ERISA Class Action Defense Cases–Nauman v. Abbott Laboratories: Illinois Federal Court Denies Defense Motion For Summary Judgment On ERISA Class Action Complaint Holding Conduct “As A Whole” Warranted Trial

Jul 28, 2008 | By: Michael J. Hassen

Defense Summary Judgment in ERISA Class Action Complaint Erroneously Attacked Class Action Claims as Separate and Distinct, but when Defendants’ Conduct was Considered as a Whole, Genuine Issues of Material Fact Existed Sufficient to Defeat Summary Judgment Illinois Federal Holds

Plaintiffs filed a class action lawsuit against their former employer, Abbott Laboratories, and their new employer, Hospira, a newly-created corporate entity, after Abbott spun off its Hospital Products Division (HPD) to Hospira. The class action complaint alleged that the manner in which defendants spun off HPD violated sections 510 and 404 of ERISA. Nauman v. Abbott Labs., ___ F.Supp.2d ___ (N.D.Ill. July 10, 2008) [Slip Opn., at 1]. The four-count class action alleged that, in order to save money associated with the costs of its pension and retiree medical benefits plans for older workers, (1) Abbott terminated HPD employees with the specific intent of denying them retirement benefits, (2) as part of that scheme, Abbott refused to rehire employees transferred to Hospira within two years of the transfer, (3) as part of that scheme, Hospira refused to hire Abbott employees who retired and collected benefits from Abbott, and (4) Abbott breached fiduciary duties owed under § 404 “by making deliberate misrepresentations about the benefits that post-spin-off employees could expect at Hospira.” Id., at 1-2. Defense attorneys moved for summary judgment on the class action claims on the grounds that Abbott argued that it had legitimate business reasons for spinning off HPD. Id., at 2, 16. The district court held that while the claims may be subject to attack if viewed individually, when the course of conduct are viewed as whole the class action adequately presented genuine issues of material fact as to whether defendants acted with a specific intent to deny benefits to retirees in violation of ERISA.

After providing a lengthy discussion of the material facts, see Nauman, at 5-12, and the legal standard governing § 510 claims under ERISA, see id., at 12-15, and § 404 claims under ERISA, see id., at 16, the district court turned to the merits of the defense motion. The federal court admitted that by “dissecting” the claims in the class action and “examining each in isolation,” the summary judgment motions were “generally persuasive” and “convincing[],” id., at 16. But the district court explained that the motions were “premised on the assumption that the several counts of plaintiffs’ complaint arise out of independent and unrelated events,” id., at 17. The defense motions thus overlook the thrust of the class action – viz., “that the termination alleged in Count I, coupled with the policies challenged in Counts II and III, constitute a ‘scheme’ that Abbott conceived, and that the defendants jointly adopted, with the specific intent of avoiding the payment of projected benefits.” Id., at 18. The court considered defendants’ conduct “as a whole,” id., at 20, and concluded that genuine issues of material fact existed sufficient to warrant a trial on the § 510 class action claims, id., at 21-22.

With respect to the class action’s § 404 claim, the defense argued that it was under no obligation to advise employees about the benefits that would be provided by Hospira and that, in any event, plaintiffs could not demonstrate detrimental reliance. Nauman, at 22. The district court disagreed. First, genuine issues of material fact exist as to whether Hospira was truly separate from Abbott, id., at 23-24. And second, the court stated that the Seventh Circuit has never held detrimental reliance to be an element of an ERISA § 404 claim, id., at 24-25. Accordingly, the court denied the defense motions for summary judgment. Id., at 25.

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