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Jamal J. Kifafi, Individually and On Behalf of All Others Similarly Situated v. Hilton Hotels Retirement Plan

November 23, 2011

JAMAL J. KIFAFI, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED PLAINTIFF,
v.
HILTON HOTELS RETIREMENT PLAN, ET AL., DEFENDANTS.



MEMORANDUM OPINION

Plaintiff Jamal J. Kifafi brought this action on behalf of himself and similarly situated individuals for violations of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended 29 U.S.C. §§ 1001 et seq., in the Hilton Hotels Retirement Plan. Defendants are the Plan, the individual members of the Committee of the Plan, the Hilton Hotels Corporation, and individual Hilton officers or directors (collectively, "Defendants" or "Hilton"). On October 24, 2011, Defendants filed [269] Notice of Defendants' Proposed Plan Amendment Filed in Response to the Court's August 31, 2011 Order. Presently before the Court is Plaintiff's [274] Objections to Hilton's Proposed Plan Amendments. Defendants filed a revised proposed amendment in connection with their [279] Response to Plaintiff's Objections on November 21, 2011. For the reasons explained below, the Court finds Plaintiff's objections to Sections F.1, F.2(a), and F.2(b)(2) of Defendants' proposed amendment are well taken, and orders Hilton to enact the amendment as revised by the Court to correct these errors.*fn1 The remainder of Plaintiff's objections, to the extent they have not already been resolved by Defendants' proposed plan amendment, are hereby overruled.

I. BACKGROUND

The long and complex factual history of this case has been detailed on numerous occasions in the Court's prior opinions. See, e.g., Kifafi v. HiltonHotels Retirement Plan, 616 F. Supp. 2d 7 (D.D.C. 2009) (summary judgment); Kifafi v. Hilton Hotels Retirement Plan, 736 F. Supp. 2d 64 (D.D.C. 2010) (initial remedial order); Kifafi v. Hilton Hotels Retirement Plan, -- F. Supp. 2d --, 2001 WL 3836455 (D.D.C. Aug. 31, 2011) (final remedial order). The relevant facts for purposes of this opinion are set forth briefly.

In ruling on the parties' cross motions for summary judgment, the Court found Hilton had violated ERISA's anti-backloading provisions by"providing inordinately low rates of accrual [of benefits] in the employee's early years of service . . . [and] concentrating the accrual of benefits in the employee's later years of service." 616 F. Supp. 2d at 23-26 (quoting Langman v. Laub, 328 F.3d 68, 71 (2d Cir. 2003)). To remedy this violation, the Court ordered the parties to recalculate benefits for the members of the relevant subclass based on the formula proposed by Defendants. 736 F. Supp. 2d at 72-73. Defendant's proposed formula set a minimum accrual rate for benefits determined by capping the offset for Social Security benefits employed by the plan. See id. at 71. During the subsequent round of briefing on outstanding remedial issues, Defendants specifically proposed the following formula for post-1981 service:

1.4325% of average monthly compensation ("AMC") multiplied by years of benefit service ("YBS") to a maximum of 25 years, plus 0.375% of AMC multiplied by YBS in excess of 25 years (up to 45 years), less offsets for union and New York Hotel Association ("NYHA") plan benefits that are provided for in the Plan.

Defs.' Unresolved Remedial Issues Resp. Br., ECF No. [244], at 7. Defendants proposed a similar formula for pre-1982 service, but without the adjustment for YBS in excess of 25 years. Id. at 8. The Court adopted Defendants' proposal for post-1981 service and further ordered Hilton to use the following formula in calculating benefits for pre-1982 service: 1.125% of AMC multiplied by YBS, less offsets for union and NYHA plan benefits that are provided for in the plan. 8/31/2011 Order at 6. The Court ordered Hilton to amend the Plan to provide benefits in accordance with these formulas. Id. at 7. Hilton filed Amendment 2011-1 to the Hilton Hotels Retirement Plan on October 24, 2011. See ECF No. [269].

III. DISCUSSION

Plaintiff lodges essentially eight objections to Hilton's proposed amendment. For the sake of clarity, the Court shall address the objections in the order in which they appear in the proposed amendment itself. Because Defendants added several provisions to the proposed amendment in response to Plaintiff's Objections, the Court will analyze the proposed amendment as revised in Attachment 1 to Defendants' Responses.

A. The Reference to Fee and Incentive Awards in the Introductory Clause is Permissible

Hilton's proposed plan amendment begins with four "WHEREAS" clauses introducing the purpose of the amendment. See Proposed Amend. at 1. The final clause notes in relevant part that "should the Court award compensation to Plaintiff Jamal J. Kifafi, the Kifafi Litigation Plaintiff class, and/or his counsel (including, but not limited to, attorneys' fees or an incentive award) from a common fund that includes any increases that result" from the amendment, "such awards will proportionally reduce the benefits otherwise payable" under the amendment. Id. Plaintiff objects to this language on the basis that it improperly presumes that any incentive or fee award would be from the common fund, contrary to the attorney fee provision in ERISA.

Pl.'s Obj. at 6.

Section 502(g)(1) of ERISA provides that in actions such as this, the Court "in its discretion may allow a reasonable attorney's fee and costs of action to either party." See Bezio v. Gen. Elec. Co., 655 F. Supp. 2d 162, 167-78 (N.D.N.Y. 2009) (approving ERISA settlement containing fee award of $10 million, not payable out of the class recovery). However, the Court may also award attorney's fees from the common fund in ERISA litigation. See In re Broadwing, Inc., ERISA Litig., 252 F.R.D. 380, 380-81 (S.D. Ohio 2006) (awarding attorney's fees of $2.53 million from the common fund). Plaintiff's counsel has indicated they intend to seek fees from the common fund. See Pl.'s Br. on Equit. Relief, ECF No. [211], at 38 ("After judgment is entered in this case, Class counsel intend to request a common fund fee award."); id. at 39 ("Class counsel also intend to request a common fund award from Hilton under the 'catalyst' theory based on the benefits that have been conferred under the Amendment 1999-1 that Hilton adopted in direct response to this litigation.").

In light of the discretion accorded the Court in awarding fees and class counsel's own statements, the "whereas" clause proposed by Hilton is appropriate. Contrary to Plaintiff's argument, the clause does not presume an award from the common fund, but rather simply notes that if an award of fees or incentives is payable out of the common fund, the benefits payable to class members would be reduced. In drafting the proposed amendment, Defendants reasonably relied on the representations made to this point by class counsel as to what type of fees would be sought. Defs.' Resp. at 7-8. To avoid any confusion, the Court has revised the language of the clause to note that the Court may award attorney's fees and/or incentives from the common fund or from Hilton directly, and that an award from the common fund would proportionally reduce the benefit increases resulting from the proposed amendment. The parties have yet to make, and the Court has yet to consider any request for fees or incentive awards, and thus does not want Participants to be misled as to what type of fees or awards may be granted and the potential implications on the Participants' benefit increases under the Plan.

B. Hilton Improperly Attempts to Stay the Effect of the Court's Judgment Without Moving ...


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