Appendix — Crosby v. Bowater Inc. Retirement Plan for Salaried Employees of Great Northern Paper Inc.

A-i

TABLE OF CONTENTS TO APPENDIX

SPMRIEER COUR CIRGRINOD on ois cn cecesniseend canadien

Opinion, granting Plaintiff's Motions for

Class Certification and Summary Judgment

EE ROSE WOD 6a Keds cananadhenatWendeecavenwens

Final Judgment and Injunction (filed 11/26/02) ......

Opinion, awarding attorney fees and costs

to Plaintiff and against Defendants (filed 5/20/03) ....

Sixth Circuit (Opinion, Judgment and Order) .......

Opinion, vacating the Judgment entered by the

District Court and ordering that the Complaint be

dismissed for lack of subject matter jurisdiction

ee TGF OED 6 sc cceceshentessacdradancedoawesans

Judgment respecting the Opinion (filed 9/09/04) ....

Order, denying Petition for Rehearing En Banc

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CEO NOUNS nove ccd ncacasnceessnsseananeacnues

SP WDA. GOOOE PR GAS cok ccacacnieaccacescias

29 U.S.C. §1053(a) [ERISA §203(a)] ........4.....08.

29 U.S.C. §1103(a),(c) [ERISA §403(a),(c)] ...........

29 U.S.C. §1104(a) [ERISA §404(a)}] ..............05.

A-29

WUSt Se EDIE ook ko chs Se

29 U.S.C. §$1132(a) [ERISA §502(a)] .. 2... sce cccsees

Internal Revenue Code Statutes ..................

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pik Se | Ware rrr rr tor tre TT Ey eee re ey

SrA GOP ose db wack swncsioekacaeuss

50 U.S.C. App. §925(a) (terminated)

[§205 of Emergency Price Control Act of 1942].......

Be Tee ee

26 C.F.R. §1.411(d)-4, Q&A2(a)(4) .. 0. cece eee eee

Legislative History (by date) .................045,

S. Rep. No. 93-127

1974 U.S.C.C.A.N. 4838 (Apr. 18, 1973) .......ee0e0e

H.R. Rep. No. 93-533

1974 U.S.C.C.A.N. 4639, 4643, 4655 (Oct. 2, 1973) ..

H.R. Conf. Rep. 93-1280

1974 U.S.C.C.A.N. 5038, 5076 (Aug. 12, 1974) ........

A-82

A-82

. A-83

A-83

A-iii

120 Cong. Rec. 29,198 (Aug. 20 a Se Dee ne A-84

120 Cong. Rec. 29,928 (Aug. 20, BPE strapeky stan. A-84

sansa) cntip oes GE TE CR TE TET POOR aT en en A-85

G. Bogert, Trusts & Trustees (2d ed. 1982) .......... A-85

D. Dobbs, Law of Remedies (2d ed. Pr ree A-86

G. Palmer, Law of Restitution SUNG Seen che ncuis A-90

J. Pomeroy, Equity Jurisprudence (4"°ed. 1918) ...... A-92

A. Scott, Law of Trusts (3d ed. SUED kas kaN WA eek an A-92

Restatement of Restitution ME a aaricancrnceeeecs A-93

Restatement (Second) of Trusts SOEUTE Sikes conrawes A-95

MOU sacs te cenrucs Gee A-97

IRS Notice 96-8

1996-1 C.B. 359, 1996-6 ILR.B. 23

1996 WL 17901 (Jan. 18, 1996) ..................... A-97

Revenue Ruling 95-6

1995-4 I.R.B. 22 (Dec. 30, PE Adie vasa ee Sees A-111

Black’s Law Dictionary (6 ed. 1990) .............. A-118

Webster’s New Collegiate Dictionary (1979) ....... A-119

Pertinent Plan Provisions ................eeeeees

Article 1 TROTAIUORS . 5. oc asec c cn davcccceseneecends

Article IV Employer Contributions ...............

Article VI Participants’ Personal Accounts .........

Article VIII Death Benefits ............ ccc eeeeeees

Article XII Distribution Requirements .............

Article XVII Miscellaneous Provisions .............

Other Pertinent Materials ................. ye eeees

Final Denial of Crosby’s Claim ............0.e000s

Affidavit of Frank J. Crosby ............ eee eeeeees

Transcript of Oral Argument in the Sixth Circuit ....

Merits Excerpt from Crosby’s Appeal Brief ........

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UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

FRANK J. CROSBY,

individually and on behalf of

all others similarly situated,

Case No, 1:01-CV-683

Plaintiff,

v. HON. RICHARD ALAN ENSLEN

BOWATER INCORPORATED

RETIREMENT PLAN FOR

SALARIED EMPLOYEES OF

GREAT NORTHERN PAPER, INC., and

BOW ATER INCORPORATED,

Defendants. OPINION

/

This matter is before the Court to considerate three

Separate issues: (1) whether to certify this action as a class

action pursuant to Federal Rule of Civil Procedure 23; (2)

whether to grant or deny the Motion to Dismiss of Defendants

(Bowater Incorporated and its Retirement Plan) and the

Cross-Motion for Summary Judgment of Plaintiff Frank J.

Crosby; and (3) whether to award equitable remedies in the

event that Plaintiff succeeds as to his Cross-Motion for

Summary Judgment.

On review of the briefing and the papers filed in this

matter, the Court dispenses with oral argument since it would

unnecessarily protract the resolution of these issues.

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FACTS

This is the rare case which for the most part surrounds

an isolated legal question. The question is whether the

Defendant Retirement Plan was permitted to reduce its

payments to a retiree who elected to cash out his retirement

benefits based on a mortality discount for years prior to his

65th birthday. There are no disputed factual issues which

affect the resolution of this legal question.

Before discussing this question, a few comments are in

order about the class certification allegations. As is apparent

from the Complaint and the briefing filed, this Complaint

stems from a sale of a business which left some workers

electing te receive their vested retirement benefits before

normal rei*sement. (See Complaint at | 9, 63-65.) Plaintiff

estimated the number within the class at 350 members. (Id.)

This estimate was based on the total number of affected works

as well as formal studies which indicate that workers who

have a cash-out option in retirement benefits almost always

elect the cash-out option. (Id.) Since providing the estimate,

Plaintiff has discovered additional facts and _ located

evidentiary materials pertinent to the likely number of affected

workers.

This Plan has been extant since 1992. (Defendants'

Response Brief at 8.) Under the terms of the Plan, participants

are vested after five years of service. (Plan §§ 10.1, 12.1(a)-(b)

and 12.2(b).) Plan data from the most recent Form 5500 Annual

Reports confirm that as of January 1, 2000, there were 89

terminated vested participants, 12 retiree participants or

beneficiaries receiving annuity payments and 220 active

participants. (Plaintiff's Reply Exhibit 35, at Schedule B.) Each

of the 220 participants is fully vested. (Id.) The 2000 Plan

Annual Report also assumes that terminated vested

participants, other than annuity recipients, have elected lump

sum benefits. This was assumed in the Notes to the Report,

which state: "As a result of the sale of GNP, all participants not

receiving annuity payments are assumed to take a lump sum

distribution on January 1, 2001, as permitted by the Plan."

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(Plaintitt's Reply Exhibit 36, at 6.) The financial data contained

in the Report likewise suggests this result in that the high

amounts paid during the year are the likely consequence of

payment of lump sum benefits rather than those payments to

the very few participants or beneficiaries clecting annuity

payments. (See Plaintiff's Reply at 12 and documents cited

therein.) Similar conclusions are warranted as to the earlier

Plan financial reports for 1996 and 1999. (See Plaintiff's Reply

at 13 and 14 and documents cited therein.) Furthermore, it is

rational to assume that during the nearly three years since the

2000 Report, additional Participants have retired and have

elected lump sum benefits.

Plaintiff has filed his own Affidavit pertinent to the

number of class members. His A ffidavit states in pertinent part

that at the time of the sale most plan participants, to his

knowledge, continued to participate in the Plan as workers for

the purchaser, Inexecon. (See Crosby Affidavit of September

30, 2002 at ¥ 9.) Notwithstanding, it is also apparent from

Plaintiff's Affidavit that a significant minority of Plan

participants have elected benefits due to retirement and the

great majority of those have elected a lump sum payout. (Id. at

19 5-11.) Indeed, Crosby conducted a sample survey of 36

Plan participants.’ All 36 either had opted to receive lump

sum benefits or intended to opt for those benefits in the future.

(Id.)

Defendants were provided an opportunity to contest

these documents and conclusions. Despite the opportunity,

Defendants have failed to file any evidentiary materials

sufficient to justify a conclusion other than that the number of

class members likely to participate in the class are sufficiently

numerous to make joinder of all class members impracticable.

‘The Court in no way confuses Plaintiff's survey with

a scientific or disinterested survey of Plan participants, given

Plaintiff's participation in this suit. Nevertheless, those

numbers are what they are and suggest conclusions consistent

with those reached by Plaintiff.

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Plaintiff, and the putative class, are represented by the

law firm of Hertz, Schram and Saretsky, P.C. This law firm is

nationally recognized for its plaintiff representation in ERISA

and employee benefit cases. It has appeared in more than 30

reported cases within the Sixth Circuit Court of Appeals and

in an even larger number of cases nationally. It has also won

class certification and substantive relief in a number of

reported decisions, including the Sixth Circuit's decision in

Rawlings v. Prudential-Bache, 9 F.3d 513 (6th Cir.1993) and the

Eleventh Circuit's decision in Lyons v. Georgia-Pacific Corp.

Salaried Employees Retirement Plan, 221 F.3d 1235 (11th

Cir.2000). The law firm is located in Bloomfield Hills,

Michigan. Thus, the law firm and the lead attorney, Bradley

Schram, appear to be very experienced and capable advocates

for the class.

As to the merits of this action, Plaintiff has brought this

action under sections 203(a)(2) and 502(a)(3) of the Employee

Retirement Income Security Act ("ERISA") (codified at 29

U.S.C. §§ 1053(a)(2) and 1132(a)(3)). Plaintiff sued Defendants

based on his right to benefits which accrued when his

employer sold its subsidiary, Great Northern Paper, which

employed Plaintiff. Plaintiff was then eligible, and elected, a

lump sum distribution of his retirement benefits under the

Plan. These benefits were part of an accruing retirement

account which had long ago vested. Plaintiff elected to receive

his retirement benefit in a lump sum and, consistent with its

regular practice, the Defendant Plan Administrator calculated

Plaintiff's benefits by use of a "whipsaw calculation," i.e.,

reducing the benefit to its present value by use of a discount

rate (to account for the effect of interest) and a mortality table

(to account for the likelihood of Plaintiff's pre-retirement

death). Plaintiff does not dispute the use of the discount rate,

but does dispute the use of the mortality table as to his pre-65

years. The benefit as computed by Defendants resulted in a

lump sum payout of $52,013.90. According to Plaintiff, without

the mortality reduction, the amount of the lump sum payout

would be computed at $57,262.98.

eencieeniaeieneienesemeanitaitiaa aan

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Defendants' Plan is silent on this precise question. The

Plan gives the Defendant Administrator deference to make

plan interpretations and requires the employee to exhaust

administrative remedies. Plaintiff has exhausted

administrative remedies as demonstrated by the

correspondence as to this dispute. (See Defendants’ Motion to

Dismiss, Exhibits 2-5.) Plaintiff's legal claim is that the above

computation of his benefits violates the anti-forfeiture rules of

section 203(a)(2) of ERISA (29 U.S.C. § 1053(a)(2)) by red ucing

an accrued benefit. Defendants' position is that the statute and

regulations are silent on this point and the Plan Administrator

permissibly interpreted the Plan in making this calculation.

CLASS CERTIFICATION STANDARDS

According to the United States Supreme Court, this

Court must conduct a "rigorous analysis" into whether the

prerequisites of Federal Rule of Civil Procedure 23 are met

before certifying a class action. General Tel. Co. v. Falcon, 457

U.S. 147, 161 (1982). The trial court has broad discretion in

deciding whether to certify a class, but that discretion must be

exercised within the framework of Rule 23. Gulf Oil Co. v.

Bernard, 452 U.S. 89, 100 (1981); In re American Med. Systems,

Inc., 75 F.3d 1069, 1079 (6th Cir.1996). The "rigorous analysis"

requirement means: that a class is not maintainable merely

because the complaint parrots the legal requirements of Rule

23. American Med. Systems, 75 F.3d at 1079. Although a hearing

prior to the class determination is not always required, "it may

be necessary for the court to probe behind the pleadings before

coming to rest on the certification question." Falcon, 457 U.S. at

160; see also Weathers v. Peters Realty Corp., 499 F.2d 1197, 1200

(6th Cir.1974) (stating that in some cases it will be necessary to

give the parties an opportunity to present evidence on the

certification question). In this case, an evidentiary hearing is

unnecessary because of the extensive briefing in connection

with the dispositive motions and because the case centers

around a purely legal decision about a calculation method

which is applicable to all class members alike.

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Rule 23 places the burden of class certification on

Plaintiff. American Medical Systems, 75 F.3d at 1079; Senter v.

General Motors Corp., 532 F.2d 511, 522 (6th Cir.1976). Under

the language of the Rule, Plaintiff must prove four

prerequisites under subsection (a) and one of the clauses

under subsection (b) for the class to be certified. The Rule

provides in pertinent part as follows:

(a) Prerequisites to a Class Action. One or more members

of a class may sue or be sued as representative parties on

behalf of all only if

(1) the class is so numerous that joinder of all

members is impracticable,

(2) there are questions of law or fact common to

the class,

(3) the claims or defenses of the representative

parties are typical of the claims or defenses of

the class, and

(4) the representative parties will fairly and

adequately protect the interests of the class.

(1) Class Actions Maintainable. An action may be main-

tained as a class action if the prerequisites of subdivision (a)

are satisfied, and in addition:

(1) ** *. or

(2) the party opposing the class has acted or

refused to act on grounds-generally applicable

to the class, thereby making appropriate final

injunctive relief or corresponding declaratory

relief with respect to the class as a whole; or....

Fed. R. Civ. Proc. 23(a)-(b).

CERTIFICATION ANALYSIS

Under Rule 23, certification analysis first addresses the

four preliminary requirements of Rule 23(a)--i.e., (1)

numerosity; (2) commonality; (3) typicality; and (4) adequate

representation. Senter, 532 F.2d at 522. Once these prerequisites

are satisfied, then Plaintiff must satisfy one or more of the

requirements of subsection (b) for certification. Id.

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(1) Numerosity

To begin this analysis, the Court must determine

whether the class is sufficiently numerous that joinder is

impracticable. Numbers alone are not dispositive when the

numbers are small, but will dictate impracticability when the

numbers are large. H. Newberg and A. Conte, 1 Newberg on

Class Actions, § 3.05 (3rd ed.1992). Although Rule 23 imposes

no "numerical" limit, it has been held in this circuit that a class

of 35 employees was sufficient to meet the numerosity

requirement. See American Med. Systems, 75 F.3d at 1076 (citing

Afro American Patrolmen's League v. Duck, 503 F.2d 294, 298 (6th

Cir.1974)); see also Roman v. Korson, 152 F.R.D. 101, 105

(W.D.Mich.1993); Van Vels v. Premier Athletic Center of

Plainfield, Inc., 182 F.R.D. 500, 507 (W.D.Mich.1998); Saur v.

Snappy Apple Farms, Inc., 203 F.R.D. 281, 286 (W.D.Mich.2001).

Here, the expected numbers are much larger. This class

action relates to a class of retirees, and future retirees, who

either were affected by, or stand to be affected in the future, by

Defendants' calculation method for lump sum payments. The

evidence cited above clearly demonstrates that the class size is

somewhere between 40 and 350 (the total number of plan

Participants) and is much more likely to consist of the majority

of the plan participants since many, if not most, plan

Participants would retire before age 65 and would elect the

option of lump sum payment. (See GAO Report, Private

Pensions, Implications of Conversions to Cash Balance Plans, No.

HEHS-00-185, at 4 (Sept. 29, 2000) (Defendants' Reply Exhibit

33) (stating based on survey that majority of plan participants

opt for a lump sum payment).) Therefore, the Court

determines that the numerosity requirement is met.

(2) Commonality

Rule 23 requires “commonality "--meaning, questions of

law and fact common to all class members. Sprague v. General

Motors Corp., 133 F.3d 388, 397 (6th Cir.1998). Not all common

questions suffice. Id. What is necessary for certification are

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common issues the resolution of which advance the litigation.

Id. The purpose of this inquiry, according to the United States

Supreme Court, is to ensure that a class action is an

economical means of addressing the legal claims and that the

legal claims of both representatives and class members will be

fairly resolved through the process. Falcon, 457 U.S. at 157 n.

13. Once it is determined that there are common questions of

law and fact, differences in the amounts of damages sustained

by class members will not usually defeat certification. Sterling

v. Velsicol Chemical Corp., 855 F.2d 1188, 1197 (6th Cir.1988);

Kornberg v. Carnival Cruise Lines, Inc., 741 F.2d 1332 (11th

Cir.1984). ar

This case is a perfect one for class certification because

of truly common questions of law and fact. Each of the class

members are participants in the same retirement plan who

have been injured by a common practice of the Defendant

Retirement Plan--that is, calculation of retirement benefits

utilizing a mortality discount for years prior to the

participant's 65th birthday. Whether this calculation is proper

is purely a legal question under ERISA and the pertinent plan

language. Furthermore, resolution of this question will

essentially determine liability and equitable relief as to the

claims of all class members.

In circumstances like this, i.e., class actions brought on

behalf of_retirees subject to a common practice of denying

benefits, the federal courts have consistently found

commonality. See, e.g., Forbush v. ].C. Penney Co., Inc., 994 F.2d

1101, 1103 (5th Cir.1993) (finding that certification was

required under Rule 23 and that there was commonality as to

class members who were each vested retirees of the J.C.

Penney Company Pension Plan and who were injured by a

common method for estimating social security benefits for the

purpose of determining retiree benefits); Fallick v. Nationwide

Mut. Ins. Co., 162 F.3d 410, 423 (6th Cir.1998) (following

Forbush and remanding for certification decision); Fuller v.

Fruehauf Trailer Corp., 168 F.R.D. 588, 596 (E.D.Mich.i1996)

(following Forbush).

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In fact, the instant case presents an even better case for

certification than some of the cases cited. In this case, there is

a single plan which applies to all class members and there isa

strictly legal dispute as to a standard calculation method

utilized by Defendants. As such, the Court determines that

there are common questions of law the resolution of which

will advance the litigation.

Notwithstanding this commonality, Defendants assert

several arguments that are directed toward both the

commonality requirement and the typicality requirement of

Rule 23. Defendants assert that "future lump sum recipients,”

who are the bulk of the class and who, unlike Plaintiff Crosby,

have not yet been shorted by the Plan, do not have standing to

assert a future right to payment, especially since the Plan may

be amended in the interim so as to make clear that benefits

may be calculated in the manner sugges.ed by Defendants.

This argument is thoroughly wrong. To start, once benefits are

"accrued" under a Plan, then the anti-cutback rule codified at

29 U.S.C. § 1054(g) prevents plan modifications reducing the

accrued benefits. As is explained later in the Court's summary

judgment analysis, retiree benefits are "accrued" benefits and

not "incident" benefits because they are designated and treated

as such in the Plan language. (See Plan at Article VIL example

1.) Thus, the premise of this argument (that there could be a

change in plan language) is simply mistaken.

Furthermore, future retirees have a clear and

significant legal interest in the determination and adjudication

of their rights to payment. Under the Plan language, a retiree

has a right to select between the lump sum and annuity option

when retiring. To intelligently understand that choice, the

Retiree must ascertain the method for the calculation of his

lump sum benefit. This kind of information is also helpful, if

not critical, to both current workers and retirees when making

decisions as to whether to continue employment or retire, and

as to whether to select lump sum or annuity payment.

Therefore, future retirees as well as past retirees have common

legal interests and both have legal standing to prosecute

requests for equitable relief.

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Defendants, in their Response Brief and Sur-Reply,

have also asserted a number of arguments which, according to

them, undercut the commonality and typicality of class

members. The first of these arguments is that although

Plaintiff has administratively exhausted his claim for benefits,

other class members have not, and this distinction should

prevent certification of the class. This argument has already

been expressly rejected by the Sixth Circuit in the context of

very similar ERISA class actions. Specifically, the Fallick

decision, noted above, rejected such an argument based on the

availability of a futility exception to administrative exhaustion

and the clear application of that exception to a standard

method of medical benefit calculation. See Fallick, 162 F.3d at

419-20. In the instant case, the class representative Plaintiff has

exhausted his administrative remedies. It is noteworthy that

the Fallick decision also cited with approval the decision in

Costantino v. TRW, Inc., 13 F.3d 969, 975 (6th Cir. 1994), which

similarly applied a futility exception to the exhaustion

requirement in an ERISA class action relating to a pension

benefit methodology for calculation of payment. Such case law

makes clear that class membership should not be limited to

persons who have administratively exhausted claims in a case

like this one--wherein administrative exhaustion would be

pointless because the case involves the legality of a standard

- calculation method.

Defendants have also argued that class members have

dissimilar interests because of potential statute of limitations

defenses which they might urge against particular class

members. This argument, like Defendants' other arguments,

is a thin reed to hang hope upon in the context of the ERISA

legislative backdrop. ERISA adopts the pertinent state statute

of limitations, which is, in this case, Michigan's six year statute

for breach of contract. See Mich. Comp. Laws § 600.5807.

Second, the ERISA limitation period does not begin to run

from a date of payment or calculation of benefits. The ERISA

limitation period, under the law of this Circuit and the law of

several other federal circuits, does not begin to run until a

participant formally presents the claim for benefits to the

ee

A-11

pension administrator and has had his claim formally denied.

Stevens v. Employer-Teamsters Joint Council, 979 F.2d 444, 451

(6th Cir.1992).?

In this case, Plaintiff received his final denial letter on

June 14, 2001. He filed suit on October 22, 2001. So it is clear

that Plaintiff's claim is timely. Moreover, there is no evidence

in this record that a single participant of the Plan, prior to

Plaintiff, ever made a claim for benefits of this type (i.e., that

Defendants were miscalculating the lump sum in the manner

described by Plaintiff) prior to Plaintiff's claim for benefits.

Indeed, common sense and analysis of the authorities cited

herein compel this finding. This is the type of argument

familiar to some accountants and attorneys specializing in

pension administration, but otherwise lost on the general

public, such that there is every reason to believe that this suit

is Defendants' first formal denial on this issue. Furthermore,

the authorities cited by Plaintiff as to its position, both factual

and legal authorities, are documents and testimony which all

: occurred with the six-year time frame of M ichigan's statute of

limitations. In fine, in the context of this kind of case, these

claims, and these claimants and class members, the statute of

limitations is not an applicable defense and will not prevent

certification of class claims.

; ‘As stated in Plaintiff's Sur-Sur-Reply Brief, the cases of

Union Pacific Railroad Co. v. Beckham, 138 F.3d 325, 330 (8th

; Cir.1998) and Cotter v. Eastern Conference of Teamsters Retirement

| Plan, 898 F.2d 424, 428-29 (4th Cir.1990), cited by Defendants,

actually support Plaintiff's position, since those cases confirm

that an ERISA claim does not accrue until the claim has been

formally denied. Other limitation arguments made by

Defendants, such that case law from Title VII and ADEA

| contexts should be applied in this context and that past retirees

| should have exercised "due diligence" regarding the

calculation of their benefits, are not persuasive, for the reasons

stated by Plaintiff. (See Plaintiff's Sur-Sur Reply Brief at 4-6.)

A-12

Defendants also argue that commonality and typicality

are defeated because a class adjudication might "drain" the

assets of the Plan and deprive future recipients of benefits,

especially those entitled to annuity payments. Defendants'

comments about annuity recipients are not apposite because

this class is defined to include only those selecting lump sum

benefits. The interests of annuity recipients are not common,

but there is no intent to represent those interests. In terms of

the suggestion that class certification might drain the Plan,

presumably creating some adverse consequences for later

lump sum recipients, the present record simply does not

support such a result. First of all, there has been no

demonstration that if lump benefits are recalculated for past

and future recipients that the funds cf the Plan will be

inadequate to fund the recalculated payments. Second,

assuming that the funds of the Plan were inadequate, ERISA,

29 U.S.C. § 1082, requires that a plan sponsor, in this case

Defendant Bowater, fund unfunded promised benefits as a

condition for the termination of any plan unless the sponsor is

insolvent. Since there is also no reason to believe that

Defendant Bowater is insolvent, even if there were some

shortage of funds, the law would expect these to be paid by

Defendant Bowater for the benefit of all class members.

Accordingly, the Court rejects Defendants' arguments.

(3) Typicality

Rule 23 requires that the claims asserted by class

representatives be typical of class members. American Med.

Systems, 75 F.3d at 1082. As the Court of Appeals said in the

American Medical Systems case:

"Typicality determines whether a sufficient

relationship 2xists between the injury to the

named plaintiff and the conduct affecting the

class, so that the court may properly attribute

a collective nature to the challenged conduct..."

zeae

A-13

... A necessary consequence of the typicality

requirement is that the representative's

interests will be aligned with those of the

represented group, and in pursuing his own

claims, the named plaintiff will also advance

the interests of the class members.

Id. (citation omitted). The typicality requirement, so explained,

tends to merge with the commonality requirement. Falcon, 457

U.S. at 158 n. 13. Nevertheless, it is a separate inquiry and in

Particular focuses attention on differences between class

representative claims and class claims which would defeat the

representative nature of the class action. Fuller, 168 F.R.D. at

598.

In this case, the class representative's claims are typical

of t: eclaims of class members. Namely, each concern the same

plan, the same plan language, the same calculation method,

and the same questions of legality under ERISA and the

pertinent Treasury Regulations.> Therefore, the Court also

determines that the typicality requirement is met.

(4) Adequate Representation

Rule 23(a) requires that the class members and their

counsel be prepared to provide fair and adequate

representation to the class. In Senter, the Sixth Circuit

articulated two criteria for determining adequacy of

representation: "1) the representative must have common

interests with unnamed members of the class, and 2) it must

appear that the representatives will vigorously prosecute the

interests of the class through qualified counsel." Senter, 532

F.2d at 525; see also American Med. Systems, 75 F.3d at 1083;

Nat'l Ass'n of Reg. Med. Programs v. Mathews, 551 F.2d 340, 345

(D.C.Cir.1976); compare Oxendine v. Williams, 509 F.2d 1405 (4th

*‘Defendants' other typicality arguments were

addressed above.

A-14

Cir.1975) (per curiam) (declining to approve prisoner class

action because of pro se representation).

Plaintiff's Complaint (and the documents filed in

connection with the dismissal and summary judgment

motions) identify him as a plan participant who has a vested

interest in retirement benefits and who has been adversely

affected by the Defendants' practice for calculating a cash out

of retirement benefits based in part on a mortality reduction

for years prior to the participant's 65th birthday. Thus, it

appears that the Plaintiff's interests are identical to those of

unnamed class members. As for the class counsel, the Plaintiff

law firm is a nationally recognized firm with expertise in

prosecuting ERISA class actions. This is demonstrated by their

history of advocacy in published opinions in this Circuit as

well as other Circuits. In fact, the Lyons decision, which

Plaintiff relies upon in his argument on the merits, was an

Eleventh Circuit case in which Plaintiff's counsel was retained

as class counsel and which resulted in the Eleventh Circuit's

approval of relief for the class. Both Plaintiff and his counsel

also appear motivated to zealously represent the class. Thus,

the Court approves of Plaintiff and his counsel as adequately

representing the class.

(b)(2} Certification

Under Rule 23(b)(2), a class action may be certified for

injunctive or declaratory relief if the party opposing the relief

requested has acted or refused to act on grounds generally

applicable to the class, making the requests for such relief

appropriate. The Sixth Circuit's language in Fallick implicitly

endorsed Rule 23(b)(2) certification in Forbush-type ERISA

cases. Indeed, in addition to the cases cited above, there are

many other federal decisions approving certification under

Rule 23(b)(2) as to such claims. See, e.g., Caranci v. Blue Cross &

Blue Shield of Rhode Island, 194 F.R.D. 27, 39 (D.R.1.2600) (citing

Corsini v. United Healthcare Corp., 51 F Supp.2d 103 (D.R.I. 1999)

and Corsini v. United Healthcare Corp., 965 F.Supp. 265 (D.R.I.

1997)); Groover v. Michelin North America, Inc., 187 F.R.D. 662,

A-15

667 (M.D.Ala. 1999); Bower v. Bunker Hill Co., 114 F.R.D. 587

(E.D.Wash.1986); Morgan v. Laborers Pension Trust Fund for

Northern California, 81 F.R.D. 669, 681 (N.D.Cal.1979).

In this instant cause, it is clear from the Complaint and

the request for class relief as to the summary judgment motion

that Plaintiff is seeking primarily equitable relief in this

action--i.e., an injunction requiring recalculation of benefits in

accordance with ERISA and a constructive trust to secure

payment of additional benefits to class members. Under

pertinent case law discussed herein, such remedies are not

properly regarded as "monetary relief." Therefore, and in light

of the pertinent case law and facts of this case, the Court

determines that the requirements of Rule 23(b)(2) are met and

that certification is proper under Rule 23(b)(2).‘

‘One thing unusual about the procedural posture of

this case is that dispositive motions were filed early (before

this Court could schedule any hearing or briefing on class

certification) and that the request for certification was then

made (in addition to the Complaint) in Plaintiff's

Cross-Motion for Summary Judgment, before the filing of the

certification motion. While certification in this posture is not

the most desired practice under Rule 23, for the reasons

explained above, the Court determines that this is the proper

instance to address and decide the certification issues as well

as the dispositive motions. See, e.g., Larionoff v. United States,

533 F.2d 1167, 1183 (D.C.Cir.1976) (approving simultaneous

entry of judgment and class certification); Jimenez v.

Weinberger, 523 F.2d 689, 697 (7th Cir.1975) (stating that "in

some cases the final certification need not be made until the

moment the merits are decided"); see also Gurule v. Wilson, 635

F.2d 782, 788-90 (10th Cir.1980) (allowing post-judgment class

certification under Rule 23(b)(2)); Marshall v. Kirkland, 602 F.2d

1282, 1301 (8th Cir.1979)(same); Johnson v. Mathews, 539 F.2d

1111, 1125 n. 23 (8th Cir.1976) (same); Alexander v. Aero Lodge

No. 735, 565 F.2d 1364, 1372 (6th Cir.1977) (affirming

post-judgment certification where there was a lack of

A-16

NOTICE AND CLASS DEFINITIONS

Since this Court has c “tified under Rule 23(b)(2), but

not under Rule 23(b)(3), Rule 23 does not direct that notice and

opt-out procedures be used. See Rule 23(c)(2). Hence, those

procedures are not appropriate in this case.

As for the class definition, the Plaintiff has proposed

the following class definition:

All participants or beneficiaries of participants who

received alump sum distribution from the Plan (either

directly or indirectly via transfer to an individual

retirement account or other eligible retirement plan), or

who are entitled to receive a lump sum distribution

now or in the future (either direct or indirectly via

transfer to an individual retirement account or other

eligible retirement plan).

(See Complaint at § 63; Brief in Support of Class Certification,

at 3.)

Upon review of the particular class definition offered

here, the Court finds that it properly and_ specifically

designates class members in an objective fashion. As such, the

class definition is approved.

STANDARDS OF REVIEW _ON THE MERITS,

GENERALLY

Defendants have moved under Federal Rule of Civil

Procedure 12(b)(6) to dismiss Plaintiff's Complaint for failure

to state a claim for which relief may be granted. However,

because Defendants' Motion to Dismiss raises matters outside

the pleadings, the pertinent standard for review of it (as well

as Plaintiff's summary judgment motion) is the summary

judgment standard of Rule 56. See Fed. R. Civ. Proc. 12(b).

prejudic»).

A-17

Review of a motion for summary judgment requires

the Court to determine if the pleadings, depositions, answers

to interrogatories and admissions on file, together with

affidavits, if any, show that there is no genuine issue as to any

material fact such that the moving party is entitled to

judgment as a matter of law. Fed. R. Civ. P. 56(c). It is the

function of the Court to decide "whether the evidence presents

a sufficient disagreement to require submission to a jury or

whether it is so one-sided that one party must prevail as a

matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

251-52 (1986).

STANDARD FOR REVIEW FOR ERISA LEGAL

REVIEW FOR ERISA LEGAL

INTERPRETATIONS

Although the parties do not quibble about the general

standards of review under the Federal Rules, they do contest

whether the Plan Administrator's legal interpretation to use

the discount table is entitled to deference or whether it should

be reviewed de novo. This dispute arises in large part because

of the language employed in the famous case of Firestone Tire

& Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Therein, the

United States Supreme Court held that a de novo standard of

review applies to decisions by plan administrators unless the

plan gives the administeator discretionary authority to

determine eligibility for benefits or to construe the terms of the

plan, in which case an arbitrary and capricious standard

applies. Id. at 115, 109 S.Ct. 948. However, the Firestone Court

limited its holding to actions under section 502(a)(1)(B) of

ERISA, i.e., those "challenging denials of benefits based on

plan interpretations." Id. at 108.

Plaintiff argues that because his cause of action was

brought under section 502(a)(3), not section 502(a)(1)(B),

Firestone does not apply and de novo review is appropriate.

Defendants argue, to the contrary, that because this case

involves a plan interpretation, regardless of the subsection

label attached by Plaintiff, it falls within the deferential

standard of Firestone.

A-18

On review of this argument, the Court believes that the

Defendants have the better argument. The Firestone holding,

while limited on its face, clearly intended itself to apply to

plan interpretations. In this case, the Plan grants the

Administrator deference and that deference was clearly used

in reaching the benefit determination challenged here. Thus,

the logic of Firestone favors a "clearly erroneous" standard of

review. In determining this, the Court is also mindful of both

published and unpublished cases of the Sixth Circuit which

have applied the Firestone standard of review to plan

interpretation questions made under sections 502(a)(2) and

502(a)(3). See Hunter v. Caliber System,.Inc., 220 F.3d 702, 711

(6th Cir.2000) (finding as to § 1132(a)(1)(B) claim that "this case

is about benefits, and Firestone requires application of the

arbitrary and capricious standard if required by the language

of the plan"); Bd. of Admin. v. Huntsman, 187 F.3d 634, 1999 WL

591458, at *3 (6th Cir. July 27, 1999) (holding that claim

brought under section 1132(a)(3) was subject to clearly

erroneous review under Firestone); see also Paramore v. Delta Air

Lines, 129 F.3d 1446, 1450 (11th Cir.1997).

Notwithstanding, the Court also determines that a

decision on the standard of review is unnecessary to resolve

the summary judgment issues because, regardless of the

standard of review, clearly erroneous or de novo, the Court

would adopt the plan interpretation stated below. This is

because the legal interpretation stated below is based purely

on a legal interpretation of the Plan language and the Court

finds the terms used in the Plan to be unambiguous and to

require the interpretation stated below. See Williams v. Int'l

Paper Co., 227 F.3d 706, 711 (6th Cir.2000).

SUMMARY JUDGMENT ANALYSIS

To put the question succinctly, the question presented

here is whether a worker who elected to receive lump sum

early retirement benefits is entitled to receive the value of his

retirement benefit without a mortality discount for the years

until his 65th birthday. To put this question into the context of

A-19

the pertinent plan language and regulations, does the above

described worker have an accrued interest in the amount of

the retirement benefits without reduction for a mortality

discount?

Herein, it is acknowledged that section 203(a)(2)(A) of

ERISA provides that "an employee [such as Plaintiff] who has

completed at least 5 years of service has a nonforfeitable right

to 100 percent of the employee's accrued benefit derived from

employer contributions." 29 U.S.C. § 1053(a)(2)(A). It is also

not disputed that when an employee elects to take a lump sum

distribution that certain deductions are proper under Internal

Revenue Service regulations. The Internal Revenue Code and

Regulations permit use of "the applicable mortality table" and

the "applicable interest rate" in computing present value. See

26 U.S.C. § 417(e)(3); Treas. Reg. § 1.417(e)- 1(d). Thus, another

way to put the question is whether the mortality table was

"applicable" when the employee elects to receive lump sum

benefits before age 65 in the context of this plan language.

To understand this issue, it is important to contrast two

different kinds of retirement plans. Under one kind of plan,

the participant, his estate and his survivors lose any interest in

the employee contributions for retirement upon the

employee's death. Under this kind of plan, which is permitted

under the Treasury Regulations if there is explicit plan

language so providing, the plan administrator must make an

assumption about mortality before retirement age in order to

determine how to fund the plan. That is, one cannot determine

the amount of funding without knowing the mortality risk.

Under a second type of plan, a retiree has a vested interest in

his retirement benefits which cannot be defeated by his death

such that his estate or other beneficiary is entitled to collect

accrued benefits upon his death. Under the second type of

plan, a mortality discount is not proper because the

assumption of the system is that the money will be made

available to each participant regardless of pre-retirement

death. In other words, in the later kind of system, the death of

a plan participant does not affect plan funding since the

money is necessarily paid to a beneficiary in the event of a

ie A-20

participant's death.

In the instant case, the pertinent plan language says: "If

a participant dies prior to his Normal Retirement Date, then no

benefit of any kind shall be payable from this Plan and Trust

except for the death benefit (if any) provided for in this Death

Benefit Section. The amount of the Participant's death benefit

shall be the then vested present value of the Participant's

Accrued Benefit accrued to date of death ...." (Plan § 8.1.) This

kind of system is much closer to the second kind of plan

envisioned above than the first. The operation of the system

does not need to discount the possibility of the participant's

death because in such an event the money is paid to the

participant's beneficiary. While an employer might be able to

: reduce or eliminate a true and separate "incidental death

benefit" under the ERISA regulations, 26 C.F.R. § 1.411(a)-7,

the employee's successor's right to his or her vested benefits

could not be reduced in this case precisely because the plan

language intended the creation of an accrued right. Another

way to say this is that the plan, by giving payment to

survivors in the event of death, only provided a mechanism

for easy payment; it did not intend to deprive the survivors of

the right to receive payment nor leave open the possibility of

depriving them in the future.” Were the latter intended, the

drafters of the Plan, who had control of the plan language,

could have much more clearly and explicitly stated the result.

The fact that they did not do so tends to show an intent to

create an accrued benefit instead of an ancillary benefit.

Furthermore, this conclusion is buttressed by the

several arguments made by Plaintiff from the case law, the

Treasury Regulations and the knowledgeable authorities cited

by Plaintiff. Internal Revenue Service Notice 96-8 contains a

‘The end of Defendants' arguments are apparent:

namely, if a plan makes its distributions and there is a

resulting trust, the resulting trust is the presumptive property

of the settlor. See Borst v. Chevron Corp., 36 F.3d 1308, 1315 (5th

Cir.1994).

rere

A-21

methodology for calculating the cash benefit amounts of

participants under cash value plans. Under the recommended

methodology, no reduction is made for mortality risks prior to

retirement age. See I.R.S. Notice 96-8 at A-18 to A-19. This case

is not the unusual case which would require departure from

that methodology. Indeed, leading actuarial experts who have

testified before Congress have testified that when a valuation

of a cash balance plan of this kind is made, no mortality

adjustment until age 65 is to be made. (Testimony of Larry D.

Stahly and John F. Woyke, Plaintiff's Exhibits 11 and 12.)

Furthermore, under 26 U.S.C. § 1.411(a)-7, "accrued benefits"

include not only retirement benefits themselves, but also death

benefits which are "directly related" to the value of the

retirement benefits. In other words, those death benefits are

not "incidental" to the plan's "accrued benefits." The

interpretations of the Eleventh Circuit in Lyons ov.

Georgia-Pacific Corp., 221 F.2d 1235 (11th Cir.2000) and the

Second Circuit in Esden v. Bank of Boston, 229 F.3d 154 (2nd Cir.

2000) likewise assumed the correctness of Plaintiff's position

since those courts utilized Plaintiff's method of calculation and

not Defendants' method. Finally, the Southern District of

Illinois, Berger v. Xerox Retirement Income Guaranty Plan, 231

F.Supp. 2d 804 (S.D.III. 2002), recently decided a pension

benefit class action case which was prosecuted by Plaintiff's

attorneys on the same groundsas this suit. The Berger decision

upheld Plaintiff's method of calculation and required

restitution to all affected class members.

For these reasons, and those other reasons argued in

Plaintiff's Cross-Motion, summary judgment shall be granted

in favor of Plaintiff. For the same reasons, Defendants' Motion

to Dismiss shall be denied.

REMEDIES

Plaintiff's proposed remedies include an injunction to

forbid the future use of the offending calculation as to class

members, an injunction requiring re-computation of class

member benefits as to benefits already paid and payment of

A-22

the difference between the amount previously paid and the

recalculated amount plus pre-judgment interest, and a

constructive trust over plan assets (or those of Bowater if plan

assets are insufficient) sufficient to fund the restitution

payments. Plaintiff argues that this relief is consistent with the

Supreme Court's decision in Mertens v. Hewitt Assocs., 508 U.S.

248, 253 (1993) that relief under ERISA provision 502(a)(3) be

for the purpose of redressing a violation or enforcing a

provision of ERISA, that it is consistent with the Supreme

Court's decisions in Harris Trust & Savings Bank v. Salomon

Smith Barney, Inc., 530 U.S. 238, 250-51 (2000) and Great-West

Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), which

allowed imposition of a constructive trust over plan assets to

return property belonging to plan participants. Plaintiff also

requests that the restitution payments be made with interest

calculated between the date the lump sum payment was

initially due and the date restitution is paid at the higher of

either the federal post-judgment rate for that period or the rate

of return for the plan for the period. See Rybarczyk v. TRW, Inc.,

235 F.3d 975, 985 (6th Cir. 2001) (allowing such rate of interest

as to a miscalculated lump sum ERISA payment to avoid

unjust enrichment).

Defendants oppose this relief on several grounds.

Defendants argue that under ERISA, Plaintiff may seek

adequate legal relief (an award of damages under section

502(a)(1) of ERISA) and, as such, cannot obtain equitable relief

pursuant to section 502(a)(3) of ERISA. See also Wilkins v.

Baptist Healthcare System, Inc., 150 F.3d 609, 615 (6th Cir.1998).

Defendants also disagree that relief under section 502(a)(1) is

inadequate because the section allows a plan participant to sue

for benefits due under an ERISA plan. Defendants further

argue that the requested relief is not "equitable" in the sense

that Plaintiff has mis-characterized a claim for monetary relief

as an equitable remedy.

Defendants' concerns, though legitimate, do not defeat

the remedies sought in this case. In Great-West, 534 U.S. at 204,

n. 2, the United States Supreme Court recognized that in the

context of ERISA cases, and particularly under section 502(a),

a el

A-23

the district courts may enter appropriate equitable relief

including equitable restitution and a constructive trust

requiring the return of monies wrongfully retained. In Harris

Trust, 530 U.S. at 250-53, the Supreme Court commented on a

statement in Great-West that orders to pay money are "almost

invariable" monetary relief. The Supreme Court reviewed that

“comment” in Harris Trust when it stated that under Section

502(a)(3) an injunction t require return of monies wrongfully

transferred is appropriate equitable relief. Id. Plaintiff's

position is also supported by the Supreme Court's decision in

Mertens v. Hewitt Assocs., 508 US. 248 (1993). Plaintiff's

position is also strongly supported by the recent unpublished

decision in Berger, which treated equitable restitution of

monies withheld because of a mortality discount as a proper

equitable remedy under ERISA.

Not only do case authorities support Plaintiff's

position, but Plaintiff's position is commended by the pure

dint of logic, the nature of the ERISA claim and the nature of

the remedial processes. Plaintiff is not seeking here a monetary

award of a sum certain. Such issues as to whether his years of

service or earnings have been properly credited are not before

the Court. Rather, Plaintiff is seeking the more limited, but

more effective, remedy of an order requiring recalculation

consistent with ERISA non-forfeiture regulations (and future

correct calculation). This remedy will make Plaintiff whole, as

well as other class members, without resort to time-consuming

legal remedies, which would require separate and prolonged

jury considerations of the amounts due each claimant--which

are mostly likely not disputed anyway and which are subject

to certain mathematical calculations to be performed by the

Plan consistent with the Court's instructions.

Additionally, in cases like this, the Sixth Circuit has

directed that equitable relief include an award of

pre-judgment interest (i.e., interest on unpaid benefits between

the date of benefit payment and the date of judgment) at the

greater rate of either federal post-judgment rate (under 28

U.S.C. § 1961) or the rate of return earned by the Plan on the

unpaid benefits of affected workers. Rybarczyk v. TRW, Inc.,

A-24

235 F.3d 975, 985 (6th Cir.2000). This is done to make class

members whose claims were previously paid whole and to

deprive Defendants of the benefit of the wrongful conduct. Id.

Although Defendants concur that the district court has

authority to order pre-judgment interest in an ERISA benefit

case in which benefits were wrongly withheld, they also imply

that the Court should not use its discretion in this case. This

argument is rejected because this Court, like the Sixth Circuit

panel in Rybarczyk, believes that pre-judgment interest is

necessary to fully compensate past-retirees and to avoid the

Plan from taking untoward advantage of the use of those

retirees' funds between the time of their retirement and the

Judgment in this suit.

As to the calculation of pre-judgment benefits,

Defendants have not commented on pre-judgment interest as

to class members, but have commented that an award of

pre-judgment interest to Crosby should be limited to the

federal funds rate at the time of the entry of judgment because

a higher rate would give him a windfall. (See Defendants'

Sur-Reply Brief at 6-7.) Plaintiff then contends that applying

the federal post-judgment rate to a pre-judgment award would

be unfair to class members because the federal

post-judgment/current 52- week Treasury bill rate is

historically low and would under-compensate past retirees for

the losses during periods of their retirement at which interest

rates were much higher. Plaintiff's last argument ignores two

facts. First, the pre-judgment rate utilized in Rybarczyk was the

higher rate of either the current post-judgment rate or the

Plan's rate of return for the affected period. Second, the Court

will order that this calculation be done individually as to

i affected retirees for the time periods pertinent to their own

individual retirements. In other words, a retiree who has lost

the use of a portion of his or her lump retirement because of

the faulty calculation is entitled to receive pre-judgment

interest for the affected time period (the time between the

payment of the incorrect benefit amount and the date of

judgment) at the greater of the post-judgment interest rate at

the time of judgment or the Plan's rate of return for the

—— —

A-25

particular time period pertinent to the retired worker. Thou gh

this calculation is somewhat administratively complex, it is

clearly workable given the availability of mathematical

software and the ready financial data needed to make the

calculations. Thus, the Court will require that these

calculations be made individually as to all affected class

members, including Plaintiff Crosby. The Court will also

require Defendants to share the financial data supporting its

calculations with Plaintiff, so that Plaintiff can verify the

accuracy of the calculations.®

With this said, though, Plaintiff has not made a

sufficient case for the receipt of any equitable relief other than

an injunction requiring recomputation and proper payment of

benefits with pre-judgment interest as to benefits already paid.

Such monies held by the Plan are already held in trust for Plan

participants. While the monies held by Bowater, Inc. are not

held in trust for plan participants, there is no sufficient basis

to conclude, on the present record, that existing plan funds are

inadequate to fund payments without additional contributions

from the plan sponsor. Thus, while the Court accepts Plaintiff's

premise that the plan sponsor is required legally to adequately

fund a plan and should at times deposit additional funds in a

plan to guarantee sufficient payment, there is simply an

inadequate evidentiary record at this point in time to warrant

the imposition of a constructive trust as to Defendant Bowater,

Inc.'s assets. While so holding, Defendant Bowater, Inc. should

be advised that the sword of justice is now unsheathed. If, in

the future, it is apparent that the Plan is short of funds to pay

the required benefits, this Court is prepared to entertain and

grant a post-judgment motion requiring additional

‘Should Plaintiff have significant questions about the

calculations upon review of the data, the Plaintiff would be

free to request post-judgment discovery on this issue, or other

appropriate remedies. Of course, post-judgment interest will

also be required in accordance with 28 U.S.C. § 1961.

A-26

contributions by Defendant Bowater, Inc. for the purpose of

adequately funding the Plan.

CONCLUSION

For the reasons given, a Final Judgment and Injunction

shall enter granting Plaintiff's Motion for Class Certification,

granting Plaintiff's Cross-Motion for Summary Judgment,

denying Defendants' Motion to Dismiss, and granting in part

and denying in part Plaintiff's requested equitable remedies.

As a result, Defendants will be enjoined to utilize the correct

methodology in claim calculation in the future as well as to

recalculate lump sum claims paid in the past and to repay

underpaid benefits with pre-judgment interest as individually

calculated for past retirees whose lump sum benefits were

incorrectly calculated.

/s/ Richard Alan Enslen

DATED in Kalamazoo, MI: RICHARD ALAN ENSLEN

November 26, 2002 UNITED STATES DISTRICT

JUDGE

TRUE COPY

SIGNED ORIGINAL FILED

ELECTRONICALLY

Ronald D. Weston, Sr.., Clerk

A-27

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

FRANK J. CROSBY,

individually and on behalf of

all others similarly. situated,

Case No. 1:01-CV-683

Plaintiff,

v. HON. ..ICHARD ALAN ENSLEN

BOWATER INCORPORATED

RETIREMENT PLAN FOR

SALARIED EMPLOYEES OF

GREAT NORTHERN PAPER, INC., and

BOWATER INCORPORATED,

Defendants. FINAL JUDGMENT

/ AND INJUNCTION

In accordance with the Opinion of this date;

IT IS HEREBY ORDERED that Plaintiff Frank J.

Crosby’s Motion for Class Certification (Dkt. No. 34) is

GRANTED and the Court certifies the following class:

All participants or beneficiaries of participants who

received a lump sum distribution from the Plan (either

directly or indirectly via transfer to an individual

retirement account or other eligible retirement plan), or

who are entitled to receive a lump sum distribution

now or in the future (either direct or indirectly via

transfer to an individual retirement account or other

eligible retirement plan).

IT IS FURTHER ORDERED that Defendant Bowater

Incorporated Retirement Plan for Salaried Em ployees of Great

Northern Paper, Inc. and Defendant Bowater Incorporated’s

A-28

Motion to Dismiss (Dkt. No. 6) is DENIED.

IT IS FURTHER ORDERED that Plaintiff's Cross-

Motion for Summary Judgment (Dkt. No. 17) is GRANTED

and Judgment is entered in favor of Plaintiff and the Plaintiff

Class, and against Defendants.

IT iS FURTHER ORDERED that Defendants Bowater

Incorporated Retirement Plan for Salaried Employees of Great

Northern Paper, Inc. and Bowater Incorporated, and their

agents, employees and officers, are hereby enjoined to

recalculate the lump sum benefits of class members who have

previously received lump sum benefits, in accordance with the

Court's Opinion, and to immediately refund under-payments,

plus pre-judgment and post-judgment interest, as more

particularly described in the Court’s Opinion.

IT IS FURTHER ORDERED that Detendants shall

provide financial data and records justifying their pre-

judgment interest calculations to Plaintiff within 14 days of the

payment of any under-payment.

IT IS FURTHER ORDERED that Defendants Bowater

Incorporated Retirement Plan for Salaried Employees of Great

Northern Paper, Inc. and Bowater Incorporated, and their

agents, employees and officers, are hereby enjoined to

calculate lump sum payments for class members who have not

yet received any lump sum benefits in accordance with the

Court’s Opinion.

/s/ Richard Alan Enslen

DATED in Kalamazoo, MI: RICHARD ALAN ENSLEN

November 26, 2002 UNITED STATES DISTRICT

JUDGE

TRUE COPY

SIGNED ORIGINAL FILED

ELECTRONICALLY

Ronald D. Weston, Sr.., Clerk

A-29

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

FRANK J. CROSBY,

individually and on behalf of

all others similarly situated,

Case No. 1:01-CV-683

Plaintiff,

HON.RICHARD ALAN ENSLEN

BOW ATER INCORPORATED

RETIREMENT PLAN FOR

SALARIED EMPLOYEES OF

GREAT NORTHERN PAPER, INC.,

AND BOWATER INCORPORATED,

Defendants. OPINION

/

This matter is before the Court on Plaintiff Frank J.

Crosby's Motion for Costs and Attorney Fees. Defendants

Bowater IncorporatedRetirement Plan for Salaried Em ployees

of Great Northern Pager, Inc. and Bowater Incorporated have

opposed the Motio1. The Motion has been fully and

extensively briefed ani the Court finds that further briefing or

argument is unnecesary to resolve the Motion. For the

reasons which follow,the Motion will be granted in part and

denied in part.

BACKGROUND

This action wis brought pursuant to the Employee

Retirement Income Se:urity Act of 1974, 29 U.S.C. § 1001 et seq.

A-30

("ERISA"). On November 26, 2002, after very extensive legal

briefing by the parties, this Court granted class certification,

granted summary judgment in favor of Plaintiff, and awarded

the Plaintiff class most of the equitable relief requested by

Plaintiff's attorneys. On December 10, 2002, Plaintiff filed an

Unopposed Motion for Enlargement of Time to File Motions

for Costs and Attorney Fees. The Motion for Enlargement was

later granted and Plaintiff then submitted its timely Motion for

Costs and Attorney Fees for filing on January 7, 2003

consistent with the enlargement granted.’

Plaintiff's Motion for Costs and Attorney Fees seeks

$270,640.00 of attorney fees through January 6, 2003, costs in

the amount of $4,973.12 through January 6, 2003, and an

unspecified amount of attorney fees and costs incurred after

January 6, 2003. The attorney fees sought are based on the

following lodestar calculations: $3,465.00 for Bradley J.Schram

(7.70 hours times $450/ hour); $29,707.50 for Robert P. Geller

(69.90 hours times $425/hour); $5,925.00 for Bradford Yaker

(15.80 hours times $375/hour); and $231,542.50 for Eva

Cantarella (661.55 hours times $350/ hour).

Plaintiff has documented his costs and attorney

services through thorough attorney billing records (Plaintiff's

Ex. 56) and affidavits for each of the attorneys (Plaintiff's Exs.

52-55.) The affidavits also detail the legal experience of each of

the billing attorneys.

Attorney Bradley Schram is a graduate of Georgetown

Law School and a former Assistant Prosecuting Attorney for

Wayne County. (Plaintiff's Ex. 52.) He founded the law firm of

Hertz and Schram (now Hertz, Schram & Saretsky, P.C.) in

1979. (Id.) His legal experience includes lecturing at both

‘OnJanuary ' 2003, the Motion for Costs and Attorney

Fees was submitte for filing together with an Unopposed

Motion to File Excess Pages--in order to comply with Local

Civil Rule 7. The lengthy brief was approved by Order of

January 13, 2003 and the Motion for Costs and Attorney Fees

was then entered on the docket on January 13, 2003.

eS MT Orme

A-31

University of Detroit School of Law and Wayne State

University Law School on professional responsibility in

litigation. (Id.) It also includes work on some eight federal

ERISA class actions and numerous other security class actions.

(Id.) His legal work in this case, according to the billing

records, consists mostly of conferences with Eva Cantarella

and Robert Geller concerning case strategy, and revisions of

key 7ocuments, such as the Complaint. (See Plaintiff's Ex. 56.)

Robert Geller is a graduate of the Boston University

School of Law and a former attorney for the United States

Agency for International Development (where he worked in

Mogadishu, Somalia negotiating “government contracts).

(Plaintiff's Ex. 53.) He returned to private practice in 1986. (Id.)

He has at least eight years of experience in litigating ERISA

class actions and has litigated or supervised eight federal

ERISA class actions filed by his firm. (Id.) He also has

significant experience in many other securities class actions

and non-ERISA class actions filed throughout the country and

is a member in gooc’ standing of the bar of the United States

Supreme Court. (Id.) It appears from the firm billing records

that his work in this case has consisted mostly of consulting

with firm members about strategic litigation decisions and

reviewing key documents, such as the Complaint. (Id.)

Bradford Yaker is a 1988 graduate of Wayne State

University Law School and a partner of Hertz, Schram &

Saretsky, P.C. (Plaintiff's Ex. 54.) Prior to joining the firm, he

was a partner of the Chicago law firm of Keck, Mahin and

Cate. (Id.) He has seven years experience litigating ERISA class

actions and has prosecuted eight federal ERISA class actions

in that time. (Id.) He also has extensive experience prosecuting

other class actions involving securities, accounting

malpractice, and consumer protection issues. (Id.) According

to his Affidavit and the billing records, his involvement in this

case has consisted of researching class certification issues and

preparing pleadings in support of class certification. (Plaintiff's

Ex. 54 & 56.)

Eva Cantarella is a 1994 graduate of Wayne State

University Law School and a former member of the Wayne

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State Law Review. (Plaintiff's Ex. 55.) Prior to law school, she

owned and operated an appraisal services company which

performed income property appraisals for financial

institutions. (Id.) In 1994 and 1995, she worked for the firm of

Pepper Hamilton & Sheetz in the practice of litigation. (Id.) In

1995, she began work as a litigation associate for Hertz,

Schram & Saretsky, P.C. and, in that capacity, has worked on

seven federal ERISA class actions. (Id.) She is a member in

good standing of the bars of the Sixth Circuit Court of Appeals

and the United States Supreme Court, and is a frequent

lecturer on ERISA and employee benefits law. (Id.) The law

firm billing records detail that she has done the lion's share of

the litigation work in this matter, includimg conducting client

contacts, reviewing evidence, researching legal issues, drafting

legal documents including the Complaint, numerous motions,

briefs, and proposed orders, and conferriing with co-counsel

regarding strategic litigation decisions. (Plaintiff's Ex. 56.)

‘Costs sought by Plaintiff includes court fees, charges

for Westlaw and other electronic searches, delivery charges,

mileage, parking fees and other miscellaneous small

disbursements as detailed on the final page of the law firm

billing records. (Plaintiff's Ex. 56.) These costs total $4,973.12.

(Id.) The greatest percentage of these costs are for copying

($3,074.80). (Id.)

Defendants have opposed the award of any attorney

fees under ERISA given their analysis of tthe factors pertinent

to such an award. They have also opposed the attorney fee

rates charged by each of Plaintiff's attorneys as excessive. They

have also opposed much of the attorney services billed by

*The need for such copying is obvious from the docket,

given the lengthy briefings and other papers submitted in this

case and presumably copied to many persons involved in the

case.

ee

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Plaintiff's attorneys as unnecessary and/or excessive’ and in

one case, a dual billing for the same 1.25 hours on December

21, 2002, as an outright mistake. They have also opposed the

costs as excessive and maintain that some of the items of

disbursements (and particularly legal research charges) should

not be allowed since they are considered as part of attorney

overhead and not a recoverable cost. Plaintiff contests each of

the arguments made by Defendants (with the exception of the

double billing of 1.25 hours on December 21, 2002, which is

conceded to be a billing mistake).

The parties' briefing also focuses attention on past

statements made by the attorneys. During a motion hea ring on

March 12, 2002, Magistrate Judge Ellen S. Carmody asked, "If

plaintiff were to prevail, | assume he would be entitled to

attorneys fees under ERISA?" Defense counsel Thomas

Piskorski responded: "Yes. There is a fee-shifting provision in

ERISA, your honor, that is correct." Plaintiff regards this an

admission that attorney fees should be awarded if Plaintiff

prevailed. Defendants regard the statements only as an

admission that the ERISA statute allows attorney fees in some

cases, but not an admission that an award is proper in this

case.

Defendants also argue that Plaintiff has "basically

conceded" that Defendants’ legal position in this case was

taken in good faith. (Brief in Opposition, at 5.) This argument

is based on statements on pages “ve through seven of

Plaintiff's Memorandum of Law. As p-inted out by Plaintiff,

though, this is a curious argument since the statements made

on those pages argue that Defendants were culpable for

ignoring expert actuarial opinions.

‘Defendants' objections to particular hours are stated

both in their Brief in Opposition, at pages 15-19, and in

attached Charts/Exs. 4-9.

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LEGAL ANALYSIS

A. Legal Standards

Section 502 of ERISA, 29 U.S.C. § 1132, provides that

"[i]Jn any action under this subchapter (other than an action

described in paragraph (2)) by a participant, beneficiary, or

fiduciary, the court in its discretion may allow a reasonable

attorney's fee and costs of action to either party." 29 U.S.C. §

1132(g)(1). This language has been interpreted by the Sixth

Circuit as granting "substantial discretion" to the district court

to grant or deny a request for attorney fees in an ERISA action.

Jordan v. Michigan Conf. of Teamsters Welfare Fund, 207 F.3d 854,

860 (6th Cir. 2000); see Schwartz v. Gregori M.D., 160 F.3d 1116,

1119 (6th Cir.1998). Before exercising this discretion under a

fee-shifting statute, the district court is required to examine

five factors: ="

z The degree of the opposing party's culpability

or bad faith;

2. The opposing party's ability to satisfy an award

of attorney fees;

3. The deterrent effect of an award on other

persons under similar circumstances;

4. Whether the party requesting fees sought to

confer a common benefit on all participants

and beneficiaries of an ERISA plan or to resolve

a significant legal question regarding ERISA;

and

5. The relative merits of the parties' positions.

Schwartz, 160 F.3d at 1119 (quoting Sec. of Dept. of Labor v. King,

775 F.2d 666, 669 (6th Cir.1985)). The King factors are a useful

tool in analyzing fee requests, but should be used flexibly by

the district courts; no single factor is necessary or dispositive.

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Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550, 558 (6th

Cir.1987).

If an analysis of the King factors dictates an award of

attorney fees, then attorney fees are calculated using the

"lodestar" method of calculation, i.e., determining a reasonable

fee based on a reasonable hourly rate and a reasonable *810

number of hours of service. The lodestar method was aptly

explained by the United States Supreme Court in Hensley v.

Eckerhart, 461 U.S. 424 (1983):

The most useful starting point for determining

the amount of a reasonable fee is the number of

hours reasonably expended on the litigation

multiplied by a reasonable hourly rate. This

calculation provides an objective basis on

which to make an initial estimate of the value

of a lawyer's services. The party seeking an

award of fees should submit evidence

Supporting the hours worked and rates

claimed. Where the documentation of hours is

inadequate, the district court may reduce the

award accordingly.

The district court also should exclude from this

initial fee calculation hours that were not

"reasonably expended." S.Rep. No. 94-1011, p.

6 (1976). Cases may be overstaffed, and the

skill and experience of lawyers vary widely.

Counsel for the prevailing party should make

a good faith effort to exclude from a fee request

hours that are excessive, redundant, or

otherwise unnecessary, just as a lawyer in

private practice ethically is obligated to exclude

such hours from his fee submission. "In the

private sector, ‘billing judgment' is an

important component in fee setting. It is no less

important here. Hours that are not properly

billed to one's client also are not properly billed

A-36

to one's adversary pursuant to statutory

authority." Copeland v. Marshall, 205 U.S.App.

D.C. 390, 401, 641 F.2d 880, 891 (1980) (en banc)

(emphasis in original).

Hensley, 461 U.S. at 433-34.

Reasonable hourly rates under Hensley mean the

customary local attorney fee rates for attorneys of comparable

experience and expertise with one notable exception. See Hadix

v. Johnson, 65 F.3d 532, 536 (6th Cir. 1995). The notable

exception is that certain cases, by their content and character,

require the employment of “out-of-town specialists" to

perform services not regularly performed by local attorneys.

Id. Regarding such specialists, the Sixth Circuit has said:

When fees are sought for an out-of-town specialist,

courts must determine (1) whether hiring the

out-of-town specialist was reasonable in the first

instance, and (2) whether the rates sought by the

out-of-town specialist are reasonable for an attorney of

his or her degree of skill, experience, and reputation.

Chrapliwy v. Uniroyal, Inc., 670 F.2d 760, 768-69 (7th Cir.

1982); Maceira v. Pagan, 698 F.2d 38, 40 (1st Cir. 1983).

A corollary of this rule is that judges may question the

reasonableness of an out-of-town attorney's billing rate

if there is reason to believe that competent counsel was

readily available locally at a lower charge or rate.

Chrapliwy, 670 F.2d at 769.

Id. at 535.

Adjudication of the lodestar fee does not end the fee

analysis mandated by the Supreme Court. While there is a

“strong presumption" that the lodestar represents a reasonable

fee, pertinent circumstances may warrant an adjustment of the

fee either upward or downward. Bldg. Serv. Local 47 Cleaning

Contractors Pension Plan v. Grandview Raceway, 46 F.3d 1392,

1401-02 (6th Cir. 1995). A list of many of the factors pertinent

to setting the lodestar fee and adjusting the fee was specified

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long ago by the Fifth Circuit in Johnson v. Georgia Highway

Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974). The Johnson

factors have now become part of the settled law of lodestar

analysis under both Supreme Court and Sixth Circuit

decisions. These factors include: ——.

(1) the time and labor required; (2) the novelty and

difficulty of the questions; (3) the skill requisite to

perform the legal service properly; (4) the preclusion of

other employment by the attorney due to acceptance of

the case; (5) the customary fee; (6) whether the fee is

fixed or contingent; (7) time limitations imposed by the

client or the circumstances; (8) the amount involved

and the results obtained; (9) the experience, reputation,

and ability of the attorneys; (10) the "undesirability" of

the case; (11) the nature and length of the professional

relationship with the client; and (12) awards in similar

cases.

Blanchard v. Bergeron, 489 U.S. 87,91 n. 5 (1989) (citing Johnson);

see also Paschal v. Flagstar Bank, 297 F.3d 431, 434-35 (6th Cir.

2002). Like the King factors, the Johnson factors are a "useful

catalog" to consider when exercising statutory discretion.

Paschal, 297 F.3d at 435. They are not die-hard requirements

to be met. ne

Of course, as the Supreme Court has stated not once,

but repeatedly, the resolution of a motion for attorney fees

under a fee-shifting statute should not become a "second major

litigation" itself. Buckhannon Bd. and Care Home, Inc. v. West

Virginia Dep't of Health & Human Res., 532 U.S. 598, 609 (2001)

(quoting Hensley, 461 U.S. at 437 and Texas State Teachers Ass'n

v. Garland Indep. Sch. Dist., 489 U.S. 782, 791 (1988)). For this

reason, the Sixth Circuit has determined that the district court

should have substantial discretion in determining whether to

conduct an evidentiary hearing on attorney fee motions. Bldg.

Serv. Local 47, 46 F.3d at 1402. Consistent with this discretion,

the Sixth Circuit only requires an evidentiary hearing on an

attorney fee dispute when an evidentiary hearing is timely—___

A-38

requested and when the district court is unable to resolve

material factual disputes based on the affidavits and written

documentation submitted. Id. (citing authorities). In this case,

an evidentiary hearing has not been requested. Moreover,

even had it been requested, it would have been denied because

the disputes between the parties can be readily resolved based

on the written materials submitted.

B. Entitlement to Fees and Costs

As explained above, the Court must assess uncer the

King factors, and other pertinent information, whether to

award attorney fees and costs. Plaintiff's argument that the

Defendants should be deemed to have admitted the

entitlement misses the mark. The question by Magistrate Judge

Carmody was designed to elicit whether there was a

fee-shifting statute, not an entitlement to fees. Thus, the Court

reads the answer, consistent with Defendants’ explanation, as

only a confirmation of the pertinency of the statute. Likewise,

Defendants' argument that Plaintiff's brief "basically concedes"

the "good faith" nature of the defense is mistaken. The whole

of Plaintiff's statements, when read in context, dispute the

reasonableness of Defendants’ positions in this case.

In terms of the King factors, the Court first finds that

Defendants exercised a sufficiently high degree of fault so as

to be judged "culpable." This finding is based on the fact that

Defendants' position contradicts most, if not all, learned

actuaries (including Defendants’ own actuary, Hewitt

Associates) who have studied this issue and counseled against

the use of a pre-mortality decrement in this context. From this

standpoint, Defendants' position was more than slightly

unreasonable. This is true despite that there was no binding

precedent in the Sixth Circuit. The absence of precedent,

though a brute fact, will not excuse the taking of positions

which on their face are unreasonable and can be defended

only by a sophist's resort to linguistic sleight-of-hand.

A-39

Furthermore, as argued by Plaintiff, Defendants took

other positions in this suit, especially on class certification,

which were not even remotely reasonable. Defendants

originally contended‘ that Plaintiff did not meet the

numerosity requirement for the class because it was not

sufficiently shown that more than a small number of class

members would elect to receive pension benefits in a lump

sum. At the time, such a contention was known or should

have been known to be false simply because empirical studies

of pension plan participants have shown (as one would

expect) that they usually take their benefits in a lump sum.

Since the resolution of the class certification issue, Defendants

in answering discovery requests have admitted that 463 out of

473 known pensioners have taken their benefits in a lump sum

as opposed to an annuity. Thus, in the Court's judgment,

Plaintiff has shown sufficient culpability on behalf of

Defendants. both as to the positions taken in advance of

litigation and in litigation.

As for the second King factor, Defendants have

expressly admitted that they have funds sufficient to pay

attorney fees. Therefore, the Court finds consistent with this

concession.

As for the third King factor, the deterrent effect of an

attorney fee award warrants an award of attorney fees.

Without this deterrent effect, plan trustees might opt to use the

improper discount in hopes of not being caught (especially

since this is a highly technical matter which is not apparent to

pensioners, with the exception of actuaries experienced in

pension administration). The award also is important for the

purpose of fairly compensating the class. Without the award,

the class members' legitimate expectations of complete

pension benefits (without the improper decrement) would be

‘Defendants abandoned this contention after being

confronted with their own statement to the Internal Revenue

Service and the Department of Labor that they assumed that

all participants would take benefits in the form of a lump sum.

A-40

unnecessarily frustrated by the payment of the attorney fees

themselves.

As for the fourth King factor, since this is a class action

affecting nearly all pensioners of the Defendant pension fund

and the Plaintiff has sought and secured a common benefit for

those pensioners, it is very apparent that this case was

pursued to secure a common benefit for a large number of

class members. It is also apparent since Defendants have

attempted to justify their conduct based on a lack of binding

case precedent that the resolution of this question is important

both for the pensioners affected and the pensioners of any

other plans following similar practices. Therefore, the Court

determines that both the common benefits sought and the

significance of the legal question favor an award of attorney

fees.

As for the fifth King factor, in terms of the relative

merits of the parties' position, as reflected in the Court's

Opinion of November 26, 2002, this factor clearly favors

Plaintiff. Additionally, the Court notes that since its ruling, the

Treasury Department has also proposed regulations which

will direct the computation of pension compensation for cash

balance plans without the offending decrement. See Proposed

Rules, Department of Treasury, Reductions of Accruals and

Allocations because of the Attainment of any Age; Application

of Nondiscrimination Cross-Testing Rules to Cash Balance

Plans, 67 Fed.Reg. 76123, 76133 ex. 5 (Dec. 11, 2002). ©

Accordingly, the Court determines that all King factors

favor the award of attorney fees. As such, attorney fees will be

awarded to Plaintiff's counsel.

C. Calculation of Lodestar Amount

1. Reasonable Attorney Rates

Defendants first argue in their briefing that Plaintiff

has failed to justify the rates sought, citing to this Court's

earlier decisions in Holford v. Exhibit Design Consultants, 218

F.Supp.2d 901, 910 (W.D.Mich.2002) and Swans v. City of

A-41

Lansing, 65 F.Supp.2d 625, 647 (W.D.Mich. 1998). Both of those

decisions significantly reduced attorney fee rates and fees

based on the Sixth Circuit's holding in Hadix, 65 F.3d at 535,

described above.

As argued by Plaintiff, this comparison ignores the

pertinent facts of both this case and the cited cases. Holford was

a very simple ERISA claim (failure to provide a mandated

notice) which could have been easily prosecuted by cheaper

local counsel. Swans was a civil rights brutality case typical of

many other cases filed by local attorneys. In neither of those

cases was there any need to employ either high priced local

counsel or an out-of-town specialist to perform the duties of

the plaintiff counsel. |

In this case, in contrast, the suit involves a highly

technical ERISA claim based on the nature of actuarial

assumptions made in computing pension benefits. Defendants

themselves employed out-of-town specialists (the Chicago law

firm of Seyfarth Shaw) to defend the action. While there are a

small number of attorneys in the Western District of Michigan

with some expertise in this area, in the Court's experience,

these attorneys all work on behalf of employers and pension

plans.* None of these attorneys, in the Court's experience, has

any experience or expertise in prosecuting actions on behalf of

plaintiffs and none has any experience in prosecuting class

actions. Therefore, appointment of "out-of-town specialists" -

was necessary in this case because local attorneys were not

available to provide the necessary services. The type of

speciality services needed in this case are provided only by a

small number of specialty law firms which, almost exclusively,

are located in large metropolitan areas. Plaintiff's attorneys are

an example of such a firm. %

‘l was appointed to the bench in 1979. Before that, I

began my legal practice in Western Michigan in 1958 and am

well familiar with the firms and attorneys practicing in

Western Michigan by virtue of long experience.

A-42

Defendants have also argued that Plaintiff's counsel

should be limited to the rate of $220 per hour. Defendants :

justify this rate based on related arguments. One of these

arguments is that Plaintiff's attorneys' billing rates for hourly

clients are in fact lower than the rates requested. Another

related argument is that the $220/hour rate was determined

as the appropriate rate by the Northern District of Illinois as to

the same attorneys in the ERISA case of White v. Employee Ret.

Plan of Amoco Corp., 2001 WL 1204193 (N.D.III. Oct. 10, 2001).

Plaintiff's attorneys do not disagree that their hourly

rates for corporate clients are lower. However, they argue that

those rates (whatever they are) are irrelevant because the

services provided are of an essentially different character, i.e.,

those services involve simple advice on individual corporate

decisions, they do not involve the issues at interest in this suit,

and they do not involve the prosecution of plaintiff class

claims. The Court finds this reasoning persuasive and will not

limit Plaintiff's billing rate by use of an artificially lower rate

which is not pertinent to the services at issue.

As for the rate chosen in White, Plaintiff's attorneys

characterize this rate as of minimal importance because White

was decided on acommon fund theory of recovery as opposed

to a lodestar analysis. Moreover, Plaintiff's attorneys also

argue that the use of the White rate would be greatly unfair

given the substantial inflation of attorney costs/fees which

have occurred between the time services were rendered in

White and the time services are to be rendered in this case. The

Court concurs with both of these arguments and, therefore,

will not artificially limit Plaintiff's attorney fees to the rates

awarded in White.

As for the Johnson factors, the Court will address each

of the Johnson factors through separate findings.

First, substantial time and attorney services were

necessary to prosecute this case. As with all class actions, this

case involved substantial effort in identifying class members

and following the procedures under Rule 23 for the

certification of the class. As with all complicated cases driven

by actuarial issues, this case involved complex and technically

A-43

skilled work in addressing the actuarial issue. As with all

major ERISA litigation, this case involved detailed argument

about the pertinent statutory authority for the relief sought.

For all of these reasons, the Court finds generally that the time

and labor expended by Plaintiff's attorneys were wholly

necessary.

Second, for the reasons explained above, this case is

best described as a highly difficult and novel case.

Third, for the reasons given above, this case

necessitated an extremely high-level of attorney skill (i.e.,

within the top five percent of the national bar), which services

were ably provided by Plaintiff's counsel.

Fourth, consistent with the statements of Plaintiff's

counsel, the appearance of Plaintiff's counsel in this case

precluded Plaintiff's counsel from engaging in other lucrative

work.

Fifth, the customary fees for such work are best

represented by the hourly rates for high-quality,

major-metropolitan defense firms who regularly defend these

kinds of cases (simply because the relevant plaintiff firms

work on a contingency basis and not on an hourly-fee basis).

The rate for eight-year associates of those firms (i.e., persons

with "comparable experience" to attorney Cantarella) are

between $300 to $400 per hour. Therefore, the Court will select

the rate of $300/hour as the appropriate rate for attorney

Cantarella. The rate for partners of those firms are between

$300 to $600 per hour depending on the firm, the experience

and the services rendered. Therefore, the Court selects the

rates of $325/hour for attorney Yaker, $375/hour for attorney

Geller, and $400/hour for attorney Schram as appropriate

rates for their experience and expertise. While these rates are

less than those requested by Plaintiff, they are adequate to

fairly compensate Plaintiff's counsel.

Sixth, Plaintiff's took this case ona contingent fee basis.

Therefore, the contingency serves to justify the high fees

discussed above.

Seventh, this case did not involve unusual time

limitations.

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Eighth, this case involves an estimated $2.7 million

dollars, according to Defendants' last estimate. Therefore, the

amounts at stake are sufficient to justify excellent

representation at the rates described above.

Ninth, Plaintiff's attorneys have excellent experience,

reputations and abilities, as proven not only by their work in

this case, but in many other federal class actions. Therefore,

this factor supports the rates discussed above.

Tenth, while this case was desirable from the aspect

that the legal claims were likely to succeed, the lack of a

controlling precedent made the case more difficult for Plaintiff.

Therefore, the Court considers this a mixed factor which does

not greatly impact on the fee analysis.

Eleventh, Plaintiff and Plaintiff's counsel had no

relationship prior to this suit. Their relationship is confined to

representation in this suit. This factor does not significantly

affect the analysis of either fees or rates.

Twelfth, awards in similar cases support the rates

described above. Plaintiff has composed a chart of similar

cases in which high rates were awarded (Chart B). The chart

supports the rates described above, notwithstanding the fact

that Plaintiff's attorneys themselves have not always been

awarded such high rates (as in the White case). The other

"comparable" cases cited by Defendants are not comparable

and do not bear on the appropriate rates for this case.

Therefore, for the reasons given, the Court will award

rates of $300/hour for attorney Cantarella, $325/hour for

attorney Yaker, $375/hour for attorney Geller, and $400/ hour

for attorney Schram.

2. Reasonable Hours of Service

As stated above, the Court generally agrees that the

total amount of attorney hours claimed was reasonably

necessary given the legal tasks incumbent upon class counsel

and given the serious opposition made by defense counsel.

. With this said, however, the Court will also address the

particular objections made by Defendants to hours of service

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by Plaintiff's counsel.

It is conceded by Plaintiff's counsel that Plaintiff's

counsel erroneously twice billed 1.25 hours for memorandum

preparation by attorney Cantarella on December 21, 2002.

Therefore, the second 1.25 hours will be stricken as mistaken.

Defendants have challenged the total hours billed as

excessive on the ground that the legal issues in this case

largely overlapped with those in another of Plaintiff's cases

(Lyons v. Georgia-Pacific Corp., 196 F.Supp.2d 1260

(N.D.Ga.2002) (unpublished)). In fact, Defendants have

attached copies of underscored briefing for the purpose of

showing that briefing done in this case was, in some instances,

"recycled" from Lyons. Of course, this Court is not interested in

the exact process used to create briefing, whether it be

recycling or creation ab initio et ex nihilo. The Court is

interested, however, in carefully regarding the billing of hours

on briefing to determine whether the hours billed were

excessive in light of the services provided. In assessing this,

the Court does take into account that the repetition of briefing

previously completed is not an arduous task. While this is

plain, it is also plain that the facts of each and every ERISA

case involving distinct plans are distinct. Therefore, even when

briefing can be recycled, its recycling still involves significant

numbers of attorney hours to tailor it and to ensure that the

recycled briefing is factually accurate and legally pertinent to

the circumstances of the present law suit. For those reasons,

the Court finds that the hours billed by Plaintiff's attorneys for

completing briefing in this matter were not overstated.

In making the above finding, the Court also finds that

the briefing was of a very high quality and greatly assisted in

the resolution of the case. For the same reasons, the Court

finds that the hours spent on the various briefs submitted were

not overstated. These findings are consistent with the

directions of the Sixth Circuit and Second Circuit in the cases

of Wooldridge v. Marlene Indus. Corp., 898 F.2d 1169,1177 (6th

Cir. 1990) and Grant v. Martinez, 973 F.2d 96, 99 (2nd Cir.1992).

Those cases make clear that in assessing attorney fees, the

district court should assess whether the hours of service were

A-46

deemed necessary at the time they were performed. The

district court should not engage in an "ex post facto

determination of whether attorney hours were necessary to the

relief obtained." Grant, 973 F.2d at 99 (citing Wooldridge )."The

relevant issue ... is not whether hindsight vindicates an

attorney's time expenditures, but whether, at the time the

work was performed, a reasonable attorney would have

engaged in similar time expenditures." Id. Defendants'

criticisms suffer inappropriate ex post facto thinking. The

many hours expended in briefing were necessary because a

reasonable attorney would have engaged in similar time

expenditures at the time.

Defendants have also objected to the number of hours

billed in seeking attorney fees. Plaintiff has billed as much as

108.30 hours in the process of seeking attorney fees and costs.

(See Plaintiff's Reply, at 23 n. 8; Defendants' Ex. 9, Chart F.)

This is very large considering that Plaintiff only billed 636.1

hours in obtaining the relief ordered. The Sixth Circuit in

Coulter v. Tennessee, 805 F.2d 146, 151 (6th Cir. 1986)

announced a general rule that attorney fee hours in seeking

attorney fees in lodestar cases are allowed, but only up to 3

percent of the total hours billed in obtaining relief. To the

contrary, Plaintiff argues that this rule should be limited to

civil rights cases, such as Coulter, and not be applied outside

that context. This interpretation of Coulter is unduly limiting

because the rationale in Coulter applies equally to attorney fee

petitions filed under statutes other than 42 U.S.C. § 1983.

Therefore, the Court will reduce these hours to the

three-percent limit or 19.1 hours. The Court will do so by

reducing attorney Geller's 8.3 hours on attorney fee issues to

2.5 hours and reducing attorney Cantarella's 100 hours on

attorney fee issues to 16.6 hours.

Defendants have objected to the hours billed by

attorney Schram, which were mostly consulting hours.

Defendants argue that Schram served only as the overseer of

an overseer (referring to attorney Geller's supervision).

Defendants’ argument overlooks the value served by office.

consultations between junior and senior attorneys. These kind

A-47

of office consultations alert less experienced attorneys to

litigation pitfalls and save both the federal courts and many

parties avoidable legal problems and the unnecessary

expenditure of resources. They also ensure (as argued by

Plaintiff) that technical arguments are appropriately

"packaged" so as to be readable by non-actuaries, including

judges of the federal courts. While in this case two senior

attorneys were involved with oversight and consultation, their

hours were relatively modest in light of the services rendered.

In particular, attorney Schram billed only 7.7 hours. Such

hours were an appropriate exercise of billing judgment and

should not be stricken as unnecessary. See Hensley, 461 U.S. at

433-34; see also Rodriguez ex rel. Kelly v. McLoughlin, 84

F.Supp.2d 417, 426 (S.D.N.Y. 1999) (permitting attorney fees

for office conferences by multiple attorneys); Meriwether v.

Coughlin, 727 F Supp. 823, 826-27 (S.D.N.Y. 1989) (approving

similar attorney fee billings).

Defendants further maintain that 23 hours spent by

attorney Cantarella in traveling to the Society of Actuaries and

in researching actuarial issues there was unnecessary.

Defendants suggest that attorney Cantarella could have

simply called the Society and had relevant documents shipped

to her office, thereby avoiding the travel. As explained by

attorney Cantarella, her travel was necessitated by the fact that

the Society does not conveniently catalogue all its materials

and does not identify requested materials during telephone

inquiries (which attorney Cantarella first tried before traveling

to the Society). The information learned was very pertinent

and the travel at issue was wholly justified. Therefore,

Defendants' argument on this point is emphatically rejected.

To summarize, Plaintiff's counsel will be allowed the

following hours of service as time reasonably expended in this

litigation: 576.9 hours for attorney Cantarella; 64.1 hours for

attorney Geller; 7.7 hours for attorney Schram; and 15.80 hours

for attorney Yaker. The Court regards those hours when

multiplied by the allowable rates described above as a proper

lodestar fee for Plaintiff's attorneys. According to the Court's

calculations, this results in lodestar fees of: $173,070 for

\ A-48

attorney Cantarella; $24,037.50 for attorney Geller; $5,135 for

attorney Yaker; $3,080 for attorney Schram; and a total

lodestar attorney fee of $205,322.50.

While the Court will allow such hours of service, the

Court rejects Plaintiff's suggestion (on page 27 of their

Memorandum of Law in Support) to allow later billed fees

based on subsequent verification of those hours by Plaintiff's

attorneys without review by the Court. Due process does not

permit the writing of such a blank check because such

amounts (even if proper) would not be subject to legitimate

challenge by Defendants and would not be independently

reviewed and assessed by the District Court as required by

section 502 of ERISA. See also United States v. Bowers, 828 F.2d

1169, 1175 (6th Cir. 1987) (warning about the writing of a

judicial "blank check"). Therefore, this latter request by

Plaintiff is rejected.

D. Costs

Defendants have also contested that the $4,973.12

sought by Plaintiff are not allowable costs, with the exception

of the filing fee, which is conceded. Defendants argue that

Plaintiff has not sufficiently documented the costs incurred. To

address this concern, Plaintiff has filed an updated statement

of costs (Ex. 65) which documents that telephone charges,

copying, delivery charges, et cetera were made in connection

with court filings in this case. Even without this

documentation, the Court would be inclined to grant all such

costs since exactly those kinds of costs are routine and

expected costs of maintaining representation in this kind of

suit. Based on the material submitted, the Court finds that the

costs have been sufficiently documented by Plaintiff and were

reasonably and necessarily incurred in this litigation.

Defendants have also objected to Westlaw charges,

citing unpublished decisions which hold that Westlaw charges

should not be allowed. Plaintiff has responded by citing to

decisions by the Third, Seventh, Tenth and D.C. Circuits

allowing on-line charges as reasonable costs. See, e.g.,

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Continental Illinois Securities Litigation v. Continental Illinois

Corp., 962 F.2d 566, 570 (7th Cir. 1992); Case v. Johnson County,

Kansas, 157 F.3d 1243, 1258 (10th Cir. 1998). The logic of those

cases is irrefutable. They treat Westlaw charges, like paralegal

expenses, as an expense which is routinely billed to clients and

which is necessary and proper in the studied practice of law.

A contrary rule would only discourage the use of on-line

research and would make the legal practice both more costly

and less effectual. Therefore, these charges will be allowed as

proper costs. In reaching this ruling, the Court also relies on

the Sixth Circuit's decision in Northcross v. Bd. of Educ., 611

F.2d 624, 638-39 (6th Cir.1980), which allowed costs, including

paralegal fees, as part of reasonable attorney fees because such

costs are routinely charged by attorneys as part of their

effective practice of law. _

As such, Defendants' objections to costs are wholly

overruled.

CONCLUSION

For the reasons given, an Order shall enter awarding

attorney fees and costs in the amount of $210,295.62 in favor

of Plaintiff and against Defendants.

/s/ Richard Alan Enslen

DATED in Kalamazoo, MI: RICHARD ALAN ENSLEN

May 20, 2003 UNITED STATES DISTRICT

JUDGE

TRUE COPY

SIGNED ORIGINAL FILED

ELECTRONICALLY

Ronald D. Weston, Sr.., Clerk

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RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

ELECTRONIC CITATION: 2004 FED App. 0303P (6" Cir.)

File Name: 04a0303p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Frank J. CROSBY,

individually and on behalf of

all others similarly situated, No. 03-1044

Plaintiff-Appellee,

v.

|

|

|

BOWATER INCORPORATED |

RETIREMENT PLAN FOR |

SALARIED EMPLOYEES OF |

GREAT NORTHERN PAPERINC. |

and BOWATER, |

INCORPORATED, |

Defendants-Appellants. |

Appeal from the United States District Court

for the Western District of Michigan at Grand Rapids

No. 01-00683--Richard A. Enslen, District Judge

Argued: April 20, 2004

Decided and Filed: September 9, 2004

Before: BOGGS, Chief Judge; NELSON and SUTTON,

Circuit Judges.

A-51

COUNSEL

ARGUED: Thomas J. Piskorski, SEYFARTH SHAW, Chicago,

Illinois, for Appellants. Eva T. Cantarella, HERTZ, SCHRAM

& SARETSKY, Bloomfield Hills, Michigan, for Appellee. ON

BRIEF: lan H. Morrison, SEYFARTH SHAW, Chicago, Illinois,

for Appellants, Eva T. Cantarella, Bradley J. Schram, Robert P.

Geller, Bradford T. Yaker, HERTZ, SCHRAM & SARETSKY,

Bloomfield Hills, Michigan, for Appellee.

OPINION

DAVID A. NELSON, Circuit Judge. This appeal shows

that the distinction between law and equity can still have

consequences. ("The forms of action we have buried,” Maitland

observed in a very different context, "but they still rule us from

their graves."’)

The plaintiff, a participant in a retirement plan

governed by the Employee Retirement Income Security Act of

1974 (ERISA), 88 Stat. 832, claimed that the plan administrator

had acted improperly in using a pre-retirement mortality

discount factor when calculating lump sum pre-retirement

benefits. As a result, the plaintiff asserted, he was paid a

benefit that fell $5,249.08 short of what he was entitled to

receive. Invoking § 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3),?

'F.W. Maitland, The Forms of Action at Common Law

2 (A.H. Chaytor & W.J. Whittaker eds., 1948).

*As codified in Title 29 of the U.S.Code, ERISA §

502(a)(3) provides as follows:

"A civil action may be brought--

see

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and purporting to act on behalf of a class of approximately 350

plan participants said to be similarly situated, the plaintiff

brought suit against the plan and its administrator for what he

described as “equitable and injunctive relief." At the heart of

the plaintiff's prayer for relief was a request for recovery of

additional lump sum benefits.

After a wave of motions had been filed, the district

court entered an order granting class certification, granting

summary judgment in favor of the plaintiff and the class,

ordering a recalculation of lump sum pre-retirement benefits

without the mortality discount, and requiring the defendants

“to immediately refund [the] under-payments...."

For the district court to order the defendants to

"refund" (i.e. to pay) the difference between the amount

calculated without a mortality discount and the amount

actually received was to grant a form of relief not typically

_available in equity. Such relief, we conclude, was thus not

available under the statutory provision on which the plaintiff

elected to base his action. See Great-West Life & Annuity Ins. Co.

v. Knudson, 534 U.S. 204 (2002), and Mertens v. Hewitt

Associates, 508 U.S. 248 (1993).

(3) by a participant, beneficiary, or fiduciary

(A) to enjoin any act or practice which violates

any provision of this subchapter or the terms of

the plan, or (B) to obtain other appropriate

equitable relief (i) to redress such violations or

(ii) to enforce any provisions of this subchapter

or the terms of the plan." 29 U.S.C. § 1132(a)(3)

(emphasis supplied).

A separate provision, § 502(a)(1)(B) of ERISA, 29 U.S.C.

§ 1132(a)(1)(B), authorizes a participant to bring suit "to

recover benefits due to him under the terms of his plan...." The

plaintiff in this case did not invoke § 502(a)(1)(B).

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If we assume, for purposes of analysis, that the

defendants had no discretion to use the mortality discount

factor in making the benefit calculation, the fact remains that

ERISA § 502(a)(3), which authorizes only suits for injunctive

or other equitable relief, does not, in most situations, authorize

an action for money claimed to be due and owing. An action

in which the plaintiff complains that the defendant owes him

money and has refused to pay the debt is, of course, the locus

classicus of an action at law; if we were te say that such an

action qualifies as a suit in equity, we should be giving the

words used by Congress in § 502(a)(3) a meaning that

Great-West and Mertens teach they will not bear. The

challenged judgment will therefore be reversed.

I

The individual plaintiff, Frank J. Crosby, was a

participant in an ERISA retirement plan administered by

defendant Bowater Incorporated, the parent corporation of Mr.

Crosby's sometime employer, Great Northern Paper, Inc.

Before he reached his normal retirement age, but after his

pension rights had vested, Mr. Crosby lost his job as a result

of Great Northern's having been sold to another company. The

termination of Mr. Crosby's employment accelerated his right

to receive benefits under the retirement plan.

The Bowater plan was of the "cash balance" variety, a

species of the "defined benefit" genus. The plan gave Mr.

Crosby a hypothetical "Personal Account," and his benefits

were to be a function of the balance in that account. The

balance reflected credits geared to Mr. Crosby's monthly

compensation and a specified rate of interest. The Personal

Account was nothing more than a computational construct,

and benefits were to be paid from the plan's general assets.

If Mr. Crosby had been able to retire from Great

Northern at age 65--the "normal retirement age" specified in

the plan--a joint-and-survivor annuity would have been

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payable as long as he or his wife continued living. The amount

of the annuity would have been determined by taking the

balance in Mr. Crosby's Personal Account at age 65 and

dividing it by a prescribed annuity factor. And had Mr. Crosby

died before age 65 while still employed by Great Northern, a

death benefit would have been payable in an amount equal to

the then present value of his accrued retirement benefit.

When Mr. Crosby ceased to be an employee of Great

Northern, not having retired or died on the job, he became

eligible, under the terms of the plan, for a distribution of his

retirement benefit. Mr. Crosby, who was 43 years old at the

time, elected to take his distribution in a lump sum.

Bowater, as plan administrator,’ told Mr. Crosby that

the lump sum would be $48,732.14. That was the balance in

Crosby's Personal Account. (Article XII of the plan provided

that a participant's accrued benefit could only be distributed

in a form of payment selected by the participant from a list of

options incorporated in § 12.2 of the plan. The second option,

set forth in § 12.2(b), was "[a] single lump sum payment equal

to the amount credited to the Participant's Personal Account

as of the end of the month preceding his Benefit

Commencement date.") a

Claiming that the relevant statutory law, as interpreted

by the Internal Revenue Service in IRS Notice 96-8 (IRB 1996-6,

Feb. 5, 1996), entitled him to receive more than the amount

credited to his Personal Account, Mr. Crosby asked Bowater

to recompute his lump sum by (1) projecting interest credits to

normal retirement age, (2) dividing the resultant age-65

account balance by the annuity factor prescribed in the plan,

and (3) discounting the age-65 annuity to its present value.

"Except where the context indicates otherwise, all

references in this opinion to "Bowater" should be read as

meaning Bowater in its plan-administrator capacity.

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Bowater acceded to this request, notwithstanding that the

Internal Revenue Service had approved the plan provision

pegging the lump sum entitlement to the amount credited to

the participant's Personal Account. Mr. Crosby was advised

that his claim for a larger benefit had been granted and that his

lump sum entitlement had been recalculated. The resulting

figure was $52,013.90. We presume that this amount was paid

in full.

In a detailed explanation of how it arrived at the

$52,013.90, Bowater told Mr. Crosby, among other things, that

it had used a pre-normal-retirement-age mortality discount

factor in its present-value calculation. When it determined the

present value of an age-65 annuity, in other words, Bowater

took into account the possibility that Mr. Crosby might die

before reaching the age at which he would be entitled to start

receiving annuity payments.

Mr. Crosby objected to the use of the mortality

discount factor, filing an appeal with Bowater in which he

made the following argument:

"This discount factor is not consistent with the

calculation method described in IRS Notice 96-8.

Further, I believe this discount reduces my accrued

benefit, and, thus, is not allowed under ERISA."

Bowater's Pension Administration Committee denied the

appeal, issuing a five-page explanation of its decision to do so.

Mr. Crosby then sued the Bowater plan and Bowater

Incorporated in the United States District Court for the

Western District of Michigan. The complaint alleged, among

other things, (1) that "when Bowater discounted Crosby's

age-65 annuity to present value, it should not have used a

mortality discount for the period before normal retirement age;"

(2) that "[i]f Bowater had utilized the . . . mortality discount

factors for the period after normal retirement age only,

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Crosby's lump sum entitlement . . . would have been

$57,262.98" instead of the $52,013.90 produced by the method

Bowater in fact used; and (3) that "Bowater's use of a mortality

discount for the period before normal retirement age caused a

partial forfeiture of Crosby's accrued benefit, thereby violating

ERISA § 203(a), 29 U.S.C. § 1053(a)."*

The complaint stated that Mr. Crosby brought his claim

"under ERISA § 203(a), 29 U.S.C. § 1053(a), and the enabling

— statute, ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3)." As noted

above, Mr. Crosby did not bring his claim under ERISA §

502(a)(1)(B)--the section that authorizes a party to sue for

"benefits due to him under the terms of his plan...." (Under the

language of the plan, Mr. Crosby was entitled to less than he

had already been paid--a circumstance that explains the

decision not to invoke § 502(a)(1)(B).° )

The complaint alleged that approximately 350 plan

participants or beneficiaries were in the same boat as Mr.

Crosby--i.e., they were victims of Bowater's insistence on use

of a mortality discount factor for the period before normal

retirement age. Joinder of such a large number of individuals

‘Section 203(a) sets forth rules on the extent to which

accrued benefits are nonforfeitable. As Mr. Crosby

subsequently reiterated in a brief filed with the district court,

"Crosby's claim is for violation of ... the anti-forfeiture rules

under ERISA § 203(a)."

‘In his brief on appeal, Mr. Crosby tells us that he "could

not bring his claim under ERISA § 502(a)(1)(B) because the Pian's

lump sum provision contemplates payment of an amount

equal to the participant's Personal Account ..., the amount

Bowater initially offered Crosby. Consequently, if Crosby had

brought his claim under § 502(a)(1)(B), he would be entitled to

no relief at all...." We intimate no view as to whether this

proposition is correct.

A-57

was said to be impracticable, and the complaint stated that Mr.

Crosby "seeks both equitable and injunctive relief for the Class,

as permitted under ERISA § 502(a)(3)."

The complaint's prayer for relief asked the court to

enter ajudgment ordering the defendants to "[rje-compute any

-and all lump sum benefits previously paid," using the

methodology followed in the recomputation of Mr. Crosby's

lump sum entitlement "but without any mortality discount for the

period before normal retirement age." The court was further asked

to (1) order the defendants to "[p]ay all Plan participants or

their beneficiaries who previously received a lump sum

distribution . . . the difference between the amount [so]

computed ... and the lump sum amount the participant or

beneficiary received from the Plan, plus pre-judgment and

post-judgment interest on this amount;" to (2) "[e]njoin

defendants from utilizing a mortality discount for the period

before normal retirement age when computing a lump sum

distribution from the Plan in the future;" and to (3) order the

defendants to "[p]ay . . . reasonable attorney's fees and costs

..." The prayer for relief also included a request that the court

"impose a constructive trust over the amount of plan assets

necessary to pay the amounts determined ... and award any

other equitable relief this Court deems appropriate."

The defendants responded to the complaint with a

motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P. The first

and second numbered paragraphs of the defendants’ motion

read as follows:

"1. Crosby purports to bring this action under Section

502(a)(3) of the Employee Retirement Income Security

Act of 1974 (‘ERISA’), 29 U.S.C. § 1132(a)(3), and styles

it as an action to enforce Section 203(a)(2)(A) of ERISA.

FR Crosby sues to recover an increased lump sum

distribution of his retirement benefit under the Plan, a

retirement benefit plan sponsored and administered by

Ar ee

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Bowater. In particular, Crosby claims that in

calculating the present value of his retirement benefit,

defendants incorrectly used a mortality discount for

the part of that calculation dealing with the time before

Crosby had reached age 65."

The brief accompanying the motion pointed out that the

statutory provision on which Mr. Crosby purported to sue did

not authorize a suit for the relief he was seeking:

"Although what he really seeks is an award of

additional benefits, a claim properly brought under

ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B) [footnote

omitted], Crosby purports to sue under ERISA §

502(a)(3), 29 U.S.C. § 1132(a)(3). That provision only

authorizes Crosby to bring an action to ‘enjoin any act

or practice which violates any provision of [ERISA] or

the terms of the plan.'"

Mr. Crosby filed a response to the 12(b)(6) motion in

which he admitted the substance of paragraphs 1 and 2 of the

motion:

"2. Crosby agrees that he brought this action

under § 203(a)(2) and § 502(a)(3) of the

Employee Retirement Income Security Act

(‘ERISA’). 29 U.S.C. § 1053(a)(2) and 29 U.S.C.

§ 1132(a)(3).

2. Crosby agrees that (a) he is suing to recover

additional lump sum benefits; (b) the Plan is

sponsored and administered by Bowater; and

(c) he claims that Bowater incorrectly utilized

a mortality discount for the period before age

65 when it computed his lump sum."

The response was accompanied with a cross motion for

summary judgment based on the complaint as filed; at no time

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did Mr. Crosby seek leave to amend the complaint.

In due course, after Mr. Crosby had filed a motion for

class certification, the district court ordered briefing on the

appropriateness of the requested equitable remedies in the

event the plaintiff succeeded on his summary judgment

motion. In the brief filed pursuant to the court's direction, Mr.

Crosby reiterated he had brought his claim under § 502(a)(3),

"which authorizes ‘appropriate equitable relief." Arguing that

the relief he sought was "equitable" as well as "appropriate,"

Mr. Crosby cited Great-West Life & Annuity Ins. Co. v. Knudson,

634 U.S. 204 (2002), as "suggest[ing] that if the relief requested

does not seek to impose liability for a contractual monetary

obligation, it is probably an appropriate equitable remedy."

The district court was told that "Crosby does not seek to

impose liability on defendants for any contractual obligation

to pay money."

After the completion of briefing, and having dispensed

with oral argument, the district court entered a final judgment

in which the court granted class certification; denied the

defendants’ motion to dismiss; granted the plaintiff's summary

judgment motion; enjoined the defendants "to recalculate the

lump sum benefits of class members who had previously

received lump sum benefits, in accordance with the Court's

Opinion, and to immediately refund under-payments, plus

pre-judgment and post-judgment interest;" and to "calculate

lump sum benefit payments for class members who have not

yet received any lump sum benefits in accordance with the

Court's Opinion."

The opinion itself--a comprehensive and well-crafted

analysis of a variety of issues, some of which are not in

contention on appeal--reasoned that because the plan

provided for payment of a pre-retirement death benefit in the

amount of the then-vested present value of the participant's

accrued benefit, the death benefit was not "incidental" to the

participant's accrued benefit and the plan administrator thus

A-60

lacked discretion to use a mortality discount factor in reducing

the projected age-65 annuity to its present value. The bottom

line, in the district court's view, was that the lump sum

payment to which Mr. Crosby claimed to be

entitled--$57,262.98, as the court noted--should not have

undergone the mortality reduction that resulted inalump sum

payout of only $52,013.90.

The defendants perfected a timely appeal. Much of the

argument they present to our court is a defense of the merits

of the plan administrator's decision to take pre-retirement

mortality risk into account. The defendants argue further that

the decision should have been reviewed under an

arbitrary-and-capricious standard, and that the district court

was required to uphold the decision as reasonable. We do not

reach these issues, because--as the defendants also argue--the

primary relief sought by Mr. Crosby did not qualify as

"equitable relief" of the sort authorized by ERISA § 502(a)(3),

29 U.S.C. § 1132(a)(3).

I]

The present opinion is not the place for a history lesson

on the development of the parallel systems of jurisprudence

known as "law" and "equity." It will suffice, we trust, to

remind the reader that courts of law--in which the common

law of the English speaking peoples had its principal

growth--were for a number of centuries separate and distinct

from chancery courts (originally the court of an ecclesiastical

person appointed by the king to be his chancellor); that the

rules of decision followed in chancery courts were not 7

common law rules, but rules of equity; that chancery courts

(i.e. courts of equity) likewise had their own

procedures--procedures under which, for example, the

chancellor performed the fact-finding role that in courts of law

would be performed by a jury; and that the remedies typically

available to a party who prevailed in a court of equity

(injunctive relief, e.g.) were far from identical to the remedies

A-61

the prevailing party could obtain in a court of law. Although,

in most jurisdictions, the same courts have long administered

both law and equity,’ the unified courts have been

administering what Professor Geldart described as “distinct

bodies of law, governed largely by different principles.””

Against this background, we return to the text of

ERISA § 502(a)(3), the statutory section under which plaintiff

Crosby brought his suit. Under § 502(a)(3), as codified at 29

U.S.C. § 1132(a)(3), Mr. Crosby could institute a proceeding

"(A) to enjoin any act or practice which violates [ERISA] or the

terms of the plan, or (B) to obtain other appropriate equitable

relief (i) to redress such violations or (ii) to enforce any

provisions of [ERISA] or the terms of the plan." (Emphasis

supplied.) Section 502(a)(3) does not authorize a plan

participant to sue for recovery of benefits due to him under the

terms of the plan. That is the office of § 502(1)(B)--a section

with which Mr. Crosby has always insisted he will have

nothing to do.

But what if the benefits are not claimed to be due

under terms of the plan, strictly speaking, but under the terms

of a statute--in this case ERISA § 203(a), 29 U.S.C. §

1053(a)--setting forth requirements that the plan must satisfy?

The answer, we believe, depends on whether the claim for

benefits allegedly due under the statutory requirements is or

is not, at bottom, a claim for injunctive or other equitable relief.

No matter how well founded it may be as a matter of

substantive law, a claim for benefits is not cognizable under §

‘In England, for example, this has been true since 1875.

See W.M. Geldart, Elements of English Law (5th Ed.1953) at p.

22. In some American jurisdictions--New Jersey, for

exam ple--the fusion took place within living memory. See N.J.

Const., Art. 11, § 4, § 3 (1947).

'Geldart, id.

A-62

502(a)(3) of ERISA unless it is a claim for "equitable relief."

As used in § 502(a)(3), the Supreme Court has

repeatedly held, “equitable relief" refers to "those categories of

relief that were typically available in equity (such as

injunction, mandamus, and restitution, but not compensatory

damages)." Mertens v. Hewitt Associates, 508 U.S. 248, 256

(1993); cf. Great-West Life & Annuity Ins. Co. v. Knudson, 534

U.S. 204, 210 (2002). And "[a]lmost invariably ... suits seeking

(whether by judgment, injunction, or declaration) to compel

the defendant to pay a sum of money to the plaintiff are suits

for 'money damages,’ as that phrase has traditionally been

applied, since they seek no more than compensation for loss

resulting from the defendant's breach of legal duty." Bowen v.

Massachusetts, 487 U.S. 879, 918-19 (1988) (Scalia, J., dissenting),

as quoted with approval in Great-West, 534 U.S. at 210. "And

'[mJoney damages are, of course, the classic form of legal relief.'

"Id. (quoting Mertens, 508 U.S. at 255).

Mr. Crosby acknowledged in the court below that suits

seeking to compel the defendant to pay a sum of money to the

plaintiff are "almost invariably" excluded from the category of

suits seeking relief typically available in equity, according to

the Supreme Court. Citing Harris Trust and Savings Bank v.

Salomon Smith Barney Inc., 530 U.S. 238 (2000), however,

Crosby argued that " '‘[a]lmost invariably' does not mean

‘always'...." (Reply Brief in Support of Plaintiff's Request for

Equitable Relief, at page 29.) Because he is seeking imposition

of a constructive trust (an equitable -emedy) on property that

he says "truly and equitably" belongs to him, see Harris Trust

at 250-51, and because "restitution [another equitable remedy]

may be awarded for any ‘ill-gotten plan assets or profits,’ " see

id. at 253, Mr. Crosby argued that his individual claim for the

wrongfully withheld $5,249.08 was not a claim for legal *595

relief, but a claim for the sort of “equitable relief" spoken of in

§ 502(a)(3).

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We do not find this line of argument persuasive. It is

true that Mr. Crosby requested the district court to impose a

constructive trust over the amount of plan assets necessary to

pay his claim--and over the separate assets of Bowater

Incorporated, if necessary--but we do notread Harris Trust as

suggesting that such a request for securitization of the debt

can transmogrify Mr. Crosby's claim for a money judgment

into an essentially equitable claim. A glance at the facts of

Harris Trust explains why.

In Harris Trust a retirement plan had purchased certain

motel interests from a company that the plan had been using

as a stockbroker. Because the stockbroker was a "party in

interest," as the Supreme Court assumed, the purchase of the

motel interests was prohibited under § 406(a)(1)(A) of ERISA,

29 U.S.C. § 1106(a)(1)(A). Invoking the "equitable relief"

provision of ERISA § 502(a)(3), the trustee and the

administrator of the retirement plan sued the stockbroker for

rescission of the purchase of the motel interests; restitution of

the purchase price, with interest, from the stockbroker; and

disgorgement of any profits the stockbroker had made with

the purchase money.

The Court of Appeals for the Seventh Circuit

concluded that as a non-fiduciary, the stockbroker could not

be held liable under § 502(a)(3) for participating in a

transaction prohibited by § 406. See Harris Trust and Savings

Bank v. Salomon Brothers Inc., 184 F.3d 646, 653 (7th Cir.1999).

The Supreme Court reversed, holding that the stockbroker's

non-fiduciary status did not insulate it from claims for

equitable relief under § 502(a)(3).

Referring to the law of trusts--one of the main branches

of equity jurisprudence--the Harris Trust court observed that

"it has long been settled that when a trustee in breach

of his fiduciary duty to the beneficiaries transfers trust

property to a third person, the third person takes the

A-64

property subject to the trust, unless he has purchased

the property for value and without notice of the

fiduciary's breach of duty. The trustee or beneficiaries

may then maintain an action for restitution of the

property (if not already disposed of) or disgorgement

of proceeds (if already disposed of), and disgorgement

of the third person's profits derived therefrom.” Harris

Trust, 530 US. at 250.

The Court went on to explain that

“[o]nly a transferee of ill-gotten trust assets may be

held liable, and then only when the transferee

(assuming he has purchased for value) knew or should

have known of the existence of the trust and the

circumstances that rendered the transfer in breach of

the trust." Id. at 251.

And--making an obvious point that has obvious significance

for us--the Supreme Court observed that a suit against a

transferee for tainted plan assets, in addition to satisfying the

“appropriateness” criterion,

“is also ‘equitable ' in nature. See Mertens, 508 US., at

= 260 (‘[T]he “equitable relief* awardable under § 502(a)(5)

includes restitution of ill-gotten plan assets or profits ...'); |

ibid. (explaining that, in light of the similarity of

language in §§ 502(a)(3) and (5), that language should

be deemed to have the same meaning in both

subsections)." Id. at 253, 113 S.Ct. 2063 (emphasis

supplied).

In the case at bar, of course, Mr. Crosby is not seeking

restitution to the plan of assets wrongfully conveyed to a third

party. He is not seeking to have a constructive trust imposed

A-65

on assets so conveyed.” And he is not seeking disgorgement

of profits made by a third party on ill-gotten assets. Harris

Trust, as we see it, is thus inapposite.

While Harris Trust is readily distinguishable from the

case now before us, Great-West, in our judgment, is not. It is

true that the plaintiffs in Great-West sought to impose personal

liability on the defendants for a contractual obligation to pay

money, whereas here the plaintiff insists that the asserted

liability is not contractual in nature.’ But if we accept, for

purposes of analysis, plaintiff Crosby's representation that he,

*Mr. Crosby does ask for imposition of a constructive

trust over sufficient assets to assure that his claim will be paid,

thereby putting him in a better position than he would occupy

as a general creditor. But Crosby has no basis for obtaining

such a priority, as far as we can see, and he is clearly not

asking for application of the principle applied in Harris

Trust--the principle that trust property transferred to a third

party in breach of the trustee's fiduciary duty is impressed

with a trust “unless [the third party] has purchased the

property for value and without notice of the fiduciary's breach

of duty." Harris Trust, 530 US. at 250.

"On its face, as we have seen, the language of the

retirement plan's lump sum provision contemplates payment

of an amount equal only to the participant's Personal

Account--an amount less than Bowater has already voluntarily

paid. In addition to pointing this out, Mr. Crosby notes that

among the plan's miscellaneous provisions is the following:

"The adoption and maintenance of this Plan shall not be

deemed to constitute a contract, expressed or implied, between

the Company and any Employee or to be a consideration for,

or inducement or condition of, the employment of any

person." It thus seems clear that Mr. Crosby would have had

no claim for breach of contract absent ERISA, whatever the

situation may be in light of ERISA.

A-66

unlike the plaintiffs in Great-West, has no claim for breach of

contract, we think that the distinction between the Great-West

case and this one is a distinction without a difference.

The statutory origin of Buwater's asserted obligation to

pay Mr Crosby an additional $5,249.08, with interest, does not

mean that a breach of the obligation to pay is redressable

through a suit in equity rather than an action at law.

Historically, an action in debt was no less an action at law than

an action in covenant. See F.W. Maitland, The Forms of Action

at Common Law 63, 64 (A.H. Chaytor & W.J. Whittaker eds.,

1948). And an action of assumpsit (a form of trespass on the

case) to redress the breach of a statutory obligation to pay a

sum certain was likewise an action at law. See G.C. Cheshire

and C.H.S. Fifoot, Law of Contract 15 (3rd ed.1952); Marley v.

Bankers' Indemnity Insurance Co., 166 A. 350, 351 (1933)

(holding that trespass on the case is the appropriate action to

enforce a statutory right).

If it be argued that Mr. Crosby's position should be

likened to that of a beneficiary of a trust, who could invoke the

jurisdiction of an equity court to enforce a right to receive

money from the trust, the short answer is that just such an

argument has been explicitly rejected by the United States

Supreme Court. See Great-West, 353 U.S. at 219:

"These trust remedies are simply inapposite. In

Mertens, we rejected the claim that the special

equity-court powers applicable to trusts define the

reach of § 502(a)(3)."

It remains to be mentioned that Mr. Crosby does

request a form of equitable relief in asking that the defendants

be ordered to recompute--without any mortality discount for

the period before normal retirement age--"any and all lump

sum benefits previously paid to Plan participants," including

Mr. Crosby. As far as Crosby's individual claim is concerned,

however; such a recomputation by the defendants is

ee os

A-67

unnecessary; Mr. Crosby or his advisors have already

performed the recomputation themselves, and Crosby's

complaint specifies the amount claimed to be due him down

to the last penny. Equity, as the pertinent equitable maxim

tells us, does not require the doing of a vain act.

Mr. Crosby's complaint also asks for equitable relief in

the form of injunction against use of a

pre-normal-retirement-age mortality discount factor in

computing future lump sum distributions. Assuming that such

relief might be beneficial to someone, however, it could only

benefit members of the class other than Mr. Crosby. In the next

(and concluding) part of this opinion we address the question

whether Mr. Crosby can maintain the present suit on behalf of

other class members who might arguably receive some benefit

from the equitable relief sought for them.

Ill

The Supreme Court has held that a class action may

proceed despite the dismissal of the named plaintiff's claim, if

the class has been certified and at least one class member has

a live claim. See County of Riverside v. McLaughlin, 500 U.S. 44,

51-52 (1991), and Sosna v. lowa, 419 U.S. 393, 399-403 (1975).

But these decisions in no way detract from the principle that

the judicial power of Article III courts extends only to the

“cases and controversies" specified in that article. If the class

action is to be maintained, therefore, there must be "a named

plaintiff who has such a case or controversy at the time the

complaint is filed and at the time the class action is certified."

Sosna, 419 U.S. at 402. Where the named plaintiff's claim is one

over which "federal jurisdiction never attached," there can be

no class action. See Walters v. Edgar, 163 F.3d 430, 432-33 (7th

Cir.1998), cert. denied, 526 U.S. 1146 (1999).

For reasons already explained, we do not believe that

Mr. Crosby ever had a justiciable claim under ERISA §

502(a)(3), the particular statutory provision on which he

A-68

elected to sue. Our caselaw teaches--perhaps surprisingly --that

federal subject matter jurisdiction is lacking in sucha situation.

Thus in Qualchoice, Inc. v. Rowland, 367 F.3d 638, 650 (6th

Cir.2004), we affirmed the dismissal, on jurisdictional grounds.

of an action that sought essentially legal relief under §

“502(a)(3). In Community Health Plan of Ohio v. Mosser, 347 F.3d

619, 624 (6th Cir.2003), similarly, we held that an action

seeking legal relief under § 502(a)(3) must be dismissed for

lack of subject mi ter jurisdiction. Community Insurance Co. v.

Morgan, 54 Fed. Appx. 828, 831-33 (6th Cir.2002), and Sheet

Metal Local # 24 v. Newman, 35 Fed. Appx. 204, 207 (6th Cir.

2002), are in accordance with that holding. If these decisions

mean what they say, federal jurisdiction never attached to Mr.

Crosby's claim in the case at bar. It follows that there is no

class action. See Walters, 163 F.3d at 432-33.

The judgment entered by the district court is

VACATED and the case is REMANDED with instructions to

DISMISS Mr. Crusby's complaint for lack of subject matter

jurisdiction.

eS ee tit hides Pere wore eenes

A-69

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

FILED

No. 03-1044 SEP -9 2004

LEONARD GREEN

CLERK

Frank J. CROSBY, individually and on behalf of all others

similarly situated,

Plaintiff-A ppellee,

V.

BOW ATER INCORPORATED RETIREMENT PLAN FOR

SALARIED EMPLOYEES OF GREAT NORTHERN PAPER

INC. and BOWATER, INCORPORATED,

Defendants-Appellants.

Before: BOGGS, Chief Judge; NELSON and SUTTON,

Circuit Judges.

JUDGMENT

On Appeal from the United States District Court

for the Western District of Michigan at Grand Rapids.

THIS CAUSE was heard on the record from the district

court and was argued by counsel.-

IN CONSIDERATION WHEREOF, it is ORDERED that

the judgment of the district court is VACATED and the case is

REMANDED with instructions to DISMISS plaintiff Frank J.

Crosby’s complaint for lack of subject matter jurisdiction.

ENTERED BY ORDER OF THE COURT

/s/Leonard Green

Leonard Green, Clerk

A-70

No. 03-1044

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT FILED

FRANK J. CROSBY, INDIVIDUALLY ) NOV 10 2004

AND IN BEHALF OF ALL OTHERS )

SIMILARLY SITUATED, ) LEONARD GREEN

Plaintiff-Appellee, ) Clerk

)

Vv. ) ORDER

BOW ATER INCORPORATED )

RETIREMENT PLAN FOR )

SALARIED EMPLOYEES OF GREAT )

NORTHERN PAPER INC., ET AL., _ )

)

)

Defendants-Appellants.

BEFORE: BOGGS, Chief Judge; NELSON and SUTTON,

Circuit Judges.

The court having received a petition for

rehearing en banc, and the petition having been circulated not

only to the original panel members but also to all other active

judges of this court, and no judge of this court having

requested a vote on the suggestion for rehearing en banc, the

petition for rehearing has been referred to the original panel.

The panel has further reviewed the petition for

rehearing and concludes that the issues raised in the petition

were fully considered upon the original submission and

decision of the case. Accordingly, the petition is denied.

ENTERED BY ORDER OF THE COURT

/s/ Leonard Green

Leonard Green, Clerk

A-71

ERISA STATUTES

29 U.S.C. §1001

§ 1001. Congressional findings and declaration of policy

(a) Benefit plans as affecting interstate commerce and the

Federal taxing power

The Congress finds that the growth in size, scope, and

numbers of employee benefit plans in recent years has been

rapid and substantial; that the operational scope and economic

impact of such plans is increasingly interstate; that the

continued well-being and security of millions of employees

and their dependents are directly affected by these plans;

that they are affected with a national public interest; that they

have become an important factor affecting the stability of

employment and the successful development of industrial

relations; that they have become an important factor in

commerce because of the interstate character of their activities,

and of the activities of their participants, and the employers,

employee organizations, and other entities by which they are

established or maintained; that a large volume of the activities

of such plans are carried on by means of the mails and

instrumentalities of interstate commerce; that owing to the

lack of employee information and adequate safeguards

concerning their operation, it is desirable in the interests of

employees and their beneficiaries, and to provide for the

general welfare and the free flow of commerce, that disclosure

be made and safeguards be provided with respect to the

establishment, operation, and administration of such plans;

that they substantially affect the revenues of the United States

because they are afforded preferential Federal tax treatment;

that despite the enormous growth in such plans many

employees with long years of employment are losing

anticipated retirement benefits owing to the lack of vesting

provisions in such plans; that owing to the inadequacy of

current minimum standards, the soundness and stability of

A-72

plans with respect to adequate funds to pay promised

benefits may be endangered; that owing to the termination of

plans before requisite funds have been accumulated,

employees and their beneficiaries have been deprived of

anticipated benefits; and that it is therefore desirable in the

interests of employees and their beneficiaries, for the

protection of the revenue of the United States, and to provide

for the free flow of commerce, that minimum standards be

provided assuring the equitable character of such plans and

their financial soundness.

(b) Protection of interstate commerce and beneficiaries by

requiring disclosure and reporting, setting standards of

conduct, etc., for fiduciaries

It is hereby declared to be the policy of this chapter to

protect interstate commerce and the interests of participants

in employee benefit plans and their beneficiaries, by

requiring the disclosure and reporting to participants and

beneficiaries of financial and other information with respect

thereto, by establishing standards of conduct, responsibility,

and obligation for fiduciaries of employee benefit plans, and

by providing for appropriate remedies, sanctions, and ready

access to the Federal courts.

(c) Protection of interstate commerce, the Federal taxing

power, and beneficiaries by vesting of accrued benefits,

setting minimum standards of funding, requiring

termination insurance

It is hereby further declared to be the policy of this chapter

to protect interstate commerce, the Federal taxing power, and

the interests of participants in private pension plans and

their beneficiaries by improving the equitable character and

the soundness of such plans by requiring them to vest the

accrued benefits of employees with significant periods of

service, to meet minimum standards of funding, and by

requiring plan termination insurance.

A-73

(emphasis added)

Dh at aT ae eee eS AE Rie RMN BENE area Cok run ah Ge oe ERK yaks

29 U.S.C. §1053(a)

Minimum vesting standards

(a) Nonforfeitability requirements

Each pension plan shall provide that an employee's right to his

normal retirement benefit is nonforfeitable upon the

attainment of normal retirement age and in addition shall

satisfy the requirements of paragraphs (1) and (2) of this

subsection.

(1) A plan satisfies the requirements of this paragraph if an

employee's rights in his accrued benefit derived from his own

contributions are nonforfeitable.

(2) A plan satisfies the requirements of this paragraph if it

satisfies the requirements of subparagraph (A) or (B).

(A) A plan satisfies the requirements of this subparagraph

if an employee who has completed at least 5 years of service

has a nonforfeitable right to 100 percent of the employee's

accrued benefit derived from employer contributions.

(B) A plan satisfies the requirements of this subparagraph

if an employee has a nonforfeitable right to a percentage of the

employee's accrued benefit derived from employer

contributions determined under the following table:

The nonforfeitable

Years of service: percentage is

TT RO EY 20

SD vssriensiannlinrtitintestaiesapbnaindeeei ie: 40

Wininctnaninnedibelasnatijnidliiaiiastesdinisbbuier: 60

Pas crsischsaisniai chibi pliant 80

TI scicctesaitiniitg es 100.

(3)(A) A right to an accrued benefit derived from employer

contributions shall not be treated as forfeitable solely because

the plan provides that it is not payable if the participant dies

(except in the case of a survivor annuity which is payable as

A-74

provided in section 1055 of this title).

zee

(underlined emphasis added)

SOK HSHFCEKRKHKSCHSCHFCAECECECBRECHOHSCEERED EO +O CLA EC OOS S6 6.8 6 66 668 4 OO

29 U.S.C. §1103(a), (c)

(a) Benefit plan assets to be held in trust; authority of trustees

Except as provided in subsection (b) of this section, all assets

of an employee benefit plan shall be held in trust by one or

more trustees. Such trustee or trustees shall be either named in

the trust instrument or in the plan instrument described in

section 1102(a) of this title or appointed by a person who is a

named fiduciary, and upon acceptance of being named or

appointed, the trustee or trustees shall have exclusive

authority and discretion to manage and control the assets of

the plan, except to the extent that--

(1) the plan expressly provides that the trustee or trustees are

subject to the direction of a named fiduciary who is not a

trustee, in which case the trustees shall be subject to proper

directions of such fiduciary which are made in accordance

with the terms of the plan and which are not contrary to this

chapter, or

(2) authority to manage, acquire, or dispose of assets of the

plan is delegated to one or more investment managers

pursuant to section 1102(c)(3) of this title.

“kee

(c) Assets of plan not to inure to benefit of employer;

allowable purposes of holding plan assets

(1) Except as provided in paragraph (2), (3), or (4) or

subsection (d) of this section, or under sections 1342 and 1344

of this title (relating to termination of insured plans), or under

section 420 of Title 26 (as in effect on October 22, 2004), the

assets of a plan shall never inure to the benefit of any

employer and shall be held for the exclusive purposes of

A-75

providing benefits to participants in the plan and their

beneficiaries and defraying reasonable expenses of

administering the plan.

(emphasis added)

29 U.S.C. §1104(a)

(a) Prudent man standard of care

(1) Subject to sections 1103(c) and (d), 1342, and 1344 of this

title, a fiduciary shall discharge his duties with respect to a

plan solely in the interest of the participants and beneficiaries

and--

(A) for the exclusive purpose of:

(i) providing benefits to participants and their beneficiaries;

and

(ii) defraying reasonable expenses of administering the plan;

(B) with the care, skill, prudence, and diligence under the

circumstances then prevailing that a prudent man acting in a

like capacity and familiar with such matters would use in the

conduct of an enterprise of a like character and with like aims;

(C) by diversifying the investments of the plan so as to

minimize the risk of large losses, unless under the

circumstances it is clearly prudent not to do so; and

(D) in accordance with the documents and instruments

governing the plan insofar as such documents and instruments

are consistent with the provisions of this subchapter [i.e.,

subchapter I of ERISA] and subchapter III of this chapter.

(underlined emphasis and bracketed text added)

A-76

29 U.S.C. §1109

(a) Any person who is a fiduciary with respect to a plan who

breaches any of the responsibilities, obligations, or duties

imposed upon fiduciaries by this subchapter [i.e., subchapter

I] shall be personally liable to make good to such plan any

losses to the plan resulting from each such breach, and to

restore to such plan any profits of such fiduciary which have

been made through use of assets of the plan by the fiduciary,

and shall be subject to such other equitable or remedial relief

as the court may deem appropriate, including removal of such

fiduciary. A fiduciary may also be removed for a violation of

section 1111 of this title.

29 U.S.C. §1132(a)

§ 1132. Civil enforcement

(a) Persons empowered to bring a civil action

A civil action may be brought-

(1) by a participant or beneficiary-

(A) for the relief provided for in subsection (c) of this section,

or

(B) to recover benefits due to him under the terms of his plan,

to enforce his rights under the terms of the plan, or to clarify

his rights to future benefits under the terms of the plan;

(2) by the Secretary, or by a participant, beneficiary or

fiduciary for appropriate relief under section 1109 of this title;

(3) by a participant, beneficiary, or fiduciary (A) to enjoin any

act or practice which violates any provision of this subchapter

or the terms of the plan, or (B) to obtain other appropriate

equitable relief (i) to redress such violations or (ii) to enforce

any provisions of this subchapter or the terms of the plan;

A-77

(4) by the Secretary, or by a participant, or beneficiary for

appropriate relief in the case of a violation of 1025(c) of this

title;

(5) except as otherwise provided in subsection (b) of this

section, by the Secretary (A) to enjoin any act or practice which

violates any provision of this subchapter, or (B) to obtain other

appropriate equitable relief (i) to redress such violation or (ii)

to enforce any provision of this subchapter;

(6) by the Secretary to collect any civil penalty under

paragraph (2), (4), (5), (6), or (7) of subsection (c) of this section

or under subsection (i) or (1) of this section;

(7) by a State to enforce compliance with a qualified medical

child support order (as defined in section 1169(a)(2)(A) of this

title);

(8) by the Secretary, or by an employer or other person

referred to in section 1021(f)(1) of this title, (A) to enjoin any

act or practice which violates subsection (f) of section 1021 of

this title, or (B) to obtain appropriate equitable relief (i) to

redress such violation or (ii) to enforce such subsection; or

(9) in the event that the purchase of an insurance contract or

insurance annuity in connection with termination of an

individual's status as a participant covered under a pension

plan with respect to all or any portion of the participant's

pension benefit under such plan constitutes a violation of part

4 of this title [FN1] or the terms of the plan, by the Secretary,

by any individual who was a participant or beneficiary at the

time of the alleged violation, or by a fiduciary, to obtain

appropriate relief, including the posting of security if

necessary, to assure receipt by the participant or beneficiary of

the amounts provided or to be provided by such insurance

contract or annuity, plus reasonable prejudgment interest on

such amounts.

A-78

INTERNAL REVENUE CODE STATUTES

26 U.S.C. §402(a),(c)

(a) Taxability of beneficiary of exempt trust.--Except as

otherwise provided in this section, any amount actually

distributed to any distributee by any employees’ trust

described in section 401(a) which is exempt from tax under

section 501(a) shall be taxable to the distributee, in the taxable

year of the distributee in which distributed, under section 72

(relating to annuities).

(c) Rules applicable to rollovers from exempt trusts.--

(1) Exclusion from income.--If--

(A) any portion of the balance to the credit of an employee in

a qualified trust is paid to the employee in an eligible rollover

distribution,

(B) the distributee transfers any portion of the property

received in such distribution to an eligible retirement plan,

and

(C) in the case of a distribution of property other than money,

the amount so transferred consists of the property distributed,

then such distribution (to the extent so transferred) shall not

be includible in gross income for the taxable year in which

paid.

A-79

26 U.S.C. §417(e)(3)

(3) Determination of present value.--

(A) In general.--

(i) Present value.--Except as provided in subparagraph (B), for

purposes of paragraphs (1) and (2), the present value shall not

be less than the present value calculated by using the

applicable mortality table and the applicable interest rate.

(ii) Definitions.--For purposes of clause (i)--

(1) Applicable mortality table.--The term “applicable mortality

table" means the table prescribed by the Secretary. Such table

shall be based on the prevailing commissioners’ standard table

(described in section 807(d)(5)(A)) used to determine reserves

for group annuity contracts issued on the date as of which

present value is being determined (without regard to any

other subparagraph of section 807(d)(5)).

(II) Applicable interest rate.--The term “applicable interest

rate" means the annual rate of interest on 30-year Treasury

securities for the month before the date of distribution or such

other time as the Secretary may by regulations prescribe.

A-80

OTHER STATUTES

15 U.S.C. §16

Any person, firm, corporation, or association shall be entitled

to sue for and have injunctive relief, in any court of the United

States having jurisdiction over the parties, against threatened

loss or damage by a violation of the antitrust laws, including

sections 13, 14, 18, and 19 of this title, when and under the

same conditions and principles as injunctive relief against

threatened conduct that will cause loss or damage is granted

by courts of equity, under the rules governing such

proceedings, and upon the execution of proper bond against

damages for an injunction improvidently granted and a

showing that the danger of irreparable loss or damage is

immediate, a preliminary injunction may issue. ...

42 U.S.C. §2000e-5(g)(1)

(1972-present)

(g) Injunctions; appropriate affirmative action; equitable relief;

accrual of back pay; reduction of back pay; limitations on

_ judicial orders

(1) If the court finds that the respondent has intentionally

engaged in or is intentionally engaging in an unlawful

employment practice charged in the complaint, the court may

enjoin the respondent from engaging in such unlawful

employment practice, and order such affirmative action as

may be appropriate, which may include, but is not limited to,

reinstatement or hiring of employees, with or without back

pay (payable by the employer, employment agency, or labor

organization, as the case may be, responsible for the unlawful

employment practice), or any other equitable relief as the court

deems appropriate. Back pay liability shall not accrue from a

date more than two years prior to the filing of a charge with

the Commission. Interim earnings or amounts earnable with

reasonable diligence by the person or persons discriminated

A-81

against shall operate to reduce the back pay otherwise

allowable.

50 U.S.C. App. §925(a) (terminated)

[§205 of Emergency Price Control Act of 1942]

Whenever in the judgment of the Administrator any person

has engaged or is bout to engage in any acts or practices which

constitute or will constitute a violation of any provision of

section 4 of this Act, he may make application to the

appropriate court for an order enjoining such acts or practices,

or for an order enforcing compliance with such provisions and

upon a showing by the Administrator that such person has

engaged or is about to engage in any such acts or practices a

permanent or temporary injunction, restraining order, or other

order shall be granted without bond.

SHHSSHSSASSEASDAEGSEAAPMCHRECESOGASCHAHOEBDAAASAOCBZDAADAASCAOCKDSD OSD AS

TREASURY REGULATIONS

26 C.F.R. §1.411(d)-4, Q& A2(a)(4)

(4) Benefits payable to a spouse or beneficiary. [Code]

Section 411(d)(6) protected benefits [includes accrued benefits]

may not be eliminated merely because they are payable with

respect to a spouse or other beneficiary.

(bracketed text added)

A-82

LEGISLATIVE HISTORY

S. Rep. No. 93-127

1974 U.S.C.C.A.N. 4838, 4870, 4889, 4988-4989

(Apr. 18, 1973)

(cited parts only)

The enforcement provisions [of ERISA] have been designed

specifically to provide both the Secretary and participants and

beneficiaries with broad remedies for redressing or preventing

violations of the Act. The intent of the Committee is to

provide the full range of legal and equitable remedies

available in state and federal courts and to remove

jurisdictional and procedural obstacles which in the past

appear to have hampered effective enforcement of fiduciary

responsibilities under state law or recovery of benefits due to

participants.

zkee

Under the bill, the Secretary of Labor and participants and

beneficiaries of a plan may bring civil actions for any

appropriate legal or equitable relief to redress or restrain a

violation of fiduciary duties. ... Appropriate equitable relief

may be granted ina civil action. For example, injunctions may

be granted to prevent a violation of fiduciary duty, and a

constructive trust may be imposed on the plan assets, if

needed to protect the participants and beneficiaries.

(emphasis added)

tin See na ace ae CRT

eniatarae 3 aah wes

A-83

H.R. Rep. No. 93-533

1974 U.S.C.C.A.N. 4639, 4643, 4655 (Oct. 2, 1973)

(cited parts only)

In the absence of adequate federal standards, the participant

is left to rely on the traditional equitable remedies of the

common law of trusts. .. . The fact that statutory rules exist

says little as to their efficacy in adjusting inequities that are

visited upon plan participants, as evidenced by the hearings

before this Committee. . . . Courts strictly interpret the plan

indenture and are reluctant to apply concepts of equitable

relief or to disregard technical document wording.

“kee

The enforcement provisions [of ERISA] have been designed

specifically to provide both the Secretary and participants and

- beneficiaries with broad remedies for redressing or preventing

violations of the Act. The intent of the Committee is to

provide the full range of legal and equitable remedies

available in state and federal courts and to remove

jurisdictional and procedural obstacles which in the past

appear to have hampered effective enforcement of fiduciary

responsibilities under state law or recovery of benefits due to

participants.

z*e*

(emphasis added)

H.R. Conf. Rep. 93-1280

1974 U.S.C.C.A.N. 5038, 5076 (Aug. 12, 1974)

(cited parts only)

The labor law provisions apply rules and remedies similar to

those under traditional trust law to govern the conduct of

fiduciaries. ...

—V—V—_V<3<3._

A-84

120 Cong. Rec. 29,198, 29,200 (Aug. 20 1974)

(cited parts only) :

MR. ULLMAN: ...I urge the adoption of the legislation that

is now before us, the Employee Retirement Income Security

Act of 1974....

z***

The labor law provisions provide rules and remedies similar

to those under traditional trust law to govern the conduct of

fiduciaries. ...

CSLRTEA EEA ALDEPEAADAAROEA SOLE CELA CR SERDAR BEADO4A4AE DODD OD OD

120 Cong. Rec. 29,928-929, 29,932 (Aug. 20, 1974)

(cited parts only)

EMPLOYEE RETIREMENT INCOME SECURITY ACT OF

1974-CONFERENCE REPORT

Sa eke

MR WILLIAMS: Mr. President, returning to a brief discussion

of the provisions of the conference report...

zee

Providing administrative and judicial remedies, available to

both the government and participants, which will assure

compliance with the foregoing substantive provisions. ...

ee *

Despite the value of full reporting and disclosure, it has

become clear that such provisions are not in themselves

sufficient to safeguard employee benefit plan assets from such

abuses as self-dealing, imprudent investing, and

misappropriating of plan funds. Neither existing State nor

Federal law has been effective in preventing or correcting

many of these abuses. Accordingly, the legislation imposes

strict fiduciary obligations on those who have discretion or

responsibility respecting the management, handling, or

disposition of pension or welfare plan assets. The objectives

of these provisions are to make applicable the law of trusts; to

prohibit exculpatory clauses that have often been used in this

field; to establish uniform fiduciary standards to prevent

A-85

transactions which dissipate or endanger plan assets; and to

provide effective remedies for breach of trust.

z** -

(underlined emphasis added)

66S oS ERE HPEESHSS64B4CB4AA@ COSZEHKhESZBARAA DCA SEAESCAEAS ASSO SEES SS FP

LEARNED WORKS

G. Bogert, Trusts & Trustees (2d ed. 1982)

(cited parts only)

§862. Decree Against the Trustee for the Payment of

Money-Damages

For a breach of trust the trustee may be directed by the

court to pay damages to the beneficiary out of the trustee's

own funds, either in a suit for that purpose or on an

accounting where the trustee is surcharged beyond the

amount of his admitted liability.

zane

... If the trust property, or its substitute, can be traced into the

property in the hands of the trustee or his representative, the

beneficiary is not dependent upon the recovery of a money

judgment against the trustee and its collection from the

trustee’s general assets; the beneficiary may elect the remedy

of following the trust property ...

z**

Another rule of damages provides that a trustee is

liable for any profit he has made through his breach of trust

even though the trust has suffered no loss. ...

A third measure of damages permits recovery of profit

that would have accrued to the trust had there been no breach

of trust.

z“**

In other cases, where the essence of the suit is the

conversion of trust property, the beneficiary may be given the

option of holding the trustee liable in damages for the value of

the trust property at one time or another, or for the value of

one item of property or another, or, where the trustee has used

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the trust fund for his own benefit, reconveying the property

and holding the trustee liable for the actual income obtained

from the trust property or for interest.

ze

SHSACSSASOKBAABRAABDAASHESABEASAASESARPOKBAR SAHA ECASKAGKERASAEAD SE C4 SE

D. Dobbs, Law of Remedies (2d ed. 1983)

(cited parts only)

§4.1 Restitution and Unjust Enrichment

ze

Unjust enrichment basis of restitution claims. . . . In spite

of their diversity, restitution claims are bound by a major

unifying thread. Their purpose is to prevent the defendant's

unjust enrichment by recapturing the gains the defendant

secure in a transaction.

***

Relation to Restitution Damages

Remedial differences. Restitution measures the remedy

by the defendant's gain and seeks to force disgorgement of

that gain. It differs in its goal or principle from damages,

which measures the remedy by the plaintiff's loss and seeks to

provide compensation for that loss... .

**

Relation of Restitution to Equity

The substantive basis of restitution is related to

substantive equity. That is, courts applying substantive equity

and courts applying the law of unjust enrichment are both

applying a law of “good conscience.” Remedially and

historically speaking, however, restitution might be either a

pure

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