Johnson et al. v. Evangelical Lutheran Church in America et al.

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The Board of Pensions’ counsel retained Cornerstone Research and Professor Steven Grenadier of the Stanford Graduate School of Business, to analyze the economic impact of the adjustment actions on the proposed class members.

Retained by Morgan, Lewis & Bockius

The judge granted our client’s motion for denial of class certification in this alleged breach of fiduciary duty matter. The plaintiffs brought a class action on behalf of themselves and other annuitants in the retirement plan offered by the Evangelical Lutheran Church in America (ELCA). The plaintiffs alleged that the Board of Pensions of the ELCA breached its fiduciary duties by reducing annuity payments effective 2010, allegedly despite earlier promises that previous increases in lifetime annuity payments would be permanent. The plaintiffs sought to reverse the downward adjustments to the annuity payments and recover the implemented reductions as damages.

The Board of Pensions’ counsel retained Cornerstone Research and Professor Steven Grenadier of the Stanford Graduate School of Business, to analyze the economic impact of the adjustment actions on the proposed class members.

The judge granted our client’s motion for denial of class certification in this alleged breach of fiduciary duty matter.

Professor Grenadier opined that continuing or increasing the amount of the annuity payments after losses sustained in the 2007–2009 market downturn could have depleted the annuity fund’s assets in the near future and deprived the proposed class members of the lifetime payments that they expected. Professor Grenadier concluded that the adjustment actions impacted proposed class members differently, depending on their life expectancies and other factors. He showed that, using investment return assumptions considered by the Board before it decided to reduce annuities, those who expect to be alive to receive payments from the fund beyond 2017 likely benefitted from these adjustment actions that improved the fund’s long-term viability.

In an order filed on March 23, 2013, Chief Judge Michael J. Davis agreed with Professor Grenadier and denied class certification, explaining:

“The defendant’s expert report demonstrates that the board’s adjustment actions restored the funded status of the annuity fund, and that if those actions were reversed, then the annuity fund’s ability to meet its projected future benefits obligations would also be in “serious jeopardy.” Defendant’s expert report also demonstrates that most putative class members were helped, not harmed, by the board’s actions that are now challenged by plaintiffs.”


For more information on this case, contact John Simon or Kıvanç Kırgız.


Case Expert

Steven R. Grenadier

William F. Sharpe Professor of Financial Economics,
Stanford Graduate School of Business;
Senior Advisor, Cornerstone Research