SAN FRANCISCO (CN) — A federal judge declined to dismiss a class action brought by a California supermarket chain's workers who claim the company misrepresented medical benefits offered to non-union employees.
U.S. District Judge William Orrick ruled Friday that the four plaintiffs — Jose Luna, Katherine Baker, Edgar Popke, and Denny G. Wraske, Jr. — "plausibly alleged the remedial wrong that Save Mart breached its fiduciary duty under the Employers Retirement Income Security Act of 1974 by misrepresenting the medical benefits provided to non-union retirees."
Each of the employees had been offered medical benefits equal or better than those they might have received had they opted for union membership. They sued in August 2022, claiming Save Mart Supermarkets — a Modesto, California-based chain of 293 grocery stores and pharmacies with revenues of $4.6 billion in 2019 — broke its pledge to provide those benefits.
"These representations, which Save Mart made repeatedly up until the company announced it was terminating the non-union retiree medical plan in April 2022, were false and misleading because they obscured that the plan could in fact be
eliminated at any time, and that Save Mart did in fact intend to (and did) eliminate the plan as a cost-saving measure when that became advantageous to Save Mart, which occurred immediately upon Save Mart’s acquisition by a private equity firm from the family that had owned the company since its founding 70 years ago," the plaintiffs say in their complaint.
Orrick found several problems with Save Mart's move to quash the suit. Save Mart accused the plaintiffs of relying upon "their own subjective interpretations of vague alleged statements to extrapolate an implied promise that Save Mart would never modify or terminate plan benefits."
But Orrick noted the relevant differences between benefits offered to union and non-union employees were that the union benefits "were and are more secure than those offered by the plan [offered to non-union employees]."
"If the alleged misstatement (the 'what') is that Save Mart would provide non-union employees benefits as good or better than those provided to union employees, the first amended complaint has sufficiently alleged 'how' that statement is false," Orrick wrote in his order denying Save Mart's motion to dismiss.
The plaintiffs also claim Save Mart lied about spousal benefits for employees. According to their complaint, Save Mart had promised the plaintiffs that, if they were to retire before Dec. 17, 2017, they would retain their health reimbursement accounts for their spouses for the rest of the employees' lives. This was promised again and again at meetings and in letters "during a push in 2016 and 2017 to encourage retirements," the plaintiffs say.
But they say these promises were false because Save Mart could terminate the health reimbursement accounts at any time, including for employees who retired by the cutoff date.
As for Save Mart's argument the plaintiffs hadn't shown they relied on a guarantee of benefits when they took non-union management positions, Orrick found that to be true for all but one of the plaintiffs. Plaintiff Katherine Baker "was especially concerned about preserving her medical benefits," the other plaintiffs did not rely upon that information specifically when they agreed to accept the benefits for their non-union positions, Orrick found.
Still, all plaintiffs had plausibly claimed they relied on Save Mart's representations about the health reimbursement account benefit in deciding to retire when they did.
Orrick also rejected Save Mart's argument that the lawsuit fell outside the statute of limitations because the plaintiffs knew of company's ability to modify their benefits offerings as early as 2009 and no later than 2016.
"The 2009 and 2016 changes might indicate Save Mart’s ability to modify plan benefits, but the alleged breach relies on misrepresentations about how long those benefits would last — and it is plausible that neither of the changes would inform the plaintiffs that their benefits could be unilaterally terminated," Orrick wrote.
While attorneys for Save Mart didn't respond immediately to a request for comment, the plaintiffs' attorney said her clients are encouraged by Orrick's decision.
"We're pleased with the ruling and think it is a well reasoned opinion," said Emily Bolt with Bolt Keenley Kim LLP. "This is of course just the first hurdle in the case, but it’s an important step toward getting some justice for Save Mart’s retirees and the whole team is excited to put the work in to get them."
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