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Bilello v. JPMorgan Chase Retirement Plan

April 10, 2009


The opinion of the court was delivered by: Denise Cote, District Judge


Defendants JPMorgan Chase Retirement Plan and JPMorgan Chase Director of Human Resources have moved to dismiss a complaint filed by Frank Bilello on behalf of himself and all others similarly situated. Bilello was an employee of JPMorgan Chase & Co. ("JPMC") and predecessor banks, including Chemical Banking Corporation ("Chemical"), from 1960 until his retirement in the Spring of 2008. Chemical's 1989 conversion to a cash balance pension plan and the subsequent plan amendments are the subject of this lawsuit.

Bilello filed his complaint on August 17, 2007. This action was reassigned to this Court on October 21, 2008. Bilello alleges numerous violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., and the Internal Revenue Code. Defendants have moved to dismiss all counts of the complaint pursuant to Rules 8(a), 12(b)(1), and 12(b)(6), Fed R. Civ. P. An Opinion and Order of January 6, 2009 denied defendants' motion to the extent that it argued that Bilello lacked statutory standing as an ERISA participant because he received a lump-sum distribution of his pension benefit upon retirement. Bilello v. JPMorgan Chase Retirement Plan, 592 F. Supp. 2d 654 (S.D.N.Y. 2009) (the "January 6 Opinion"). Familiarity with the January 6 Opinion is assumed. The defendants' argument that many of Bilello's claims, including all of his class-wide claims, are barred by the statute of limitations will now be considered.


At the center of this lawsuit is Chemical's conversion from a traditional defined benefit plan to a cash balance plan, whose contours are outlined in the January 6 Opinion. Under a cash balance plan, a hypothetical account is established in each participant's name to keep track of his accrued benefit. Typically, the account contains "pay credits," representing a percentage of the participant's salary that is periodically deposited into the account, as well as "interest credits," which apply a common interest rate to the account balances. See Hirt v. The Equitable Retirement Plan for Employees, Managers, and Agents, 533 F.3d 102, 104-105 (2d Cir. 2008). Cash balance plans became widespread in the 1990s and provoked strong criticism for lowering benefits earned by older workers in order to reduce companies' liabilities under pension plans. See, e.g., Mary Williams Walsh, Issues Left Unresolved on Pensions, N.Y. Times, Jan. 17, 2007, at C1. The Second Circuit having recently ruled that cash balance plans do not violate ERISA's prohibition on age discrimination in Hirt, 533 F.3d at 110, litigants in this Circuit seeking to challenge the plans' reduction of benefits as a participant ages must find more indirect ways of doing so. The claims in Bilello and its related case, In re J.P. Morgan Cash Balance Plan Litigation, No. 06 Civ. 732, whose age discrimination claim was dismissed without opposition following the Hirt decision, include a plethora of claims that attempt to chip away at the legality of a conversion to, and the administration of, cash balance plans. These claims, described below, include charges that participants were improperly notified of the reduction in benefits that could occur under a cash balance plan, or that the cash balance plans at issue here gave the employer improper discretion to determine interest rates.

Chemical converted its conventional defined benefit retirement plan (the "Pre-1989 Plan") into a cash balance plan on January 1, 1991, retroactive to January 1, 1989 (the "1989 Plan"). Chemical announced the conversion to its employees in July 1990, and sent a letter later that month (the "July Letter," attached to the complaint) explaining that it was "changing its retirement plan to help you meet your retirement planning needs" by adopting a cash plan, which offered the "special advantage" of being "clear-cut and easy to understand." The letter promised that Chemical was "making sure the Plan continues to provide similar benefits at retirement" and would provide a brochure describing the cash balance plan in more detail later in the year as well as statements of individual account balances under the new plan.

As set out in the July Letter, participants received information regarding the 1989 Plan later that year, in September 1990 (the "September 1990 Notice," attached to the complaint). In 1992, Chemical issued a Summary Plan Description ("SPD") describing the 1989 Plan.*fn1 The next year, Chemical's retirement plan merged with that of Manufacturers Hanover Trust ("MHT"), following the 1991 merger of the two companies. The result was the 1993 Chemical Plan (the "1993 Plan"), effective January 1, 1993. Plaintiff attaches a 1994 SPD that describes the 1993 Plan.

Chemical next merged with the Chase Manhattan Corporation ("Chase") in 1996, and the two companies' plans were merged effective January 1, 1997 (the "1997 Plan"). Plaintiff attaches a 1999 SPD describing the 1997 Plan to the complaint. Chase then merged with J.P. Morgan in 2000, creating JPMC. J.P. Morgan's cash balance pension plan merged into Chase's cash balance plan effective January 1, 2002 (the "2002 Plan"). A July 1, 2004 merger with Bank One Corporation resulted in a merger of the JPMC and Bank One plans effective January 1, 2005 (the "2005 Plan"). The 2005 Plan is administered by defendant JPMorgan Chase Director of Human Resources (the "Plan Administrator").

Following the denial of class certification in In re J.P. Morgan Class Balance Litigation for claims relating to retirement plans in place before 2002, Bilello filed this lawsuit challenging the 1989 conversion to a cash balance plan and the subsequent plans arising from the retirement plan mergers of Chemical and its successors Chase and JPMorgan Chase, alleging nine class-wide and two individual counts of ERISA violations. Defendants moved to dismiss the complaint on November 16, 2007 on statutory standing and statute of limitations grounds, among others. Before that motion was fully submitted, Bilello amended his complaint on December 21. Defendants renewed their motion to dismiss with new briefing filed on February 25, 2008 that sought dismissal of all counts of the complaint.

After the January 6 Opinion rejected defendants' statutory standing argument that Bilello was not an ERISA plan "participant," an Order requested supplemental briefing on the argument that Bilello's claims must be dismissed for failure to exhaust his administrative remedies, because he accepted a lump-sum payout without disputing the amount. The plaintiff also made a submission on April 8, 2009 seeking to clarify the amended complaint's description of a frontloaded interest credit cash balance plan and presenting an additional statute of limitations argument with respect to the first count of the amended complaint. A separate Order disposes of the exhaustion issue, finding that Bilello is not required to exhaust the claims at issue in this lawsuit. While many of Bilello's class-wide claims are legally vulnerable for several different reasons,*fn2 the analysis in this Opinion principally addresses defendants' assertion that the six-year statute of limitations generally applicable to non-fiduciary ERISA actions bars each of the class-wide claims.


Motions to dismiss a complaint on statute of limitations grounds are properly brought under Rule 12(b)(6), Fed. R. Civ. P. McKenna v. Wright, 386 F.3d 432, 436 (2d Cir. 2004). Such motions may be granted only "if the defense appears on the face of the complaint" and where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Id. (citation omitted).

A trial court considering a Rule 12(b)(6) motion must "accept as true all factual statements alleged in the complaint and draw all reasonable inferences in favor of the non-moving party." Vietnam Ass'n for Victims of Agent Orange v. Dow Chemical Co., 517 F.3d 104 (2d Cir. 2008) (citation omitted). At the same time, "conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to defeat a motion to dismiss." Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328, 337 (2d Cir. 2006) (citation omitted).

Motions under Rule 12(b)(6) are evaluated according to a "flexible plausibility standard, which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Boykin v. KeyCorp, 521 F.3d 202, 213 (2d Cir. 2008) (citation omitted). "To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient to raise a right to relief above the speculative level." ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (citation omitted).

Statutes of limitations reflect a "policy of repose," recognizing that "the right to be free of stale claims in time comes to prevail over the right to prosecute them." Ledbetter v. Goodyear Tire & Rubber Co., Inc., 550 U.S. 618, 127 S.Ct. 2162, 2170 (2007) (citation omitted). Statutes of limitations also guard against adjudication of claims based on a decayed evidentiary record, as the "passage of time may seriously diminish the ability of the parties and the factfinder to reconstruct what actually happened." Id. at 2171.

ERISA does not provide a statute of limitations for civil enforcement actions, so the most similar state statute of limitations applies to most ERISA claims, and a court looks to federal common law to determine when the cause of action accrues.*fn3 Guilbert v. Gardner, 480 F.3d 140, 149 (2d Cir. 2007). The statute of limitations for ERISA actions brought under 29 U.S.C. § 1132(a)(1)(B) in New York is six years, inferred from the statute of limitations for contract actions set by Section 213 of the New York Civil Practice Law and Rules. Slupinski v. First Unum Life Ins. Co., 554 F.3d 38, 55 (2d Cir. 2009) (citing Miles v. N.Y. State Teamsters Conf. Pension & Retirement Fund Employee Pension Benefit Plan, 698 F.2d 593, 598 (2d Cir. 1983)). While not all of Bilello's claims may be characterized as claims under 29 U.S.C. § 1132(a)(1)(B), the parties do not dispute the application of the six-year statute of limitations period to the nine claims to which the defendants' statute of limitations defense is addressed. This case was filed on August 17, 2007. Consequently, any claims must have accrued after August 17, 2001 to be within the limitations period, unless an equitable toll applies.*fn4

Under federal common law, courts generally apply the "discovery rule" to determine when an ERISA cause of action accrues, looking to when the plaintiff "discovers, or with due diligence should have discovered, the injury that is the basis of the litigation." Guilbert, 480 F.3d at 149 (2d Cir. 2007) (citation omitted); see also Carey v. Int'l Bhd. of Elec. Workers Local 363 Pension Plan, 201 F.3d 44, 48 (2d Cir. 1999) ("a plaintiff's claim accrues when he discovers or with reasonable diligence should discover, the injury that gives rise to his claim").*fn5 The discovery rule, recognized by the Supreme Court in cases involving fraud and concealment of the fraud, latent disease, and medical malpractice, TRW Inc., 534 U.S. at 27, arose from the belief that a ...

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