An opinion issued by Chief Judge Sidney A. Fitzwater of the U.S. District Court for the Northern District of Texas, Dallas Division, cited multiple reasons for the dismissal including the plaintiffs’ failure to prove that Sections 102(b), 404(a) and 510, as well as Section 409(a), of the Employee Retirement Income Security Act (ERISA) were violated.
The case, Lee v. Verizon Communications Inc., et al., was a class-action lawsuit that arose from the decision of Verizon in October 2012 to purchase a single premium group annuity contract from a third party, The Prudential Insurance Company of America, to settle approximately $7.4 billion of the Verizon Management Pension Plan’s liabilities to certain plan beneficiaries. Under the terms of the transaction, Verizon amended the pension plan and transferred to Prudential the responsibility to provide pension benefits to approximately 41,000 retirees, who were then no longer considered plan participants. The plaintiffs took issue with this transaction and filed the aforementioned lawsuit against Verizon.
With regard to ERISA Section 102(b), the plaintiffs alleged that Verizon did not disclose in the summary plan description (SPD) that it retained the right to “remove participants from the plan by transferring the pension obligations to an insurance company,” as well as that SPDs are required to contain information on circumstances that could result in a loss of benefits. The court said that Section 102(b) only requires “a description of existing plans terms, not a disclosure of future plan changes, such as the amendment…that directed the annuity purchase.” The court found that because the SPD did not lack “any description that it was required to include,” the plaintiffs did not prove a violation of Section 102(b).
With Section 404(a), the plaintiffs alleged that Verizon’s plan amendment and the resulting annuity transaction were fiduciary functions and that the company breached fiduciary duties by “avoiding ERISA rules that would have applied had the plan been terminated” and that “by removing the class members from the plan, they have lost the pension guarantee provided by the Pension Benefit Guaranty Corporation.” The plaintiffs further claimed that exchanging pension plan assets from an ongoing plan for a group annuity contract constitutes a fiduciary function. The court found that since amending a plan is not a fiduciary function and that Verizon was not acting in a fiduciary capacity when it amended the plan to direct the purchase of an annuity for participants meeting certain criteria, this section of ERISA has not been violated.
For Section 510, the plaintiffs alleged that “Verizon discriminated against members of the class…by removing them from the plan while other retirees were allowed to remain.” The court said that the plaintiffs “failed to show that Verizon had a specific intent to interfere with their rights under the plan and ERISA, or to rebut Verizon’s proffered legitimate, nondiscriminatory reason for defining the group of retirees for the annuity contract as it did.”
The court added that Section 510 deals with "discrimination for the purpose of interfering with the attainment of a right" and that the plaintiffs were not found to have any authority supporting a right to continued participation in the plan. Citing these two points, the court found that Verizon had not violated Section 510.
As for alleged violations by Verizon of Section 409(a), the court found that the plaintiffs did not establish "a particularized, concrete, and actual or imminent injury…more than the mere loss of plan assets" and did not show an effect on the plan members' benefit payments. As such the court found that the plaintiffs insufficiently established any such "injury." While the plaintiffs claimed that "ERISA grants participants a legal right to have plan assets managed solely in their interest, and that breach of that fiduciary duty constitutes an injury," the court disagreed, citing the fact that the plaintiffs did not have constitutional standing to sue under Section 409(a).
While the case was dismissed, the opinion did not prohibit the plaintiffs from repleading their case in the future.
In March 2013, Fitzwater had certified that there was a class of plaintiffs for the case who had common issues of law and fact (see "Verizon Pension Suit Gets Class Action Status").