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LEGAL ACTIONS
Health Care suit:
With the parties continuing in discussions including the extent of damage suffered by retirees, the parties proposed the following joint pretrial order to guide further proceedings. Read the Pretrial Order Here...
Death Benefit Appeal – Rehearing Denied
On September 22, 2008, just days after class action counsel filed a Request for Rehearing, the U.S. Third Circuit Court of Appeals denied the Request.
Class action counsel had asked that the full court review the decision of a 3-Judge Panel which upheld dismissal by the U.S. District Court in Newark, NJ of Lucent retirees’ lawsuit against Lucent Technologies over the company’s elimination of the Death Benefit in 2003.
The retiree plaintiffs had argued that the Pensioner Death Benefit was a vested pension benefit. In contrast to Lucent’s arguments that the Death Benefit was a mere “welfare” benefit not required to vest, the retirees’ arguments were well-grounded in fact and law; and ought to have persuaded the Third Circuit to at least re-hear the matter.
The LRO deplores this unfortunate result.
Appealing the Third Circuit decision to the Supreme Court is one option of class action counsel. Meanwhile, the Third Circuit decision which strips the Death Benefit from about 35,000 beneficiaries of Lucent retirees, could have far reaching impact on other retirees who have a Death Benefit that mirrors the Death Benefit that Lucent eliminated and the courts have upheld the company’s action.
This concern will now be raised by the LRO’s Representatives to the National Retiree Legislative Network whose members include several former Bell System retiree groups. We will explore whether the NRLN can help us seek legislative relief in Congress as a recourse to what Lucent retirees and their surviving spouses have suffered.
Court of Appeals Affirms Dismissal of Death Benefits Lawsuit
The LRO learned on August 28, 2008, that the U.S. Third Circuit Court of Appeals in Philadelphia, PA has affirmed the decision of the U.S. District Court in Newark, NJ to dismiss the Lucent retirees’ lawsuit against Lucent Technologies over the company’s elimination of the Death Benefit on February 3, 2003.
In the appeal of the District Courts’ November 26, 2006 summary judgment dismissal of the lawsuit, attorneys for the retirees contended that the pensioner death benefit is an accrued and vested pension benefit that is protect by ERISA from unilateral termination. Lucent, on the other hand, had argued that the pensioner death benefit was an unvested welfare benefit that it could terminate unilaterally.
The three-judge panel concluded that, “The pensioner death benefit, a lump-sum payment made in the event of a pensioner’s death, was an unvested welfare benefit that Lucent could terminate without violating ERISA [Employee Retirement Income Security Act] or unilateral contract principles.”
The LRO vigorously disagrees with this conclusion. Unfortunately, the Appeals Court adopted virtually all of the fallacious reasoning of the District Court while essentially ignoring class action counsel’s arguments that the Death Benefit was vested. LRO will urge that counsel file a request for reconsideration which if granted would allow the full Third Circuit Court of Appeals to reconsider the 3-Judge panel’s decision.
The attorneys for the Lucent retiree plaintiffs, who argued the case before the three judges on April 16, 2008 will be meeting next week to discuss their course of action. We will follow up with further announcements as we get word. The LRO will assist them in every way possible.
“This is a sad day for Lucent retirees who had counted on a vested death benefit to help provide for the financial security of surviving spouses,” said Andy Guarriello, President of the Lucent Retirees Organization. “The LRO is certainly disappointed in the Court of Appeals’ decision and believes an incorrect judgment has been made.
“Our retirees had every right to believe the Death Benefit was a vested benefit within the Pension Plan. It therefore will come as a surprise to our retirees that according to the Appeals Court ‘Nothing in the (Lucent) Plan documents suggests that the pensioner death benefit vests during the life of the pensioner and the Plan documents certainly do not state such vesting in clear and express language’.
“The LRO wants to hear from you in two regards. We need to learn the reaction of its members to this legal conclusion that Lucent was within its rights to terminate the Death Benefit. LRO also wants to hear from you about instances of particular hardship that this ruling will cause our families if left standing. Email us at lro_message@lucentretirees.com .
Federal Judge Rules Lucent Technologies Violated Law By Failing To Maintain Medical Benefits For Retirees
A news release was issued on June 12, 2008 announcing that a federal district court judge in Newark, N.J. has ruled that Lucent Technologies, now known as Alcatel-Lucent, violated the requirements of Section 420 of the Internal Revenue Code in administering its health care plan for management retirees during the period 1999-2006.
Lucent retiree plaintiffs had charged in a lawsuit filed on October 24, 2005 that, following several transfers beginning in September 1999 of excess pension assets to a retiree health care trust, Lucent failed to meet its "benefit maintenance" obligations for the years 1999 through 2003 and its "cost maintenance" obligation for the years 2004 through 2006, as mandated by plan provisions incorporating these requirements of Internal Revenue Code Section 420.
In a 40-page opinion released the morning of June 12, 2008, U.S. District Judge Peter G. Sheridan ruled that the federal Employee Retirement Income Security Act (ERISA) statute and the intent of Congress were very clear. Companies that take advantage of the special provision permitting transfers of excess pension funds to fund retiree health care benefits must comply with strict requirements that for a period of five years benefits be maintained at the same level as in the year preceding the first transfer. This "maintenance of benefit" rule was triggered by Lucent's first transfer of approximately $183 million on September 29, 1999.
The court ruled before trial on motions for summary judgment that the evidence at least established that Lucent breached its obligations to maintain benefits for the year 2003. Regarding the other years in the period 1999-2003 that are in dispute, the court ruled that the evidence did not permit a determination one way or the other and ordered discovery to continue as to Lucent's liability for years 1999 through 2002 under the "maintenance of benefit "rule as well as Lucent's liability for "maintenance of cost" for the years 2004 to 2006.
"This is a significant victory for Lucent retirees who have seen the cost of their company-sponsored health care insurance increase substantially since 2000," said Alan Sandals, lead attorney for the Lucent retirees. "While the court believed that the evidence assembled so far only permits a determination of a violation during the year 2003, we believe that further discovery and analysis will lead to findings of violations during other years as well."
The lawsuit challenged Lucent's reductions and terminations of retiree medical and prescription drug benefits, as well as increased co-pays and increased contribution requirements after the company made transfers from the management pension trust fund totaling $ 888.2 million to offset Lucent's obligations to pay for retiree medical benefits. Congress enacted strict conditions to ensure that participants did not experience benefits reductions at the same time the funding of their pension plan was being tapped by the employer.
The lead plaintiffs in the proposed class action lawsuit are Peter and Geraldine Raetsch of Reading, Pa. and Curtis Shiflett of Macungie, Pa.
"We commend the Lucent retirees and their attorneys for standing up for the rights of all Lucent retirees," said Andy Guarriello, President of the Lucent Retirees Organization. "Although the LRO couldn't be a plaintiff in this type of lawsuit, we have closely followed the case and provided the plaintiffs' attorneys with documents relating to the company's benefit plans."
Three-Judge Panel Hears Oral Arguments In Death Benefit Case Appeal
A 1-hour oral argument was held April 16, 2008 before a three-judge Panel in the Third Circuit Court of Appeals in Philadelphia on the appeal from summary judgment and dismissal in favor of Lucent in the Death Benefit lawsuit brought by Lucent retirees. Chuck Graves, LRO Legal Team Director, and several LRO members attended the hearing.
Click here to read Chuck's summary of the hearing.
LRO Supporting Retirees' Death Benefits and Health Care Lawsuits
The LRO is monitoring and supporting two class action litigations
against Lucent Technologies. These class action lawsuits seek redresses
for reductions and terminations of certain retiree benefits by Lucent
Technologies.
Click here to read about the lawsuit to redress the termination
of the retiree death benefit.
Click here to read about the lawsuit to redress the reduction and
elimination of certain health care benefits.
Federal Judge Hears Arguments in Lucent Retirees' Health Care Lawsuit
A hearing on the Section 420 health benefits class action suit against Lucent Technologies took place on February 28, 2008.
Presiding was U. S. District Judge Peter Sheridan, the Judge in the case. Presenting for Plaintiffs was Alan Sandals of the firm of Sandals and Associates of Philadelphia; and for defendant Lucent, Howard Shapiro. Eleven retirees and three spouses were in the courtroom audience to hear the proceedings, having traveled from Pennsylvania, New York, and various parts of New Jersey.
The Judge heard arguments from each party on their motions for partial Summary Judgment. The issue is whether, following a transfer of money by Lucent in September 1999 from the Management Pension Trust to a Section 420 health care account within the Pension Trust, Lucent used the correct rule to set the level of health benefits over the next several years.
Lawsuit To Redress Reduction And
Elimination Of Certain
Health Care Benefits
In October 2005, a class action lawsuit was filed in U.S. District
Court in Newark, N.J. against Lucent Technologies Inc., Lucent’s
Employee Benefits Committee and Lucent’s Medical Expense Plan for
Retired Employees. The suit claims that following transfers, beginning
in 1999, of nearly $900 million of Lucent Management Pension Plan
“surplus” assets to a health care trust to fund retiree medical
benefits, Lucent violated a requirement to maintain the retiree benefits
and in so doing cost retirees dearly.
Specifically, the suit alleges that beginning in 2001 and thereafter
Lucent made impermissible cuts in retiree medical benefits by
terminating coverage for some spouses, reducing levels of coverage and
raising deductible levels and co-payment requirements. Retirees affected
by Lucent’s decisions have suffered severe losses.
The LRO has fully supported the legal effort to have benefits
restored or/and monetary restitution awarded. Click here to read the complaint on the
lawsuit resulting from Lucent's reductions and terminations of retiree
medical benefits coverage.
Click here
to read the LRO's news release issued when this lawsuit was
filed.
In February 2006, defendants filed a motion to dismiss the complaint.
On March 10, 2006, plaintiffs filed an opposition to the motion to
dismiss the complaint. In August 2006, this lawsuit was reassigned to a
new judge.
On September 28, 2006, the judge conducted a hearing with the
attorneys for Lucent and the plaintiffs. The judge’s questions to the
two sides were focused on clarifying the positions in the attorneys’
briefs on the case. Lucent’s position was that the case does not
belong in U.S. District court but in the realm of the Internal Revenue
Service and/or the “exhaustion process” as defined within the Lucent
benefits plan. The attorney for the retirees argued that Lucent
violated ERISA law and the court should enforce the law.
In an opinion issued October 27. 2006, the judge denied Lucent’s
motion to dismiss the case. The judge ruled that Lucent must provide the
Court with its input on the “substantive matters presented by the
plaintiffs in this case,” including but not limited to “the timeliness
of such claims [and] whether deductibles and co-pays were charged in
violation of Plan terms, and the impact, if any, on Plan participants.”
While the Court’s Order and Opinion allowing the case to proceed does
not necessarily translate to any particular outcome for the plaintiffs,
Lucent will be required to confront the consequences of its conduct in a
legal setting and turn over documents and submit to oral questioning of
company witnesses.
Plaintiffs’ Attorneys File For Partial Summary Judgment In Healthcare Lawsuit
The LRO continues to support and track the status of the Lucent retirees’ lawsuit charging that the company failed to maintain health care benefits for retirees as required by Section 420 of the Internal Revenue Code and by Lucent’s medical plan and pension plan. Plaintiffs’ attorneys have filed a Motion for Partial Summary Judgment.
In these pleadings plaintiffs argue that as matters stand plaintiffs are entitled to have the trial court rule that the Report of a Special Committee appointed by Alcatel-Lucent is entitled to no credence for any of five reasons. (The Special Committee of former Lucent executives concluded that Lucent had not violated IRS regulations in transferring excess pension assets while cutting benefits.)
Further, plaintiffs attorneys have asked the U. S. Federal District Court to rule that as a matter of law Lucent failed to maintain benefits and thereafter further failed to maintain costs as required by law following the transfer of the excess pension assets. Defendant Lucent has been granted an extension of time in which to reply.
LRO Asks Alcatel-Lucent For Specific Information On 2008 Benefits
The LRO Board shares the views stated in messages from many LRO members that Alcatel-Lucent's June 30, 2007 letter to management retirees about 2008 healthcare and prescription drug benefits provided little specific information. LRO Vice President Andy Guarriello has sent a letter to John Hickey, Alcatel-Lucent Vice President, Human Resources, requesting that the company provide specific information soon so management retirees can make informed decisions about the future of healthcare and prescription drug coverage for themselves and their dependents.
Click here to read Alcatel-Lucent's letter.
Click here to read Andy Guarriello's letter.
Transcript of Oral Arguments In The Death Benefit Lawsuit Appeal
Click here to read the transcript
of the April 16, 2008 oral arguments in the appeal of the dismissal of the lawsuit brought by Lucent retirees as the result of the Death Benefit being eliminated by Lucent Technologies on February 1, 2003. The oral arguments were before a three-judge panel in the United States Court of Appeal for the Third Circuit in Philadelphia, PA.
Lawsuit To Redress Termination of Retiree Death Benefit
In October 2003, a class action suit was filed in U.S. District Court in Newark, NJ against Lucent Technologies to redress the unlawful
termination effective February 3, 2003 of death benefits owed under the pension plan sponsored by Lucent Technologies. An amended complaint was filed on November 10, 2005 adding further grounds for redress.
Click here to read the amended complaint on the death benefits lawsuit.
In December 2005, defendants filed a motion for summary judgment and
a brief in support, plus a statement of material facts. On March 8,
2006, plaintiffs filed their brief in opposition to defendants’ motion
for summary judgment.
A new judge was appointed in August 2006 to take over the Death
Benefits lawsuit following the retirement of the previous judge. On
November 9, 2006, the judge held oral argument on Lucent's motion for
summary judgment in the death benefit case.
On November 28, 2006, the LRO received word from Alan Sandals, class
action co-counsel for plaintiffs in the Death Benefit litigation against
Lucent, that the U.S. District Court judge awarded “summary judgment” in
the case in favor of the company and dismissed the case.
On first reading the judge appears to have ignored several of
plaintiffs’ strongest arguments, deciding the case instead on provisions
in ERISA (Employee Retirement Income Security Act) which generally (but
not always) define a death benefit as a “welfare” benefit instead of a
“pension” benefit. Welfare benefits have much less protection under
ERISA, so this characterization was critical to the outcome. (Rights to
pension payments are required to vest under ERISA.) In the court’s view,
therefore, the Lucent pension plan death benefit can be terminated since
it is not actually a pension benefit, just a “welfare” benefit hiding in
a pension plan.
The Judge did not find any available exceptions to his
interpretations of ERISA, that all death benefits are “welfare”
benefits. This part of the Court’s decision appears either to misread or
ignore provisions and assurances found in the AT&T Pension, Death and
Disability Benefits Plan inherited in 1996 by Lucent. The Plan covers
both the pension and the death benefit; and states that no changes in
the Plan (either to pension or death benefit) may be made that “affect
the rights of any employee to any benefit …to which he may have
previously become entitled hereunder.” The question whether under the
AT&T plan beneficiaries of employees and retirees become irrevocably
entitled to receive the death benefit at some point, appears to have
been left unanswered by the Court.
The ruling also does not discuss considerable evidence showing that
both AT&T and Lucent historically understood this death benefit to be a
pension benefit. To those retirees who worked at AT&T, this entitlement
language was made so clear with respect to the death benefit as to be
beyond question. Other parts of the Court’s one-sided reasoning are also
challengeable.
Retirees’ Attorneys File Reply Briefs In Death Benefits Lawsuit Appeal
The LRO continues to support and track the status of the lawsuit stemming from Lucent’s elimination of the Death Benefit. Further briefs (reply briefs to Lucent) have been filed with the U.S. Third Circuit Court of Appeals by plaintiffs’ class action attorneys in the appeal of the trial court’s dismissal of the retirees’ lawsuit challenging termination of the death benefit.
Click here to read the reply brief by plaintiffs’ attorney Alan Sandals.
Attorneys For Lucent Retirees File Briefs In Appeal Of Death Benefit Lawsuit Dismissal
The attorneys for the Lucent retirees who are plaintiffs in the lawsuit against Lucent over the elimination of the Death Benefits filed on April 20, 2007 their appeals on the district
court's dismissal of the lawsuit. The appeals were filed with the U.S. Court of Appeals for
the Third Circuit in Philadelphia.
Alan Sandals, who also serves as the LRO’s attorney, and Victoria Quesada stated in the opening sentence of their brief’s “Summary of Argument” that the district court’s dismissal
“is based on a fundamental error about the law governing pension plans under ERISA [Employee Retirement Income Security Act] and the Internal Revenue Code.
Jim Malone, the attorney for other retiree plaintiffs, stated in the opening sentence of his “Summary of Argument” that “Pensioner Death Benefits were intended to be protected pension benefits under the plan documents.”
To read the Sandals/Quesada 76-page brief, click
here.
NRLN Files Amicus Brief In Support Of Lucent Retirees
The National Retiree Legislative Network has filed an Amicus Brief in support of Lucent Retiree Plaintiffs-Appellants in the Lucent Death Benefits ERISA Litigation.
An
Amicus Brief—often called a “friend of the court” brief—is a document
filed in a legal proceeding by an interested party who is not directly
part of the case, but who believes that the court’s decision may affect
its interest.
The brief was filed on April 26, 2007 with the U.S. Court of Appeals for the Third Circuit in Philadelphia and urges reversal of the U.S. District Court’s Order of Dismissal.
The NRLN argues in the brief that the U.S. District Court erred by ruling the Pension Death Benefits were unprotected welfare benefits subject to post-retirement elimination, which Lucent did on February 1, 2003.
Click here to read the 42-page Amicus Brief.
NRLN Issues News Release On Amicus Brief In Lucent Retirees’ Death Benefit Appeals Case
Jim Norby, President of the National Retiree Legislative Network, announced in an April 27, 2007 news release the NRLN's filing of an Amicus Brief with the U.S. Third Circuit Court of Appeals in Philadelphia in an effort to assist Lucent Technologies retirees regain the pensioner death benefit eliminated by the company in 2003.
“When an employer eliminates our members’ retirement benefit that should be protected by law, the NRLN has a duty to seek justice for the affected retirees,” Norby said. “We believe the U.S. District Court in Newark, N.J. erred in its November 2006 order of dismissal and judgment that the Pension Death Benefits were unprotected welfare benefits subject to post-retirement elimination.”
Norby said the NRLN is joining the Lucent retiree plaintiffs-appellants in
asking that the case be remanded back to the U.S. District Court for further
proceedings.
An Amicus Brief—often called a “friend of the court” brief—is a
document filed in a legal proceeding by an interested party who is not
directly part of the case, but who believes that the court’s decision may
affect its interest.
