The opinion of the court was delivered by: CAHN
CAHN, C.J. October 13, 1993
Plaintiffs allege that Unisys Corporation violated the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., when it unilaterally modified their retiree medical benefit plans. The court has subject matter jurisdiction under 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e)(1). Currently before the court is Unisys' Motion for Partial Summary Judgment. For the reasons set forth below, the court will grant the motion in part and deny it in part.
In September of 1986, Sperry Corporation and Burroughs Corporation merged to form Unisys Corporation. After the merger, Unisys maintained the pre-existing medical benefit plans ("the predecessor plans") for Sperry and Burroughs retirees. In 1989, Unisys created the Post-Retirement and Extended Disability Medical Plan ("the old plan") to cover all employees who retired after April 1, 1989, most of whom were former Sperry and Burroughs employees. At that time, Unisys left the predecessor plans intact. On January 1, 1993, Unisys terminated the predecessor plans and the old plan and replaced these plans with the new Unisys Post-Retirement and Extended Disability Medical Plan ("the new plan"). Under the new plan, the retirees no longer receive free medical insurance. Instead, they must pay a portion of the monthly premiums. After January 1, 1995, the retirees will have to pay the full cost of premiums.
Eight different lawsuits have been filed against Unisys in four jurisdictions.
The Judicial Panel on Multidistrict Litigation transferred all lawsuits filed outside this district here for consolidated disposition. See 28 U.S.C. § 1407. Plaintiffs seek primarily injunctive and other equitable relief. On June 9, 1993, after determining that Unisys "has acted on grounds generally applicable to the class," the court certified this case as a class action pursuant to Fed. R. Civ. P. 23(b)(2). The class consists of approximately 21,000 former non-union employees of Sperry, Burroughs and Unisys. Plaintiffs have been assigned to sub-classes according to who their employer was at the time of retirement.
Each sub-class contains some plaintiffs who accepted early retirement incentive packages ("early retirees") and some who did not ("retirees").
Plaintiffs allege that Unisys has denied them vested benefits in violation of 29 U.S.C. § 1132(a)(1)(B). Plaintiffs also allege that Unisys breached its fiduciary duty under 29 U.S.C. § 1104. Finally, plaintiffs seek relief on various estoppel theories. Unisys has moved for partial summary judgment on all claims brought by retirees. Unisys has not moved for summary judgment against the early retirees in the class.
When considering a motion for summary judgment, the court must draw all justifiable inferences in favor of the non-moving party. Anderson v. Liberty Lobby, 477 U.S. 242, 255, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The court, however, may not make credibility determinations or weigh the evidence. Id. at 252. If the record thus construed could not lead the trier of fact to find for the non-moving party, then there is no genuine issue for trial. Matsushita Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986).
Plaintiffs urge the court to delay consideration of Unisys' motion until the close of discovery. Counsel has filed a Rule 56(f) affidavit setting forth the type of material likely to emerge from further discovery.
None of this material, however, would change the court's analysis of the threshold legal question. See Lunderstadt v. Colafella, 885 F.2d 66, 71 (3d Cir. 1989) (Rule 56(f) motion must identify particular information that would preclude summary judgment).
Whether an ERISA plan is ambiguous is a question for the court, as a matter of law. Alexander v. Primerica Holdings, Inc., 967 F.2d 90, 92 (3d Cir. 1992). Summary judgment "should be entered only if the pertinent provisions of the contractual documents are unambiguous; it is the lack of ambiguity within the express terms . . . that forecloses any genuine issues of material fact." Ryan v. Chromalloy American Corp., 877 F.2d 598, 602 (7th Cir. 1989). To the extent the plan language is ambiguous, summary judgment is inappropriate.
ERISA provides that plan participants may bring a civil action to recover benefits due and to clarify their rights to future benefits. 29 U.S.C. § 1132(a)(1)(B). Plaintiffs allege that Unisys has reneged on its promise to provide lifetime health coverage. They assert that Unisys' intent to confer vested benefits can be discerned from the official plan documents or, to the extent those documents are ambiguous, from the informal communications between the parties. Plaintiffs seek money damages for Unisys' failure to pay premiums since January 1, 1993. They also seek declaratory and injunctive relief to force Unisys to continue paying the full cost of premiums.
Unisys maintains that it has an inherent right to terminate the retiree's medical benefit plan. Unisys argues that it expressly reserved its termination rights in the official plan documents. Because it believes that the reservation of rights language is unambiguous, Unisys has moved for summary judgment.
ERISA recognizes two types of benefit plans: pension plans and welfare plans. Deibler v. Local Union 23, 973 F.2d 206, 209 (3d Cir. 1992). A benefit plan that provides medical insurance for its participants is considered a welfare plan. 29 U.S.C. § 1002 (1). The parties agree that the old plan and predecessor plans are welfare plans, but they disagree about whether they conferred vested benefits upon plaintiffs. Welfare benefits do not vest automatically, Alexander, 967 F.2d at 95, but the plan sponsor may, under certain circumstances, become obligated to maintain benefits at a fixed level for a fixed period of time. Wise v. El Paso Natural Gas Co., 986 F.2d 929, 937 (5th Cir. 1993). Congress rejected automatic vesting for welfare plans, 29 U.S.C. § 1051, because plan sponsors cannot accurately predict future costs. The court must determine whether, despite this uncertainty, Unisys, Burroughs or Sperry chose to confer vested benefits upon its retirees.
The scope of a welfare plan is defined by the summary plan description and the official plan documents. Henglein v. Informal Plan For Plant Shutdown Benefits, 974 F.2d 391, 400 (3d Cir. 1992); Moore v. Metropolitan Life Ins. Co., 856 F.2d 488, 492 (2d Cir. 1988). The courts have held that such plans are not subject to amendment as a result of informal communications between employer and employees. Moore, 856 F.2d at 492. This includes oral promises made by the employer or its agents. Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1163 (3d Cir. 1988); Musto v. American General Corp., 861 F.2d 897, 910 (6th Cir. 1988), cert. denied, 490 U.S. 1020, 104 L. Ed. 2d 182, 109 S. Ct. 1745 (1989). The Eleventh Circuit Court of Appeals has succinctly stated that: "any retirees' right to lifetime medical benefits at any particular cost can only be found if it is established by contract under the terms of the ERISA-governed benefit plan document." Alday v. Container Corp. of America, 906 F.2d 660, 665 (11th Cir. 1990), cert. denied, 498 U.S. 1026, 112 L. Ed. 2d 668, 111 S. Ct. 675 (1991). This rule of construction furthers ERISA's mandate that "every employee benefit plan shall be established and maintained pursuant to a written instrument." 29 U.S.C. § 1102(a)(1).
ERISA requires that the written instrument contain a comprehensive description of plan coverage. See 29 U.S.C. § 1022. The Third Circuit Court of Appeals has held that 29 U.S.C. § 1022 requires plan sponsors to "warn employees of adversity." Alexander, 967 F.2d at 94. There are, under ERISA, two types of adversity: loss of benefits under an existing plan and loss of benefits due to termination of a plan. Subsection 1022(b) provides in pertinent part that "the plan description and summary plan description shall contain the following information: . . . circumstances which may result in disqualification, ineligibility, or denial or loss of benefits." It is unclear from this statutory language whether plan sponsors must warn participants about both types of adversity.
As a threshold matter, the parties disagree about what the background rule should be, namely whether or not termination rights are retained when governing plan documents are silent. See Bidlack v. Wheelabrator Corp., 993 F.2d 603, 608 (7th Cir. 1993) (en banc). Plaintiffs maintain that a plan sponsor's failure to reserve its termination rights constitutes a waiver of those rights. This precise issue was left undecided in Hozier, 908 F.2d 1155, 1162 (3d Cir. 1990), where the court noted that "plaintiffs might be correct that an employer's purported amendment is invalid if the original plan's governing documents fail to reserve an amendment power expressly." Similarly, the Third Circuit was not squarely faced with the issue in Alexander, where the only issue on appeal was whether the reservation of rights language was ambiguous. 967 F.2d at 92.
Unisys argues that its inherent right of termination is preserved unless explicitly waived in the summary plan description. Unisys relies on Wise, in which the Fifth Circuit held that § 1022(b) "relates to an individual employee's eligibility under then existing, current terms of the Plan and not to the possibility that those terms might later be changed, as ERISA undeniably permits." 986 F.2d at 935. Under the holding in Wise, "mere silence is not of itself abrogation," and consequently, plan sponsors need not inform participants of the possibility that an existing plan will be terminated. Id. at 938.
This dispute is academic because Unisys and its predecessors have chosen to include reservation of rights clauses in the relevant plan documents. Alexander holds that summary judgment may not be granted unless the reservation of rights language is unambiguous.
Plaintiffs urge that the motion for partial summary judgment should be denied for two reasons. First, they argue that the reservation of rights language is ambiguous. Second, to the extent the reservation of rights language is not ambiguous, they argue that it is inconsistent with other portions of the summary plan descriptions that guarantee lifetime medical coverage.
The court will address these arguments in turn.
The court's analysis of the operative language is guided by the decision in Mellon Bank, N.A. v. Aetna Business Credit, 619 F.2d 1001 (1980).
To determine whether or not a document is ambiguous, the court must:
consider the words of the contract, the alternative meaning suggested by counsel, and the nature of the objective evidence to be offered in support of that meaning. The trial judge must then determine if a full evidentiary hearing is warranted. If a reasonable alternative interpretation is suggested, even though it may be alien to the judge's linguistic experience, objective evidence in support of that interpretation should be considered by the fact-finder.
Id. at 1011. Similarly, in Senn v. United Dominion Industries, Inc., 951 F.2d 806, 814-815 (7th Cir. 1992), cert. denied, 125 L. Ed. 2d 687, 113 S. Ct. 2992 (1993), the court held that "the question of whether . . . plan documents contain agreements to vest entitlement to lifetime retirement benefits should be determined without reference to extrinsic evidence if the terms of the writings involved are unambiguous."