204 F.3d 475 (3rd Cir. 2000), 99-3570, Adams v. Freedom Forge Corp.

Docket Nº:99-3570
Citation:204 F.3d 475
Party Name:DAVID L. ADAMS; AARON F. ANDREWS; PAUL A. ARCHIBALD; LYNN E. AURAND; DOROTHY E. BAKER; CHARLES BANSHIERE; JOHN O. BASHORE; ALBERT L. BASOM; VAUGHN K. BAUMGARDNER; RONALD L. BECKWITH; WILLIAM K. BELL, JR.; CHARLES E. BENDER; JOSEPH G. BERRIER; EDWARD W. BICKEL; CLARENCE R. BOREMAN, JR.; HARRY BRADLEY, JR.; JOHN H. CLARK; JOSEPH R. CLOSE; JOHN A. CLO
Case Date:March 07, 2000
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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204 F.3d 475 (3rd Cir. 2000)

DAVID L. ADAMS; AARON F. ANDREWS; PAUL A. ARCHIBALD; LYNN E. AURAND; DOROTHY E. BAKER; CHARLES BANSHIERE; JOHN O. BASHORE; ALBERT L. BASOM; VAUGHN K. BAUMGARDNER; RONALD L. BECKWITH; WILLIAM K. BELL, JR.; CHARLES E. BENDER; JOSEPH G. BERRIER; EDWARD W. BICKEL; CLARENCE R. BOREMAN, JR.; HARRY BRADLEY, JR.; JOHN H. CLARK; JOSEPH R. CLOSE; JOHN A. CLOUSER; CHARLES W. CONDO; H. RAY CONFER; THOMAS J. CONNARE; DONALD G. COOK; RONALD W. CRAWFORD; GLEN F. CRISSMAN; GERALD W. CRISSWELL; CHARLES R. CRUIKSHANK; WILLIAM L. CUMMINGS; FRANK J. DAVIDHEISER; WILLIAM A. DAVIS; DAVID S. DOWNING; GERALD G. DUMM; RICHARD H. EATON; PAUL E. EMMERLING; PHILIP H. ERB; GERALD ERB; ROY J. FREED; MARVIN E. FULTZ; CLARENCE GALVIN; RALPH A. GAUL, JR.; FRANK H. GEISSINGER; JAMES T. GILBERT; HARVEY W. GILBERT, JR.; ROBERT W. GILLILAND; GENE M. HAGENBERGER; LARRY L. HARSHBARGER; JAMES L. HARSHBARGER; CARL L. HARTSOCK; EDWIN E. HEISTER; JOSEPH E. HELLER; DAVID S. HERST; T. LEWIS HETRICK; WILLIAM L. HILE; DONALD HORNER; JOHN B. HOSTETLER; MELVIN H. HUGHES; MRS. BOYD HUNTER; RONALD N. JOHNSON; JOHN I. JOHNSON; FRANK B. KELLER; JOHN R. KELLY; DONALD E. KNEPP; DENNIS D. KNEPP; MRS. FRED KREBS; CHARLES W. LEEPER; GARY M. LEEPER; EUGENE F. LINGLE; HARRIET MARTHOUSE; MRS. CLARE MARTIN; LARRY C. MCCOY; LOIS M. MCKEE; RICHARD D. MCMUNN; JOHN E. METZGER; CHESLEY S. MIDDLETON; FRED MITCHELL; RICHARD L. MOORE; HAROLD C. MUMMAH; CLARENCE B. NALE; JOE F. NORMAN; JAMES L. NORRIS; JOSEPH M. OLNICK; MRS. PHIL PACINI; MRS. JOHN PACINI; MELVIN E. PARKER, JR.; HERBERT PECHT; GEORGE W. PITZER; RICHARD J. QUILTER; JAY A. REAM; DON E. RICHARD; FRED D. RHINEHELDER; CHARLES RIGHTER; FERDINANDO ROSS; CALVIN E. ROTHROCK; ROBERT R. RUNTAGH; JOHN E. SEARER; MRS. EDWARD SHANNON; WAYNE E. SHEAFFER; RONALD J. SHOEMAKER; PAUL SIMONETTI; DONALD W. SMITH; ROSS L. SMITH; DONALD H. SNYDER; JAMES L. SNYDER; GLEN C. SOLT; WILLIAM M. STEELE; JOHN W. STUCK; DAVID L. SULOFF; ROBERT SWARTZELL; EDWARD M. THOMPSON; S. L. TREASTER; IRVIN S. TUBBS; WILBUR C. ULSH; RONALD I. VANADA; GILBERT H. VARNER; GARY L. WAGNER; HARRY M. WAGNER; RICHARD S. WAGNER; WILLIAM L. WAGNER; GENE M. WAGNER; JAMES E. WILHELM; HENRY F. WILSON; LEE M. WILSON; HAROLD E. WOLFGANG; ROBERT

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R. WRAY; PAUL WRIGHT; DAVID W. WYCOFF; FRANK C. YOCUM, JR.; HARRY G. NORTON; WILLIAM J. BEERS; JOSEFA R. LINGLE

v.

FREEDOM FORGE CORPORATION, Appellant

No. 99-3570

United States Court of Appeals, Third Circuit

March 7, 2000

Argued: November 5, 1999

On Appeal From the United States District Court For the Middle District of Pennsylvania (D.C. Civ. No. 99-cv-00446) District Judge: Honorable Yvette Kane

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LEO A. KEEVICAN, JR., ESQUIRE CLARE M. GALLAGHER, ESQUIRE WALTER G. BLEIL, ESQUIRE (ARGUED) ALLAN W. BROWN, ESQUIRE Doepken, Keevican & Weiss 600 Grant Street USX Tower, 58th Floor Pittsburgh, PA 15219 Counsel for Appellant Freedom Forge Corporation

ALLEN C. WARSHAW, ESQUIRE (ARGUED) MARY PATRICIA PATTERSONLAVERY, ESQUIRE ELLIOT D. RAFF, ESQUIRE JENNIFER L. MURPHY, ESQUIRE Duane, Morris & Heckscher 305 North Front Street P.O. Box 1003, 5th Floor Harrisburg, PA 17108-1003 Counsel for Appellees

Before: BECKER, Chief Judge, GREENBERG, and CUDAHY,[*] Circuit Judges.

OPINION FOR THE COURT

BECKER, Chief Judge.

This ERISA appeal arises from an order of the District Court for the Middle District of Pennsylvania granting a preliminary injunction to approximately 136 former employees of Freedom Forge Corporation (and to surviving spouses of former employees), who are individually named plaintiffs in a suit seeking to require Freedom Forge to continue funding the health benefits plan currently in place for retirees and spouses. The preliminary injunction requires funding pending trial. The gravamen of the plaintiffs' claim is that Freedom Forge induced them into early retirement with oral assurances that their health insurance benefits would continue essentially unmodified until death, without informing them that it actually retained the power to amend or eliminate the benefits program altogether. In doing so, the plaintiffs contend, Freedom Forge breached its duties as an ERISA fiduciary by misrepresenting and omitting material facts.

This suit was prompted by Freedom Forge's announcement that it would be switching from a self-insured benefits program with no premiums to a managed care system in which retirees would be able to choose among plans. Almost all of the choices that would provide health care comparable to that which they now receive would require the plaintiffs to pay monthly premiums. Shortly after filing suit, the plaintiffs moved for a preliminary injunction, alleging that they would be irreparably harmed if Freedom Forge changed the plans, and asserting that they were reasonably likely to succeed on the merits. After a hearing, the District Court granted the requested preliminary injunction.

This appeal primarily presents the important question whether a district court, faced with a large group of plaintiffs whom the court determines are reasonably likely to succeed on the merits, may grant a preliminary injunction to the entire group of plaintiffs if there is evidence that some, but not all, of the plaintiffs will suffer irreparable harm. At the preliminary injunction

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hearing, only eleven of the approximately 136 plaintiffs testified, while none of the other plaintiffs presented evidence that they were threatened with irreparable harm or were similarly situated to those who testified. We conclude that the demanding requirements for a preliminary injunction do not yield to numbers. The vast majority of the plaintiffs did not present sufficient evidence upon which the court could find that they faced irreparable harm. Accordingly, we will vacate the preliminary injunction as to all but three of the plaintiffs for failure to meet the essential irreparable harm requirement of a preliminary injunction.

Because we find that three of the plaintiffs have adequately established that they are threatened with irreparable harm, we also consider, and affirm (as to two of them), the District Court's determination that they were reasonably likely to succeed on the merits. Their claim appears to fall squarely within the framework established by In re Unisys Corp. Retiree Med. Benefits "ERISA" Litigation, 57 F.3d 1255 (3d Cir. 1995), which held that it is a breach of fiduciary duty for an employer to knowingly make material misleading statements about the stability of a benefits plan.

I. Facts and Procedural History

A. The Parties and the Proposed Change in the Plan

The plaintiffs are retired employees, and surviving spouses of employees, of the Burnham, Pennsylvania facility of Freedom Forge Corporation's Standard Steel Division. Since 1975, Freedom Forge has provided health benefits to retirees and their spouses through a self-insured plan--the Freedom Forge Corporation Welfare Benefit Plan for Salaried Employees and Retirees of the Standard Steel Division (the "Plan"). The Plan, administered by Metropolitan Life Insurance Company until 1988, is now administered by a third-party administrator, Blue Cross and Blue Shield. It is a self-insured plan, as Freedom Forge pays for the cost of retiree health coverage, and pays the administrator to process claims. Although the Plan beneficiaries are responsible for paying a yearly deductible and copayments if necessary, they do not have to pay premiums.

Early in 1999, Freedom Forge announced that it intended to switch from the Plan to a system of coverage through managed care programs. Under the proposal, retirees under age 65 would be switched to Keystone Health Plan Central coverage, and would be required to pay a portion of their premiums, ranging from $30 to $90. Those older than 65 would be able to choose between two different plans: (1) a plan with no premium payments required, but a $10 copayment per prescription and limited annual benefits of drug prescriptions ($1250); and (2) a plan with $20 to $40 monthly premiums, $10 to $20 co-payment per 30-day supply of prescription drugs, and drug benefits limited to $2500 a year. The retirees immediately protested. Approximately 130 retirees and spouses thereupon joined in this ERISA-based suit. They allege that Freedom Forge owed them a duty, as their fiduciary, not to mislead them about their benefits under the Plan; that Freedom Forge breached that duty by misleading them into thinking they would never have to pay premiums; and that this breach harmed them by inducing them to retire early and otherwise rely on the assurances.

The plaintiffs moved for a preliminary injunction to require Freedom Forge to maintain the preexisting plan pending suit.1 At the hearing, two Freedom Forge administrators (Robert Robinson, Manager of Compensation and Benefits since 1979, and Thomas McGuigan, Vice President of Human Resources and Administration)

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testified, and the plaintiffs introduced deposition testimony of Gerald Sieber, who had been in charge of pension administration at the Burnham facility from 1978 to 1993. Eleven of the plaintiffs also testified. Plaintiffs' counsel explained: "We're not going to call 130 witnesses. We are going to, because of the time limitations, call what we believe is a representative sample of the plaintiffs." However, he adduced no evidence that the eleven witnesses were representative of the other retirees and surviving spouses.

The evidence presented at the preliminary injunction hearing established that in 1982 and 1991, Freedom Forge developed "voluntary job elimination programs" ("VJEPs") to encourage voluntary retirement.2 The controversy centers around the terms and tenor of...

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