Opinion
MASTER FILE: 05 Civ. 5296 (SAS).
April 4, 2007
For Plaintiffs: Edgar Pauk, Esq., New York, New York.
Brad N. Friedman, Esq., Milberg Weiss Bershad Schulman, LLP, New York, New York.
William D. Frumkin, Esq., Sapir Frumkin LLP, White Plains, New York.
Richard S. Schiffrin, Esq., Joseph H. Meltzer, Esq., Edward W. Ciolko, Esq., Schiffrin Barroway, LLP, Radnor, Pennsylvania.
For Defendants: Myron Rumeld, Esq., Proskauer Rose LLP, New York, New York.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
Michael Lonecke, Raymond Duffy, Anne Nelson, Robert S. Fash and Craig A. Harris on behalf of themselves and a class of similarly situated individuals, filed consolidated actions alleging that the Citibuilder Cash Balance Plan ("Plan") violates the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001 et seq., seeking injunctive and declaratory relief as well as monetary damages. By Opinion and Order dated December 11, 2006, this Court denied summary judgment for defendants and granted summary judgment for plaintiffs with respect to three major legal issues raised in their Complaint. Specifically, the Court ruled that (1) the Plan's unorthodox formula violated ERISA's anti-backloading rules and kept accrual rates below the minimum rate prescribed by statute; (2) the Plan was impermissibly age discriminatory under ERISA; and (3) defendants failed to meet statutory notice requirements with respect to amendments made to the Plan in 2000 and 2002. The Court also directed defendants to reform the Plan to comply with ERISA.
See Complaint ¶¶ 32-42, "Prayer for Relief" (A)-(F).
See In re Citigroup Pension Plan ERISA Litig., No. 05 Civ. 5296, 2006 WL 3613691 (S.D.N.Y. Dec. 12, 2006) (" Citigroup I").
See id.
See id. at *14.
By Opinion and Order dated December 19, 2006, this Court certified a class of plaintiffs consisting of all individuals who were participants in the Plan at any time on or after January 1, 2000, their beneficiaries and estates, and those who are currently subject to the Plan's cash balance formula under ERISA. Defendants now move for partial final judgment on the age discrimination and backloading issues pursuant to Federal Rule of Civil Procedure 54(b), leave to file an interlocutory appeal pursuant to 28 U.S.C. § 1292(b), and for a stay of this Court's rulings pending appellate proceedings in both this case and another case currently on appeal to the Second Circuit. For the reasons stated below, all of defendants' motions are denied. The Court also takes this opportunity to clarify its prior summary judgment ruling with respect to plaintiffs' notice claims under ERISA § 204(h).
See In re Citigroup Pension Plan ERISA Litig., No. 05 Civ. 5296, 2006 WL 3770504, at *2 (S.D.N.Y. Dec. 19, 2006) (" Citigroup II"). Defendants petitioned the Second Circuit for appellate review of this Court's class certification ruling pursuant to Federal Rule of Civil Procedure 23(f); their petition was denied. In re Citigroup Pension Plan ERISA Litig., No. 07-0070-MV (2d Cir. Jan. 4, 2007).
See Memorandum of Law in Support of Defendants' Motion for Partial Final Judgment Pursuant to Rule 54(b) and Certification Under 28 U.S.C. § 1292(b) and for a Stay ("Def. Mem.") at 1 (requesting a stay until the Second Circuit rules in Hirt v. Equitable Ret. Plan for Employees, Managers Agents, 441 F. Supp. 2d 516 (S.D.N.Y. 2006), appeal pending, No. 06 Civ. 4757 (filed Oct. 13, 2006).
For a discussion of cash balance plans, generally, and the factual background of this litigation, see Citigroup I, 2006 WL 3613691, at *1-4.
II. LEGAL STANDARD
A. Final Judgments Under Rule 54(b)
Rule 54(b) states, in relevant part:
When more than one claim for relief is presented in an action . . . or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of a judgment.
The Second Circuit has provided the following guidance in deciding whether to certify a final judgment under Rule 54(b):
Generally, a district court may properly make a finding that there is no just reason for delay only when there exists some danger or hardship or injustice through delay which would be alleviated by immediate appeal, for example, where a plaintiff might be prejudiced by a delay in recovering a monetary award, or where an expensive and duplicative trial could be avoided if, without delaying the prosecution of the surviving claims, a dismissed claim were reversed in time to be tried with the other claims. The district court's explanation as to why a disposition should be appealable immediately is entitled to substantial deference, and we thus review it for abuse of discretion.
Advanced Magnetics, Inc. v. Rayfront Partners, Inc., 106 F.3d 11, 16 (2d Cir. 1997). See also Ginnett v. Computer Task Group, Inc., 962 F.2d 1085, 1095 (2d Cir. 1992) ("The proper guiding star . . . is the interest of sound judicial administration." (quotation marks omitted)).
The Second Circuit has also emphasized that "[r]espect for the historic federal policy against piecemeal appeals requires that a Rule 54(b) certification not be granted routinely." The power should be "exercised sparingly," and reserved for "the infrequent harsh case" where the aforementioned dangers of hardship or injustice exist.
Grand River Enters. Six Nations Ltd. v. Pryor, 425 F.3d 158, 165 (2d Cir. 2005) (citing Citizens Accord, Inc. v. Town of Rochester, 235 F.3d 126, 128-29 (2d Cir. 2000)).
Advanced Magnetics, 106 F.3d at 16.
Grand River Enters., 425 F.3d at 165 (citation omitted).
B. Interlocutory Appeals Under Section 1292(b)
Appeals of interlocutory district court orders are governed by 28 U.S.C. § 1292(b). Under section 1292(b), the order being appealed must "(1) involve a controlling question of law (2) over which there is substantial ground for difference of opinion," and the movant must also show that "(3) an immediate appeal would materially advance the ultimate termination of the litigation." "[I]n practice the courts treat the statutory criteria as a unitary requirement, and the decisions granting and discussing interlocutory appeals under [section] 1292(b) uniformly cite all three of the elements as being present in any particular case."
Estevez-Yalcin v. The Children's Village, No. 01 Civ. 8784, 2006 WL 3420833, at *1 (S.D.N.Y. Nov. 27, 2006) (quotation marks and citation omitted).
In addition, leave to appeal is warranted only when the movant demonstrates the existence of "exceptional circumstances" sufficient to overcome the "general aversion to piecemeal litigation" and to "justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment." Interlocutory appeal "is limited to `extraordinary cases where appellate review might avoid protracted and expensive litigation,' . . . and is not intended as a vehicle to provide early review of difficult rulings in hard cases" The decision whether to grant an interlocutory appeal from a district court order lies within the district court's discretion.
Williston v. Eggleston, 410 F. Supp. 2d 274, 276 (S.D.N.Y. 2006).
In re AroChem Corp., 176 F.3d 610, 619 (2d Cir. 1999). Accord Ted Lapidus, S.A. v. Vann, 112 F.3d 91, 95 (2d Cir. 1997).
In re Flor, 79 F.3d 281, 284 (2d Cir. 1996) (quotation marks and citations omitted).
In re Levine, No. 03 Civ. 7146, 2004 WL 764709, at *2 (S.D.N.Y. Apr. 9, 2004) (quoting German v. Federal Home Loan Mortgage Corp., 896 F. Supp. 1385, 1398 (S.D.N.Y. 1995)).
See, e.g., Swint v. Chambers County Comm'n, 514 U.S. 35, 47 (1995) ("district courts [have] first line discretion to allow interlocutory appeals"); In re Kassover, 343 F.3d 91, 94 (2d Cir. 2003); DM Rothman Co., Inc. v. Cohen Mktg. Int'l, Inc., No. 98 Civ. 7905, 2006 WL 2128064, at *1 (S.D.N.Y. July 27, 2006).
"In regard to the first prong, the `question of law' must refer to a `pure' question of law that the reviewing court could decide quickly and cleanly without having to study the record." The question must also be "controlling" in the sense that reversal of the district court's order would terminate the action, or at a minimum that determination of the issue on appeal would materially affect the litigation's outcome.
In re Worldcom, Inc., No. M47, 2003 WL 21498904, at *10 (S.D.N.Y. June 30, 2003).
See In re XO Commc'ns, Inc., No. 03 Civ. 1898, 2004 WL 360437, at *3 (S.D.N.Y. Feb. 26, 2004); North Fork Bank v. Abelson, 207 B.R. 382, 389-90 (E.D.N.Y. 1997).
As to the second prong, the "substantial ground for a difference of opinion" must arise out of a genuine doubt as to whether the district court applied the correct legal standard in its order. The requirement that such a substantial ground exists may be met when "(1) there is conflicting authority on the issue, or (2) the issue is particularly difficult and of first impression for the Second Circuit." However, it is not sufficient that the relevant case law is "less than clear" or allegedly "not in accord," or that there is a "strong disagreement among the parties." "A mere claim that a district court's decision was incorrect does not suffice to establish substantial ground for a difference of opinion." Rather, the district court must "analyze the strength of the arguments in opposition to the challenged ruling when deciding whether the issue for appeal is truly one on which there is substantial ground for dispute."
In re Worldcom, 2003 WL 21498904, at *10 (citation omitted).
In re Lloyd's Am. Trust Funds Litig., No. 96 Civ. 1262, 1997 WL 458739, at *5 (S.D.N.Y. Aug. 12, 1997) (citing Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21, 25 (2d Cir. 1990)).
North Fork Bank, 207 B.R. at 390.
In re Iridium Operating LLC, Nos. 99-45005, 01-02952, M47, 2003 WL 21507196, at *1 (S.D.N.Y. June 30, 2003) (stating that to demonstrate that there is a substantial ground for difference of opinion a party "must show that the issue is difficult and of first impression and involves more than just a strong disagreement among the parties") (quotation omitted).
Aristocrat Leisure Ltd. v. Deutsche Bank Trust Co. Americas, No. 04 Civ. 10014, 2005 WL 3440701, at *2 (S.D.N.Y. Dec. 14, 2005) (citations omitted).
In re Flor, 79 F.3d at 284 (quotation omitted). Accord Marlin v. United States Tr., 333 B.R. 14, 20 (W.D.N.Y. 2005).
Finally, "`[a]n immediate appeal is considered to advance the ultimate termination of the litigation if that appeal promises to advance the time for trial or shorten the time required for trial.'" Courts place particular emphasis on the importance of this last factor.
Transportation Workers Union of Am., Local 100, AFL-CIO v. New York City Transit Auth., 358 F. Supp. 2d 347, 350 (S.D.N.Y. 2005) (quoting In re Oxford Health Plans, Inc., 182 F.R.D. 51, 53 (S.D.N.Y. 1998)).
See Koehler v. Bank of Bermuda, Ltd., 101 F.3d 863, 865-66 (2d Cir. 1996) ("The use of § 1292(b) is reserved for those cases where an intermediate appeal may avoid protracted litigation."); Lerner v. Millenco, L.P., 23 F. Supp. 2d 345, 347 (S.D.N.Y. 1998) ("The Court of Appeals has emphasized the importance of the third consideration in determining the propriety of an interlocutory appeal.").
III. DISCUSSION
A. Rule 54(b) Partial Final Judgment
Principles of sound judicial administration do not favor the entry of a final judgment under Rule 54(b). In arguing for a final judgment, defendants gloss over the fact that Rule 54(b) final judgments are disfavored in this Circuit. Buried in their brief, defendants acknowledge that such judgments are suitable where "`there exists some danger of hardship or injustice through delay which would be alleviated by immediate appeal,'" but overall, their submissions are devoid of support for a finding that such a danger exists here. The only "hardships" and/or "injustices" defendants assert are that if a remedial pension plan is proposed and approved before the Second Circuit has an opportunity to rule definitively on the backloading and age discrimination issues, the parties and the Court will have "needlessly" expended resources devising and evaluating potential reforms to the Plan. These hardly constitute the requisite, rare hardships required for final judgments under Rule 54(b).
Def. Mem. at 12 (quoting Cullen, 811 F.2d at 711 (quotation marks and citation omitted)).
Id. See also id. at 8 (arguing that having the Court "perform a complicated evaluation of the fairness of a Plan reform proposal," while elements of that proposal are "vulnerable" to appellate review, "is not an efficient use of judicial resources"). Notwithstanding plaintiffs' opposition, defendants also claim that a final judgment and stay are in Plan participants' best interest. See id. at 5-6, 12 (arguing that "until it is clear how these issues finally play out," defendants remain unable to "give Plan participants and beneficiaries reliable advice about their pension benefits" or to devise an accrual formula that would ostensibly maximize participants' benefits). I cannot find that plaintiffs would indeed be better served by the granting of a stay, over the vehement opposition of their own class counsel.
The age discrimination and backloading issues also lack the degree of finality required for a final judgment under Rule 54(b), because only liability has been adjudicated and there had been no final remedy determination on any claim. As noted above, this Court specifically directed the parties to file remedy plans, and the parties are currently on track to complete all briefing on the remedy issues by May 25, 2007.
See Acha v. Beame, 570 F.2d 57, 62 (2d Cir. 1978) (where a district court grants summary judgment as to liability, but "specifically reserves" "consideration of further relief," its judgment lacks the degree of finality required for certification under Rule 54(b)) (citing Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 737 (1976)).
See 1/16/07 Letter to the Court from Brad N. Friedman, counsel for plaintiffs. Pursuant to an agreement between the parties, defendants produced discovery data on the remedy issues to the plaintiffs on February 12, 2007. See 2/12/07 Letter to the Court from Myron D. Rumeld, counsel for defendants, to Edgar Pauk, counsel for plaintiffs (enclosing discovery).
B. Section 1292(b) Certification
I am not persuaded that this case presents the "exceptional circumstances" justifying section 1292(b) certification. With respect to the backloading issue, defendants' arguments in favor of certification are without merit. Defendants do not cite a single case suggesting that any difference of opinion exists — let alone a substantial one — as to whether the Plan's application of the fractional test indeed violates ERISA's anti-backloading rules.
In re Flor, 79 F.3d at 284 (quotation marks and citations omitted).
See Def. Mem. at 16-17. Dicta in a recent Third Circuit case supports this Court's analysis that cash balance plans calculated using a career average formula must apply the 133 1/3% test in order to comply with statutorially mandated minimum accrual rates. See Register v. PNC Fin. Servs. Group, Inc., 477 F.3d 56, 70 (3d Cir. 2007) (noting that the only accrual test that can apply to a cash balance plan that uses career pay history is the 133 1/3% test).
Similarly, with respect to the age discrimination issue, I am not of the view that contrary decisions, even by two circuit courts, constitute the rare case of a substantial difference of opinion justifying interlocutory appeal. Nor would allowing section 1292(b) certification on this issue avoid protracted litigation in this case, for independent of the age discrimination issue, a reformation of the Plan to comply with Congressionally prescribed minimum rates of benefit accrual ( i.e., with the 133 1/3% rule) must proceed without delay.
See Register, 477 F.3d at 68-70; Cooper v. IBM Pers. Pension Plan, 457 F.3d 636 (7th Cir. 2006).
See In re Flor, 79 F.3d at 284 ("[T]he mere presence of a disputed issue that is a question of first impression, standing alone, is insufficient to demonstrate a substantial ground for difference of opinion."). See also Citigroup I, 2006 WL 3613691, at *7, 10-13 (discussing the split among federal courts on this issue). Two other courts in this Circuit have also considered, and denied, requests to grant section 1292(b) certification on similar cash balance plan age discrimination issues. See Richards v. Fleetboston Fin. Corp., No. 03 Civ. 1638, 2006 WL 3000768 (D. Conn. Oct. 16, 2006); In re J.P. Morgan Chase Cash Balance Litig., No. 06 Civ. 732, Doc. No. 66 (S.D.N.Y. Nov. 13, 2006) (endorsed letter denying request for interlocutory appeal).
C. This Court's Prior Ruling on Plaintiffs' ERISA § 204(h) Claims
For a discussion of the legal standard governing claims arising under ERISA § 204(h), see Citigroup I, 2006 WL 3613691, at *6-7.
With respect to the Plan's compliance with ERISA's notice requirements, I previously ruled that, "because both the December 1999 and December 2000 § 204(h) notices failed to mention the formula's fractional rule application, which kept accrual rates below the statutory minimum, the amendments never took legal effect." In retrospect this language is ambiguous and requires clarification. The Citigroup Plan presented the Court with an unusual set of facts (unprecedented, as far as this Court is aware) in that it involved a cash balance plan predicated on a career average formula that circumvented ERISA's anti-backloading rules by applying the fractional test instead of the 133 1/3% test. Because the only applicable test for such a plan is the 133 1/3% test, the Plan's accrual formula was a radical departure from what participants had every reason to expect of their new cash balance formula. As the Court indicated in its December 11 ruling, this egregious defect was not merely a "technical flaw" — it was a deliberate end-run around statutory guidelines that effectively kept the Plan's accrual rates below the minimum prescribed by Congress.
Id. at *10.
Brief Amicus Curiae of The American Benefits Council in Support of Defendants' Petition for Permission to Appeal Pursuant to Federal Rule of Civil Procedure 23(f) at 3, In re Citigroup Pension Plan ERISA Litigation, petition for appeal denied, No. 07-0070-MV (2d Cir. Jan. 4, 2007) ("Benefits Brief") (characterizing the Plan's noncompliance with minimum accrual rates as a technicality).
See Citigroup I, 2006 WL 3613691, at *9 (explaining that the notices at issue were inaccurate and also failed to provide Plan participants or beneficiaries with an opportunity to understand the effect of the upcoming amendments (quotations and citations omitted)).
It has been suggested that the Court's ruling stands for the proposition that any post-amendment discovery of a cash balance formula's technical defect will render the § 204(h) notices of that amendment per se defective. This reading is overly broad. Insofar as the Court's ruling suggests that the § 204(h) notices were required to describe how the amendments were going to reduce rates of benefit accrual, their lack of detail was of secondary importance to their material omission of an unorthodox yet vital component of the Plan's formula. Suffice it to say here, with benefit of hindsight, that had the notices merely identified the Plan's novel compliance mechanism, those few words would likely have been adequate.
See Benefits Brief at 2-7.
The Court expresses no opinion on whether the addition of such language would satisfy current law.
V. CONCLUSION
For the reasons stated above, defendants' motion is denied. The Clerk of Court is directed to close all pending motions [Docket Nos. 67, 69].
SO ORDERED: