Foot Locker Owes Retirees over $100 Million

Posted on: July 10th, 2017 by Steve Larson

The Second Circuit affirmed a district court ruling finding that Foot Locker owes an estimated $100 million-plus in benefits to a class of about 16,000 workers whose retirement benefits it cut. The class action suit filed against Foot Locker in 2007 alleged that the company hid that a 1996 shift to a cash balance benefit plan temporarily froze benefits for a swath of employees despite their continuing to pay in, which is known as wear-away.

The Second Circuit  opinion rejected Foot Locker’s arguments the statute of limitations began running when workers cashed out at retirement, saying if one of the most financially literate plan participants couldn’t tell a 1996 change to the company’s retirement formula had eroded his benefits, the average plan member couldn’t. The Second Circuit noted that “The [chief financial officer] of the company’s Woolworth division was not able to divine that his account was suffering from wear-away,” Judge Gerard Lynch wrote for the panel. “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 [Foot Locker plan documents] would be unreasonable.”

Foot Locker did not contest on appeal that it violated the Employee Retirement Income Security Act by hiding the benefits cut, instead arguing that the court erred by awarding class-wide relief. It argued the statute of limitations had already run out on some class members’ claims, that the court had to find each worker relied on Foot Locker’s deception to their detriment, that some class members understood their benefits were cut, and that the award overpays certain class members.

The court rejected each argument in turn, finding the court did not have to find detrimental reliance on each class member’s part to fix the plan, that plan members could not reasonably have understood they were losing benefits because Foot Locker claimed the new plan would be an improvement, and that the district court did not abuse its discretion even if Foot Locker’s overpayment argument is not “completely without theoretical appeal.”

The case is Geoffrey Osberg et al v. Foot Locker Inc. et al., case number 15-3602, in the U.S. Court of Appeals for the Second Circuit.