Schumacher v. AK Steel Corp.

711 F.3d 675

William J. SCHUMACHER, on behalf of himself and all persons similarly situated, Plaintiff–Appellee/Cross–Appellant,

v.AK STEEL CORPORATION RETIREMENT ACCUMULATION PENSION PLAN and AK Steel Corporation Benefit Plans Administrative Committee, Defendants–Appellants/Cross–Appellees.

Nos. 12–3061, 12–3063.

United States Court of Appeals, Sixth Circuit.

Argued: Oct. 10, 2012.

Decided and Filed: March 28, 2013.

ARGUED:Andrew R. Kaake, Frost Brown Todd LLC, Cincinnati, Ohio, for Appellants/Cross–Appellees. Matthew T. Hurst, Susman, Heffner & Hurst LLP, Chicago, Illinois, for Appellee/Cross–Appellant. ON BRIEF:Andrew R. Kaake, George E. Yund, Frost Brown Todd LLC, Cincinnati, Ohio, for Appellants/Cross–Appellees. Matthew T. Hurst, Susman, Heffner & Hurst LLP, Chicago, Illinois, for Appellee/Cross–Appellant.

Before: BATCHELDER, Chief Judge; KEITH and MARTIN, Circuit Judges.

OPINION

DAMON J. KEITH, Circuit Judge.

This class action case involves AK Steel's employees' Employee Retirement Income Security Act (ERISA) claims for a “whipsaw” calculation of their benefits from an AK Steel pension plan in which they participated before terminating their employment. This case is related to the case of West v. AK Steel Corp. Retirement Accumulation Plan, 484 F.3d 395 (6th Cir.2007). The Class was originally involved in the West litigation and included identical claims against the same defendants. The Class was excluded from the West litigation due to the class members' execution of a severance agreement and release that each of them signed during the West litigation. The district court ruled in favor of the Class, awarding partial summary judgment and an award of pre-judgment interest.

Appellants appeal three district court orders: 1) denial of a motion to dismiss; 2) grant of Schumacher's motion for class certification; and 3) grant of Schumacher's motion for partial summary judgment on liability. The Class cross-appeals the district court's decision to award pre-judgment interest at a rate of 0.12%.

For the reasons that follow, we REVERSE the district court's award of prejudgment interest and REMAND for further proceedings consistent with this opinion. We AFFIRM the district court's judgment in all other respects.

FACTUAL BACKGROUND

Plaintiff–Appellee Cross–Appellant William Schumacher brought this case on behalf of himself and all persons similarly situated (collectively referred to as the “Class”). The Class in this case is a group of ninety-two former employees of AK Steel Corporation (“AK Steel”) who participated in the Retirement Accumulation Pension Plan (“Plan” or “RAPP”). They each elected to receive a lump-sum payment of their retirement benefits under the Plan which is administered by AK Steel Corporation Benefit Plans Administrative Committee (“Administrative Committee”). They allege that the Defendants failed to properly calculate their payment. Their claims are essentially identical to the claims that were presented in West v. AK Steel Corp. Retirement Accumulation Pension Plan, 484 F.3d 395 (6th Cir.2007), where this Court affirmed the district court's decision that the Plan failed to utilize the so-called “whipsaw” formula to properly calculate lump-sum payments. Plaintiffs in this case were initially included within the definition of the class that was certified in West, but were ultimately excluded due to release agreements they signed after the West litigation began.

West Litigation

After entry of the West class certification order, the Defendants brought to the attention of the district court that AK Steel had undertaken layoffs in the fall of 2003 after the litigation began, and had offered severance packages to some 300 employees. Ninety-two of the West class members accepted AK Steel's offer and executed severance agreements that generally included a release of “all claims” against AK Steel and its “related entities.” The West Defendants moved for summary judgment against these ninety-two individuals. Alternatively, Defendants argued these individuals should be excluded from the already-certified class. Out of an abundance of caution, the district court also excluded the ninety-two individuals from the West class.

The West plaintiffs ultimately prevailed on the merits of their case and were awarded over $37 million in additional benefits under the whipsaw calculation, in addition to pre-judgment interest at the statutory post-judgment rate under 28 U.S.C. § 1961(a). At the time of judgment, the rate was 4.7%, which resulted in over $9 million in pre-judgment interest. We affirmed the district court's holdings.

Schumacher Litigation

The complaint in the present case was filed on October 29, 2009, on behalf of a class of all participants in the Plan seeking “whipsaw” benefits who had been excluded from the West class. They received lump-sum payments between February 1, 1996 and August 17, 2006, and were previously excluded from other litigation due to their execution of a severance agreement and release. Therefore, some of the following facts occurred during the pendency of the West litigation.

The layoffs of the ninety-two plaintiffs in the present case started in the midst of the West litigation. The Human Resources Managers (“HR”) notified the plaintiffs that they were being terminated. The employees were not told of the ongoing West litigation and neither was HR. HR followed a script when requesting the signatures. During the meeting with HR, employees were told that they would “receive information concerning pension benefits in the mail approximately 60–90 days following termination.”

The agreements did not mention pension benefits, the Plan, the administrative committee, or ERISA. Paragraph 9 of each agreement states:

You waive and release and forever discharge, on behalf of yourself and your heirs, representatives and assigns, AK Steel Holding Corporation, AK Steel Corporation and its predecessors, and past, current and future, subsidiaries, related entities, their officers, directors, shareholders, agents, employees, successors, or assigns, from any and all claims, causes of action, and rights of recovery of any kind or nature, including without limitation back or front pay or benefits, damages of any sort, debts, liabilities, and contract rights, and any costs, fees, or other expenses or attorneys' fees incurred in law or in equity, whether known or unknown. This waiver, release and discharge also includes but is not limited to any claims, whether known or unknown (including those arising out of or relating to your employment with the Company and/or the separation of your employment with the Company) for discrimination, slander, libel, damage to reputation, emotional distress, attorney fees, compensatory damages, punitive damages, tort damages, breach of contract, quasi-contract, promissory estoppel, any violation of federal, state, local, statutory or common law, including but not limited to the Age Discrimination in Employment Act of 1967, the Older Workers' Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Family and Medical Leave Act, and the Americans with Disabilities Act. However, you do not waive, nor shall this Agreement be construed to waive, any right which is not subject to waiver as a matter of law.... However, [you do not waive any rights or claims you may have under the federal Age Discrimination in Employment Act that arise after the date you sign this Agreement. In addition,] ¹ you do not waive, nor shall this Agreement be construed to waive, any right which is not subject to waiver as a matter of law.

R. 87, at 5.

Schumacher, the named Plaintiff, was one of the employees who accepted a severance agreement and release. He worked at AK Steel and its predecessor, Armco Inc., from June 1962 until he retired in November 2003 at the age of 60. Schumacher executed a severance agreement sometime between late 2003 and early 2004. He, and the other Class members, claimed their pension benefits after the execution of the Severance Agreements, requesting a lump-sum payment. Schumacher's agreement did not include a whipsaw calculation.

Pre–Judgment Interest

Both the West and Schumacher classes were awarded pre-judgment interest under 28 U.S.C. § 1961(a). At the time of the West judgment, the class received pre-judgment interest at an annual rate of 4.7%. The Schumacher class received a rate of 0.12%.

PROCEDURAL BACKGROUND

Schumacher and the Class were originally included in the West Class on March 9, 2004. West, No. 02–0001, R. 55. The district court eventually excluded them from the West class “out of an abundance of caution.” Schumacher was notified of his exclusion from the West class.

On October 29, 2009, Schumacher filed the present suit to recover benefits on behalf of himself and the class. On March 8, 2010, the district court denied Defendants' motion to dismiss, in which they raised a statute of limitations issue. On January 24, 2011, the court issued an order granting Plaintiff's motion for class certification. On June 27, 2011, the court granted Plaintiffs' motion for partial summary judgment.

The parties stipulated that the amount of unpaid benefits to this class was $3,010,060. On October 12, 2011 the district court issued an order ruling that prejudgment interest was due at the federal statutory rate established by 28 U.S.C. § 1961(a). At the time of the judgment, that rate was 0.12%. Final Judgment for Plaintiffs was entered on December 12, 2011. Plaintiffs were awarded damages of $3,010,060 and pre-judgment interest of $29,094.

STANDARD OF REVIEW

This Court reviews a dismissal de novo. Hughes v. Sanders, 469 F.3d 475, 477 (6th Cir.2006). We also review a district court's grant of a motion for summary motion de novo, construing the evidence and drawing all reasonable inferences in favor of the non-moving party. Ireland v. Tunis, 113 F.3d 1435, 1440 (6th Cir.1997).

Certification of a class action is reviewed for an abuse of...