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January 9, 2004.

GERALD H. PETERSON, et al., Plaintiffs,

The opinion of the court was delivered by: JOSE L. LINARES, District Judge Page 2



  This matter comes before the Court as a putative class action on behalf of former employees of AT & T who retired after April 28, 1997 and before January 1, 1998 under the Special Update to AT & T's Management Pension Plan (the "Plan"). Plaintiffs allege that AT & T breached its fiduciary duties under § 404 (29 U.S.C. § 1104) of the Employee Retirement Income Security Act of 1974 ("ERISA") by encouraging them to retire under terms less advantageous than what could have been obtained shortly thereafter. Defendant presently seeks a motion for summary judgment pursuant to Fed.R.Civ.P. 56, and in a separate motion Plaintiffs seek certification of the class. The motion is resolved without oral argument. Fed.R.Civ.P. 78. As discussed herein, to the extent that Defendant has complied with its requirements under ERISA, Defendant's motion for summary judgment is GRANTED on all claims, except for Plaintiffs' claim that Defendant made statements that retirees would be eligible for future changes to the Plan. On that issue, summary judgment is DENIED with respect to Plaintiffs Lando and Wuzniak and GRANTED with respect to all other named Plaintiffs. Plaintiffs' motion for class certification is DENIED. Page 3


  The present dispute arises out of changes made to Defendant AT & T's Management Pension Plan through the enactment of its Voluntary Retirement Incentive Program ("VRIP").*fn1 The VRIP, which will be subsequently discussed in greater detail, provided substantial financial benefits to departing management employees who were on AT & T's payroll as of January 1, 1998, and employees who retired prior to that date were ineligible for these increased benefits. It is those employees that retired "prematurely" so as to preclude them from VRIP benefits who have filed this action.

  The AT & T Management Pension Plan is an ERISA-covered defined-benefit pension plan in which AT & T, and not the employees, makes all contributions. At all relevant times, AT & T Executive Vice President of Human Resources Harold Burlingame was responsible for making recommendations to senior executives on changes to the Plan. Burlingame was a member of AT & T's senior management team, referred to at AT & T as the Operations Group ("OG"). Other Page 4 than Burlingame, the OG was composed of the CEO, the CFO, and the principal operating heads of the various business units. Once the OG approved a change to the pension plan, it would make recommendations to the Compensation and Employee Benefits Committee, which could then make recommendations to the Board of Directors. The full Board had the final and exclusive authority to amend the Plan.

  Prior to 1997, the Plan calculated a participant's pension benefit by using a "modified career average" formula, in which a participant's pension was based on his annual compensation during a specified multi-year period (known as the "pay-base averaging period"), his length of service, and a specified percentage multiplier. On April 16, 1997, AT & T's Board of Directors amended the Plan to adopt a "Cash Balance" formula ("Cash Balance"), effective January 1, 1998.*fn2 Under Cash Balance, participants would receive hypothetical cash balance accounts that would be supplemented annually with "interest" and "pay" credits. In order to transition to Cash Balance, AT & T simultaneously implemented a program known as "Special Update." Special Update was a one-time only fixed increase in the benefits provided under the Plan.*fn3 Special Page 5 Update was designed to provide security to those participants who neared retirement before their benefits under the Cash Balance account could adequately accrue.

  On April 28, 1997, Burlingame distributed a letter and fact sheet to eligible AT & T employees informing them of the impending Special Update/Cash Balance modifications to the AT & T Management Pension Plan. The fact sheet stated in pertinent part:
In general, if you are within 7 years of retirement eligibility under the current plan, your special update will most likely provide a greater benefit than the cash balance feature. If you're more than 7 years from retirement eligibility under the current plan though, the cash balance feature will most likely produce a better benefit than the special update.
Dep. Ex. D-7.

  The letter encouraged employee participation in company-sponsored seminars to learn more about the pension changes. During these seminars, Plaintiffs allege, in various permutations, that Defendant orally misrepresented that the Special Update would provide the greatest benefits to retirees over the next four to seven years and that anyone retiring pursuant to this plan would be given the opportunity to participate in future changes to the Plan. Over the next several months, AT & T issued various detailed communications to participants regarding Special Update and Cash Balance in both paper and electronic form.

  C. Michael Armstrong became the new CEO of AT & T on November 1, 1997. Soon after taking the helm, Armstrong set out to substantially reduce the company's expenses. During November 1997, Armstrong began to outline a series of "bold strokes" he wanted implemented at AT & T which included various cost-cutting measures. (Def. Statement of Material Facts, ¶ 48). Pursuant to this outline, Burlingame then consulted the staff of an AT & T subsidiary, Actuarial Page 6 Sciences Associates, Inc. ("ASA") to "think conceptually" about the options that AT & T could use to reduce its workforce. (Id. at ¶ 50). ASA responded on December 1, 1997 with various "tools" available, yet none of these approaches resembled what ultimately became the Voluntary Retirement Incentive Program. At some point in the middle of December, Armstrong asked Burlingame to develop a plan to substantially reduce AT & T's workforce. By the end of December, the AT & T Director of Benefit Planning met with ASA staff in a "brain storming" session to explore various options that could be used in an early retirement incentive program. Around this period, ASA actuaries also performed cost analyses on several designs involving pension enhancements. As of the end of 1997, senior-level executives had not yet discussed changing the Plan in order to reduce the number of AT & T employees.

  On January 7, 1998, for the first time, the Operations Group was presented with different options for reducing the size of the workforce, which included measures to temporarily increase pension benefits with the goal of persuading employees to retire. As no consensus was reached at the meeting on how to proceed, the OG instructed Burlingame to further develop and refine the different alternatives discussed. (Id. at 63-65). On January 10-11, 1998, members of AT & T's Human Resources, Benefits and Legal departments met with representatives of ASA, during which they examined the feasibility of three downsizing options: 1) using the Plan to create incentives for management employees to leave AT & T (the precursor of the VRIP); 2) implementing an involuntary force reduction; and 3) a combined voluntary/involuntary program. These sessions produced a document that evaluated each option. (Id. at ¶ 66-68). At a meeting held on January 14, 1998, the three design options were presented to the entire Operations Group. No final decision was reached as to which of the three options, if any, would be Page 7 approved and recommended to the Board. (Id. at ¶ 70-72). On January 16, 1998, the OG discussed downsizing again and placed the issue on the Board's next agenda. On January 19, 1998, the OG met to discuss force reduction and agreed to recommend the VRIP concept to the Compensation and Employee Benefits Committee at its upcoming meeting. The VRIP plan was presented to the Committee on January 20, 1998, and the Committee agreed to recommend resolutions to the Board of Directors that would authorize the development of VRIP and direct Burlingame to study additional details of the Plan. The following day, the Board adopted the Committee's recommendation authorizing the development of VRIP. On January 26, 1998, AT & T announced the concept of VRIP to its employees. (Id. at ¶ 73-78). Over the next several months, numerous oral and written communications were made between AT & T senior management and executives regarding further development of the VRIP design. On March 18, 1998, the Board approved the final design of VRIP and formally adopted the program. (Id. at ¶ 80).

  The VRIP program as ultimately formulated offered, for a limited period, significant financial benefits to certain full-time or part-time managers who were participants in the Plan at any time from January 1, 1998 to January 21, 1998 and who met other eligibility criteria. Participants who accepted the offer and voluntarily terminated their employment received a one-time "incentive" added to their pension benefits, regardless of whether it was calculated under the Special Update or Cash Balance formulas. VRIP did not constitute a permanent Plan change for employees who did not accept the package.

  Plaintiffs first filed their putative class action complaint on October 22, 1999, and amended it on January 28, 2000, seeking to represent a class of management employees who Page 8 elected retirement benefits from April 28, 1997 to December 31, 1997 under the Special Update program. Because the named Plaintiffs terminated their employment with AT & T prior to January 1, 1998, they were not eligible for the Voluntary Retirement Incentive Program. The amended complaint alleges that AT & T breached its fiduciary duties under § 404 (29 U.S.C. § 1104) of the Employee Retirement Income Security Act of 1974 ("ERIS A") by encouraging them to retire under less favorable conditions than what could have been obtained soon after under the VRIP. Plaintiffs filed their motion for class certification on September 23, 2002, and Defendant filed its summary judgment motion on December 16, 2002.

  Summary Judgment Standard

  Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment may be granted only when the evidence shows "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Serbin v. Bora Corp., 96 F.3d 66, 69, n.2 (3d Cir. 1996). In determining whether there remain any actual issues of factual dispute, the court must resolve all reasonable doubts in favor of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986); Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n.2 (3d Cir. 1983). At the summary judgment stage, "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 249 (1986).

  The moving party bears the initial burden of identifying evidence that demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317 (1986). Once Page 9 that burden has been met, it is incumbent upon the nonmoving party to set forth specific facts showing that there is a genuine issue for trial. Anderson, 477 U.S. at 248. The non-movant must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. Thus, if the non-movant's evidence on any essential element of the claims asserted is merely "colorable" or is "not significantly probative," the court should enter summary judgment in favor of the moving party. Anderson, 477 U.S. at 249-250. In other words, the non-moving party must "make a showing sufficient to establish the existence of [every] element essential to that party's case, and on which that ...

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