6th Circuit Reverses Trial Court’s “Mechanical Application” of Statutory Pre-Judgment Interest Rate Applied to Pension Benefit Award
The U.S. Court of Appeals for the Sixth Circuit recently affirmed a trial court’s award of more than $3 million in unpaid pension benefits but reversed the trial court’s award of pre-judgment interest at the statutory rate. The Sixth Circuit agreed that a class of plaintiffs’ claims for unpaid pension benefits were not precluded by their execution of severance agreements, which included a release of claims, because the claims allegedly released (i.e., lump sum benefit calculations) had not yet accrued at the time the severance agreements were signed, since lump sums were not yet available for those who signed the releases, and because there was no mention in the releases of future pension or ERISA claims. The circuit court held that its ruling was consistent with the law that waivers of future ERISA violations are unenforceable. Nevertheless, the Sixth Circuit reversed the trial court’s application of the statutory pre-judgment interest rate of 0.12 percent. The Sixth Circuit found the trial court’s “mechanical application” of the statutory rate, without considering case-specific factors, to be an abuse of discretion because the statutory interest rate failed to adequately compensate the plaintiffs for the lost time value of their pension benefits and failed to prevent the defendant employer’s unjust enrichment. Accordingly, the Sixth Circuit remanded the case back to the trial court to set a more appropriate pre-judgment interest rate based on the specific factors of the case. Schumacher v. AK Steel Corp. Retirement Accumulation Pension Plan, No. 1:09-cv-794 (6th Cir. Mar. 28, 2013).