2nd Circuit Again Remands Decade-Old PwC ERISA Litigation

Plaintiffs filed a lawsuit known as Laurent v. PricewaterhouseCoopers LLP some 15 years ago, claiming PricewaterhouseCoopers’s pension plan distribution formula used an improper “whipsaw calculation” to set payment amounts.

The suit suggests that, under the Employee Retirement Income Security Act (ERISA), a lump sum whipsaw calculation must use a “fair estimate” of the rate of return an average participant would have received had he remained in the plan until normal retirement age. In basic terms, this estimate is used by pension plans to project benefits forward to the normal retirement age, and then to pay out benefits at the “present value” of the projection.

According to the plaintiffs in Laurent, the interest rates used by the PricewaterhouseCoopers pension artificially deflated the present value of certain lump sum benefits being paid to participants. They argue that ERISA requires whipsaw payments to guarantee that plan participants who take distributions in the form of a lump sum when they terminate employment receive the actuarial equivalent of the value of their accounts at retirement.

This week, a new ruling has been filed in the case by the U.S. 2nd Circuit Court of Appeals, which has remanded the matter for still further proceedings in the U.S. District Court for the Southern District of New York.

The text of the new ruling spells out the complex procedural history leading up to this point: “In a prior appeal, we affirmed the District Court’s holding that the plan violated the statute, and we remanded for the District Court to consider the appropriate relief. On remand, however, defendants‐appellees moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), contending that the relief requested by plaintiffs‐appellants—reformation of the plan and the recalculation of benefits in accordance with the reformed plan—was unavailable as a matter of law.”

The District Court agreed with that argument, but now the 2nd Circuit has vacated and remanded that decision.

For context, prior to the recently decided appeal, PwC had moved for judgment “on the pleadings,” arguing that ERISA did not authorize the relief sought by plaintiffs. In agreeing with PwC, the District Court held that ERISA did not authorize the recalculation of benefits in the circumstances here, and so it dismissed the second amended complaint with prejudice on that basis—notwithstanding the violation of ERISA.

“Plaintiffs appealed, contending that the District Court erred in granting PwCʹs motion, because ERISA does in fact authorize the relief they sought,” the new 2nd Circuit decision explains. “We agree, and for the reasons detailed [in this decision], we vacate the judgment and remand for further proceedings consistent with this opinion.”

The Circuit Court’s rationale for ruling against PwC’s arguments is detailed at length in the text of the ruling, but it boils down to the simple conclusion that “in the absence of controlling authority otherwise, we are inclined to follow the Supreme Court’s express preference that violations of ERISA should be remedied.”