Appendix — Young v. Verizon's Bell Atlantic Cash Balance Plan
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APPENDIX
TABLE OF CONTENTS
Appendix A: Opinion of the United States
Court of Appeals for the Seventh
Circuit
(Aug. 10, 2010) .......... la
Appendix B: Opinion of the United States
District Court for the Northern
District of Illinois
(Nov. 2, 2009) ....... -..... 29a
Appendix C: Opinion of the United States
District Court for the Northern
District of Illinois
(Aug. 28, 2008) ......-... .. 144a
Appendix D: Order of the United States Court
of Appeals for the Seventh Circuit
Denying Petition for Rehearing or
Rehearing En Banc
(Sept. 8, 2010) ............ 19la
Appendix E: Statutory Provisions Involved . 193a
Appendix F: Excerpts, Bell Atlantic Cash
Balance Plan ............. 224a
Appendix G: [ixcerpts, Summary Plan Descrip-
tlon ........0 ee eee ee een 229a
APPENDIX A
In the
United States Court of Appeals
For the Seventh Circuit
Nos. 09-3872 & 09-3965
[Filed August 10, 2010]
CYNTHIA N. YOUNG, on behalf of
herself and others similarly situated,
Cross-Appellee,
VU.
)
)
)
Plaintiff-Appellant /
)
)
)
4
VERIZON'S BELL ATLANTIC CASH )
BALANCE PLAN, et al., )
)
Defendants-Appellees /
Cross-Appellants.
)
Appeals from the United States District Court
for the Northern District of Illinois,
Eastern Division. No. 05 C 07314—
Morton Denlow, Magistrate Judge.
ARGUED JUNE 1, 2010
DECIDED AUGUST 10, 2010
Before BAUER, FLAUM, and TINDER, Circuit Judges.
TINDER, Circuit Judge. “People make mistakes.
Even administrators of ERISA plans.” Conkright v.
Frommert, 130 S. Ct. 1640, 1644 (2010). This
introduction was fitting in Conkright, which dealt with
a single honest mistake in the interpretation of an
ERISA plan. It is perhaps an understatement in this
case, which involves a devastating drafting error in the
multi-billion-doliar plan administered by Verizon
Communications, Inc. (“Verizon”).
Verizon’s pension plan contains erroneous language
that, if enforced literally, would give Verizon
pensioners like plaintiff Cynthia Young greater
benefits than they expected. Young nonetheless seeks
these additional benefits based on ERISA’s strict rules
for enforcing plan terms as written. Although Young
raises some forceful arguments, we conclude that
ERJSA’s rules are not so strict as to deny an employer
equitable relief from the type of “scrivener’s error” that
occurred here. We will accordingly affirm the district
court’s judgment granting Verizon equitable
reformation of its plan to correct the scrivener’s error.
Ja
I. Background
A. Bell Atlantic’s Pension Plans
Bell Atlantic, the predecessor of Verizon, operated
the Bell Atlantic Management’ Pension Plan
(“BAMPP”) until 1996. The BAMPP expressed an
employee’s retirement benefit as a defined annuity,
but employees also had the option of receiving a lump
sum if they retired during specified “cashout windows.”
For certain employees who retired during the 1994
1995 cashout window, the BAMPP provided a lump
sum equal to the “actuarial equivalent present value”
of the employce’s pension benefit, but calculated using
an enhanced discount rate. Specifically, section 4.19 of
the BAMPP required the use of a discount rate of
“120% of the applicable . . . PBGC [Public Benefit
Guarantee Corporation| interest rate in effect” at the
time of severance.
In 1996, Bell Atlantic adopted the Bell Atlantic
Cash Balance Plan to replace the BAMPP. ‘The new
Plan expressed an employee’s benefit as a cash balance
that grew steadily with the employee’s age and years
of service. Under the Cash Balance Plan, employees
still had the option of receiving their retirement
benefit as either an annuity or a lump sum.
Key to this transition to the Cash Balance Plan was
converting the value of employees’ benefits under the
old BAMPP to cash balances under the new Plan. The
Plan used “transition factors,” a series of multipliers
that increased with employees’ age and years of
service, to make the conversion. The Plan language
describing this conversion is critical, so we reproduce
it in some detail (the emphasis is ours):
16.5 Opening Balance
16.5.1 Pension Conversions is ot the
Transition Date
Where a present value must be determined under
this Section 16.4 |sic, should read “Section
16.5", the present value shall be determined as
follows: (a) using the PBGC interest rates which
were in effect for September of 1995
16.5.1(a) 1995 Active Participants and 1995
Former Active Participants
the opening balance of the Participant’s
Cash Balance Account on January 1, 1996 shall
be the amount described in subsection (1) or (2)
below, as applicable:
16.5.l(a)(1) If Eligible for Service
Pension
16.5.1(a)(2) Not Eligible for Service
Pension
In the case of a Participant who is not
eligible for a Service Pension under the 1995
BAMPP Plan as of the Transition Date, the
amount described in this paragraph (2) is the
product of multiplying (A) the Participant's
applicable Transition Factor described in
Table I of this Section, times (B) the lump
sum cashout value of the Accrued Benefit
payable at age 65 under the 1995 BAMPP
Plan, determined as if the Participant had a
Severance From Service Date on December
31, 1995, based on Compensation paid
through December 31, 1995, multiplied by
the applicable transition factor described in
Table 1 of this Section.
B. Young’s Administrative Claim
Cynthia Young worked for Bell Atlantic from 1965
to 1997. When the Cash Balance Plan took effect. in
1996, Young was not eligible for a service pension
under the BAMPP—that is, her age and service level
did not qualify her for full retirement benefits—so her
opening cash balance was calculated using
§ 16.5.1(a)(2), for a resulting balance of $240,127. By
the time Young retired in 1997, her cash balance had
grown to the point that she received a lump-sum
benefit of $286,095.
Several years later, in 2004, Young filed a claim
with the Claims Review Unit of Verizon (which by then
had taken over Plan administration as Bell Atlantic’s
successor). Young claimed that Bell Atlantic made two
errors in calculating her opening cash balance, and
hence her ultimate pension benefit, under the Cash
Balance Plan. First, Young read the language of
§ 16.5.1(a)(2) to require that the “applicable transition
factor” be multiplied twice to convert her lump-sum
cashout under the BAMPP to her opening cash balance
under the new Plan. Bell Atlantic, however, multiplied
the transition factor only once when making the
conversion. Second, Young claimed that Bell Atlantic
improperly applied the 120% PBGC discount rate used
in the 1995 BAMPP to determine the “lump-sum
6a
cashout value” under § 16.5.1(a)(2). Young contended
that Bell Atlantic should have used a discount rate of
simply 100% of the PBGC rate.
Verizon’s Claims Review Unit denied Young's
clams, and on appeal, Verizon’s Claims Review
Committee affirmed. The Committee concluded that
the intended meaning of § 16.5.1(a)(2) was to use only
a single transition factor to calculate opening cash
balances; the section’s second reference to the
“applicable transition factor” was a drafting mistake.
As for Young’s discount rate claim, the Committee
concluded that § 16.5.1(a)(2) incorporated the 120%
PBGC rate used in the 1995 BAMPP by referring to
“the lump-sum cashout value ... under the 1995
BAMPP Plan.”
C. Young’s Federal Court Class Action
In 2005, Young brought a federal court action
under ERISA § 502(a), 29 U.S.C. § 1132(a), against
Verizon and its Cash Balance Plan (collectively
“Verizon”). Young asserted the same claims she raised
in Verizon’s administrative process, arguing that
Verizon improperly applied only a single transition
factor and the 120% PBGC discount rate to calculate
her opening cash balance. The parties agreed to treat
the case as a class action, and the district court
certified a class of some 14,000 Bell Atlantic/Verizon
pensioners similarly situated to Young.
Young's class action presented the district court,
acting through Magistrate Judge Denlow, with a
challenge. The court was confronted with a convoluted
ERISA plan that seemed to contain a costly drafting
error, but an uncertain state of law on the scope of the
fa
court’s review of such an error. So the court decided to
bifureate the trial into two phases and apply
alternative standards of review. In the first phase, the
court assumed that it was limited to examining the
administrative record and reviewing the Verizon
Review Committee’s denial of benefits under a
deferential standard. (The Cash Balance Plan granted
Verizon, as plan administrator, broad discretion to
interpret the Plan, so judicial review was constrained
to an “arbitrary and capricious” standard. Black v.
Long Term Disability Ins., 582 F.3d 738, 743-44 (7th
Cir. 2009).) Under this standard, the district court
upheld the Committee's denial of Young's discount rate
claim. Conversely, on Young’s transition factor claim,
the court concluded that the Committee abused its
discretion in unilaterally disregarding the second
reference to the transition factor in § 16.5.1(a\2) asa
drafting mistake. If Verizon wished to avoid that
mistake, it would have to seek a court order for
equitable reformation of the Plan.
Taking the district court's cue, Verizon
counterclaimed for equitable reformation of the Plan to
remove the second transition factor in § 16.5.1(a)(2) as
a “scrivener’s error.” The court took up Verizon's
counterclaim in the second phase of the trial, in which
the court conducted a de novo review of the Plan and
allowed the parties to introduce extrinsic evidence on
the intended meaning of § 16.5.1(a)(2). And that
evidence overwhelmingly showed that the inclusion of
the second transition factor was indeed a scrivener’s
error.
The drafting history of the 1996 Plan revealed how
the second, erroneous transition factor came to be. Six
drafts of the Plan were prepared prior to the final
version. The first three drafts were prepared by
Mercer Human Resources Consulting, an outside firm
hired by Bell Atlantic, and contained no mention of a
second transition factor. It was not until one of Bell
Atlantic’s in-house attorneys, Barry Peters, took over
drafting responsibility that the second transition factor
appeared. In working on the fourth draft, Peters
restructured the conversion formula under
§ 16.5.1(a)(2) into a more readable “A times B” format,
but in doing so, neglected to delete a trailing clause
from the previous draft that referred to “the applicable
Transition Factor.” Testifying in the district court,
Peters admitted that he made this mistake in failing
to delete the trailing clause in § 16.5.1(a)(2), thereby
duplicating the transition factor. Peters’s mistake
survived unnoticed in the fifth, sixth, and final drafts
of the Plan.
In addition to the drafting history, the
correspondence between Bell Atlantic and plan
participants showed an expectation that only a single
transition factor would be used to calculate opening
cash balances. In October 1995, Bell Atlantic sent
participants a brochure entitled, “Introducing Your
Cash Balance Plan,” which clearly depicted opening
cash balances as the product of an employee’s lump-
sum value under the 1995 BAMPP and a single
transition factor. In November 1995, Bell Atlantic sent
participants personalized statements of their
estimated opening account balances, which also
illustrated the use of a single transition factor.
Following the implementation of the Plan, Bell
Atlantic sent participants personalized statements of
their actual opening balances, and thereafter quarterly
cash balance statements, which, again, reflected the
use of only one transition factor. Notably, though,
Qa
these Plan-related communications contained “plan
trumps” provisions cautioning that. in the event of
discrepancies between those communications and the
Plan, the Plan would govern.
Also convincing was the course of dealing between
Bell Atlantic/Verizon and plan participants. Bell
Atlantic consistently calculated opening cash balances
using a single transition factor and paid benefits
accordingly. Taking Young's case as an example, her
transition factor was 2.659. The estimated opening
balance statement that Young received illustrated the
multiplication of this 2.659 transition factor by her
BAMPP lump-sum cashout value of $90,027, for an
estimated opening balance of $90,027 x 2.659 =
$239,381. The actual opening balance statement that
Young received in 1996 apphed the same, singie
transition-factor formula to slightly different numbers:
$90,307 x 2.659 = $240,127. Prior to Young’s lawsuit,
no employee complained that opening balances should
have been increased by an additional transition factor.
For her part, Young admitted that she never relied on
the transition factor language in § 16.5.1(a)(2) prior to
this litigation.
Based on this evidence of the intended meaning of
the Plan, the district court found that the second
transition factor in § 16.5.1(a)(2) was a scrivener’s
error and granted Verizon’s counterclaim for equitable
reformation. The court aiso resolved a host of other
arguments raised by the parties, many of which we
discuss below. But suffice it to say, the district court’s
treatment of the issues presented by this case was
exhaustive Over the course ofa four-year, multi-phase
litigation, the court built a complete record, fully
explored alternative bases of decision, and sharply
10a
honed the issues for appellate review. These
commendable efforts by the district court, as well as
the fine advocacy by both sides, have greatly assisted
this court in deciding this complex ERISA case.
[. Analysis
A. Statute of Limitations
Before reaching the merits, we must address each
side’s argument that the other’s claims are barred by
the statute of limitations. ERISA does not provide a
limitations period for actions brought under § 502, 29
U.S.C. § 1132, so we borrow the most analogous
statute of limitations from state law. Berger v. AXA
Network LLC, 459 F.3d 804, 808 (7th Cir. 2006). We do
not automatically borrow the forum state’s limitations
period; if another state has a significant connection to
the dispute and its limitations period is more
consistent with federal ERISA policies, that state’s
limitations period should apply. /d. at 813. For actions
such as this one to enforce ERISA plans under
§ 502(a), we have previously borrowed state
limitations periods for suits on written contracts.
Leister v. Dovetail, Inc., 546 F.3d 875, 880-81 (7th Cir.
2008); Daill v. Sheet Metal Workers’ Local 73 Pension
Fund, 100 F.3d 62, 65 (7th Cir. 1996).
The parties agree that Pennsylvania’s four-year
statute of limitations for breach of contract actions, 42
Pa. Cons. Stat. § 5525, should apply to this ERISA
case. Pennsylvania hasthe most significant connection
to this dispute, since Bell Atlantic was headquartered
and drafted the Cash Balance Plan there. Also, more
class members currently live in Pennsylvania than any
other state, and while a few class members live in the
lla
forum state of Illinois, Young has never lived or
worked there. We further note that the Plan contains
a choice of law provision stating that Pennsylvania law
will fill any gaps left by federal ERISA law. See Berger,
459 F.3d at 813-14 (considering choice of law clause as
a non-controlling but relevant factor in selecting a
limitations period).
The real point of contention is the accrual date of
the parties’ claims, that is, when Pennsylvania’s four-
year limitations period started to run. Although
federal courts borrow state limitations periods for
certain ERISA claims, the accrual of those claims is
governed by federal common law. Daill, 100 F.3d at 65.
Beginning with Young’s ERISA claim, we have held
that a claim to recover benefits under § 502(a) accrues
“upon a clear and unequivocal repudiation of rights
under the pension plan which has been made known to
the beneficiary.” Jd. at 66. In this case, Young did not
receive a clear repudiation of her claim for additional]
benefits until 2005, when Verizon’s Review Committee
resolved her administrative appeal. (Actually, the
Committee denied Young’s claim with respect to the
discount rate issue 1n 2005 but took until 2007 to deny
her claim with respect to the transition factor issue.
Since it is obvious that Young’s entire federal court
action, filed in 2005, would be timely using a 2005
accrual date, this distinction is immaterial.) Prior to
denying Young’s administrative claim, Verizon did not
inform Young that it rejected her interpretation of the
Plan calling for two transition factors and a 100%
PBGC discount rate. Cf. id. at 66 (claim accrued upon
correspondence from plan _ disagreeing with
participant’s understanding of benefits).
12a
Verizon argues that Young’s claim accrued in
February 1998, when she received her lump-sum
benefit computed under Verizon’s interpretation of the
Cash Balance Plan. At that time, however, the parties’
dispute over the correct interpretation of the Plan had
not developed. And nothing suggests that the $286,095
payment that Young received should have been a red
flag that she was underpaid. Cf Redmon v. Sud-
Chemie Inc. Ret. Plan for Union Employees, 547 F.3d
531, 539 (6th Cir. 2008) (finding a clear repudiation
when the plan stopped making payments entirely, but
not earher when the payment amount was merely
inconsistent with the plaintiffs understanding of
benefits). The 1998 payment that Young received was
not so inconsistent with her current claim for
additional benefits as to serve as a clear repudiation.
Moving to Verizon’s counterclaim, Seventh Circuit
precedent provides less guidance on the accrual of a
claim for equitable reformation under ERISA
§ 502(a)}—understandably so, since the cognizance of
such a claim is an issue of first impression for this
court. The general federal common law rule is that an
ERISA claim accrues when the plaintiff knows or
should know of conduct that interferes with the
plaintiffs ERISA rights. See Berger, 459 F.3d at 815-16
(accrual when beneficiaries learned of change in
employer’s method for determining benefit eligibility);
Teumer v. Gen. Motors Corp., 34 F.3d 542, 550 (7th
Cir. 1994) (“Once an unlawful action is taken, a claim
accrues when the putative plaintiff discovers the
injury that results.”). Applying this rule to Verizon’s
reformation action, we consider when Verizon should
have known that the scrivener’s error in the Cash
Balance Plan, if left unreformed, would impede its
rights under the Plan.
13a
The district court found, and Verizon does not
dispute, that Verizon’s predecessor Bell Atlantic
learned of the scrivener’s error in 1997. Indeed, Bell
Atlantic removed the second, erroneous transition
factor from the 1998 plan that it adopted to replace the
1997 version of the Cash Balance Plan. Still, we
conclude that this 1997 discovery did not give Verizon
notice of the need to reform the scrivener’s error, given
a course of dealing consistent with Verizon’s
interpretation of the Plan.
Verizon always treated the Plan’s second transition
factor as a drafting mistake, and _ through
correspondence with plan participants, it
communicated that only a single transition factor
would be used to calculate opening cash balances.
Verizon consistently paid benefits using this formula,
and prior to Young’s administrative claim, no
employee communicated a contrary understanding
that Plan benefits should be calculated using two
transition factors. Cf Tolle v. Carroll Touch, Inc., 977
F.2d 1129, 1141 (7th Cir. 1992) (employee’s ERISA
unlawful discharge claim accrued when employer
communicated discharge decision); Bowes v. Travelers
Ins. Co., 173 F. Supp. 2d 342, 346 (E.D. Pa. 2001)
(applying Pennsylvania law, claim for reformation of
written contract accrued when conflicting oral
statements underlying the dispute were made). Under
these circumstances, although Verizon discovered the
drafting mistake in 1997, it did not then know that
this mistake would give rise to a controversy requiring
it to raise an equitable reformation claim. See Inti
Union v. Murata Erie N. Am., Inc., 980 F.2d 889, 901
(3d Cir. 1992) (ERISA claim did not accrue when plan
sponsor amended plan absent evidence that
participants knew of any potential controversy over
l4a
amended language). Instead, it was not before Young
put the transition factor language at issue in her 2005
federal court action that Verizon’s counterclaim for
equitable reformation accrued.
None of the parties’ claims accrued before 2005
when Young brought her federal court ERISA action,
so these claims are timely under the applicable
Pennsylvania four-year limitations period. We may
proceed to the merits of Verizon’s claim for equitable
reformation and Young’s claim for additional benefits
under ERISA § 502(a).
B. Equitable Reformation Due to Scrivener’s
Error
ERISA is a comprehensive statute designed to
uniformly regulate employee benefit plans. Aetna
Health Inc. v. Davila, 542 U.S. 200, 208 (2004). To
achieve uniformity, ERISA contains numerous
requirements for adopting and administering plans.
Plans must be “established and maintained pursuant
to a written instrument.” 29 U.S.C. § 1102(a)(1). The
plan terms must be communicated to participants
through an easily understood “summary plan
description,” as well as a “summary of any material
modification” to the plan. Jd. § 1022(a). These ERISA
required writings are given primary effect and strictly
enforced, and plan administrators must adhere to “the
bright-line requirement to follow plan documents in
distributing benefits.” Kennedy v. Plan Adm’r for
DuPont Sav. & Inv. Plan, 129 S. Ct. 865, 876 (2009).
While ERISA’s strict requirements “ensure|[ | fair
and prompt enforcement of rights under a plan,”
Songress was careful not to make those requirements
Ja
so onerous “that administrative costs, or litigation
expenses, unduly discourage employers from offering
plans in the first place.” Conkright v. Frommert, 130 S.
Ct. 1640, 1649 (2010) (quotations omitted). So ERISA
also allows some flexibility in plan administration and
enforcement to achieve fair, equitable results. In
particular, employers may grant plan administrators
broad discretion in interpreting plan terms. /d.
“Deference promotes efficiency by encouraging
resolution of benefits disputes through internal
administrative proceedings rather than _ costly
litigation.” Id.
Another ERISA provision that promotes equitable
plan enforcement—and the statute important here—is
§ 502(a)(3), which allows a_ plan _ participant,
beneficiary, or fiduciary to bring a civil action for
“appropriate equitable relief.” 29 U.S.C.
§ 1132(a)(3)(B). The Supreme Court has explained that
the statute authorizes “those categories of relief that
were typically available in equity” during the days
when common law courts were divided as courts of law
or of equity. Mertens v. Hewitt Assocs., 508 U.S. 248,
256 (1993); see also Kenseth v. Dean Health Plan, Inc.,
No. 08-3219, 2010 WL 2557767, at *24 (7th Cir. June
28, 2010) (describing categories of equitable relief
available under 29 U.S.C. § 1132(a)(3)). The issue in
this case, then, is whether Verizon’s claim for
equitable reformation of its Cash Balance Plan is the
type of equitable relief authorized by § 502(a)(3).
We have: never considered whether § 502(a)(3)
authorizes equitable reformation of an ERISA plan due
to a scrivener’s error, but our case law addressing the
related problem of ambiguous plan language suggests
that such relief may be appropriate.
loa
In Mathews v. Sears Pension Plan, 144 F.3d 461
(7th Cir. 1998), we put the parties’ reasonable
expectations ahead of the literal text of an ERISA
plan. Although the plain language of the plan
suggested a benefits formula more favorable to
employees, the employer offered objective, extrinsic
evidence showing an “extrinsic ambiguity” in this
language. Jd. at 466-67. The summary plan documents
and the parties’ course of dealing were consistent with
the employer’s reading of the plan, so we declined to
adopt the employees’ contrary reading under “rigid and
archaic” rules of contract interpretation. Jd. at 469.
We reached a different result in Grun v. Pneumo
Abex Corp., 163 F.3d 411, 420-21 (7th Cir. 1998),
refusing to set aside unambiguous plan language
based on an employer’s claim of “mutual mistake.”
Still, we acknowledged that such relief would be
available in “the rare case where literal application of
a text would lead to absurd results or thwart the
obvious intentions of its drafters.” /d. at 420 (quotation
omitted). Reformation was inappropriate in Grun
because the employee relied on the literal plan
language to predict his right to severance
compensation. Id. at 421; cf. Mathews, 144 F.3d at 469
(noting absence of claim that any beneficiary actually
relied on plan language).
Other circuits have directly addressed claims for
equitable reformation of an ERISA plan. Using
reasoning similar to that in Mathews and Grun, these
courts have either concluded that ERISA authorizes
such relief or does not foreclose the possibility.
Verizon’s strongest case is Int’l Union v. Murata
Erie N. Am., Inc., 980 F.2d 889, 907 (3d Cir. 1992), in
lVa
which the Third Circuit recognized an employer's
§ 502(a)(3) claim to correct a “scrivener’s error” in a
plan provision on the distribution of excess funds. The
court found equitable reformation appropriate because
holding the employer to the scrivener’s error would
produce “what is admittedly a ‘windfall’ ”—“an excess
remaining in the Plans” that the plaintiffs could not
have reasonably expected. Jd. The Eighth Circuit
applied a similar rationale in Wilson v. Moog Auto.,
Ince. Pension Plan, 193 F.3d 1004, 1008-10 (8th Cir.
1999), to conclude that an ERISA plan’s failure to
provide a minimum age for retirement benefits was a
reformable mistake. Reformation was possible because
extrinsic evidence showed that none of the plaintiffs
actually relied on the erroneous plan language or
believed that they would be eligible for early
retirement. /d. at 1009-10.
The Ninth Circuit distinguished Murata in Cinelli
v. Sec. Pac. Corp., 61 F.3d 1437, 1444-45 (9th Cir.
1995), rejecting an employee’s claim that the absence
of a plan provision entitling him to vested life
insurance benefits was a_emistake. Although
reformation of a scrivener’s error was appropriate in
Murata to avoid a “windfall” and uphold employees’
reasonable expectations of benefits, those factors were
lacking in Cinelli. Id. at 1445. Likewise, in Blackshear
v. Reliance Standard Life Ins. Co., 509 ¥.3d 634, 643-
44 (4th Cir. 2007), abrogated on other grounds as
stated in Williams v. Metro. Life Ins. Co., Nos. 09-1025
& 09- 1568, 2010 WL 2599676, at *5 (4th Cir. June 30,
2010), the Fourth Circuit declined to equitably reform
an ERISA plan under the circumstances, where the
plan language was clear and neither the summary
plan description nor other plan documents supported
the employer’s claim of a scrivener’s error.
18a
From this authority, we conclude that ERISA
§ 502(a)(3) authorizes equitable reformation of a plan
that is shown, by clear and convincing evidence, to
contain a scrivener’s error that does not reflect
participants’ reasonable expectations of benefits.
Though complex in design, ERISA maintains the basic
goal of “protecting employees’ justified expectations of
receiving the benefits their employers promise them.”
Cent. Laborers’ Pension Fund v. Heinz, 541 U.S. 739,
743 (2004). It would thwart this goal to enforce
erroneous plan terms contrary to those expectations,
even if doing so would increase employees’ benefits.
The “appropriate equitable relief’ authorized by
§ 502(a)(3) allows a court to reform an ERISA plan to
avoid such an unfair result. See Cent. Pa. Teamsters
Pension Fund v. McCormick Dray Line, Inc., 85 F.3d
1098, 1105 n.2 (3d Cir. 1996) (“[I}]n circumstances
where a court can establish that no plan participants
were likely to have relied upon the scrivener’s error in
question . . . allowing reformation of the scrivener’s
error does not thwart ERISA’s statutory purpose
....”); Murata, 980 F.2d at 907 (“[T)he alleged error
relates to what is admittedly a ‘windfall’. . . that
neither side could have reasonably expected.”); cf
Mathews, 144 F.3d at 469 (“We cannot see how ERISA
beneficiaries or anyone else . . . would be benefited by
the adoption of principles of contractual interpretation
so rigid and archaic as to permit the class to reap the
pure windfall here sought to the potential prejudice of
other beneficiaries.”).
We acknowledge, like the Third Circuit in Murata,
980 F.2d at 907, that equitable reformation of an
ERISA plan creates some tension with the “written
instrument” requirement of 29 U.S.C. § 1102(a)1),
also known as the “plan documents rule,” Kennedy,
19a
129 S. Ct. at 877. This rule ensures “that every
employee may, on examining the plan documents,
determine exactly what his rights and obligations are
under the plan,” Murata, 980 F.2d at 907, without
complicated “enquiries into nice expressions of intent”
behind plan language, Kennedy, 129 S. Ct. at 875.
Young cautions that allowing equitable reformation of
ERISA plans will undermine the efficient, easily
enforceable plan documents rule and encourage
protracted, discovery-intensive litigation over the
intended meaning of a plan.
Even so, since we interpret § 502(a)(3) to authorize
the equitable reformation claim asserted here, we
cannot simply reject such a claim based on the added
litigation burden that it might represent. Moreover, we
see little difference between the intent-based inquiry
that took place in this reformation case and what must
occur in the related case of an ambiguous ERISA plan.
In each case, the court must look beyond the plan
document to extrinsic evidence to determine the
parties’ understanding of the plan. See Mathews, 144
F.3d at 467. We do not think that the availability or
scope of this judicial inquiry should turn on whether
the error in an ERISA plan is deemed an “ambiguity”
or a “scrivener’s error.” Drafting mistakes in ERISA
plans may take many forms; some involve language
that is ambiguous on its face while others, like the
mistake here, involve language that is not intrinsically
ambiguous but still misstates participants’ benefits. It
would not further the purposes of ERISA to allow
courts to correct one type of mistake but not the other.
Also, other limitations on the equitable reformation
claim that we recognize under § 502(a)(3) will mitigate
its impact on the plan documents rule. Only those who
20a
can marshal “clear and convincing” evidence that plan
language is contrary to the parties’ expectations will
have a viable claim. Murata, 980 F.2d at 908. This
standard of proof is rigorous, requiring evidence that
is “clear, precise, convincing and of the most
satisfactory character that a mistake has occurred and
that the mistake does not reflect the intent of the
parties.” /d. at 907 (quotation omnutted); accord
Blackshear, 509 F.3d at 642. The evidence also must
be “objective” and not dependent “on the credibility of
testimony (oral or written) of an interested party.”
Mathews, 144 F.3d at 467. These high standards of
proof should deter an employer from seeking to reform
plan language simply because it has_ proven
unfavorable.
In this case, though, we agree with the district
court that Verizon presented enough objective,
convincing evidence to show that the second reference
to the transition factor in § 16.5.1(a)(2) of the Cash
Balance Plan was a scrivener’s error inconsistent with
participants’ expected benefits.
The drafting history left little doubt that the second
transition factor in § 16.5.1(a\2) was a mistake. It first
appeared in the fourth draft of the Plan, the first draft
prepared by Bell Atlantic attorney Barry Peters. This
draft reformatted the multiplication formula in
§ 16.5.1(a)(2), but in doing so, failed to omit the prior
draft’s trailing clause that referred to the transition
factor. thereby duplicating the transition factor. We
need not rely on Peters’s arguably self-serving
testimony to conclude that this botched reformatting
led to the second transition factor; so much is clear by
comparing the fourth draft with the prior version. And
given the absence of any evidence contemporaneous to
Pla
the fourth draft suggesting that Bell Atlantic was
reworking the Plan to increase benefits, it is evident
that duplicating the transition factor was a drafting
mistake.
The communications and course of dealing between
Bell Atlantic/Verizon and plan participants further
illustrate that the parties intended a single-transition
factor formula. Young and other participants received
a Plan brochure that described their opening cash
balances as the product of their lump-sum values
under the 1995 BAMPP and a single transition factor.
Although the brochure did not explicitly state that a
“single” transition factor would be used, the formula
depicted in the brochure makes clear that only one
multiplier would apply. That was confirmed in the
personalized statements sent to participants of their
estimated and actual opening cash balances, which
reported values based on the use of a single transition
factor. By way of illustration, Young received an
estimated opening balance statement that reported her
transition factor of 2.659 and her BAMPP lump-sum
cashout value of $90,027, for an estimated opening
balance of $239,381. Her actual opening balance
reported in a later statement, $240,127, was calculated
similarly. If a second 2.659 transition factor were
applied to these figures, Young’s estimated and actual
opening balances would have been $636,514 and
$638,498, respectively. Bell Atlantic/Verizon never
squared transition factors in this manner but instead
calculated benefits using only a single transition
factor, consistent with the Plan communications. Prior
to Young’s claim, no employee complained that cash
balances should have been increased by an additional
transition factor.
222
Granted, many of the Plan communications,
including the Plan brochure and opening balance
statements, are less compelling because they contain
what Young describes as “plan trumps” provisions,
which stated that the communications were
subordinate to any contrary language in the Plan. As
Young points out, were the situation reversed and the
employee-favorable language contained in a Plan
communication rather than the Plan itself, Verizon no
doubt would contend that these plan trumps
provisions barred Young from relying on the
communication. See Kolentus v. Aveo Corp., 798 F.2d
949, 958 (7th Cir. 1986) (““{W]hen the summary booklet
expressly states that it is merely an outline of the
pension plan and that the formal text of the plan
governs in the event a question arises, the plaintiffs
cannot rely on the general statements of the booklet
but must look to the plan itself.”). Young’s point is
well-taken, but we cannot agree that the mere
existence of plan trumps provisions precludes Verizon
from reforming the Plan consistent with Plan
communications. At issue is whether Verizon has
established by clear and convincing evidence that the
intended meaning of § 16.5.1(a)(2) was to apply only a
single transition factor to calculate opening cash
balances. Verizon may include all the Plan
communications describing a single-transition-factor
formula as part of that evidence, even though they
contain plan trumps provisions.
Based on this evidence of the intended meaning of
the Plan, the district court correctly found that the
second transition factor in § 16.5.l(a)(2) was a
scrivener’s error inconsistent with plan participants’
expected benefits. Under these circumstances,
23a
equitable reformation of the Plan to remove the error
is appropriate.
We close our discussion of Verizon’s reformation
claim by considering additional defenses to equitable
relief. Because Verizon’s claim is one for “appropriate
equitable relief” under ERISA § 502(a)(3)(B), 29 U.S.C.
§ 1132(a)(3)(B), it is subject to the traditional equitable
defenses at common law, provided that they are not
inconsistent with ERISA.
Young raises the defense of “good faith” and “fair
dealing,” under which a contracting party may be
precluded from reforming a mistake caused by the
party's own “gross” negligence. Restatement (Second)
of Contracts § 157 & cmt. a (1981). As the district court
put it, Bell Atlantic/Verizon’s failure +o prevent the
drafting mistake in § 16.5.1(aX2) was “profound”
negligence. Bell Atlantic charged a single in-house
attorney, Barry Peters, with revising a _ critical
provision of a miulti-billion-dollar pension plan,
apparently without critical review by another ERISA
expert. It is baffling that a major corporation would
not invest greater resources to ensure accuracy in the
drafting of such an important document. Still, we
cannot agree with Young that this institutional failure
showed a lack of good faith. Verizon never
misrepresented its intended meaning of the Cash
Balance Plan, and indeed, based on the extrinsic
evidence examined above, it made great efforts to
accurately communicate how participants’ benefits
would be calculated. Cf id. cmt. a, illustration 2
(misrepresentation that party verified bid for accuracy
was failure to act in good faith).
24a
For similar reasons, we do not accept Young’s
“unclean hands” defense, under which “equitable relief
will be refused if it would give the plaintiff a wrongful
gain.” Scheiber v. Dolby Labs., Inc., 293 F.3d 1014,
1021 (7th Cir. 2002). A plaintiff who acts unfairly,
deceitfully, or in bad faith may not through equity seek
to gain from that transgression. See Packers Trading
Co. v. Commodity Futures Trading Comm’n, 972 F.2d
144, 148-49 (7th Cir. 1992). Verizon made a mistake,
and a big one at that, in drafting the Cash Balance
Plan, but Verizon did not attempt to deceive plan
participants regarding their benefit rights under the
intended meaning of § 16.5.1(a)(2). Cf id. (barring
relief for a plaintiff who concealed his knowledge of the
defendant’s mistake and then attempted to recover
based on that mistake). On the contrary, Verizon’s
Pian administration and communications reflected its
consistent view that opening cash balances would be
calculated using only a single transition factor.
Finally, Young raises the equitable defense of
laches, or unreasonable delay, by Verizon in seeking
equitable reformation. Laches means “culpable delay
in suing” and may apply if the plaintiff commits an
unreasonable, prejudicial delay in bringing the suit.
Teamsters & Employers Welfare Trust of Ill. v. Gorman
Bros. Ready Mix, 283 F.3d 877, 880 (7th Cir. 2002).
For reasons explained above in our discussion of the
statute of limitations, Verizon did not unreasonably
delay in bringing its equitable reformation claim.
Although Verizon learned of the scrivener’s error in
the Cash Balance Plan in 1997, at that time it had no
reason to believe that this error would lead to a
benefits dispute. Instead, the parties’ correspondence
and course of dealing were consistent with Verizon’s
understanding that only a single transition factor
i oe
20a
would be used to calculate benefits. By 1998, Verizon
had corrected the Plan to reflect this understanding,
and no employee communicated a_ contrary
interpretation before Young brought her admin-
istrative claim in 2004. Since this course of conduct
reinforced Verizon’s interpretation of the Cash Balance
Plan, Verizon did not “sleep on [its] rights,” Hot Wax,
Inc. v. Turtle Wax, Inc., 191 F.3d 813, 820 (7th Cir.
1999), by not bringing an equit2ble reformation claim
before Young’s lawsuit.
In sum, no equitable defenses bar Verizon's
equitable reformation claim under ERISA § 502(a)(3),
and the district court properly granted that claim to
remove the scrivener’s error from the Cash Balance
Plan.
C. Discount Rate for Opening Cash Balances
In addition to her argument regarding the second
transition factor in § 16.5.1(a)(2), Young claimed that
Verizon improperly applied the enhanced, 120% PBGC
discount rate used in the 1995 BAMPP to calculate her
opening balance under the Cash Balance Plan.
Verizon’s Review Committee denied Young’s discount
rate claim, and because the Plan grants the
administrator broad discretion to interpret Plan
provisions, we review the Committee’s decision for an
abuse of discretion. See Black v. Long Term Disability
Ins., 582 F.3d 738, 744 (7th Cir. 2009).
The interpretation of ERISA plans is governed by
federal common law, which draws on_ general
principles of contract interpretation to the extent they
are consistent with ERISA. Mathews, 144 F.3d at 465.
Under these principles, contract language is given its
26a
plain and ordinary meaning. Pitcher v. Principal Mut.
Life Ins. Co., 93 F.3d 407, 411 (7th Cir. 1996).
Contracts must be read as a whole, and the meaning
of separate provisions should be considered in light of
one another and the context of the entire agreement.
Taracorp, Inc. v. NL Indus., Inc., 73 F.3d 738, 745 (7th
Cir. 1996). Contract interpretations should, to the
extent possible, give effect to all language without
rendering any term superfluous, id. at 746, but if both
a general and a speci"c provision apply to the subject
at hand, the specific provision controls, Medcom
Holding Co. v. Baxter Travenol Labs., Inc., 984 F.2d
223, 227 (7th Cir. 1993).
The use of a discount rate to calculate opening
balances under the Cash Balance Plan occurs by
operation of § 16.5.1(a)(2). That section defines
opening cash balances as the product of two variables
(assuming, of course, one ignores the _ second
“transition factor” that we have disregarded as a
scrivener’s error): “(A) the Participant’s applicable
Transition Factor described in Table 1 of this Section,
times (B) the lump-sum cashout value of the Accrued
Benefit payable at age 65 under the 1995 BAMPP Plan
.... Under § 4.19 of the BAMPP, which was attached
to the Cash Balance Plan as an appendix, lump-sum
payments for employees who retired during the 1994-
1995 cashout window were calculated using a discount
rate of 120% of “the applicable PBGC interest rate.”
Reading the language of § 16.5.1(a)(2) in the
context of the entire Cash Balance Plan—including the
attached 1995 BAMPP—the best interpretation is one
that applies the 120% PBGC discount rate used in the
1995 BAMPFP to calculate opening cash balances. The
plain meaning of the “(B)” variable in
§ 16.5.1(a)(2)—“the lump-sum cashout value . . .
payable .. . under the 1995 BAMPP Plan”—is the
lump-sum value as calculated under the 1995 BAMPP.
Since the BAMPP used a 120% PBGC discount rate,
that same methodology carries over to calculating
opening balances under the Cash Balance Plan.
Young points to the umbrella section 16.5.1, which
provides that any “present value” that “must be
determined under this Section 16.[5] shall be
determined . . . using the PBGC interest rates which
were in effect for September of 1995.” Young would
apply this present value definition, which uses a
discount rate of simply 100% of the PBGC rate, to
determine the “lump-sum cashout value” in
§ 16.5.1(a)(2). Young’s interpretation ignores the
explicit reference in § 16.5.1(a)(2) to the cashout value
“under the 1995 BAMPP Plan.” Because § 16.5.1(a)(2)
specifically uses the 1995 BAMPP formula for
discounting lump-sum values, the more general
present value formula in § 16.5.1 does not apply to
that section.
We also disagree with Young that incorporating the
1995 BAMPP, 120% PBGC formula into § 16.5.1(a)(2)
in this manner renders the 100% PBGC formula in
§ 16.5.1 superfluous. The latter formula applies
broadly to calculate present values under “this Section
16.[5].”. Notably, unlike § 16.5.1(a), provisions in
§ 16.5.2(a) use the “present value” term defined in
§ 16.5.1 to determine opening cash balances for
employees covered by those sections. So it harmonizes
all the language in § 16.5 to give effect to the 120%
PBGC rate incorporated into § 16.5.1(a)(2) for that
specific provision, while giving effect to the general
100% PBGC rate for other provisions in § 16.5.
20a
The most reasonable reading of § 16.5.1(a)(2) is one
that applies the 120% PBGC discount rate to calculate
opening cash balances. At the very least, Verizon’s
Review Committee did not abuse its discretion in
adopting this interpretation.
Ill. Conclusion
ERISA’s rules for written plans are strictly
enforced, but they are not so strict as to prevent
equitable reformation of a plan that is shown, by clear
and convincing evidence, to contain a scrivener’s error
that is inconsistent with participants’ expected
benefits.
AFFIRMED
29a
APPENDIX B /
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT
OF ILLINOIS EASTERN DIVISION
Case No. 05 C 7314
Magistrate Judge Morton Denlow
[Filed November 2, 2009]
CYNTHIA N. YOUNG, on behalf of herself
and others similarly situated,
Plaintiff
VERIZON'S BELL ATLANTIC CASH
BALANCE PLAN, formerly known as Bell
Atlantic Cush Balance Plan, formerly known )
as Bell Atlantic Management Pension Plan,
and VERIZON COMMUNICATIONS, INC
as successor in interest to Bell Atlantic
Corporation
Detendant:
MEMORANDUM OPINION AND ORDER
This ERISA class action presents the issue of
whether a billion dollar scrivener’s error should be
30a
reformed or enforced as written. Plaintiff Cynthia N.
Young (“Plaintiff or “Young”) alleges that Defendants
Verizon's Bell Atlantic Cash Balance Plan (the “Plan”)
and Verizon Communications, Inc. (“Verizon”)
(collectively “Defendants”) improperly calculated her
pension benefits, and those of similarly situated
employees. Plaintiff seeks judicial review of the final
decision of the Plan Administrator denying her claims
for additional benefits. In their counterclaim,
Defendants seek reformation of the Plan to correct an
alleged scrivener’s error.
This Court previously considered these issues
applying a deferential) standard of review to the Plan
administrators’ decisions to deny Plaintiffs claims
based upon the administrative record. Young ov.
Verizon's Bell Atlantic Cash Balance Plan, 575 ¥ Supp
2d 892 (N.D. Il). 2008). (“Phase I Trial.”) Because this
case raises novel issues under ERISA and will likely
proceed to the Seventh Circuit Court of Appeals, the
Court now reviews these issues applying a de novo
standard of review, while permitting the parties to
introduce additional evidence. It is the Court’s
intention to decide all issues in such a way that the
reviewing court can finally resolve the case without
the necessity for a later remand
The Court conducted a second trial on September |
and 2, 2009 and heard closing arguments on October
5, 2009. (“Phase II Trial.”) The Court has carefully
considered the testimony of the two witnesses who
testified at the trial, the deposition excerpts of the
witnesses included in the parties’ exhibits, the parties’
trial exhibits, the parties’ agreed statement of facts,
the parties’ proposed findings of fact and conclusions
ola
of law, the parties’ briefs and the closing arguments of
counsel.
The following constitute the Court’s findings of fact
and conclusions of law in accordance with Rule 52(a) of
the Federal Rules of Civil Procedure. To the extent
certain findings of fact may be deemed conclusions of
law, they shall also be considered conclusions of law.
Similarly, to the extent matters contained in the
conclusions of law may be deemed findings of fact, they
shall also be considered findings of fact.
1. ISSUES PRESENTED
1. Whether the Defendants properly used an
interest rate of 120% of the PBGC rate, rather than
100% of the PBGC rate, in calculating Plaintiffs
opening balance (“Discount Rate Issue”)
ANSWER: Yes
2. Whether there was a scrivener's error in Plan
§ 16.5.1(a)(2) by reason of a second reference to the
transition factor in the calculation of the opening
balance (“Transition Factor Issue”)
ANSWER: Yes
3. Whether the Defendants are entitled to
reformation of the Plan to eliminate the second
reference to the transition factor in Plan § 16.5. 1(a)(2).
ANSWER: Yes
4. Whether Plaintiffs claims are barred by the
statute of limitations
ANSWER: No.
5. Whether Defendants’ claims are barred by the
statute of limitations.
ANSWER: No.
Il. FINDINGS OF FACT
A. The Parties.
1. Plaintiff Cynthia N. Young is the Class
representative for the Class in this action. AG ¥ 1.’
She testified by means of a deposition. (DX 58.)
a Young worked at Bell Atlantic (or one of its
acquired subsidiaries) from 1965 through 1997. During
the course of her career, she was a telephone operator,
service representative, administrative assistant,
communications representative, assistant manager,
and manager, and she finished her career as a project
manager. AG { 2.
3. Young was a participant in a series of
defined benefit pension plans, including the Bell
‘The Parties’ Agreed Statement of Facts (hereinafter,“AG]___*)
(Dkt. 178.) References to “PX __” and “DX __” are references to
Plaintiffs and Defendants’ trial exhibits, respectively. The parties
prepared a Joint Index of Trial Exhibits with cross references to
Bates numbers. (Dkt. 186.) Reference to“Dkt. __” are references
to docket entnes. References to “T. _” are references to the
September 1 and 2, 2009 trial transcript. The Court has provided
selected citations to the factual record. These are intended to be
representative citations and there may be other factual support in
the record that is not specifically cited.
33a
Atlantic Management Pension Plan (“BAMPP”), and
then the 1996 and 1997 Bell Atlantic Cash Balance
Plan (“Cash Balance Plan”). Young retired in 1997
when the 1997 Bell Atlantic Cash Balance Plan was
the operative plan and received a lump-sum payment
of her benefit on February 2, 1998, in the amount of
$286,094.89. AG { 3.
4. Young later received another payment of
$9,558.70 related to her participation in the Cash
Balance Plan due toa settlement by the Plan with the
Equal Employment Opportunity Commission
(““EEQC”"). AG ¥ 4.
5. Defendant Verizon Communications, Inc.
(“Verizon”)is a Delaware corporation with its principal
place of business in Basking Ridge, New Jersey.
Verizon is the successor-in-interest to Bell Atlantic
Corporation (“Bell Atlantic”). Bell Atlantic was one of
seven regional telephone operating companies created
on January 1, 1984 as a result of the divestiture of
AT&T. It represented one of 22 local operating
companies that AT&T owned and served the northern
Atlantic states. Bell Atlantic was headquartered in
Philadelphia and consisted of telephone companies in
Pennsylvania, New Jersey, Delaware, Maryland,
Virginia, West Virginia and the District of Columbia.
An agreement to merge Bell Atlantic and NYNEX, the
regional telephone operating company for New York
and New England, was announced in April 1996 and
became final on August 14, 1997. The combined
company took the name of Bell Atlantic, with
headquarters in New York City and a workforce of
130,000 employees. On July 27, 1998, Bell Atlantic
announced an agreement to merge with GTE, and this
merger was effective on June 30, 2000, with the new
ota
company taking the name of Verizon Communications,
Inc. AG J 5.
6. The merger of Bell Atlantic and NYNEX, and
the subsequent merger of Bell Atlantic and GTr, were
both large mergers. Bell Atlantic after the first merger
and Verizon after the second merger amended their
numerous benefit plans, including pension plans and
a variety of welfare plans. Bell Atlantic/Verizon
implemented these two major mergers and
transformed its business from regional telephone
operations to a leading provider of national] and
international wireless telephone and high-speed
internet services. AG q 6.
Z. Verizon is “both the plan sponsor and the
plan’s administrator.” You ng v. Verizon’s Bell Atlantic
Cash Balance Plan, 575 F. Supp. 2d 892, 907 (N.D. IIL.
2008). AG J 6. In 2008. Verizon earned $6.4 billion in
profits on revenues of $97.4 billion. (PX 204 and 205.)
B. The Class.
8. The parties stipulated to the treatment of
this action as a class action. On January 16, 2007, the
Court certified a Class pursuant to Rule 23, Fed. R.
Civ. P., with two subclasses. AG 7 8: Dkt. 61.
9. Subclass 1 is defined as follows:
All participants in the Bell Atlantic
Management Pension Plan whose
opening balances for the Bell Atlantic
Cash Balance Plan were purportedly
calculated using section 16.5.1 of the Bel]
IIA
Atlantic Cash Balance Plan and using
120% of the applicable PBGC rate.
Dkt. 61.
10. The class claim associated with Subclass ]
(hereinafter called the “Discount Rate Issue”) is
defined as follows:
Whether, in determining the benefits
afforded by the Bell Atlantic Cash
Balance Plan to the plaintiff and the
Class, it was improper to use 120% of the
applicable PBGC interest rate when
calculating the “Opening balances,” and.
if proper, the remedy therefor
Dkt. 61.
L1. Subclass 2 js defined as follows
All participants in the Bell Atlantic
Management Pension Plan whose
opening balances for the Bell Atlantic
Cash Balance Plan Were purportedly
calculated using section 16.5.1(a)\(2) of
the Bell Atlantic Cash Balance Plan.
Dkt. 61]
iz. The class claim associated with Subclass 2
(hereinafter called the “Transition Factor Issue”) is
defined as follows:
Whether, in determining the benefits
afforded by the Bell Atlantic Cash
ap
ova
Balance Plan to plaintiff and the Class, i
was proper to apply the cash balance
transition factor found in Table 1 of
Section 16 of the Cash Balance Plan once
rather than twice when calculating the
“opening balances,” and if improper, the
remedy therefor.
Dkt. 61.
12. Young is the class representative for both
Subclasses, which taken together are referred to asthe
“Class.” The Class, consisting of both Subclasses,
includes approximately 13,784 former and current
management employees of Bell Atlantic and later
Verizon. AG ¥ 13.
C. The Pension Plans and the Transition to the
Cash Balance Plan.
14. The Verizon Management Pension Plan is
the successor plan to Verizon’s Bell Atlantic Cash
Balance Plan. (PX 206 at VZ432.) Verizon's Bell
Atlantic Cash Balance Plan was the successor plan to
the Bell Atlantic Cash Balance Plan (the foregoing are
hereinafter referred to as the “Cash Balance Plan” or
the “Plan”). The Bell Atlantic Cash Balance Plan is the
successor plan to the Beil Atlantic Management
Pension Plan “BAMPP”). (DX 18 at VZ1053). All of
these plans are defined benefit pension plans as
defined by ERISA. The effective dates of these plans
were as follows:
¢ BAMPP - for decades prior to December 21,
1995
"7,
ofa
e Bell Atlantic Cash Balance Plan 7/6/96 -
effective 12/31/95
e Bell Atlantic Cash Balance Plan 9/3/07
Restatement - effective 12/31/95
e Bell Atlantic Cash Balance Plan - 10/8/98
effective 1/1/98
e Bell Atlantic Cash Balance Plan 7/6/99
effective 1/1/98
e¢ Merged Bell Atlantic & Bell Atlantic-North Plan
12/1/99 - effective 1/1/99
e Verizon's Bell Atlantic Cash Balance Plan
12/31/01 - effective 1/1/99
e Vernzon Management Pension Plan 1/1/02
effective 1/1/02
15. Thislitigation principally involves the events
surrounding the adoption and completion of the Bel!
Atlantic Cash Balance Plan on July 6, 1996 to replace
the BAMPP effective December 31, 1995.
D. Benefits Under the BAMPP.
16. The BAMPP was the principal pension plan
that applied to non-union management employees of
Bell Atlantic. (T.81.) Salaried management employees
of Bell Atlantic participated in the BAMPP, a defined
benefit pension plan, for decades until December 31,
1995. A participant’s benefit under the BAMPP was
expressed in the form of an annuity commencing at
age 65. The BAMPP provided that participants who
NO
oO0a
attained specified age and service levels were eligible
for a “Service Pension.” (DX 17, BAMPP 8§ 4.2-4.3, at
VZ110-12.) The Service Pension permitted an eligible
participant to begin receiving an annuity before age 65
without a full actuarial reduction to reflect the early
commencement of the participant’s pension. (/d.,
BAMPP § 4.3, at VZ111-12.) AG { 14.
17. TheBAMPP was structured to provide a very
significant increase in the value of the benefit once a
participant reached a long-term service point, referred
to as a “cliff,” which gave an incentive for employees to
spend their entire careers with the company. (T. 81.)
This took place when the participant became eligible
for a Service Pension. (DX 17, BAMPP 8§§ 4.2-4.4, at VZ
110-13; DX 1 at VZ 10391).
18. Although a participant’s retirement benefit
was traditionally paid as an annuity, the BAMPP also
included certain “windows,” during which participants
could elect to receive their retirement benefits in the
form of a one-time lump sum payment, instead of the
traditional annuity. (DX 17 at VZ130—32 & VZ133--35,
BAMPP §8§ 4.16, 4.19.) AG ¥ 15.
E. Use of Pension Benefit Guaranty Corporation
(“PBGC”) Interest Rate.
19. Section 4.19 of the BAMPP was one such
cash-out “window.” It provided for a lump-sum
payment (and an accompanying method to calculate
that lump-sum) to any vested participant who was an
“Active Participant on his Severance from Service Date
which occurs on or after December 31,1993 and prior
to December 31, 1995.” (DX 17 at VZ133.)
39a
20. The lump-sum formula for those who retired
between December 31, 1993, and December 30, 1995
was as follows:
(2) Lump-sum Form of Payment.
(A) Service Pension Cash-Outs. The lump-sum
payable to a Window-Eligible Employee who is
eligible for a Normal or Early Retirement Service
Pension shall equal the Actuarial Equivalent
present value (calculated using the assumptions in
subsection (c)(2)(C)) of the Service Pension
otherwise payable to the Participant in the Normal
Form commencing on his Annuity Startign Date, as
determined under the provisions of the Plan other
than this Section 4.19.
(B) Deferred Vested Pension Cash-Outs. The
lump-sum payable to a Window-Eligible Employee
who is eligible for a Deferred Vested Pension shall
equal the Actuarial Equivalent present value
(calculated using the assumptions in subsection
(c)2)(C)) of the Deferred Vested Pension otherwise
payable to the Participant in the Normal Form
commencing at Normal Retirement Age (or age at
Severance from Service Date, if later), as
determined under the provisions of the Plan other
than this Section 4.19.
(DX 17 at VZ134.)
21. Section 4.19 of the BAMPP uses three
assumptions for determining a lump- sum cashout
value (DX 17 at VZ134):
40a
(a) The discount rate is 120% of the
“PBGC interest rate in effect on the last day of
the calendar month immediately preceding the
first month of the calendar quarter in which the
Severance from Service Date occurs.” (DX 17 at
VZ134-35);
(b) A participant’s expected life span is
determined using the “Non-Insured Unisex
Pension 1984 (UP84) Mortality Table.” (DX 17
at VZ135); and
(c) A participant’s age is to be “years,
months and days. . . measured as of the 15"
day of the middle of the month of the calendar
quarter containing the Severance from Service
Date, and that age shall be rounded down to a
number of whole months.” (/d.)
22. The Court incorporates by reference its
discussion of the background facts to the selection of
the appropriate Pension Benefit Guaranty Corporation
(“PBGC”) interest rate (“Discount Rate Issue”) from its
prior decision. Young v. Verizon’s Bell Atlantic Cash
Balance Plan, 575 F.Supp. 2d 892 at 899-903.
23. Bell Atlantic consistently applied the same
PBGC formula under the BAMPP to determine the
actuarial equivalent amount, namely “using 120% (or
100% if your cashout is under $25,000) of the Pension
Benefit Guaranty Corporation (PBGC) rates that were
in effect ...” (T. 170; DX 70 at VZ10374 for 1993: DX 71
at VZ10380 for the1994-95 Cashout Option Period.)
4la
24. In converting the BAMPP to the Cash
Balance Plan, Bell Atlantic communicated to its
participants that it would continue to use the “same
conversion method used in calculating a cashout
payment under the old plan.” (DX 1 at VZ10392.) Bell
Atlantic sent Estimated Opening Account Balance
Statements to each participant in the Cash Balance
Plan, which explained in Step 2:
Step 2: Your accrued benefit is converted to a
lump-sum value applying the same method used
today to determine lump-sum cashouts and is
based on the PBGC interest rate of 5%.
(DX 11 at VZ10476.)
25. The Cash Balance Plan planning documents
also reveal an intention to use the same PBGC
methodology as before. In the September 26, 1995
memo from Rob Maienshein at Mercer Human
Resources Consulting (“Mercer”) to Bell Atlantic, he
explains: “The beginning account balance as of 1/1/96
will be determined using the lump-sum cashout value
of accrued benefits based on the PBGC graded rate
structure with an immediate rate of 5.0% (120% of the
rate structure will be used for cashout values over
$25,000) and the UP-84 mortality table.” (DX 5 at
VZ10229. See also, 9/27/95 memo from Maienshein,
DX 6 at MER4684; 10/22/96 memo from Maienshein,
DX 7 at MER4806.)
26. This formula was consistently applied
thereafter. In a memo from Robert Moreen (“Moreen”),
the Mercer Partner in charge of the Bell Atlantic
assignment, dated November 14, 1997, he reviews the
three steps 1n calculating the initial account balances
42a
in the Cash Balance Plan. At step two, he explains:
“Determine the lump-sum value of the accrued benefit
as of December 31, 1995, using interest (5% PBGC
rates, including 120% rates) and mortality (UP-84)
assumptions, and calculation procedures, established
for use in lump-sum payments from the [BAMPP].”
(DX 8 at VZ13307; PX 54 at 238-39.) Moreen testified
by means of a deposition. (PX 54.)
27. This formula was made more explicit in the
1998 Cash Balance Plan adopted on October 8, 1998.
(DX 31 at 11712-1383.) (“. . . and using the deferred
PBGC rates for individuals who were not then eligible
for a Service Pension or 120% of the PBGC rate if the
present value, using the PBGC rate, is $25,000 or
more.”) This clarifying language also appeared in the
April 22, 1998 draft of the 1998 Cash Balance Plan.
(PX 471 at MLB 547; T. 162 - 63.)
F. The Development of the Transition Factors.
28. In 1994, Bell Atlantic began to consider a
new pension plan design. (‘T. 82.) Bell Atlantic hired
Mercer to start from scratch, analyze the current Plan,
and come up with a new plan that “employees could
believe in and is fair.” (T. 83.) Mercer worked with the
Bell Atlantic design team to interview employees,
conduct focus groups and to perform an immense
amount of statistical analysis to help design a plan
consistent with Bell Atlantic’s new business model. (T.
83-84.) Mercer ultimately recommended a cash balance
plan with gradually and predictably increasing values,
thereby eliminating the “cliffs” present in the BAMPP.
(T. 84-85.) One of the big challenges facing Bell
Atlantic was to develop a transition formula to fairly
43a
treat participants in the BAMPP as they were
transitioned to the Cash Balance Plan. (T. 85-87.)
29. Mercer assisted in developing the cash
balance formula, including the formula for establishing
the opening balances of participants who had
previously earned pension benefits under the BAMPP.
(T.83-86; DX 54 at 30.) Mercer also assisted in
preparing the specifications for the calculation of the
opening balances. Coopers & Lybrand was retained by
Bell Atlantic to perform the opening balance
calculations. (DX 54 at 102-03, 135-36.) AG J 22.
30. OnSeptember 26, 1995, Mercer submitted a
memorandum to Bell Atlantic, which included a copy
of the plan’s transition factor table and a 15-year
projection of liabilities. (DX 5, DX 54 at 213-26.) AG
{ 23. The projected liabilities were based on the
transition factor being multiplied once, not twice. (DX
54 at 243-44). Mercer’s cover memorandum submitting
its final recommendation for the Cash Balance Plan
explained that the transition factor was to be
multiplied only once by the lump-sum cashout value:
The following items should be noted about the
calculation of initial cash balance accounts as of
January 1, 1996 using the attached
recommended final transition tables:
ms Me
The lump sum cash out value is then
multiplied by the transition factor
provided on the attached transition
tables to calculate the actual opening
balance under the cash balance plan.
44a
(DX 5 at VZ 10229; T. 88-89.) The projected liabilities
were predicated on multiplying the transition factor
only once. (Jd.)
31. OnSeptember 27, 1995, Mercer sent Coopers
& Lybrand the specifications to calculate the opening
balances as of December 31, 1995. (DX 6 at MER4684-
85; DX 54 at 102-112, 221-228.) AG ¥ 24. Those
specifications provided for multiplying the lump-sum
cashout value times the transition factor only once, not
twice. (/d.)
32. ‘The transition factors in the table attached
to Mercer’s September 26, 1995 memorandum to Be!!
Atlantic and its September 27 memorandum to
Coopers & Lybrand were the same ones used to
calculate the actual opening balances in January 1996
and the same ones contained in the tables attached to
the July 1996 Cash Balance Plan. (Compare DX 18,
1996 Plan Art. 16, at VZ 1102-03 with DX 5 at VZ
10233-34 and DX 6 at MER 4686-87.) These
documents and the related testimony by Moreen, the
Mercer Partner in charge of the Bell Atlantic
engagement, and Barry Peters, the in-house counsel
responsible for drafting the Cash Balance Plan, fully
support a finding that Defendants intended to multiply
the transition factor only once. (DX 54 at 234-44; T. 88-
89.)
33. Mercer created two additional memoranda,
dated October 22, 1996, and November 14, 1997,
relating to and describing the methodology that had
been used to calculate opening balances. (DX 7, DX 8.)
AG {J 25. Mercer’s description confirmed its continued
understanding that the lump-sum cash-out value
ADa
under the BAMPP had been multiplied only once by
the transition factor. (/d.; DX 54 at 244-44.)
34 According to Moreen, during the
development of the Cash Balance formula, “the idea of
multiplying twice by the transition factor was never
once discussed.” (DX 54 at 105-06, 125, 243-44.)
35 Multiplying the lump-sum cashout value by
the transition factor twice would have “vitiated” the
goals that guided the construction of the transition
factor table because it would have given participants
benefits that were far more valuable than the benefits
they could have earned under the BAMPP. Ud., DX 54
at 230-32.) On October 22, 1996, Mercer provided Bell
Atlantic with a detailed explanation of how the
transition multipliers were developed. (DX 7.) Mercer
begins the explanation as follows:
the Transition Multiphers were developed in
order to provide a smooth transition between
the ultimate retirement benefit level of the old
Bell Atlantic Management Pension llan
(BAMPP) and the new Bell Atlantic Cash
Balance Plan. The Multipliers were developed
to be applied to the 12/31/95 lump sum value of
the BAMPP accrued benefit producing the
opening account balance under the Cash
Balance Account
(id. at MER 4806; DX 54 at 232-37.)
A6a
G. The Corporate Approval of the Cash Balance
Plan Design.
36. Bell Atlantic’s Corporate Employee Benefits
Committee (““CEBC”) adopted a resolution in October
1995 authorizing the transition from the BAMPP to
the Cash Balance Plan. (DX 3.) AG J 26. The
resolution specified that a= participant’s opening
balance in the Plan would equal “the product of the
cashout value of the participant’s accrued benefit on
the Effective Date (determined under the existing
rules of BAMPP as of 12/31/95) times a transition
factor (greater than or equal to 1.0) according to the
table presented to this meeting...” (DX 4 at VZ 1039.)
The table presented at. the meeting was the Transition
Factor table submitted by Mercer in September 1995.
(DX 5 at VZ10233-34.)
mY p In November 1995 the Iluman Resources
Committee (“HRC”) of Bell Atlantic’s Board of
Directors approved the amendment of the BAMPP,
effective December 31, 1995, to create the Cash
Balance Plan. (DX 4.) AG ¥ 27.
H. Pre-Conversion Communications to
Participants.
38. Bell Atlantic clearly and_ consistently
communicated to its employees that the transition
factor would be multiplied only once in establishing
the employees’ opening balances.
39. In or around October 1995, Bell Atlantic
created a communication plan relating to the Cash
Balance Plan. (PX 431, VZ10534-36.) AG J 28. Oue of
the objectives of the communications plan was to
AVa
“provide clear understanding of the plan = design
provisions, while placing special emphasis on the
plan’s transition features.” (PX 431 at VZ10534). The
communications plan also called for all management
employees who were participants as of 1/1/96 to receive
a retirement planning guide in March 1996 “to show
employees their plan balances as of 12/31/95.” Ud. at
10535).
40. In October 1995, Bell Atlantic sent all
BAMPP participants a brochure entitled “Introducing
Your Cash Balance Plan.” (DX 1.) AG 4 29. The
brochure contains a graph to show the differece
between the BAMPP with its “cliff and the Cash
Balance Plan, which provides steadily growing
benefits. (DX 1 at VZ10391.) The brochure described
the provisions of the new cash balance formula,
including the formula for calculating the opening
balances of participants who had earned pension
entitlements under the BAMPP. (DX 1.) “Introducing
Your Cash Balance Plan” constituted a Summary of
Material Modifications (“SMM”) under’ ERISA
§ 104(b)(1) and 29 C.F_R. § 2520.104b-3 (2009) because
it described material changes in the plan and was
“written in a manner calculated to be understood by
the average plan participant.” The document was
intended to be a SMM and was designed to accurately
and visually communicate the summary of changes to
the Plan participants. (T. 102-105, 182). The SMM
used the following formula to show how a participant’s
lump-sum cashout benefit under the BAMPP would be
converted to the opening balance under the new Cash
Balance Plan:
LUMP SUM
VALUE xX |MULTIPLIER | =| BALANCE
ASa
OLD PLAN
Step 1: Your current pension benefit will be
calculated based on your age, service and pay as
of December 31, 1995.
Step 2: Next, your current benefit) will be
converted to a lump-sum cash-out value, using
the same conversion method used in calculating
a cash-out payment under the old plan.
Step 3: Finally, to make sure the new Plan
continues to provide you with a fair benefit,
your account balance may be increased by
multiplying the lump-sum cash-out value
determined in Step 2 times a special transition
multiplier to arrive at your opening account
balance.
Lump-Sum Cash Out.
Full payment of the value of your cash balance
account at one time.
Transition Multiplier.
TRANSITION OPENING
ACCOUNT
(DX1 at VZ10392.) The SMM also explained the
benefit conversion in words:
Ud.) The terms “lump-sum cash out” and “transition
multiplier” were defined in the SMM as follows:
4AYa
A number used to figure your opening account
balance in the Cash Balance Plan on January 1,
1996. This number is based on your age and
service. Your multiplier may increase your
initial account balance to ensure equitable
treatment during the transition to the Cash
Balace Plan
(id. at 10386.)
Al. The SMM provided hypothetical examples of
the impact of “the transition multipher” on Plan
participants. (DX 1 at VZ10393-94.) One example,
“Alison,” was a 47 year-old employee with 27 years of
Bell Atlantic service on the conversion date. Ud. at
VZ10394.) The SMM explained
Her transition multiplier of 2.680 increases her
opening account balance so that, together with
future pay credits and interest credits, the gap
between the old plan and the new Cash Balance
Plan will be filled.
(id.) If Bell Atlantic had intended to multiply the
transition factor twice, “Alison’s” transition multiplier
would have been 7.1824 (2.68 x 2.68), not 2.68, and her
opening balance would nearly triple
42. The SMM also contained the following
disclaimer in small print on the back page: “If there is
any conflict between the Plan document and this
brochure, the text of the Plan decument is controlling.”
Ud. at VZ10396).
43. In letters to plan participants in October
1995, November 1995 and May 1996, Bell Atlantic
50a
repeatedly instructed participants to “please be sure to
read” and “please refer to” the SMM, “Introducing
Your Cash Balance Plan” (which Bell Atlantic referred
to as “the Cash Balance brochure”), for an accurate
statement of the Plan’s opening balance and transition
factor provisions. (DX10 at VZ10553; DX11 at
VZ10476, DX13 at VZ10519.) These documents also
contained disclaimers that in the event there were
discrepancies between these communications and the
Plan, the Plan would govern. (DX11 at VZ10477; DX13
at VZ10490.)
44 In October 1995, Bell Atlantic prepared a
video for BAMPP participants, entitled “Changes,” to
describe the transition to the Cash Balance Plan. (DX
10.) AG ¥ 30. In the video, Bell Atlantic explained that
the participants would receive a statement with an
opening account balance and an explanation of how
the transition factor applied to their account. (Ud. at
VZ 10553.)
45. In November 1995, Bell Atlantic sent
estimated “opening account balance” statements to
BAMPP participants. (DX 11.) AG ¥ 31. These
statements provided each participant with an estimate
of his or her opening balance in the Cash Balance
Plan, provided a_ step-by-step description of the
opening balance formula, and contained a table of the
Plan’s transition factors. (/d. at VZ10475-76.) Asample
statement for a 36-year, 9-month old employee with 14
years and 3 months of service as of January 1, 1996
stated:
5la
SLEEP 1:
Your monthly Age 65 Deferred Pension
benefit as a Single Life Annuity estimated at
12/31/1995 is... . $1,520.
STEP 2:
Your monthly pension converted to a lump
sum cash-out value at 12/31/1995 is
$35,812.
STEP 3
Your lump-sum amount’ times your
transition multipher of 1.480 is your
Mstimated Opening Account Balance.
$53,001.
Ud. at VZ10476.) The statement explains that the Step
2 calculation uses “the same method used today to
determine lump-sum cash outs and is based on the
PBGC interest rate of 5%.” Ud.)
I. Implemention of the Cash Balance Plan as of
January 1, 1996.
46. Bell Atlantic amended and restated the
BAMPP effective December 31, 1995, and changed its
name to the “Bell Atlantic Cash Balance Plan.” (DX 3,
4, 18). The Cash Balance Plan expressed a
participant’s benefit as a lump-sum balance, to which
pay and interest credits were added on a monthly
basis. (DX 18, 1996 Plan Art. IV, at VZ1064—66.) AG
{ 16. Upon severance from the company, a participant
could receive his or her pension benefit as either a
lump sum or an annuity. (/d., 1996 Plan, § 5.2, at VZ
1067-68). Bell Atlantic began implemention of the
52a
Cash Balance Plan as of January 1, 1996, however, the
Plan document was not finalized until July 6, 1996.
47. The Cash Balance Plan provided opening
balances for each participant. Those opening balances
were established for all 13,784 active BAMPP
participants retroactive to January 1, 1996. (DX 62).
AG J 17. These included 2,271 participants who were
already eligible for a Service Pension and 11,513 who
were not eligible for a Service Pension. (DX 62). These
opening balances were based on their pension
entitlement earned under the BAMPP. (DX 18, 1996
Plan § 16.5 at VZ 1100-03; DX 1 at VZ 10392).
48. All of the calculations were performed by
multiplying the transition factor only once. Of the
11,513 participants not eligible for a Service Pension,
10,808 had transition factors greater than 1.000. Most
of them—approximately 8,600—had transition factors of
1.5 or higher, and 4,750 had transition factors ef 2.000
or higher. The 2,271 Service Pension eligible
participants for whom opening balances were
established included 762 with transition factors
ereater than 1.000. (DX51, DX62.)
49. One variable in the calculation of opening
balances was the annuity that participants had earned
under the BAMPP. (DX 18, 1996 Plan § 16.5 at
VZ1100-03; DX 1 at VZ10392). AG ¥ 18.
50. The formula toestablish the opening balance
consisted of two steps: (1) calculating the lump-sum
cashout value of the participant’s annuity under the
BAMPP; and (2) multiplying the lump-sum cashout
value by a transition factor. (DX 18, 1996 Plan
§ 16.5.1(a) at VZ 1100; DX 1 at VZ10392.) The opening
53a
balances of the Cash Balance Plan participants
thereafter grew through the addition of pay credits
and interest credits. (DX 18, 1996 Plan §§ 4.4-4.5 at VZ
1065; DX 1 at VZ10389-90.)
51. The transition factors were designed so that
participants who were close to reaching the age and
service thresholds for a Service Pension under the
BAMPP, and thus were expecting to see an upward
spike in the value of their BAMPP accrued benefit,
would receive a retirement benefit that approximated
the expected cashout value of their Service Pension
under the BAMPP. (T. 83-87; DX 1 at VZ 1391-94; DX
7 at MER 4806-09; DX 8 at VZ13307-08.) Transition
factors were carried to three decimal places and
ranged from 1.000 to 3.105. (DX 18, 1996 Plan Art. 16,
at VZ 1102-03.) The applicable transition factor
depended on the participant’s age and service. (/d.)
Young participants with relatively little service had a
transition factor of 1.000. Ud.) The closer a participant
was to qualifying for a Service Pension under the
BAMPYP, the higher the participant’s transition factor.
(/d.) For participants 40-46 years old with 16-20 years
of service, for example, the transition factors were as
follows:
YEARS OF SERVICE
AGE 16 17 18 19 20
54a
YEARS OF SERVICE
AA 1618 | 1.655 {1.691 | 1.719 | 1.737
45 1.625 | 1.664 | 1.699 | 1.730 | 1.751
46 1.632 | 1.672 | 1.707 | 1.741 {1.764
(id. at VZ 1102.) Most participants who had already
become eligible for a Service Pension under the
BAMPP, and had already experienced the upward
spike in the value of their BAMPP accrued benefit, had
a transition factor of 1.000. Ud. at VZ 1103.)
Transition factors were carried to three decimal places
and ranged from 1.000 to 3.105 depending on a
participant’s age and service. (DX 18, 1996 Plan Art.
16, at VZ1102—03.) AG J 19.
52. Multiplying the transition factors twice,
rather than once, for the participants who were not
eligible for a Service Pension would have increased
their opening balances by $1.67 billion. The opening
balances of the 4,750 participants with transition
factors greater than 2.000 would have been at least
doubled, and in many cases nearly tripled, if their
transition factors had been squared. More than 5,780
participants would have received increases in the
opening balances of $100,000 or more — increases that
would have given them opening balances that exceeded
the opening balances of many of the 2,271 participants
whose longer service or higher age had already
qualified them for a Service Pension. (DX51, DX62.)
53. Young was a salaried employee of Bell
Atlantic. As of January 1, i996, Young was
approximately 48 years-old and had 27.8 years of Bell
55a
Atlantic net credited service. Her transition factor was
2.659. (DX 14 at Y811.) AG J 20.
54. The average Class member’s years of service
at Bell Atlantic as of year-end 1995 was 20 years. (DX
at VZ27114-323.) AG J 21.
J. Post-Conversion Employee Communications.
55. Following the conversion, Bell Atlantic and
Verizon consistently communicated to the participants
that the transition factor would be multiplied only
once in determining the participant’s opening account
balance and the same BAMPP method for determining
the lump-sum cash out value was being used in the
Cash Balance Plan.
56. In May 1996, Bell Atlantic provided each
participant in the Cash Balance Plan with a
customized retirement planning guide, “A Look at
Your Future Today: Your Retirement Planning Guide.”
(DX13.) AG ¥ 32. This guide included a personalized
“opening balance” statement setting forth each
participant’s actual opening balance calculation. (/d. at
VZ10519.) These actual opening balance statements
explained that each participant’s lump sum cash-out
value would be multiplied by the applicable transition
factor only once. (/d.) The sample page further
explains at Step 3: “Your account balance may have
been increased by applying a transition multiplier to
the lump-sum value of your pension benefit at
12/31/95. Transition multipliers vary by age and
service.” (/d.) The Retirement Planning Guide
contained the following disclaimer: “If there are any
discrepancies between the information in this guide
56a
and official Plan documents, the Plan documents will
always govern.” (DX 13 at VZ10490.)
57. Starting June 30, 1996, Bell Atlantic sent
participants a quarterly statement that, among other
information, set forth the participant’s current balance
in the cash balance plan. (Eg., DX 15.) AG 7 33. By
June 30, 1996, Bell Atlantic had completed more than
50,000 separate mailings to participants, each of which
made clear that the lump-sum cash out was multiplied
by the transition factor just once. (DX1, DX11, DX13.)
58. In August 1996, Bell Atlantic issued a
summary plan description for the Cash Balance Plan
as part of a document entitled “The Big Picture.” (PX
232 at 678-96.)
K. Communications to Plaintiff.
59. There is no evidence that the Plaintiff or any
class member ever relied upon the transition factor
being multiplied more than once in determining t’ e
participant’s opening balance. Prior to this litigation,
no class member ever claimed the transition factor was
to be multiplied more than once in determining their
opening balance.
60. Plaintiff does not assert that she ever
reviewed or relied on the mistaken language in the
1996 and 1997 Plans. She never looked at the Plans
until 2008, when her lawyers were preparing her for
deposition, at which time she merely “glanced” at
them. (DX 58 at 84-87.)
61. The 1996 version of the Cash Balance Plan,
including appendices, was nearly 150 pages because
Kila
the Appendix included the BAMPP. ( DX17, DX18.)
Except in the event of a specific request by a Plan
participant, Bell Atlantic did not distribute to
participants the restated document containing the
erroneous description of the § 16.5.1(a\(2) opening
balance formula. (DX9 at VZ10400.) Although Bell
Atlantic regularly provided participants with
information on how to obtain a copy of the Plan, few
requests were received for copies of the Plan
document. (DX67 at 11-12.)
62. Plaintiff received from Bell Atlantic and
retained in her. personal files numerous
communications plainly stating that her opening
balance would be calculated based on a one-time
multiplication by the transition factor. (DX 58 at 28-
46.) One of the documents Plaintiff received, reviewed
and kept in her files was the October 1995 SMM,
“Introducing Your Cash Balance Plan.” (DX12.)
Plaintiff wrote her name on this document and kept it
in her files for more than 10 years with other
“important” documents relating to her employment.
(DX58 at 28-37.)
63. Plaintiff also produced from her files the
Estimated Opening Account Balance Statement
(“Specially prepared for: Cynthia Young”), which was
distributed in November 1995. (DX12.) This document
explained the calculation of Plaintiffs opening balance
as follows:
STEP 1:
Your monthly age 65 Deferred Pension benefit
as a Single Life Annuity estimated at 12/31/95
is... $2,160.
58a
STEP 2:
Your monthly pension converted to a lump-sum
cash-out value at 12/31/95 is . . . $90,027.
STEP 3:
Your lump-sum amount times your transition
multiplier of 2.659 is your Estimated Opening
Account Balance. . . $239,381.
Ud. at Y842.)
64. Plaintiff produced from her files the May
1996 booklet, “A Look at Your Future Today,” which
was sent to her home and described the actual
calculation of her opening account balance on January
1, 1996 as follows:
STEP 1:
Your monthly Age 65 Deferred Pension benefit
as a Single Life Annuity at 12/31/95 was .. .
$2,166.70.
STEP 2:
Your monthly pension converted to a lump-sum
cash-out value at 12/31/95 was. . . $90,307.16
STEP 3:
Your lump-sum amount times your transition
multiplier of 2.659 is your Opening Account
Balance on 1/1/96 . . . $240,126.74.
(DX14 at Y811; DX58 at 48-51).
65. Plaintiff produced from her files’ the
quarterly statements she received showing her Cash
Balance Plan Account status at the start of each
59a
quarter and the amount it increased through pay and
interest credits. (DX15, DX58 at 56-57.) Following her
retirement, she cashed out her account in February
1998. (DX 58 at 68, DX15, DX 64.)
66. Squaring the transition factor would have
produced balances far greater than the amounts
communicated to Plaintiff in November 1995, in May
1996, and quarterly from June 30, 1996 until she
cashed out in early 1998. Squaring the transition
factor would have increased the estimated opening
balance communicated to Plaintiff in November 1995
from $239,581 to $636,516.
L. The Actuarial Report.
67. The Plan actuary, Towers Perrin, prepared
an actuarial report for the Cash Balance Plan in
January 1997, in which Towers Perrin attempted to
determine the Plan’s lhabilities and assets as of
January 1, 1996. (DX16.) AG 51. This report was based
on the understanding that the Plan’s opening balances
for BAMPP participants were calculated by
multiplying each participant’s lump sum cash-out
value by the transition factor one time. (Ud. at
VZ13295-96.)
68. Ifthe opening balances were to be calculated
by multiplying each participant’s lump sum cash-out
value by the square of the transition factor, the Plan’s
liabilities would have increased by at least $1.67
billion above the amount reported by ‘Towers Perrin.
Ud. at VZ13263, VZ13270, VZ13274; DX51, DX62.)
60a
M. Drafting History of the July 1996 Cash
Balance Plan.
69. ‘The drafting history of the Cash Balance
Plan demonstrates by clear and convincing evidence
that a scrivener’s error and mistake were made in the
drafting of the restated Plan document. by including
two references to the transition factor in § 16.5.1(a)(2)
of the Plan.
70. The restated Plan document was finalized on
July 6, 1996, and was effective December 31, 1995.
(DX 18.) AG J 35. The restated Plan document was
finalized after Bell Atlantic calculated the actual
opening balances and communicated them to ail
13,784 plan participants. (DX18.)
71. Barry Peters (“Peters”) joined Bell Atlantic
in 1986 to serve as in-house counsel responsibie for all
ERISA matters and employee benefit issues. (‘T. 76-80;
DX 56 at 13.) Although the Bell Atlantic in-house legal
department consisted of over 100 attorneys from 1986-
1998, Peters was the only attorney at Bell Atlantic
with extensive experience and knowledge of ERISA
during that time. Ud.) His duties at Bell Atlantic
included preparing governance documentation for the
board of directors and its Human _ RKesources
Committee regarding all benefit plans, benefits
matters, and being the company’s ERISA expert. (DX
56 at 11-14.) Peters left Bell Atlantic in 2001 to work
at Mercer Human Resources Consulting until he
retired in 2007. (Ud. 14-15). Peters testified at trial and
by means of two depositions. (T. 73-199, DX 56-57.)
72. Peters was also highly involved in work
dealing with compensation and benefits of the
61a
corporate executives in mergers and acquisitions that
Bell Atlantic engaged in during the 1990s. (T. 78-79;
DX 56 at 14.)
73. Peters was the Bell Atlantic employee
responsible for coordinating and steering the plan
documentation process. (DX 56 at 50.) Peters was
located in the Philadelphia headquarters of Bell
Atlantic, and he was counsel to the Corporate
Employees Benefits Committee (““CEBC.”) (T. 77-78;
DX 56 at 12-14, 149.) Peters was “the person
authorized by resolutions of the CEBC to maintain and
publish the benefits plans adopted and amended by
the Committee .. .” (PX 219 at VZ14438.)
74. Peters was the only person at Bell Atlantic
charged with the responsibility of ensuring that the
1996 Plan conformed to the intent of Bell Atlantic in
converting the BAMPP to a cash balance design. (DX
57 at 18-19.) He never assigned anyone else the
responsibility to review the plan document in general
or the transition rules specifically to avoid drafting
errors. Ud. at 19.) AG J 43.
75. The conversion of the BAMPP to the Cash
Balance Plan was the single most complicated plan
drafting assignment Peters ever faced in his career.
(DX 56 at 78:7—25.) It involved converting a decades-
old traditional pension plan to a new formula that
looked more like a defined contribution plan and
reviewing and accounting for numerous intricate
additional plan options and amendments. (/d. at 78.)
The BAMPP (and the Cash Balance Plan) covered tens
of thousands of employees and over $5 billion in
liabilities. (VZ22019.) AG J 44.
62a
76. Robert Abramowitz (“Abramowitz”), a
partner in the law firm of Morgan Lewis and Bockius
(“Morgan Lewis”) was hired to provide outside legal
assistance in the drafting of the Cash Balance Plan. (T.
205-06.) Abramowitz is an expert in ERISA. (‘T. 204-05;
DX 55 at 33-34.) He has been involved in the drafting
and amendment of hundreds of emloyee benefit plans,
including 10 to 26 plans that were converted to a cash
balance design. (DX 55 at 37). He testified at trial and
by deposition. (T. 203-59, DX 55.)
ei. Abramowitz was assisted by Kathy Capone,
an ERISA paralegal, Vivian McCardell, a senior
associate, and Marianne Grey, a benefits analyst. (‘T.
206-207.) Ms. Capone testified by means of a
deposition. (DX 59.)
78. Paul Strella (“Strella”) was a principal at
Mercer and an attorney who “knew the law
surrounding cash balance plans very well.” (DX 54 at
212; DX 21 at VZ11119.) Strella was the head of the
document drafting working group on the team Mercer
assembled for the Bell Atlantic cash balance
conversion. (PX 222 at MER20675.)
79. Six drafts of the Cash Balance Plan exist.
Mercer was engaged to prepare the initial drafts “to
have a high level of confidence that it would reflect the
design that Mercer had been so intimately involved
in.” (T. 57 at 20.) Strella prepared the first three
drafts, completing the first in August 1995, the second
in September 1995, and the third in October 1995. (T.
90, 93; DX 19, 20, 21; DX 56 at 51-53). The three
Mercer drafts express the opening balance formulas
for Service Pension eligible and non-Service Pension
eligible participants in similar terms, using a single
7. |
OSA
transition factor. (DX 19 at VZ10804 -05: DX 20 at
VZ10971 -77; DX 21 at VZ11144-45.) AG J 37. The
relevant language in the third draft of the Plan
prepared by Mercer states:
(i) 1995 Active Participants and 1995 Former
Active Participants. In the case of a 1995 Active
Participant or 1995 Former Active Participant,
the opening balance of the Participant’s Cash
Balance Account on January 1, 1996 shall be
the amount described in (1) or (II) below, as
applicable:
(lI) lf, as of December 31, 1995, the
Participant was eligible for a Normal
Retirement Service Pension or an Early
Retirement Service Pension under the 1995
Plan, then the amount described in this
paragraph (I) is the present value of the
immediate benefit payable commencing on
January 1, 1996 under the 1995 Plan,
determined as if the participant had retired on
December 31, 1995, based on Compensation
paid through December 31, 1995, or the date of
status change to a non-Eligible Employee
category, if earlier, multiplied by the
applicable transition factor described in
Schedule D.
(II) In the case of a Participant not
described in (1) above, the amount described in
this paragraph (IT) is the present value as of
January 1, 1996 of the Accrued Pension Benefit
payable at age 65 under the 1995 Plan,
determined as if the Participant had a
Severance From Service Date on December 31,
1995, based on Compensation paid through
64a
December 31, 1995, or the date of status change
to a non-Eligible Employee category, if earlier,
multiplied by the applicable transition
factor described in Schedule D.
(DX 21 at VZ11145 (emphasis added).)
80. Beginning with Draft 4, Mercer was no
longer responsible for preparing revisions to the draft
plan. (T. 93; DX 56 at 149.) Peters prepared Draft 4 of
the Cash Balance Plan, dated April 15, 1996. (T. 95,
DX 56 at 53; see also DX 22.) Draft 4 is the first draft
of the Plan that contains a second reference to the
transition factor in the opening balance formula for
nonservice pension eligible participants. (DX 22 at
VZ11248.) AG J 38.
81. The introduction of the second reference to
the transition factor in the opening balance formula
was a scrivener’s error made by Peters. Peters edited
and reorganized the language’ governing the
calculation of the opening balances in an effort to
make the text more clear. (DX56 at 73-74, T. 97-100.)
As revised, Draft 4 expressed the opening balance as
“the product” of one number “times” another, setting
off the two components of the opening balance formula
with a capital “A” and “B” in parentheses, and with
“times” in italics to emphasize that “[ylou multiply
block ‘A’ times block ‘B.”” (DX56 at 58-60; 62-64; 73-75.)
The draft also made the transition factor a defined
term, and highlighted this through the use of initial
capitals — “Transition Factor.” (DX56 at 58-59.) Peters’
Draft 4 also reversed the order of the two components
of the opening balance formula, placing the more
succinctly described term, the Transition Factor, first,
so that the “(A) times (B)” structure was more obvious,
65a
and used a Bell Atlantic term of art, “lump-sum
cashout value” for the other component of the formula.
(DX56 at 59, 62-63.) Peters also changed the format of
the transition factor table by splitting it in two, with
one table for those eligible for a service pension and
the other for those not eligible. (DX 22 at VZ 11248.) It
was Peters’ practice to perform all drafting and make
all changes “on screen on the word processor.” (T. 130-
31.)
82. Thus, Peters revised § 4.3.1l(a)(1) (the
predecessor to Plan § 16.5.1(a)(1)) in draft 4 as follows:
4.3.1(a)(1) If Eligible for Service Pension:
If, as of December 31, 1995, the Participant was
eligible for a Normal Retirement Service
Pension or an Early Retirement Service Pension
under the 1995 BAMPP Plan, then the amount
described in this paragraph (1) is the product
of multiplying (A) the _ Participant’s
applicable Transition Factor described in
Schedule C, times (B) the lump-sum
cashout value of the immediate annuity
benefit under the 1995 BAMPP Plan,
determined as if the Participant had retired on
December 31, 1995.
(DX22 at VZ11248 (bold emphasis added).
83. Peters revised § 4.3.1(a)(2) (the predecessor
of Plan § 16.5.1(a)(2)) and mistakenly inserted the
second reference to the transition factor into the
Fourth draft:
66a
4.3.1.(a)(2) Not Eligible for Service
Pension:
In the case of a Participant who is not eligible
for a Service Pension under the 1995 BAMPP
Plan as of the Transition Date, the amount
described in this paragraph (2) is the product
of multiplying (A) the Participant’s
applicable Transition Factor described in
Schedule D, times (B) the lump-sum
cashout value of the Accrued Benefit payable
at age 65 under the 1995 BAMPP Plan,
determined as if the Participant had a
Severance From Service Date on December 31,
1995, based on Compensation paid through
December 31, 1995, or the date of status change
to a non-Eligible Employee category, if earlier,
multiplied by the applicable transition
factor described in Schedule C.
(DX 22 at VZ11248 (bold emphasis added).)
84. In revising § 4.3.1(a)(2), Peters made a
drafting error in one of the most important provisions
in the Plan. Working on a word processor, and
attempting to make the same revisions in § 4.3.1(a)(2)
as he did in § 4.3.1(a)(1), Peters neglected to delete the
“trailing clause” at the end of the paragraph,
“multiplied by the applicable transition factor
described in Schedule C.” (DX22, DX56 at 58-64, 70,
73-75, 78; T. 100-01.)
85. As a result of Peters’ mistake, the formula in
§ 4.3.1(a)(2) called for the lump sum cashout value to
be multiplied by the transition factor twice; rather
than once as intended. (DX 22 at VZ11248: T. 100-01.)
67a
86. The Court accepts Peters’ testimony that he
made a drafting mistake that was inconsistent with
the authorization he was given. (“I made an error ... I
failed to delete the words at the very end of the second
paragraph.”); (T. 100-01) (“I failed to delete this
trailing clause at the end of the paragraph that says
“Multiplied by the applicable transition factor
described in Schedule C.’ I know that’s an error
because it’s contrary to the terms of the plan that were
approved. ... This is the first draft that I had a hands-
on role in doing and this is an error that I, therefore,
made.”) (DX 56 at 74); (“I believe I made an error that
was unintentional and I did not know I made the
error. ...It was a good faith error which I regret.”);
(7d. at 111) (“I never knew of the error that I had made
and I never heard anyone tell me that that text
problem existed.”) (/d. at 78); (“I was always working
electronically so that I could share my work more
efficiently with both people in my company and
elsewhere, and I must not have seen clearly the words
that had been left at the end of that paragraph ... It
was unfortunately my own mistake by my own hand.”)
(T. 101.)
87. On April 9, 1996, Peters stated in an e-mail
memo to Susan McClain, Joseph Ronan Jr., and
rordon Downing at Bell Atlantic and Abramowitz at
Morgan Lewis that the Fourth draft “reflects my
review and changes of the 3rd draft that had been
presented to us by Paul Strella of Mercer.” (PX 226 at
VZ11226.) In his e-mail, Peters asked McClain to
review the document and “share it with Kwasha
Lipton [the company performing the _ intricate
computer programming to calculate the benefits], to
make sure they review it with an eye to assuring that
it accurately reflects the mechanics and programming
68a
that has been built into the administration of the
plan.” (/d.) Peters noted in his e-mail that Abramowitz
and Grey, his paralegal, were “standing by to assist in
finalizing the drafting process, and assisting us with
the eventual submission of the document to the IRS.”
(Id.) He also instructed Abramowitz “not to begin any
revision work until you [McClain] and Kwasha have
had a chance to make any changes to fix any problems
that you find.” (U/d.) Finally, Peters noted that one of
the “pieces that still remain to be completed” was
“physically moving” the transition-related provisions
“to a Section at the back of the plan that is solely
devoted to transition rules.” (/d.)
88. Abramowitz reviewed the Fourth draft and
made written notes on the document. (T. 223-25; PX
225 at VZ11248.) Significantly, he underlined a portion
of the sentence immediately preceding the second
transition factor reference in Section 4.3.1(a)(2). Ud.)
He clearly read this entire paragraph but did not
notice an error. (T. 225.) Abramowitz understood that
responsibility for the transition factors rested with
Mercer and Bell Atlantic. (T. 215.)
89. Peters was negligent in failing to notice and
correct the scrivener’s error in the Fifth draft. Like the
Fourth draft, the Fifth draft of the Cash Balance Plan
contains a second reference to the transition factor in
Section 4.3.1(a)(2). (PX 227 at VZ11379.) The changes
suggested by Abramowitz in Section 4.3.1(a)(2) were
made and blackline versions were prepared. (PX 228 at
VZ11447.) Changes were noted immediately before and
immediately after the second reference to the
transition factor. (/d.)
69a
90. Peters also prepared the Fifth draft dated
June6 1996 (DX 23), which he sent to Marianne Grey,
a benefits analyst at Morgan Lewis, on June 7, 1996.
(PX228 at VZ11446-47.) AG J 39. The “blackline”
version of the Fifth draft shows that Peters: (1)
changed the first transition factor reference from
“described in Schedule D” to “described in Schedule C,”
(2) immediately before the second reference to the
transition factor, he deleted the text “or the date of
status change to a non Eligible Employee category, if
earlier,” and (3) immediately after the second reference
to the transition factor, he added the sentence “For a
1995 Former Active Participant, the date on which the
individual ceased to be an Eligible Employee shall be
substituted for December 31, 1995 in the last phrase of
the previous sentence.” (PX 228 at VZ11446—47.)
Despite all of the changes made immediately before
and immediately after the second reference to the
transition factor, Peters claims no one brought the
issue of the second transition factor to his attention.
(T. 140-41; PX 228 at VZ11446-47.) Peters made
approximately 240 changes to the Fourth draft in
preparing the Fifth draft. (T. 133.)
91. Specifically, Section 4.3.1(a)(2) of the
blackline version of the Fifth draft reads as follows:
4.3.1(a)(2) Not Eligible for Service Pension
In the case of a Participant who is not eligible
for a Service Pension under the 1995 BAMPP
Plan as of the Transition Date, the amount
described in this paragraph (2) is the product of
multiplying (A) the Participant’s applicable
Transition Factor described in Schedule DC
times (B) the lump-sum cashout value of the
Accrued Benefit payable at age 65 under the
70a
1995 BAMPP Plan, determined as if the
Participant had a Severance From Service Date
on December 31, 1995, based on Compensation
paid through December 31, 1995, orthe-date-of
status—change—to—a_non-Ehgrbte Employee
eategory;—if—earlier, multiplied by the
applicable transition factor described in
Schedule C. For _a_1995 Former Active
Participant, the date on which the ‘individual
ceased_ to be an Eligible Employee shall be
substituted for December 31, 1995 in the last
phrase of the previous sentence.
(PX 228 at VZ11446-47.) (Emphasis added.)
92. Inahandwritten note to Grey on the cover of
the blacklined version of the Fifth draft, Peters noted
that “[t]his is blacklined to show changes from the
prior draft that you and Bob reviewed and commented
(PX 228 at VZ11423.) Peters’ handwritten note
asks Grey to print a copy for Abramowitz. (/d.)
93. On or around June 7, 1996, Peters asked
Abramowitz to execute the “physical move” of the
transition rules to a separate section at the back of the
Cash Balance Plan. (PX 448, DX 55 at 132-33.) Peters
did not expect Morgan Lewis to review the transition
factor formula. (T. 143.)
94. On July 1, 1996, Abramowitz sent a Sixth
draft of the Cash Balance Plan to Peters. (DX 24.) This
was the first draft prepared by Morgan Lewis. (T. 229.)
As Peters requested, the cash balance transition
provisions were moved to a separate section, Appendix
B, in the Sixth draft. (DX 24 at VZ11561-68.) The
Sixth draft also includes the second reference to the
Tla
transition factor. Ud. at VZ11565.) Abramowitz does
not recall anyone at Morgan Lewis ever bringing the
second transition factor reference to his attention. (T.
225- 26.)
95. The Sixth draft is dated 6/25/96. (DX 24 at
VZ11505.) Abramowitz noted in his cover letter to the
Sixth draft his understanding that “your [Peters’| office
will take care of blacklining the document.” (/d. at
VZ11503.) He also noted that “(t]he majority of our
changes are self-explanatory or have been previously
discussed with you.” U/d. at VZ11503.)
96. Peters used the Sixth draft to create a final
plan document entitled “Bell Atlantic Cash Balance
Plan Effective December 31, 1995 (7/6/96 edition)” (DX
18 at VZ1046-1106) (the “1996 Plan”). AG 741. Peters
finalized the 1996 Plan at his office in Bell Atlantic’s
corporate headquarters in Philadelphia, Pennsylvania,
on July 6, 1996. (DX 56 at 149.)
97. In the 1996 Plan, Appendix B of the Sixth
draft was moved to a new § 16, entitled December 31,
1995 Transition Plan, but § 16.5.1(a)(2) of the 1996
Plan is substantially the same as Section 3.2.1(a)(2) of
Appendix B of the Sixth draft. (T. 135-36.)
98. The final, adopted version of §§ 16.5.1(a)(1)
and (a)(2) state:
16.5.1(a)(1) If Eligible for Service Pension
If, as of December 31, 1995, the Participant was
eligible for a Normal Retirement Service
Pension or an Early Retirement Service Pension
under the 1995 BAMPP Plan, then the amount
described in this paragraph (1) is the product of
T2a
multiplying (A) the Participant’s applicable
Transition Factor described in Table 2 of this
Section, times (B) the lump-sum cashout value
of the immediate annuity benefit under the 1995
BAMPP Plan, determined as if the Participant
had retired on December 31, 1995, ignoring any
compensation paid after the date of the last
paycheck for salary earned in December 1995.
For a 1995 Former Active Participant, the date
on which the individual ceased to be an Eligible
Employee shall be substituted for December 31,
1995 in the last phrase of the previous sentence.
16.5.1(a)(2) Not Eligible for Service Pension
In the case of a Participant who is not eligible
for a Service Pension under the 1995 BAMPP
Plan as of the Transition Date, the amount
described in this paragraph (2) is the product
of multiplying (A) the Participant’s
applicable Transition Factor described in
Table 1 of this Section, limes (B) the lump-
sum cashout value of the Accrued Benefit
payable at age 65 under the 1995 BAMPP
Plan, determined as if the Participant had a
Severance From Service Date on December 31,
1995, based on Compensation paid through
December 31, 1995, multiplied by the
applicable transition factor described in
Table 1 of this Section. For a 1995 Former
Active Participant, the date on which the
individual ceased to be an Eligible Employee
shall be substituted for December 31, 1995 in
the last phrase of the previous sentence.
(DX 18 at VZ1100) (emphasis added). This was a key
provision for anyone who had an opening cash balance.
T3a
(T. 236.) According to Abramowitz, this provision on a
scale of 1 to 10 ranks as a 10 in terms of importance.
(Id.)
99. In practice, the CEBC and the HRC never
reviewed plan documents to ensure they were
consistent with Bell Atlantic’s intent. (DX 57 at 17-18.)
It was primarily Peters’ responsibility to ensure that
final plan documents were consistent with Bell
Atlantic’s intent. (/d. at 18.) Bell Atlantic did not have
a practice of executing its final plan documents. (DX 56
at 65-66.) In other words, no one ever signed the plan
document when it was finalized. (/d.) Instead, Peters
was delegated the task of deciding when a_ plan
document was final. (/d.) Peters finalized the 1996
Plan document on July 6, 1996 pursuant to a grant of
authority given to him by the HRC and Bell Atlantic’s
Vice President — Human Resources. Ud. at 57, 65-66.)
AG ¥ 45.
100. Mercer did not review the final 1996 Plan
document. (DX 54 at 87.) Peters never asked Mercer to
review his work on the Cash Balance Plan after he
generated the Fourth draft. (DX 57 at 20-22.) AG ¥ 48.
Peters did request Susan McLanin to ask Kwasha
Lipton to review the Plan “to confirm that it stated
how the plan was being administered.” (‘T. 125-26.) He
is not certain that it happened. (T. 131-32.)
Abramowitz has no recollection of seeing a second
reference to the transtion factor in the 1996 or 1997
Plans. (T. 218-19.)
101. April 1996 was also the time when Peters
and his wife had set aside to vacation in China. (T.
128-29; DX 56 at 160—61.) Peters went to China for
four weeks, but he did not assign anyone to take over
14a
his responsibilities with respect to the Bell Atlantic
cash balance conversion while he was in China. (/d.)
AG {| 47.
102. The Cash Balance Plan was not negotiated at
arms-length between multiple parties. (DX 56 at 66
67.) AG ¥ 49.
N. Corcoran Litigation.
103. A putative class action lawsuit entitled
Corcoran v. Bell Atlantic Corp., No. 97-cv-510 (E.D.
Pa.), was filed against Bell Atlantic Corporation, the
Bell Atlantic Management Pension Plan, and the Bell
Atlantic Cash Balance Plan, among others, on January
23, 1997. AG J 52. In Count II of the amended
complaint in Corcoran, plaintiffs alleged that Bell
Atlantic violated its fiduciary duty by adopting the new
Cash Balance Plan which (1) did not use a four-year
age set-back for its mortality assumptions, and (2)
used a PBGC interest rate for September 1995, rather
than December 1995, in calculating opening balances.
(PX 475 at VZ22890.) The district court did not reach
the merits, but dismissed the claim because the
decisions did not have fiduciary ramifications. (/d.) The
Third Circuit affirmed, holding that the opening cash
balance assumptions constituted “a design function
and non-fiduciary in light of Lockheed (Corp. v. Spink,
517 U.S. 882, 890 (1996).”] Ud. at VZ22891.)
104. The only record of anyone noticing the
erroneous second reference to the transition factor in
§ 16.5.1(a)(2) is footnote 2 in a brief filed by the
plaintiffs in the Corcoran case which reads as follows:
Tda
By its terms, Section 16.5.1(a)(2) appears to
require that participants whose cash balance
account was calculated on the basis of their
deferred vested pension under the Management
Pension Plan receive their transition multiplier
twice. Literal application of this provision would
be highly advantageous to those Plaintiffs and
class members who had their opening account
balance calculated on the basis of the deferred
vested pension. For example, under a literal
application of this provision, plaintiff Pierce,
who was assigned a transition multiplier of
2.928, would receive an opening account balance
of 5.8 times the lump-sum cash-out value of his
pension rights under the Management Pension
Plan. However, given the overall context of the
Plan document, Plaintiffs assume that this
represents a scrivener’s error.
(DX 37 at VZ22557-58.) (Emphasis added.)
For these six Corcoran plaintiffs, the potential
advantage of multiplying the transition factors twice
would be an aggregate increase in the operating
balances of approximately $2 million, from $1.1 million
to $3.1 million. (DX62.) The Corcoran plaintiffs and
their counsel acknowledged in the footnote, however,
that the Plan document contains “a scrivener’s error”
and they expected to receive no more than the opening
balance resulting from multiplying the participant’s
lump-sum cashout value by the transition factor only
once. (DX37 at VZ22558.)
105. Bell Atlantic hired Morgan Lewis to defend
the Corcoran litigation. Abramowitz was the billing
attorney at Morgan Lewis for all Bell Atlantic benefit
76a
matters, including the Corcoran litigation. (DX 56 at
227-29; Peters Dep. Ex. 15.) AG 7 53.
106. On June 17, 1997, Bell Atlantic moved to
dismiss the Corcoran complaint. for failure to state a
claim. AG 54.
107. The Corcoran Plaintiffs’ Memorandum of Law
in Opposition to Defendants’ Motion to Dismiss, which
contained the footnote referenced above, was served on
Michael L. Banks, Bell Atlantic’s attorney at Morgan
Lewis, in Philadelphia, Pennsylvania, by hand delivery
on August 6, 1997. AG { 55.
108. On or about August 8, 1997, Peters,
Abramowitz, and Morgan Lewis attorneys Steven
Spencer, Richard Rosenblatt, and Erin Mulhollan,
received the Plaintiffs’ Memorandum of Law in
Opposition to the Motion to Dismiss. (DX 56 at 174—75;
VZ24230.) AG ¥ 56. Abramowitz received and reviewed
the brief; he probably read footnote 2, but he has no
specific recollection. (T. 217-18, 251.) In his cover
letter, Banks asks Peters to review the memorandum
and to call him to discuss it. (PX 246 at VZ24230.)
Peters denies he read a footnote because, as the
scrivener, “bells would have gone off for me,” and he
would have taken action, including notifying the chair
of the benefits committee and his human resources
department clients, and he would have corrected the
error. (T. 171-72, 177; DX 56 at 181.) Peters claims
that he first learned of the mistake several years ago
during the course of this litigation when he was
contacted by a Morgan Lewis paralegal. (T. 112-13.)
109. On August 22, 1997, Bell Atlantic filed a
reply brief in response to the Plaintiffs’ Memorandum
of Law in Opposition to the Motion to Dismiss.
(VZ23309-32.) AG J 57.
110. Bell Atlantic prevailed on its motion to
dismiss. Corcoran v. Bell Atlantic Corp., No. 97-510,
1997 WL 602859 (E.D. Pa. Sept. 23, 1997). AG ¥ 58.
111. The Corcoran plaintiffs appealed the decision
to the Third Circuit Court of Appeals. AG J 59.
112. Bell Atlantic’s attorneys at Morgan Lewis
forwarded a copy of the plaintiffs’ brief filed with the
Third Circuit to Peters on or about February 24, 1998.
AG J 60.
113. OnJune 30, 1998, the Third Circuit affirmed
the decision of the district court. (PX 475 at VZ22883-
93.) AG J 61.
114. It was Bell Atlantic’s practice in 1997 to
allow Peters to correct discovered errors in the text of
the final plan documents. (T. 174; DX 56 at 181-84.)
Bell Atlantic’s practice was not necessarily to formally
amend or notify participants regarding a discovered
alleged drafting error. Ud. at 181-84, 190-91.)
O. The 1997 Plan Amendment.
115. Defendants knew or should have known of
the existence of the drafting error in Plan § 16.5.1(a)(2)
in early or mid-August, 1997. No corrective action was
taken at that time.
116. On September 3, 1997, the Cash Balance
Plan was restated in a document entitled “Bell Atlantic
Cash Balance Plan Effective December 31. 1995 (9/3/97
78a
edition)” (the “1997 Plan”). (VZ13856.) The 1997 Plan
contains a second reference to the transition factor in
the opening balance formula for non-Service Pension
eligible employees. (/d.) The 1997 Plan was finalized
by Peters. (DX 56 at 196-97.) AG J 62. Section
16.5.1(a)(2) of the 1997 Plan is identical to
§ 16.5.1(a)(2) of the 1996 Plan. Both contain a second
reference to the transition factor.
117. The September 1997 restatement
incorporated a single amendment clarifying the Plan’s
anti-cutback provision that was adopted in response to
the Corcoran htigation. (DX 79 at VZ14925-29.) The
amendment was drafted and reviewed by Peters and
Morgan Lewis, and was authorized by the CEBC on
June 26, 1997. (PX 276 at MLB372-78; DX 79 at
VZ14928.) AG 1 63.
118. Drafting of the 1997 Plan began sometime
around February 3, 1997, when Morgan Lewis became
involved in the drafting process. (PX 279 at MLB2041.)
Peters and Morgan Lewis worked on drafting and
reviewing the 1997 Plan during the summer and fall of
1997. (DX56 at 77.)
P. Submission of the Plan to the IRS.
119. On November 24, 1997, Bell Atlantic
formally submitted the 1996 Plan to the IRS for a
favorable determination of its tax-advantaged status.
(VZ21386—492.) AG J 64.
120. The submission included a copy of the 1996
Plan and the 1997 Plan amendment. (T. 186; VZ21387;
VZ21417—77.) AG J 65.
79a
121. On March 26, 1998, the IRS made a
favorable determination of tax-exempt qualification of
the Cash Balance Plan. (PX 285 at HA420—-21.) AG
4 66. That determination included both the 1996 Plan
and the 1997 Plan. (PX 285 at HA 420.)
Q. NYNEX Merger and Bell Atlantic-North Plan.
122. The negotiations over the NYNEX/Bell
Atlantic merger began just a few months before April
1996, anda key point in the negotiations was occurring
in April 1996, at the same time as Peters worked to
complete the fourth draft of the Pian. (DX 56 at 160.)
Additionally, Peters was responsible at this time for
researching all of the potential employment
agreements with NYNEX and Bell Atlantic executives
to ensure synergies from the merger. Ud. at 160-61.)
Furthermore, Bell Atlantic’s Human _ Resources
Department, which was charged with administering
dozens of Bell Atlantic pension plans, was due to lose
a number of jobs at the combined entity, and Peters
was also at this time very concerned and active in the
process of determining how to retain institutional
knowledge of the various NYNEX and Bell Atlantic
benefit plans after the merger. Ud.) AG ¥ 46.
123. Bell Atlantic merged with NYNEX effective
August 14, 1997. (DX50) AG J 67. The merger began
with negotiations early in 1996, culminating in a
merger agreement in the first half of 1996, and finally
closed as a merger in August, 1997. (T. 108.) In
September 1997 Bell Atlantic’s CEBC adopted a
resolution authorizing the amendment of the NYNEX
Management Pension Plan (“NYNEX Plan”) to provide
for a cash balance formula (“Bell Atlantic-North Plan”
or “BA-North Plan”) for salaried employees formerly
SOa
with NYNEX. (DX26.) AG J 68. In other words, the
NYNEX Plan would be amended and become the Bell-
Atlantic North Plan. The CEBC resolution stated that
one purpose of the amendment was “conforming the
design of the BA-North Plan to the benefit design
approved by this Committee in 1995 for the Bell
Atlantic Cash Balance Plan.” (Ud. at VZ13469.) The
Human Resources Committee of Bell Atlantic’s Board
of Directors adopted a parallel amendment on
September 5, 1997, stating that the BA-North Cash
Balance Plan was to be “substantially identical!” to the
Bell Atlantic (South) Cash Balance Plan, “including
without limitation .. . to provide for a reasonable
methodology for a one-time transition from the
[INYNEX Plan’s}] prior benefit design to an opening
account balance ....” (DX27 at VZ13472; DX57 at 37.)
124. Outside counsel, Morgan, Lewis & Bockius
LLP, drafted the BA-North Plan document for Bell
Atlantic starting in late 1997 and continuing through
the first half of 1998. (DX 56 at 118, DX 57 at 30.) The
BA-North Plan was completed in the summer of 1998,
and was effective retroactively to December 31, 1997.
AG { 69. Peters claims that despite receving black-line
copies of the BA-North Plan comparing the document
to the Cash Balance Plan, he did not see the error in
the Cash Balance Plan. (T. 157-59: PX 289.)
Somewhere along the line, the reference to the second
transition factor was removed from the Cash Balance
Plan. (T. 160.)
25. Bell Atlantic sent a number of
communications to participants in the NYNEX Plan
regarding the conversion to the BA-North Plan. (DX
29, 30.) AG ¥ 70.
Sla
126. The final Bell Atlantic-North Plan contains
only one reference to the transition factor in the
opening balance formula for non-service pension
eligible participants. (DX 28, BA-North Plan
§ 16.5.1(b)(2), at VZ13650.) AG J 71.
R. The 1998 Plan.
127. lit preparation for the merger of the plans of
Bell Atlant ¢ and BA-North, an amended and restated
Bell Atlantic Plan was completed on October 8, 1998
(“1998 Plan”). (DX 31.) The 1998 Plan contained only
one reference to the transition factor in its recitation of
the opening balance formula for non-Service Pension
eligible participants. (DX 31, 1998 Plan, § 16.5.1(b)(2),
at VZ11713; DX 57 at 26-28; DX 56 at 103-06, 120-21.)
A subsequent 1999 restatement, issued prior to the
plan merger, also stated the opening balance formula
for non-Service Pension eligible participants using a
single transition factor. (DX 32 at VZ11848.) AG J 72.
The effective date of the 1998 Plan was January 1,
1998. (DX 31.)
128. Bell Atlantic eliminated the second reference
to the transition factor in § 16.5.1(b)(2) of the 1998
Plan (which corresponds to § 16.5.1(a)(2) of the 1997
Plan). (DX31 at VZ11713.) The second reference to the
transition factor in § 16.5.1(b)(2) was in an April 22,
1998 draft of the 1998 Plan. (PX 472 at MLB 548; T.
163-64.)
129. Verizon claims it does not know how the
second reference to the transition factor was removed
from the 1998 Plan. (DX 57 at 24-25.) (“I, neither I
[Peters] nor anyone else at Bell Atlantic has any idea
how that phrase disappeared from a document draft.”)
82a
The Court finds that it was removed intentionally to
correct the mistake that appeared in the 1996 and
1997 Plans.
130. Numerous document drafts were created
during 1997 and 1998, leading up to the merger of the
1997 Plan with BA-North Plan that would have shown
how the second transition factor was removed from the
Cash Balance Plan. Those documents were destroyed
prior to this litigation being instituted. Verizon has
produced all documents still in existence from its law
firms, consultants and employees related to the
transition factor reference in the 1996, 1997, and 1998
Plans.
131. Bell Atlantic sent communications’ to
NYNEX participants informing them that they would
be receiving the same benefits under the North Plan as
participants in the 1997 Plan, but no one reviewed the
North Plan document to confirm that it mirrored the
1997 Plan document in its benefits calculations. (DX57
at 31-33.)
132. The most important, basic, and fundamental
portion of the benefits determination under the Cash
Balance Plan, with respect to the Class, was the
opening balance formulas contained in §§ 16.5.1(a)(1)
and (a)(2). (T. 97, 127, DX57 at 32.)
133. Bell Atlantic never notified the Plan
participants of its error in including the second
transition factor in § 16.5.1(a)(2) of the 1996 Plan or
the 1997 Plan.
134. Bell Atlantic never notified the Plan
participants in a participant communication that it
83a
eliminated the second reference to the transition factor
in § 16.5.1(b)(2) of the 1998 Plan.
135. Bell Atlantic never notified the Plan
participants in a summary of material modifications
that it eliminated the second reference to the
transition factor in § 16.5.1(b)(2) of the 1998 Plan.
136. Neither Bell Atlantic nor Verizon ever
notified the IRS of the elimination of the second
reference to the transition factor in § 16.5.1(a)(2) of the
Cash Balance Plan in the 1998 Plan document. (DX56
at 111-12.)
S. The Merger of the Bell Atlantic and the Bell
Atlantic-North Plans.
137. Bell Atlantic merged the Bell Atlantic Plan
and the BA-North Plan on December 31, 1998, and a
merged Plan document was completed on December 1,
1999. (DX 33 at VZ11862, VZ11868; DX 80 and
VZ15102-03.) AG ¥ 73.
138. The merged 1999 Plan and its 2000
restatement both stated the opening balance formula
for non-Service Pension eligible participants using a
single transition factor. (DX 33, 34.) AG J 74.
139. In June 1999 and February 2000, Bell
Atlantic prepared “HR & You” newsletters. AG { 75.
140. Under the Bell Atlantic-North Plan, opening
balances were calculated by multiplying the transition
factor once. (DX28, BA-North Plan § 16.5.1(b)(2), at
VZ13650.) The Bell Atlantic-North Plan also used the
same transition factor tables that Bell Atlantic used in
S$4a
January 1996. (Compare DX18, 1996 Plan Art. 16, at
VZ1102-03 with DX28, BA-North Plan Art. 16, at
VZ13653-54.)
141. Numerous communications to NYNEX Plan
participants confirmed that the “substantially
identical” provisions of the BA-North Plan required the
transition factor to be multiplied only once to calculate
each participant’s opening balance. (DX29 at VZ13486-
92, DX30 at VZ13531-49.)
T. No Other Claims.
142. During the period from January 1, 1996 until
Plaintiff filed her claim in August 2006, no participant
asserted a claim, either through the Plan’s
administrative claims process or through litigation,
that his or her opening balance should have been
calculated by multiplying the lump sum cashout value
of his or her BAMPP accrued benefit by the square of
the transition factor.
U. Other Verizon Litigation.
143. Between 2003 and 2008, Verizon filed suit
against a number of participants seeking repayment of
alleged benefit overpayments’ resulting from
administrative errors in calculating benefits under the
terms of a Verizon pension plan. AG { 76. (See PX 304-
80.)
144. Verizon has also been sued by a number of
participants seeking additional benefits from the Plan
and other company-sponsored benefit plans. These
lawsuits include Gramm uv. Bell Atlantic Mgmt. , 983 F.
Supp. 585 (D.N.J. 1997), Wagner v. Bell Atlantic Corp.,
Sha
No. 96-113 (W.D. Pa. 1996), and Todisco v. Verizon
Comms. Inc., 497 F.3d 95 (1st Cir. 2007). AG J 77.
V. Plaintiff's Assertion of Her Claim.
145. In 2003, Young contacted the National
Center for Retirement Benefits (““NCRB”) to review her
retirement plan and her benefit payment. (DX 58 at
70-78, DX 38, 39.) AG 7 78. Plaintiff did so because
she thought mistakes might have been made in
calculating her pension, particularly with regard to the
recording of her compensation. (DX58 at 70-78, DX 38,
DX 39.)
146. The NCRB obtained copies of plan
documents, including the 1997 restatement of the
Plan, which contains the erroneous second reference to
the transition factor. (DX40, DX 41, DX25.)
147. On behalf of Young, the NCRB filed an
administrative claim on June 9, 2004. (DX 42.) The
NCRB argued that Young’s benefit should be higher
because Bell Atlantic should have used a different
discount rate to calculate the lump-sum cashout value
(100% — not 120% — of the PBGC rate). Ud.) The
Verizon Claims Review Unit denied this claim on
October 19, 2004. (DX 43.) Young appealed the Claims
Review Unit’s decision to the Committee on December
6, 2004. (DX 44.) The Committee denied Young’s
appeal in February 2005. (DX 45.) AG ¥ 79. The initial
administrative claim did not include a claim regarding
the transition factor. (DX 42.)
148. Plaintiffs counsel filed the initial complaint
in this action on December 30, 2005. (Dkt. 1.) In that
complaint, Plaintiff challenged only the discount rate
Soha
used to calculate her opening balance, arguing that her
opening balance should have been larger by $52,000.
AG {1 80. The complaint quotes § 16.5.1(a)(2), including
the second reference to the transition factor, but did
not contend that the transition factor should have been
multiplied twice. (Dkt. 1 at 4 24 and Ex. B, DX 66 at
q 3.)
149. On July 26, 2006, Young sought leave to
amend the complaint to add a claim relating to the
transition factor. (Dkt. 36.) The Court granted the
motion in August 2006 but stayed all proceedings to
permit Verizon to review the transition factor claim in
the administrative process. (Dkt. 43.) AG ¥ 81.
150. The Claims Review Unit denied Plaintiff
Young’s transition factor claim in a determination
letter dated December 8, 2006. (DX 46.) Plaintiff
appealed, and in a determination letter dated April 5,
2007, the Committee denied Plaintiff's edministrative
appeal. (DX 47.) AG 4 82. The Committee determined
that Bell Atlantic’s intent was to provide for a single
multiplication by the transition factor, and that the
insertion of the second reference to the transition
factor in § 16.5.1(a)(2) was “a mistake and cannot be
applied to increase Ms. Young’s benefits.” (DX 47 at
VZ15646-48. )
W. Plan Funding.
151. As of January 1, 1996, the market value of
the Plan’s assets exceeded the present value of the
Plan’s accrued benefits by approximately $992 million
(PX 396 at VZ20052.) AG J 83
152 As of January 1, 1998, the last available
higures before the meryer of the Cash Balance Plan
with the BA-North Plan, the market value of the Plan’s
assets exceeded the present value of the Plan’s accrued
benefits by approximately $2.3 billion. (PX 425 at
Y991.) AG 4 84
153. The Verizon Management Pension Plan
(“VMPP”) is the result of a number of mergers of
previously separate plans, including the BAMPP, the
NYNEX Plan, and GTIt’s defined benefit plan for
management employees. (DX 61 at 61.) The VMPP ha:
subsequently undergone several additional spinoffs
and divestitures. (Ud. at 62, 66, 69-70.) AG JY 85
154. As of December 31, 2008, an unaudited
Annual Funding Notice prepared by the plan's
actuaries pursuant to the Pension Protection Act of
2006 indicated that the market vaiue of the VMPL’s
assets was approximately $10.11 yn and the market
value of the Plan’s liabilities was approximately $12.1
billion. (DX 69 at VZ26893.) AG J 86. The Court was
not provided up-to-date information as of the date of
closing arguments
X. Plan Administration.
155. Bell Atlantic (and now Verizon) ha:
consistently calculated pension amounts for
participants who retired between 1996 and the present
who were covered by § 16.5.1(a)(2) using the transition
factor only once. AG | 87
Soa
Y. The Financial Impact of Enforcing the Second
Transition Factor.
156. The financial impact of enforcing the second
transition factor is over $1 billion in additional benefits
to the class. (T.261-63.) Document VZ27114-323
represents Verizon’s best approximation of the effect of
the second transition factor reference on opening
balances. (DX 62.)The names, dates, transition factors,
opening balances and effect of multiplying the
transition factor twice are all approximately correct.
Applying the transition factor twice would have
increased opening balances by $1.67 _ billion
($1,670,000,000.00) for the 10,808 participants with
transition factors greater than 1.000. AG J 88.
157. Itisnot known to what extent the increase in
opening balances would affect the actual benefits these
participants would receive, because a number of
participants were eligible to receive benefits under
alternative formulas and benefit windows that may
have provided a higher benefit than the Plan’s cash
balance formula. AG J 89.
158. Many employees would receive very large,
unexpected increases in their opening balances if the
transition factor were squared. Delores B., for
example, whose salary as of December 31, 1995, was
$110,000, had a transition factor of 2.91, based on her
age of 47 and her service of 29.33 years. If the
transition factor were squared, her opening balance of
$431,000 would increase to $1,253,000 — an increase of
$822,000. (DX62 at VZ27199.) Likewise, if his 2.70
transition factor were squared, Patrick H. would see
an increase in his opening balance of $956,000 — from
$563,000 to $1,519,000. Ud. at VZ27149.) Similarly, if
89a
the transition factor were squared, Sharon R., Anthony
M. and Bruce G. would experience increases in their
opening balances of $819,000, $827,000, and $829,000,
respectively. Ud. at VWZ27285, VZ27143, VZ27183.)
Over 136 participants would receive unexpected
increases in their opening balances of more than
$500,000. (DX62.) Nearly 5,800 members of the
subclass would receive unexpected increases in their
opening balances of more than $100,000. Ud.)
159. Squaring the transition factor for employees
not eligible for a Service Pension would result in
Plaintiff and many members of the subclass receiving
benefits as of the transition date that were
substantially larger than the benefits received by co
workers of the same age who received the same annual
compensation, yet worked more years for Bell Atlantic.
(DX62.) In effect, this would penalize many employees
for their longer service. It would also violate a
fundamental understanding under which Bell Atlantic
participants had operated throughout’ their
employment: that each additional year of service
resulted in an increase in their retirement benefit, and
that the attainment of the years of service and age
required for a Service Pension would result in a
substantial increase in their benefit. (DX17, BAMPP
§§ 4.1-4.38, at VZ109-12; DX1 at VZ10391-94.)
160. Plaintiffwas 48 years old and had 27.8 years
of Bell Atlantic service as of January 1, 1996. (DX14 at
Y811.) The opening balance for a participant with the
Same age and earnings, but 30 years of service, would
have been determined under Plan § 16.5.1(a)(1)
because the participant would have been eligible for a
Service Pension. (DX 17, BAMPP § 4.3(a), at VZ111.:
DX18 1996 Plan § 16.5.1(a\1), at VZ1100.) Not
90a
surprisingly, the participant with the additional 2.2
years of service would have been entitled to the larger
benefit, $262,000 vs. $240,812. (DX47 at VZ15648.)
But if the transition factor is squared in computing
Plaintiffs benefit under § 16.5.1(a)(2), then Plaintiff,
with 27.8 years of Bell Atlantic service, would have an
opening balance of $640,321 -- far more than the
$262,000 earned by the otherwise identical participant
with an additional two-plus years of service. (/d.)
Byron D. is an example of a participant who had three
years more service than Plaintiff, was four years older
and had a slightly higher rate of pay as of December
31, 1995. (DX62 at VZ27150.) His opening balance of
$352,018 was $111,000 more than Plaintiff's opening
balance of $240,812. Ud.) But if the transition factor is
squared, Plaintiffs opening balance would jump ahead
of Byron D.’s by nearly $300,000. (7d. )
161. Examples of the anomalies produced by
squaring the transition factor for employees not
eligible for a Service Pension are numerous. Compare,
for example, Rose W. and Mary R., who were not
eligible for a Service Pension, to Dorothy B., who was
older, had more service and was higher paid. (DX 62 at
VZ27222, VZ27198, VZ27114.) Because her age and
service had already qualified her for a Service Pension
as of the date of conversion to the Cash Balance Plan
(as well as her higher pay), Dorothy B. received a
higher opening balance on January 1, 1995 than Rose
W. and Mary R. ($257,000 for Dorothy B., $210,000 for
Rose W., and $221,00 for Mary R.) Ud.) But if the
transition factor is squared (“TFS”) for Rose W. and
Mary KR. (because §16.5.1(a)(2) applies to them) but not
for Dorothy B. (§ 16.5.1(a)(1) applies to her), their
opening balances would leapfrog far ahead of Dorothy
B.’s ($604,000 for Rose W. and $643,00 for Mary R., as
Gla
compared to $257,0007 for Dorothy B.) Ud.) Rose W.
and Mary R. would also leapfrog ahead of numerous
other employees whose age, service and 1995 pay were
greater than theirs, including the following: (Ud. at
VZ27222, VZ27198, VZ27114, VZ27187, VZ27114.)
162. Plaintiffand many members of the subclass
would also receive benefits that exceed the benefits of
many employees of NYNEX who expected to receive
the same transition benefits as their peers at Bell
Atlantic. (DX48 at VZ13511, VZ13514-15.)
Z. Location of Class Members and Activities
Giving Rise to This Lawsuit.
163. According to records maintained by the
Plan’s benefits administrator, approximately 3,743
members of the class reside in the Commonwealth of
Pennsylvania, more than live in any other state. (DX
63.) Approximately 20 class members reside in Illinois.
Ud.) Plaintiff has never lived or worked in the state of
Illinois. (DX 58 at 5-17, 53- 55.) AG J 90.
AGE | SERVICE | 1995 OPEN- OB -
SAL- ING TFS
ARY BAL-
ANCE
Rose W 47 29 56,800 210,000 / 604,000
Mary R. 47 29 57,600 | 221,000 | 644,000
ee — = —— —— at —— _ 4 Le
Dorothy 48 30 61,500 | 257,000 | 257,000
B. | |
~ |
AGE SERVICE 1995 OPEN- | OB-
SAL ING TES
ARY BAL-
ANCE
—— ~~~ “foo ~— - be —_——_—-—__—__+ - -—__________-_ —-4
Howard 50 30 | 58,500 278,000 | 278,000
M
David W 50 33 | 61,900 | 294,00 294,000
= cas ws . aes Se ae. en
eh al
Walter 55 34 96,000 520,000 520,000
M |
Ree. see | om >
164. During 1995-1998, all of the Morgan Lewis
attorneys who worked on the Cash Balance Plan, the
in-house lawyers at Bell Atlantic, and the consuStants
at Mercer were located in Philadelphia, Pennsylvania.
(DX 56 at 149.) AG J 91
165. FromJduly 1996 until at least 2002, the Plan
was not administered in Illinois. (DX 64 at Y3890; DX
65 at Y695, Y777.) The Plan has been administered in
Illinois since sometime after its merger into the VMPP
on January 1, 2002. AG ¥ 92.
166. The 1996 and 1997 versions of the Plan both
state that “|e]xcept to the extent superseded by ERISA,
all questions pertaining to the validity, construction,
and operation of the Plan shall be determined in
accordance with the laws of the Commonwealth of
Pennsylvania.” (DX 18, 1996 Plan § 12.5, at VZ1090;
DX 25, 1997 Plan § 12.5, at VZ11770.) AG J 93
93a
lI. CONCLUSIONS OF LAW
A. Procedural History.
Plaintiffalleges that Defendants miscalculated her
pension benefits under § 16.5.1(a)(2) of the Plan by: 1)
calculating her opening balance using 120% of the
PBGC rate instead of 100% (“Discount Rate Issue”),
and 2) calculating her opening balance by multiplying
her lump-sum cashout value by her applicable
Transition Factor once instead of twice (“Transition
Factor Issue”). Plaintiffs claims are brought under
ERISA §§ S502(a\1)B) and (a3), 29 U.S.C.
§ 1132(a\1)B) and 29 U.S.C. § 1132(a)(3). This Court
has jurisdiction over the claims pursuant to ERISA
§ 502(e), 29 U.S.C. § 1132(e). The parties consented to
this Court’s jurisdiction pursuant to 28 U.S.C.
§ 636(c)(1).
At the Phase I trial, this Court applied the
deferential “abuse of discretion” standard of review to
Defendants’ determination to deny Plaintiff benefits
under the Plan. Yeung v. Verizon’s Bell Atlantic Cash
Balance Plan, 575 F.Supp. 2d 892 (N.D. Ill. 2008). As
to Plaintiffs Discount Rate claim, the Court upheld
Defendants’ decision to calculate Plaintiffs opening
account balance at 120% of the PBGC rate, instead of
100%, as a_ reasonable interpretation within
Defendants’ discretion. Jd. at 910. As to Plaintiffs
Transition Factor claim, the Court found Defendants
did abuse their discretion by disregarding
“unambiguous” Plan terms requiring the Transition
Factor to be multiplied twice in calculating Plaintiffs
opening balance—terms that Defendants claim were a
“scrivener’s error.” Id. at 918. This Court held that
“upon determining the language was a mistake, the
} ]
Committee should have sought to reform the plan
document in court subject to de novo judicial
: ”» Ty?
review. {Qa
Following issuance of the Phase I opinion,
Defendants took up the Court’s invitation to file a
counterclaim for equitable reformation of the Plan’s
Transition Factor provision in § 16.5.1(a)(2) on theories
of scrivener’s error and mistake. Dkt. 139. The parties
engaged in extensive discovery.
The Court subsequently held a Phase IT bench trial,
where it considered both the Discount Rate Issue and
Transition Factor Issue de novo. The Court also heard
evidence on Defendants’ reformation counterclaim,
including the in-court testimony of two witnesses, and
received numerous exhibits in evidence, including
depositions. Dkt. 186
B. Statute of Limitations.
Before reaching the merits of the case, the Con rt
must first address Defendants’ argument that both of
Plaintiffs ERISA benefits claims are barred by the
statute of limitations because Plaintiff was “on notice”
of the benefit denial in 1998, when she retired and
received her lump-sum pension benefits under the
Plan. Plaintiff additionally asserts that Defendants’
reformation counterclaim is untimely because the
hmitations period started running in 1996, when the
Plan was finalized and approved with the second
reference to the Transition Factor
ERISA does not contain a statute of limitations for
suits brought to recover benefits under § 502. Doe v
Blue Cross & Blue Shield United of
/
Wisconsin, 112
95a
F.3d 869, 873 (7th Cir. 1997). When a federal statute
does not provide direction, the court’s inquiry is guided
by principles of federal common law. Berger v. AXA
Network LLC, 459 F.3d 804, 8U8 (7th Cir. 2006).
Federal courts generally borrow from either federal or
state statutes of limitations, whichever is most
consistent with the law and policy underlying the
federal cause of action. Lampf, Pleva, Lipkind, Prupis
& Petigrow v. Gilbertson, 501 U.S. 350, 355 (1991);
Lumpkin v. Envirodyne Indus., Inc., 933 F.2d 449, 465
(7th Cir. 1991).
One of ERISA’s fundamental goals is to protect plan
participants by requiring plan terms be communicated
to them in writing. 29 U.S.C. § 1001(b). In line with
that purpose, ERISA actions are authorized under
§ 502(a) to enforce or recover benefits due under the
“terms of the plan.” 29 U.S.C. § 1132(a)(1)(B), (a)(3).
Thus, characterizing § 502(a) claims as akin to written
contract claims for purposes of the applicable statute
of limitations is consistent with the underlying
purposes of ERISA. In looking for the most compatible
statute of limitations for ERISA § 502(a) actions, the
Seventh Circuit has repeatedly borrowed from state
statutes pertaining to written contracts. Leister v.
Dovetail, Inc., 546 F.3d 875, 880 (7th Cir. 2008); Datl/
v. Sheet Metal Workers’ Local 73 Pension Fund, 100
F.3d 62, 65 (7th Cir. 1996); Jenkins v. Local 705 Int'l
Brotherhood of Teamsters Pension Plan, 713 F.2d 247,
253 (7th Cir. 1983).
Once the appropriate limitations period has been
determined, the next relevant question is when the
limitations period begins to run. While courts borrow
from state law to supply a statute of limitations for
ERISA § 502 actions, federal common law determines
96a
when the limitations period accrues. Daill, 100 F.3d at
65; Miller v. } ortis Benefits Ins. Co., 475 F.3d 516, 520
(3d Cir. 2007). Generally, the federal “discovery rule”
holds that a claim accrues once the defendant performs
the alleged wrongful act and once the plaintiff
discovers it. Tolle v. Caroll Touch, Inc., 977 F.2d 1129,
1139 (7th Cir. 1992). However, ERISA-specific
concerns may provide for a different accrual date based
on the nature of the action involved. Id.
Therefore, to determine whether Plaintiffs claims
and Defendants’ counterclaim are barred, the Court
must consider: 1) what limitations period applies; and
2) the accrual date of the claim.
1. Plaintiff's Claims
a. Applicable Limitations Period
The parties raise two possible states whose statute
of limitations might apply: Illinois or Pennsylvania.
The most analogous Illinois statute of limitations is the
ten-year limitations period for suits pertaining to
written contracts. 735 ILCS 5/13-206; Lumpkin, 933
F.2d 449, 464-65 (7th Cir. 1991). Plaintiff advocates for
application of the I}inois statute, as the Plan has been
administered here since 2002. On the other hand,
Defendants contend that Pennsylvania’s four-year
limitations period for breach of contract claims should
apply. 42 Pa. Cons. Stat. § 5525; Hahnemann Univ.
Hosp. v. All Shore, Inc., 514 F.3d 300, 305-06 (3d Cir.
2008). Defendants claim that Pennsylvania was the
“hub” of this case during the most relevant time period.
To determine which limitations period applies, the
forum state’s statute is the “starting point.” Berger v.
97a
AXA Network LLC, 459 F.3d 804, 813 (7th Cir. 2006).
However, if another state has “a limitations period
that is more compatible with the federal policies
underlying the federal cause of action, that state’s
limitations law ought to be employed... .” Berger, 459
F.3d at 813. To decide whether to import another
state’s statute of limitations, the Seventh Circuit looks
to the state with the most “significant connection” to
the action. /d.
The Berger case illustrates the “significant
connection” analysis. In Berger, a class of insurance
agents brought an ERISA action in Illinois, alleging
the defendant wrongly deprived them of ERISA
benefits by reclassifying them as_ independent
contractors. The reclassification decision was made at
the defendant’s New York headquarters. And although
both of the named plaintiffs resided in the forum state
of Illinois, “other members of the class reside! in
states other than Illinois,” leading the court to obs: °7e
that “Illinois is simply a spoke rather than the hub of
this lawsuit.” Jd. Furthermore, the court found it “not
entirely irrelevant” that the ERISA plan at issue
contained a choice of law provision naming New York
as the forum for any non-ERISA disputes, as it spoke
to the parties “justified expectations” of where
potential litigation would ensue. /d. at 813-14. The
Seventh Circuit concluded that “New York is the state
with the most significant relationship to the parties
and to the transaction” and thus it better served the
federal policies at issue to displace the Illinois statute
of limitations with New York’s. /d. at 813-14; see also
Jenkins, 713 F.2d at 251 (court determined Illinois
statute of limitations applied because the operative
events happened there, including location of plan
98a
administrator, plan headquarters, and _ plan
investment agents).
Under the Berger considerations, Pennsylvania law
applies in the present case because it is more closely
connected to the parties, it was specified in the pension
plan, and it was the “hub” of the decisions made
relating to Plaintiffs claim. Pennsylvania is where
Defendant was headquartered during the time period
most relevant to this claim (the 1990s), where the Plan
was drafted, and where the most putative Class
members (3,743) still live. In addition, Plaintiff never
lived or worked in Illinois during the most relevant
time periods to the case, and onlv a handful of Class
members (20) currently reside in Illinois. Furthermore,
the pension plan in the present case contains a choice
of law provision that designates Pennsylvania law to
fill in any gaps in the ERISA statute. (PX 231 at
VZ1090.)
Therefore, Pennsylvania’s four-year statute of
limitations will be applied to Plaintiffs claims to
recover benefits under ERISA § 502.
b. Accrual of Plaintiff's Claim
It is well established in this Circuit that ERISA
§ 502(a)(1)(B) benefit claims begin to accrue only after
a “clear and unequivocal repudiation of rights under
the Pension Plan which has been made known to the
beneficiary.” Dall, 100 F.3d at 66. Defendants argue
that Plaintiffs causes of action accrued when she
received her lump sum pension payment in February
1998, the time when the alleged underpayment
occurred. Plaintiff, on the other hand, argues that no
“clear repudiation” occurred until the claims review
99a
committee denied her final appeals on the Discount
Rate claim on February 16, 2005 and on the Transition
Factor claim on April 5, 2007.
Plaintiff presents the more compelling argument.
An ERISA § 502(a)(1)(B) claim accrues at the time
benefits are denied. Tolle, 977 F.2d at 1139. In this
Circuit, an ERISA plaintiff is required to exhaust all
administrative remedies before bringing an action
challenging a denial of benefits. Ruttenberg v. U.S. Life
Ins. Co., 413 F.3d 652, 662 (7th Cir. 2005). Therefore,
an ERISA action logically accrues after the final
administrative appeal is denied in writing. Riemma v.
Bekins Van Lines Co., 1996 WL 99899, at *6 (N.D. III.
Feb. 29, 1996).
Furthermore, most other circuits addressing the
issue have also found that an ERISA claim accrues
only when all administrative appeals have been
exhausted. See, e.g., White v. Sun Life Assurance Co. of
Canada, 488 F.3d 240, 246 (4th Cir. 2007); Hall v.
Natl Gypsum Co., 105 F.3d 225, 230 (5th Cir. 1997);
Stevens v. Employer-Teamsters Council No. 84 Pension
Fund, 979 F.2d 444, 451 (6th Cir. 1992).
Defendants cite a Third Circuit case for the
proposition that a “clear repudiation” of ERISA
benefits occurs upon the initial denial of benefits.
Miller v. Fortis Benefits Ins. Co., 475 F.3d 516 (3d Cir.
2007). In Miller, the court held that a § 502(a)(1)(B)
claim for benefits accrued at the date of the
underpayment, because this was the point the plaintiff
could be considered “on notice” of the alleged injury.
Miller, 475 F.3d at 521-22. However, the Miller court
specifically noted that this approach “diverges from
100a
that of other courts confronting the same issue.”
Miller, 475 F.3d at 523.
This Court declines to follow the Third Circuit’s
reasoning because the better argument is_ that
Plaintiffs Discount Rate claim accrued in February
2005 and Transition Factor claim accrued in April
2007, following receipt of the respective final
administrative denials from Defendants. Those dates
represent the “clear and unequivocal repudiation of
rights under the Pension Plan which has been made
known to the beneficiary.” Daill, 100 F.3d at 66. This
result promotes the ERISA policy of requiring an
exhaustion of administrative remedies prior to
instituting litigation. Ruttenberg, 413 F.3d at 662.
Therefore, both of Plaintiffs claims are timely under
the four-year Pennsylvania statute of limitations.
2. Defendants’ Counterclaim
a. Applicable Limitations Period
The Court applies the above analysis to ascertain
the applicable statute of limitations for Defendants’
counterclaim. Absent a governing ERISA provision, the
Court again looks to the most analogous state statute.
For the reasons set forth above, the Court will borrow
from Pennsylvania law, which applies the four-year
statute of limitations for contract claims in suits for
reformation. Bowes v. Travelers Ins. Co., 173 F. Supp.
2d 342, 346 (E.D. Pa. 2001).
b. Accrual of Defendants’ Counterclaim
While the four-year’ period’ provided _ by
Pennsylvania state law applies, the Court must look to
LOla
federal law to determine the accrual date for an ERISA
reformation counterclaim. Barry Aviation Inc. v. Land
O'Lakes Mun. Airport Comm’n, 377 F.3d 682, 688 (7th
Cir. 2004). The parties assert two alternative
theories—Plaintiff contends the limitations period
began running in 1996, when Defendants published
the Plan with the mistake, and Defendants argue the
limitations period began when Plaintiff raised the
mistake in the present action
Under Pennsylvania law, a suit for reformation
accrues at the time the error 1s committed, regardless
of whether the parties had knowledge of the mistake.
Firestone & Parson, Inc. v. Union League of
Philadelphia, 672 F. Supp. 819, 822 (E.D. Pa. 1987).
However, this rule is in conflict with the federal
“discovery rule,” which provides that a statute of
limitations begins to run when a claimant knew or
should have known of the facts giving rise to the cause
of action. Barry, 377 F.3d at 688. In a reformation
claim, the discovery rule means that “where the
parties, by their actions, consistently construe a
contract in a manner that conflicts with its plain
meaning, the time to seek reformation does not begin
to run until one of the parties repudiates the past
construction and elects to rely on the plain meaning of
the contract terms.” [lal Roach Studios, Inc. v. Richard
Feiner and Co., Inc., 896 F.2d 1542, 1549 n. 13 (9th
Cir. 1990). Even if a party is negligent in failing to
discover its mistake, mere negligence is not a bar to
reformation. Restatement (Second) of Contracts § 508
(1981); Olivas v. ITT Hartford Life and Annuity Ins.
Co., 1995 WL 349855, at *2 (9th Cir. June 9, 1995)
(failure to discover clerical error in contract did not bar
reformation).
102a
Here, Defendants consistently paid out benefits
under the Plan using a one-time multiplication of the
apphcable Transition Factor. The Plan beneficiaries,
including Plaintiff, accepted these benefits without
complaint about the Transition Factor calculation until
2006, when Plaintiff amended her complaint in the
present action. While the error was brought to
Defendants’ attention in 1997 in a footnote of the
Corcoran brief, the plaintiffs in that case did not raise
a claim against Defendants for a_e different
interpretation of the Transition Factor provision. Thus,
while Defendants were arguably negligent for failing
to “discover” the error in 1997, it was not enough to
have started the limitations period running, because
the Corcoran plaintiffs did not repudiate the past
course of dealing. Therefore, the Court concludes that
Defendants’ reformation counterclaim accrued in 2006,
when Plaintiff raised the issue in this action
Therefore, Defendants’ counterclaim for reformation 1s
timely under the four-year Pennsylvania statute of
limitations
C. De Novo Standard of Review.
Unlike deferential review, where the Court looks to
the reasonableness of the Plan administrator’s
decision, the de novo standard requires the Court to
review the case with a fresh eye. In fact, the Court is
not technically “reviewing” any decision, but rather
making its own independent determination about the
merits of the dispute and the employee’s entitlement to
benefits. Diaz v. Prudential Ins. Co. of Am., 499 F.3d
640, 643 (7th Cir. 2007). The Seventh Circuit put it
this way:
103a
[Wjhen de novo consideration is appropriate in
an ERISA case ... the court can and must come
to an independent decision on both the legal and
factual issues that form the basis of the claim.
What happened before the Plan administrator
or ERISA fiduciary is irrelevant. [Cite omitted].
That means that the question before the district
court ... was the ultimate question whether [the
plaintiff] was entitled to the benefits he sought
under the plan.
Id. This Court will now address both issues raised tn
this case under the de novo standard.
D. Discount Rate Issue.
Plaintiff contends Defendants incorrectly calculated
her opening account balance because it used an
interest rate equal to 120% of the PBGC rate, instead
of 100%. Plaintiffargues that because § 16.5.1 provides
a formula for determining the “present value,” and
because § 16.5.1(a\(2) refers to the term “lump-sum
cashout value” without re-defining that term, the
“lump-sum cashout value” is synonymous with the
term “present value.” Accordingly, Plaintiff asserts
that § 16.5.1 governs how to determine that lump-sum
cashout value, which uses 100% of the PBGC rate
when determining the opening account balance.
Defendants, however, interpret “lump-sum cashout
value” as not being synonymous with the term “present
value” as stated in § 16.5.1. Rather, Defendants assert
the “lump-sum cashout value” is to be determined by
a formula under the 1995 BAMPP Plan, and thus uses
the formula under § 4.19 of the 1995 BAMPP calling
for a calculation of 120% of the PBGC rate.
104a
Although the Court will review Plaintiffs Discount
Rate claim de novo for the sake of thoroughly
addressing all issues for possible appellate review, the
Court concludes this issue was properly within
Defendants’ discretion. See Young, 575 F. Supp. 2d at
905-12. When a plan administrator has discretion, the
Court reviews its decision under an “abuse of
discretion” standard to determine whether it was
reasonable. Metro. Life Ins. Co. v. Glenn, ULS. ---,---,
1288. Ct. 2343, 2348 (2008). In Phase I, the Court held
Defendants’ interpretation of the Plan language to
mean that the lump-sum cashout value is to be
determined under the formula stated in the 1995
BAMPP Plan was reasonable. Young, 575 F. Supp. 2d
at 910. Therefore, the issue was appropniately decided
in Phase I under the deferential standard of review
lL. De Novo Review of Discount Rate Issue
Applying the de novo standard, the Court concludes
that Defendants correctly used 120% of the PBGC rate
pursuant to § 4.19 of the 1995 BAMPPD, instead of
100%, in determining Plaintiffs opening account
balance. The Court first looks to the provision of the
Plan governing Plaintiff's benefits, which indicates
that the lump-sum cashout value is to be determined
under the 1995 BAMPP methodology. Specifically,
§ 16.5.1(a)(2) states that:
ijn the case of a Participant who is not eligible
for a Service Pension under the 1995 BAMPP
Plan as of the Transition Date, the amount
described in this paragraph (2) is the product of
multiplying (A) the Participant’s applicable
Transition Fact described in Table 1 of this
Section, tives (B) the lump-sum cashout value
105a
of the Accrued Benetit payable at age 65 under
the 1995 BAMPP Plan, determined as if the
Participant had a Severance From Service Date
on December 31, 1995, based on Compensation
paid through December 31, 1995.
(PX 231 at VZ 1100) (emphasis added).) The 1995
BAMPP Plan was attached as Appendix A to the 1996
Plan. Under § 4.19(c)(2\C) of the BAMPP, “[ilf the
Acturarial Equivalent present value of the pension
using the ‘applicable interest rate’ (as defined in (c))
does exceed $25,000, 120% of the applicable interest
rate” was to be used. (DX 17 at VZ 134.) An ERISA
plan may incorporate terms and provisions from a
predecessor plan, including provisions that “expired”
before adoption of the current plan. Young, 575 F.
Supp. 2d at 911.
Furthermore, Bell Atlantic communicated to the
plan participants that it would continue to use the
“same conversion method used in calculating a cashout
payment under the old plan.” (DX 1 at VZ 10392.)
Specifically, Estimated Opening Account Balance
Statements sent to participants explained that “|yJour
accrued benefit is converted to a lump-sum value
applying the same method used today to determine
lump-sum cashouts and is based on the PBGC interest
rate of 5%.” (DX 11 at VZ 10476.) For participants with
cashout balances over $25,000, that meant that 120%
of the rate structure was used. Bell Atlantic
consistently applied 120% of the rate structure to
balances over $25,000 under the Plan. Restatements of
the Plan beginning in 1998 were amended to explicitly
state that 120% of the applicable PBGC rate is to be
used for this type of participant. Given these
L06a
considerations, Defendants properly used 120% of the
PBGC rate to calculate Plaintiffs opening balance.
2. Defendants Are Not Judicially Estopped
From Asserting That § 4.19 of the BAMPP
Applies
Plaintiff asserts that Defendants are judicially
estopped from arguing that § 4.19 of the BAMPP
controls present value calculations under § 16.5. 1(a) of
the Plan, claiming they took an inconsistent position in
Corcoran v. Bell Atl. Corp. Tine Corcoran ltigation
commenced in 1997 and challenged the Discount Rate
calculation in determining participants’ opening
balances when the BAMPP converted to the Cash
Balance Plan. The Corcoran plaintiffs alleged that
December 1995 PBGC rates should h
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