COLLEEN KOLLAR-KOTELLY, District Judge.
This action is brought by Plaintiff Jamal J. Kifafi, on behalf of himself and similarly situated individuals, to recover for violations of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001, et seq., in the Hilton Hotels Retirement Plan (the "Plan"). Defendants are the Plan, the individual members of the Committee of the Plan, the Hilton Hotels Corporation, and individual Hilton officers or directors (collectively, "Defendants" or "Hilton"). On May 15, 2009, this Court granted-in-part Plaintiff's motion for summary judgment, finding that Defendants had violated ERISA's anti-backloading provision, 29 U.S.C. § 1054(b)(1)(C), and had violated the Plan's vesting provisions with respect
The parties' briefs on equitable relief reflect a number of significant disagreements about the proper scope of equitable relief that should be ordered by the Court. The parties have filed competing proposals to remedy the benefit accrual and vesting violations previously found by the Court, and the parties also dispute how each party's proposal should be applied to the certified classes. This Memorandum Opinion sets forth the Court's ruling as to a number of the issues disputed by the parties. However, a final order of equitable relief cannot be issued until the parties further confer about the proper means of implementing this Court's rulings and a hearing is held to resolve certain disputed factual issues.
As explained below, the Court shall generally endorse Defendants' proposal for remedying the backloading violations, but the Court rejects Defendants' contention that relief should be limited to participants who separated from service after 1987. With respect to Defendants' failure to credit union service for purposes of vesting, the Court shall order Defendants to credit union but not other non-participating service; the Court shall require Hilton to search its corporate records for information relating to class members' union service and permit class members to submit claims based on union service not reflected in records. With respect to Defendants' violation of the 1000 hours of service standard, the Court shall adopt the parties' proposal to apply the 870/750 hours worked standard with hours equivalencies but reject Plaintiff's proposal to apply equivalencies to periods of time for which there are no records of hours of service. With respect to Defendants' failure to credit the first year of participation, the Court shall reject Plaintiff's proposal to credit participants with a year of service for the first year in which there is any record of participating service. With respect to Defendants' failure to credit leaves of absence, the Court shall not order additional discovery of corporate records as requested by Plaintiff. The Court declines to order additional discovery of Hilton's records except with respect to union service, as mentioned above. The Court also does not see the need to appoint a class action administrator to oversee the implementation of final relief, but the parties should develop a more limited mechanism for monitoring Hilton's implementation of remedies. The Court shall not approve lump sum payments in lieu of future benefits owed to participants, nor shall it include a cy pres provision in its final order. Other disputed issues of fact, such as the alleged application of unlawful equivalencies or elapsed time methods and discrepancies between versions of the Plan's database, shall be decided at a final remedies hearing.
The factual and procedural history of this case was thoroughly discussed by the Court in its Memorandum Opinion issued on May 15, 2009. See 616 F.Supp.2d at 10-21. The Court incorporates that discussion
The Hilton Hotels Retirement Plan (the "Plan") is a defined benefit pension plan subject to ERISA. Benefits under the Plan accrue according to a formula based on an employee's average compensation and years of service, with an offset for the employee's Social Security benefits. See 616 F.Supp.2d at 13-14. ERISA prevents employers from "backloading" benefits, i.e., using a benefit accrual formula that postpones the bulk of an employee's accrual to his later years of service. Id. at 11. In order to prevent backloading, ERISA requires defined benefit plans to satisfy one of three alternative minimum accrual rules, known as the "3% rule," the "133 1/3% rule," and the "fractional rule." Id. at 11-12; see 29 U.S.C. § 1054(b)(1). Beginning in 1976 and continuing until 1999, the Plan contained an accrual schedule that was supposed to comply with ERISA's "133 1/3% rule." 616 F.Supp.2d at 14. In 1999, after this lawsuit was filed, Hilton amended the Plan's benefit accrual formula seeking to comply with the fractional rule. Id. at 16. The 1999 amendment (Amendment 1999-1) also changed two unrelated aspects of the Plan that lowered benefits for participants. Id. Following briefing on summary judgment, this Court held that the pre-amendment Plan failed to comply with any of the three minimum accrual rules and that the pre-amendment Plan was required to comply with the 133 1/3% rule. Id. at 24. The Court concluded that "the Plan's participants are entitled to receive the benefits they would have accrued had the Plan complied with the 133 1/3% rule." Id. at 24. The Court also concluded that the 1999 amendment to the Plan did not moot the ERISA violation found by the Court. Id. at 25-28. The Court's ruling applies to a certified class of current and former Hilton employees (the "benefit-accrual class").
The Court also found that Defendants had violated ERISA with respect to the vesting of benefits under the Plan, i.e., the time of service required for an employee to obtain a right to his or her accrued benefits.
Beginning in 1976 and continuing until the Plan was amended in December 2002, Hilton applied the 1000 hours standard for calculating employees' years of service. 616 F.Supp.2d at 29. By its terms, the Plan required all periods of employment between the date of hire and the date of termination to be taken into account, including leaves of absences and union service. Id. at 14. The Court found that Defendants had violated the Plan's vesting provisions with respect to four certified subclasses: (1) they failed to credit employees' union service for purposes of vesting
Section 502(a)(1)(B) of ERISA allows a participant or beneficiary to bring a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). Pursuant to this provision, the Court may order that participants' benefits be recalculated consistent with the terms of the Plan. See Frommert v. Conkright, 433 F.3d 254, 270 (2d Cir. 2006) ("The relief that the plaintiffs seek, recalculation of their benefits consistent with the terms of the Plan, falls comfortably within the scope of § 502(a)(1)(B).")
ERISA also has a "catchall" provision, Section 502(a)(3), which allows a participant, beneficiary, or fiduciary to "(A) enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3); Varity Corp. v. Howe, 516 U.S. 489, 507, 511, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996). Where relief is otherwise available under Section 502(a)(1)(B), equitable relief under Section 502(a)(3) will not be "appropriate." Varity Corp., 516 U.S. at 515, 116 S.Ct. 1065. However, where a plan does not conform with the requirements of ERISA, relief under the catchall provision may be appropriate. The phrase "appropriate equitable relief" encompasses those categories of relief typically available in equity, such as injunction, mandamus, and restitution, but it does not include compensatory or punitive damages. See Mertens v.
The parties have each filed briefs in support of their separate proposals for remedying the minimum accrual rate and vesting violations previously found by the Court. After Plaintiff filed its Reply Brief on Equitable Relief, Defendants filed a Motion for Leave to File Sur-Reply on Equitable Relief and for Expert Discovery in Advance of Remedies Hearing. Defendants ask the Court for permission to file a Surreply, which they attached to their motion, in order to rebut certain arguments raised by Plaintiff in his Reply regarding Defendants' proposed remedies. Plaintiff opposes this request, arguing that Defendants' motion is untimely and that the Surreply merely restates arguments that were or could have been raised in Defendants' Response Brief on Equitable Relief. While the Court notes that surreplies are generally disfavored, Plaintiff's Reply Brief does contain detailed criticisms of Defendants' proposals as well as a supplemental declaration from its expert, to which Defendants should be permitted to respond. Moreover, Plaintiff has failed to identify any prejudice suffered by any delay in filing,
With respect to Defendants' request for discovery in advance of a remedies hearing, the Court agrees with Plaintiff that discovery is not warranted at this time. The Court has not yet determined that there are material factual issues in dispute that require a remedies hearing. Cf. United States v. Microsoft Corp., 253 F.3d 34, 101 (D.C.Cir.2001) (holding that courts must conduct an evidentiary hearing to resolve disputed factual issues in determining appropriate relief). The parties have submitted separate proposals for equitable remedies that rely on the declarations of experts who disagree about the propriety of the other party's proposals under ERISA. This Court shall make a legal ruling about what equitable relief is appropriate based on its prior decision as to liability, relying on facts that are not in dispute. The Court shall then hold a remedies hearing to resolve any factual disputes as to methodology, if necessary. Accordingly, the Court shall deny Defendants' motion for expert discovery.
The parties agree that all relief should be provided in the form of benefits to be provided from Hilton's tax-qualified plan. However, the parties disagree regarding the benefit calculations that should be required to remedy the minimum accrual rate and vesting violations previously found by the Court. The Court shall address each of their proposals below.
The parties agree that the cause of the unlawful "backloading" of benefits under
The parties agree that for purposes of remedying the backloading violations in the Plan, the maximum annual accrual rate under the Plan is 1.91% of the employee's average monthly compensation ("AMC").
Plaintiff's proposed remedy, stated most simply, is to increase the benefits paid to participants so that any annual accrual rate below 1.4325% will be raised to 1.4325%, and all annual accrual rates at or above 1.4325% remain unchanged. Plaintiff's actuarial expert, Claude Poulin, has calculated a schedule of revised benefits for members of the benefit-accrual class based on this proposed remedy. Plaintiff's proposal calls for participants to receive a "base benefit increase" that varies based on the year the participant separated from the Plan, with certain adjustments. See Pl.'s Br., Decl. of Claude Poulin ("Poulin Decl.") ¶¶ 5-18. Mr. Poulin contends that different base benefit amounts are necessary to account for changes in the Social Security wage base and schedule each
Defendants' proposed remedy is simpler and rather more elegant. Defendants propose amending the benefits formula by capping the Social Security offset at.5676% of AMC, thereby mathematically ensuring that the annual accrual rate never falls below the required minimum of 1.4325%.
Although they sound similar, the parties' proposals are distinctly different. Plaintiff's proposal essentially freezes the Plan's existing accrual rates and then seeks to add benefits to early years until the minimum annual accrual rate reaches 1.4325%. By contrast, Defendants' proposal changes the benefits formula in a way that shifts benefits accrued in later years to earlier years. The result is that under Defendants' plan, the annual accrual rate decreases slightly during some later years to make up for the fact that there are higher accrual rates in early years. This happens purely by mathematical operation of Defendants' modified benefits formula.
In his Reply, Plaintiff argues that Defendants' proposed remedy does not satisfy the 133 1/3% rule because it employs an "average rate of accrual" methodology that is explicitly rejected by ERISA regulations. See Pl.'s Reply Br. at 5-11. Plaintiff (and his expert, Mr. Poulin) point to an example in the Treasury Regulations in which the rate of accrual is 2% for the first five years, 1% for the next five years, and 1.5% for each following year. See 26 C.F.R. § 1.411(b)-1(b)(2)(iii) (Example 3). Although the average rate of accrual under such a scheme "is not less rapidly than ratably," it nevertheless fails the 133 1/3% rule because 1.5% is more than 133 1/3% of the lowest rate, 1%. Id. However, Defendants' proposed solution caps the Social Security offset so as to ensure that the minimum accrual rate in any given year is never less than 1.4325% (or 1.0575% for participants who separated before 1982). Therefore, it does not, in fact, rely on an "average rate of accrual" methodology. Plaintiff also relies on the IRS's Technical
Plaintiff's criticism of Defendants' proposal is founded on his view that because the Plan violated the 133 1/3% rule, every Plan participant must be owed some remedy. But the backloading violation in the Plan does not affect all participants equally. As the Court explained in its decision on liability,
Langman v. Laub, 328 F.3d 68, 71 (2d Cir.2003) (quoting H.R. Rep. No. 93-807 (1974), U.S.Code Cong. & Admin.News 1974, p. 4670). Thus, by preventing the backloading of benefits, ERISA protects employees who work only a short period from vesting with only a minimal amount of accrued benefits. See Hoover v. Cumberland, Maryland Area Teamsters Pens. Fund, 756 F.2d 977, 982 n. 10 (3d Cir. 1985). But employees who stayed in the Plan for a longer period of time eventually accrued those benefits that were denied to them in earlier years of service. The term "backloading" is quite appropriate to explain this phenomenon, as the benefits that did not accrue in early years of service are loaded into the back end of an employee's years of service. As Hilton describes it, longer-term employees "outgrow" the violation of the 133 1/3% rule that would have affected them if they had separated in early years. Thus, although Hilton's proposed remedy provides additional benefits to workers who were shortchanged because they terminated after a relatively brief period of service, it does not provide additional benefits to longer-term workers who made up any initial deficiency through their longevity with Hilton. That is not to say that there was no ERISA violation with respect to these longer-term workers. But those workers suffered no decrease in benefits as a result of the violation and therefore are not entitled to equitable relief. See Mertens, 508 U.S. at 256-58 & n. 8, 113 S.Ct. 2063 (holding that equitable relief under ERISA does not include compensatory damages to fully remedy all injuries). Indeed, as Hilton points out, such workers are not even a part of the benefit-accrual class, which is limited to employees whose benefits "have been, or will be, reduced as a result of the Defendants' failure to accrue retirement benefits at the annual rates that ERISA requires." Plaintiff's proposal improperly provides a windfall to many of these participants whose benefits were not reduced by backloading.
Therefore, the Court endorses Hilton's proposed remedial benefits formula, which is easier to implement and properly compensates individuals whose benefits were reduced as a result of Defendants' failure to comply with the 133 1/3% rule. The Court shall require the parties to recalculate
The Court must also address Defendant's contention that equitable relief should be limited to Plan participants who separated from service after December 29, 1994 (or, alternatively, January 1, 1987). Defendants argue that this is appropriate because the Plan did not explicitly provide for compliance with the 133 1/3% rule until an amendment was signed on December 29, 1994 (and made retroactive to January 1, 1987). In essence, then, Defendants ask the Court to provide no remedy for 6096 participants whose benefits were calculated under an unlawfully backloaded plan. That is not an equitable result. It is true that Plan participants could not have relied on the Plan's purported compliance with the 133 1/3% rule until the 1994 amendment was signed. However, the pre-amendment Plan did not comply with any of the three minimum accrual tests under ERISA, and it is appropriate for the Court to reform the Plan so as to comply with ERISA. See Carrabba v. Randalls Food Mkts., Inc., 145 F.Supp.2d at 773 ("Due to the absence of an accrual method in the plan, the court is called upon to select for use in the calculations of the awards to be made to the participants against defendant one that, in equity, most appropriately recognizes the objectives of the [plan] in an ERISA context.") The 1994 amendment explicitly adopted the 133 1/3% rule, and it did so without substantially changing the benefits formula that existed previously.
The parties have filed separate proposals to remedy the vesting violations previously found by the Court. Unfortunately, the parties have agreed on little, and the number of disputes remained to be resolved by the Court is substantial. The Court shall address what appear to be the parties' largest disagreements regarding vesting remedies.
This Court previously determined that under the terms of the Plan, Hilton was required to credit employees' union service for purposes of vesting, yet it failed to do so. Defendants propose to remedy this violation by crediting any union service that is reflected in the Plan records. Plaintiff, however, argues that Defendants should be required to credit all years of non-participating service. Plaintiff argues that it is necessary to credit all non-participating service, not just union service,
The Court previously ruled that it would not expand Plaintiff's union service claim to include all "non-participating" service because Kifafi never moved to expand the scope of the subclass and the Court never certified a "non-participating service" subclass. 616 F.Supp.2d at 30 n. 18. Having declined to expand the claim at the liability stage, the Court will not do so now at the remedy stage. Thus, the Court agrees with Defendants that the objective of any injunctive relief should be to compensate individuals with vesting credit for years of union service. The relevant question with respect to the remedy, however, is whether Hilton's records of union service are accurate enough to be relied upon on their own or whether non-participating service should be used as a proxy for union service because the records are inadequate.
Plaintiff claims that the Plan's records of union service are not reliable because they are not coded to show union service that occurred before an employee became a participant or after an employee's participation ended. See Pl.'s Reply, Supp. Decl. of Allison C. Pienta ("Supp. Pienta Decl.") ¶ 24. In other words, where Plan records indicate pre- or post-participation service, Plaintiffs contend that there is no way to tell whether or not the employee was in a union position. Plaintiff cites a number of examples of employees who served at unionized Hilton properties but whose years of service are not credited in Plan records. See Supp. Pienta Decl. ¶ 25; Pl.'s Mot. for Summ. J., Ex. 54 (Supp. Decl. of Martha Anderson).
Therefore, Plaintiff argues that there are only two viable remedial options: either (1) count all years of non-participating service identified in the Plan's records (which would capture union service as well as some non-union service); or (2) establish a claims procedure to identify individuals whose years of service were not credited by Hilton. The first option would not be inequitable for Hilton, Plaintiff contends, because ERISA already requires all non-participating years to be counted for vesting purposes. See Holt v. Winpisinger,
Although Defendants filed a surreply in order to respond to the claims raised in Plaintiff's reply brief, Defendants failed to directly address the adequacy of Plan records with respect to union service in light of Plaintiff's cited examples. Defendants' expert, Ian Altman, contends in his report that there are a number of reasons why the date of hire would precede the first date of service in Plan records, such as an error in recording a hire date or a period of service for which benefits were earned and distributed before a re-hire. See Defs.' Br., Expert Report of Ian H. Altman, FSA ("Altman Report") at 22 n. 3 & ¶ 56. Therefore, he argues that a discrepancy between a hire date and service date does not support a claim for uncounted union service hours. See Altman Report ¶ 56 ("Without evidence of hours worked as a union employee, it is unreasonable to award vesting for phantom service.")
The Court does not agree with Defendants that no credit can be awarded for union service where the records do not explicitly show that an employee had eligible union service. As the Court noted in its decision on liability, there is evidence in the record that Hilton never "kept track of nonparticipating properties' employees (hours/earning) to give them vesting." See 616 F.Supp.2d at 19 (citing Pl.'s Ex. 27 at 4 (5/9/02 Email Exchange between V. Stoicof and G. Trotter)). In light of this record evidence and the examples cited by Plaintiff in its Reply Brief on Equitable Relief of employees whose union service was not reflected in the Plan's records, the Court cannot conclude that Defendants' proposed remedy—crediting union service solely as reflected in Plan records—is adequate to remedy the violation found by the Court.
However, based on the present record, the Court also cannot conclude that Plaintiff's proposed remedy—crediting participants with vesting credit for all years of non-participating service reflected in Plan records (which would presumably include some union service and some other non-participating service)—is an equitable result. It is not clear to the Court, based on the parties' submissions, why the Plan has records of some union service but not other union service. It is also not clear how many participants who did not have any union service would become vested under Plaintiff's proposed remedy, making it difficult to determine whether the benefits to such persons would be purely incidental to relief for the subclass or constitute an end-run around the Court's class certification ruling.
Because there is uncertainty about whether there are corporate records that would indicate union service beyond what the Plan records show, the Court shall order Defendants to conduct a search of their corporate records. Defendants shall be required to identify and produce any records that demonstrate, with respect to the potential subclass members identified by Plaintiff,
This Court previously determined that Hilton violated the terms of the Plan's vesting provisions by using a 1000 hours of service standard when it failed to maintain the records necessary to implement it. Under ERISA regulations, when a plan fails to keep records adequate to determine all of the hours that an employee should be credited (which includes hours for which the employee was entitled to be paid as well as hours for vacation, holiday, illness, leave of absence, etc.), the plan may use an "equivalency." See 29 C.F.R. § 2530.200b-3(a). Under the "hours worked" equivalency, an employee is credited with a year of service if he has 870 hours worked during a twelve-month period (or 750 for a salaried employee). Id. § 2530.200b-3(d). Alternatively, a plan may use an equivalency based on periods of employment, such that for each month of employment in which the employee would otherwise be credited with at least one hour of service, the employee is credited with 190 hours of service. Id. § 2530.200b-3(e)(1)(iv).
Defendants' proposed remedy calls for the 870/750 "hours worked" equivalency to be applied in lieu of the 1000 hours of service standard where an employee's records are sufficient to indicate the hours worked.
Plaintiff does not object to Defendants' proposal in principle.
There are some participants whose last record of service, i.e., the last date for which any hours are recorded, does not match up with their date of termination of employment ("DOTE"). For these participants, Plaintiff proposes to have the Court presume that the employee had at least one hour of service in each month between the last record of service and the DOTE, even though Plan records do not indicate any hours of service. If the Plan records do not indicate any DOTE and there is no other explanation of an absence in the employee's records, Plaintiff would have the Court presume that the employee worked until the end of the last calendar year for which there is any record of employment or earnings. Plaintiff would also seek an audit of termination dates of "12/31" to determine whether they are actual termination dates or merely placeholders in the records. See Pl.'s Br. at 24-25.
Plaintiff provides no clear explanation as to why the Court should assume that there were additional hours of service for employees between their last record of service and their date of termination of employment. Plaintiff refers to the Plan Manual, which defines the termination date as "the date the employee terminated from the active status (vested term, retirement, death, etc."; and it says that "[i]f the employee is still working, then this date is blank." See Pl.'s Reply, Ex. 3 (Pension Admin. Manual)) at 6; Pl.'s Reply at 18. Plaintiff apparently concludes that an employee remains on active status until the date of termination and therefore should be credited with vesting service during that time. The relevant question, however, is not whether the individual continued to be employed, but whether the employee had any additional hours of service. ERISA defines an "hour of service"
In his motion for summary judgment, Plaintiff argued that Hilton improperly used a 1000 hours standard "in years where its pension database contains records of hours." See Pl.'s Mot. for Summ. J. at 40. Plaintiff pointed to evidence in the record that Hilton had failed to credit pay after termination, such as accrued vacation and lump sum severance payments. Id. The Court agreed with Plaintiff in its decision on liability. See 616 F.Supp.2d at 30. Defendants' proposal remedies this violation by relying instead on the 870/750 hours worked standard. Applying that standard necessarily means that where there are no hours worked by an employee, there will be no vesting credit awarded. In other words, Plaintiff cannot assume that wherever the Plan records show no hours of service, records of hours worked are "unavailable." Plaintiff's proposal to "assume" that there are hours worked until the end of employment where the Plan records show none more closely resembles the "elapsed time" method for determining vesting credit, which is an alternative to counting hours of service (with or without equivalencies) that does not require plans to keep detailed records of employee hours. See 26 C.F.R. § 1.410(a)-7 (defining "elapsed time" method).
As the Court previously explained, Hilton amended the Plan in 2002 to retroactively apply the elapsed time method to periods of non-participating service. 616 F.Supp.2d at 19-20. The Court found that this amendment did not moot Plaintiff's claim that the 1000 hours standard had been violated because it was mathematically possible that a participant would earn more vesting credit under an hours standard than the elapsed time method. Id. at 34. Accordingly, the Court held that participants must be awarded vesting credit under an hours standard if it would result in more credit awarded than under the elapsed time method. Id. Hilton has never proposed applying the elapsed time method to periods of time when employees were participating in the Plan (and their hours were recorded), and this Court's rulings do not require it to do so. Plaintiff's proposal resembles a hybrid between the elapsed time method and the hours worked standard, as it would require Hilton to count the hours worked (where there are hours shown) and count at least one "presumed hour" for every other month that elapses (where there are no hours shown). See Altman Report ¶ 44. In other words, Plaintiff is trying to get the best of both worlds by taking the upside of each method without the downside of either. That is not an equitable remedy.
It is possible that the Plan failed to record hours leading up to the date of termination of employment and that Plaintiff's proposal would remedy that failure. But it is also possible (and more likely) that Plaintiff's proposal would drastically overcompensate members of the subclass by awarding them vesting service for periods of time in which they performed no service. Unlike Plaintiff's union service claim, Plaintiff has not even proffered examples of participants who should be entitled to this relief. Therefore, the Court declines to endorse Plaintiff's proposal to presume that a participant had at least one hour of service in each month before his date of termination of employment (or, if
Plaintiff also contends that its presumption of at least one hour of service per month should apply to participants whose "Service Date" reflected in the Plan records does not coincide with the first year of participation in the Plan. See Pl.'s Reply at 24. Plaintiff wants to credit participants with 190 hours for each month between the "Service Date" (which reflects the beginning of an employee's service with Hilton) and the first year of participation in the Plan. Defendants' expert, Ian Altman, admits that "[t]he date active service commences—the `service date' reflected on the plan records—is the correct starting point for counting service." Supp. Altman Report ¶ 29. However, this period of time would be non-participating service. As explained in the previous section, the Court shall only order equitable relief with respect to periods of union service.
Plaintiff claims that "it is indisputable that the Plan's records of hours necessarily stop once a property stops reporting service to the Plan, even if the individual continues to be employed," and that "much of the reporting of service to the Plan stopped once benefit accruals were frozen at the end of 1996." Pl.'s Reply at 26. In her supplemental declaration, Allison C. Pienta claims that there are 37 individuals who have employment termination dates after Hilton properties stopped reporting service to the Plan. See Supp. Pienta Decl. ¶ 18. According to Ms. Pienta, the Plan's records for these individuals show "1000" or "500" hour entries or no entries at all after 1996, indicating that the property was no longer actually reporting service under the Plan. Id. However, in each of the four examples cited by Ms. Pienta in her supplemental declaration, it appears that the participants were in fact credited with vesting service after 1996, and they would not be entitled to any additional service if the 190-hours standard were applied according to Plaintiff's presumption of at least one hour each month until the date of termination. See Supp. Pienta Decl., Ex. Grp. 1(e).
Defendants' expert, Ian Altman, states in his supplemental report that properties only stop reporting service to the Plan when they become disassociated from Hilton, such as through closure or a sale. See Supp. Altman Report ¶ 31. At that point, Mr. Altman says, employees are no longer entitled to credit under the Plan because the property is no longer a part of Hilton. Id. Therefore, he contends there is no reason to credit vesting service after a property stops reporting. Id. Mr. Altman provides no evidentiary basis for this assertion, and Plaintiff did not have an opportunity to rebut this contention, as it was raised for the first time in the supplemental report filed with Defendants' Surreply. Therefore, the record is unclear as to whether properties stopped reporting service altogether after 1996 (or any other time) or whether Hilton failed to track any vesting service during this time. Hilton's use of "1000" and "500" hour placeholders in the records cited by Ms. Pienta suggests that even if exact service hours were not being reported after 1996, some measure of vesting service was being credited to participants.
At this stage, because Plaintiff has failed to identify any participants who were deprived of vesting credit to which they were entitled after 1996, the Court declines to order Defendants to provide additional
Plaintiff proposes that participants who have earlier original dates of hire in corporate records than Plan records receive years of service credit for the time in between the conflicting dates, to be determined according to the agreed-upon equivalencies. See Pl.'s Reply at 25. In other words, where corporate records show that a participant was hired on a date that is earlier than the Plan's hire date, Plaintiff would have the Court presume that the participant had at least one hour of service for each month in between the conflicting dates. Plaintiff points to a Hilton press release showing that one particular participant was hired in October 1973, but Plan records show a hire date of September 1, 1975. See Pl.'s Reply at 25; Pl.'s Mot. for Summ. J., Ex. 45. Plaintiff also points to a 1998 report on Plan data indicating that for a number of participants, the date of hire is earlier than the first record of earnings. See Pl.'s Mot. for Summ. J., Ex. 52 (Data Clean-up Project July 20, 1998) at 3. Neither party has provided an adequate explanation as to why there would be any discrepancy in hire dates. To the extent that earlier corporate hire dates would reflect earlier periods of non-participating service, the Court has already addressed this issue in the context of Plaintiff's union service claim. To the extent that an earlier corporate hire date would reflect a period of participating service for which Hilton has failed to provide vesting credit, that time period falls within the scope of the claim that Hilton failed to comply with the 1000 hours standard by failing to keep track of hours necessary to implement it.
Plaintiff concedes that he has not made any calculations based on discrepancies between corporate hire dates and Plan hire dates because corporate records were not produced during discovery. See Pl.'s Reply at 25. Accordingly, Plaintiff has failed to identify any members of the vesting class who would become vested if hours of service were presumed between the earliest corporate hire date and the Plan's earliest record of service. Rather, Plaintiff speculates that "the corporate records of hire dates are, in fact, likely to show additional service." Id. If that is the case, it was Plaintiff's obligation to uncover that evidence during discovery and bring it to the Court's attention. Plaintiff's core claim with respect to this subclass is that Hilton improperly used a 1000 hours service standard rather than an 870/750 hours standard; Plaintiff now seeks to order additional discovery to find out whether Hilton failed to count any hours of participating service that predate the Plan's earliest record of service. Plaintiff shall not be afforded a second bite at the apple to expand his claim. There is no evidence that participants are entitled to vesting credit for the period between the earliest hire date in corporate records and the Plan's hire or service date. Therefore, the Court shall not order Hilton to provide vesting credit for this period of time.
Plaintiff contends that Hilton has applied an unlawful equivalency of 36 hours per week to certain salaried employees in order to produce years in which the hours fall short of 750, thus depriving them of years of vesting credit. See Pl.'s Reply at 24; Supp. Pienta Decl. ¶ 7. Plaintiff cites three examples of salaried participants who would be credited with a year of vesting if the proper equivalency were applied (45 hours per week of service, see 29 C.F.R. § 2530.200b-3(e)(1)(ii)) to the number of weeks of service indicated by Plan
Plaintiff contends that there are 181 individuals who, according to the "Services Prior" table in an earlier version of the database, should be vested because they have sufficient hours to earn additional years of vesting credit. See Pienta Decl. ¶¶ 2(A), 4; Supp. Pienta Decl. ¶¶ 16-17. Plaintiff argues that these individuals' records of service were dropped or revised in Hilton's current "Services" table to show lesser years of service. Ms. Pienta states in her declaration that there were close to three thousand downward revisions to years of benefit service
In her supplemental declaration filed with Plaintiff's Reply, Ms. Pienta provides documentation for four participants who appear to have additional years of vesting service in "Services Prior" records but which are not reflected on current Plan records. See Supp. Pienta Decl., Grp. Id. These years of service appear to be after dates of termination in 1996. Defendants do not address this issue in their Surreply. Based on the records presented to the Court, it appears that the individuals identified by Plaintiff should be entitled to additional vesting credit. However, because there is no explanation from Defendants for the discrepancy in the records, the Court is reluctant to make a finding with respect to these individuals. If Hilton has made downward revisions to a participant's years of vesting service during the pendency of this litigation, it is required that there be a valid reason for doing so. To the extent that Plaintiff can identify years of vesting service for participants reflected on earlier records, the Court expects Hilton to credit the participant with those years of vesting service unless it provides a valid explanation for any change in the records. The Court shall resolve any discrepancies during a remedies hearing.
Plaintiff contends that Hilton has failed to count actual hours for certain participants, relying instead on an elapsed time method that has left some participants with fractional years of vesting service. See Pienta Decl. ¶ 2(A); Supp. Pienta Decl. ¶ 9. Plaintiff contends that there are at least 218 participants who should be vested when their hours are counted properly with equivalencies instead of using the elapsed time method. Defendants' expert, Ian Altman, reviewed the 124 participants whose sole claim was in this subclass and determined that 96 should be vested. See Altman Report ¶ 53. Thus, Defendants agree that hours should be counted for participants. In her supplemental declaration, Ms. Pienta identifies a number of additional participants who appear to be entitled to vesting credit See Supp. Pienta Decl., Grp. 1b. Defendants fail to address these additional examples in their Surreply. Therefore, the Court expects Defendants to credit participants for service based on the hours reflected in the Plan records and the proper equivalencies, not the elapsed time method.
Plaintiff proposes that "the first year of participation shall be counted for vesting in all cases (even if the recorded number of hours of service is low or zero)." Pl.'s Br. at 26. As this Court previously explained, an employee becomes a participant in the Plan only upon meeting the Plan's minimum eligibility requirements, which includes completing 1000 hours of service within the 12-month period following his date of hire or during any subsequent plan year. 616 F.Supp.2d at 32. Accordingly, the Court found that "Hilton's application of this first year provision is inextricably intertwined with Hilton's violations of the 1000 hours standard." Id. Because an employee does not become a Plan participant until he has obtained the necessary hours for a year of service, Plaintiff's request is, on its face, tautological. However, the Plan records appear to show that some participants have low numbers of hours of service during their first year of participation. These participants have less than the requisite number of hours during the first year that is marked "P" for participating service. Plaintiff contends that there are over 1300 individuals who have not been credited with a year of vesting service for this first year of participation and who would become vested if they were given this credit. See Pl.'s Reply at 26.
Defendants dispute Plaintiff's interpretation of the "P" code in Plan records, noting that the "P" indicates only that the hours of service are participating service, not that the employee is a participant. See Defs.' Surreply at 22; Supp. Altman Report ¶ 34. Defendants point to the Plan Manual, which shows that the "P" code is one of three codes used to indicate that service is participating service. See Pl.'s Reply, Ex. 3 (Pension Admin. Manual) at 22-23. It is clear from the Plan Manual, as well as from the Plan records that have been provided by the parties, that the "P" code does not automatically indicate that an employee is a Plan participant. As the Court noted in its decision on liability, an individual only becomes a participant when he has met the minimum hours requirements for eligibility. Therefore, a participant should not automatically be credited with a year of vesting service for the first year in which he has any hours of participating service.
This Court previously found that Hilton had violated the Plan by failing to properly credit employees' leaves of absences for purposes of vesting. Plaintiff has identified 99 individuals who should be vested
Defendants do not directly address Plaintiff's claim that corporate records would show additional leaves of absence not reflected in Plan records. However, Plaintiff has failed to demonstrate that corporate records would be likely to show additional leaves of absence that would result in the vesting of additional members of the subclass. As the Court noted above with respect to alleged discrepancies between corporate hire dates and Plan hire dates, it was Plaintiff's obligation to obtain evidence of violations during discovery, not to merely raise the possibility of additional violations. Defendants have conceded that it is proper, based on the Court's prior ruling, to credit vesting service for leaves of absences identified in Plan records. It is too late at this stage of the litigation for Plaintiff to seek recovery for additional violations for which it has no direct evidence.
Plaintiff argues that the Court must take certain steps to "reverse Hilton's revisions of records" since 2002. See Pl.'s Br. at 27. Specifically, Plaintiff argues that Hilton has applied forfeiture codes to individual records based on the improper application of break-in-service rules, causing some individuals to lose credit for years of vesting service to which they are entitled. Id. Additionally, Plaintiff contends that Hilton has mistakenly removed other years of vesting service and misapplied the Plan's 10-year vesting rule to participants with at least one hour of service after 1988, when a 5-year vesting rule was adopted. Id. at 27-28. Defendants contend that Plaintiff has failed to provide any basis for this claim and that the Court's order does not prevent Hilton from revising the Plan records to fix errors in the pension database. Defs.' Br. at 31.
The parties' briefs on equitable relief do not provide an adequate basis for this Court to make any ruling regarding Defendants' changes to Plan records. It is Plaintiff's burden to show that the particular equitable relief it seeks is appropriate, and Plaintiff has failed to show that Defendants have misapplied the break-in-service rules or the Plan's vesting rules to the detriment of any members of the vesting subclasses. Accordingly, the Court declines to adopt Plaintiff's proposed remedy at this time with respect to Defendants' revisions to the Plan database.
Plaintiff contends that in order to remedy the violations of the Plan previously found by the Court, the Court must order Hilton to produce additional corporate records relating to the Plan. See Pl.'s Br. at 29-30. Specifically, Plaintiff seeks to compel the production of corporate personnel records of (a) original dates of hire; (b) leaves of absence; (c) marital records; (d) employment with former Participating Employers/Affiliates that participated in the Plan; and (e) employment records for any Related Companies including "Managed Properties" that never participated in the Plan. Id. at 30. Plaintiff contends that such production is required by Magistrate Judge Alan Kay's October 31, 2001 Order, which required production of electronic databases and programs within 30 days. Plaintiff contends that Defendants have "never provided" some of this information and were obliged to provide it on a continuing basis.
Defendants argue that it is too late for Plaintiff to complain about Defendants' alleged failure to produce documents pursuant to Magistrate Judge Kay's order. The parties agree that in August 2005, Hilton provided Plaintiff with a copy of its entire pension database containing data on over 140,000 participants. Hilton also provided an updated pension database to Plaintiff in October 2009. The Court agrees with Defendants that Plaintiff should have sought to compel further production during discovery or, alternatively, before the briefing on equitable relief was completed. The Court has already addressed several aspects of Plaintiff's request for additional records; the Court shall not order additional production beyond what has been previously discussed.
Plaintiff argues that the Court should appoint a Class Action Administrator to carry out the terms of the equitable relief that will be ordered by the Court. In addition to an administrator, Plaintiff would have the Court appoint an oversight committee. Plaintiff contends that a Class Action Administrator is necessary to ensure that corporate records have been completely produced and ensure that Hilton complies with the Court's order. See Pl.'s Br. at 35-36; Pl.'s Reply at 44-50. Defendants argue that there is no need for a Class Action Administrator because the parties have already calculated the benefits to be paid to the class members and Hilton is capable of implementing any remedy ordered by the Court. Defendant contends that an administrator would be intrusive and remove authority from Hilton to administer the Plan. See Defs.' Surreply at 24.
The Court is not inclined at this point to appoint a Class Action Administrator in this case. The Court is not convinced that a Class Action Administrator will ultimately be necessary to implement the equitable relief in this case, which consists primarily of recalculated benefits for class members and reformation of the Plan. Based on the Court's rulings, the parties should be able to agree on the benefit calculations for each class member to be incorporated in the final judgment. Plaintiff argues that Hilton should not be trusted to implement the remedies in this case because of its history of violations. See Pl.'s Reply at 49. The Court shares Plaintiff's concern. Defendants' proposal does not provide for this Court's continuing jurisdiction or establish any protocols for monitoring compliance. While Plaintiff's proposal is too intrusive, Defendants' proposal is too lax. Therefore, once the remaining issues are
Under Defendants' proposed remedy, class members who are entitled to additional benefits (either because of the change in benefits formula or because they are newly vested) shall receive "true up" payments reflecting benefits owed to them to date and increased annuity payments in the future reflecting their additional benefits. See Defs.' Br. at 9. Plaintiff does not disagree with these aspects of Defendants' proposal but offers several additional proposals. For example, Plaintiff argues that all benefit increases of less than $5 per month should be discharged with a lump sum payment rather than a series of future benefit payments. See Pl.'s Br. at 30-32. Plaintiff also proposes that prejudgment and post-judgment interest be applied at a uniform rate of 6%. See id. at 32-33. Plaintiff also proposes a specific procedure to notify class members of increased benefit obligations due in the future. Id. at 33-34. Defendants do not specifically address Plaintiff's proposals.
With respect to Plaintiff's suggestion that benefit increases of less than $5 per month be discharged with a lump sum distribution, it is unclear why this would be administratively cost effective. If a participant is entitled to monthly pension benefits, Hilton already bears the administrative cost of distributing that benefit; it would not make sense to separate out the "increased" benefit owed due to this litigation as a lump sum payment. There may be some administrative savings with respect to participants who are newly vested and will receive less than $5 per month in benefits. However, participants may prefer an annuity to a lump sum payment, even if the monthly payment received is small; Plaintiff's proposal does not consider this possibility. Accordingly, the Court is not inclined to allow a lump sum payment option to replace future periodic payments. The Court has no problem with lump sum payments for benefits that are past due, as both parties' proposals contemplate.
The D.C. Circuit has held that prejudgment interest on unpaid ERISA benefits is presumptively appropriate. Moore v. CapitalCare, Inc., 461 F.3d 1, 13 (D.C.Cir. 2006). Accordingly, the Court agrees with Plaintiff that interest should be awarded to compensate participants for the time value of their benefits, particularly in light of the protracted nature of this litigation. The decision on how to calculate prejudgment interest is subject to the Court's discretion. Forman v. Korean Air Lines Co., 84 F.3d 446, 450 (D.C.Cir.1996). The Court shall not decide an appropriate interest rate without input from Defendants on this issue. Accordingly, the Court shall reserve this issue for later determination.
With respect to notice, Plaintiff proposes that participants who are not immediately due benefits be provided with notice of the original and increased benefit obligations and how benefits may be claimed, including return envelopes for participants to submit additional contact information. See Pl.'s Br. at 33-34. Defendants have not raised any specific objections to these procedures, and the Court does not foresee any problems with Plaintiff's notice proposal.
Plaintiff proposes that the Court's remedial order include a cy pres provision to
Plaintiff indicates that he intends to apply for an incentive award of $50,000 for the named plaintiff, Jamal Kifafi, as well as for attorneys' fees and expenses. See Pl.'s Br. at 37-40. The Court shall reserve any decision as to attorneys' fees and incentive awards until after a final judgment is entered in this case.
Based on the Court's rulings as stated above, the parties should confer in an effort to determine what issues remain disputed. To the extent there are disputes remaining regarding the proper equitable relief for the minimum accrual rate and vesting violations, the Court shall require further briefing and hold a hearing to decide disputed issues of material fact. Plaintiff should identify each class member whom it believes (and Defendants dispute) should be provided with additional benefits or vesting service, and Defendants shall provide a legal and factual basis for the benefit and vesting determinations it makes with respect to each disputed class member's remedy. Once the parties have filed these additional briefs and supporting schedules, the Court shall schedule a hearing to resolve any final factual disputes. This hearing will not consider individual class member claims but class claims and issues impacting the methodology.
The Court has reviewed the parties' submissions on remedies and made rulings on the major issues contested by the parties. With respect to the backloading violation, the Court shall generally adopt Defendants' proposed revision to the benefits formula but reject Defendants' contention that relief should only be provided to participants who separated from service after 1987. With respect to Defendants' failure to credit union service for purposes of vesting, the Court shall order Defendants to credit union but not other non-participating service, and the Court shall require Hilton to search its corporate records for information relating to class members' union service and permit class members to submit claims based on union service not reflected in records. With respect to Defendants' violation of the 1000 hours of service standard, the Court shall adopt the parties' proposal to apply the 870/750 hours worked standard with hours equivalencies but reject Plaintiff's proposal to
Kifafi v. Hilton Hotels Retirement Plan, 189 F.R.D. 174, 176 (D.D.C. 1999) (Kifafi I).
