A brief excerpt from the memorandum and order by United States District Judge J. Paul Oetken: This case involves claims against Defendant PricewaterhouseCoopers (“PWC”) under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et. seq. (“ERISA”). Plaintiffs move to certify a class of themselves and all others similarly situated pursuant to Rule 23 of the Federal Rules of Civil Procedure and to appoint Eli Gottesdiener as class counsel. Plaintiffs seek certification only as to the first and fifth counts of their Second Amended Class Action Complaint—both of which seek a declaration under ERISA § 502(a)(1)(B). For the reasons that follow, the motion is granted.
I. Background
This case concerns the “whipsaw” problem that arises when participants in certain ERISA plans end their employment before normal retirement age (“NRA”). See Edsen v.
Retirement Plan of the First Nat’l Bank of Boston, 229 F.3d 154, 159-59 (2d Cir. 2000). Until 2006,2 ERISA required that “(1) the accrued benefit under a defined benefit plan must be valued in terms of the annuity that it will yield at normal retirement age; and 2) if the benefit is paid at any other time . . . or in any other form . . . it must be worth at least as much as that annuity.” Id. at 163. Under the pre-2006 regime, then, employees could cash out their retirement benefits at any time before NRA and still receive the actuarially discounted value of those benefits in the form of a one-time lump-sum payment. To make a one-time lump-sum payment worth as much as an annuity that begins in the future, two calculations are required: first, one must calculate what the annuity would have been worth had the employee worked until NRA; and second, one must discount that amount back to its present value to adjust for the time-value of money. This is called a “whipsaw” calculation because it requires a round-trip from the present to the NRA, conceptually resembling a saw that cuts back and forth. Whenever the rate at which the cash balance account is predicted to increase (the “projection rate”) exceeds the 30-year Treasury rate (which is the present-discount value rate under ERISA), a whipsaw calculation will increase the value of the employee’s cashed-out benefits. Defendant claims that the appropriate projection rate is the 30-year Treasury rate, in which case the whipsaw comes out in a wash: in step one, the whipsaw projects the value out to NRA using the 30-year Treasury rate, but on the return trip it reverses the same calculation, leaving the cash balance right where it started. Plaintiffs, on the other hand, claim that the fair projection rate ought to be higher than the 30-year Treasury rate. This is because, under the RBAP, Plaintiffs could invest the money in their accounts in one or more of a selection of mutual funds provided by the plan. On average, Plaintiffs claim, the investments selected by plan participants beat the 30-year Treasury rate of return.
II. Discussion ... (of) ...
A. Legal Standard ...
B. Class Certification ... Presumably, some employees invested more profitably than others. Those whose rate of return beat the average would stand to benefit from an individualized rate—instead of, say, an average of the performance of the RBAP accounts as a whole—while those whose rate of return was below the average would lose. This is a reasonable concern. But Defendant has offered no evidence with which to evaluate its truth. Judge Posner’s opinion in Johnson addresses nearly identical issues. In that case, in an analogous context, defendants objected that some members of the plaintiff class would benefit from a fixed rate while others would suffer. The district court concluded that—even where defendants had offered “some evidence” of the possibility of conflict—the conflicts were “hypothetical.” Id. at 372. The appellate court concluded that the proper way to solve the problem would be to address it if it arises: “should the conflicts prove real . . . it may be possible to resolve them by dividing some of the subclasses and appointing new class representatives for the newly carved out subclasses.” Id. This is the appropriate course here. If during the litigation the Defendants produce evidence of a conflict, the Court will consider bifurcating the class into those whose rates beat the average and those whose rates did not—or another similar division. Until then, it is premature to speculate about a conflict that does not yet exist. Rule 23(a)(4) is satisfied.
C. Appointment of Class Counsel
The appointment of class counsel is governed by Rule 23(g) of the Federal Rules of Civil
Procedure, which mandates that a court certifying a class appoint class counsel, and specifies that
a court must consider:
(i) the work counsel has done in identifying or investigating potential claims in the action;
(ii) counsel’s experience in handling class actions, other complex litigation, and the types of claims asserted in the action;
(iii) counsel’s knowledge of the applicable law; and
(iv) the resources that counsel will commit to representing the class . . . .” Fed. R. Civ. P. 23(g)(1)(A)(i)–(iv).
A court may also “consider any other matter pertinent to counsel’s ability to fairly and adequately represent the interests of the class.” Id. at 23(1)(B).
Mr. Gottesdiener has handled named Plaintiffs’ claims for eight years, and he has extensive experience in ERISA litigation.
Defendant acknowledges that Mr. Gottesdiener is an “experienced and accomplished ERISA practitioner.” (Dkt. No. 168, Defendant’s Memorandum, at 13 n.6.)
Undeterred, Defendant objects that Mr. Gottesdiener has failed to pursue certification of this class for seven years. Id.
It is unclear from its brief if Defendant thinks this is a reason to disqualify Mr. Gottesdiener.
Regardless, it is not.
III. Conclusion
For the foregoing reasons, Plaintiffs’ motion to certify a class of those PWC employees
who elected to take lump-sum distribution of their benefits under PWC’s Retirement Benefit
Accumulation Plan between March 23, 2000, and August 17, 2006, is certified. Mr.
Gottesdiener is appointed class counsel.
The Clerk of Court is hereby directed to close the motion pending at Docket Number 161.
SO ORDERED.
Dated: June 26, 2014
New York, New York
____________________________________
J. PAUL OETKEN
United States District Judge
Full document may be found here.