It is gratifying to see, in one day, two ERISA retiree heath care cases reported on appeal where the plaintiffs came off well. In the Sixth Circuit, the court (2-1) remands a putative class action on a section 502(a)(1) and (a)(3) claim for benefits, holding that the district court erred in finding a collective bargaining agreement (CBA)unambiguous and disregarding relevant evidence in the summary plan description. In the Third Circuit, the court affirms a judgment for twelve retirees who won a breach of fiduciary duty case tried under section 502(a)(3), in which the plaintiffs won reinstatement to the plan and an injunction that the employer not be allowed to remove them in the future.
Schreiber v. Philips Display Components Co., No. 07-2440 (6th Cir. Sept. 2, 2009): The Sixth Circuit case is a LMRA/ERISA hybrid case brought under a CBA on behalf of a class of hourly workers; there is a separate class for salaried workers. The primary legal issue on this appeal of summary judgment is whether the district court erred in construing the CBA to provide unambiguously for retiree health benefits only up to the date of the expiration of the CBA. Although the employer included “reservations of rights” that provided that the plan could be amended at any time, the plaintiff retirees contended that once they retired, the employer was obliged to continue the benefits, i.e., that the retiree health benefits “vested.” The benefits terminated after the employees’ unit was spun off into a new division, which soon thereafter went bankrupt.
The court (2-1) reverses summary judgment on the cancellation of retiree health coverage. It applies, once again, a special rule prevailing in the Sixth Circuit under UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), which holds that “retiree benefits are in a sense ‘status’ benefits which, as such, carry with them an inference . . . that the parties likely intended those benefits to continue as long as the beneficiary remains a retiree.” Id. at 1482. Under Yard-Man, the court tends to find that a retiree welfare benefit included in the same agreement as pension benefit means that the welfare benefit vests upon retirement.
The panel majority also finds (in contrast to the district court) that the durational clause in the CBA — describing when the terms of the contract expire — was ambiguous as to whether retiree benefits continued after expiration. Accordingly, the court holds that the district court therefore in not considering extrinsic evidence to interpret the language, including the summary plan description (SPD). It also concludes that a prior arbitration award construing the CBA was not preclusive, because it concerned the provision of retiree life insurance to employees who retired only after the expiration of the contract, in contrast to the putative class who retired under the forme contract.
Finally, on a separate claim involving the salaried and hourly employees, the panel majority also holds that there is a genuine issue of material fact about whether “Philips failed to properly exclude plaintiffs from its retiree health benefit plans and that, as a result, defendants’ subsequent refusal to provide plaintiffs with retiree health benefits is a breach of fiduciary duty.” Although Philips contended that its decision to transfer the assets to a new division was a “settlor” function not subject to fiduciary standards, the panel majority disagrees. “[T]he fact that Philips’ decision to transfer assets was not a fiduciary one under ERISA does not mean that it did not trigger ERISA obligations. While it ‘is firmly established . . . that ‘a company does not act in a fiduciary capacity when deciding to amend or terminate a welfare benefits plan,” ERISA still provides instructions as to how an employer should properly amend or terminate a plan. 29 U.S.C. § § 1022, 1024(b).” In this case, there was an unresolved issue of whether Philips followed its own rules when it changed the plan.
In re Unisys Corp. Retiree Medical Benefits ERISA Litig., No. 07-3369 (3d Cir. Sept. 2, 2009): The Third Circuit affirms a judgment awarding retiree health benefits to 12 individual plaintiffs. This case is what remains of a very lengthy piece of class litigation, first filed in 1992, in which the ERISA claims were gradually narrowed down to breach of fiduciary duty, and the class was eventually decertified. Some 900 class members filed follow-on individual cases. Fourteen plaintiffs (the applies in this appeal) had a bench trial before a magistrate judge, who held that as to 12 of the 14, Unisys affirmatively misrepresented and inadequately disclosed information about the retiree health plan. Specifically, Unisys was charged with misrepresenting that the retiree health care vested and could not change (in spite of the fact that the plan had a reservation-of-rights, which Unisys later used to announce reductions in the benefits). The district court entered a decree restoring them to the health plan and precluding Unisys from either terminating or modifying the benefits. The district court rejected an addition al remedy (reformation of the plan).
The panel affirms the judgment on appeal. It upholds, over clear error review, findings that each individual received false information about vesting of retiree health benefits, that the false information was material because it affected the timing of the plaintiffs’ retirement, and that 12 of the 14 plaintiffs retired in reliance on the inaccurate information. (Of the two plaintiffs who lost, one was fired and the other retired under a settlement agreement regarding a different lawsuit; those two plaintiffs appealed the adverse judgments and lost).
Even more importantly for the future of these types of cases, the panel also affirms the injunctive relief. Unisys argued that the relief was an abuse of discretion because it would prevent Unisys from ever terminating the plaintiffs from the plan, even though (as a plan settlor) it could typically always amend or terminate the plan. But the court holds that because Unisys committed to provide each of the plaintiffs lifetime benefits, it was therefore estopped from terminating them. The panel nevertheless affirms the denial of retrospective monetary damages to the twelve plaintiffs, holding that unless a plaintiff can identify “profit generating property or money wrongly held by Unisys,” this remedy way foreclosed by Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002). Finally, it affirms a $2.3M fee award and nearly $100K in expenses. Great result here!