274 F.3d 76 (2nd Cir. 2001), 00-9469, Devlin v Empire Blue Cros

Docket Nº:00-9469
Citation:274 F.3d 76
Party Name:FRANCIS J. DEVLIN, Plaintiff, RICHARD G. KUNKEL, JOSEPH G. MURPHY, DANIEL ROSENBERG, DANIEL G. SANDERS, JAMES C. SNYDER, ANTHONY J. TRUHON, JOHN WANDZILAK, JR., JOHN F. BYRNES, WILLIAM A. DE MAURO, MICHAEL ELKINS, JERROLD I. EHRLICH, BEVERLY GLICKERMAN, GERALD HARRISON, JOHN F. LUCZUN, JOHN F. MULDOON, HARRY E. NICHOLSEN, RONALD D. ZAMMIT, STERLING
Case Date:December 06, 2001
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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274 F.3d 76 (2nd Cir. 2001)

FRANCIS J. DEVLIN, Plaintiff,

RICHARD G. KUNKEL, JOSEPH G. MURPHY, DANIEL ROSENBERG, DANIEL G. SANDERS, JAMES C. SNYDER, ANTHONY J. TRUHON, JOHN WANDZILAK, JR., JOHN F. BYRNES, WILLIAM A. DE MAURO, MICHAEL ELKINS, JERROLD I. EHRLICH, BEVERLY GLICKERMAN, GERALD HARRISON, JOHN F. LUCZUN, JOHN F. MULDOON, HARRY E. NICHOLSEN, RONALD D. ZAMMIT, STERLING E. CATHEY, LOUIS L. LEVINE, ELLEN H. PROPP, JOHN L. SHURTLEFF, JULES K. LAMBEK, and EUGENE F. HARRISON, Plaintiffs-Appellants,

v.

EMPIRE BLUE CROSS AND BLUE SHIELD, Defendant-Appellee.

No. 00-9469

United States Court of Appeals, Second Circuit

December 6, 2001

Argued: June 20, 2001

Amended: February 14, 2002.

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[Copyrighted Material Omitted]

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MEREDITH H. SAVITT, Hite & Savitt, Albany, New York, for Appellants.

GARY H. GLASER, Seyfarth Shaw, New York, New York (Craig P. Pacernik, on the brief), for Appellee.

BEFORE: JACOBS, F.I. PARKER, and SOTOMAYOR, Circuit Judges.

F.I. PARKER, Circuit Judge:

In 1998, defendant-appellee Empire Blue Cross and Blue Shield ("Empire") significantly lowered the amount of life insurance provided to retirees.1 Plaintiffs-appellants are former employees of Empire who retired between 1989 and 1993. Plaintiffs seek to enforce the terms of the life insurance plan provided by Empire to its retirees, as those terms existed during

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their employment with Empire. In addition to their claim for injunctive and declaratory relief under §§ 502(a)(1) & (3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1132 (a)(1) & (3), plaintiffs assert claims for monetary relief under ERISA for wrongful reduction of benefits, for breach of fiduciary duty, and for failure to provide information summaries in a timely fashion. Plaintiffs also assert a claim based on promissory estoppel.

The district court (Barbara S. Jones, Judge) rejected plaintiffs' claims for relief, principally concluding that the relevant ERISA plan documents did not provide plaintiffs with a vested life insurance benefit at the previous level of coverage. Byrnes v. Empire Blue Cross and Blue Shield, No. 98 CIV. 8520(BSJ), 2000 WL 1538605, at *4-*9 (S.D.N.Y. Oct. 18, 2000). On appeal, plaintiffs contend that the relevant plan documents provide them with a vested life insurance benefit in an amount equivalent to their final annual salary. Additionally, plaintiffs contend that they are entitled to recover benefits under a theory of promissory estoppel. Finally, plaintiffs assert a breach of fiduciary duty claim under ERISA § 404(a), 29 U.S.C. § 1104 (a).

For the reasons set forth below, we agree with plaintiffs that the relevant plan documents can reasonably be interpreted to provide a vested life insurance benefit. We also agree that summary judgment was inappropriately granted to defendant on the promissory estoppel, breach of fiduciary duty, and penalty claims. We therefore vacate the district court's decision granting summary judgment to Empire and remand to the district court for further proceedings consistent with this opinion.

I. BACKGROUND

Plaintiffs were all employed by Empire for various lengths of time, with some plaintiffs having worked at Empire for over 40 years. All retired from Empire between 1989 and 1993. Some of these plaintiffs retired pursuant to an early retirement incentive program announced in 1992, known as the Voluntary Separation Opportunity Program ("VSOP"). Others retired pursuant to a similar program offered in 1993, known as the Voluntary Incentive Program ("VIP"). The remaining plaintiffs retired pursuant to Empire's normal retirement program.

Throughout plaintiffs' employment, Empire provided life insurance benefits at no cost to its employees and retirees. These benefits were described by Empire in a summary plan description ("SPD") distributed to employees prior to 1987:

All graded employees, hired on a full-time basis, after a probationary period become a member of our Group Life Insurance Plan, while all full-time Executive Compensation Program are covered upon employment.

In addition, retired employees, after completion of twenty years of full-time permanent service and at least age 55 will be insured.

. .

Your life insurance is twice your annual salary, excluding overtime pay.

. .

For eligible retirees, the group life insurance will be reduced 10% on the retirement date and in equal amounts on the next four anniversaries of the retirement date. That is, on the fourth anniversary of the employee's retirement, benefits will have been reduce [sic] 50% of the pre-retirement level for the remainder of their lives [sic].

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J.A. at 522 (emphasis added).2 This SPD contained no qualification or condition on these benefits, nor did it contain any indication that Empire would or could later reduce or eliminate them.

In 1987, Empire created and distributed an employee handbook, entitled "Your Handbook," which also included a summary plan description of Empire's group life insurance benefits. Like the earlier plans, this plan provided no-cost life insurance benefits to employees at an amount equal to two times the employee's annual salary. For retirees, the plan provided that:

If you retire . . . at age 65 or older with 10 or more years of full-time service; or at age 55 or older with 20 or more years of full-time service; or at any age, with 30 or more years of full-time service, your basic life insurance will be reduced by 10% as of your retirement date, and by an equal amount on each of the next four anniversaries of your retirement date so that 50% of your life insurance coverage remains in force for the rest of your life, at no cost to you.

J.A. at 73. The last sentence on the last page of this document informs employees that "other important information about [their] Group Life Insurance Plan and its administration can be found in the section entitled 'Benefit Administration.'" J.A. at 79. Contained in the "Benefit Administration" section is the following statement:

Empire Blue Cross and Blue Shield maintains the Plans for the exclusive benefits [sic] of its employees. The company expects and intends to continue the Plans in your Benefits Program indefinitely, but reserves its right to end each of the Plans, if necessary. The company also reserves its right to amend each of the Plans at any time.

J.A. at 83. This reservation of rights appears for the first time in 1987 in "Your Handbook." As noted, the earlier plan descriptions contain no similar language.

In 1992, Empire implemented the VSOP, a voluntary workforce reduction program. In connection with this program, Empire distributed materials outlining eligibility and program benefits. Participation in this program required eligible employees to "voluntarily resign from Empire in exchange for certain benefits." J.A. at 536. These "certain benefits" included life insurance coverage, on substantially the same terms as provided in the earlier plans. While the VSOP's description of health insurance benefits included an explicit reservation of Empire's right to adjust coverage, the description of life insurance benefits did not. In the "Administration" section of these materials, however, Empire "reserved the right to amend and/or terminate the VSO Program at any time for any purpose." J.A. at 540. This section also warned that "Empire may or may not adopt new or modified programs or benefits or take other actions in the future that, depending on your individual circumstances, may be more or less advantageous to you than the current Program." Id.

In 1993, Empire offered the VIP, another early retirement incentive program similar to the VSOP. A document distributed in connection with this program informed employees that "your insurance benefits may be extended to you for your lifetime . . .,depending on your age and years of

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service. You will be eligible for retiree insurance benefits if you normally qualify or if you would qualify by adding five years to your age and five years to your service under the VIP." J.A. at 559. The VIP provided for life insurance benefits virtually identical to those described in earlier plans; that is, benefits were reduced by 10% on retirement and for four subsequent years, until reaching one's annual salary. Like the VSOP materials, the VIP's healthcare insurance description contained a reservation of rights, but the description of life insurance benefits did not. The VIP's Administration section included the following language:

Empire reserves the right to amend and/or withdraw the VIP at any time for any purpose with respect to any employee, up to the date on which that employee's Resignation and General Release and Covenant Not to Sue becomes effective. Empire also reserves the right to announce new and different plans and programs as business needs require.

J.A. at 562.

In late 1997, because of financial difficulties and in an effort to "remake itself as a corporation in the managed care environment and remain economically competitive," Empire reviewed its benefits plans. On June 24, 1998, Empire announced that the "Board of Directors voted to adopt a number of new benefit provisions for current employees [and] retirees" effective January 1, 1999. J.A. at 572. These new benefits provisions affected individuals who retired from Empire after January 1, 1989 and before June 23, 1998. Among the changes instituted by Empire was a reduction in life insurance coverage to a flat $ 7,500.

Many retirees wrote to Empire, demanding an explanation for this reduction in benefits and to obtain more information about Empire's decision-making process. In response, Empire informed...

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