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Nov. 10 -- BNA, Inc. Construction Labor Report
Benefit Plans
Court Affirms Benefit Miscalculation Ruling
For Individual Plaintiff, Remands Class Claims
BNA Snapshot
Novella v. Westchester County, 2d Cir., No. 09-4061-cv(L), 11/3/11
Key Holding: The Second Circuit affirmed a lower court's entry of summary judgment in favor of a pension plan participant regarding the plan's calculation of disability pension benefits at two different rates, but remanded the class action to the lower court regarding when the statute of limitation accrued for all class members.
Key Takeaway: The district court will have to determine whether, and if so when, each class member knew or should have known of the defendants' miscalculation of pension benefits.
The U.S. Court of Appeals for the Second Circuit Nov. 3 affirmed a district court's award of summary judgment to a named class action plaintiff on a claim of miscalculation of benefits, but remanded the case to the district court to determine when the statute of limitations began to run for each class member (Novella v. Westchester County, 2d Cir., No. 09-4061-cv(L), 11/3/11).
The class action is based on when the applicable statute of limitation on the class members' claim of miscalculated pension benefits began to accrue. The court agreed with the U.S. District Court for the Southern District of New York that the plan's two-rate calculation of disability benefits was "arbitrary and capricious," and that Carlo Novella filed his claim before the statute of limitations ran out.
The court was able to rule on Novella's individual claims because it found that the district court properly determined when the statute of limitations began to accrue.
However, the Second Circuit reversed the lower court's judgment in favor of the class as a whole and remanded for further fact-finding in order to determine when each individual class member became, or should have become, aware of his or her alleged injury "so as to begin the running of the statute of limitations," the court said.
"[W]e conclude, contrary to the district court, that the six-year statute of limitations applicable to the plaintiff's and each other putative class member's Employee Retirement Income Security Act claims began to run when each pensioner knew or should have known that the defendants had miscalculated the amount of his pension benefits, and that he was being underpaid as a result," the court wrote.
The court could not rule on the class claims because "we are unable to determine whether, and if so when, each class member had information by which he knew or should have known of the miscalculation."
The case was before Judges John M. Walker Jr. and Robert D. Sack, and District Judge John G. Koeltl of the Southern District of New York, sitting by designation.
Class Affected by ‘Freeze Practice’ Certified in 2006
Novella worked as a carpenter in Westchester County, N.Y., and New York City from 1962 through 1995 and participated in the New York Carpenters' Pension Fund. He earned pension credits during 1962 through 1981 and 1987 through 1995. He did not earn credits during 1982 through 1986 because he worked in jobs that were covered by a different pension plan. In 1995, Novella suffered an injury at work and applied for a disability pension.
In calculating his benefits, the plan froze the benefit rate in effect at the time Novella discontinued work covered by the plan. The plan applied the rate applicable in 1995 to benefits for work performed between 1987 and 1995, and it applied the lower rate in effect in 1981 to benefits for work performed between 1962 and 1981, the court said. The use of the 1981 rate for the earlier period resulted in a lower aggregate monthly pension payment, it said.
Novella filed a lawsuit against the plan and its trustees, alleging that the application of the two benefit rates violated the terms of the plan and the Employee Retirement Income Security Act. The district court certified the class of disability pensioners affected by the "freeze" practice (52 CLR 778, 8/9/06).
Edgar Pauk of New York represented Novella. John H. Byington III and Robert T. McGovern of Archer Byington Glennon & Levine, Melville, N.Y., represented the plan.
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