On Appeal From the United States District Court For the District of New Jersey. On Appeal From the United States District Court For the District of New Jersey. (D.C. Civil Action No. 84-04542). (D.C. Civil Action No. 84-04542).
Before: Stapleton, Roth and Lewis, Circuit Judges.
STAPLETON, Circuit Judge:
This appeal and cross-appeal involve a controversy precipitated by defendant Curtiss-Wright's (CW's) termination of health insurance benefits for former employees who had retired from a plant in Wood-Ridge New Jersey. The district court found that CW had reserved the right to amend its benefits plan to allow termination of benefits, but that CW had violated ERISA
§ 402(b)(3), 29 U.S.C. § 1102(b), by failing to include an amendment procedure among the plan's provisions. The court concluded that the lack of an amendment procedure rendered invalid a purported amendment authorizing termination of plaintiffs' benefits. As a result, the district court entered a judgment in excess of $2 million in favor of the plaintiffs' class. It declined, however, to find a non-terminable lifetime right to benefits for the plaintiffs' class. We will affirm.
The facts are largely undisputed. CW owns a number of industrial plants. One, in Wood-Ridge, New Jersey, opened during World War II and did defense-related work for forty years. Following a period of declining business, this plant closed in late 1983. At that time, CW notified a class of individuals who had retired from the Wood-Ridge plant that their health benefits were being terminated.
In 1984, a number of retirees who had their benefits terminated brought this suit as a class action on behalf of "all those retired Wood-Ridge employees who were not members of the bargaining unit represented by the United Auto Workers at the time of their retirement and whose post-retirement medical benefits were terminated or denied on or about December 1, 1983." The complaint alleged that CW's termination of benefits was wrongful and that the plaintiffs had a vested right to retiree health benefits for life. Plaintiffs sought damages as well as declaratory and injunctive relief.
A. The Benefit Program: 1966-82
In 1966, CW established a post-retirement health benefits program for the Wood-Ridge facility. CW was the plan sponsor and administrator of the plan, as well as its sole source of funding. From 1966 to 1983, the benefits were provided by a succession of health insurance plans provided by several different carriers. Each time a plan terminated and a new one was initiated, notice was apparently sent to the plaintiffs. From 1966 through 1970, Liberty Mutual provided the insurance benefits. During this period two booklets were sent to retirees stating that benefits would terminate upon death or "if the Group Policy terminates." From 1971 through 1972, Prudential was the insurance carrier for retiree health benefits. Apparently, little, if anything, was provided during this period in the way of documentation. From 1973 through 1974, Blue Cross/Blue Shield provided benefits and CW sent retirees a letter summarizing those benefits. The letter stated that coverage would terminate upon death or "the date the class of persons of which the retiree is a member ceases to be covered by the program" and also stated that CW "reserves the right to modify, revoke, suspend, change, or terminate the program, in whole or in part." The term "class of persons of which the retiree is a member" was not defined. However, the contract between CW and Blue Cross/Blue Shield included in the classification of employees eligible for benefits: "All full-time salaried non-bargaining exempt and non-exempt Employees retired prior to January 1, 1973" and "All full-time salaried, non-bargaining exempt Employees retired on or after January 1, 1973."
In September, 1976, CW established an ERISA plan in accordance with the recently enacted ERISA statute. The plan had a written Constitution and Trust Agreement. The Constitution provided in part that "the Company reserves the right at any time and from time to time to modify or amend, in whole or in part, any or all of the provisions of the Plan." It also provided that "the Company reserves the right to terminate the Plan established hereby for any reason at any time." The Constitution did not specify any particular benefits but simply incorporated any "plan or plans" CW might "from time to time adopt." Also at that time, CW changed the manner in which it provided benefits: it began to self-insure, at least with respect to the medical-surgical benefits, and contracted with various carriers to administer the program.
In accordance with ERISA's requirements, Summary Annual Reports (SARs) were provided to plan participants. Starting in 1979, CW added the following reservation language to these SARs: "The company expects and intends to continue this plan indefinitely, but reserves the right to discontinue or amend it."
Plaintiffs claim that from 1976 through 1983, although active employees received Summary Plan Descriptions (SPDs), retirees did not. CW insists that SPDs were sent to retirees. In any event, the 1976 SPD, which was prepared by CW and Prudential and not replaced until 1983, provided in part: "When your employment terminates, or you cease to be a member of a class eligible for insurance under any part of the plan, your insurance under that part of the plan will cease. . . . Your insurance under the group policy will also terminate upon discontinuance of the group policy." Nothing in the SPD defined "class," although the underlying agreement between CW and Prudential listed sixteen classes of employees including:
"14. All full-time exempt retired salaried employees located in the United States" and "15. All full-time Retired Employees . . . [who] (ii) are classified as full-time non-bargaining non-exempt employees."
A five-page "highlight summary" of exempt retiree benefits, first distributed to exempt retirees in 1973 and revised in 1975 to reflect the change from Blue Shield to Prudential, explained:
A retiree's coverage will terminate on the date of his or her death or on the date the class of persons of which the retiree is a member ceases to be covered by the Program.
CURTISS-WRIGHT CORPORATION RESERVES THE RIGHT TO MODIFY, REVOKE, SUSPEND, CHANGE, OR TERMINATE THE PROGRAM IN ...