ERISA-Second Circuit Affirms District Court’s Grant Of Plan Reformation As Equitable Relief

In Osberg v. Foot Locker, Inc., Docket No. 15-3602-cv (2nd Cir. 2017), the defendants, Foot Locker, Inc. and Foot Locker Retirement Plan (together, the “Defendants”), appeal from a judgment entered by the district court.

Following a two week bench trial, the district court held that the Defendants violated §§ 102 and 404(a) of ERISA by, among other things, failing to disclose “wear-away” caused by the Company’s introduction of a new employee pension plan – a phenomenon which effectively amounted to an undisclosed freeze in pension benefits.  Drawing on its equitable power under § 502(a)(3) of ERISA, the district court ordered reformation of the plan to conform to plan participants’ reasonably mistaken expectations, which the district court found to have resulted from the Defendant’s materially false, misleading, and incomplete disclosures. On appeal, the Defendants do not challenge the district court’s determination that they  violated ERISA.  Instead, they quarrel with the district court’s award of equitable relief under § 502(a)(3), advancing several arguments.  Upon analyzing the case, the Second Circuit Court of Appeals (the “Court”) rejected the Defendants’ challenges to the district court’s award of equitable relief and affirmed the district court’s judgment.

In so acting, the Court held that the district court did not err in: (i) rejecting the Defendants’ position that the plaintiff’s claims were time-barred (the §102 claims were filed on a timely basis after the plaintiffs learned about the “wear-away”, and the §404(a) claims were filed timely, having been filed within the 6 year period of ERISA section 413 for claims of fraud or concealment ); (ii) ordering class-wide relief on participants’ section 404(a) claims without requiring individualized proof of detrimental reliance (noting that neither the statutory text of § 404(a) nor the equitable remedy of reformation requires a showing of detrimental reliance); and (iii) concluding that mistake, a prerequisite to the equitable remedy of reformation, had been shown by clear and convincing evidence as to all class members, based on the Defendant’s arguments and the record as a whole. Finally, the Court found that the district court did not abuse its discretion or make a clear error of law by awarding equitable relief.

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