Laurent v. PricewaterhouseCoopers LLP

Background

Timothy Laurent and Smeeta Sharon brought this class action for themselves and others similarly situated against PricewaterhouseCoopers LLP, the Retirement Benefit Accumulation Plan for Employees of PricewaterhouseCoopers LLP, and the plan’s Administrative Committee. The claims arise under the Employee Retirement Income Security Act of 1974, a federal law governing employee benefit plans.

The court had previously entered judgment for the defendants on the pleadings and denied the plaintiffs’ summary-judgment motion, concluding that the relevant ERISA provisions did not authorize the requested relief. The Second Circuit later vacated that decision, holding that ERISA authorized a two-step remedy: reforming the plan and then enforcing the reformed plan. On remand, the defendants moved to decertify the class, and the plaintiffs renewed their motion for summary judgment.

Motion to Decertify the Class

The defendants argued that the class could not proceed under Federal Rule of Civil Procedure 23(b)(2) because plan reformation was only a preliminary step, enforcement would provide money rather than injunctive relief, and the defendants would be unable to raise individualized defenses. The defendants also argued that the former participants who had cashed out lacked constitutional standing to seek plan reformation.

The court rejected these arguments and denied the motion to decertify. It held that reformation may be a proper precursor to injunctive relief when it declares the participants’ rights and requires enforcement of the reformed plan. The court also held that former plan participants could have standing to seek this prospective relief, relying on prior appellate decisions rejecting the argument that only current employees can seek reformation of an ERISA plan.

The court further held that enforcing the reformed plan was not improper merely because it could result in monetary payments. It rejected the defendants’ reliance on individualized equitable defenses, explaining that such defenses could not override the terms of a valid ERISA plan. The court also concluded that certain adjustments involving former Coopers & Lybrand personnel could be handled through mechanical calculations rather than requiring decertification.

Summary Judgment

The plaintiffs sought summary judgment on two liability issues. First, they argued that the plan’s normal retirement age should be 65 because the plan’s alternative provision, defining that age by completing five years of service, violated ERISA. Second, they argued that the plan unlawfully used the interest rate on 30-year Treasury securities as the projection rate in calculating the actuarial equivalent of early lump-sum distributions.

The court agreed that the plan’s lawful normal retirement age was 65. It held that the five-years-of-service provision violated ERISA and that the remaining age-65 provision should govern. The court also held that the plan unlawfully used the 30-year Treasury rate as its projection rate. Because the plan credited participant accounts using variable investment returns rather than a guaranteed rate, ERISA required an estimate of that variable rate. The 30-year Treasury rate was not such an estimate. The court therefore held the defendants liable on this issue as a matter of law.

The plaintiffs proposed replacing the unlawful projection rate with the 20-year average annualized return for one of the plan’s model portfolios. The court did not decide whether that proposed rate was appropriate. It held that the plaintiffs had not shown that there was no genuine dispute about which model portfolio, time period, or other lawful method the plan’s drafters would have selected. Summary judgment was therefore denied as to the remedy.

Disposition

The court ordered that the defendants’ motion for class decertification was DENIED. The plaintiffs’ motion for summary judgment was GRANTED in part and DENIED in part. The plaintiffs received summary judgment on liability concerning both the plan’s normal retirement age and its projection rate, but summary judgment was denied as to relief. The parties were directed to confer and file proposals for the next phase of the litigation within 21 days.