Federal Judge Hears Arguments in Lucent Retirees' Health Care Lawsuit

 

A hearing on the Section 420 health benefits class action suit against Lucent Technologies took place on February 28, 2008. Presiding was U. S. District Judge Peter Sheridan, the Judge in the case.  Presenting for Plaintiffs was Alan Sandals of the firm of Sandals and Associates of Philadelphia; and for defendant Lucent, Howard Shapiro. Eleven retirees and three spouses were in the courtroom audience to hear the proceedings, having traveled from Pennsylvania, New York, and various parts of New Jersey.

 

The Judge heard arguments from each party on their motions for partial Summary Judgment. The issue is whether, following a transfer of money by Lucent in September 1999 from the Management Pension Trust to a Section 420 health care account within the Pension Trust, Lucent used the correct rule to set the level of health benefits over the next several years. 

 

Plaintiffs argued that the Court need look no further than the IRS rule, the plain language of which required Lucent to “maintain benefits” regardless of their costs for 5 years.  Lucent argued variously. 

           

Lucent urged that the case does not "arise" from the language of the IRS rule but rather must be decided on the language of Plan documents which reserved to Lucent the right to amend or change or terminate the coverage.  For this reason Lucent was entitled to maintain costs. 

           

Doing so effectively froze Lucent's contribution to the health care trust for each of the next 5 years to the contribution level of 1998 while increasing health coverage cost to retirees. This point was not lost on the Judge, who at one point stated to the effect that Lucent wants its  "“cake and eat it too.  They took money out of the plan and want to increase the costs…”.

           

Lucent further argued the IRS rule is irrelevant because the Plan documents trump the IRS rule; and having the right to amend the Plan, Lucent plan administrators were within their authority to not "maintain benefits". 

           

Judge Sheridan early in the case had ordered Lucent to conduct what amounted to an "Administrative Hearing" akin to the process federal Agencies conduct to hear complaints from parties having business before the Agency. The purpose was to give class action plaintiffs a fair hearing on their complaint. In response, Lucent appointed a committee of three persons intimately connected to Lucent's decision to not "maintain benefits'. Not surprisingly this committee reported back to the Court that  Lucent had used the correct judgments in setting the level of benefits and costs to retirees following Lucent’s transfer of funds in 1999 from the Pension Trust to the Section 420 health care trust. 

 

Sandals responded  that this Committee lacked the legal expertise as well as the detachment required to make an informed decision. Shapiro countered that the Court was obliged to "defer to" the Committee's determination, much as a federal court must give due deference to an administrative agency determination. 

The Judge took umbrage at Shapiro's argument that the Court should decide the case on the Plan documents, saying at one point: "Don't you think that the Court has the right to look at the statute?"
  

According to LRO members who attended, the Judge was attentive, appeared well informed, asked both sides pointed questions, and seemed to understand the legal issues underpinning the question of Lucent’s liability.  The Judge indicated he would render his decision before the end of March. If the Judge finds Lucent liable, the question of damages will next be addressed.

 

 

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