The opinion of the court was delivered by: MICHAEL R. MERZ
Id., citing, Fed.R.Civ.P. 23(a).
Doc. 19 at PP. 43, 46.
As noted supra, in determining whether to certify a class, a court is prohibited from considering the merits of an action and must accept as true the factual allegations contained in the complaint.
Accepting as true the Insurance Plan Plaintiffs' allegation that no plan document and/or summary plan description exists, this Court concludes that the Insurance Plan Plaintiffs are unable to establish the prerequisite of commonality for the purposes of Rule 23. In the absence of at least one common written document distributed to all members of the class, in which an objective determination as to its misleading nature could be made, there is no means of handling the Insurance Plan Plaintiffs' claim in a class action. See, Alday, 1988 U.S.Dist. LEXIS at *7; accord. Mayo, 148 F.R.D. at 580-81.
A brief review of relevant parts of the procedural history of this matter is appropriate at this point.
Plaintiffs filed this action on March 8, 1993, (Doc. 1), and filed their Amended Complaint on July 6, 1993. (Doc. 19).
Defendants filed their present motion on July 21, 1993, and in support of the motion, filed the extensive affidavit of Jill B. Wellman. (Doc. 23). The Pension Plan Plaintiffs filed their Rule 56(f) memorandum on August 11, 1993, (Doc. 25), and Defendants replied on August 25,1993. (Doc. 26).
On September 1, 1993, Plaintiffs filed their lay witness list, the purpose of which was to disclose the persons they would call as lay witnesses at trial. (Doc. 30). Plaintiffs identified several persons who will testify on Plaintiffs' behalf with respect to Plaintiffs' Pension Plan claims and particularly with respect to Plaintiffs' claims of ERISA fiduciary duty breaches.
These persons include, inter alia, Pension Plan Plaintiffs Frederick S. Walther and William D. Walther, as well as Richard Phillips, Robert Duplain, and Terence Geremski. Id. On November 8, 1993, the Pension Plan Plaintiffs identified their expert witness, Claude Poulin, F.S.A. (Doc. 43). Plaintiffs expect that Mr. Poulin will testify that the requirements of section 208 of ERISA, 29 U.S.C. Sec. 1058, (see, infra), were not met when the Pension Plan merged with the Citation Walther Plan. Id.
While the Court recognizes that the Pension Plan Plaintiffs did not file their lay and expert witness lists until after August 11, 1993, when they filed their Rule 56(f) memorandum, the Court notes that Plaintiffs identified, inter alia, the above-referenced lay witnesses in their May 27, 1993, answers to Defendants' interrogatories. See, Doc. 25, Ex. A. It is clear, then, that Plaintiffs had available to them at least by May 27, 1993, information from lay witnesses, two of whom are Plaintiffs in this action with respect to their Pension Plan claims. Yet, Plaintiffs did not file affidavits from any of these persons to contradict Ms. Wellman's affidavit testimony. Again as an aside, as is the case with the Wellman and Walton depositions, the Pension Plan Plaintiffs have not sought to amend or supplement their memorandum in opposition since they filed their lay and expert witness lists.
For the foregoing reasons, this Court concludes that the Pension Plan Plaintiffs' arguments that there has not been an adequate time for discovery are not well taken. The Court also concludes that for purposes of Rule 56(f), Plaintiffs have failed to satisfy their burden of establishing any beneficial effects of a continuance or extension of discovery. Accordingly, the Plaintiffs' Motion under Rule 56(f) is DENIED.
The Court now turns to the merits of Defendants' motion for summary judgment as to the Pension Plan Plaintiffs' claims.
29 U.S.C. Sec. 1104(a)(1).
ERISA recognizes the inherent tension between the desire that employees retire with adequate retirement income and the practical internal pressures exerted on the trustees charged with preserving the assets of the pension fund. Holliday v. Xerox Corp., 732 F.2d 548, 551-52 (6th Cir.), cert. denied, 469 U.S. 917, 83 L. Ed. 2d 229, 105 S. Ct. 294 (1984). While ERISA resolves this conflict resoundingly on the side of the employees, Congress did not intend the Act to penalize employers for exercising their discretion to make rational economic decisions which are both in the best interest of the preservation of the fund and which are also not adverse to the employer's interest. Id. at 552.
ERISA requires a fiduciary to defray reasonable expenses of administering the plan. United Steelworkers of America v. Cyclops Corp., 860 F.2d 189, 198 (6th Cir. 1988), citing, 29 U.S.C. Sec. 1104(a)(1).
Pure business decisions are not governed by fiduciary standards. Sutter v. BASF Co., 964 F.2d 556, 562 (6th Cir. 1992).
29 U.S.C. Sec. 1058.
Even assuming that merger decisions are fiduciary decisions, the fiduciary duties imposed by ERISA are met if the requirements of 29 U.S.C. Sec. 1058 are satisfied. See, Cyclops, 860 F.2d at 200; see also, Dougherty v. Chrysler Motors Corp., 840 F.2d 2 (6th Cir. 1988).
The Pension Plan Plaintiffs do not dispute that Dayton-Walther's Board of Directors amended the Pension Plan, effective September 30, 1989, to permit participation in the Varity Master Pension Trust, nor do they dispute that Varity's North American Pension Committee, which administers the Trust meets at least quarterly and that the Pension Plan is reviewed, certified and audited once a year. In addition, Wellman's uncontradicted affidavit testimony shows that since the Pension Plan has started its participation in the Varity Master Pension Trust, it has been consistently overfunded.
As an aside, the Court notes that the Pension Plan Plaintiffs do not dispute that since their respective retirements, they have received all of the benefits due under the plan.
Wellman's uncontradicted affidavit establishes that the plan's selection of First Wisconsin ("Firstar") resulted in the plan's ability to defray the reasonable expenses of administering the plan. See also, Doc. 25, Ex. F at Bates Stamp No. A000034 (October 27, 1988, report to the Pension Committee).
On September 28, 1983, Frederick S. Walther, who was then president of Dayton-Walther, wrote to all retirees advising that effective October 1, 1983, Dayton-Walther was changing the retiree health Insurance Plan. The preeminent change in the plan was that all retirees, regardless of when they retired, were required to pay all medical charges up to a specific deductible amount, and they were then reimbursed 80% of any charges above the deductible amount. Prior to these changes, Dayton-Walther had paid all medical expenses. In addition, the October, 1983, changes included providing a prescription drug card to retirees. Previously, no prescription drug card was provided under the plan.
The plan document which covered the October, 1983, Insurance Plan reads in relevant part:
Effective September 1, 1988, Dayton-Walther changed the Insurance Plan to require persons retiring on or after that date to contribute $ 15.00, $ 30.00, or $ 45.00 per month (depending upon the number dependents the retiree had who were covered by the plan) towards insurance premiums. In addition, since September 1, 1988, at the time they retire, retirees have signed an "Election and Authorization Form" which reads in relevant part:
Effective January 1, 1990, Dayton-Walther changed the retiree contributions. The company required all retirees already making contributions towards premiums to pay $ 22.00, $ 44.00, or $ 66.00 per month towards premiums (depending upon the number of dependents the retiree had who were covered by the plan). These payments were clearly an increase from the previously established (1988) figures.
As noted supra, Dayton-Walther notified salaried retirees that it intended to change the salaried retirees Insurance Plan effective January 1, 1994. Essentially, Dayton-Walther will require contributions from all retirees in the amount of $ 45.60 or $ 91.20 (depending upon the number of dependents the retiree has who are covered) for pre-Medicare eligible retirees and $ 4.00 or $ 8.00 per month for Medicare eligible employees. In addition, the deductibles and out-of-pocket maximum payments will be raised and the prescription drug care will be reinstituted. Further, the deductible for dental insurance will be eliminated and the retirees will pay the entire premium for dental coverage.
ERISA simply does not prohibit a company from eliminating previously offered benefits that are neither vested nor accrued. Adams v. Avondale Industries, Inc., 905 F.2d 943, 948 (6th Cir.), cert. denied, 498 U.S. 984, 112 L. Ed. 2d 529, 111 S. Ct. 517 (1990), citing, Phillips v. Amoco Oil Co., 799 F.2d 1464, 1471 (11th Cir. 1986), cert. denied, 481 U.S. 1016, 95 L. Ed. 2d 500, 107 S. Ct. 1893 (1987).
In re White Farm Equipment Co., 788 F.2d 1186, 1193 (6th Cir. 1986); see also, Gill v. Moco Thermal Industries, 981 F.2d 858, 860 (6th Cir. 1992) (health Insurance Plans are employee welfare plans for which there is no vesting requirement under ERISA); Adams, 905 F.2d at 947 (Congress chose not to impose vesting requirements on welfare benefit plans for fear that placing such a burden on employers would inhibit the establishment of such plans); Musto v. American General Corp., 861 F.2d 897, 901 n.2 (6th Cir. 1988), cert. denied, 490 U.S. 1020, 104 L. Ed. 2d 182, 109 S. Ct. 1745 (1989) (ERISA establishes minimum vesting standards for pension benefits making some of such benefits non-terminable, but Congress declined to make welfare benefits non-terminable).
Although medical insurance benefits do not vest automatically under ERISA, such benefits may vest by agreement between the parties:
The parties themselves may set out by agreement or by private design, as set out in plan documents, whether retiree welfare benefits vest, or whether they may be terminated. In construing such agreements, courts may draw inferences or make presumptions as this court has done in construing collective bargaining agreements providing welfare benefit plans.
White Farm, 788 F.2d at 1186; see also, Gordon v. Barnes Pumps Co., 999 F.2d 133 (6th Cir. 1993) (under certain circumstances, employee welfare benefits may vest, but this can only be by private agreement between the parties).
The law governing modification and termination of retiree Insurance Plans was further articulated in Boyer v. Douglas Components Corp., 986 F.2d 999 (6th Cir. 1993):
Even though a welfare benefit plan is not subject to mandatory vesting requirements, the parties can agree to vest a welfare benefit plan. International Resources Inc. v. New York Life Ins. Co., 950 F.2d 294, 301 (6th Cir. 1991), cert. denied, U.S. , 112 S. Ct. 2941 ... (1992); White Farm, 788 F.2d at 1193. To determine whether the parties have agreed to vest the welfare benefit plan, we apply principles of federal common law to ascertain the parties' intent. Armistead v. Vernitron Corp., 944 F.2d 1287, 1297-98 (6th Cir. 1991); White Farm, 788 F.2d at 1192-93.
To ascertain the parties' intent, we first examine the plan documents. Musto v. American Gen. Corp., 861 F.2d 897, 900-01 (6th Cir. 1989), cert. denied, 490 U.S. 1020, 104 L. Ed. 2d 182, 109 S. Ct. 1745 (1989). The written terms of the plan documents control and cannot be modified or superseded by the employer's oral undertaking. Id. at 910. However, if the plan documents are ambiguous with respect to a particular term, then, under federal common law, a court may use traditional methods of contract interpretation to resolve the ambiguity, including drawing inferences and presumptions and introducing extrinsic evidence. See White Farm, 788 F.2d at 1193.
Boyer, 986 F.2d at 1005.
The issue in the present case becomes whether Dayton-Walther set out in its plan documents an agreement or "private design" that health care benefits would vest upon retirement or whether such benefits are subject to change.
As the Court in White Farm, supra, indicated, the starting point for determining the Insurance Plan Plaintiffs' rights under the health care plan is the plan documents. See also, Musto, 861 F.2d at 900. ERISA requires that every employee benefit plan be established and maintained pursuant to a "written instrument". 29 U.S.C. Sec. 1102(a)(1). A program under which an employer provides medical insurance benefits constitutes such a plan, see i.e., 29 U.S.C. Sec. 1002(1), and the insurance policies themselves are the written instruments required by law. See, Musto, 861 F.2d at 901. Courts have also looked at written SPDs required by ERISA, see, i.e., 29 U.S.C. Sec. 1022, as evidence of the terms and conditions of employee welfare plans. See, Musto, 861 F.2d at 904-06; see also, White Farm, 788 F.2d at 1193-94.
As noted supra, Dayton-Walther stated in the 1979, 1983, and 1987, SPDs that it reserved the right to "terminate" or "modify" the Plan. In addition, since September 1, 1988, retirees have signed acknowledgments that their benefits were "subject to change and a rate increase". This Court concludes that there is nothing ambiguous with respect to the language in the relevant documents. The Court also concludes that there was not an agreement between the parties nor a private design whereby the retiree welfare benefits at issue were intended to become, or did become, vested. Dayton-Walther reserved its right to amend the health Insurance Plan, and in fact did so five time over the last eleven years. Indeed, some of those amendments were made while William Walther (as well as Frederick S. Walther) served the company as president.
This Court concludes that the Insurance Plan Plaintiffs' claim that Defendants do not have the right to modify the plan must fail.
The Sixth Circuit has held that a company does not act in a fiduciary capacity when deciding to amend or terminate a welfare benefit plan. Adams, 905 F.2d at 947, citing, Musto, 861 F.2d at 911; see also, Drennan v. General Motors Corp., 977 F.2d 246, 251 (6th Cir. 1992), cert. denied, 124 L. Ed. 2d 639, U.S. , 113 S. Ct. 2416 (1993) (existing precedent has recognized the distinction between an employer's prerogative to initiate discretionary policy decisions such as creating, amending, or terminating a particular plan as compared to its fiduciary responsibilities to administer an existing plan for the benefit and interest of its participant-employees).
This issue was addressed by the court in United Paperworkers v. Jefferson Smurfit Corp., 771 F. Supp. 992 (E.D. Mo. 1991), aff'd., 961 F.2d 1384 (8th Cir. 1991).
In United Paperworkers, the plaintiffs challenged the defendants' unilateral increase of group medical insurance premium contributions and unilateral reduction of maximum lifetime medical benefits. The plaintiffs alleged, inter alia, that the defendants' actions constituted a breach of their fiduciary duty under ERISA. The court noted: An employer acts as a fiduciary when administering a welfare plan in accordance with the terms, but not when deciding how and under what terms the employer should provide benefits in a plan. Musto v. American General Corp., 861 F.2d 897, 911 (6th Cir. 1988), cert. denied, 490 U.S. 1020, 104 L. Ed. 2d 182, 109 S. Ct. 1745 ... (1989). If the employer is acting in his capacity as a settlor of the plan, his conduct as to business decisions in implementing the plan are not regulated by the fiduciary duties outlined in the ERISA statute. Id. Consequently, an employer's decision to provide a less favorable plan of benefits and related decisions regarding plan design fall into the category of settlor acts and are not subject to review under the fiduciary standards of ERISA. Hickman v. Tosco Corp., 840 F.2d 564, 566 (8th Cir. 1988); Phillips v. Amoco Oil Co., 799 F.2d 1464, 1471 (11th Cir. 1986), cert. denied, 481 U.S. 1016, 95 L. Ed. 2d 500, 107 S. Ct. 1893 ... (1987).
United Paperworkers, 771 F. Supp. at 999.
Defendants' decision to modify the Insurance Plan is not a fiduciary decision and therefore cannot give rise to fiduciary liability under ERISA. Accordingly, the Insurance Plan Plaintiffs' claim with respect to fiduciary liability fails,
As noted above, the Insurance Plan Plaintiffs allege that Defendants failed to promulgate and distribute a SPD, and failed to establish and maintain the plan pursuant to a written instrument and therefore violated ERISA. Plaintiffs' position seem to be that this violation results in a prohibition of against amending the plan.
Assuming arguendo that Plaintiffs are correct in their position that Dayton-Walther failed to perform the above-referenced procedures, that deficiency does not give rise to the substantive remedy of prohibiting plan amendments.
We do not believe, however, that Congress intended that any plan failing to comply with section 1102(b) would, for that reason alone, become unamendable. Plaintiffs have failed to show any detrimental reliance based on the Defendant's failure to comply with Section 1002(b), and, under these circumstances, we decline to impose the substantive remedy of prohibiting plan amendment in response to Defendant's procedural violations. Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th Cir. 1984), cert. denied, 474 U.S. 865, 88 L. Ed. 2d 152, 106 S. Ct. 183 ... (1985) (absent a defendant's bad faith for failure to comply with ERISA's reporting requirements, employees ordinarily have no substantive remedy under the Act).
Adams, 905 F.2d at 949.
This Court concludes that the Insurance Plan Plaintiffs' claim that they are entitled to a substantive remedy for alleged procedural violations of ERISA must fail.
The Insurance Plan Plaintiffs allege that they received repeated promises, representations, and assurances, both oral and otherwise, that salaried retirees' insurance benefits would last throughout retirement, that they relied on those representations to their detriment, and therefore Dayton-Walther is promissorily estopped from amending the plan.
Plaintiffs' argument contravenes a basic principle of ERISA that the terms of a plan may not be modified or superseded by oral statements or other extrinsic evidence. See, i.e., Gordon, 999 F.2d at 137, citing, Musto, 861 F.2d at 907. In affirming United Paperworkers, supra, the Eighth Circuit noted
The ERISA requirement that terms of a welfare benefit plan be committed to writing was intended to insure that employees could rely on the terms of the formal written plan provided to them without fear that unwritten contrary terms would later surface.
United Paperworkers, 961 F.2d at 1386.
While these plaintiffs would be helped by a decision in their favor, such a ruling would not only fly in the face of ERISA's plain language but would also decrease protection for future employees and retirees. Id.8
This Court concludes that the Insurance Plan Plaintiffs' claim that Defendants are promissorily estopped from amending the plan fails.
For all of the foregoing reasons, this Court concludes that there is no genuine issue of material fact as to the Insurance Plan Plaintiffs' claims and that Defendants are entitled to judgment as a matter of law.
It is therefore recommended that:
1) Plaintiffs' Motion for Class Certification, (Doc. 35), be denied;
2) Defendants' Motion for Summary Judgment as to Plaintiffs' Pension Plan claims, (Doc. 22), be granted; and
2) Defendants' Motion for Summary Judgment as to Plaintiffs' Insurance Plan claims, (Doc. 38), be granted.
February 22, 1994.
Michael R. Merz
UNITED STATES MAGISTRATE JUDGE
NOTICE OF FILING REPORT AND RECOMMENDATIONS
Attached is a Report and Recommendations of United States Magistrate Judge Michael R. Merz, filed on the above file-stamped date.
Pursuant to Fed. R. Civ. P. 72(b), any party may serve and file specific, written objections to the proposed findings and recommendations within ten days after being served with this Report and Recommendations. Pursuant to Fed. R. Civ. P. 6(e), this period is extended to thirteen days (excluding intervening Saturdays, Sundays, and legal holidays) because this Report is being served by mail. Such objections shall specify the portions of the Report objected to and shall be accompanied by a memorandum of law in support of the objections. If the Report and Recommendations are based in whole or in part upon matters occurring of record at an oral hearing, the objecting party shall promptly arrange for the transcription of the record, or such portions of it as all parties may agree upon or the Magistrate Judge deems sufficient, unless the assigned District Judge otherwise directs. A party may respond to another party's objections within ten days after being served with a copy thereof.
Failure to make objections in accordance with this procedure may forfeit rights on appeal. See, United States v. Walters, 638 F.2d 947 (6th Cir. 1981); Thomas v. Arn, 474 U.S. 140, 88 L. Ed. 2d 435, 106 S. Ct. 466 (1985).
February 22, 1994.
Michael R. Merz
UNITED STATES MAGISTRATE JUDGE
Due date: March 14, 1994.