Appeal from the United States District Court for the District of New Jersey. (D.C. Civil No. 89-05151)
Before: Stapleton and Mansmann, Circuit Judges and Pollak, District Judge.*fn*
At issue here is whether a particular clause in an ERISA summary plan description reserved a company's right to reduce employee welfare benefits. The district court opined that it did. Because we conclude that the clause is ambiguous, we will reverse the district court's grant of summary judgment, and we will remand the case for a determination by the district court, as fact finder, as to whether the company promised lifetime fixed-cost benefits to its retirees.
The plaintiffs, Judd Alexander and Richard Edwards, are retired salaried employees of American Can Company. As retirees, they received health and life insurance from the American Can Salaried Retirees Group Insurance Plan. In this class action, they contest a tenfold increase in their monthly premiums, instituted by Primerica Holdings, Inc., a successor in interest to American Can. In essence, the retirees claim that the increase violated the terms of the Plan. Primerica argues that the Plan reserved the right to reduce benefits and, therefore, that the Plan did not promise any vested benefit.
Because a formal plan document does not exist, our knowledge of the Plan arises from three summary plan descriptions. These summary plan descriptions provide that, upon retirement, salaried employees and their spouses will receive the Plan's Basic Medical coverage and that the death of a retiree does not affect a spouse's right to benefits. The Plan's Major Medical Benefits will terminate, however, if a retiree ceases to contribute to the Plan.
The following section of one summary plan description figures prominently in this litigation:
Extent and Limit of Coverage
The Company expects to continue this Plan indefinitely, but necessarily reserves the right to amend, modify, or discontinue the Plan in the future in conformity with applicable legislation. The Plan does not provide for benefit payments in any case or under any condition not identified and provided for in this booklet. The Group Insurance Policy and the certificates thereunder issued by the Insurance Company are consistent with the terms and conditions outlined in this booklet.
If any changes become effective under the Medicare Program by reason of current or future Governmental legislation or regulations, then full consideration will be given to appropriate modification in this Retired Group Insurance Plan.
App. 172. This section appeared with a slight variation in one other summary plan description. Primerica argues that the amendment clause in the section's first sentence reserves an unqualified right to reduce or terminate benefits. To the contrary, the retirees argue that it reserves only a limited right.
In 1989, shortly after it acquired American Can, Primerica raised monthly premiums from $5 to $50 per person. The retirees then filed this class action, claiming that the increase violated the terms of the Plan, that the reduction of vested benefits violated ERISA, that Primerica's violation of ERISA resulted in a breach of its fiduciary duty, and that the Plan's ambiguity in itself violated ERISA.
Primerica, in a motion for summary judgment, argued that the summary plan descriptions notified the employees of the Plan's absolute right to reduce or terminate benefits, and that therefore the Plan did not promise vested benefits. In response, the retirees argued that the summary plan descriptions only notified employees that the Plan would necessarily change if required by law. The district court held that the clause was unambiguous, granted summary judgment for the defendants, and dismissed the complaint. The retirees appealed.
We have jurisdiction over the final order of the district court. 28 U.S.C. § 1291. Our review of an order granting summary judgment is plenary. Country Floors, Inc. v. Partnership of ...