Kifafi v. Hilton Hotel Retire ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
JAMAL J. KIFAFI, individually and on
behalf of all others similarly situated,
Plaintiff, Civil Action No. 98-1517 (CKK)
v.
HILTON HOTELS RETIREMENT PLAN,
et al.,
Defendants.
MEMORANDUM OPINION
(May 15, 2009)
Plaintiff Jamal J. Kifafi, on behalf of himself and similarly situated individuals, brings
this lawsuit alleging that the terms and implementation of the Hilton Hotels Retirement Plan
violated the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), 29
U.S.C. § 1001, et seq. In particular, Kifafi alleges that (1) the terms of the Plan produced an
impermissible amount of variation among accrual rates, commonly called “backloading,” (2)
Defendants improperly applied the Plan’s vesting provisions, and (3) Defendants committed
multiple other ERISA violations as to Kifafi individually by, for example, failing to keep on file
records of his marital status. On May 11, 1999, the Court certified a so-called “benefit-accrual
class” as to the first allegation, and on March 30, 2005, the Court certified four sub-classes as to
the second allegation.
Defendant Hilton Hotels Corporation (together with the Hilton Hotel Retirement Plan,
Committee, and individual members, “Hilton”), assert that the terms of the Plan have not
violated ERISA, and that they have fully implemented the Plan in accordance with its terms.
Hilton has, nevertheless, continuously amended its Plan throughout the course of this litigation in
an attempt to respond to Kifafi’s allegations and to moot all of the claims in this case.
Currently pending before the Court are the parties’ Cross-Motions for Summary
Judgment, Hilton’s Motion to Strike certain declarations submitted by Kifafi in support of his
Motion for Summary Judgment, and a Motion for Leave to submit a Sur-Reply, which was filed
by Kifafi as support for his Opposition to Hilton’s Motion to Strike. After thoroughly reviewing
the parties’ submissions, relevant case law, applicable statutory and regulatory authority, and the
record of the case as a whole, the Court shall GRANT-IN-PART and DENY-IN-PART Kifafi’s
[177] Motion for Summary Judgment, GRANT-IN-PART and DENY-IN-PART Hilton’s [180]
Cross-Motion for Summary Judgment, DENY Hilton’s [183] Motion to Strike, and DENY [194]
Kifafi’s Motion for Leave to file a Sur-Reply, for the reasons that follow.
I. BACKGROUND
A. Statutory and Regulatory Background
It is well established that ERISA does not require employers to establish retirement plans
for their employees and does not mandate any particular level of benefits that must be provided
should an employer choose to have such a plan. See Lockheed Corp. v. Spink, 517 U.S. 882, 887
(1996). “Employers or other plan sponsors are generally free under ERISA, for any reason at any
time, to adopt, modify, or terminate welfare plans.” Curtiss-Wright Corp. v. Schoonejongen, 514
U.S. 73, 78 (1995). Nevertheless, employers’ discretion with respect to their retirement plans is
not without limitation. ERISA contains certain requirements that “protect[] employees’ justified
expectations of receiving the benefits their employers promise them.” Central Laborers’
Pension Fund v. Heinz, 541 U.S. 739, 743 (2004).
2
The present case involves ERISA protections associated with employees’ accrual of
benefits (the amount of benefits to which an employee is entitled) and vesting of benefits (the
time at which an employee obtains a right to his or her accrued benefits). These are distinct but
related concepts:
the ‘vesting schedule’ specifies the time at which an employee obtains his
nonforfeitable right to a particular percentage of his accrued benefit. It does not
provide any formula or schedule for determining the amount of the accrued
benefit. Thus, ‘vesting’ governs when an employee has a right to a pension;
‘accrued benefit’ is used in calculating the amount of the benefit to which the
employee is entitled.
Holt v. Winpisinger, 811 F.2d 1532, 1536 (D.C. Cir. 1987) (quoting Stewart v. Nat’l Shopman
Pension Fund, 730 F.2d 1552, 1562 (D.C. Cir. 1984) (emphasis in original omitted)). Because
“vesting is tied to length of employment” and the accrual of benefits “depends upon participation
in the plan,” it is possible for employees to “earn credit toward vesting without accumulating any
pension benefits.” Id. at 1537.
With respect to the accrual of benefits, ERISA protects employees by limiting the
variation associated with rates of accrual, setting forth three alternative tests for monitoring
accrual rates. See Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 512-13 (1981). By
requiring defined benefit plans to comply with any one of these three alternative tests, ERISA
prevents employers from “backloading” benefits, a term of art used to describe “a plan’s use of a
benefit accrual formula that postpones the bulk of an employee’s accrual to [his] later years of
service.” In re Citigroup Pension Plan ERISA Litig., 470 F. Supp. 2d 323, 333 (S.D.N.Y. 2006).
See also 26 C.F.R. 1.411(b)-1 (“[a] defined benefit plan is not a qualified plan unless the method
provided by the plan for determining accrued benefits satisfies at least one of the alternative
3
methods . . . for determining accrued benefits with respect to all active participants under the
plan”).1 Backloading is prohibited because it defeats ERISA’s minimum vesting provisions:
[t]he primary purpose of [minimum accrual rates] is to prevent attempts to defeat
the objectives of the minimum vesting provisions by providing undue
‘backloading,’ i.e., by providing inordinately low rates of accrual in the
employee’s early years of service when he is most likely to leave the firm and by
concentrating the accrual of benefits in the employee’s later years of service when
he is most likely to remain with the firm until retirement.
Langman v. Laub, 328 F.3d 68, 71 (2d Cir. 2003) (quoting H.R. Rep. No. 93-807 (1974),
reprinted in 1974 U.S.C.C.A.N. 4639, 4688).
The three alternative tests are set forth in Section 204(b) of ERISA, 29 U.S.C. §
1054(b)(1). The first test is commonly called the “3% rule,” 29 U.S.C. § 1054(b)(1)(A).2 The
second test is commonly called the “133 1/3% rule,” and it requires that the annual rate of accrual
in any later year of participation not exceed 133 1/3% of the accrual rate in any earlier year under
the plan:
1
The Court notes that this and other Internal Revenue Service (“IRS”) regulations relate
directly to ERISA’s provisions. As the Supreme Court has explained,
[w]hen Title I of ERISA was enacted to impose substantive legal requirements on
employee pension plans . . ., Title II of ERISA amended the Internal Revenue
Code to condition the eligibility of pension plans for preferential tax treatment on
compliance with many of the Title I requirements. The result was a curious
duplicate structure with nearly verbatim replication in the Internal Revenue Code
of whole sections of text from Title I of ERISA.
Central Laborers’ Pension Fund, 541 U.S. at 746. While the IRS “has primary jurisdiction and
rule-making authority over [certain] ERISA provisions, ‘regulations prescribed by the Secretary
of the Treasury [under I.R.C. §§ 410 and 441] shall also be used to implement the related
provisions contained in [ERISA].’” In re Citibank Pension Plan ERISA Litig., 470 F. Supp. 2d
323, 333 n.39 (quoting Esden v. Bank of Boston, 229 F.3d 154, 158 (2d Cir. 2000)).
2
Neither party suggests that this test bears any relevance in this case.
4
[a] defined benefit plan satisfies the requirements of this paragraph of a particular
plan year if under the plan the accrued benefit payable at the normal retirement
age is equal to the normal retirement benefit and the annual rate at which any
individual who is or could be a participant can accrue the retirement benefits
payable at normal retirement age under the plan for any later plan year is not more
than 133 1/3 percent of the annual rate at which he can accrue benefits for any
plan year beginning on or after such particular plan year and before such later plan
year.
Id. § 1054 (b)(1)(B). The third test is commonly called the “fractional rule,” and it requires an
employee’s accrued benefit to exceed a fractional projected retirement benefit:
[a] defined benefit plan satisfies the requirements of this paragraph if the accrued
benefit to which any participant is entitled upon his separation from the service is
not less than a fraction of the annual benefit commencing at normal retirement age
to which he would be entitled under the plan as in effect on the date of his
separation if he continued to earn annually until normal retirement age the same
rate of compensation upon which his normal retirement benefit would be
computed under the plan, determined as if he had attained normal retirement age
on the date any such determination is made (but taking into account no more than
the 10 years of service immediately preceding his separation from service). Such
fraction shall be a fraction, not exceeding 1, the numerator of which is the total
number of his years of participation in the plan (as of the date of his separation
from the service) and the denominator of which is the total number of years he
would have participated in the plan if he separated from the service at the normal
retirement age.
Id. § 1054 (b)(1)(C).
With respect to vesting, Section 203(a) of ERISA provides that an employee’s accrued
benefits cannot be forfeited once an employee reaches the age of retirement. Id. § 1053(a).
Whether an employee has reached the age of retirement turns, at least in part, on his or her years
of service. Id. § 1002(24) (allowing retirement plans to specify the age of retirement or,
alternatively, setting the age of retirement as 65 years old or the fifth year of participation in the
plan).
Pursuant to Section 203(b) of ERISA, employers are required to count all of an
5
employee’s years of service for calculating his or her years toward vesting. Id. § 1053(b)(1)
(requiring employers to count “all of an employee’s years of service with the employer or
employers maintaining the plan”). An employee’s years of service are counted even if they occur
prior to participation in the retirement plan. See Holt, 811 F.2d at 1537 (citing H.R. Conf. Rep.
No. 1280, 93rd Cong., 2d Sess. 268 (1974), reprinted in 1974 U.S. Code Cong. & A. News 5038,
5050 (“generally, . . . once an employee becomes eligible to participate in a pension plan, all his
years of service with an employer (including pre-participation service, and service performed
before the effective date of [ERISA]) are to be taken into account for purposes of determining his
place on the vesting schedule”)).
An employee who is credited with 1,000 hours of service during an “eligibility
computation period” must generally be credited with one year of service. 29 C.F.R. §
2530.200b-1. Pursuant to this calculation, the employer must count hours reflected in its records
not only for hours as to which the employee was paid or entitled to be paid for the performance
of his or her duties, but also for hours “during which no duties are performed . . . due to vacation,
holiday, illness, incapacity . . . layoff, jury duty, military duty or leave of absence.” Id. §
2530.200b-2(a). To calculate these hours, an employer may rely on any records in its possession,
“provided that they accurately reflect the actual number of hours of service with which an
employee is required to be credited . . . .” Id. § 2530.200b-3(a).
If an employer’s existing records do not allow it to properly calculate an employee’s
actual number of hours that are required to be credited, “a plan must either develop and maintain
adequate records or use a permitted “equivalenc[y],” provided that it credits “no less than the
actual number of hours of service required be credited under § 2530.200b-2 to each employee in
6
a computation period.” Id. If an employer is unable to accurately determine an employee’s total
hours of service under this standard, an employer “may determine service to be credited to an
employee on the basis of hours worked . . . if 870 hours worked are treated as equivalent to 1,000
hours of service . . . .” Id. § 2530.200b-3(d). Accordingly, if an employer is relying on its
records to calculate an employee’s total hours of service, it may credit one year of service time if
the employee has worked 1,000 hours (taking into account all hours and not only those during
which the employee is required to be paid for performance); if an employer is unable to calculate
an employee’s total hours of service, it may credit one year of service time if the employee has
worked 870 hours (taking into account only the hours during which the employee is required to
be paid for performance).
A third method for calculating an employee’s years of service for vesting purposes is not
based on an employee’s hours, but rather, based upon the total time elapsed while the employee
is employed with the employer or employers maintaining the plan (the “elapsed time” method).
See 26 C.F.R. 1.410(a)-7(a)(ii). This method allows an employer to avoid having to maintain
hourly records associated with its employees, and permits “each employee to be credited with his
or her total period of service with the employer or employers maintaining the plan, irrespective of
the actual hours of service completed in any 12-consecutive-month period.” Id.
Finally, ERISA provides for civil enforcement of its provisions and those in an
employee’s plan. Under Section 502(a)(1)(B) of ERISA, a participant may bring an action “to
recover benefits due to him under the terms of his plan, to enforce his rights under the terms of
the plan, or to clarify his rights to future benefits under the terms of the plan.” 29 U.S.C. §
1132(a)(1)(B). Aggrieved plan participants may seek “(A) to enjoin any act or practice which
7
violates any provisions of [Title 29] or the terms of the plan, or (B) to obtain other appropriate
equitable relief (i) to redress such violations or (ii) to enforce any provisions of [Title 29] or the
terms of the plan.” Id. § 1132(a)(3).
B. The Hilton Hotels Retirement Plan Background
The Hilton Hotels Retirement Plan (the “Plan”) is a defined benefit pension plan subject
to ERISA.3 Defs.’ Stmt. ¶ 1. The Plan’s initial accrual formula was based on a participant’s
compensation and years of service, and offset by a participant’s “integrated benefits,” a term that
encompasses a participant’s “primary social security benefit.” Pl.’s Ex. 1 § 1.2 (Hilton Hotels
Retirement Plan, version dated March 30, 1995). Beginning in 1976 and continuing until 1999,
the Plan contained an accrual schedule that was supposed to comply with the 133 1/3% rule:
5.4 133-1/3 Percent rule.
The method of computing a Participant’s accrued benefit under the
provisions of Article IV is intended to satisfy the requirements of the 133-1/3 rule
provided in Section 411(b)(1)(B) of the Code.
Id. § 5.4. For this reason, when Hilton filed applications with the Internal Revenue Service for
approval of its retirement plan, it indicated its compliance with the 133 1/3% rule. See, e.g., Pl.’s
3
As a preliminary matter, the Court notes that it strictly adheres to the text of Local Civil
Rule 7(h)(1) (formerly 56.1 when resolving motions for summary judgment). See Burke v.
Gould, 286 F.3d 513, 519 (D.C. Cir. 2002) (district courts need to invoke Local Civil Rule 56.1
before applying it to the case). The Court has repeatedly advised the parties that it strictly
adheres to Rule 7(h) and has stated that it “assumes facts identified by the moving party in its
statement of material facts are admitted, unless such a fact is controverted in the statement of
genuine issues filed in opposition to the motion.” [170] Order at 2 (May 31, 2005). Thus, in
most instances the Court shall cite only to Plaintiff’s Statement of Material Facts (“Pl.’s Stmt.”)
or Defendants’ Statement of Material Facts (“Defs.’ Stmt.”) unless a statement is contradicted by
the opposing party. Where a party objects to relevant aspects of an opposing party’s proffered
material fact, the Court shall cite to Plaintiff’s Response to Defs.’ Stmt. (“Pl.’s Resp. Stmt.”) or
Defendants’ Response to Pl.’s Stmt. (“Defs.’ Resp. Stmt.”), as necessary. The Court shall also
cite directly to evidence in the record, where appropriate.
8
Ex. 2 at 3 (Hilton Application dated March 29, 1995) (indicating that the “[m]ethod for
determining accrued benefit[s]” was the “133-1/3% Rule - Code Sec. 411(b)(1)(B)”).4
With respect to vesting, the Plan credits participants with years of service beginning
January 1, 1976, during the periods in which the employee “is employed with a Participating
Employer or a Related Company.” Pl.’s Ex. 1 § 1.2 (Hilton Hotels Retirement Plan, version
dated March 30, 1995) (defining “Vesting Computation Period”). By its terms, the Plan required
all periods of employment between the date of hire and the date of termination to be taken into
account, including leaves of absences and union service. Defs.’ Stmt. ¶ 15; Pl.’s Resp. Stmt. ¶
15. An employee can earn a year of vesting credit by completing 1,000 hours of service. Defs.’
Stmt. ¶ 16; Pl.’s Ex. 1 (Hilton Hotels Retirement Plan, version dated Mar. 30, 1995) (defining
“Years of Benefit Service”) (“a Participant shall not be entitled to any Years or fractional Years
of Benefit Service for a Plan Year during which he completes less than 1,000 Hours of Service”).
Under the Plan, a participant is eligible for early retirement benefits when he or she
retires, has reached the age of 55, and has at least 10 years of vesting service (and has elected an
early retirement benefit). See Pl.’s Ex. 1 § 1.2 (Hilton Hotels Retirement Plan, version dated
March 30, 1995) (defining “Early Retirement Date”). A participant is eligible for normal
retirement benefits on the date:
on which occurs the later of (a) or (b), where (a) is the date a Participant attains
age 65, and (b) is the earlier of:
4
The Plan was amended to “freeze” accruals effective December 31, 1996, Defs.’ Stmt.
¶ 4, which Kifafi attributes to Hilton’s takeover of Bally Entertainment (and which Hilton
disputes as a reason). See Pl.’s Stmt. ¶ 2; Defs.’ Resp. Stmt. ¶ 2. The parties nevertheless agree
that employees’ years of service continued to accrue for vesting purposes. See Pl.’s Ex. 4 at 2
(Nov. 19, 1996 Amendment).
9
(i) the date he has completed 5 Years of Vesting Service, or
(ii) the earlier of (A) the tenth anniversary of the date he commenced
participation in the Plan, or (B) the fifth anniversary of the first day of the
first Plan Year beginning on or after January 1, 1988.
Id. (defining “Normal Retirement Age”).
C. Factual and Procedural Background
The facts of this case are inextricably intertwined with its procedural history. Between
1976 and 1982, Kifafi was intermittently employed by Hilton and other hotels as a union
employee. Defs.’ Stmt. ¶ 28.5 On September 11, 1983, Kifafi was hired as a full-time union
employee at the Capital Hilton in Washington, D.C. Id. ¶ 29. Less than one month later, he
suffered a back injury that caused him to take a leave of absence. Id. This injury limited the
number of hours Kifafi worked in 1983 and 1984. Id. Kifafi was terminated from the Capital
Hilton in 1984, but reinstated as a nonunion employee on July 25, 1985. Id. ¶ 30. Kifafi worked
in that capacity until he resigned on November 9, 1993. Id.
Upon his resignation, Hilton did not notify Kifafi that he was eligible to receive a
pension. Pl.’s Stmt. ¶ 4; Defs.’ Resp. Stmt. ¶ 4. Kifafi nevertheless inquired about his eligibility
for retirement benefits, which resulted in Hilton’s preparation of a benefits illustration that was
sent to Kifafi in July 1997. Defs.’ Stmt. ¶ 31. The benefits illustration listed Kifafi’s marital
status as “not married,” and indicated that Kifafi was eligible to receive a pension of
approximately $74.85 per month. See Pl.’s Ex. 78 at 1 (1997 Benefits Illustration).
On July 9, 1997, Kifafi’s counsel wrote Hilton requesting additional information
5
Kifafi objects to the use of the word “intermittently,” but fails to explain why. See Pl.’s
Resp. Stmt. ¶ 28. He also objects to the end date of “1982,” but fails to cite to any evidence in
the record supporting a different end date. Id.
10
concerning Kifafi’s benefits. Defs.’ Stmt. ¶ 32. On December 29, 1997, Kifafi’s counsel sent a
letter to the Plan’s Pension Committee arguing that the terms and implementation of the Plan
violated several provisions of ERISA. Id. In particular, the letter asserted that the Plan
backloaded benefit accruals and failed to properly credit Kifafi’s years of service. See Defs.’ Ex.
21 at 2 (12/29/97 Letter from S. Bruce to Pension Committee).
The Pension Committee responded on March 27, 1998, through counsel, concluding that
Kifafi was entitled to an additional year of vesting for 1983, but not for 1984 or 1985. Id. ¶ 33.
Because the Pension Committee also concluded that Kifafi continued to fall below the 10 years
of service necessary to receive early retirement benefits even with the additional year of service
credit, it denied Kifafi’s claim for early retirement benefits. Id. The Pension Committee also
denied that the terms or implementation of the Plan violated any ERISA provisions. See Pl.’s
Ex. 3 at 1-12 (3/27/98 Letter from W. Jacobsen to S. Bruce). With respect to Kifafi’s argument
that the Plan unlawfully backloaded benefit accruals, the Pension Committee “determined that
the Plan satisfies the 133-1/3% rule.” Id. at 6. Kifafi filed an appeal, which was denied on
September 22, 1998. Id.
Kifafi filed this lawsuit on June 17, 1998. Initially, Hilton defended the Plan as having
complied with the 133 1/3% rule. For example, in its initial Statement of the Case submitted to
the Court, Hilton represented that:
[t]he rate of accrual of pension benefits is set forth in the Hilton Hotels
Retirement Plan (‘Retirement Plan’), which expressly provides for accrual of
pension benefits under ERISA § 204(b)(1)(B), 29 U.S.C. § 1054(b)(1)(B) – the
so-called ‘133 1/3% rule.’ The Retirement Plan complies with the 133 1/3% rule.
Defs.’ Stmt. of the Case at 2 (Oct. 15, 1998). The documents produced to Kifafi in discovery,
11
however, demonstrated that Hilton’s own consultants had performed analyses of the Plan and
concluded that the Plan did not, in fact, comply with the 133 1/3% rule. For example, the
Towers Perrin consulting company (“Towers Perrin”) prepared a spreadsheet dated February 10,
1998, titled “411(b) Accrual Test.” Pl.’s Ex. 7 at 2 (2/10/98 Accrual Test). The spreadsheet
examines the Plan’s benefit accrual formula and asks, “Does the Plan Pass 133% Rule?” Id. The
answer “No” appears for the first seven years of benefit accruals reflected in the spreadsheet. Id.AON consulting also prepared a spreadsheet for a February 27, 1998 Hilton meeting. Pl.’s Ex. 8
at 1 (2/27/93 Meeting Spreadsheet). The spreadsheet depicts accrual rates of more than 200%
under the Plan’s benefit accrual formula, which is greater than the variation permissible under the
133 1/3% rule. Id.Kifafi moved for class certification on November 4, 1998. After his motion had been
fully briefed by the parties but prior to its resolution by the Court, Hilton amended the Plan. See
Pl.’s Ex. 11 (Amendment 1999-1). The amendment modified the Plan’s benefit accrual formula
“for the purpose of eliminating any controversy regarding the proriety [sic] of the rate of benefit
accruals under the Plan,” and specifically referenced this lawsuit. Id. at 1. Unlike the previous
formula which purportedly complied with the 133 1/3% rule, Hilton’s new formula sought to
comply with the fractional rule. Id. at 2-3. According to Kifafi, and not disputed by Hilton, the
amendment also modified two unrelated components of the Plan that were favorable to
participants: (1) the Plan previously offered 2.0% of the highest average pay for each of the first
25 years of participation but was amended to effectively reduce this amount to 1.33% at its
lowest, and (2) the Plan previously calculated Social Security benefits based only on earnings
12
from Hilton but was amended to calculate this amount using projected earnings.6 Pl.’s Stmt. ¶
27. Significantly, the amendment made all of these changes retroactive and specified that a
participant would receive benefits pursuant to the formula under the pre-amendment Plan or the
post-amendment Plan, whichever produced greater benefits for that participant. See Pl.’s Ex. 11
at 4 (Amendment 1999-1).
Following Hilton’s amendment, Kifafi filed an Amended Complaint that contains six
claims for relief. Count I alleges that the Plan unlawfully backloaded benefit accruals and that
Hilton’s amendment would pay class members only a portion of the benefits that would be owed
if their accrued benefits had been calculated in compliance with ERISA. Am. Compl. ¶¶ 40-
42A. Count II alleges that Hilton failed to count all of his years of service in violation of the
Plan. Id. ¶¶ 43-45. Count III alleges that Hilton failed to maintain sufficient data needed to
locate and pay surviving spouses of Plan participants in violation of ERISA. Id. ¶¶ 46-48. Count
IV alleges that Hilton failed to issue an individual benefit statement to Kifafi after his separation
from service in violation of ERISA and Hilton’s Supplemental Plan Document (“SPD”). Id. ¶¶
49-51. Count V alleges that Hilton failed to timely supply a copy of the Plan document to Kifafi
in violation of ERISA. Id. ¶¶ 52-53. Count VI alleges that Hilton’s failure to comply with the
obligations set forth in ERISA (based apparently on the alleged violations underpinning Counts
I-V) constituted a breach of fiduciary duty. Id. ¶¶ 54-56.
Because Hilton amended the Plan and Kifafi had filed an Amended Complaint, the Court
6
Hilton does object to Kifafi’s “characterization” of these modifications, see Defs.’ Resp.
Stmt. ¶ 27, but does not offer an explanation (or contrary evidence) suggesting that Kifafi’s
description is inaccurate. In fact, Hilton’s Opposition clarifies that it does not dispute that these
elements of the Plan were modified, arguing only that Kifafi “wants to have his cake and eat it
too.” Defs.’ Opp’n at 17.
13
allowed the parties an opportunity to submit additional pleadings in connection with Kifafi’s
Motion for Class Certification. After considering the parties’ numerous submissions, the Court
subsequently granted-in-part and denied-in-part the Motion for Class Certification on May 11,
1999. See Kifafi v. Hilton Hotels Ret. Plan, 189 F.R.D. 174 (D.D.C. 1999). The Court granted
the motion with respect to a benefit-accrual class in connection with Count I of the Amended
Complaint, subject to a possible amendment to conform the class with the statute of limitations,
if necessary. Id. at 176-78. The Court denied the motion with respect to a “service-counting”
class in connection with Count II of the Amended Complaint, which the Court found to consist
of five sub-classes:
[w]ith respect to [Kifafi’s] (1) union-service claim and (2) his claim that the
Defendants failed to give credit for leave of absence, Mr. Kifafi does not even
appear to be a member of the proposed class . . . [w]ith respect to the other three
service-counting claims, Mr. Kifafi fails to show that his individual circumstances
give rise to a generally applicable practice that ought to be tried on a class-wide
basis.
Id. at 179-80 (internal numbering added).7
Notwithstanding the pendency of this litigation, on September 3, 1999, Hilton submitted
the amended Plan to the IRS and requested a determination that the Plan, as amended, satisfied
the requirements of a qualified retirement plan. Defs.’ Stmt. ¶ 9. In connection with the same,
Kifafi’s counsel drafted at least three letters advising the IRS of the claims asserted in this case to
“protect the rights of [the] class.” Defs.’ Ex. 6 at 4 (5/27/99 Letter from S. Bruce to C. Gold).
See also Defs.’ Ex. 7 (7/12/00 Letter from S. Bruce to IRS); Defs.’ Ex. 8 (11/1/01 Letter from S.
Bruce to L. Isaacs). The IRS regional office handling the request referred the issues associated
7
The Court subsequently indicated that it would revisit its findings if there were a basis
for doing so. See Kifafi v. Hilton Hotel Ret. Plan, Mem. Op. at 3 n.2 (Mar. 30, 2005).
14
with Hilton’s Plan amendments to its national office (the National Employee Plans Technical
Office). Defs.’ Stmt. ¶ 11.
The IRS national office issued a Technical Advice Memorandum on July 25, 2002. See
Pl.’s Ex. 16 (7/25/02 Technical Advice Memorandum). The Memorandum began by reviewing
the accrual provisions associated with Hilton’s Plan and identifying the concerns articulated by
Kifafi’s counsel. Id. at 6. The IRS then evaluated the pre-amendment Plan and determined that
it “fails to meet the 133 1/3 percent rule.” Id. at 7. The IRS explained that:
[u]nder the 133 1/3 percent rule the annual rate of accrual for any participant must
be determined for each year and compared with the annual rate of accrual for any
later plan year. Under the Plan, the first year accrual Pre-Amendment Benefit rate
is generally .71% of a participant’s average monthly compensation . . .
***
For all except the lowest paid participants in the Plan and participants in the Plan
with decreasing compensation, an accrual rate of 1.54% or higher will generally
occur in at least one plan year after the first plan year and before the twenty-sixth
plan year . . . . Thus, because 1.54% is more than 133 1/3 percent of .71%, the
Pre-Amendment Benefit fails to meet the 133 1/3 percent rule.
Id. The IRS also found that the pre-amendment Plan violated the 3% rule and the fractional rule
(i.e., it failed to comply with any of the three alternative accrual tests set forth in 29 U.S.C. §
1054 (b)(1)). Id. at 6-8, 12 (“[t]he Plan benefit formula before the Amendment 1999-1 did not
satisfy the 133 1/3% accrual rule under Internal Revenue Code Section 411(b)(1)(B), nor did it
meet the fractional rule or the 3 percent method”).
With respect to Hilton’s post-amendment Plan, the IRS determined that the Plan still
failed to comply with the 133 1/3% rule (or the 3% rule), but that it did comply with the
fractional rule. Id. (“[t]he Plan benefit formula after the Amendment 1999-1 does not satisfy the
15
133 1/3% accrual rule under Internal Revenue Code section 411(b)(1)(B) nor does it meet the 3
percent method, but it does meet the fractional rule”). Because the IRS did not believe that
Hilton had previously misstated or omitted material facts at the time it had submitted
applications related to the pre-amendment Plan, and because the IRS believed that Hilton had
acted in good faith reliance on the IRS’ determination letters, the IRS decided not to retroactively
revoke the Plan’s qualified status. Id. at 13. In making this determination, however, the IRS
explained that Hilton agreed to further amend its Plan. Id. at 12. Among these amendments,
Hilton eliminated the Plan’s representation that it was complying with the 133 1/3% rule:
Amendment 2002-1
In response to concerns raised in the National Office, the Taxpayer’s
representative has drafted a proposed amendment (“Amendment 2002-1”)
providing:
***
(4) that section 5.4 of the Plan is amended to read as follows: “5.4 Code Section
411(b)(1). The method of computing a Participant’s accrued benefit under the
provisions of Article IV is intended to satisfy the requirements of Section
411(b)(1) of the Code.”
Id. at 12 (emphasis in original). Finally, the IRS explained in a cover letter that its determination
“relates only to the status of [the] [P]lan under the Internal Revenue Code. It is not a
determination regarding the effect of other federal or local statutes.” Pl.’s Ex. 84 (7/25/02 Letter
from P. Shultz to Hilton).
Although Hilton initiated these Plan amendments to remedy perceived deficiencies with
its accrual provisions, Hilton also amended the Plan during the pendency of this litigation to
correct issues associated with the Plan’s vesting provisions. For example, Hilton initially
16
asserted that it complied fully with the Plan’s vesting provisions that allowed employees to earn a
year of vesting credit by completing 1,000 hours of service:
Defendants followed the early retirement provisions of the Retirement Plan in
determining that only those years of employment in which Plaintiff had 1,000
hours of employment with Hilton were credited years of service . . . . Defendants
calculated Plaintiff’s years of credited service and service hours in accordance
with ERISA and the terms of the Retirement Plan.
Pl.’s Ex. 10 at 2-3 (10/15/98 Defs.’ Statement of the Case). See also Defs.’ Resp. to Pl.’s Suppl.
Class Cert. Br. at 4 & n. 2 (“Hilton does not use equivalency methods to count hours of service
under the Plan [such as the 870 method] and did not do so in Plaintiff’s case” and “[i]f Hilton
used an equivalency method, it would have to say so in the Plan”). Similar to the events
surrounding the Plan’s accrual provisions, documents produced to Kifafi in discovery
demonstrated that Hilton had not implemented the terms of the Plan in full compliance with its
vesting provisions. For example, an email drafted by Vera Stoicof, a benefits administrator
employed by Hilton, indicated that Hilton did not properly calculate employees’ years of service
prior to their participation in the Plan:
In past calculations with Abacus,8 a person’s Union years were not bridged for
purposes of benefit or vesting services unless the participant met the Special
Service Rules requirements. However, due to the lawsuit we are reexamining this
practice. We have been giving vesting years to participants who go into the union
after years of benefit service . . ., but should a participant be given vesting for
union years prior to any benefit service, except in cases where special service
rules apply? . . . We have not previously given vesting prior to benefit service
except in Reno’s special agreement, and it may alter calculations for certain
retirees.
Pl.’s Ex. 27 at 1 (5/6/02 Email from V. Stoico to G. Trotter) (emphasis in original). In another
8
Abacus is the pension software Hilton used from 1992 to approximately 1998. See
Defs.’ Ex. ¶ 17 (Decl. of V. Stoicof).
17
example, Ms. Stoicof’s email exchange with Hilton employee Greg Trotter contained a similar
description of Hilton’s failure to track these hours:
Ms. Stoicof: [f]or as far back as we can go, no one kept track of the non-
participating properties’ employees (hours/earnings) to give them vesting. How
can we say the employees get vesting if that company was never participating?
***
Mr. Trotter: I recognize that many of these issues would not be a concern if,
historically, Hilton had been able to obtain good records from the various
employers under the Plan and that the basic form of these rules have been in the
Plan long before any of us were involved with the Plan. However, as I’ve said,
most of the rules simply reflect legal requirements that the Plan must follow.
Pl.’s Ex. 27 at 4-5 (5/9/02 Email Exchange between V. Stoicof and G. Trotter).
Hilton again amended the Plan on December 10, 2002 (Amendment 2002-4) to change
the methods it used to calculate years of service. A background document prepared in
connection with the amendment specifically acknowledged Hilton’s failure to maintain the
records necessary to properly calculate employees’ years of service:
The pending Kifafi v. Hilton Hotels Retirement Plan litigation includes claims that
the Plan failed to track and count all hours of service in determining vesting and
eligibility for early retirement benefits as required by ERISA. We are uncertain
whether these claims have merit because we have to date been unable to locate
adequate historical records to verify the claims. To ensure that plan participants
are provided with ERISA compliant benefits based on verifiable historical
records, it is proposed to amend the Plan to change the method of counting hours
worked for [the] purpose of determining years of service.
Pl.’s Ex. 39 (Undated Document titled “proposed hours counting amendment to Hilton Hotels
Retirement Plan”); Pl.’s Stmt. ¶ 90.
Whereas the Plan previously allowed participants to earn one year of vesting credit for
completing 1,000 hours of service, Defs.’ Stmt. ¶ 16, Hilton’s amendment replaced the 1,000
18
standard with two new counting methods. Id. ¶ 17. First, when a participant performs services
that are credited under the Plan for both vesting and benefit accruals (such as nonunion service),
the participant receives a year of vesting service for each Plan year in which the participant
completes at least 870 hours of service (or 750 hours if the participant is a salaried employee).
Id. Second, when a participant performs services that are credited under the Plan for purposes of
vesting only (such as union service), the participant earns a year of vesting credit for each 365-
day period of service regardless of the employees’ hours during that period (a so-called “elapsed
time method” of counting). Id. Hilton subsequently adopted a formal resolution clarifying that
its new calculating methods were to have retroactive effect. Id. ¶ 18.
Following these Plan amendments, the Court held a Status Hearing with the parties on
June 24, 2003. During the hearing, Hilton’s counsel conceded that Hilton did not possess all of
the records necessary to properly calculate employees’ years of service prior to the Plan’s
amendments:
THE COURT: I take it you’re admitting that the plan requires this credit and that
that has not actually occurred, whether it’s because you don’t have the historical
records or whatever. Is that accurate or not?
HILTON: Not quite, Your Honor. The plan was amended to just eliminate the
issue of trying to figure out what these preparticipation years of service [were]. It
went to this elapsed time method that makes it unnecessary to compute that with
precision.
***
THE COURT: Okay. But there was a period in there before you did the
amendment where you had the plan, you then have the amendment at this end, and
there’s a period in here when the plan was not being implemented. Do you agree?
HILTON: Not completely, Your Honor.
19
THE COURT: Where it wasn’t fully implemented.
HILTON: With some adverb like that, I’ll agree.
***
HILTON: We would say it was being implemented in many situations, including
Mr. Kifafi’s fully. When he made his claim, efforts were made to get the hours
and we believe adjudicated correctly. There were situations where the records
weren’t there and, therefore, if that is not full implementation, I would agree with
that . . . .
Defs.’ Ex. 27 at Tr. 23:10 - 24:24 (6/24/03 Status Hearing Transcript).
With the Court’s permission, Kifafi subsequently renewed his motion to certify a vesting
claims class on July 21, 2003.9 Kifafi explained that “this renewed motion is based on new
evidence obtained in the course of discovery, which is now completed.” Kifafi v. Hilton Hotel
Ret. Plan, 228 F.R.D. 382, 384 (D.D.C. 2005).10 As explained in its Memorandum Opinion, the
Court certified four sub-classes in connection with the vesting violations alleged as Count II of
the Amended Complaint:
(1) Plaintiff’s claim that Defendants failed to credit employees with years of union
service for vesting purposes;
(2) Plaintiff’s claim that Defendants improperly used a 1000 hours service
standard rather than an 870 hour service standard;
9
Kifafi also attempted to cure deficiencies in his original class certification motion by
having three other individuals move to intervene as class representatives. The Court found that
these three individuals were not proper plaintiffs and denied the motion. See Kifafi v. Hilton
Hotel Ret. Plan, No. 98-1517, 2004 U.S. Dist. LEXIS 28928 at *1 (D.D.C. Sept. 27, 2004).
10
The Court permitted Kifafi to file this renewed motion, in its discretion, which is
permitted under Federal Rules of Civil Procedure 54(b) (allowing a court to revisit interlocutory
orders that adjudicate fewer than all the claims in a given case “at any time” prior to the Court’s
final judgment in the case) and 23(d) (allowing a court to “alter[] or amend[] [orders] as may be
desirable from time to time” in the class action context).
20
(3) Plaintiff’s claim that Defendants failed to credit leaves of absence; and
(4) Plaintiff’s claim that Defendants failed to count the year in which employees
became participants in the retirement plan for vesting purposes.
Id. at 386-89.
Following class certification, the Court set a briefing schedule for the parties’ submission
of Cross-Motions for Summary Judgment. Pursuant to that schedule, Kifafi filed a Motion for
Summary Judgment (“Pl.’s Mot.”), Hilton filed a Consolidated Cross-Motion for Summary
Judgment and Opposition to Kifafi’s Motion for Summary Judgment (“Defs.’ Opp’n”), and
Kifafi filed a Consolidated Opposition to Hilton’s Cross-Motion for Summary Judgment and
Reply in support of his Motion for Summary Judgment (“Pl.’s Reply”). Hilton also filed a
Motion to Strike certain declarations submitted by Kifafi in support of his Motion for Summary
Judgment, which the parties proceeded to fully brief. In connection with this briefing, Kifafi also
filed a Motion for Leave to file a Sur-Reply, which was opposed by Hilton and fully briefed by
the parties. The Court decided to hold the Motion to Strike and Motion to file a Sur-Reply in
abeyance, considering them within the larger context of the parties’ Cross-Motions for Summary
Judgment. Accordingly, the Cross-Motions for Summary Judgment, the Motion to Strike, and
the Motion to file a Sur-Reply, are all addressed in this Memorandum Opinion.
Finally, the Court referred the parties to mediation with Magistrate Judge Alan Kay while
they continued to brief their motions. Because the Court was notified that the parties were
engaged in potentially fruitful settlement negotiations with the goal of resolving the lawsuit in its
entirety, the Court denied all of the parties’ motions without prejudice, with leave to reinstate
them if the negotiations ultimately proved to be unsuccessful. The parties were unable to reach a
21
settlement during their negotiations, and consequently, the Court now reaches the parties’ Cross-
Motions for Summary Judgment, Hilton’s Motion to Strike, and Kifafi’s Motion to file a Sur-
Reply, all of which are now ripe for decision.
II. LEGAL STANDARD
Pursuant to Federal Rule of Civil Procedure 56, a party is entitled to summary judgment
“if the pleadings, the discovery and disclosure materials on file, and any affidavits show that
there is no genuine issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(c). See also Tao v. Freeh, 27 F.3d 635, 638 (D.C. Cir. 1994).
Under the summary judgment standard, the moving party bears the “initial responsibility of
informing the district court of the basis for [its] motion, and identifying those portions of the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits which [it] believe[s] demonstrate the absence of a genuine issue of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In response, the non-moving party must “go
beyond the pleadings and by [its] own affidavits, or depositions, answers to interrogatories, and
admissions on file, ‘designate’ specific facts showing that there is a genuine issue for trial.” Id.
at 324 (internal citations omitted).
Although a court should draw all inferences from the supporting records submitted by the
nonmoving party, the mere existence of a factual dispute, by itself, is insufficient to bar summary
judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To be material, the
factual assertion must be capable of affecting the substantive outcome of the litigation; to be
genuine, the issue must be supported by sufficient admissible evidence that a reasonable trier-of-
fact could find for the nonmoving party. Laningham v. U.S. Navy, 813 F.2d 1236, 1242-43 (D.C.
22
Cir. 1987); Liberty Lobby, 477 U.S. at 251 (the court must determine “whether the evidence
presents a sufficient disagreement to require submission to a jury or whether it is so one-sided
that one party must prevail as a matter of law”). “If the evidence is merely colorable, or is not
sufficiently probative, summary judgment may be granted.” Liberty Lobby, 477 U.S. at 249-50(internal citations omitted). “Mere allegations or denials in the adverse party’s pleadings are
insufficient to defeat an otherwise proper motion for summary judgment.” Williams v.
Callaghan, 938 F. Supp. 46, 49 (D.D.C. 1996). The adverse party must do more than simply
“show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Instead, while the movant bears the initial
responsibility of identifying those portions of the record that demonstrate the absence of a
genuine issue of material fact, the burden shifts to the non-movant to “come forward with
‘specific facts showing that there is a genuine issue for trial.’” Id. at 587 (citing Fed. R. Civ. P.
56(e)) (emphasis in original).
III. DISCUSSION
Counsel for the parties have made resolution of the issues in this case unnecessarily
difficult for two reasons. First, counsel have shifted their burden to the Court to determine which
facts are in dispute between the parties. Local Civil Rule 7(h)(1) provides that
[e]ach motion for summary judgment shall be accompanied by a statement of
material facts as to which the moving party contends there is no genuine issue,
which shall include references to the parts of the record relied on to support the
statement. An opposition to such a motion shall be accompanied by a separate
concise statement of genuine issues setting forth all material facts as to which it is
contended there exists a genuine issue necessary to be litigated, which shall
include references to the parts of the record relied on to support the statement.
LCvR 7(h)(1). Despite this rule’s emphasis on materiality, precision, and citations to the record,
23
the parties presented the Court with 250 “material” facts, a substantial segment of which are
opposed by the parties for frivolous or unsupported reasons. For example, Kifafi opposes
Hilton’s 62nd proffered fact with this meritless objection: “[d]ispute the second sentence [of the
proffered fact] which is unintelligible because of the double negative.” See Pl.’s Resp. Stmt. ¶
62. Hilton makes a similarly well-reasoned objection to Kifafi’s 11th proffered fact: “[d]ispute
plaintiff’s interpretation of the [documents], the purpose for which they were created and what
they demonstrate,” with no citation to evidence in the record and no further explanation. Defs.’
Resp. Stmt. ¶ 11. These types of objections not only reflect poorly on counsel, they also require
the expenditure of resources that should be borne by the parties, not the Court. See Jackson v.
Finnegan, Henderson, Farabow, Garrett & Dunner, 101 F.3d 145, 151 (D.C. Cir. 1996)
(“[LCvR 7(h)(1)] places the burden on the parties and their counsel, who are most familiar with
the litigation and the record, to crystallize for the district court the material facts and relevant
portions of the record”) (citing Twist v. Meese, 854 F.2d 1421, 1425 (D.C. Cir. 1988)).
The second difficulty created by counsel is that each side has repeatedly shifted their
arguments such that the Court has consistently been presented with moving targets. For
example, Kifafi has consistently demonstrated an inability to focus on the claims that he has
actually asserted in his Amended Complaint, repeatedly raising new claims that are not a part of
this litigation (such as various claims related to how Hilton has implemented amendments to its
Plan). For Hilton’s part, it has consistently amended the Plan and sought to conflate separate
inquiries associated with liability and remedies to argue that any ERISA violations should not
give rise to liability because they have been mooted. In resolving the parties’ claims, the Court
shall not allow Kifafi to expand his Amended Complaint, and shall not allow Hilton to conflate
24
liability with issues associated with remedies or the doctrine of mootness.
With these preliminary matters resolved, the Court shall now turn to the claims raised in
the Amended Complaint: (A) the backloading of benefit accruals (certified as a class claim); (B)
the improper calculation of vesting credit (certified as four sub-classes); (C) the failure to
maintain data to locate Kifafi’s spouse (an individual claim); (D) the failure to issue an
individual benefit statement (an individual claim); (E) the failure to supply a copy of the Plan
document (an individual claim); and (F) the breach of fiduciary duty (an individual claim).
A. “Backloading” Of Benefit Accruals (Count I)
As set forth above, ERISA prevents employers from backloading benefit accruals, i.e.
“providing inordinately low rates of accrual in the employee’s early years of service . . . [and]
concentrating the accrual of benefits in the employee’s later years of service.” Langman, 328
F.3d at 71. In order to comply with ERISA, an employer must satisfy one of the three alternative
tests set forth in Section 204(b) of ERISA, 29 U.S.C. § 1054(b)(1) (setting forth the 3% rule, the
133 1/3% rule, and the fractional rule).
Beginning in 1976 and continuing until 1999, the Plan expressly provided for its
compliance with the 133 1/3% rule. See Pl.’s Ex. 1 § 5.4 (Hilton Hotels Retirement Plan, version
dated March 30, 1995) (“[t]he method of computing a Participant’s accrued benefit under the
provisions of Article IV is intended to satisfy the requirements of the 133-1/3 rule”). Kifafi
argues that Hilton failed to comply with this rule (and failed to comply with the other two accrual
rules) such that it unlawfully backloaded benefit accruals. See Pl.’s Mot. at 3-10.
The record is replete with uncontested evidence that the Plan failed to comply with the
133 1/3% rule because its accrual rates varied by more than the permissible 133 1/3%. See, e.g.,
25
Pl.’s Ex. 7 at 2 (2/10/98 Towers Perrin Accrual Test) (Hilton’s consultant asking whether the
Plan passes the 133 1/3% rule and answering “No”); Pl.’s Ex. 8 at 1 (2/27/93 Meeting
Spreadsheet) (Hilton’s consultant preparing a spreadsheet reflecting variations of accrual rates of
more than 200%); Pl.’s Ex. 16 at 6-8, 12 (7/25/02 IRS Technical Advice Memorandum)
(evaluating Hilton’s Plan and concluding that it “did not satisfy the 133 1/3% accrual rule”
because the accrual rates varied between .71% to 1.54%); Pl.’s Ex. 5 ¶ 10-16 (Affidavit of C.
Poulin) (Plaintiff’s expert explaining his analysis of Hilton’s Plan and concluding that “the
Plan’s benefit formula did not meet the requirement of the 133 1/3 percent rule”).
Hilton does not dispute, as a factual matter, that the Plan violated this rule.11 Instead,
Hilton argues that the Court should, as a legal matter, ignore the language in the Plan indicating
its intention (but failure) to comply with the 133 1/3% rule. Specifically, Hilton argues that “a
plan sponsor’s intention when drafting an ERISA plan will not be considered by courts unless the
plan language at issue is ambiguous on its face.” Defs.’ Opp’n at 21. Hilton surmises that Kifafi
“has made no claim that the Plan’s accrual provisions . . . are ambiguous in any way,” and
therefore, the Court should simply avoid any finding that the plan violated ERISA’s backloading
provisions. Id. Hilton also references the entirely uncontroversial proposition that “ERISA does
not require the adoption of the 133-1/3% Rule.” Id. at 21-22.
The Court rejects Hilton’s suggestion that the Plan’s explicit anti-backloading clause and
11
Hilton’s counsel initially argued that the Plan complied with the 133 1/3% rule in a
letter sent to Kifafi’s counsel prior to initiation of this lawsuit. See Pl.’s Ex. 3 at 2-6 (3/27/98
Letter from W. Jacobsen to S. Bruce). The arguments set forth in this letter have not been raised
by Hilton in its summary judgment briefing and have apparently been abandoned. As Kifafi
observes in his Reply, Hilton “presents no legal arguments, offers no expert report, and
introduces no other evidence in support of [the] position” that the Plan did not violate the 133
1/3% rule. Pl.’s Reply at 6.
26
Hilton’s representations related to the same were mere musings without consequence. Not only
did the Plan explicitly provide for its compliance with the 133 1/3% rule, but Hilton conveniently
ignores that it represented its compliance with this rule to both the IRS, see Pl.’s Ex. 2 at 3
(Hilton Application dated March 29, 1995) (indicating that the “[m]ethod for determining
accrued benefit[s]” was the “133-1/3% Rule”), and this Court, see Defs.’ Stmt. of the Case at 2
(Oct. 15, 1998) (“[t]he Retirement Plan complies with the 133 1/3% rule”). Moreover, because
the Plan failed to satisfy any of the three accrual methods, this is not an instance where a Plan
sponsor stated an intention to comply with one rule but the Plan in practice complied with a
different one. Rather, Hilton’s Plan failed to comply with any of ERISA’s anti-backloading
provisions, and most significantly, with the 133 1/3% rule included among its provisions.
Hilton thus faces a circumstance where it was required to comply with the accrual method
it expressly selected, even though ERISA generally allows employers to select compliance with
any of the three alternative anti-backloading rules. See Curtiss-Wright Corp. v. Schoonejongen,
514 U.S. 73, 85 (1995) (“[w]hatever level of specificity a company chooses, in an amendment
procedure or elsewhere, it is bound to that level”). The Third Circuit’s decision in Smith v.
Contini expounds on this principle:
we agree with the defendants and the district court that the defendants were under
no obligation under ERISA to provide for reciprocal agreements and Pro-rata
Pensions. Nevertheless, once having made the determination to provide for such
pensions, the defendants were obliged to formulate a plan providing for vesting in
accordance with ERISA section 203(a)(2)(A), 29 U.S.C. § 1053(a)(2)(A). Thus,
this case represents a situation, not unusual in the law, that an actor’s discretion in
how it engages in certain conduct is circumscribed, even though it was not obliged
to engage in the conduct in the first instance.
205 F.3d 597, 605 (3d Cir. 2000). Accordingly, it is apparent that the Plan violated ERISA’s
27
anti-backloading provision, 29 U.S.C. § 1054(b)(1), and in particular, violated the 133 1/3% rule.
As a result, the Court has little difficulty concluding that the Plan’s participants are entitled to
receive the benefits they would have accrued had the Plan complied with 133 1/3% rule. Cf.
Carrabba v. Randalls Food Mkts., Inc., 145 F. Supp. 2d 763, 773 (N.D. Tex. 2000) (requiring a
backloaded plan to conform to the 133 1/3% rule where no accrual method was otherwise
specified and the plan violated all three of ERISA’s anti-backloading provisions), aff’d 252 F.3d
721 (5th Cir. 2001).
Having made the determination that Hilton’s Plan violated ERISA’s anti-backloading
provision, 29 U.S.C. § 1054(b)(1), the Court shall now consider Hilton’s principal argument on
summary judgment that its 1999 amendment to the Plan has mooted Kifafi’s benefit accrual
claim. Defs.’ Opp’n at 30-33. As discussed above, the 1999 amendment was implemented “for
the purpose of eliminating any controversy regarding the proriety [sic] of the rate of benefit
accruals under the Plan.” See Pl.’s Ex. 11 at 1 (Amendment 1999-1). Rather than amend the
Plan to comply with the 133 1/3% rule, however, Hilton’s new formula seeks to comply with the
fractional rule. Id. at 2-3. The amendment also makes two changes unrelated to any effort to
bring the Plan into compliance with ERISA’s anti-backloading provision. Pl.’s Stmt. ¶ 27.
Hilton does not contest that its two unrelated changes to the Plan resulted in lower levels
of accrued benefits than if the changes were not made, but instead argues that such a result does
not present a problem. See Defs.’ Opp’n at 17 (“Plaintiff wants to have his cake and eat it too; he
wants to keep all of the upward adjustments in the new benefit formula while eliminating any
downward adjustments”). Referring to the pre-amendment formula as simply “irrelevant” to
resolution of the parties’ Cross-Motions for Summary Judgment, Hilton also argues that the new
28
formula offers “complete relief in that it complies with § 204(b)(1) [the anti-backloading
provision], specifically, the Fractional Rule of § 204(b)(1)(C).” Defs.’ Opp’n at 30-31.
According to Hilton, “[n]othing more is required” because the Plan’s participants “are entitled to
participate in a plan that complies with ERISA § 204(b)(1) [and] they are not entitled to
participate in a plan that complies with the 133-1/3% Rule.” Id. at 31.
The Court rejects Hilton’s argument for several reasons, not the least of which is that, if
accepted, it would make lawful Hilton’s otherwise unlawful backloading of benefit accruals. In
particular, Hilton’s Plan violated ERISA’s anti-backloading provisions for the reasons stated
above. The 1999 Plan amendment, while purporting to bring the Plan into compliance, also
made other changes that were unfavorable to the benefits accrued by Plan participants. The fact
that the Plan now provides that participants may receive the greater of the old (unlawful) formula
or the new (lawful but with decreased benefits) formula does not remedy Hilton’s violations.
Plan participants are entitled to receive the benefits they would have accrued under the Plan’s
initial benefit accrual formula, amended only to bring it into compliance with the 133 1/3% rule.
If this were not so, Hilton and all other employers that have unlawfully backloaded benefit
accruals could simply “amend away” their ERISA violations. The Court therefore finds Kifafi’s
argument on this point entirely persuasive:
[a] company could violate ERISA’s accrual rules and then, after the violation is
discovered by a participant, ‘restructure’ its formula retroactively to either
eliminate or dramatically diminish any liabilities. Under Hilton’s logic, if a
retirement plan promised 2% of pay per year of participation but only provided
1% of pay in practice, only the unlawful 1% would be protected against a
retroactive amendment.”
Pl.’s Reply at 14.
29
Although few cases have analyzed ERISA’s prohibition on backloading in factually
similar circumstances (and none in this Circuit), Judge Shira Scheidlin faced a similar factual
scenario in In re Citigroup Pension Plan ERISA Litigation and rejected the same argument as the
one advanced by Hilton. 470 F. Supp. 2d 323 (S.D.N.Y. 2006), overruled in part on other
grounds, sub nom., Hirt v. Equitable Ret. Plan for Employees, Managers & Agents, 533 F.3d
102, 107 (2d Cir. 2008).12 In that case, Citigroup adopted a plan that purported to follow the
fractional rule pursuant to 29 U.S.C. § 1054(b)(1)(C). Under the terms of the plan, if “an
individual’s hypothetical account balance [turned out to be] less than the minimum amount
required by section 204(b)(1)(C) of ERISA, Citigroup credits the participant the difference.” Id.
at 337. In other words, if a participant discovered that Citigroup’s plan violated ERISA’s anti-
backloading provisions, the plan provided that Citigroup would pay the amount necessary to
bring the participant’s accrued benefits into compliance. Citigroup argued that “this
supplementary contribution brings accrued pensions into compliance with the minimum required
by the fractional rule,” but Judge Scheindlin soundly rejected that argument. Id. Finding that the
plan “not only fail[ed] to guard against backloading,” she held that “this lump-sum contribution,
made on the eve of the benefit payout, is inadequate precisely because it permits the backloading
12
Numerous courts have analyzed backloading claims in the context of plan conversions,
where a party asserts a claim for unlawful backloading when comparing the benefits received
under the two plans. Such claims have not generally been successful. See, e.g., Register v. PNC
Fin. Servs. Grp., Inc., 477 F.3d 56, 72 (3d Cir. 2007) (“the objective of the anti-backloading
provisions, to prevent a plan from being unfairly weighted against shorter-term employees,
simply is not implicated by the defendant’s [plan] conversion”) (internal citation and punctuation
omitted); Amara v. Cigna Corp., 534 F. Supp. 2d 288, 323 (D. Conn. 2008) (explaining that the
plaintiff’s backloading argument was “unpersuasive” because “the change in accumulation rates .
. . is not the result of a specific plan provision,” but is rather the result of a shift in plans). These
cases have no relevance to this one, however, which involves a claim that the Plan itself,
irrespective of later amendments, was backloaded and violated ERISA’s 133 1/3% rule.
30
that the fractional rule was designed to prevent.” Id. (emphasis added). She also explained that
“[i]f such applications of the fractional rule were permissible, plans would be free to adopt
formulas providing a mere pittance of benefit accrual over, say, the first twenty years of
employment, and thereafter have benefits accrue rapidly by tacking on an additional amount
. . . .” Id. at 338. The same logic applies in this case, prohibiting Hilton from simply changing
the Plan’s formula to make accrued benefits lower for a substantial number of participants than
the benefits they would have accrued had Hilton’s Plan not violated ERISA’s anti-backloading
provision.
The Court also agrees with Kifafi that Hilton’s legal argument–that Plan participants are
only entitled to receive the greater of the old (unlawful) formula or the new (lawful but with
decreased benefits) formula–would, if accepted, transgress ERISA’s so-called “anti-cutback” rule
in Section 204(g). See 29 U.S.C. § 1054(g) (“[t]he accrued benefit of a participant under a plan
may not be decreased by an amendment of the plan”). This provision “prohibits any amendment
of a pension plan that would reduce a participant’s ‘accrued benefit.’” Central Laborers’
Pension Fund v. Heinz, 541 U.S. 739, 741 (2004).13 Accrued benefits are considered “reduced”
not only when they are decreased in size or eliminated entirely, but also when an employer
imposes new “conditions” or “materially greater restrictions on the[ir] receipt.” Id. at 744. See
also Bellas v. CBS, Inc., 221 F.3d 517, 522 (3d Cir. 2000) (“[a] plan amendment that
retroactively reduced benefits promised to plaintiffs for almost seven years was precisely the sort
of inequity Congress designed ERISA to prevent”).
13
There are two exceptions to this rule, see 29 U.S.C. §§ 1082(c)(8), 1441 (substantial
business hardships and terminated plans), but neither exception applies in this case.
31
Hilton argues that it has not reduced the benefits owed to Plan participants because its
1999 amendment provided participants with the “greater of” the pre-amendment and post-
amendment accrual formulas. Defs.’ Opp’n at 15. According to Hilton, “numerous cases” have
found that a Section 204(g) violation has not occurred if a post-amendment accrued benefit is not
less than the pre-amendment accrued benefit, citing Brody v. Enhance Reinsurance Co. Pension
Plan, 00-9600, 2003 U.S. Dist. LEXIS 3785, at *27-*28 (S.D.N.Y. Mar. 16, 2003).14 Id. This
argument misses the mark, however, for the same reasons discussed above. The appropriate
point of comparison is not what Plan participants accrued under the unlawfully backloaded pre-
amendment Plan, but rather, what the Plan participants would have accrued had the pre-
amendment Plan operated in compliance with the 133 1/3% rule. Hilton’s reliance on Brody and
related cases is unpersuasive because none endorse the “greater of” method to “make lawful” an
otherwise unlawful plan.15
Finally, the Court specifically finds that Hilton has not met its burden of demonstrating
mootness in the context of controlling case law. “Simply stated, a case is moot when the issues
14
Hilton also makes the brief but erroneous argument that the IRS examined whether the
anti-cutback rule was violated by the 1999 amendment and concluded that it was not, which
Hilton characterizes as “conclusive and compelling.” See Defs.’ Opp’n at 23. This argument is
decidedly inconclusive and not compelling because the IRS made no such determination. Rather,
the IRS noted without resolving Kifafi’s argument that the amendment violated Section 204(g),
found that the pre-amendment Plan violated ERISA’s anti-backloading provision, and concluded
that the post-amendment Plan complied with the factional rule when “looked at in isolation.”
Pl.’s Ex. 16 at 1-8 (7/25/02 Technical Advice Memorandum).
15
Although Hilton argues that the anti-cutback rule protects only “accrued benefits” and
not the “formulas” under which the benefits are calculated, see Defs.’ Opp’n at 17, Hilton’s
argument is based on its erroneous but familiar refrain that Plan participants are only entitled to
receive the benefits accrued under the unlawfully backloaded pre-amendment Plan or its post-
amendment plan with other changes to the benefit accrual formula.
32
presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.”
County of Los Angeles v. Davis, 440 U.S. 625, 631 (1979) (citing Powell v. McCormack, 395
U.S. 486, 496, (1969)). Thus, when two conditions are satisfied: (1) “it can be said with
assurance that there is no reasonable expectation that the alleged violation will recur;” and (2)
“interim relief or events have completely and irrevocably eradicated the effects of the alleged
violation” – a case is moot “because neither party has a legally cognizable interest in the final
determination of the underlying questions of fact and law.” Id.However, “voluntary cessation of allegedly illegal conduct” rarely moots a case because it
leaves the defendant “free to return to his old ways.” United States v. W.T. Grant Co., 345 U.S.
629, 633 (1953); see also Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., 528 U.S. 167, 173-
74 (2000) (“[t]he appellate court erred in concluding that a citizen suitor’s claim for civil
penalties must be dismissed as moot when the defendant, albeit after commencement of the
litigation, has come into compliance”). Because a court’s finding that a case is moot would
entitle the defendant to a dismissal as of right, courts have been reluctant “to grant defendants
such a powerful weapon against public law enforcement” because there is “a public interest in
having the legality of . . . practices settled.” W.T. Grant Co., 345 U.S. at 632-33. For this
reason, the Supreme Court has emphasized that a defendant’s burden to demonstrate mootness is
substantial and difficult to satisfy:
the standard we have announced for determining whether a case has been mooted
by the defendant’s voluntary conduct is stringent: ‘A case might become moot if
subsequent events made it absolutely clear that the allegedly wrongful behavior
could not reasonably be expected to recur.’
Friends of the Earth, 528 U.S. at 189 (citing United States v. Concentrated Phosphate Export
33
Ass’n, 393 U.S. 199, 203 (1968)).
Hilton offers two reasons to support its argument concerning mootness. First, Hilton
reasons that Plan participants “are entitled to participate in a plan that complies with ERISA,”
and that its amendment has created an ERISA-compliant plan (despite the Plan’s previous
noncompliance). Defs.’ Opp’n at 31. Second, Hilton indicates that “there is no reasonable
expectation that [it] will again attempt to amend the Plan to revert to the old formula.” Id. at 32.
The Court finds that these reasons do not come remotely close to satisfying the standard for
mootness.
First, Hilton continues to suggest that it has not violated any ERISA provisions because it
has retroactively amended the Plan to bring it into compliance. Courts have repeatedly found
that cases are not moot where, as here, a defendant has insisted upon the legality of the
challenged practices. See, e.g., Donovan v. Cunningham, 716 F.2d 1455, 1461-62 (5th Cir.
1983) (defendants’ “bare assurances” that they did not intend to serve as ERISA fiduciaries in the
future were “insufficient to meet their burden of persuasion . . . in the face of [their] continuing
insistence that their discontinued activities were legal”); Cf. Am. Fed’n of Gov’t Employees,
AFL-CIO v. Brown, 886 F. Supp. 16, 19 (1994) (case mooted where defendants had “adopted
entirely plaintiffs’ view of [the] dispute”). Second, complete relief has not been afforded to the
class because the Plan participants are entitled to the benefits they would have accrued had the
pre-amendment Plan operated in compliance with the 133 1/3%, not a Plan that retroactively
denies them those same rates of accrual. See Wiley v. Nat’l Collegiate Athletic Ass’n, 612 F.2d
473, 476 (10th Cir. 1979) (holding that case was not moot despite a subsequent amendment to
the NCAA constitution because “the amendment does not fully comport with the relief sought by
34
the plaintiff”).
Given the foregoing, the Court finds that Hilton violated ERISA’s anti-backloading
provision, 29 U.S.C. § 1054(b)(1)(C), and that Hilton’s subsequent amendments to the Plan have
not mooted this violation. Accordingly, the Court shall grant Kifafi’s Motion for Summary
Judgment and deny Hilton’s Motion for Summary Judgment as to Count I of the Amended
Complaint.16
B. Vesting Claims (Count II)
As set forth above, Section 203(b) of ERISA requires employers to count all of an
employee’s years of service for determining an employee’s vesting credit. 29 U.S.C. §
1053(b)(1) (requiring employers to count “all of an employee’s years of service with the
employer or employers maintaining the plan”). Beginning in 1976 and continuing until the Plan
was amended in December 2002, Hilton applied the 1,000 hours standard for calculating
employees’ years of service. See Pl.’s Ex. 1 (Hilton Hotels Retirement Plan, version dated
March 30, 1995) (defining “Years of Benefit Service”) (“a Participant shall not be entitled to any
Years of fractional Years of Benefit Service for a Plan Year during which he completes less than
1,000 Hours of Service”); Id., Ex. 10 at 2-3 (10/15/98 Defs.’ Statement of the Case)
(“Defendants followed the early retirement provisions of the Retirement Plan in determining that
only those years of employment in which Plaintiff had 1,000 hours of employment with Hilton
were credited years of service”); Defs.’ Resp. to Pl.’s Suppl. Class Cert. Br. at 4 & n. 2 (“Hilton
16
Kifafi argues that the post-amendment Plan violates ERISA because (1) the fractional
rule cannot be used when a plan has frozen accruals and (2) the formula violates ERISA’s
prohibition on age discrimination. See Pl.’s Mot. at 18-20. The Court does not reach these
arguments because they are not claims that have been asserted in the Amended Complaint and
they are immaterial to resolution of Count I.
35
does not use equivalency methods to count hours of service under the Plan and did not do so in
Plaintiff’s case” and “[i]f Hilton used an equivalency method, it would have to say so in the
Plan”).
The record is replete with uncontested evidence that Hilton failed to properly implement
the 1,000 hours standard for calculating employees’ vesting credit, often because it lacked the
necessary records to do so. See, e.g., Pl.’s Ex. 27 at 1 (5/6/02 Email from V. Stoico to G.
Trotter) (Hilton’s benefits administrator indicating that “[w]e have not previously given vesting
[credit] prior to benefit service”); Pl.’s Ex. 27 at 4-5 (5/9/02 Email Exchange between V. Stoicof
and G. Trotter) (Hilton’s benefits administrator indicating that “[f]or as far back as we can go, no
one kept track of the non-participating properties’ employees (hours/earnings) to give them
vesting”); Pl.’s Ex. 39 (Undated Document titled “proposed hours counting amendment to Hilton
Hotels Retirement Plan”) (“[t]he pending Kifafi v. Hilton Hotels Retirement Plan litigation
includes claims that the Plan failed to track and count all hours of service in determining vesting
and eligibility for early retirement benefits as required by ERISA. We are uncertain whether
these claims have merit because we have to date been unable to locate adequate historical records
to verify the claims”). In response to the Court’s questions during the June 24, 2003 Status
Hearing, Hilton’s counsel even conceded that the Plan could not have fully complied with the
1,000 standard because Hilton lacked the requisite records. See Defs.’ Ex. 27 at Tr. 23:10 -
24:24 (6/24/03 Status Hearing Transcript) (“[w]e would say [the Plan] was being implemented in
many situations . . . [but] [t]here were situations where the records weren’t there and, therefore, if
that is not full implementation, I would agree with that”).
In the context of this uncontested record evidence, it is apparent that Hilton did, in fact,
36
violate the terms of the Plan’s vesting provisions with respect to each of the four certified sub-
classes:
(1) Plaintiff’s claim that Defendants failed to credit employees with years of union
service for vesting purposes;
(2) Plaintiff’s claim that Defendants improperly used a 1,000 hours service
standard rather than an 870 hour service standard;
(3) Plaintiff’s claim that Defendants failed to credit leaves of absence; and
(4) Plaintiff’s claim that Defendants failed to count the year in which employees
became participants in the retirement plan for vesting purposes.
Kifafi v. Hilton Hotel Ret. Plan, 228 F.R.D. 382, 386-89 (D.D.C. 2005).
Under the terms of the Plan, Hilton was required to credit employees’ union service for
purposes of vesting. See Pl.’s Ex. 1 § 1.2 (Hilton Hotels Retirement Plan, version dated March
30, 1995) (defining “Years of Benefit Service”). The evidence in the record indicates that Hilton
did not credit these hours for purposes of vesting where, for example, an employee worked in a
union position prior to working in a non-union position (as was the case with Kifafi). See, e.g.,
Pl.’s Ex. 27 at 1 (5/6/02 Email from V. Stoico to G. Trotter) (“[w]e have not previously given
vesting prior to benefit service”).17 Accordingly, the Court finds that Hilton failed to properly
credit union service for vesting purposes.18 See Pl.’s Mot. at 38-40.
Similarly, application of the 1,000 hours standard required Hilton to credit employees’
17
Hilton argues that it has mooted any violation related to this claim (and the other
vesting claims) through subsequent but retroactive Plan amendments. See Defs.’ Opp’n at 46-49.
The Court shall address Hilton’s mootness arguments below.
18
Kifafi seeks to expand this claim beyond union service to include all “non-participating
service.” See Pl.’s Reply at 38-43. Kifafi never moved to expand the scope of this sub-class and
the Court never certified a “non-participating service” class. The Court declines to revisit the
scope of this sub-class at this late date.
37
hours of service using the records in its possession, “provided that they accurately reflect the
actual number of hours of service with which an employee is required to be credited . . . .” 29
C.F.R. § 2530.200b-3(a). Employers cannot rely on records that do not allow for this calculation,
and must “either develop and maintain adequate records or use a permitted “equivalenc[y],”
provided that it credits “no less than the actual number of hours of service required be credited
under
§ 2530.200b-2 to each employee in a computation period.” Id. The evidence in the record
indisputably supports Kifafi’s argument that Hilton failed to maintain the records necessary to
implement the 1,000 hours standard. See, e.g., Pl.’s Ex. 39 (Undated Document titled “proposed
hours counting amendment to Hilton Hotels Retirement Plan”) (“[t]he pending Kifafi v. Hilton
Hotels Retirement Plan litigation includes claims that the Plan failed to track and count all hours
of service in determining vesting and eligibility for early retirement benefits as required by
ERISA. We are uncertain whether these claims have merit because we have to date been unable
to locate adequate historical records to verify the claims”). Because application of the 1,000
hours standard is inappropriate where, as here, an employer fails to maintain the records
necessary to properly credit employees with all of their service hours, the Court finds that Hilton
failed to properly apply the 1,000 hours standard for vesting purposes.
The analysis with respect to leaves of absence is slightly more nuanced because the
parties disagree as to what Hilton’s obligations were under the Plan. In particular, from 1977 to
the end of 1994, the Plan contained a specific leave of absence provision stating that “[a] period
of leave of absence or temporary layoff will be included in determining a participant’s credited
service.” Pl.’s Ex. 38 § 3.2(b) (Hilton Hotels Retirement Plan, version dated Sept. 23, 1991).
38
Based on this provision, Kifafi argues that he and all others who are similarly situated should
have received credit for their leaves of absence during that period. See Pl.’s Mot. at 41.
In contrast, Hilton argues that this provision does not require a participant to receive
credit for years of vesting service based on their leaves of absence, but rather, that “any service
credited to an employee during a leave of absence will be added to service credited for periods of
active employment in determining whether the employee has earned a year of vesting service in
that Plan year.” Defs.’ Opp’n at 48. In other words, Hilton would re-write the Plan provision as
follows, with its proposed conditions in italics:
[a] period of leave of absence or temporary layoff will be included in determining
a participant’s credited service, provided the participant has a period of active
employment as to which the leave of absence may be added for purposes of
calculating a year of vesting service in that Plan year.
The Plan language (or rather the absence of Plan language) simply cannot support
Hilton’s interpretation. The text of the provision itself nowhere admits of the limitations
advanced by Hilton, and the Plan’s definition of “leave of absence” does not distinguish between
absences taken in Plan years where an employee otherwise has active employment and those
where the employee does not. See Pl.’s Ex. 38 § 3.8 (Hilton Hotels Retirement Plan, version
dated Sept. 23, 1991) (defining “leave of absence” as “an absence from active employment with
an employer”). Moreover, such a reading of the Plan would conflict with how “the great
majority” of pension plans operate. Holt, 811 F.2d at 1537 (“[o]nce an employee participates in
a pension plan, all of his or her years of service, whether completed before or after participation
begins, count statutorily toward the ten years of vesting credit”).
Attempting to bolster its interpretation, Hilton argues that the “Pension Committee’s
39
interpretation of a disputed Plan provision should be upheld unless clearly unreasonable,” relying
on the Supreme Court’s decision in Firestone Tire & Rubber v. Bruch, 489 U.S. 101, 112-13
(1989). This argument does not add anything to Hilton’s position because there is nothing in the
record to suggest that Hilton’s interpretation was the product of the Pension Committee’s
consideration – which even Hilton acknowledges. See Defs.’ Opp’n at 49 n.33 (“[t]o the extent
that the Court believes that the Pension Committee failed to address this issue, it should remand
the plaintiff’s claim to allow it to interpret the disputed provisions”).19 Accordingly, because the
Court finds that Hilton improperly limited the scope of the leave of absence provision, it also
finds that Hilton violated the Plan by failing to properly credit employees’ leaves of absence for
purposes of vesting.20
Finally, the fourth sub-class certified by the Court involves employees’ first years of Plan
participation. Kifafi claims that, between 1977 and 1994, Hilton failed to credit employees with
a year of vesting service for their first years of participation. Pl.’s Mot. at 41-42. The relevant
Plan provision states that “a participant shall be entitled to a year of credited service for the plan
year in which he becomes a participant in the plan.” Pl.’s Ex. 38 § 3.2(b) (Hilton Hotels
19
The Court notes that the deference described in the Supreme Court’s Firestone decision
is owed where “the plan itself gives the administrator discretionary authority,” Varity Corp. v.
Howe, 516 U.S. 489, 514 (1996), and not simply because the pension committee administers the
plan, as Hilton suggests.
20
Hilton asserts that Kifafi has made an “additional claim that Hilton retroactively
eliminated the ‘leave of absence’ rule in the 1987 Restatement of the Plan.” Defs.’ Opp’n (citing
Pl.’s Mot. at 41). The Court does not read Kifafi’s Motion as having raised this claim, and Kifafi
does not appear to address it in his Reply. Nonetheless, the Court would note that employers are
generally free to amend their plans at any time, Curtiss-Wright Corp., 514 U.S. at 78, but they
may not retroactively eliminate the vesting credit an employee has already accrued, see 29 U.S.C.
§ 1053(c)(1); 26 C.F.R. 1.411(a)-8(c)(1).
40
Retirement Plan, version dated Sept. 23, 1991). Hilton does not dispute that this provision
should have been applied to Kifafi and other members of the sub-class, but argues that Kifafi’s
argument “is devoid of factual support.” Defs.’ Opp’n at 50.
The Court is not persuaded by Hilton’s argument. As Hilton acknowledges, application
of the “first year of participation” provision is based on a fact intensive inquiry:
[a]n employee becomes a participant only upon meeting the plan’s minimum
eligibility requirements, which may take several years of employment, and in fact
some employees never become participants. Thus, determining when an
employee became a participant requires examining the employee’s individual
record to determine when those requirements were satisfied.
Id. To apply this provision correctly, Hilton must determine when an employee has met
minimum eligibility requirements, which in turn requires Hilton to properly apply the 1,000
hours standard:
each . . . employee of an employer will become a participant in the plan on the
date he meets all of the following requirements:
***
(b) He has completed 1,000 hours of service during the 12-month
period commencing on his date of hire or, if he has not completed
1,000 hours of service during the 12-month period, he has
completed 1,000 hours of service during a plan year beginning
after his date of hire
Defs.’ Ex., 25 § 2.1 (Hilton Hotels Retirement Plan, version dated Sept. 23, 1991). Thus,
Hilton’s application of this first year provision is inextricably intertwined with Hilton’s
violations of the 1,000 hours standard that the Court has described above. Because the Court has
already found that Hilton did not comply with the Plan’s 1,000 hours standard, the Court finds
that Hilton likewise failed to comply with this provision.
41
Having made the determination that Hilton violated the Plan’s vesting provisions by
failing to properly calculate the years of service related to each of the four certified sub-classes,
the Court must now consider Hilton’s principal argument on summary judgment that its
subsequent amendments to the Plan have mooted these vesting violations. See Defs.’ Opp’n at
39-51. As discussed above, Hilton amended the Plan on December 10, 2002. Pl.’s Ex. 41 at 1-2
(Amendment 2002-4). Pursuant to the Plan’s amended service counting methods, when a Plan
participant performs service that is credited under the Plan both for purposes of vesting and
benefit accruals, the participant receives a year of vesting service for each Plan year in which the
participant completes at least 870 hours of service (750 hours for salaried employees). Id. When
a participant performs service that is credited for purposes of vesting only–such as union
service–the participant earns a year of vesting service for each 365-day period of service
(including partial years) regardless of the hours completed (an “elapsed time method”). Id. at 3-
4. Accordingly, the post-amendment Plan “applies an 870/750 hour standard only to those
periods for which the database maintains complete records of hours worked, but uses the elapsed
time method for all other periods of employment that are credited for vesting purposes.” Defs.’
Opp’n at 40.
Hilton emphasizes that its new service counting methods are permitted by applicable
regulations:
[a]n ERISA plan may use the 870/750 hour standard where it maintains records of
actual hours worked, but not all hours for which employees are paid (e.g., paid
vacation). 29 C.F.R. § 2530.200b.3(d). A plan may use the elapsed time method
even if it maintains no records of hours by simply calculating vesting service
based on the time elapsed between the first and last date of service.
Defs.’ Opp’n at 39 (citing 29 C.F.R. § 1.410(a)-7(a)(1)(i)). Hilton then proceeds to argue, as to
42
each of the vesting claims in Count II of the Amended Complaint, that Kifafi has failed to
advance sufficient evidence demonstrating that employees other than Kifafi have not received all
of the vesting credit to which they are entitled pursuant to Hilton’s new service counting
methods. See, e.g., id. at 45 (“[Kifafi’s] evidence that other class members have not received
proper credit for their union service is . . . unavailing”) (internal citation omitted); id. at 47(“[Kifafi’s] fanciful estimates of unidentified, unexplained vesting violations based on
inadmissible evidence cannot establish a genuine issue of material fact regarding this claim
[concerning the 1,000 hours standard]”); id. at 48 (“[t]here is also no evidence that Hilton failed
to apply the Plan’s leave of absence rule to any other employee”); id. at 50 (“there is no evidence
that Hilton failed to apply the first year of participation rule to any other employee”).
Contrary to Hilton’s arguments, Kifafi does not bear an evidentiary burden to show that
the vesting claims are not moot. Rather, as a defendant alleging that its voluntary conduct has
mooted the claims raised against it, Hilton has the heavy burden of proving that these vesting
claims have become moot. See Friends of the Earth, Inc., 528 U.S. at 173-74 (2000) (“a
defendant claiming that its voluntary compliance moots a case bears [a] formidible burden . . .”).
Accordingly, Hilton must show that: (1) “there is no reasonable expectation that the alleged
violation will recur;” and (2) “interim relief or events have completely and irrevocably eradicated
the effects of the alleged violation.” County of Los Angeles, 440 U.S. at 631. The Court finds
that Hilton has not met its burden with respect to either showing.
First, Hilton has not demonstrated that these vesting violations are moot because it has
not conceded that it previously violated the Plan’s vesting provisions. See Defs.’ Opp’n at 38
(“[Kifafi] has proffered no credible evidence that any of the four alleged service-counting
43
violations has occurred . . . there is simply no credible evidence that the service counting
violations he alleges exist”). Throughout this litigation, Hilton has repeatedly amended the Plan
to moot Kifafi’s claims rather than allow adjudication of the Plan’s provisions and Hilton’s
implementation of the same. There is no reason offered by Hilton as to why it could not amend
the Plan in the future in ways that could produce similar vesting violations. Under such
circumstances, the vesting violations cannot be considered moot. See Donovan, 716 F.2d at
1461-62 (defendants’ “bare assurances” that they did not intend to serve as ERISA fiduciaries in
the future were “insufficient to meet their burden of persuasion” “in the face of [their] continuing
insistence that their discontinued activities were legal”).
Equally significant, Hilton has not shown that all of the class members have received
complete relief as a result of the Plan amendments. This is so because ERISA prohibits plan
amendments that retroactively eliminate the vesting credit an employee has already accrued. See
29 U.S.C. § 1053(c)(1); 26 C.F.R. 1.411(a)-8(c)(1). Kifafi argues that the retroactive application
of the Plan amendments will deprive some employees of the vesting credit to which they would
otherwise have been entitled:
[r]etroactive application of the elapsed time alternative can cause employees to
lose years of service which they would have earned under an hours standard, or an
equivalency based on hours. For example, employees can earn a critical year of
service for vesting by accumulating 870 hours of service before the end of a
calendar year, whereas the elapsed time method operates in ‘whole years’ and
therefore may require employment that spans over a longer period.
Pl.’s Stmt. ¶ 149 (citing 26 C.F.R. § 1.410(a)-7(d)(1)(iv)).21 Hilton readily concedes that, as a
21
Kifafi also argues that Hilton’s failure to maintain proper records prevents them from
properly implementing the elapsed time method, particularly 26 C.F.R. 1.410(a)-7(a)(3) (relating
to “severance from service” and “service spanning”). See Pl.’s Mot. at 49-50. Kifafi provides no
further description of this issue and fails to explain how the absence of records relates to this
44
result of its Plan amendments, some employees may have lost vesting credit: “[it is]
mathematically possible for an employee to have fewer years of vesting service under the elapsed
time method than under an hours standard.” Defs.’ Opp’n at 40-41. Hilton nevertheless argues
that this reduction of some employees’ vesting credit would violate ERISA “only if it also
reduced the participant’s years of vesting service below the number needed to become vested
under the Plan.” Id. Hilton also argues that its amendments are “far more likely to increase the
years of vesting service credited to an employee” than the previous calculation methods. Id. at
41 (emphasis in original omitted).
The Court is not persuaded by Hilton’s arguments. In order to demonstrate mootness,
Hilton would have to show that members of the vesting sub-classes have not had their years of
service reduced by application of the amendments – which Hilton has not shown by arguing that
it is “far more likely” that some may have received more credit.22 At bottom, there is nothing in
the record demonstrating that complete relief has been afforded the sub-classes because, as even
Hilton acknowledges, some members of the sub-classes may have lost vesting credit based on
regulation. In any event, Hilton explains that the dates of termination and rehire is all it needs to
implement the provision, both of which are recorded in its database. See Defs.’ Opp’n at 40
n.27.
22
Bolstering Kifafi’s position that some employees have not received complete relief, the
Court notes that Kifafi identified individuals whose union service had not been credited in
violation of the Plan’s vesting provisions in a declaration produced in 2002. See Pl.’s Reply at
35. Only after Kifafi identified these individuals does it appear that Hilton corrected their
records. Id. Moreover, at the time of the parties’ briefing, Hilton admitted that it had not even
fully implemented the amendments to the Plan. See, e.g., Defs.’ Stmt. ¶¶ 24, 22 (“[in addition to]
a group of 7,326 former employees (or beneficiaries) for whom further investigation is needed to
determine if they are entitled to an increase in payment due to the 1999 Amendment,” an
additional 230 records “remain for which further review is needed to determine whether these
participants have been provided notice [of their vesting eligibility]”).
45
application of the Plan amendments.23
One final matter remains. Kifafi asserted the vesting violation claims in Count II both
individually and as a representative for the class. Unlike the Court’s resolution of the other class
members’ claims above, the Court finds that there is clear and undisputed evidence that Kifafi’s
individual vesting claims have become moot.
With respect to Kifafi’s union service, Kifafi argues that “he should have received years
of vesting credit for the period after a 1983 injury during which he was on ‘leave’ until he was
able to resume active work in a non-union job in July 1985.” Pl.’s Mot. at 41. It is undisputed
that Hilton has now credited Kifafi with 2.3 years of vesting service for that time period.24 See
Defs.’ Stmt. ¶ 48; Pl.’s Resp. Stmt. ¶ 48. Because Kifafi also had his leave of absence during
this period, Kifafi has now also received credit for years of service during his leave of absence.
See Defs.’ Stmt. ¶ 54; Pl.’s Resp. Stmt. ¶ 54. With respect to the 870 hours standard, Kifafi
concedes that his individual claim has now been redressed by Hilton. See Defs.’ Stmt. ¶ 51
(“Plaintiff has received a year of vesting service for 1985, a year in which he completed only 962
hours of service”); Pl.’s Resp. Stmt. ¶ 51 (“Admitted”). Finally, with respect to Kifafi’s first year
23
Kifafi’s Motion raises numerous other vesting-related claims, including claims related
to Hilton’s implementation of the Plan amendments, none of which were included in the
Amended Complaint. See, e.g., Pl.’s Mot. at 42-52 (relating to pre-age 21 service, early
retirement vesting requirements, and other vesting-related issues). The Court again rejects
Kifafi’s attempt to expand the scope of the Amended Complaint to encompass claims that were
not included therein.
24
While Kifafi does not dispute that Hilton has now credited him with years of service
during that period, he argues that he should have received 3 years instead of 2.3 years of credit if
Hilton had applied the elapsed time method correctly. See Pl.’s Resp. Stmt. ¶¶ 34, 48. Kifafi
provides no further explanation to support his argument, and he fails to make any showing that
the difference between the 2.3 and 3 years of service would be material in any way.
46
of participation in the Plan in 1985, Hilton has credited Kifafi with a year of service for that year.
See Defs.’ Stmt. ¶ 59; Pl.’s Resp. Stmt. ¶ 59.
In accordance with the foregoing, the Court shall grant-in-part Kifafi’s Motion for
Summary Judgment on Count II as to the vesting claims of the four certified sub-classes, but
deny-in-part Kifafi’s Motion as to his individual vesting claims. The Court shall also grant-in-
part Hilton’s Motion for Summary Judgment as to Kifafi’s individual vesting claims, and deny-
in-part Hilton’s Motion as to the vesting claims of the four certified sub-classes.
C. Statute of Limitations for Class Claims
On May 11, 1999, the Court certified the benefit-accrual class in connection with Count I
of the Amended Complaint, subject to a possible amendment to conform the class in connection
with the statute of limitations, if necessary. See Kifafi v. Hilton Hotels Ret. Plan, 189 F.R.D.
174, 176-78 (D.D.C. 1999). Although Hilton raised a statute of limitations argument in its
Opposition to Kifafi’s Motion for Class Certification, the Court held that “resolution of the
statute of limitation issue at the class certification stage would impermissibly intrude upon the
merits of [Kifafi’s] claim[s],” and therefore reserved resolution of the issue until the parties had
the opportunity to brief it in the context of their dispositive motions. Id. at 178.
Renewing the same statute of limitations argument, Hilton argues that the benefit-accrual
class definition previously adopted by the Court “must be adjusted to exclude time-barred claims
of absent class members.” Defs.’ Mot. at 36. Hilton makes a similar argument in a footnote with
respect to the vesting sub-classes. Id. at 39 n.25. The Court finds that Hilton’s statute of
limitations arguments lack merit.
Kifafi’s class claims are brought under Section 502 of ERISA, 29 U.S.C. § 1132, which
47
does not contain a limitations period. Where, as here, Congress fails to provide a statute of
limitations, a court must borrow the most analogous limitations period from the state in which
the court sits. Connors v. Hallmark & Son Coal Co., 935 F.2d 336, 341 (D.C. Cir. 1991).
Because employee benefit plans are contracts, courts in this jurisdiction have borrowed the
statute of limitations provision for breach of contract actions in the District of Columbia. Id.That provision–Section 12-301(7) of the District of Columbia Code–contains a three-year
limitations period.
In addition, the D.C. Circuit has instructed that courts should apply the “discovery” rule
to determine when a cause of action accrues; thus, “a claim for relief does not accrue until the
plaintiff discovers, or with due diligence should have discovered ‘the injury that is the basis of
the action.’” Id. (quoting N. Cal. Retail Clerks Unions & Food Employers Joint Pension Trust
Fund v. Jumbo Markets, Inc., 906 F.2d 1371, 1372 (9th Cir. 1990)). In most instances, therefore,
a plaintiff’s ERISA claim will not begin to accrue until “‘there has been a repudiation by the
fiduciary which is clear and made known to the beneficiaries.’” Davenport v. Harry N. Abrams,
Inc., 249 F.3d 130, 134 (2d Cir. 2001) (quoting Miles v. New York State Teamsters Conf.
Pension Plan, 698 F.2d 593, 598 (2d Cir. 1983) (emphasis in original omitted)).
For example, in Connors v. Hallmark & Son Coal Co., certain coal companies were sued
for their failure to report and pay pension fund contributions due under certain national industry
wage agreements. Although the district court had found those claims to be time-barred, the D.C.
Circuit explained that the payment of the pension fund involved information that, “by its nature,
[was] accessible in the first instance only to the mine operators” and that others were
“dependent” on the defendants’ “honesty and accuracy.” Id. at 342-43. Despite numerous audits
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of this information, the Court explained that the failure to report and pay pension funds was the
type of “hidden injury” for which the discovery rule was most appropriate, and that the plaintiffs’
claims “accrued only at the time when . . . [they became] aware of the defendants’ alleged
inaccuracies.” Id. at 343.
In this case, Hilton argues that the class definitions must be limited to bar the claims of
class members who “either (1) received a benefits statement prior to three years before the
commencement of this action on June 17, 1998, or (2) began receiving benefits prior to June 17,
1995.” Defs.’ Opp’n at 38. Hilton reasons that there was a “clear repudiation” at the time that
these class members began to receive notice of their benefits. Id.
Although Hilton has failed to proffer the benefits statements as exhibits, conspicuously
absent from Hilton’s argument is any assertion that these statements provided class members
with notice of the information associated with Hilton’s backloading of their benefit accruals or
violations of the Plan’s vesting provisions. It would seem highly unlikely that such information
was conveyed, as Hilton has insisted prior to and during this litigation that the terms and
implementation of the Plan did not violate any ERISA provisions. See Pl.’s Reply at 27 (“[i]t is
difficult to find a ‘clear repudiation’ by a party who throughout the period before the suit was
filed, and even after it was filed, maintained that it complied with the backloading rules”). It is
also apparent that the mere receipt of benefits could not have conveyed such information.25
25
Hilton cites several cases for the erroneous proposition that causes of action accrue
when a class member receives his or her benefits. See Defs.’ Opp’n at 38 (citing Carollo v.
Cement & Concrete Workers Pension Plan, 964 F. Supp. 677, 689 (E.D.N.Y. 1997); Laurenzano
v. Blue Cross & Blue Shield Ret. Income Trust, 134 F. Supp. 2d 189, 208-210 (D. Mass. 2001)).
In fact, the district courts in these cases did not determine when the plaintiffs’ causes of action
accrued because, even “assuming” they accrued when the plaintiffs received their benefits, the
plaintiffs’ claims were untimely.
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Absent any showing that class members received information putting them on notice of
their claims, and any indication that Hilton made a “clear repudiation” with respect to those
claims, the Court cannot find that the class members’ claims are barred by the statute of
limitations. Compare Romero v. Allstate Corp., 404 F.3d 212, 223 (3d Cir. 2005) (“when an
ERISA plan is amended but the fact that the amendment actually affects a particular employee or
group of employees cannot be known until some later event, the cause of action of the employee
will not accrue until such time as the employee knew or should have known that the amendment
has brought about a clear repudiation of certain rights that the employee believed he or she had
under the plan”) with Union Pac. R.R. Co. v. Beckham, 138 F.3d 325, 331 (8th Cir. 1998)
(finding that a claim accrued when the employer distributed a “fact sheet” explaining how an
amendment would affect the accrual of pension benefits and providing specific examples
demonstrating how service would be allocated when determining benefits, and where plaintiff
read the fact sheet and believed the amendment was “unfair” and “improper” at the time of the
amendment). Accordingly, the Court finds that modification of the class definitions to exclude
claims based on the statute of limitations is unnecessary and inappropriate.26
26
Hilton included a footnote in its Opposition suggesting that the class members’ claims
with respect to Hilton’s vesting violations were not tolled between May 11, 1999 (when the
Court initially declined to certify the vesting violation sub-classes) and March 30, 2005 (when
the Court ultimately did so). See Defs.’ Opp’n at 39 n.25. Beyond Hilton’s failure to include any
legal or factual support for this argument, the Court rejects it because, as indicated above, the
Court advised the parties that it would subsequently reconsider class certification with respect to
these violations if, after discovery, certification became appropriate. Tolling the statute of
limitations for the claims of the putative class members under these circumstances serves the
purposes of Federal Rule of Civil Procedure 23 (governing class actions) and encourages judicial
economy by eliminating the need for the putative members of those sub-classes to file individual
claims while the parties engaged in discovery and the Court subsequently considered
certification.
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D. Kifafi’s Remaining Individual Claims (Counts III - VI)
Kifafi’s four remaining individual claims received cursory attention in the parties’
briefing, and none requires extended discussion here.
First, Kifafi claims that Hilton violated ERISA by failing to maintain information
associated with his spouse. See Pl.’s Mot. at 56-58. Pursuant to Section 209 of ERISA, “every
employer shall . . . maintain records with respect to each of his employees sufficient to determine
the benefits due or which may become due to such employees.” 29 U.S.C. § 1059. According to
Kifafi, Hilton violated this provision because he has been married for over thirty years and has
indicated as such on “numerous employment forms,” Pl.’s Mot. at 56-57, but the records in
Hilton’s pension database did not reflect that he was married. Even assuming this claim were
factually cognizable,27 it would fail because Section 209 of ERISA does not provide employees
with a private right of action. See 29 U.S.C. § 1059(b) (requiring employers who fail to comply
with this requirement to “pay to the Secretary a civil penalty of $10 for each employee with
respect to whom such failure occurs”). While the Court is certainly authorized to award
“appropriate equitable relief” for ERISA violations, Kifafi has not demonstrated that any
equitable relief is appropriate given that he has not shown any harm associated with a failure to
maintain data concerning his spouse.28 Accordingly, the Court shall deny Kifafi’s Motion for
Summary Judgment as to Count III and grant Hilton’s Motion for Summary Judgment as to
27
The regulation requires the “employer” to maintain such records, and Kifafi is basing
this claim on the absence of such information in Hilton’s pension database, without any showing
that Hilton otherwise failed to maintain the information.
28
Kifafi’s Reply also argues that the names of spouses for the majority of Plan
participants are missing in Hilton’s pension database. The Court rejects Kifafi’s attempt to
convert this individual claim into a class claim as to which no class was ever certified.
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Count III.
Kifafi’s next claim fails for the same reason. Kifafi argues that Hilton failed to provide
him with an individual benefit statement upon termination as required by ERISA Sections 105(c)
and 209(a)(1), 29 U.S.C. §§1025(c), 1059(a)(1). It is undisputed that Kifafi has now received an
individual benefit statement. Defs.’ Opp’n at 58; Pl.’s Reply at 55. In addition to the fact that
Section 209 does not create a private cause of action, Hilton argues that any further equitable
relief would be inappropriate because Kifafi has now received all the relief to which he is
entitled. See Defs.’ Opp’n at 58. The Court agrees. See Pierce v. Sec. Trust Life Ins. Co., 979
F.2d 23, 30 (4th Cir. 1992) (“case law establishes that a plan participant ‘must show reliance and
prejudice in order to recover for an employer’s failure to comply with ERISA’s statutory
requirements”) (quoting Govoni v. Bricklayers, Masons & Plasterers Int’l Union of Am., Local
No. 5 Pension Fund, 732 F.2d 250, 252 (1st Cir. 1984)); Colin v. Marconi Commerce Sys.
Employees’ Ret. Plan, 335 F. Supp. 2d 590, 605 (M.D.N.C. 2004) (“[b]eneficiaries cannot
recover on claims under ERISA’s notice provisions absent a showing that they were harmed as a
result of the notice failure”) (citing Ellis v. Metro. Life Ins. Co., 126 F.3d 228, 238 (4th Cir.
1997)). Kifafi also failed to respond to this argument, and is therefore deemed to have conceded
the point. See Pl.’s Reply at 55 (seeking to expand this claim to include “thousands of
participants” but failing to respond to Hilton’s argument that Kifafi is no longer entitled to any
relief on this claim because he has now received his individual benefits statement). Accordingly,
the Court shall deny Kifafi’s Motion for Summary Judgment as to Count IV and grant Hilton’s
Motion for Summary Judgment as to Count IV.
Kifafi’s third remaining individual claim is based on Hilton’s failure to timely send him a
52
copy of the Plan document. Pursuant to Section 502(c)(1) of ERISA,
Any administrator . . . who fails or refuses to comply with a request for any
information which such administrator is required by this title to furnish to a
participant or beneficiary . . . by mailing the material requested to the last known
address of the requesting participant or beneficiary within 30 days after such
request may in the court’s discretion be personally liable to such participant or
beneficiary in the amount of up to $100 a day from the date of such failure or
refusal.
29 U.S.C. § 1132(c)(1). In this case, Kifafi’s counsel sent Hilton a request on August 7, 1997,
for the “complete Plan document.” Pl.’s Ex. 80 at 1 (8/7/97 Letter from S. Bruce to V. Stoicof).
Hilton apparently sent a copy of the Supplemental Plan Document to Kifafi’s counsel by mistake.
See Defs.’ Ex. 37 at 1 (notes of S. Baker). Once Hilton was made aware of this mistake, it sent a
copy of the correct Plan document to Kifafi’s counsel on November 7, 1997 (i.e., 61 days late).
On this record, the Court declines to exercise its discretion to fine Hilton for this
approximate 61 day delay, which appears to have been the result of a mistake and not bad faith,
and which does not appear to have harmed Kifafi in any way.29 Although Plaintiff references an
investment of “time, effort and money to gain access” to the Plan document, Pl.’s Reply at 56,
the Court finds that any harm that arose as a result of Kifafi’s counsel having to ask for the Plan
document a second time is a de minimis harm that does not warrant a fine on this record.
Accordingly, the Court shall deny Kifafi’s Motion for Summary Judgment as to Count V and
grant Hilton’s Motion for Summary Judgment as to Count V.
Kifafi’s final claim is that Hilton breached its fiduciary duties based on the violations
29
While there is no requirement that the Court make a finding of bad faith or prejudice to
fine a defendant under this ERISA provision, courts have often considered such factors. See,
e.g., Gorini v. AMP Inc., 94 Fed. App’x. 913, 919-20 (3d Cir. 2004) (explaining that courts may
consider “(1) bad faith or intentional conduct of the plan administrator, (2) length of delay, (3)
number of requests made, (4) documents withheld, and (5) prejudice to the participant”).
53
described above. This claim must be dismissed because a plan participant cannot proceed with a
breach of fiduciary duty claim under Section 502(a)(3) when relief is available under other
remedial sections of ERISA. See Varity Corp. v. Howe, 516 U.S. 489, 515 (1996) (“where
Congress elsewhere provided adequate relief for a beneficiary’s injury, there will likely be no
need for further equitable relief, in which case such relief normally would not be appropriate”);
Ogden v. Blue Bell Creameries U.S.A., Inc., 348 F.3d 1284, 1287 (11th Cir. 2003) (“an ERISA
plaintiff who has an adequate remedy under Section 502(a)(1)(B) cannot alternatively plead and
proceed under Section 502(a)(3) . . . [and] an ERISA plaintiff that had an adequate remedy under
Section 502(a)(1)(B) cannot assert a Section 502(a)(3) claim after his Section 502(a)(1)(B) claim
has been lost”); Mauser v. Raytheon Co. Pension Plan for Salaried Employees, 239 F.3d 51, 58
(1st Cir. 2001) (“[t]he Supreme Court has . . . limited the applicability of an individual claim for
breach of fiduciary duty to those participants who are unable to avail themselves of other
remedies”). Although Hilton raised this argument in its Opposition, see Defs.’ Opp’n at 53-55,
Kifafi failed to respond to–and therefore conceded–the point. Accordingly, the Court shall deny
Kifafi’s Motion for Summary Judgment as to Count VI and grant Hilton’s Motion for Summary
Judgment as to Count VI.
E. Remedies
Kafafi’s Amended Complaint seeks declaratory and equitable relief. See Am. Compl. at
18-20. The parties have expressed divergent views as to what equitable relief the Court should
order. Kifafi proposes a specific change to the benefit accrual formula described by his expert
witness, as well as the appointment of an outside party administrator to perform an audit of
Hilton’s records and oversee implementation of the equitable relief to be ordered by the Court.
54
See Pl.’s Mot. at 29-32, 54-56. In contrast, Hilton proposes that the “proper remedy” for
backloading is to allow the plan sponsors to re-draft the benefits formula, Defs.’ Opp’n at 34, and
Hilton is silent with respect to a proposed remedy for its vesting violations.
On the present record, the Court is reluctant to order particular equitable relief without
the benefit of a full briefing by the parties that takes into account the Court’s legal rulings set
forth above. Accordingly, the Court shall issue instructions in its Order accompanying this
Memorandum Opinion that sets a schedule for further proceedings in this case.
F. Defendants’ Motion to Strike and Plaintiff’s Motion to File a Sur-Reply
As discussed above, Hilton filed a [183] Motion to Strike certain declarations submitted
by Kifafi in support of his Motion for Summary Judgment, as to which Kifafi subsequently filed
a [194] Motion for Leave to file a Sur-Reply. The Court decided to hold the Motion to Strike
and Motion to file a Sur-Reply in abeyance, considering them within the larger context of the
parties’ Cross-Motions for Summary Judgment. Having now done so, the Court shall deny
Hilton’s Motion to Strike because the Court has found the declarations immaterial to its
resolution of the parties’ arguments on summary judgment, and has therefore not relied on them.
Because the Court finds that the briefing related to the Motion to Strike is sufficient for the Court
to resolve Defendants’ Motion to Strike, the Court shall also deny Kifafi’s Motion to file a Sur-
Reply.
IV. SUMMARY OF CONCLUSIONS
For the reasons set forth above, the Court finds that Hilton violated ERISA’s anti-
backloading provision, 29 U.S.C. § 1054(b)(1)(C), and that Hilton’s subsequent amendments to
the Plan have not mooted this violation. The Court finds that Hilton violated the Plan’s vesting
55
provisions with respect to union service, leaves of absences, first years of participation, and the
1,000 hours standard, and that Hilton’s subsequent amendments to the Plan have not mooted
these violations as to the four sub-classes but have mooted the violations as to Kifafi
individually. The Court finds that modification of the class definitions to exclude claims based
on the statute of limitations is unnecessary and inappropriate. Finally, the Court finds that Kifafi
is not entitled to relief on his claims that Hilton (1) failed to maintain information associated with
Kifafi’s spouse, (2) failed to provide Kifafi with an individual benefit statement upon
termination, (3) failed to timely send Kifafi a copy of the Plan document, and (4) breached its
fiduciary duties.
Accordingly, the Court shall GRANT-IN-PART Kifafi’s [177] Motion for Summary
Judgment as to Count I and the class claims as to Count II, and DENY-IN-PART Kifafi’s Motion
for Summary Judgment as to his individual claims in Count II, and Counts III, IV, V, and VI.
The Court shall GRANT-IN-PART Hilton’s [180] Cross-Motion for Summary Judgment as to
Kifafi’s individual claims in Count II, and Counts III, IV, V, and VI, and DENY-IN-PART
Hilton’s Cross-Motion for Summary Judgment as to Count I and the class claims in Count II.
The Court shall also DENY Hilton’s [183] Motion to Strike, and DENY [194] Kifafi’s Motion
for Leave to file a Sur-Reply. An appropriate Order accompanies this Memorandum Opinion.
Date: May 15, 2009
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
56