A group of employees worked for the credit union of Pfizer, Inc. They were covered by a severance plan that provided severance benefits to employees terminated after a change in control of the company. When Pfizer acquired Wyeth, the employees began working for Benchmark Federal Credit Union—an entity legally distinct from Pfizer—and were told they could not receive severance benefits because they had been transferred, rather than terminated. After unsuccessfully seeking severance benefits through the plan’s internal claims process, the three named plaintiff employees filed a putative class action.
According to the district court, only the three named plaintiffs had claims because they were the only individuals who had timely submitted their claims for severance benefits through the plan’s internal process (or had exhausted their claims). No other employees were permitted to join the lawsuit because they had failed to exhaust.
AARP Foundation Litigation attorneys filed AARP’s friend-of-the-court brief on the issue whether the three named plaintiffs’ exhaustion of their claims was sufficient to exhaust the claims of the class members. AARP argued that the judicially created exhaustion requirement is not intended to place a meaningless procedural hurdle in front of plaintiffs who desire to bring claims for violations of their Employee Retirement Income Security Act (ERISA) rights as long as the named plaintiffs had exhausted their rights. AARP noted that exhaustion was futile, as the three named plaintiffs received the same exact denial letters, and there was nothing to indicate that the plan would treat claims by the other class members any differently.
The U.S. Court of Appeals for the Third Circuit did not decide the exhaustion issue, but instead jumped to the merits. The Court held that the employees were not entitled to severance benefits.
What’s At Stake
Requiring exhaustion by individual class members of the internal claims process would not only waste plan resources, but also act as a barrier to participants being able to protect their employee benefit rights.
The U.S. Court of Appeals for the Third Circuit declined to decide whether unnamed plaintiffs must exhaust administrative remedies in order to be part of an ERISA class action. Feeko v. Pfizer, Inc., 2016 U.S. App. LEXIS 276 (3d Cir. 2016).