The Supreme Court gave a class of Verizon Communications Inc. retirees another chance to challenge a pension buyout annuity deal Monday when it vacated a lower court decision and ordered the 5th U.S. Circuit Court of Appeals in New Orleans to reconsider it.
The Supreme Court granted the petition in light of its May 16 decision in Spokeo Inc. vs. Robins, which made it harder for potential plaintiffs to have standing in such cases without proof of direct harm, but left it to an appeals court to rule further.
In November 2012, Verizon management plan retirees sued to halt the pension buyout deal Verizon purchased from Prudential Insurance Co. of America transferring $7.5 billion in pension obligations, on the grounds that removing them from Pension Benefit Guaranty Corp. protection violated the Employee Retirement Income Security Act. After 41,000 participants were transferred into the annuity, another 50,000 participants remaining in the plan sued Verizon for alleged mismanagement of the plan during and after the annuitization process.
After a District Court dismissed their case and an appeals court declined to review it, the remaining plan participants petitioned the Supreme Court to reverse that, citing “circuit disarray” over the question of standing, with five circuits disagreeing over when plan participants can sue and numerous amicus briefs filed by the U.S. “The consequences of this disarray are of grave importance to over 40 million people whose retirement benefits are contingent on the proper management of the $3 trillion in pension assets held in ERISA defined benefit plans,” the petition said.
Karen Handorf, a partner at Cohen Milstein Sellers & Toll, which represented the participants in their Supreme Court petition, welcomed the order to vacate. “In our estimation, that basically says if you have the statutory right to sue, then you have the right to sue. It reaffirms that participants in plans don't have to wait for actual losses” before suing plan fiduciaries, Ms. Handorf said.
Calls to Verizon were not returned by press time.