U.S. Second Circuit - The FindLaw 2nd Circuit Court of Appeals Opinion Summaries Blog

Foot Locker Loses Appeal of $180 Million Verdict for ERISA Violations

Foot Locker stepped on its employees, but didn't expect them to kick back.

In Osberg v. Foot Locker, Inc., the plaintiffs won a $180 million judgment against the company for misleading them about their pension plan. The company appealed, saying it was an unfair windfall to more than 10,000 employee claims that were time-barred.

The U.S. Second Circuit Court of Appeals rejected the arguments, saying the claims were not barred because the workers could not reasonably determine when they had been wronged.

ERISA

In the class action filed in 2007, the plaintiffs sued the defendant under the Employee Retirement Income Security Act for failing to disclose that converting to a cash balance plan would diminish employee pensions. After going up to the appeals court and back down again, the trial judge entered judgment for the cover up in 2015.

"For that conversion, Foot Locker used a formula that guaranteed that the vast majority of participants' initial account balances would be worth less than the value of their accrued pension benefits under the old plan," the court said on appeal.

Although the plan included a stopgap measure, Foot Locker did not dispute the finding that the plan caused a "wear-away" of benefits. Instead, the company said that the plan participants should have filed their claims individually and that the complaint was filed beyond their applicable statutes of limitations.

"Wear-Away"

The appeals court said the statute had not run because Foot Locker concealed the plan's detriment from employees. Not even the chief financial officer of the company's Woolworth division, with an individualized statement and the Summary Plan Description, could "divine that his account was suffering from wear-away."

"To expect the average plan participant, who the district court found had a high-school level of education, to do so on the basis of the opaque guidance in the SPD would be unreasonable," the court said.

The country's largest business group and the Department of Labor filed amicus briefs in the case.

Related Resources: