for class

24 certification under Rules 23(b)(1) and (2) of the Federal Rules

25 of Civil Procedure, seeking certification of a class to include

26 recipients of various types of pensions calculated using two

14

1 rates, or, in the alternative, a narrower class of disability

2 pensioners injured by the same practice.13 The district court

3 first determined that the only class for which Novella

4 potentially could serve as class representative was the "more

5 limited class of Disability Pensioners" affected by the

6 defendants' practice of applying section 3.07 of the Plan --

7 which pertains to Deferred Pensions and permits the use of

8 multiple per-credit rates -- to Disability Pensions. Novella v.

9 Westchester County, N.Y. Carpenters' Pension Fund (Novella II),

10 No. 02-cv-2192, 2004 WL 3035405, at *4-*5, 2004 U.S. Dist. LEXIS

11 26149, at *14 (S.D.N.Y. Dec. 29, 2004). Turning to the

12 requirements of Rule 23(a), the district court concluded that the

13 commonality, typicality, and adequacy-of-representation prongs

14 were met, but that an evidentiary hearing was necessary to

15 determine whether the numerosity prong was satisfied. Id. at *6-

16 *7, 2004 U.S. Dist. LEXIS 26149, at *16-*22. And, although the

17 court had not yet decided whether Novella could satisfy Rule

18 23(a), it concluded that, should the class be numerous enough to

19 satisfy Rule 23(a), "the class action [could] be maintained under

20 Rule 23(b)(1)" because "[r]eformation of [the] defendants'

13

The defendants argued that the motion was untimely

because it was not made until after the court had resolved the

summary judgment motions in Novella's favor. See Novella v.

Westchester County, N.Y. Carpenters' Pension Fund, No. 02-cv-

2192, 2004 WL 3035405, at *2, 2004 U.S. Dist. LEXIS 15152, at *5

(S.D.N.Y. Dec. 29, 2004). The court rejected this argument,

noting that "Rule 23 [of the Federal Rules of Civil Procedure]

does not prohibit the filing of a class certification

motion . . . after a decision on the merits of the named

individual plaintiff's claims." Id., 2004 U.S. Dist. LEXIS

15152, at *7.

15

1 practice in calculating these Disability Pensions will result in

2 pensions amounts being due to [all] these class members" -- that

3 is, "Plan-wide relief." Id. at *8, 2004 U.S. Dist. LEXIS 26149,

4 at *23, *24.

5 On August 2, 2006, after conducting the evidentiary

6 hearing, the district court certified the class of Disability

7 Pension recipients. See Novella v. Westchester County, N.Y.

8 Carpenters' Pension Fund (Novella III), 443 F. Supp. 2d 540, 542-

9 43 (S.D.N.Y. 2006). The court concluded that the proposed class

10 of twenty-four "disability pensioners whose pensions were

11 calculated using more than one rate due to a break in service"

12 met the numerosity requirement of Rule 23(a)(1).14 Id. at 544.

13 The court's determination turned on its view of the event

14 necessary to start the running of the six-year statute of

15 limitations for an ERISA claim. The defendants had argued that

16 the statute of limitations applicable to each class member's

17 claim accrued as soon as the putative class member's pension was

18 calculated, and that only eight of the pensioners had begun

19 receiving pensions within six years before Novella filed his

14

The court explained that, while a class of twenty-four

does not in all cases satisfy the numerosity requirement, Novella

III, 443 F. Supp. 2d at 546, a balancing of the relevant factors

in this case justified certification of the relatively small

class, id. at 546-48 (discussing the five factors for numerosity

set forth in Ansari v. N.Y. Univ., 179 F.R.D. 112, 114-15

(S.D.N.Y. 1998): "(1) . . . judicial economy . . .; (2) the

geographic dispersion of members of the proposed class; (3) the

financial resources of those members; (4) the ability of the

members to file individual suits; and (5) requests for

prospective relief that may have an effect on future class

members.").

16

1 complaint. Id. Novella asserted to the contrary that the court

2 should adopt a continuing-violation approach to the statute of

3 limitations, under which each month's pension check would begin a

4 new six-year limitations period. Id. at 545. The district court

5 chose a third alternative, concluding that

6 [t]he relevant date for fixing the accrual of

7 [the putative class members'] claim[s] is

8 when a plaintiff was put on notice that the

9 defendants believed the method used to

10 calculate his disability pension was correct.

11 Thus, the claim does not begin to run until a

12 prospective class member inquires about the

13 calculation of his benefits and the Plan

14 rejects his claim that the benefits were

15 miscalculated.

16 Id. (emphasis added).

17 Applying this rule, the court found Novella's claim

18 timely. Id. With regard to the other putative class members,

19 the court determined that, "[b]ecause the defendants ha[d]

20 presented no evidence that they confirmed the correctness of the

21 dual-rate benefits calculation[s] more than six years before the

22 filing of this lawsuit, th[e] court [could not] find [that] the

23 statute of limitations ha[d] run on the claims of any of the 24

24 proposed class members." Id. at 546. The court therefore

25 concluded that the class consisted of twenty-four disability

26 pensioners with timely claims and therefore was sufficiently

27 large to satisfy Rule 23, and certified it. See id. at 546-48.

28 After the class was certified, both parties again moved

29 for summary judgment, this time to resolve the class-action

17

1 claims. The district court (Barbara S. Jones, Judge15) referred

2 the motions to a magistrate judge for a report and

3 recommendation. On September 10, 2007, Magistrate Judge James C.

4 Francis IV issued a Report & Recommendation (the "R&R")

5 recommending that the district court grant the plaintiff's motion

6 and deny the defendants'. See Novella v. Westchester County,

7 N.Y. Carpenters' Pension Fund (Novella IV), No. 02-cv-2192, 2007

8 WL 2582171, at *1, 2007 U.S. Dist. LEXIS 66235, at *2 (S.D.N.Y.

9 Sept. 10, 2007).

10 The R&R first addressed the defendants' motion, in

11 which the defendants "renew[ed] their argument that fifteen of

12 the pensioners[' claims] are time-barred." Id. at *2, 2007 U.S.

13 Dist. LEXIS 66235, at *5. As a preliminary matter, the

14 magistrate judge construed the motion for summary judgment as "an

15 untimely application for reconsideration" of the district court's

16 ruling in Novella III determining the accrual of the statute of

17 limitations and certifying the class. Id. The magistrate judge

18 further concluded that "[e]ven if the defendants' motion were

19 timely, there is no basis for reconsideration," id., 2007 U.S.

20 Dist. LEXIS 66235, at *7, because "[t]he law of the case doctrine

21 requires a court to adhere to its own decision at an earlier

22 stage of the litigation" absent "cogent or compelling reasons not

23 to," id., 2007 U.S. Dist. LEXIS 66235, at *8 (internal quotation

24 marks omitted), and the defendants had not shown that they would

15

The case was reassigned to Judge Jones in October 2006,

after Chief Judge Mukasey retired.

18

1 suffer any "injustice" if the court adhered to then-Chief Judge

2 Mukasey's prior decisions, id. at *3, 2007 U.S. Dist. LEXIS

3 66235, at *10. The magistrate judge rejected the defendants'

4 argument that Novella III would "'wreak havoc [on] Taft-Hartley

5 Funds, such as [the] defendant [Fund], which rely on actuarial

6 soundness for their very continued existence.'" Id. (quoting

7 Defs.' Mem. of Law in Support of Summ. J. 9). Finally, the

8 magistrate judge refused to credit the defendants' contention

9 that the class members' claims were not tolled by the filing of

10 Novella's suit because, based on the holding of Novella III,

11 "'their individual claims never accrued in the first instance.'"

12 Id. at *4, 2007 U.S. Dist. LEXIS 66235, at *11 (quoting Defs.'

13 Mem. of Law in Support of Summ. J. 11). In the magistrate

14 judge's view, the absent class members' claims accrued "once Mr.

15 Novella filed his complaint challenging the Fund's practice of

16 applying two benefit rates." Id., 2007 U.S. Dist. LEXIS 66235,

17 at *12.

18 The magistrate judge then turned to Novella's motion

19 for summary judgment on behalf of the class, agreeing with

20 Novella that the defendants' argument denying liability for the

21 class members' claims was "based exclusively on the theory of

22 accrual that Judge Mukasey previously rejected." Id. at *5, 2007

23 U.S. Dist. LEXIS 66235, at *15. The magistrate judge therefore

24 recommended granting summary judgment to the class "on the issue

25 of liability . . . with respect to the entire plaintiff class."

26 Id. With regard to Novella's request for prejudgment interest

19

1 for himself and for the class members, the magistrate judge

2 decided that such an award was "appropriate." Id. at *6, 2007

3 U.S. Dist. LEXIS 66235, at *18. Analogizing Novella's and the

4 class's claims to those based upon latent injuries, he set the

5 interest accrual date, for Novella, as "the date that the Fund

6 denied his claim," id. at *7, 2007 U.S. Dist. LEXIS 66235, at

7 *20, and, for the absent class members, as "the date of the

8 filing of the complaint," id. Lastly, the magistrate judge

9 recommended setting the interest rate at "the Fund's assumed

10 return of seven and one-half percent," which the magistrate judge

11 found to be more equitable than either New York's statutory rate

12 of 9 percent or the federal post-judgment rate. Id. at *8, 2007

13 U.S. Dist. LEXIS 66235, at *21-*22.

14 Over both parties' objections and on de novo review,

15 see Fed. R. Civ. P. 72(b)(3), the district court (Barbara S.

16 Jones, Judge) adopted the R&R in its entirety. See Novella v.

17 Westchester County, N.Y. Carpenters' Pension Fund (Novella V),

18 No. 02-cv-2192, 2008 WL 1743342, at *1, 2008 U.S. Dist. LEXIS

19 108341, at *2-*3 (S.D.N.Y. Jan. 14, 2008).

20

1 The parties each appeal.16 The defendants appeal from

2 the summary judgment in favor of Novella individually, from the

3 certification of the class, from the summary judgment in favor of

4 the class, and from the awards of prejudgment interest to Novella

5 and the class members. Novella challenges the district court's

6 refusal to certify a broader class and its decision to award

7 prejudgment interest to the class members only from the date that

8 the complaint was filed.

9 DISCUSSION

10 I. Interpretation of the Plan

11 A. Standard of Review

12 "We review de novo a district court's ruling on cross-

13 motions for summary judgment, in each case construing the

14 evidence in the light most favorable to the non-moving party."

15 Fund for Animals v. Kempthorne, 538 F.3d 124, 131 (2d Cir. 2008)

16

After hearing argument in these cross-appeals on March

11, 2009, this panel determined that the district court's

judgments on appeal were not final and that we therefore lacked

jurisdiction over the appeals. We therefore dismissed the

appeals and instructed the parties that "[i]n the event a final

judgment is entered," they could file a new, timely notice of

appeal to return the cross-appeals to this panel for disposition.

See Novella v. Westchester County, 335 F. App'x 73, 74 (2d Cir.

2009) (summary order). We also denied the defendants' subsequent

motion for panel rehearing. See id. at 74-76 (appending the

Court's order denying rehearing).

In September 2009, the parties each filed a notice of

appeal, and their cross-appeals were returned to this panel.

See Docket, Novella v. Westchester County, Nos. 09-4061(L), 09-

3826(XAP) (2d Cir.). Pursuant to a scheduling order issued by

this panel, the parties filed supplemental briefing, which

briefing was later withdrawn on the parties' motion. As a

result, we now address only the issues presented when the parties

first filed their cross-appeals in 2008.

21

1 (internal quotation marks omitted). "Summary judgment is

2 appropriate where there exists no genuine issue of material fact

3 and, based on the undisputed facts, the moving party is entitled

4 to judgment as a matter of law." O & G Indus., Inc. v. Nat'l

5 R.R. Passenger Corp., 537 F.3d 153, 159 (2d Cir. 2008) (brackets

6 and internal quotation marks omitted), cert. denied, 129 S. Ct.

7 2043 (2009); see also Fed. R. Civ. P. 56(a) ("The court shall

8 grant summary judgment if the movant shows that there is no

9 genuine dispute as to any material fact and the movant is

10 entitled to judgment as a matter of law.").

11 "ERISA does not itself prescribe the standard of

12 review [by district courts] for challenges to benefit eligibility

13 determinations." Celardo v. GNY Auto. Dealers Health & Welfare

14 Trust, 318 F.3d 142, 145 (2d Cir. 2003). The Supreme Court has

15 instructed that "plans investing the administrator with broad

16 discretionary authority to determine eligibility are reviewed

17 under the arbitrary and capricious standard." Id. (citing

18 Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)).

19 Otherwise, courts review plan administrators' determinations de

20 novo. See Mario v. P & C Food Mkts., Inc., 313 F.3d 758, 763 (2d

21 Cir. 2002) (citing Firestone Tire, 489 U.S. at 115).

22 When the arbitrary-and-capricious standard applies,

23 "[a] court may overturn a plan administrator's decision . . .

24 only if the decision was without reason, unsupported by

25 substantial evidence[,] or erroneous as a matter of law."

26 Celardo, 318 F.3d at 146 (internal quotation marks omitted).

22

1 "Where both the trustees of [an ERISA plan] and a rejected

2 applicant offer rational, though conflicting, interpretations of

3 plan provisions, the trustees' interpretation must be allowed to

4 control." Miles v. N.Y. State Teamsters Conference Pension &

5 Ret. Fund Emp. Pension Benefit Plan, 698 F.2d 593, 601 (2d Cir.),

6 cert. denied, 464 U.S. 829 (1983).

7 Here, the district court did not decide which of the

8 two standards of review should apply, because it concluded that

9 the defendants' interpretation of the Plan could not be sustained

10 under either standard. However, in their briefing to this Court,

11 the parties appear to agree that the arbitrary-and-capricious

12 standard applies in this case. See Defs.-Appellants' Br. 17

13 [hereinafter Appellants' Br.]; Pl.-Appellee's Br. 49, 56

14 [hereinafter Appellee's Br.]. We therefore address the

15 defendants' interpretation of the Plan only under that

16 deferential standard, although, like the district court, we think

17 that the outcome under the other, less deferential option -- de

18 novo review -- would be no different.

19 B. The Merits

20 The question before us is whether the defendants acted

21 arbitrarily and capriciously in interpreting the Plan to permit

22 them to calculate Disability Pensions using two different per-

23 credit rates if the pensioner had a break in service. The

24 district court held that doing so was arbitrary and capricious

25 because "[n]othing in the provisions of the [Plan provides] that

26 a Disability Pension may be calculated using two different

23

1 benefit rates when a participant has had a break in service."

2 Novella I, 2004 WL 1752820, at *3, 2004 U.S. Dist. LEXIS 15152,

3 at *8-*9. We agree.

4 Disability Pensions are governed by section 3.10 of the

5 Plan, which provides in relevant part that "[t]he Disability

6 Pension amount shall be equal to the Regular Pension amount for

7 which the Employee would have been eligible if he had been age 65

8 when he became disabled if the Participant had 10 or more units

9 of credit at the time of his disability." J.A. 153. Section

10 3.03 sets forth the means of calculating the Regular Pension

11 amount. It authorizes calculation of that amount by reference to

12 the number of credits a pensioner earned during "the period

13 during which the Employer is obligated . . . to contribute to the

14 Fund" on behalf of the pensioner. See id. at 147, 151. The

15 defendants offer four arguments in support of their contentions

16 that this Plan language permits a two-rate benefit calculation

17 for recipients of Disability Pensions, and that the district

18 court erred in concluding to the contrary.

19 First, the defendants assert that the Trustees awarded

20 Novella the full benefit amount to which he was entitled because,

21 although Novella was only sixty-one years old at the time of his

22 disability, they treated him as if he were sixty-five years old

23 when he became disabled as required by section 3.10, the Plan

24 section governing Disability Pensions. They did not apply the

25 age-based reduction that would otherwise have been permissible

26 under section 3.05, which is entitled "Early Retirement Pension -

24

1 - Amount."17 Id. at 152. The defendants contend that they

2 therefore complied with section 3.10's requirements.

3 Although it is correct that, had Novella received an

4 Early Retirement Pension, the pension amount would have been

5 reduced to reflect his age, the argument is irrelevant.

6 Throughout this lengthy dispute, Novella has never contended that

7 his pension was reduced because of his age at retirement, nor has

8 any party argued that he should have been awarded an Early

9 Retirement Pension instead of a Disability Pension. Novella's

10 grievance, and these judicial proceedings, have focused entirely

11 on whether the defendants' use of two different rates to

12 calculate Novella's Disability Pension was improper.

13 Second, under section 3.02 of the Plan, to qualify for

14 a Regular Pension, a pensioner's employment -- and consequently,

15 employer contributions on his behalf -- must have been "more or

16 less continuous to his retirement date." Id. at 151. The Plan's

17 provisions explain that, in this context, "more or less

18 continuous" means that there must be "no period of three or more

19 consecutive years without [his performing] at least" a small,

20 specified, amount of covered work. Id. The defendants argue

21 that because Novella's employment was not "more or less

17

Section 3.05 provides: "The monthly amount of the Early

Retirement Pension is the amount of the Regular Pension reduced

by one-half of one percent for each month by which the

Participant is under age 65 on the Effective Date of his

Pension." J.A. 152.

25

1 continuous to his retirement date," id.,18 Novella "was not . . .

2 eligible for the single accrual rate Regular Pension."

3 Appellants' Br. 22.

4 The defendants may be correct that Novella is

5 ineligible for a Regular Pension, but any such eligibility is not

6 material to this dispute in light of the fact that he was awarded

7 a Disability Pension. We agree with the district court that

8 nothing in the Plan provisions governing Disability Pensions

9 requires that a disability pensioner actually be eligible for

10 another type of pension as a prerequisite to receipt of his

11 Disability Pension. See Novella I, 2004 WL 1752820, at *3, 2004

12 U.S. Dist. LEXIS 15152, at *8-*9. Section 3.10's reference to

13 "the Regular Pension amount for which [Novella] would have been

14 eligible if he had been age 65 when he became disabled," J.A. 153

15 (emphases added), establishes not an eligibility requirement for

16 a Disability Pension but a reference point for determining the

17 proper amount of such a pension.

18 Moreover, were we to endorse a reading of the Plan

19 requiring a Disability Pension recipient also to be eligible for

20 a Regular Pension, we would render the Plan's inclusion of a

21 Disability Pension meaningless, inasmuch as any person who

22 qualified for a Disability Pension would also be eligible for a

23 Regular Pension. It would appear likely that the Plan's drafters

24 established both Disability Pensions and Regular Pensions -- and

18

Novella does not dispute that he performed no covered

work between 1982 and 1986, and therefore that his employment was

not "more or less continuous" as defined in the Plan.

26

1 assigned different eligibility requirements to each -- because

2 they contemplated that Plan participants might become disabled

3 before they become eligible for a Regular Pension, and did not

4 want to bar such participants from receiving pension benefits.

5 Third, the defendants contend that because Novella did

6 not meet the eligibility requirements for a Regular Pension due

7 to his failure to perform covered work from 1982 to 1986, his

8 pension benefit amount was "calculated pursuant to the only other

9 methodology [i.e., section 3.07, which governs Deferred Pensions]

10 for calculating a pension where there was a break in service."

11 Appellants' Br. 22. Section 3.07 states that when a pensioner

12 has a break in service that lasts at least three years, his

13 pension shall be calculated using two rates: compensation for all

14 credits earned before the break in service is "based on the

15 benefit level that was in effect on the last day [the pensioner

16 w]orked prior to" the break, while "the benefit amount for [any]

17 additional units of credit" earned after a three-year break in

18 service is "based on the benefit level in effect when the

19 additional units were earned." J.A. 152. The defendants argue

20 that because Novella's break in covered employment spanned more

21 than three years, they are permitted to "us[e] two separate

22 benefit accrual rates." Appellant's Br. 21.

23 The defendants' argument is fatally flawed. The quoted

24 section, Section 3.07, explicitly applies to Deferred Pensions;

25 however, Novella was awarded a Disability Pension, not a Deferred

26 Pension. Nothing in the Plan permits the defendants to apply a

27

1 section controlling one specific type of pension to a pension of

2 a different kind. In other words, the fact that the Disability

3 Pension provisions do not include language permitting a two-rate

4 calculation does not entitle the defendants to search for

5 authorization to do so elsewhere in the Plan. Indeed --

6 following both the presumption of consistent usage and meaningful

7 variation, and the textual canon of expressio unius est exclusio

8 alterius, see Cordiano v. Metacon Gun Club, Inc., 575 F.3d 199,

9 221 (2d Cir. 2009) -- the presence of that provision applicable

10 to one type of pension makes clear that the omission of that

11 provision in the part of the Plan governing another type of plan

12 was deliberate. To permit the defendants to pick and choose

13 language from disparate sections of the Plan would subvert the

14 intention of the Plan's drafters and the reasonable expectations

15 of Plan participants.

16 Finally, the defendants argue that section 3.16, which

17 is entitled "Application to Benefit Increases," J.A. 156,

18 justifies a two-rate method for calculating Disability Pensions.

19 That section provides: "The pension to which a Participant is

20 entitled shall be determined under the terms of the Plan and the

21 benefit level as in effect at the time the Participant last

22 separates from Covered Employment." Id. The Plan defines a

23 "last separat[ion] from Covered Employment" as the "last day of

24 [covered] Work which is followed by three consecutive calendar

25 years of less than 1,000 hours of Covered Employment in each

26 year." Id. The defendants argue that a person can "last

28

1 separate" from employment more than once, and that Novella did so

2 in 1981 and again in 1995, thus permitting the defendants to

3 calculate a pension using multiple benefit levels.

4 It is apparent from the record, however, that the

5 defendants did not use Section 3.16 to calculate Novella's

6 pension in the first instance. As the district court noted, the

7 defendants identified this section as justification for their

8 calculation of Novella's pension "for the first time in

9 litigation." Novella I, 2004 WL 1752820, at *5, 2004 U.S. Dist.

10 LEXIS 15152, at *13. They did not cite this section of the Plan

11 in their letters to Novella explaining the calculation of his

12 benefits. See J.A. 183-94 (letters between Novella and the

13 Fund). Nor did they indicate to Novella at any point during his

14 administrative appeals that their two-rate calculation relied in

15 any way on section 3.16. To permit them to assert this newly

16 coined rationale in litigation despite their failure to rely upon

17 it during the internal Fund proceedings that preceded this

18 lawsuit would subvert some of the chief purposes of ERISA

19 exhaustion: to "'uphold Congress'[s] desire that ERISA trustees

20 be responsible for their actions, not the federal courts,'" and

21 to "'provide a sufficiently clear record of administrative

22 action'" should litigation ensue. Paese v. Hartford Life &

23 Accident Ins. Co., 449 F.3d 435, 445 (2d Cir. 2006) (quoting

24 Kennedy v. Empire Blue Cross & Blue Shield, 989 F.2d 588, 594 (2d

25 Cir. 1993)). It would also clearly be inequitable. See id. at

26 447-48 (equitably estopping the defendant from arguing that the

29

1 plaintiff had failed to exhaust an issue because a letter from

2 the defendant had misled the plaintiff into thinking that he had

3 no other administrative remedies to pursue).19

4 Because we agree with the district court's

5 determination that the defendants' two-rate calculation of

6 Novella's disability pension was arbitrary and capricious, we

7 affirm its entry of summary judgment in favor of Novella

8 individually. However, for the reasons discussed below, we

9 nonetheless decline to affirm the summary judgment in favor of

10 the plaintiff class.

11 II. Statute of Limitations and Class Certification

12 A. Standards of Review

13 We review the question of the application of the

14 relevant statute of limitations -- as we do all questions of

15 law -- de novo. United States v. Domino Sugar Corp., 349 F.3d

16 84, 86 (2d Cir. 2003). However, "[a] district court's

17 certification of a class under Rule 23 is reviewed for abuse of

18 discretion, provided that . . . the court applied the proper

19 legal standard[]." Brown v. Kelly, 609 F.3d 467, 475 (2d Cir.

19

Novella also argues, and the district court concluded,

that even if the defendants had cited to section 3.16 to justify

their calculation, the defendants' interpretation of that section

fails because the phrase "last separated from Covered Employment"

must be read to contemplate only one such "last separat[ion]."

See Novella I, 2004 WL 1752820, at *5, 2004 U.S. Dist. LEXIS

15152, at *14-*16. While Judge Walker agrees with the district

court on this score, Judge Koeltl and Judge Sack are not

persuaded that the plain language of section 3.16 forecloses

multiple dates of "last separat[ion] from Covered Employment."

But because we think the defendants' reliance on this section

fails on other grounds, we need not reach this particular

rationale of the district court.

30

1 2010). This standard "applies both to the district court's

2 ultimate decision on class certification and to its rulings as to

3 the individual Rule 23 requirements." Id.

4 B. The Merits

5 1. Accrual of the Statute of Limitations. The Federal

6 Rules of Civil Procedure permit maintenance of a class action

7 only if the "class is so numerous that joinder of all members is

8 impracticable." Fed. R. Civ. P. 23(a)(1). This "numerosity"

9 requirement "does not mandate that joinder of all parties be

10 impossible -- only that the difficulty or inconvenience of

11 joining all members of the class make use of the class action

12 appropriate." Cent. States Se. & Sw. Areas Health & Welfare Fund

13 v. Merck-Medco Managed Care, L.L.C., 504 F.3d 229, 244-45 (2d

14 Cir. 2007). "Determination of practicability depends on all the

15 circumstances surrounding a case, not on mere numbers." Robidoux

16 v. Celani, 987 F.2d 931, 936 (2d Cir. 1993). Nonetheless,

17 several district courts in our Circuit have suggested that courts

18 are likely to conclude that the "numerosity" requirement is

19 satisfied "when the class comprises 40 or more members" and

20 unlikely to be satisfied "when the class comprises 21 or fewer."

21 Ansari v. N.Y. Univ., 179 F.R.D. 112, 114 (S.D.N.Y. 1998).

22 In this case, the question of whether the certified

23 class was sufficiently large to satisfy Rule 23 hinges on whether

24 the statute of limitations for each class member's claim began to

25 run upon receipt of his first pension payment, as the defendants

26 contend, or upon a class member's first inquiry to the Fund

31

1 regarding the amount of his benefits and the Fund's rejection of

2 his request that his pension be calculated using one rate, as the

3 district court concluded and as Novella urges on appeal.

4 The parties agree that a six-year statute of

5 limitations governs ERISA claims and that "[t]he relevant date

6 for fixing the accrual of a miscalculation claim is when a

7 plaintiff was put on notice that the defendants believed the

8 method used to calculate his disability pension was correct."

9 Appellants' Br. 26 (brackets omitted) (quoting Novella III, 443

10 F. Supp. 2d at 545); see also id. at 27 ("The Fund agrees with

11 the . . . sentence quoted above. It makes perfect sense for a

12 claim to accrue when the participant is put on notice that the

13 Fund 'believed the method used to calculate his disability

14 pension was correct.'"); Appellees' Br. 57 (asserting that

15 federal courts generally apply a "discovery rule" for the

16 "purposes of triggering the statute of limitations on an ERISA

17 benefit claim"). The parties dispute, however, the time at which

18 a pensioner can be considered to have been put on such notice.

19 The issue is undecided in this Circuit.20

20

In Larsen v. NMU Pension Trust of the NMU Pension &

Welfare Plan, 902 F.2d 1069 (2d Cir. 1990), we concluded that on

the facts of that case -- which involved a claim by a pensioner's

widow seeking to receive her late husband's pension as a "husband

and wife pension" payable after his death, id. at 1070-71 -- the

defendant fund had not "clear[ly] repudiat[ed]" her claim until

it responded to an inquiry made on the widow's behalf and stated

that "[a]ll monies have been paid that are payable and there are

no further monies due [the plaintiff]," id. at 1074. We did not,

however, decide that an ERISA claim cannot under any

circumstances accrue before an affirmative demand is made and an

explicit rejection is offered. Moreover, Larsen is factually

distinguishable. That case concerned not an underpayment claim

32

1 The defendants urge us to reject the district court's

2 determination that the statute of limitations on a class member's

3 claim does "not begin to run until a prospective class member

4 inquires about the calculation of his benefits and the Plan

5 rejects his claim that the benefits were miscalculated," Novella

6 III, 443 F. Supp. 2d at 545, and the court's consequent finding

7 that the existence of twenty-four class members whose claims were

8 therefore timely meant that the class was numerous enough to meet

9 the requirement of Rule 23(a)(1) of the Federal Rules of Civil

10 Procedure. They argue that we should instead adopt a strict

11 first-payment approach under which the statute of limitations for

12 a miscalculation claim would begin to run when the pensioner

13 receives his first check.

14 In support, the defendants point to Miller v. Fortis

15 Benefits Insurance Co., 475 F.3d 516 (3d Cir. 2007), in which the

16 Third Circuit concluded that the statute of limitations on a

17 claim that benefits have been miscalculated starts to run when

18 the calculation or repudiation is both "clear and made known to

19 the beneficiary." Id. at 521-22. The Miller court observed that

20 this "ordinarily" will be "when [the beneficiary] first receives

21 his miscalculated benefit award" because "[a]t that point, the

22 beneficiary should be aware that he has been underpaid and that

23 his right to a greater award has been repudiated." Id. The

24 court explicitly "reject[ed]" the rule proposed by the plaintiff

like the one at issue in the present appeal, but a denial of

benefits. We therefore do not think that Larsen provides binding

Circuit precedent on the statute-of-limitations issue before us.

33

1 in that case, which would have required a "formal denial of

2 benefits to trigger the statute of limitations." Id. at 521.

3 The court did, however, require that a Fund's "repudiation of the

4 benefits [be] clear and [be] made known to the beneficiary" in

5 order for the limitations period to begin running. Id. at 520-

6 21 (emphasis in original). The court explained that it

7 "consider[ed] the clear repudiation concept to be useful . . . ,

8 as it represents a refinement of the federal discovery rule in

9 the context of ERISA claims for benefits." Id. at 521. The

10 defendants rely on Miller to support their contention that the

11 Third Circuit has adopted a strict first-payment test for the

12 accrual of the statute of limitations in ERISA miscalculation

13 claims, and argue that we should follow suit.

14 Some other courts, however, including the district

15 court in this case, have required that an ERISA fund provide a

16 formal denial of a plaintiff's application for the adjustment of

17 benefits to trigger the running of the statute of limitations.

18 In Miele v. Pension Plan of New York State Teamsters Conference

19 Pension & Retirement Fund, 72 F. Supp. 2d 88 (E.D.N.Y. 1999), for

20 example, the court considered the argument that "a miscalculation

21 claim accrues on the date that a plaintiff is clearly and

22 unequivocally informed of the amount of his benefit." Id. at 99.

23 The court noted the "logic and appeal" of such a "bright-line

24 rule," which would be "easily enforced and would correspond

25 directly to the . . . rule that a clear and unequivocal denial of

26 benefits commences the statute of limitations period." Id.

34

1 (emphasis added). But, mindful of the fact that "a

2 miscalculation generally involves an award of benefits rather

3 than a denial of benefits and thus is less likely to put a

4 plaintiff on notice of a possible claim," id., the Miele court

5 applied the rule adopted by the district court here: that "a

6 miscalculation claim does not accrue until a plaintiff 'inquires

7 about the amount of benefits and is told that those benefits were

8 correctly computed.'" Id. (brackets and ellipses omitted)

9 (quoting Kiefer v. Ceridian Corp., 976 F. Supp. 829, 843 (D.

10 Minn. 1997)).

11 Still other courts have applied a continuing-violation

12 theory to the accrual of a claim in similar circumstances. See

13 Meagher v. Int'l Ass'n of Machinists & Aerospace Workers Pension

14 Plan, 856 F.2d 1418 (9th Cir. 1988). Under this theory, each

15 payment based upon an alleged miscalculation "constitutes a fresh

16 breach by the [defendants] of their duty to administer the

17 pension plan in accordance . . . with ERISA," gives rise to "[a]

18 separate cause of action," and starts the running of a new

19 "limitations period . . . for each cause of action." Id. at

20 1423. Many courts have, however, expressly rejected this

21 approach. See, e.g., Miller, 475 F.3d at 522 (collecting Third

22 Circuit cases declining to apply a continuing-violation approach

23 to claim accrual); Edes v. Verizon Commc'ns, Inc., 417 F.3d 133,

24 139-40 (1st Cir. 2005) (rejecting a continuing-violation theory

25 where the wrongful conduct was the defendant's single

26 misclassification of plaintiffs as off-payroll employees);

35

1 Pisciotta v. Teledyne Indus., 91 F.3d 1326, 1332 (9th Cir. 1996)

2 ("Although the [plaintiffs] now contend that each and every time

3 that they were entitled to a reimbursement payment it constituted

4 a new and separate breach of ERISA . . . , the applicable four-

5 year statute of limitations begins to run 'when a plaintiff knows

6 or has reason to know of the injury that is the basis of the

7 action.'"); Phillips v. Alaska Hotel & Rest. Emps. Pension Fund,

8 944 F.2d 509, 520-21 (9th Cir. 1991) (declining to apply a

9 continuing-violation approach), cert. denied, 504 U.S. 911

10 (1992).

11 We do not adopt the continuing-violation theory. We

12 think that approach is appropriate in ERISA cases, as elsewhere,

13 only "where separate violations of the same type, or character,

14 are repeated over time." L.I. Head Start Child Dev. Servs., Inc.

15 v. Econ. Opportunity Comm'n of Nassau County, Inc., 558 F. Supp.

16 2d 378, 400 (E.D.N.Y. 2008). Usually, "[t]hese cases are marked

17 by repeated decision-making, of the same character, by the

18 fiduciaries." Id. But it is not as clear a fit in cases where,

19 as here, "the plaintiff['s] claims are based on a single decision

20 that results in lasting negative effects." Id. at 401; see also

21 Schultz v. Texaco, Inc., 127 F. Supp. 2d 443, 447 (S.D.N.Y. 2001)

22 ("[T]he mere fact that the effects of a single, wrongful act

23 continue to be felt over a period of time does not render that

24 single, wrongful act a single 'continuing violation.'"); Miele,

25 72 F. Supp. 2d at 102 n.14 (rejecting application of the

26 continuing-violation theory of accrual because a pension fund has

36

1 no obligation "to continually reassess claim denials or benefit

2 underpayments on a monthly basis").

3 We also decline, however, to accept either of the

4 approaches urged by the parties. The defendants' bright-line

5 approach is too harsh in that it places the burden on the

6 pensioner -- a party less likely to have a clear understanding of

7 the terms of the pension plan and their application to his

8 case -- to confirm the correctness of his pension award

9 immediately upon the first payment of benefits, regardless of the

10 complexity of the calculations, or of the adequacy of the

11 defendants' explanation of the basis for the calculation.

12 Indeed, this case illustrates the hazards of the defendants'

13 approach. The SPD -- the document provided to all Plan

14 participants, including Novella and the plaintiff class, to

15 explain the rules of the pension plan -- is silent on the

16 underlying issue of multiple benefit calculation rates for

17 Disability Pensions. And, unlike the simple percentage

18 calculation at issue in Miller, see Miller, 475 F.3d at 522; cf.

19 Young v. Verizon's Bell Atl. Cash Balance Plan, 615 F.3d 808, 816

20 (7th Cir. 2010) (finding a claim timely because the lump-sum

21 payment the plaintiff received more than six years before was

22 "not so inconsistent with her current claim for additional

23 benefits as to serve as a clear repudiation"), cert. denied, 131

24 S. Ct. 2924 (2011), the determination of a Disability Pension

37

1 award under the defendants' Plan may have required more than a

2 simple multiplication of two static numbers.21

3 The district court's and Novella's bright-line

4 approach -- in which a limitations period does not begin to run

5 "until a prospective class member inquires about the calculation

6 of his benefits and the Plan rejects his claim," Novella III, 443

7 F. Supp. 2d at 545 -- also poses problems. Under that approach,

8 a pensioner could collect benefit checks for twenty or thirty

9 years without any obligation to inquire as to the correctness of

10 the calculations underlying the benefit payments and could still

11 thereafter assert a timely claim for miscalculation. Indeed, as

12 the defendants point out, at least one class member is long dead.

13 See Appellants' Br. 29-30. Allowing that class member's

14 survivors to pursue his claim, the defendants say, despite the

15 fact that he collected his benefits for years before passing

16 away, would undermine the purpose of a statute of limitations.

17 See, e.g., Order of R.R. Telegraphers v. Ry. Express Agency,

18 Inc., 321 U.S. 342, 348-49 (1944) ("Statutes of limitation . . .

19 in their conclusive effects are designed to promote justice by

20 preventing surprises through the revival of claims that have been

21 allowed to slumber until evidence has been lost, memories have

22 faded, and witnesses have disappeared."); Carey v. Int'l Bhd. of

21

We do not intend to suggest that the underlying basis for

the class members' claims was undiscoverable at the time of the

first payment. Rather, it is for the district court to determine

in the first instance at what point the defendants provided

sufficient information to each class member such that that

pensioner should have been able to recognize the miscalculation.

38

1 Elec. Workers Local 363 Pension Plan, 201 F.3d 44, 47 (2d Cir.

2 1999) ("Statutes of limitation serve several important policies,

3 including rapid resolution of disputes, repose for those against

4 whom a claim could be brought, and avoidance of litigation

5 involving lost evidence or distorted testimony of witnesses.").

6 To the extent that the defendants could show that the deceased

7 class member or his survivors had information available to them

8 by which they reasonably could have discovered the alleged

9 miscalculation, the district court might well agree with the

10 defendants that permitting his survivors to assert a claim more

11 than six years after receiving such information would be

12 inequitable.

13 Having rejected each party's views, we choose a third

14 approach: We conclude that notice of a miscalculation can be

15 imputed to a pensioner -- and the statute of limitations will

16 start to run -- when there is enough information available to the

17 pensioner to assure that he knows or reasonably should know of

18 the miscalculation. We think this approach best balances a

19 pension plan's legitimate interest in predictability and finality

20 with a pensioner's equally legitimate interest in having a fair

21 opportunity to challenge a miscalculation of benefits once it

22 becomes known -- or should have become known -- to him. Stated

23 another way, this case-by-case reasonableness inquiry mitigates

24 some of the harshness of the defendants' proffered approach,

39

1 while better respecting the defendants' interests in finality and

2 repose than the district court's and Novella's chosen method.22

3 We think this method is consistent with the Third

4 Circuit's reasoning in Miller, which we read to endorse not a

5 strict first-payment theory -- such as that urged by the

6 defendants -- but rather a similar reasonableness approach.

7 Indeed, in Miller, the Third Circuit appeared to contemplate that

8 its "clear repudiation" rule would vary in its application to the

9 facts of any individual case. See Miller, 475 F.3d at 521

10 (rejecting the plaintiff's "proposed application of the clear

11 repudiation rule," which would have required an explicit demand

12 and refusal, and concluding that a court should ask "when a

13 beneficiary knows or should know he has a cause of action"

14 (emphasis added)); see also Fletcher v. Comcast Comprehensive

15 Health and Welfare Plan, No. 09-cv-1272, 2011 WL 743459, at *5,

16 *3, 2011 U.S. Dist. LEXIS 18199, at , *13, *14-*15 (W.D. Pa. Feb.

17 24, 2011) (noting that "Miller . . . does not stand for the

18 proposition that every erroneously calculated benefit award

19 automatically serves as a 'clear repudiation,'" and holding that

20 "[a] reasonable finder of fact could conclude that . . .

21 [communications between the Plan and the plaintiff beneficiary]

22

And it may be that in many cases, our reasonableness

approach will yield the same result as the first-payment theory

favored by the defendants, in that the miscalculation will be

apparent from the face of a payment check, or will readily be

discoverable from information furnished to pensioners by the

pension plan at the time the first check is issued, thereby

starting the running of the statute of limitations as of that

date. Nevertheless, whether that is the case is for each

district court to determine in the first instance.

40

1 did not suffice to alert plaintiff that his benefits were being

2 repudiated").

3 Turning to the present case: In light of the standard

4 we adopt, on the factual record before us, we are unable to

5 determine whether, and if so when, each class member had

6 information by which he knew or should have known of the

7 miscalculation. We note that, based on the foregoing discussion,

8 simply receiving a lower pension payment is not enough to put a

9 pensioner on notice of a miscalculation. Conversely, actual

10 notice to a pensioner that a double rate method was used would

11 put him on notice. Similarly, informing a pensioner of the

12 correct rate-times-units calculation, so that any difference

13 between the putative calculation and the actual amount of the

14 check would be obvious, is also probably enough. However, we

15 cannot yet tell how many of the class members' claims are timely.

16 We therefore cannot, at this stage of the proceedings, confirm

17 the district court's conclusion that the class is sufficiently

18 large to satisfy Rule 23(a)(1)'s numerosity requirement.

19 We therefore vacate the class certification and remand

20 to the district court for further factfinding regarding when each

21 plaintiff class member knew or should have known that the Fund

22 had miscalculated his Disability Pension payments, and for

23 consideration of whether there are enough class members with

24 timely claims to merit certification. We therefore also vacate

25 the summary judgment in favor of the class.

41

1 Finally on this score, we note that the approach we

2 adopt may in some cases require a resource-intensive, claimant-

3 by-claimant inquiry to determine when a pensioner knew or

4 reasonably should have known that his benefits were

5 miscalculated. And this fact-dependent inquiry into each

6 pensioner's accrual date may in turn lessen the value, and indeed

7 the availability, of class actions in this kind of litigation.

8 However, that sort of problem is not unique to this context.

9 See, e.g., Avila v. Willits Envt'l Remediation Trust, 633 F.3d

10 828, 841-42 (9th Cir.) (concluding that material issues of fact

11 precluded summary judgment regarding whether certain class

12 members in toxic-tort class action knew or should have known of

13 their injuries), cert. denied, 2011 WL 4530474, 2011 U.S. LEXIS

14 5526 (Oct. 3, 2011); In re Brooklyn Navy Yard Asbestos Litig.,

15 971 F.2d 831, 836 n.1 (2d Cir. 1992) (differentiating between

16 joint trials which are "not questioned by plaintiffs or

17 defendants" in mass tort cases from the issue of "the propriety

18 of class actions" in such cases).

19 Moreover, the fact-intensive nature of our

20 reasonableness approach could make it difficult for a potential

21 class representative to meet the typicality requirement of Fed.

22 R. Civ. P. 23(a)(3). But the case law on the effect of an

23 individualized statute-of-limitations-accrual evaluation on a

24 proposed class's ability to meet the typicality requirement, if

25 any, is sparse, see Chiang v. Veneman, 385 F.3d 256, 269 (3d.

26 Cir. 2004); Ruppert v. Alliant Energy Cash Balance Pension Plan,

42

1 255 F.R.D. 628, 633-34 (W.D. Wis. 2009), and we decline to

2 address whether that requirement is satisfied on the record

3 before us. We note, however, the well-established rule that a

4 plaintiff must satisfy all of the requirements of Rule 23, by a

5 preponderance of the evidence, to obtain class certification, see

6 Teamsters Local 445 Freight Div. Pension Fund v. Bombardier,

7 Inc., 546 F.3d 196, 202 (2d Cir. 2008); In re Initial Pub.

8 Offerings Sec. Litig., 471 F.3d 24, 41 (2d Cir. 2006), including

9 the numerosity and typicality requirements of Rule 23(a), see

10 Marisol A. v. Giuliani, 126 F.3d 372, 375-76 (2d Cir. 1997)

11 (citing Comer v. Cisneros, 37 F.3d 775, 796 (2d Cir. 1994)).

12 2. Novella's Cross-Appeal. We find no merit in

13 Novella's contention, asserted in his cross-appeal, that the

14 certified class was too narrow inasmuch as the district court

15 should not have limited it to persons receiving Disability

16 Pensions.

17 Novella's amended complaint asserted claims relating

18 both to the two-rate calculation for disability pensioners and to

19 the Plan's "accrued benefit" provisions. See J.A. 30-31. The

20 district court granted summary judgment to Novella on his

21 individual Disability Pension claims and did not reach the other

22 "accrued benefit" claims, but rather dismissed them as moot in

23 light of the fact that the other claims would entitle Novella to

24 no further relief. When Novella subsequently moved for class

25 certification with regard to both the Disability Pension claim

26 and the other claims, the district court certified only the

43

1 former class because it concluded that Novella lost standing to

2 pursue the "accrued benefit" claims when he had already

3 "succeeded on an alternative theory of recovery." Novella II,

4 2004 WL 3035405, at *4, 2004 U.S. Dist. LEXIS 26149, at *13.

5 Novella asserts in his cross-appeal that the district

6 court "confused the mootness of an issue with the mootness of a

7 case," Appellee's Br. 16 (emphasis in original), and therefore

8 erred in dismissing Novella's non-Disability Pension claims as

9 "moot." We agree that the claims were not "moot" in the

10 technical sense; "it is cases rather than reasons that become

11 moot" within the meaning of Article III.23 Air Line Pilots Ass'n

12 Int'l v. UAL Corp., 897 F.2d 1394, 1397 (7th Cir. 1990). But

13 where, as here, a litigant asserts multiple arguments in support

14 of the relief he seeks, and the court grants him complete relief

15 based upon one contention, courts also sometimes use "the word

16 'moot' . . . to refer to an issue that need not be decided in

17 light of the resolution [by the court] in the same opinion of

18 another issue." Id. It is in this sense that we understand the

19 district court to have said that some of Novella's claims were

20 "moot."

23

Mootness in the Article III sense occurs when there "no

longer is an actual controversy between adverse litigants," and

the plaintiff therefore lacks standing to continue to pursue his

claims in federal court. Erwin Chemerinsky, Federal Jurisdiction

130 (5th ed. 2007); see also In re Zarnel, 619 F.3d 156, 162 (2d

Cir. 2010); County of Suffolk, N.Y. v. Sebelius, 605 F.3d 135,

140 (2d Cir. 2010); ABN Amro Verzekeringen BV v. Geologistics

Americas, Inc., 485 F.3d 85, 94 (2d Cir. 2007); Richard H.

Fallon, Jr. et al., Hart and Wechsler's The Federal Courts and

the Federal System 205 (5th ed. 2003) (summarizing the

"foundations" of the mootness doctrine).

44

1 In any event, we agree with the district court's

2 decision not to certify the broader class. It was Novella's

3 choice to proceed individually first and only later move for

4 class certification. In his briefing on his individual motion

5 for summary judgment, Novella offered his various arguments in

6 support of his motion in the alternative. See Novella I, 2004 WL

7 1752820, at *2, 2004 U.S. Dist. LEXIS 1266, at *6. The district

8 court granted Novella complete relief on one claim and, in the

9 exercise of its discretion, did not decide the merits of the

10 others. It is the latter, unresolved claims that relate to the

11 broader class for which Novella later sought certification. But

12 by the time Novella moved for class certification, his individual

13 claims no longer matched the claims of the broader purported

14 class, and he therefore was no longer an appropriate

15 representative of that broader class.24 Stated otherwise,

16 Novella's interest as a litigant would be to pursue the claim

17 based on the Disability Pensions, while some class members'

18 interest would be to pursue the claims based on the Plan's

19 "accrued benefit" provisions instead. Novella therefore would

20 not satisfy the typicality or adequacy-of-representation prongs

21 of Rule 23(a).

24

Notwithstanding Novella's success on his individual

claim, Novella had standing to represent the class of Disability

Pension recipients inasmuch as the district court had not yet

reduced Novella's victory to a final judgment.

45

1 III. Prejudgment Interest

2 A. Standard of Review

3 "The decision whether to grant prejudgment interest and

4 the rate used if such interest is granted are matters confided to

5 the district court's broad discretion, and will not be overturned

6 on appeal absent an abuse of discretion." Endico Potatoes, Inc.

7 v. CIT Group/Factoring, Inc., 67 F.3d 1063, 1071-72 (2d Cir.

8 1995) (internal quotation marks omitted); see also Slupinski v.

9 First Unum Life Ins. Co., 554 F.3d 38, 53-55 (2d Cir. 2009);

10 Commercial Union Assurance Co. v. Milken, 17 F.3d 608, 613-15 (2d

11 Cir.), cert. denied, 513 U.S. 873 (1994).

12 B. The Merits

13 The district court awarded prejudgment interest to both

14 Novella -- beginning on the date the Fund denied his claim -- and

15 to the individual class members -- beginning on the date Novella

16 first asserted the class claims. We find no abuse of discretion

17 in the district court's award of prejudgment interest to Novella

18 individually or in its selection of the appropriate rate.25 We

19 nonetheless vacate the award of prejudgment interest to the class

20 in light of our determination that we must decertify the class

21 and vacate the judgment in its favor.

22 The defendants argue that the district court's award of

23 prejudgment interest to Novella amounts to a "windfall" because

25

Although ERISA does not explicitly provide for

prejudgment interest, courts can make such awards as part of

their "wide discretion in fashioning equitable relief to protect

the rights of pension fund beneficiaries." Katsaros v. Cody, 744

F.2d 270, 281 (2d Cir.), cert. denied, 469 U.S. 1072 (1984).

46

1 such an award would compensate him without regard to his break in

2 service, even though his employers did not pay contributions to

3 the Fund during that time. But this argument essentially

4 restates the defendants' arguments on the merits of the two-rate

5 calculation, which we have rejected. To the extent that the

6 payment of prejudgment interest creates a financial burden on the

7 Fund, that is a result of the Fund's misinterpretation of its own

8 Plan. It does not render the district court's conclusion that

9 prejudgment interest is necessary to fully compensate Novella an

10 abuse of discretion.

11 We similarly conclude that the district court's

12 determination that the proper interest rate is 7.5 percent -- the

13 Fund's assumed rate of return -- was within its discretion. In

14 light of the other options before the court, this rate seems to

15 us to be entirely consistent with the principle that plaintiffs

16 should be "made whole" and that defendants should "not profit by

17 their failure to comply with their ERISA obligations." Algie v.

18 RCA Global Commc'ns, Inc., 891 F. Supp. 875, 899 (S.D.N.Y. 1994),

19 aff'd, 60 F.3d 956 (2d Cir. 1995); see also Slupinski, 554 F.3d

20 at 54 (quoting Algie, 891 F. Supp. at 899).

21 We find no merit in Novella's argument that the

22 district court should have awarded prejudgment interest from the

23 date of the first miscalculated check. In his R&R, the

24 magistrate judge acknowledged three possible dates for the

25 accrual of prejudgment interest: "the date of each underpayment,

26 the date that a plaintiff asserted a claim, or the date that the

47

1 Fund denied the claim." Novella IV, 2007 WL 2582171, at *6, 2007

2 U.S. Dist. LEXIS 66235, at *18. The R&R recommended -- and the

3 district court concluded -- that it would, in this case, be

4 "anomalous to calculate interest from the date of injury, since

5 it was within the power of the plaintiffs to assert a claim of

6 underpayment at any time and thus trigger review by the Fund."

7 Id., 2007 U.S. Dist. LEXIS 66235, at *19. We have been given no

8 reason to conclude that the district court abused its discretion

9 in this regard.

10 CONCLUSION

11 For the foregoing reasons, we affirm the district

12 court's judgment in favor of Novella on his individual ERISA

13 claims and its award to Novella of prejudgment interest. We

14 vacate the district court's certification of the class of

15 Disability Pension recipients, its grant of judgment on the

16 merits in favor of the class, and its award of prejudgment

17 interest to the class members. We remand the case to the

18 district court for further proceedings.

19 Each party shall bear its own costs.

48