Elizabeth A. Clemons, David R. Khaliel, and Larry W. Taylor, on behalf of themselves and all other similarly situated individuals, Plaintiffs-Appellees/Cross-Appellants,
Norton Healthcare Inc. Retirement Plan, Defendant-Appellant/Cross-Appellee.
Argued: June 22, 2017
from the United States District Court for the Western
District of Kentucky at Louisville. 3:08-cv-0069-Thomas B.
Russell, District Judge.
L. Pryatel, KASTNER WESTMAN & WILKINS, LLC, Akron, Ohio,
Michael D. Grabhorn, GRABHORN LAW OFFICE, PLLC, Louisville,
Kentucky, for Appellees/Cross-Appellants.
L. Pryatel, Kenneth M. Haneline, KASTNER WESTMAN &
WILKINS, LLC, Akron, Ohio, Lira A. Johnson, Michael P. Abate,
DINSMORE & SHOHL LLP, Louisville, Kentucky, for
Michael D. Grabhorn, Andrew M. Grabhorn, GRABHORN LAW OFFICE,
PLLC, Louisville, Kentucky, William T. Payne, Joel R. Hurt,
FEINSTEIN DOYLE PAYNE & KRAVEC, Pittsburgh, Pennsylvania,
Before: SILER, McKEAGUE, and WHITE, Circuit Judges.
McKEAGUE, Circuit Judge.
appeal is the latest installment in an ERISA litigation saga
that has spanned almost ten years. At the risk of
oversimplifying their case, the Plaintiff- Retirees claim
that Defendant Norton Healthcare, Inc. Retirement Plan
("Norton") underpaid them under the terms of the
plan. The district court found that the plan was unambiguous
in the Retirees' favor. We agree with the district court
on most issues. However, because the Plan is ambiguous in one
crucial respect and may not comply with ERISA in another, we
VACATE the district court's summary
judgment order and REMAND for further
examination of those issues. Consequently, we also
VACATE the district court's damages
order, including its certification of a class under Rule
23(b)(1)(A) and (b)(2) during the damages stage. In doing so,
we mean no slight to the district judges and their staff, who
ought to be praised for their commitment to this case and for
their patience with the complex issues it presents.
Elizabeth A. Clemons, David R. Khaliel, and Larry W. Taylor
("the Retirees") were employed by Norton
Healthcare. They are covered by a plan ("the Plan")
established to benefit former Norton employees. In January
2008, the Retirees brought a putative class action under
ERISA, alleging Norton underpaid retirees who elected to take
their pension as a lump-sum payment. The district court
certified a class in 2011 and eventually granted summary
judgment to the Retirees. Damages have not been reduced to a
sum certain, but the district court adopted the Retirees'
formula for calculating damages, awarded pre-judgment
interest at a fixed rate, and entered a final judgment for
the Retirees. Collateral proceedings indicate that the total
amount at issue is between sixty and seventy million dollars.
sides appealed the judgment. Norton (technically, the
appellant) disputes the district court's interpretation
of the Plan, the standard of review employed by the district
court, class certification, and the district court's
adoption of the Retirees' proffered damages formula. The
Retirees (technically, the cross-appellants), ask us to apply
a longer statute of limitations and quibble with the
appropriate rate of prejudgment interest, in addition to
disagreeing with Norton's arguments on appeal. After the
Retirees filed their cross-appeal, Norton balked, asserting
that we lack jurisdiction over the entire case because the
district court's last order was not final under 28 U.S.C.
facts relevant to this appeal are straightforward and
undisputed. In 1991, Norton merged two predecessor plans (the
"MEH Plan" and the "NKC Plan") into one
Plan, which is the defendant here. The Plan is a
single-employer plan governed by ERISA, funded by Norton, and
maintained under a written document (the "Plan
Document"). Although the initial Plan was established in
1991, the most recent, restated Plan Document became
effective January 1, 1997. Since then, it has been amended
January 1, 1997, the Plan used two basic formulas for pension
benefits. First, it included a traditional defined-benefit
formula applicable only to members of the predecessor plans
from MEH and NKC. It also included a cash-balance formula
applicable to all other plans. See Norton Plan
§ 4.03. In 2004, the Plan was amended to tie off the
predecessor plans; that is, to end accruals under the
defined-benefit formulas and allow further accruals only
under the cash-balance benefit formula established in the
its iterations, the Plan provides for benefits for
"normal" retirement at age 65, late retirement,
early retirement, and disability retirement. §§
4.03-4.07. The Plan allows participants who are at least 55
years old and have at least 10 years of service to retire
early. §§ 2.22, 4.05(a). The Plan allows retirees
to take their benefit in the "Basic Form" or in one
of six alternative forms. § 4.02(a)-(b). One of those
alternative forms is a lump-sum payment received on the date
of retirement. § 4.02(b)(6).
Retirees here are all former Norton employees who (a) retired
after the 2004 amendments became effective and (b) elected
the lump-sum benefit. On January 30, 2008, they filed their
first Class Action Complaint. The case was assigned to Judge
Jennifer B. Coffman.
two years of motion practice and class-certification
discovery, the Retirees filed the operative complaint on May
10, 2010. Explaining the core of their allegations, the
On behalf of themselves and others similarly situated,
Plaintiffs challenge the calculation of their pension
benefits as follows:
a. the Defendant Plan's failure to include the value of
the "increasing monthly income"
("cost-of-living") in the calculation of
participant lump sum benefits and in the calculation of
participant "cash balance" starting balances;
b. the Defendant Plan's failure to include the value of
early retirement subsidies in the calculation of participant
lump sum benefits and in the calculation of participant
"cash balance" starting balances; and/or
c. the Defendant Plan's failure to calculate participant
lump sum benefits according to the contra[c]tual formula.
17, 2010, the Retirees filed a motion for class
certification. They sought certification under Rule
23(b)(1)(A), (b)(2), and (b)(3), defining their proposed
All participants in the Norton Healthcare, Inc. Retirement
Plan, its predecessors and successors, whose contractual lump
sum pension benefits:
(1) did not include the value of the basic form of benefit -
an "increasing monthly retirement income" (annual
cost-of-living adjustment) - when election of such basic form
would have yielded the highest value for the participant;
(2) did not include the value of the "alternative"
lump sum benefit where the basic form of benefit is
multiplied by 212, when election of such alternative form
would have yielded the highest value for the participant;
(3) did not include the value of the early retirement
district court granted the motion and certified the class
under Rule 23(b)(1)(A) and (b)(2), finding Norton's
counterarguments to be improperly merits-based. It also
appointed Khaliel and Taylor as class representatives, but
rejected Clemons, reasoning that the Retirees had not
satisfied the typicality requirement as to her. The district
court defined the class as requested by the Retirees. In
April 2011, the parties began merits discovery. Meanwhile,
Norton petitioned for interlocutory review of the
certification order. We denied the petition.
the district court, Norton moved for partial summary
judgment. The basis for the motion was that Kentucky's
five-year statute of limitations for statutory claims
applied, and that all claims related to benefits paid before
January 30, 2003 should be dismissed. See Ky. Rev.
Stat. Ann. § 413.120(2). The Retirees countered that
their claims were timely because Kentucky's fifteen-year
statute of limitations for claims based on a written contract
should apply. See Ky. Rev. Stat. Ann. §
413.090(2). The district court denied the motion. The court
reasoned that the dispute "centers around the
plaintiffs' rights under their contract with [Norton],
" and that the Retirees were not seeking to enforce any
statutory rights created by ERISA.
we denied interlocutory appeal of the class certification
decision, the Supreme Court decided Wal-Mart Stores, Inc.
v. Dukes, 564 U.S. 338 (2011). On July 24, 2012, Norton
attacked the existing class certification, citing
Dukes and West v. AK Steel Corp., 484 F.3d
395 (6th Cir. 2007). Norton asked the district court to
decertify the class entirely because the highly
individualized nature of pension calculations forestalled a
finding of commonality. Norton also attacked the merits of
Khaliel's and Taylor's individual claims and argued
that certification under Rule 23(b)(2) was improper in light
of Dukes and West.
district court denied the motion. The court found
Dukes inapplicable, reasoning that the commonality
requirement was satisfied because Norton "stipulated
that its actuaries used a consistent methodology when they
calculated benefits, " and "the crux of the
Plaintiffs' claims" was whether that methodology was
correct. The district court also concluded that even if
certification under Rule 23(b)(2) was improper, the class
"would remain properly certified under Rule
Norton's motion to decertify was pending, the parties
completed merits discovery and filed cross-motions for
summary judgment. Shortly after briefing on these motions was
completed, Judge Coffman retired, and the case was reassigned
to Judge Thomas B. Russell.
August 23, 2013, Norton filed a motion asking Judge Russell
to reconsider Judge Coffman's ruling on the
statute-of-limitations issue. The district court granted the
motion, concluding that Fallin v. Commonwealth Indus.,
Inc., 695 F.3d 512 (6th Cir. 2012), and Redmon v.
Sud-Chemie Inc. Ret. Plan for Union Emps., 547 F.3d 531
(6th Cir. 2008), compelled the conclusion that Kentucky's
five-year limitations period for statutory claims applied.
October 31, 2013, the district court granted summary judgment
to the Retirees. Only the issues germane to this appeal are
the district court held that, because the Plan gives its
administrator discretion to construe the terms of the plan,
arbitrary-and-capricious review applies. Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).
After announcing that conclusion, however, the court engaged
in a lengthy discussion of whether the doctrine of contra
proferentum should also apply. Relying primarily on
dicta in University Hospitals of Cleveland v. Emerson
Electric Co., 202 F.3d 839 (6th Cir. 2000), the court
concluded that there is "no significant reason why this
basic and equitable contract principle should not apply in
the context of ERISA contracts."
the district court concluded that the Plan documents
unambiguously favored the Retirees' position on most
issues. This included a finding that the 2004 amendments
created an "early retirement subsidy" and that the
Plan called for any lump sum to account for an increasing
monthly income for sixty months certain. The court
supplemented its discussion by stating, "However . . .
to the extent that any of the relevant provisions are
ambiguous, they would be construed against the
drafter and in favor of plaintiffs." However, the
district court did agree with Norton on a structural issue,
applying the last paragraph of a disputed section globally,
rather than only to the subparagraph immediately preceding
the district court agreed with the Retirees that, regardless
of the various formulas set out in the Plan, "ERISA
require[s] that a participant's lump sum benefit be the
'actuarial equivalent' of the [Monthly Retirement
Income]." 29 U.S.C. § 1054(c)(3).
Fourth, the district court declined to attempt any
actual damages calculations, instead leaving them "for
the parties to perform, consistent with the Court's
instructions." To that end, the court ordered Norton to
recalculate the class members' pensions within 45 days,
and the Retirees to raise any objections within 14 days
the district court's rulings into a pension formula
proved more difficult and contentious than expected. With the
Retirees' agreement, the deadline was extended by 45
days. However, Norton continued to struggle to assemble the
necessary records and cull the requisite data. The parties
therefore jointly requested an open-ended extension, based on
Norton's promise that once its spreadsheet detailing all
the data and calculations was completed, Norton would share
the spreadsheet with the Retirees and make the underlying
hard-copy documents available to the Retirees. The parties
also promised to discuss Norton's new formula and attempt
to resolve any disagreements. The district court granted the
open-ended extension request on January 24, 2014.
cooperation broke down about a year later. Subsequently, the
parties offered competing damages formulas, both supported by
expert affidavits. The Retirees also requested pre-judgment
interest at a rate of eight percent. Norton argued that the
Retirees were not entitled to any pre-judgment interest.
Norton also used its damages brief to reargue the
district court issued its damages opinion on January 6, 2016
(more than two years after its liability ruling). The
court's order addresses a variety of issues, however, and
was not limited to damages.
the district court ordered that the Retirees' formula be
used to recalculate class members' pensions, explaining:
After extensively reviewing the parties' formulas and
their arguments, this Court finds that Norton did not provide
a formula that will ensure that the recalculated lump sums
are at least actuarially equivalent to the Monthly Retirement
Income. Norton goes to great lengths to critique the
Class's proposed formula, but it does not adequately
explain to this Court how its own formula results in an
actuarially equivalent lump sum. Norton makes several
conclusory statements that its formula results in an
actuarial equivalent lump sum, but it does little to explain
to the Court how this is so. Alternatively, the Class has
gone to great lengths to not only create a formula and
demonstrate how it is actuarially equivalent but also to
respond to any of Norton's criticisms concerning its
the district court rejected Norton's request to decertify
the class entirely. The district court also rejected
Norton's request to interpret its liability holding in a
way that would narrow the scope of the class.
the district court concluded that the Retirees are entitled
to pre-judgment interest. However, the court found that eight
percent "would be excessive." Employing the
post-judgment interest statute and seeking to avoid "the
complexities of compounding interest, " the district
court instead awarded pre-judgment interest at a flat two
percent rate. 28 U.S.C. § 1961.
Finally, the district court concluded its damages opinion
with the following:
To conclude that this matter is complex is probably an
understatement. . . . The complexity of comprehending and
analyzing lengthy interrelated documents and deciphering the
nuisances therein has been time consuming on the part of
counsel and the Court. The Court is not inclined to entertain
any motion for reconsideration. Frankly, the Court has given
this matter its best shot. Too much time has elapsed between
the earlier ruling and the current posture of this case. The
Court originally thought agreeing on a formula would not be a
time consuming process. Obviously, it was time consuming. It
is time for another court, if the parties are so inclined, to
look at this matter with new eyes.
district court then entered judgment for the Retirees
"in an amount consistent with" its opinion, and
stated that its judgment was "final and
filed a notice of appeal on January 20, 2016. The Retirees
filed a notice of cross-appeal on February 2, 2016. On May
27, 2016, Norton filed a motion to dismiss the cross-appeal
for lack of jurisdiction, arguing the district court has not
entered a final order for purposes of 28 U.S.C. § 1291.
jurisdiction over this appeal. Norton's motion to dismiss
court of appeals has jurisdiction over all "final
decisions of the district courts." 28 U.S.C. §
1291. A district court's statement that its judgment is
final and appealable does not make it so. Liberty Mut.
Ins. Co. v. Wetzel, 424 U.S. 737, 742 (1976); Day v.
NLO, Inc., 3 F.3d 153, 155 (6th Cir. 1993). Rather, a
"final decision is 'one which ends the litigation on
the merits and leaves nothing for the [district] court to do
but execute the judgment.'" Gelboim v. Bank of
Am. Corp., 135 S.Ct. 897, 902 (2015) (quoting Catlin
v. United States, 324 U.S. 229, 233 (1945)). Generally,
"[a] judgment is not final for purposes of appeal when
the assessment of damages remains, " unless the
calculation is purely ministerial. Woosley v. Avco
Corp., 944 F.2d 313, 316-17 (6th Cir. 1991). Norton
contends that the district court's order was not final
because it has not reduced damages to a sum certain and
because "the complex actuarial calculations required to
compute the Plaintiffs' damages" under the formula
adopted by the district court "are far more than
think Woosley controls the outcome here. In
Woosley, we held that a judgment ordering the
employer to calculate backpay was final, even though the
court had yet to calculate the exact amount owed. 944 F.2d at
317. As the variables necessary to calculate backpay were not
known to the court, the judgment ordered the parties to
supply stipulations about those variables, which would
automatically be incorporated into the judgment. Id.
at 316. The employer appealed before the stipulations were
filed, and the employees subsequently challenged the
jurisdiction of this Court on finality grounds, arguing that
there were still complex calculations left to be done about
which the parties were arguing. Id. at 316-17. We
denied the motion to dismiss, reasoning that although the
calculations required more than simple addition, they did not
affect the finality of the judgment. See id. In
doing so, we pointed out that "the equities between the
parties were resolved, " even though someone still had
to find a more advanced calculator before writing the check.
Id. at 317.
same is true here. The district court answered all the
parties' merits questions, and found that Norton had
misapplied the terms of the Plan. The district court then
told the parties exactly how to recalculate those
Retirees' benefits-by using the Retirees' proposed
formula. Thus, there are no unanswered legal or equitable
questions in this case. Norton also does not contend it lacks
the data necessary to perform the calculations, or that the
parties dispute the accuracy or authenticity of the relevant
records, so there are no unanswered factual questions either.
It is undoubtedly true that the calculations required here
are complex and time-consuming. But the point made by the
Woosley panel was that complexity is not a vice in
this context. See id. The need for an advanced
understanding of applied mathematics to obey an order of the
court does not make that judgment any less final for our
purposes. The motion to dismiss is DENIED.
first thing the parties dispute is the standard of review
applicable to Norton's interpretation of the plan
documents. Ordinarily, a plan administrator's
denial-of-benefits decision is reviewed de novo.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 115 (1989). But if the plan "gives the
administrator or fiduciary discretionary authority to
determine eligibility for benefits or to construe the terms
of the plan, " we review such decisions under the
arbitrary-and-capricious standard. Id. at 111, 115.
Further, if the plan gives the administrator discretion to
make factual determinations, arbitrary-and-capricious review
extends to those issues as well. Shaw v. AT&T
Umbrella Benefit Plan No. 1, 795 F.3d 538, 547 (6th Cir.
2015). However, "if a benefit plan gives discretion to
an administrator or fiduciary who is operating under a