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Update:
- A Texas federal judge denied BP’s attempt to exclude certain retirees from a class action lawsuit alleging BP Corp. North America and BP Retirement Accumulation Plan misrepresented and underfunded the retirement plan for many employees.
- On Jan. 20, U.S. District Judge George C. Hanks Jr. denied BP’s motion to dismiss the lawsuit against it and exclude nearly 4,700 retirees who it said have already brought their claims in a previous pension-related lawsuit.
- “Viewed pragmatically, the facts of the two cases are not sufficiently related to implicate res judicata,” Judge Hanks wrote in his order.
- The class action lawsuit refers to BP’s acquisition of Standard Oil of Ohio (Sohio) in 1987.
- As part of the deal, BP was to continue Sohio’s defined benefit pension plan; however the plaintiffs allege the company later unlawfully changed the terms of their pension plans and underpaid their retirement benefits.
(April 15, 2016)
Both current and former employees of BP have filed a class action lawsuit against BP Corporation North America and BP Retirement Accumulation Plan for misrepresenting and underfunding the retirement plan for certain employees.
The class action lawsuit alleges that BP acquired Standard Oil of Ohio (Sohio) in 1987, “and made it the cornerstone of BP America.” As part of the deal, current Sohio employees were kept on by BP, and BP continued Sohio’s defined benefit pension plan.
The complaint explains that the Sohio retirement plan was a basic “final average pay” pension plan, where retired employees are paid a pension after they retire based on their salary and how many years they worked for Sohio.
BP modified the Sohio defined benefit plan when it merged together other retirement plans in 1988 to form the large Retirement Accumulation Plan. The lawsuit claims that BP did not notify its employees of any changes at that time. Effective Jan. 1, 1989, BP changed the way it calculated its employees’ retirement plan, from the “final average pay” defined benefit plan to a “cash balance” plan.
The BP retirement plan class action lawsuit claims that the typical “result is a significantly lower rate of accrual, and in most cases, a lower total pension benefit than under the original final average pay formula.” According to the complaint, BP also used an unrealistically high interest rate of eight percent in its calculations, which allowed BP to place less money in employees’ accounts during this conversion. The lawsuit explains that the higher the interest BP assumed the accounts would accrue, the lower their initial funding needed to be.
In addition, the class action lawsuit alleges that BP did not inform its employees of the modified formula until June of 1989, and that it misrepresented “that the conversion would not affect the amount, timing, or form of payment of any benefit provided by the prior plan.” The complaint accuses BP of intentionally engaging in a “communication campaign” that mislead its employees and omitted any potential downsides of the new formula.
When the assumed interest rate of eight percent was not met, and employees saw that their retirement benefits were not as good as expected, they filed an internal complaint with the BP Ombudsman in 2011. The class action states that in 2014 the Ombudsman sided with the employees, and told BP that it needed to provide more funds to the retirement plan to meet its promises. However, BP refused, and “recently discontinued the Office of the Ombudsman.”
Plaintiff Frederic A. Guenther states that he worked for Sohio starting in 1979, and has worked for BP since it acquired Sohio in 1987. Plaintiff Walton Fujimoto similarly worked for Sohio and BP for 37 years until he retired in 2014. Both plaintiffs claim that BP promised them an “as good or better” retirement plan from what they had with Sohio, when BP knew that was not true.
The plaintiffs seek to represent a Class of former Sohio employees who were switched to the BP Retirement Accumulation Plan. The complaint requests a separate Class for each issue: 1, lack of notice of the plan changes; 2, the “retroactive” changes that occurred on Jan. 1, 1989; and 3, the unreasonably high interest rate BP used to calculate what the values of the retirement accounts should be. The class action seeks damages and penalties for violations of federal employment laws.
Guenther and Fujimoto are represented by Peter Steilberg, III, and Philip R. Meade of Merrick, Hofstead & Lindsey, P.S., and Leander L. James and Susan Weeks of James, Vernon & Weeks, P.A.
The BP Retirement Plan Class Action Lawsuit is Fredric A. Guenther, et al. v. BP Retirement Accumulation Plan, et al., Case No. 4:16-cv-00995, in the U.S. District Court for the Southern District of Texas, Houston Division.
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