William Lee v. Verizon Communications, Inc.
837 F.3d 523
| 5th Cir. | 2016Background
- Verizon amended its defined-benefit pension plan in Oct. 2012 to effect a December 2012 group annuity purchase that transferred benefit obligations for retirees who began receiving payments before Jan. 1, 2010 (Transferee Class); others remained in the Plan (Non-Transferee Class).
- Verizon (as sponsor) retained an independent fiduciary (FCI) and purchased a Prudential group annuity for $8.4 billion to settle about $7.4 billion in plan liabilities; participants received post-amendment notice and statutorily required disclosure.
- Transferee Class alleged (inter alia) that pre-amendment SPDs failed to disclose the annuity possibility or loss of ERISA/PBGC protections, that fiduciaries misimplemented the amendment (e.g., paid excessive implementation costs, failed to shop insurers, didn’t obtain consent), and that the Plan improperly ceased liability.
- Non-Transferee Class representative Pundt alleged fiduciary breaches harming Plan assets and sought relief under ERISA § 409(a); district court dismissed Transferee claims under Rule 12(b)(6) and dismissed Pundt’s claim for lack of Article III standing under Rule 12(b)(1).
- Fifth Circuit previously affirmed dismissal; Supreme Court vacated and remanded for reconsideration in light of Spokeo v. Robins. On remand, the Fifth Circuit again affirmed, holding Spokeo did not change that a bare statutory-right invasion to “proper plan management” without risk to individual benefits fails Article III injury-in-fact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of pre-amendment SPDs under ERISA §102 | SPDs should have warned participants the sponsor might transfer liabilities via annuity and alert to loss of ERISA/PBGC protections | SPDs need only describe existing plan terms and properly disclosed the amendment within the statutory period; annuity purchase did not change benefit amounts | Dismissed: SPDs were not required to anticipate amendment-contingent changes; post-amendment notice sufficed |
| Whether the amendment/annuity decision was a fiduciary act | Verizon’s decision to transfer liabilities should be subject to fiduciary duties | Sponsor settlor functions (plan design/amendment) are not fiduciary acts; selection/implementation may be fiduciary | Held: Amendment/decision to purchase annuity was a settlor function immune from ERISA fiduciary duties; implementation actions may be fiduciary but must be pleaded with specifics |
| Implementation fiduciary breaches (e.g., failure to hold internal annuity, consent, communication, excess expenses, single insurer) | Fiduciaries misimplemented the amendment: they should have used an internal annuity, obtained consent, communicated, avoided excessive Plan payments, and shopped multiple insurers | Defendants say amendment precluded internal annuity, required participant notice was given, many allegations are conclusory, and implementation expenses are permissible if reasonable | Dismissed: Most implementation claims were conclusory or implausible; allegations failed to plead unreasonable expenses or imprudence in selection with sufficient factual detail |
| Article III standing for Non-Transferee Class (Pundt) to sue under ERISA §502(a)(2)/§409 | Pundt claims invasion of his statutory right to proper plan management and injury from losses to Plan assets suffices as concrete injury | Defendants argue Article III requires concrete, particularized injury (risk to participant’s own benefits); injury to Plan or statutory right alone is insufficient | Dismissed for lack of Article III standing: For defined-benefit plans, plaintiff must allege imminent risk to individual benefits (e.g., plan default/termination causing harm); bare statutory-right invasion or plan-only injury is too speculative |
Key Cases Cited
- LaRue v. DeWolff, Boberg & Assocs., 552 U.S. 248 (2008) (distinguishes defined-contribution plans where fiduciary loss directly reduces participant accounts)
- Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (1999) (plan sponsor’s decision to amend plan is settlor function, not fiduciary duty)
- Beck v. PACE Int’l Union, 551 U.S. 96 (2007) (distinguishes sponsor decisions on plan form from fiduciary duties in implementation, e.g., selecting annuity provider)
- Sprint Commc’ns Co. v. APCC Servs., 554 U.S. 269 (2008) (assignment/standing precedent permitting assignees to sue for assignor’s injury in certain historical contexts)
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (U.S. Supreme Court — influential but cited here by remand order; requires statutory violations produce a concrete injury-in-fact)
- David v. Alphin, 704 F.3d 327 (4th Cir. 2013) (rejects trust-law/statutory-right theory to confer Article III standing for defined-benefit participants absent risk to individual benefits)
- Bussian v. RJR Nabisco, 223 F.3d 286 (5th Cir. 2000) (standard for prudent investigation and selection of annuity providers)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III injury-in-fact requires concrete and particularized harm; statutory creation of rights does not by itself satisfy Article III)