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In re J.P. Morgan Chase Cash Balance Litigation

May 30, 2007

IN RE J.P. MORGAN CHASE CASH BALANCE LITIGATION


The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge

THIS DOCUMENT RELATES TO: OPINION & ORDER

All Actions

Neil Aldoroty, John J. Berotti, Annette Marie Falchetti, Terri Melli, Norman J. Schomaker, and Perry Shapiro (collectively "Plaintiffs"), former employees of JPMorgan Chase & Co. ("JPMC") and its various Predecessor Plans, allege various ERISA violations against JPMC and JPMC's Director of Human Resources (collectively "Defendants") and seek, amongst other relief, class certification. In Count I, Plaintiffs allege that the cash balance method that Defendants use to calculate pension benefits under the JPMC Retirement Plan ("Plan") is age discriminatory in violation of ERISA § 204(b)(1)(H)(i). In Count II, Plaintiffs claim that the transition from a final average pay formula to the cash balance formula created an impermissible "wear-away" of benefits in violation of ERISA § 204(b)(1)(B), and in Count III, Plaintiffs allege that the transition from a final average pay formula to the cash balance formula created an impermissible forfeiture of accrued benefits in violation of ERISA § 203(a)(2)(A).*fn1 In Counts IV --VI (collectively "notice claims"), Plaintiffs allege that Defendants failed to provide the following -- notice of reduction of the rate of their future benefit accrual pursuant to ERISA Section 204(h), an adequate Summary Plan Description ("SPD") as required by ERISA Section 102(b), and summaries of material modifications to the Plan pursuant to ERISA Section 102(a).

The action was initiated in January 2006 and Defendants, in June 2006, filed a motion to dismiss all claims. I granted the motion with respect to Counts II and III, but denied it with respect to the age discrimination and notice claims. Thus, Counts I, IV, V, and VI remain.

As noted, Plaintiffs now request, pursuant to Federal Rule of Civil Procedure 23, certification of their proposed class, appointment of Plaintiffs as class representatives, and appointment of class counsel. For the reasons set forth below, this motion to certify the class is GRANTED in part. Plaintiffs Berotti, Falchetti, Melli, and Shapiro are appointed class representatives and the law firms of Schiffrin & Barroway, LLP, Kirby, McInerney & Squire, LLP, and Keller Rohrback LLP are appointed class counsel pursuant to Federal Rule of Civil Procedure 23(g).

I. BACKGROUND

The facts of this case, including the terms of the Plan at issue, are set forth in detail in my October 30, 2006 Opinion & Order, familiarity with which is presumed. In re J.P. Morgan Cash Balance Litigation, 460 F.Supp.2d 479 (S.D.N.Y. 2006). In summary, the JPMC Plan is a cash balance plan that was initiated after the union of, and amendments to, the various retirement plans of the JPMC Predecessor Companies. Over the years, JPMC has merged with the following companies (collectively "Predecessor Companies") -- the Retirement Plan of the Chase Manhattan Bank & Certain Affiliated Companies, the Retirement & Family Benefits Plan of the Chase Manhattan Bank, N.A., the Retirement Plan of Chemical Bank and Certain Affiliated Companies, Cash Plan for Retirement of Chemical Bank and Certain Affiliates, the Chase Balance Plan of Morgan Guaranty Trust Company of New York and Affiliated Companies for United States Employees, and Bank One Corporation Personal Pension Account Plan. At present, there is one plan, centrally administered by JPMC.

The proposed class representatives are former employees of JPMC, or one of its acquired banks ("Predecessor Companies"), and are members of its cash balance plan. Plaintiffs have put forth the following representatives:

1. Neil Aldoroty joined Chase Manhattan Corporation in 1967 and continued to work for Chase Manhattan Corporation's successor companies until 2002.

2. John J. Berotti joined Chase Manhattan Corporation in 1971 and continued to work for Chase Manhattan Corporation's successor companies until 2001.

3. Annette Marie Falchetti joined Chase Manhattan Corporation in 1975 and continued to work for Chase Manhattan Corporation's successor companies until 2001.

4. Terri Melli joined Chase Manhattan Corporation in 1997 and continued to work for the company's successor, JP Morgan Chase & Co., until 2005.

5. Norman J. Schomaker joined Chase Manhattan Corporation in 1966 and continued to work for Chase Manhattan Corporation's successor companies until 2005.

6. Perry Shapiro joined Manufacturers Hanover Trust in 1969 and continued to work for Manufacturers Hanover Trust's successor companies until 2001.

Two of class representatives, Neil Aldoroty and Norman Schomaker, have already received their lump sum payments under the plan.

II. DISCUSSION

Plaintiffs request that the court certify a class that consists of:

All Plan participants, whether active, inactive or retired, their beneficiaries and Estates, whose accrued benefits or pension benefits are based in whole or in part on the Plan's cash balance formulas, from January 1, 1989 to present.

To determine whether the proposed class should be certified, a two-step inquiry is required. The district court must first ascertain whether the class satisfies the factors set forth in Federal Rule of Civil Procedure 23(a), commonly referred to as the numerosity, commonality, typicality, and adequacy factors. If each Rule 23(a) factor is met, then the court must determine whether class certification is appropriate under one of the three provisions set out in Federal Rule of Civil Procedure 23(b). Plaintiffs bear the burden of showing that the proposed class satisfies Rule 23, see, e.g., Marisol A. v. Guiliani, 126 F.3d 372, 375 (2d Cir. 1997), and the district court must determine, based on relevant facts submitted by the Plaintiff, that Rule 23 is met. In re Initial Public Offering Securities Litigation, 471 F.3d 24, 30 (2d Cir. 2006). Finally, a court must address the proper administration of the action, including appointment of class counsel pursuant to Rule 23(g) and directing proper notice to absent class members pursuant to Rule 23(c). In re Onmicom Group, Inc. Sec. Litig., No. 02-4483, slip op. at 5 (S.D.N.Y. Apr. 30, 2007).

Defendants assert that the named Plaintiffs lack standing to bring these claims and they fail to meet the class certification requirements of Rule 23.

A. Standing

1. Standing Under Article III of the United States Constitution

In order to establish standing under Article III, the potential plaintiff must: (1) have suffered an injury-in-fact, (2) demonstrate a causal connection between the injury and the objectionable conduct; and (3) demonstrate that the injury will be remedied by the requested relief. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). Defendants maintain that ERISA § 204(b)(1)(H), the anti-age discrimination provision, only applies to individuals over the age of 65. Since none of the Plaintiffs have reached age 65, Defendants contend that they lack standing under Article III.

In my October 30, 2006 Opinion & Order, I rejected Defendants' interpretation of ERISA § 204(b)(1)(H). This provision provides as follows:

A defined-benefit plan shall be treated as not satisfying the requirements of this paragraph if, under the plan, an employee's benefit accrual is ceased, or the rate of an employee's benefit accrual is reduced, because of the attainment of any age.

I found that the unambiguous meaning of the phrase "attainment of any age" compels the conclusion that the statute applies to everyone, not only those over 65. In re J.P. Morgan Cash Balance Litigation, 2006 WL 3063424, *5. Plaintiffs allege that their injury stems from the fact that they accrue less money in their retirement accounts as they grow older due to the language of JPMC's cash balance plan and claim that JPMC must reform the plan or be in violation of ERISA ยง 204(b)(1)(H). Since their concerns will be ...


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