SBC Retirees Lawsuit ReinstatedThe Court of Appeals for the District of Columbia Circuit ruled May 17, 2005 that two retirees from SBC Communications, Inc. can pursue a class action on behalf of certain SBC early retirees. The affected class members retired early pursuant to the Enhanced Pension and Retirement Program (“EPR”) that was offered by SBC in the fall of 2000. Plaintiffs believe there are more than 6000 affected people who may have suffered an aggregate loss of approximately $30 million dollars as a result of the conduct challenged in the lawsuit. The EPR Retirees covered by the proposed class are those who accepted a so-called “enhanced grandfathered benefit” under the terms of SBC’s pension plan. The enhanced grandfathered benefit was to be calculated in the same manner as the grandfathered benefit available to certain long term employees using the formula of the SBC’s traditional defined benefit plan based on age, years of service, and average compensation over a five year averaging period. Only a subset of SBC employees could obtain this benefit: for most employees, the Pension Plan had been converted from a traditional defined benefit plan to a cash balance pension plan. The case was reinstated because the Court of Appeals held that the Complaint sufficiently stated a claim that the EPR retirees receiving the “enhanced grandfathered benefit” were discriminated against as compared to retirees receiving the ordinary “grandfathered benefit” under the plan. The Court said: it is patently unreasonable for the Committee and other Plan officials who are authorized to administer the Plan to interpret the Plan in a manner that discriminates against plaintiffs in direct contravention of the Plan’s plain language. Specifically, the Complaint alleged that in calculating the pensions for the class members, the Plan was interpreted to omit pay earned during the last pay period used to determine average compensation. By contrast, ordinary “grandfathered” retirees were treated more favorably; their average compensation for pension calculation purposes was, according to the Complaint, calculated using all of the compensation they earned during the Plan’s five year averaging period. According to Cohen, Milstein, Hausfeld & Toll attorney Marc Machiz, co-lead counsel for the plaintiffs, “The Court's decision is a terrific victory for a large group of early retirees who we believe were shortchanged in their total pension distributions by approximately $30 million dollars. This decision reinstates the Complaint and sends it back to the trial court. There we expect to be able to prove that the Plan treated these early of retirees less favorably than regular retirees in violation of their Pension Plan. We'll be looking for the full story of how that discrimination came about.” The Plan argued that the allegations of the Complaint, if true, established “only that the Plan’s record keeper which performs ministerial functions as the mathematical calculation of pension benefits, mistakenly paid certain Plan participants more then they were entitled to under the Plan.” But the Court disagreed, because Plaintiffs alleged that the discrimination “was the result of deliberate decisions made by officials responsible for the administration of the Plan, not to ministerial errors.” |
