The opinion of the court was delivered by: Jed S. Rakoff, U.S.D.J.
Plaintiffs James Watson, Joseph Avitabile, Thomas McGlade, and Robert Sheehan bring suit, on behalf of themselves and all others similarly situated, against defendants Consolidated Edison of New York and the Consolidated Edison Pension and Benefits Plan, alleging, in essence, that defendants fraudulently and in breach of their fiduciary duties reduced plaintiffs' retirement benefits. In their Class Action Complaint ("Compl."), plaintiffs asserted seven causes of action: (1) breach of fiduciary duty pursuant to ERISA § 404, 29 U.S.C. § 1104; (2) breach of fiduciary duty to keep beneficiaries informed pursuant to ERISA § 404, 29 U.S.C. § 1104; (3) failure to distribute summary plan description and misleading summary plan description in violation of ERISA § 133, 29 U.S.C. § 1133; (4) violation of disclosure rules for options with unequal values in violation of 26 C.F.R. 1.401(a)-20; (5) fraudulent inducement; (6) breach of fiduciary duty; and (7) usury. However, defendants moved, pursuant to Fed. R. Civ. P. 12(b)(1), to dismiss Counts 1 through 4 for lack of subject matter jurisdiction, and, pursuant to Fed. R. Civ. P. 12(b)(6), to dismiss Counts 5 through 7 for failure to state a claim upon which relief can be granted. After reviewing the briefs and hearing oral argument, the Court, by Order dated September 12, 2008, granted defendants' motion in part and denied it in part. This Opinion explains the reasons for that Order.
The allegations relevant to defendants' motion are as follows.*fn1 The named plaintiffs are former employees of defendant Consolidated Edison of New York, and are participants in the Con Ed Pension and Benefits Plan ("the Plan"), a defined benefits plan administered by defendants. Compl. ¶¶ 5, 8, 16. In approximately June 1999, defendants began implementing an early retirement program for its employees, pursuant to which participants were eligible to choose from among a variety of retirement plans, including the Level Income Option. Id. ¶¶ 22, 24. Pursuant to the Level Income Option, participants retiring before they became eligible for Social Security benefits could elect to receive larger pension payments before Social Security benefits began and smaller pension payments thereafter. Reyes Aff. Ex. E at 6-8. The adjustments were calculated so that the total amount of the monthly payments received from the plan and Social Security would remain level throughout retirement. Id. The Plan requires that payments made pursuant to the Level Income Option be the "actuarial equivalent" of pension payments that the retiree otherwise would have received. Compl. ¶ 21; Reyes Aff. Ex. B at 59, 65. In other words, the Plan mandates that "[t]he present value of the benefit payable under [the Level Income Option]" must "be equal to the present value of the Pension Allowance otherwise payable to the Participant," as determined by certain actuarial analyses. Reyes Aff. Ex. A at 86.
In the course of implementing the Level Income Option, defendants held meetings and made presentations for prospective early retirees, including plaintiffs, to discuss available retirement options, including the Level Income Option. Compl. ¶ 23. These presentations, which were made in accordance with standardized training and plan description practices, described the Level Income Option as a "monthly loan program" that would facilitate early retirement by raising retirees' income until they became eligible for Social Security. Id. ¶¶ 23, 25. Prospective retirees were told that once Social Security benefits began, the loans would end and that the monthly pension checks would be reduced until the loans were paid back. Id. ¶ 26. Plaintiffs allege that the presentations did not disclose, however, that retirees would have to pay "interest" on these "loans," or that early retirees' monthly pension benefits would be reduced for life, irrespective of how long they lived, when the "loan" was paid back, the amount of interest paid, or the amount in excess of the loan that was paid back. Id. ¶ 27.
Each of the named plaintiffs in this action took early retirement, and elected to participate in the Level Income Option. Id. ¶¶ 5, 28. Plaintiffs allege that they only learned the "truth" about the Level Income Action, that is, that they learned that their monthly pension benefits would be reduced for life regardless of whether or not they had repaid the balances on the loans, "well after choosing the Level Income Option, and long after the time to change or cancel their selection of the leveling option." Id. ¶ 29. As a result of plaintiffs' allegedly misinformed decisions, plaintiffs "will be required to pay, depending upon the length of their lives, tens, if not hundreds, of thousands of dollars above the amount actually borrowed." Id. ¶ 34.
In the instant motion, defendants first argue that plaintiffs lack Article III standing to assert federal claims under ERISA, and that Counts 1 through 4 accordingly must be dismissed for lack of subject matter jurisdiction. The Court is not persuaded.
Standing, "an essential and unchanging part of the case-or-controversy requirement of Article III," Lujan v. Defenders of Wildlife, 504, U.S. 555, 560 (1992), consists of three elements: (1) injury in fact, i.e., a concrete, particularized, actual or imminent injury; (2) causation, i.e., the injury is fairly traceable to the defendant's conduct; and (3) redressability, i.e., it is likely (as opposed to merely speculative) that plaintiff's injury can be redressed by a favorable decision. Cent. States Southeast and Southwest Areas Health & Welfare Fund v. Merck-Medco Managed Care, 433 F.3d 181, 198 (2d Cir. 2005). Here, defendants argue that plaintiffs have failed to allege injury-in-fact, and that plaintiffs have not suffered any injury that is redressable under ERISA. The Court considers each of these arguments in turn.
Although injury-in-fact is an "irreducible constitutional minimum," Connecticut v. Phys. Health Svc's of Conn., Inc., 287 F.3d 10, 116 (2d Cir. 2002), the Second Circuit takes a "broad view of participant standing under ERISA." Fin. Inst. Retirement Fund v. Office of Thrift Supervision, 964 F.2d 142, 149 (2d Cir. 1992).
Thus, to the extent that plaintiffs seek "injunctive relief related to ERISA's disclosure and fiduciary duty requirements," they need not make "a showing of individual harm" as to any plaintiff. Cent. States, 433 F.3d at 199.
On its face, the Complaint recounts numerous alleged fiduciary breaches, including (1) defendants' failure to disclose that "unlimited interest would be assessed" on the "loans" in question and that plaintiffs "would continue to pay Defendants well after paying back their loans," Compl. ¶ 37; (2) defendants' failure to provide accurate information about the Pension Plan and the Level Income Option, id. ¶ 38; (3) the issuance of "deceptive or uninformative disclosures . . . regarding the disadvantages of the Level Income Option," id. ¶ 41; (4) defendants' failure to distribute a Summary Plan Description that adequately disclosed the disadvantages of the Level Income Option, id. ¶ 45; and (5) defendants' failure to sufficiently "explain the relative value of the optional forms of benefit" available under the Plan. Id. ¶ 49; see also id. ¶¶ 27-30. Based on these and other allegations, plaintiffs seek, inter alia, an order requiring defendants "to take all necessary steps to make the Level Income Option fully compliant with the law, including eliminating any interest payments and eliminating payments after a [plaintiff's] loan has been paid in full," and prohibiting defendants "from collecting any interest payments or any payments made by a [plaintiff] after their loan has been paid in full." Compl. at 18. These Prayers for Relief plainly demonstrate that plaintiffs seek injunctive relief relating to defendants' alleged violations of ERISA's disclosure and fiduciary duty requirements, and that plaintiffs accordingly need not make any showing of individual harm with regard to these allegations.
Further, to the extent that plaintiffs are required to allege injury-in-fact, the Court is satisfied that they have met their burden. At the pleading stage, "general factual allegations of injury resulting from the defendant's conduct may suffice" to establish standing. Lujan, 504 U.S. at 561. Indeed, "[a]lthough standing is a fundamental jurisdictional requirement, it is still subject to the same degree of proof that governs other contested factual issues." Baur v. Veneman, 352 F.3d 625, 631 (2d Cir. 2003)
Here, the essence of plaintiffs' Complaint is that they each elected to enter into a pension program that increased plaintiffs' retirement payments for a certain period of time in the form of so-called loans, but which, if plaintiffs live long enough, will require them to repay those "loans" at huge interest rates. On the face of the Complaint, it does not appear that any plaintiff has suffered any economic harm to date. Nevertheless, as a result of defendants' alleged fiduciary breaches, plaintiffs have a binding obligation against them that, in a foreseeable number of cases, will result in them being forced to pay back to defendants substantially more than they received. This alleged harm, far from being "conjectural" or "hypothetical," concretely affects plaintiffs "in a personal and individual way," such that each "has a personal stake in the controversy." Baur, 352 F.3d at 632.
Defendants argue that plaintiffs have not suffered any injury, because payments under the Level Income Option are the actuarial equivalent of payments made under other benefit options, and plaintiffs accordingly receive benefits equal in value to the benefits they otherwise would have received. Memorandum of Law in Support of Defendants' Motion to Dismiss ("Def. Mem.") at 16. As an initial matter, the question of whether the benefits plaintiffs received pursuant to the Level Income Option were in fact the actuarial equivalent of benefits pursuant to other pension plans presents a complex question of fact that is not properly resolved on a motion to dismiss. More fundamentally, even assuming that defendants' characterization of the Level Income Option is correct, plaintiffs nevertheless assert viable allegations that they were presented with an option, that defendants made false and misleading misrepresentations and omissions concerning that option in breach of their fiduciary duties, and that plaintiffs stand to suffer significant monetary losses as a result of those breaches. At this stage of the proceeding, such allegations are more than sufficient for purposes of Article III. See Ross v. Bank of Am., N.A., 524 F.3d 217, 222 (2d Cir. 2008) ("Injury in fact is a low threshold, which we have held 'need not be capable of sustaining a valid cause of action,' but 'may simply be the fear or anxiety of future harm.'") (citation omitted).
As to redressability, defendants contend, and plaintiffs do not dispute, that plaintiffs' claims fall under ERISA § 502(a)(3), which permits ERISA beneficiaries "(A) to enjoin any act or practice which violates any provision of [ERISA] 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 [ERISA] or the terms of the plan." 28 U.S.C. § 1132(a)(3); see Varity Corp. v. Howe, 516 U.S. 489, 512 (1996) (noting that ERISA section 502(a)(3) serves "as a ...