The opinion of the court was delivered by: MICHAEL R. MERZ
This case is before the Court on Plaintiff William Walther, Eugene Nowacki, and James McGraw's (collectively the "Insurance Plan Plaintiffs") Motion for Class Certification, (Doc. 35), Defendants' Motion for Summary Judgment as to the Insurance Plan Plaintiffs' claims, (Doc. 38), and Defendants' Motion for Summary Judgment as to Plaintiff Frederick S. Walther and William D. Walther's (collectively "the Pension Plan Plaintiffs) pension plan claims, (Doc. 22). The issues have been fully briefed by the parties, (Doc. 35, 36, 39, 48; 38, 39, 46, 51; 22, 25, 26, 32), the Court has heard oral argument on Defendants' motion as to the pension plan claims, (Doc. 32), and the Motions are ripe for decision.
Plaintiffs brought this action against Defendants The Dayton-Walther Corporation, the Dayton-Walther Corporate Pension Committee, The Pension Plan for Salaried Employees of the Dayton-Walther Corporation (the "Pension Plan"), Kelsey-Hayes Company, and Varity Corporation (collectively "the Defendants") alleging particular violations of the Employee Retirement Income Security Act, 29 U.S.C. Sec. 1001, et seq. ("ERISA"). The Pension Plan Plaintiffs challenge certain of the Defendants' actions with respect to the Pension Plan in which they are participants. The Insurance Plan Plaintiffs challenge certain of the Defendants' actions with respect to the salaried retirees Insurance Plan in which they are participants. In addition, as noted above, the Insurance Plan Plaintiffs have made class action allegations and seek class certification of their claims.
Dayton-Walther Corporation was founded in Dayton, Ohio, in 1906, by the Walther family. Plaintiffs Frederick S. Walther and William Walther, who are brothers, are members of the founding family, and they each worked for the company. William Walther retired as president in 1982, and continued to serve on the Board for approximately three (3) years after his retirement. Frederick S. Walther retired as president on December 31, 1986. Both William Walther and Frederick S. Walther have participated in the Pension Plan since their respective retirements. These Plaintiffs were the last two presidents of the company it was sold to Defendant Varity Corporation ("Varity") in 1986, for a multi-million dollar figure. Defendant Kelsey-Hayes Company ("Kelsey-Hayes") is, like Dayton-Walther, a subsidiary of Varity. Kelsey-Hayes and Dayton-Walther are included in Varity's Kelsey-Hayes Group of Companies, which is one of Varity's three operating groups.
Dayton-Walther acts as the plan sponsor of the Pension Plan and Dayton - Walther and Kelsey-Hayes serve as the plan administrator. The Pension Plan is administered from the offices of Kelsey-Hayes by its employees. Defendant the Dayton-Walther Pension Committee ("the Committee") serves as the Pension Plan sponsor's internal organization responsible for the direction, control, and oversight of the Pension Plan. Members of the Committee are appointed directly by senior management of Dayton-Walther, including its chairman, president, and chief executive officer.
In approximately November, 1988, Varity chose First Wisconsin Trust Company as Master Trustee of the Pension Plan. Varity made this choice in spite of the Committee's determination that the National Bank of Detroit was the organization best suited to serve as Master Trustee.
Effective October 1, 1991, the net assets of the Office Employees Pension Plan of Citation Walther Corporation ("Citation Walther Plan") were transferred into the Pension Plan. As a result, the Pension Plan assumed all of the Citation Walther Plan's liabilities.
The Pension Plan Plaintiffs allege that Dayton-Walther has violated ERISA in that it breached its fiduciary duties by: (1) failing to hold regular meetings of the Pension Committee; (2) failing to direct, control, and oversee the operation of the Pension Plan; (3) failing to properly, adequately, and prudently conduct the affairs of the Pension Plan; (4) failing to review and determine the performance of service providers of the Pension Plan; (5) abdicating and surrendering its authority and fiduciary duties as to the Pension Plan, including direction and oversight of the Pension Plan and of the Pension Plan's service providers, at the dictate of Varity, or otherwise, to Varity; (6) allowing Varity to direct and impose the selection of the Master Trustee for the Pension Plan despite the Pension Committee's specific rejection of Varity's choice; and (7) yielding to the dictates of Varity and allowing the liabilities of the Citation Walther Plan to be merged into the Pension Plan at the direction and control of Varity. These Plaintiffs allege that Dayton-Walther and the Pension Committee violated ERISA in that they: (1) breached their fiduciary duty by allowing Varity to direct and control the choice and selection of investment managers for the Plan; (2) failed to diligently review and determine the impact and effect of the merger of the Citation Walther Plan with the Pension Plan; (3) failed to act for the exclusive purpose of providing benefits to participants and beneficiaries of the Pension Plan; and (4) failed to act with the care, skill, prudence, and diligence required by ERISA. The Pension Plan Plaintiffs allege that Kelsey-Hayes violated ERISA by breaching its fiduciary duty by participating in the control and domination of Dayton-Walther, including the Pension Committee, and by its knowledge of the fiduciary breaches of both Dayton-Walther and Varity, without reasonable efforts under the circumstances to remedy those breaches. With respect to Varity, the Pension Plan Plaintiffs claim that Varity and/or Kelsey-Hayes have exercised actual control of Dayton-Walther to such an extent and in such a manner that Dayton-Walther has ceased to function as an independent corporation. These Plaintiffs allege that Varity, Kelsey-Hayes, and Dayton-Walther are responsible and jointly and severally liable for Dayton-Walther's and the Pension Committee's acts, omissions, and breaches of fiduciary duty.
The Pension Plan Plaintiffs seek, inter alia,: (1) a complete audit and review of the Pension Plan, its activities and investments by an outside, independent auditor selected by the Court; (2) appointment of non-Varity, non-Dayton-Walther, non-Kelsey-Hayes fiduciaries, to serve as administrators of the Pension Plan, and to direct, oversee, and control its operation and functions, or in the alternative, an Order requiring Dayton-Walther to appoint a functioning Pension Committee, and an Order that the Pension Committee be permitted to, and in fact, perform its fiduciary duties with respect to the Pension Plan without the domination, control, or interference of Varity or of Kelsey-Hayes, or of Varity through Kelsey-Hayes; (3) recoupment from all Defendants jointly and severally of any and all losses suffered as a result of the breaches of fiduciary duty which they have alleged as well as others that may have occurred; (4) a complete review and analysis of the performance and operation of the Master Trustee, First Wisconsin Trust Company, and/or any and all investment managers ordered selected by, or selected at the insistence of, Varity; (5) a determination as to the legality and propriety of the merger of the Citation Walther Plan into the Pension Plan; (6) an order requiring Varity and Kelsey-Hayes, or Varity through Kelsey-Hayes, to cease and desist its domination and control of Dayton-Walther and the Pension Committee in the performance of fiduciary; duties with respect to the Pension Plan; and (7) a declaration that Dayton-Walther, Varity, and Kelsey-Hayes are jointly and severally liable for the acts, omissions, and breaches of fiduciary duties alleged as well as others that may have occurred.
Plaintiffs Eugene Nowacki and James McGraw also worked for Dayton-Walther. Mr. Nowacki retired as corporate traffic manager in October, 1984, and Mr. McGraw retired as a salaried employee effective May 1, 1990. Mr. Nowacki and Mr. McGraw, as well as William Walther, have, since their respective retirements, participated in Dayton-Walther's salaried retirees Insurance Plan ("the Insurance Plan"). Since their respective retirements William Walther and Eugene Nowacki have received Insurance Plan benefits at no cost to them for premium contributions. Mr. McGraw has, since his retirement, received Insurance Plan benefits at a fixed premium cost.
Dayton-Walther has maintained a salaried retirees Insurance Plan for over 40 years. Salaried employees who retired prior to September 1, 1988, receive these benefits at no cost for any amount of premium contributions. Salaried employees who retired on or after September 1, 1988, receive the same benefits but have been required to contribute toward the premium costs. Dayton-Walther operates the Insurance Plan, and the plan is administered by Kelsey-Hayes and/or Dayton Walther.
On or about April 26, 1993, Dayton-Walther notified the salaried retirees Insurance Plan participants of its intent to implement a new medical plan for salaried retirees, effective January 1, 1994. The new plan includes changes such as, inter alia:
--The imposition of increased and/or first-time premium contribution costs for all plan participants;
--An increase in per person and family deductibles from $ 150.00 per person/$ 450.00 per family to $ 300.00 per person/$ 600.00 per family; --Annual out-of-pocket maximum cost increase from $ 750.00 per person/$ 1,500.00 per family to $ 2,000.00 per person/ $ 4,000.00 per family;
--Elimination of dental coverage and transfer of 100% of premium costs for dental coverage to the retirees, from coverage with no additional charge under the existing plan.
The Insurance Plan Plaintiffs allege that pursuant to operation of the plan, the retirees insurance benefits for both pre-September 1, 1988, and post-September 1, 1988, retirees were intended to and did vest in the retirees for the duration of their lives and the lives of their covered dependents. These Plaintiffs allege further that no formal plan document which establishes the Dayton-Walther salaried retirees Insurance Plan now exists, and that none has existed at any time. In addition, Plaintiffs claim that Dayton-Walther has failed, since at least 1976, and continuing to date, to promulgate, issue, and distribute a summary plan description describing the salaried retirees Insurance Plan and that Dayton-Walther has failed to advise salaried retiree Insurance Plan participants under what circumstances and conditions these benefits were subject to modification, amendment, or termination. Plaintiffs allege that Varity, by virtue of domination and control of Dayton-Walther and Kelsey-Hayes, is a fiduciary with respect to the Insurance Plan. The Insurance Plan Plaintiffs allege that Defendants' termination of the current, existing salaried retirees Insurance Plan breaches the terms of the plan and therefore Defendants have breached the fiduciary duty owed to plan participants to administer the plan in accordance with its terms. The Insurance Plan Plaintiffs essentially allege that these actions on the part of Defendants with respect to the salaried retirees Insurance Plan violate of ERISA. In addition, these Plaintiffs allege Defendants are promissorily estopped from implementing any changes to the existing salaried retirees Insurance Plan because they received repeated promises, representations, and assurances, both oral and otherwise, that salaried retirees insurance benefits would last throughout retirement, and they relied on those representations.
The Insurance Plan Plaintiffs seek, inter alia, a declaratory judgment that: (1) the salaried retirees Insurance Plan provide benefits for retirees and their eligible dependents which last throughout retirement; (2) the salaried retirees Insurance Plan provide these benefits at either no premium cost to retirees, or at a premium cost fixed at retirement; (3) Defendants are estopped from denying salaried retirees lifetime benefits under the plan at either no premium cost, or at a premium cost fixed at retirement; and (4) Defendants are jointly and severally liable for the breaches of fiduciary duty and violations of ERISA with respect to the salaried retirees Insurance Plan. These Plaintiffs also seek orders that Defendants: (1) establish and maintain the salaried retirees Insurance Plan pursuant to a written instrument, in accordance with the Court's declaratory judgments as to coverage for these benefits throughout retirement at either no premium cost, or at a premium cost fixed at retirement; (2) promulgate and distribute a summary plan description of the salaried retirees Insurance Plan, pursuant to ERISA, 29 U.S.C. Sec. 1022; and (3) be preliminarily and, upon trial of this matter to the Court on the merits, permanently enjoined from terminating the salaried retirees Insurance Plan, and from modifying or amending the terms of that plan in any adverse to Plaintiffs and the putative class.
PLAINTIFFS' MOTION FOR CLASS CERTIFICATION
The Insurance Plan Plaintiffs seek class action certification and have described the proposed class as all participants in the Dayton-Walther salaried retirees Insurance Plan who have received insurance benefits since their retirement at either no premium cost or at a premium cost fixed at the time of retirement, and who currently receive these benefits. Plaintiffs have also described two sub-classes for which they seek certification: (1) all participants who qualify as members of the class, and who retired prior to September 1, 1988, and who have received retiree insurance benefits under the plan at no premium cost to them since their retirement; and (2) all participants who qualify as members of the class, and who retired on or after September 1, 1988, and who have received retiree insurance benefits under the plan at a premium cost fixed at their retirement.
The Federal Rules of Civil Procedure mandate a two-step process to determine if an action is maintainable as a class action. Mayo v. Sears, Roebuck & Co., 148 F.R.D. 576, 579 (S.D.Ohio 1993). First, the court must determine whether the four prerequisites to a class action are present. Id. (emphasis in original). These four prerequisites, referred to as numerosity, commonality, typicality, and adequacy of representation are:
(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately represent the interests of the class.
Id., citing, Fed.R.Civ.P. 23(a).
The Plaintiffs, as the party seeking certification of the class, bear the burden of establishing the required elements. Id., citing, Senter v. General Motors Corp., 532 F.2d 511, 522 (6th Cir.), cert. denied, 429 U.S. 870, 50 L. Ed. 2d 150, 97 S. Ct. 182 (1976). In determining whether to certify a class, a court is prohibited from considering the merits of the action. Mayo, supra, citing, Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 40 L. Ed. 2d 732, 94 S. Ct. 2140 (1974). For purposes of a class certification motion, a court must accept as true the factual allegations contained in the complaint. Mayo, supra, citing, Shelter Realty Corp. v. Allied Maintenance Corp., 574 F.2d 656, 661 n. 15 (2nd Cir. 1978); Blackie v. Barrack, 524 F.2d 891, 901 n. 17 (9th Cir. 1975), cert. denied, 429 U.S. 816 (1976).
Defendants oppose the Insurance Plan Plaintiffs' motion for class certification on the grounds that they have not established the commonality and typicality requirements of Rule 23. However, this Court will, as an initial matter, address the prerequisites of numerosity and adequacy of representation.
Rule 23 does not create a specific number which it deems to be sufficiently "numerous" to permit class certification. See, Sentor, supra. Impracticality of joinder must be determined in the context of the particular litigation. Akron Center for Reproductive Health v. Rosen, 110 F.R.D. 576, 581 (N.D.Ohio 1986) (citation omitted).
The Insurance Plan Plaintiffs allege that the class for which they seek certification numbers approximately 200. Plaintiffs claim that documents and records in the Defendants' possession will establish the identity of class members.
This Court concludes that joinder of all members of the proposed class is impracticable and therefore Plaintiffs have met the "numerosity" prerequisite of Rule 23(a).
Adequacy of Representation
The requirement of adequacy of representation, "includes but is broader than" the typicality test. Mayo, 148 F.R.D. at 581 (citation omitted). The Sixth Circuit has identified two criteria for determining whether the representation of the class will be adequate: (1) the representative must have common interests with unnamed members of the class, and (2) the representative will vigorously prosecute the interests of the class through competent counsel. Id., citing, Senter, 532 F.2d at 525. The court in Bowen v. General Motors Corp., AC Spark Plug Div., 542 F. Supp. 94 (N.D.Ohio 1981), identified three factors to determine if the first, "common interests" prong of this test has been met: "whether the representative was a member of the class," "the nature and extent of the named party's stake in the outcome", and the named party's "familiarity with the conditions he seeks to challenge on behalf of the class." Mayo, 148 F.R.D. at 581, citing, Bowen, 542 F. Supp. at 99.
The Insurance Plaintiffs meet the "common interest" prong of the Senter/Bowen test. Each Plaintiff is a salaried retiree from Dayton-Walther, has participated in the salaried employees' welfare benefits plan which is the subject of this litigation, and each Plaintiff has a stake in the outcome of this litigation. In addition, each Plaintiff, as a long term salaried employee of Dayton-Walther, as well as a participant in the Insurance Plan, is familiar with the conditions that this action seeks to redress. The named Plaintiffs are members of the putative classes, and share with the unnamed members of the putative classes the common interest of preventing Defendants from changing, altering, and/or amending the salaried retiree Insurance Plan.
In support of their position that they will vigorously prosecute the interests of the class through qualified counsel, Plaintiffs point to counsel's involvement in several ERISA actions, his authoring of a variety of papers and presentations on the subjects of litigation, ERISA, and class actions, and his being a contributing editor in the 1993 supplement to the work, Employee Benefits Law, (BNA, 1989). Counsel has represented that he is experienced in class action litigation, particularly with respect to ERISA litigation. A review of the pleadings in this case makes it clear to this Court that to date, Plaintiffs' counsel has in fact vigorously represented Plaintiffs in the current litigation
This Court has no reason to conclude that Plaintiffs' counsel does not have the experience and competence to adequately represent the class or that he will not vigorously pursue this matter on behalf of the putative class.
For the foregoing reasons, this Court concludes that Plaintiffs have met the "adequacy of representation" prerequisite of Rule 23(a).
The Court now turns to the two prerequisites of Rule 23(a) which Defendants claim Plaintiffs have not established, specifically, commonality and typicality.
The commonality requirement of Rule 23(a) is satisfied "as long as the members of the class have allegedly been affected by a general policy of the defendant, and the general policy is the focus of the litigation." Mayo, 148 F.R.D. at 580, citing, Day v. NLO, Inc., 144 F.R.D. 330, 333 (S.D.Ohio 1992). However, it has been held in retiree insurance benefit cases brought under ERISA, that the commonality requirement is not satisfied where the Court must examine alleged oral and other individualized promises to determine whether plaintiffs have a claim. See, Alday v. Container Corp. of America, No. 87-488- Civ-J-16, 1988 U.S. Dist. LEXIS 18421 (M.D.Fla. Sept. 2, 1988), aff'd, 906 F.2d 660 (11th Cir. 1990), cert. denied, 498 U.S. 1026 (1991).
This conclusion is consistent with Mayo, supra, wherein the Court determined that the commonality prerequisite would not be met with respect to persons who did not utilize [credit application] forms substantially similar to the forms used by the named plaintiffs. Mayo, 148 F.R.D. at 580.
In their First Amended Complaint, the Insurance Plan Plaintiffs allege, inter alia:
45. No formal plan document which establishes the Dayton-Walther salaried retirees Insurance Plan now exists, and none has existed at any time.
46. Dayton-Walther Corporation has failed, since at least 1976, and continuing to date, to promulgate, issue and distribute a summary plan description describing the Dayton-Walther salaried retirees Insurance Plan.
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.
With respect to the requirement of typicality, the Sixth Circuit has explained that "a representative's claims need not always involve the same facts or law provided there is a common element of fact or law (which unites the claims of the representative and the class]." Mayo, 148 F.R.D. at 581, citing, Senter, 532 F.2d at 525 (emphasis in original). The typicality requirement is intended to assure that the representatives' claims are similar enough to those of the class so that the representatives will adequately represent the class. General Telephone Co. v. Falcon, 457 U.S. 147, 152, 72 L. Ed. 2d 740, 102 S. Ct. 2364 (1982). The commonality and typicality requirements are closely related in that they each serve to assist in the determination of whether the claim of the named plaintiff and those of the class are so interrelated that the interests of the absent class members will be protected. Id. at 157.
Similar to the discussion with respect to the commonality requirement, supra, in the alleged absence of at least one common written document distributed to all members of the putative class, this Court cannot say that the Insurance Plan Plaintiffs' claims and defenses are typical of all potential class members. Accordingly, this Court concludes that Plaintiffs have not established the typicality prerequisite of Rule 23(a).
Because this Court concludes that the Insurance Plan Plaintiffs have not established the "commonality" and "typicality" requirements of Rule 23(a), the Court need not address whether Plaintiffs have met any ...