890 F.3d 254
6th Cir.2018Background
- Plaintiffs are former Norton Healthcare employees who retired after the Plan’s 2004 amendments and elected lump‑sum payouts; they sued under ERISA in 2008 alleging Norton underpaid lump sums.
- The Plan (restated 1997; amended 2004) contains a cash‑balance formula (§4.03(b)), prior defined‑benefit components (§4.03(a)), early‑retirement rules (§4.05(b) pre‑2004; §4.05(d) post‑2004), and lump‑sum conversion rules (§4.02(b)(6)).
- District court certified a class (Rule 23(b)(1)(A) and (b)(2)), granted summary judgment to the Retirees on liability, ordered Norton to use the Retirees’ damages formula, and awarded prejudgment interest; damages calculations later became contentious.
- On appeal Norton challenged plan interpretation, standard of review, class certification, and damages; Retirees cross‑appealed re: limitations and interest rate.
- Sixth Circuit: affirmed most liability rulings but found (1) a patent ambiguity whether post‑2004 early‑retirement reduction factors apply to class members and (2) unresolved factual issues about actuarial equivalence of the adopted lump‑sum formula—vacating parts of summary judgment, vacating damages and damages‑stage class certification, and remanding for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review / use of contra proferentum | Contra proferentum should construe ambiguities against drafter (beneficiaries) | Firestone deference applies where Plan grants administrator discretion; contra proferentum cannot temper that deference | When Plan grants Firestone discretion, contra proferentum may not be used to temper arbitrary‑and‑capricious review; but contra proferentum can bear on whether Firestone deference was clearly granted |
| Whether post‑2004 early‑retirement reduction factors apply to class (lump‑sum stage) | Retirees: 2004 amendments moved early retirees to §4.05(d)/§4.03(b) so upstream reductions in §4.05(b) no longer apply; lump sums should not be reduced | Norton: §4.02(b)(6) requires dividing by (1 − reduction factor) “as applicable,” so reduction applies to lump sums for early retirement | Plan is ambiguous on whether the old reduction scheme applies to post‑2004 early retirees; remand required for Firestone arbitrary‑and‑capricious analysis of Norton’s interpretation |
| Whether lump sum must include actuarial value of 60‑months‑certain increasing income (actuarial equivalence) | Retirees: ERISA requires lump sums be actuarial equivalents of the basic form (which includes 60 months certain), so lump sums must reflect that value | Norton: its conversion formula produces an actuarially equivalent lump sum under its assumptions | Court: ERISA’s actuarial‑equivalence requirement must be satisfied; factual dispute exists and district court erred in excluding Norton’s expert evidence—vacated and remanded for factual determination |
| Statute of limitations applicable to underpayment claims | Retirees: claims are contract‑based (interpretation of plan) so Kentucky’s 15‑year contract limitations should apply | Norton: claims depend on ERISA statutory protections so 5‑year statutory limitations applies | Sixth Circuit: to the extent claims rest on Plan interpretation, Kentucky contractual limitations apply; actuarial‑equivalence claims remain governed by the shorter statutory limitations period |
| Class certification for damages stage (Rule 23(b)(1)/(b)(2)) | Retirees: class certification proper; declaratory/interpretive relief and incidental damages justify (b)(2) and (b)(1)(A) certification | Norton: post‑Dukes individualized monetary awards cannot be certified under (b)(2); damages stage requires more rigorous analysis | Liability/class‑interpretation certification under (b)(2)/(b)(1)(A) affirmed; but certification as to damages (monetary relief) vacated for failure to address Dukes due‑process concerns and individualized awards—remand required |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (courts review ERISA benefit denials de novo unless plan grants administrator discretionary authority)
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (Rule 23(b)(2) improper when class members seek individualized monetary awards)
- West v. AK Steel Corp., 484 F.3d 395 (6th Cir.) (ERISA requires lump sums be actuarial equivalents of normal accrued benefits)
- Perez v. Aetna Life Ins. Co., 150 F.3d 550 (6th Cir. en banc) (discussing contra proferentum dicta in ERISA context)
- Copeland Oaks v. Haupt, 209 F.3d 811 (6th Cir.) (conflict‑of‑interest and construing ambiguities against drafter can inform review of administrator’s discretion)
- Woosley v. Avco Corp., 944 F.2d 313 (6th Cir.) (finality for appeal exists when liability is resolved even if complex damages calculations remain)