Press Release

02/26/08 - Vedder Price Wins ERISA Class Action Before the Third Circuit Court of Appeals

Vedder Price attorneys Charles B. Wolf, Philip L. Mowery and Patrick W. Spangler prevailed before the Third Circuit Court of Appeals in a case involving a class-action complaint filed against Novartis Consumer Health, Inc. On September 18, 2006, District Judge Joseph A. Greenway, Jr. [U.S. District Court for the District of New Jersey] dismissed with prejudice all counts of the complaint. Plaintiffs appealed that decision to the Third Circuit Court of Appeals and a three-judge panel affirmed the district court’s decision on all counts.

The class-action complaint, which had been amended on three prior occasions since it was originally brought in 2005, contained a number of claims which alleged: 1) age discrimination with respect to benefit accrual; 2) the back-loading of benefit accruals; 3) breach of fiduciary duty to administer the plan in accord with ERISA; and 4) the failure to pay early retirement benefits.

Before the district court, Novartis was able to show that, with respect to the age discrimination claims, its plan created two layers of benefit accruals with the first layer limiting years of credited service to a maximum of 20. The Plan offered a special early retirement benefit at age 57, for a participant who has 20 years of service. After special early retirement, an employee accrued benefits at a lower rate. The district court held that the shift from the first layer to the second was based on years of service and not on the age of the individual involved. The district court also held that ERISA permits such a two layered system in proposed Treasury Regulation Section 1.311(b)-2(a), stating: “This proposed rule clearly allows a plan with two different layers of benefits, differentiated by number of years of service, in which the second layer has a reduced rate of accrual relative to the first.”

The count dealing with the failure to pay early retirement benefits challenged the company’s plan description which clearly stated that to attain an early retirement benefit, the employee must have completed 20 years of service and attained his 57th birthday before retirement. Plaintiffs argued that plan participants included both current and former employees. They sought to claim special benefits for employees who had long since left the employ of the company but subsequently turned 57 years old. The district judge held that this was an absurd analysis and an impossible construction of the Plan language.

A three-judge panel consisting of Judges Ambro, McKee, and Aldisert heard oral argument on February 8, 2008. Charles Wolf argued for Vedder Price and on behalf of Novartis Consumer Health. The Third Circuit panel issued a decision affirming and adopting the reasoning of the district court on February 22, 2008.

Charles B. Wolf is a shareholder in the firm’s Employee Benefits Group, and focuses his practice on labor, employment and employee benefits law and litigation, representing employers and multi-employer funds. Mr. Wolf is ranked among the Top 100 Illinois attorneys by Super Lawyers magazine (2008). Formerly, Mr. Wolf was a member of the firm’s executive committee and also served as leader of the firm’s Labor, Employment and Employee Benefits area. Philip L. Mowery is a shareholder and chair of the Employee Benefits Group. He counsels a variety of corporations in the manufacturing and service industries on all aspects of employee benefits law, including the design, tax qualification, legal compliance, interpretation and communication of employee benefit plans. Patrick W. Spangler is an associate in the Employee Benefits Group and focuses his practice on labor, employment, and employee benefits law and litigation. He represents employers in all aspects of labor, equal employment opportunity and ERISA litigation before federal, state, and local forums.