Court Rules Against Xerox Pension Plan
Friday August 1, 11:00 pm ET
NEW YORK (Reuters) - An Illinois appeals court on Friday upheld a lower court ruling that office equipment maker Xerox Corp. (NYSE:XRX - News) underpaid retirement benefits to former workers and must pay damages of about $300 million.
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The Seventh Circuit Court of Appeals in Illinois affirmed a lower court's opinion in favor of the former employees in a class action suit against Stamford, Connecticut-based Xerox, which is best known for its office photocopiers.
The ruling comes after an Illinois district court on Thursday ruled that International Business Machines Corp.'s (NYSE:IBM - News) defined contribution pension plan was unfair to older employees. IBM said it would appeal the ruling.
Xerox's case was originally filed in 2000 against Xerox's pension plan, The Retirement Income Guarantee Plan, on behalf of as many as 25,000 employees, challenging the methodology used to establish interest rates. In 2001, the court found that some lump sum distributions were improperly calculated.
The court ordered the pension plan to pay some $300 million on a pretax basis to the retirees. Xerox in April appealed the original ruling, but also took a first-quarter charge of $183 million -- funds earmarked for payment to the workers.
"As the court of appeals has made its ruling, Xerox is disappointed in the ruling and intends to seek a rehearing," Xerox spokesman Bill McKee told Reuters.
The appeals court said it modified the original ruling related to the rate by which some of the pension assets were calculated.
The company can now ask the court's three-judge panel to rehear the case, or request that the entire Seventh Circuit Court listen to the arguments again. Xerox's McKee said he did not know when any rehearing would take place, should it occur.
Xerox is not expected to pay the penalty until all of its legal options are exhausted. Any payment would come directly from the pension plan, and is not expected to have any immediate affect on the company's funding of the plan, the company said.
The ruling comes as Xerox looks to grow sales of its equipment after enduring years of troubling issues, including a federal probe into its accounting practices.
Earlier this week, the company posted slightly lower second-quarter earnings, as weak demand for supplies and services overshadowed improving sales of new copiers and printers.
Shares of Xerox closed on Friday at $10.65, off 15 cents.
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