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Verizon Pension Plan Members Win Right to Sue as Group

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March 29 (Bloomberg) -- Verizon Communications Inc.’s pension beneficiaries can sue the company as a group over its transfer of $8.5 billion in plan obligations to Prudential Insurance Co. of America, a federal judge in Texas ruled.

The lawsuit on behalf of 41,000 people affected by the transfer can proceed as a class action on claims that the transaction violated federal law establishing standards for private pension plans, U.S. District Judge Sidney Fitzwater in Dallas said in an order yesterday.

Another 50,000 plan participants whose benefit payment obligations weren’t transferred to Prudential can also sue as a group, Fitzwater said. Common questions of law for the group include whether plan assets were used to pay costs that Verizon should have paid, he said.

Class certification provides leverage to plaintiffs in financing the lawsuit and negotiating a settlement. Certification is granted when judges find that claims of plaintiffs in a group contain common legal issues and individual lawsuits aren’t practical. Fitzwater didn’t rule on the merits of the case.

The Verizon transfer, under which a retired managers’ plan would be converted to an annuity, would strip participants of the protections of federal law and cause irreparable harm, the plaintiffs said in lawsuit filed Nov. 27.

Verizon, the second-largest U.S. phone company, said on Oct. 17 that it planned to shift about one-fourth of its pension obligations to Prudential to remove risk from its balance sheet. The New York-based company has said the beneficiaries’ lawsuit is without merit. Fitzwater in December refused to block the transfer.

Ray McConville, a Verizon spokesman, declined to comment on yesterday’s order.

The case is Lee v. Verizon Communications Inc., 12-cv-4834, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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