Press Release
09/19/06 -
Vedder Price Wins ERISA Class Action
Chicago, September 19] Vedder Price attorneys successfully defeated a class action complaint filed against Novartis Consumer Health, Inc. filed in the U. S. District Court for the District of New Jersey. Judge Joseph A. Greenway, Jr. dismissed with prejudice all counts of the complaint in a decision filed on September 18, 2006.
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.
With respect to the age discrimination claims, Novartis was able to show, and the trial judge concurred that 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 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 court held that ERISA permits such a two layered system in proposed Treasury Regulation Section 1.411(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 court held that this was an absurd analysis and an impossible construction of the Plan language.
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