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Testa v. Becker

United States District Court, W.D. New York

May 9, 2017

ROBERT TESTA, Plaintiff,
LAWRENCE BECKER, as plan administrator of the Xerox Corporation Retirement Income Guarantee Plan, and XEROX CORPORATION RETIREMENT INCOME GUARANTEE PLAN, an Employee Pension Benefit Plan, Defendants.


          DAVID G. LARIMER United States District Judge.


         Plaintiff Robert Testa brings this action against the Xerox Corporation Retirement Income Guarantee Plan (“RIGP”) and the administrator of the RIGP, alleging that his pension benefits have been reduced in violation of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1101 et seq.

         Plaintiff brought this action in the United States District Court for the Central District of California in January 2010. The action was transferred to this Court in April 2010, based on a forum selection clause that was added to the RIGP in July 2008.

         Two motions are now pending before this Court: plaintiff's motion for summary judgment (Dkt. #49) and defendants' cross-motion for summary judgment (Dkt. #53). For the reasons that follow, plaintiff's motion is granted, and defendants' motion is denied.


         This is one of several related cases presenting roughly similar claims by current and former employees of Xerox Corporation (“Xerox”). Plaintiff Testa began working for Xerox in 1972, and left in 1983, at which time he took a lump-sum distribution of about $30, 000 from the then-existing Profit Sharing Plan (“PSP”).

         Testa returned to Xerox for a second period of employment, from 1985 to 2008. In 1990, Xerox discontinued the PSP. See Conkright v. Frommert, 559 U.S. 506, 524 (2010). When it did so, Xerox merged the PSP into the RIGP. Plaintiff then became a participant in the RIGP.

         When Testa finally retired from Xerox in 2008, defendants calculated his benefit utilizing a so-called “phantom account” offset. That offset involves defendants' deduction from a participant's pension benefit, not only of the amount of the lump sum that the participant received when he first left Xerox, but also a sum representing the hypothetical interest that the lump sum would have earned had it remained in the pension plan until the employee's retirement at the end of his final period of employment with Xerox. See Frommert v. Conkright, 433 F.3d 254 (2d Cir. 2006) (explaining the details of the phantom account).

         On or about January 13, 2009, Testa received a “pension calculation statement, ” setting forth the amount of his pension benefit, as determined by defendants. For the purposes of this Decision and Order, the details of that calculation are not important, but what is important is that defendants utilized the phantom account offset. Plaintiff alleges that his pension benefit, following his final period of employment, is significantly lower than it should be, due to the application of the phantom account offset.

         Some of the relevant correspondence does not seem to be in the record, but it is referred to by the parties, and the substance of that correspondence is not in dispute. It appears that on or about January 30, 2009, Testa sent a letter to the Xerox Benefits Center, raising his objections to Xerox's calculation of the amount of his benefit. Apparently Xerox's response was not to plaintiff's liking, because he sent them another letter dated May 26, 2009, in which he sought to appeal what he characterized as Xerox's denial of his claim for additional benefits.

         By letter dated June 2, 2009, Arlyn Kaster (described as “Mgr. Pension and Life Ins. Benefits”), responded to plaintiff. Kaster stated that Testa's January 30 letter had not been submitted in accordance with prescribed procedures, and hence would not be treated as a formal claim. Kaster added that Xerox would construe Testa's May 26 letter as a claim, but without waiving any defenses that Xerox might have in any future lawsuit, including the defense that Testa's claims were time-barred. Dkt. #52-3 at 10.

         Kaster informed Testa that Xerox had determined that Testa was not entitled to any additional benefits, because Testa was not a plaintiff in the Frommert action (which was commenced in 2000) or in any other litigation concerning the phantom account. See Dkt. #52-3. By letter to plaintiff dated August 4, 2009, Plan Administrator Lawrence Becker essentially affirmed that ruling, and stated that “[t]his represents a final and binding decision under the Plan ... .” Dkt. #52-3 at 16.

         Plaintiff filed this lawsuit in January 2010, in the Central District of California. The action was transferred to this Court in April 2010. The complaint asserted four causes of action, as explained below. A full understanding of this case, however, requires some familiarity with the related cases referenced above, many of which predate this lawsuit.

         As indicated in Kaster's letter, this is not the first case stemming from Xerox's use of the phantom account. To the contrary, the phantom account has given rise to much litigation, and numerous reported cases over the years, in this and other courts, including the Supreme Court of the United States See, e.g., Frommert, 559 U.S. 506; Frommert v. Conkright, 738 F.3d 522 (2d Cir. 2013); Miller v. Xerox Corp. Retirement Income Guarantee Plan, 464 F.3d 871 (9th Cir. 2006), cert. denied, 549 U.S. 1280 (2007); Clouthier v. Becker, No. 08-CV-6441, 2016 WL 245157 (W.D.N.Y. Jan. 21, 2016). At least in this circuit, the primary focus of that litigation has been on defendants' failure to provide plan participants with adequate notice of the existence and operation of the phantom account. See Frommert v. Conkright, __ F.Supp.3d __, 2016 WL 7186489, at *11 (W.D.N.Y. Dec. 12, 2016) (“At its heart, this case has always been primarily about (1) Xerox's application of the phantom account, to employees who were not given clear and adequate notice of its existence and how it was utilized, in violation of ERISA, and (2) how to remedy that violation”).

         While some issues remain to be resolved in some of these cases, one thing that has been established is that Xerox violated ERISA by applying the phantom account to certain employees, who were inadequately apprised of the phantom account's existence, the fact that it would be applied to them, and the effect that its application would have on the amount of their pension benefits. As this Court recently stated, “If nothing else, this litigation has established that defendants violated ERISA through their application of the ‘phantom account' to employees who retired before the existence and operation of that account was fully disclosed in [the summary plan description issued in] 1998, and that plaintiffs who were adversely affected by that inequitable conduct are entitled to relief.” Frommert, 2016 WL 7186489, at *2 (citing cases).

         In the case at bar, plaintiff originally asserted four claims under ERISA. On October 30, 2013, the Court issued a Decision and Order, 979 F.Supp.2d 379, granting defendants' motion to dismiss plaintiff's first, second and fourth causes of action. Those causes of action asserted claims for pension benefits under 29 U.S.C. § 1132(a)(1)(B), and for “other appropriate relief” under § 1132(a)(3).

         The Court dismissed those three claims principally on the ground that they were time-barred. Id. at 383. Familiarity with that decision is assumed, for purposes of this Decision and Order, but the gist of the decision was that plaintiff could not seek benefits directly under the terms of the plan itself, or under the summary plan description (“SPD”), because Xerox's 1998 SPD had put plaintiff on notice of the existence and operation of the phantom account, when that SPD was issued to and received by him. At the latest, then, plaintiff's six-year limitations period under § 1132(a)(1)(B) expired in 2004. Id. The Court added ...

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