(March 29, 2013) -- The 41,000 non-union retirees whose pensions Verizon replaced with Prudential annuities can sue the telecom giant as a group, a Texas judge has ordered.
This ruling is the latest in a lawsuit that nearly derailed Verizon's $8.5 billion pension risk-transfer deal with Prudential in December. However, with just days to go before the agreement expired, the Dallas court allowed it proceed.
The plaintiffs, retirees William Lee and Joanne McPartlin, may now represent all 41,000 annuitized members in their battle against Verizon. A class action suit could pursue the following three questions, according to the judge's order:
1.) Whether Verizon ran afoul of Section 102(b) of the Employee Retirement Income Security Act (ERISA) rule requiring summary plan descriptions to disclose the circumstances that may result in a loss or reduction of benefits.
2.) Whether Verizon violated ERISA's fiduciary duty requirements, including the requirements to follow plan policy, the duty of loyalty and impartiality, and to diversify plan investments.
3.) Whether the Verizon Defendants discriminated against the plan members whose pensions were annuitized in violation of ERISA, since other participants were not transferred to Prudential and lost no federal rights and or uniform federal pension protection.
Furthermore, Chief Judge Sidney Fitzwater-who has been presiding over the complex case since the filing last November-granted class status to the 50,000 plan members who whose pensions were not annuitized.
For these participants, the risk transfer poses "common questions of law and fact," the judge ordered. He cite three such questions: Whether the use of plan assets to purchase the annuity contract violated the terms of the plan or ERISA; Whether the plan's assets were used to pay expenses and costs which should have been borne by Verizon's corporate revenues, not by the plan; and whether buying the annuities with plan assets violated ERISA's funding-based limits on payment of accelerated benefits and insurance annuities.
Verizon supported the judge's granting the class statuses, according to a memo filed with the court. Now, if the court dismissed the lawsuit as Verizon has asked it to, the decision would establish precedent for similar suits by other Verizon retirees.
"By certifying the two classes prior to granting the Verizon defendants' motion to dismiss," Verizon attorneys wrote, "the court will ensure that other federal courts will not need to consider equally deficient claims brought by absent class members."