White Farm Equipment Co., In re
| Decision Date | 04 June 1986 |
| Docket Number | Nos. 84-3870,84-3986,s. 84-3870 |
| Citation | 788 F.2d 1186 |
| Parties | , Bankr. L. Rep. P 71,104, 7 Employee Benefits Ca 1411 In re WHITE FARM EQUIPMENT COMPANY, Debtor. Douglas J. HANSEN; Raymond Borrell; Louis P. Ellery; Anthony G. Obermeier; Pearl C. Lindahl; and Lenore Knutson, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. WHITE MOTOR CORPORATION, et al., Defendants, White Farm Equipment Company and T.I.C. Investment Corporation, Defendants- Appellants, (84-3870), John T. Grigsby, Jr., (White Motor Corporation), Trustee-Appellant, (84-3986). |
| Court | U.S. Court of Appeals — Sixth Circuit |
Robin E. Phelan, argued, Danile E. Westbrook, Haynes & Boone, Dallas, Tex., Stanley Block and Charles B. Wolf, argued, Vedder, Price, Kaufman & Kammhol, Chicago, Ill., for defendants-appellants.
Russell C. Brown, argued, Doherty, Rumble & Butler, St. Paul, Minn., for plaintiffs-appellees.
G. Christopher Meyer, argued, William H. Baughman, Jr., Squire, Sanders & Dempsey, Cleveland, Ohio, and John Parks, argued, for defendants and trustee-appellant.
John M. Vine and Amy N. Moore, Covington & Burling, Washington, D.C., for amicus curiae Erisa Industry Committee.
Christopher B. Nelson, Kovar, Nelson & Brittain, Chicago, Ill., for amicus curiae Nat. Foundry Ass'n.
Leonard R. Page, Intern. Union, UAW, Detroit, Mich., and Bernard Kleinman, United Steel Workers of America, Pittsburgh, Pa., for amicus curiae Intern. Union, UAW and United Steelworkers of America, AFL-CIO:CLC (In support of plaintiffs-appellees).
Before LIVELY, Chief Judge, WELLFORD, Circuit Judge, and PORTER, Senior District Judge. *
This case raises serious questions concerning the attempted termination of certain insurance benefits under a welfare benefit plan for retired employees by an employer in the process of reorganization in bankruptcy. The benefits in question were not the subject of any collective bargaining agreement. There is involved in this controversy the application of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. Secs. 1001-1461, and the interpretation of an "assumption and assignment" agreement by a third party involved in the controversy but not in the bankruptcy proceedings. Plaintiffs are former employees and spouses of deceased former employees (hereinafter, "retirees") of White Farm Equipment Company ("White Farm"). Seeking recovery and reinstatement of welfare benefits they claim were "vested" and nonterminable, retirees sue their former employer, White Farm; the White Motor Corporation Insurance Plan for Salaried Employees ("the Plan"), a nonfunded, noncontributory 1 welfare benefit plan which provided life, health, and welfare insurance, prescription drugs, dental care, and hearing aid benefits to retirees and eligible dependents; White Motor Corporation ("White Motor"), 2 the original parent of White Farm; T.I.C. Investment Company ("TIC"), the purchaser, through a subsidiary, of the capital stock of White Farm from its original parent White Motor; and Equitable Life Assurance Society of the United States ("Equitable"), insurance underwriter of the Plan.
The bankruptcy court entered summary judgment in favor of defendants in September 1982. In re White Farm Equipment Co., 23 B.R. 85 (Bankr.N.D. Ohio 1982). The retirees appealed the bankruptcy court's award to the United States District Court for the Northern District of Ohio. On September 20, 1984, that court, the Honorable Ann Aldrich presiding, reversed the bankruptcy court and entered partial summary judgment as to liability in the retirees' favor. In re White Farm Equipment, 42 B.R. 1005 (N.D. Ohio 1984). The court ordered White Farm and TIC to reinstate the retirees' benefits retroactive to May 1, 1981, and enjoined the termination of any of the retirees' benefits under the Plan. Judgment on that order was entered by order of the court dated October 4, 1984. In this consolidated appeal, defendants White Farm and TIC, as well as Grigsby, Trustee for White Motor, appeal this judgment. Jurisdiction of this interlocutory appeal is predicated on 28 U.S.C. Sec. 1292(a)(1).
Formed in 1969 by the merger of two wholly-owned subsidiaries of White Motor, White Farm has historically been engaged in the manufacture and distribution of farm equipment and materials-handling equipment. During April 1980, White Farm suspended its manufacturing operations in the face of lagging sales and insufficient working capital.
On September 4, 1980, White Farm voluntarily petitioned for reorganization pursuant to Chapter 11 of the Bankruptcy Reform Act of 1978. (On the same date, White Motor and four other of its wholly-owned subsidiaries also voluntarily petitioned for reorganization due to severe financial difficulties.) The case now on appeal before this court is an adversary proceeding arising out of White Farm bankruptcy reorganization proceedings.
On December 19, 1980, in a transaction approved by the bankruptcy court, White Motor sold White Farm to White Farm USA, Inc. ("WF USA"), a wholly-owned subsidiary of TIC. WF USA entered into an agreement with White Motor entitled "Assignment and Assumption of Liabilities," under which it assumed, under certain conditions, White Motor's obligations to White Farm employees and retirees under the welfare benefit plan; the meaning of this agreement is at issue in this proceeding. On the same date, the president of White Farm sent a letter to the company's retirees (the plaintiffs in this action) advising them of the purchase and that their "retirement benefits will continue."
White Farm continued funding the retirees' welfare benefits for the next few months, but on March 31, 1981, it notified the retirees by letter that the Plan would be discontinued effective May 1, 1981, and that identical coverage would be made available on a fully contributory basis at group rates.
The only documentary evidence of the terms of the Plan relating to retiree insurance benefits are three summary booklets issued by White Farm to its employees and retirees describing the contents of the Plan. No formal Plan document was found or could be produced.
The 1970 booklets are organized into four parts: (I) the certificate of insurance, (II) a description of all insurance coverages then provided excepting long term disability coverage, (III) noncontributory long term disability coverage, and (IV) contributory long term disability coverage. At the conclusion of Part II, under the heading of "GENERAL INFORMATION", the following appears:
WHEN INSURANCE TERMINATES
Your insurance terminates when you leave our employ, when you are no longer eligible or when the group policy terminates, whichever happens first.
(Emphasis added).
Protection after termination
....
B. If your Group Life insurance terminates because the Group policy is terminated or amended, ... you may also make application to convert your Group Life insurance to an individual Life insurance policy....
(Emphasis added).
Protection After Termination of Survivor Income Benefits
....
B. If you die within 31 days following termination of insurance because of termination of your employment in the class or classes of employees insured under the Group Policy, or because the Group policy is terminated or amended, Survivor Income benefits will be payable if you had remained insured until your death....
(Emphasis added).
If a person's insurance terminates due to termination of the Major Medical Expense Insurance or its amendment to terminate the class of insured person of which such person is a member, all Major Medical Expense benefits will cease on the date of such termination....
(Emphasis added).
In the 1978 booklet the following language was found:
13. CONTINUANCE OF THE PLAN:
The Company fully intends to continue your plans indefinitely. However, the Company does reserve the right to change the plans, and, if necessary, discontinue them. If it is necessary to discontinue the Pension Plan, the assets of the Pension Fund will be used to provide benefits according to the Plan document.
(Emphasis added).
On June 29, 1981, the White Farm retirees commenced this adversary proceeding in the bankruptcy court against White Farm, the Plan, White Motor, TIC, and Equitable, alleging breach of contractual and fiduciary duties under the Plan in violation of ERISA and seeking (1) a declaratory judgment that the retirees' claim under the Plan is valid under ERISA and should be allowed as a claim in bankruptcy under 11 U.S.C. Sec. 502, and (2) an injunction requiring White Farm, White Motor, and TIC to reinstate retroactively, and to continue to fund, the full welfare benefits provided under the Plan.
On July 14, 1981, the plaintiff retirees filed a motion for a temporary restraining order and preliminary injunction requiring retroactive reinstatement and continued funding of the retirees' welfare benefits. At a preliminary hearing held on July 23, 1981, "[t]he Court and the parties agreed to attack as a threshold question the legal sufficiency of the Retirees' claims." 23 B.R. at 88-89.
On the same date as the preliminary hearing, responses to the plaintiff retirees' motion were filed by White Farm, and the White Farm Equipment Company Official Creditors Committee filed a motion to intervene, which latter motion was granted. White Farm and TIC then filed motions to dismiss the plaintiff retirees' complaint. On August 13, 1981, the bankruptcy court, after briefs were filed, directed a hearing on the motion to dismiss. On August 31, 1981, a letter from plaintiff retirees' counsel to all counsel of record and the bankruptcy court clerk was filed which indicated that plaintiffs intended to file a motion for partial...
To continue reading
Request your trial
-
First Capital Life Ins. v. AAA COMMUNICATIONS
...private design.'" International Resources v. New York Life Ins. Co., 950 F.2d 294, 301 (6th Cir.1991) (quoting In re White Farm Equipment Co., 788 F.2d 1186, 1193 (6th Cir.1986)), reh'g en banc, denied, Jan. 15, 1992, cert. denied, 504 U.S. 973, 112 S.Ct. 2941, 119 L.Ed.2d 565 (1992). The p......
-
Arber v. Equitable Beneficial Life Ins. Co.
...121 (3rd Cir.1988), cert. denied, 488 U.S. 1041, 109 S.Ct. 865, 102 L.Ed.2d 989 (1989), citing, inter alia, In Re White Farm Equipment Co., 788 F.2d 1186, 1191 (6th Cir.1986); Murphy v. Heppenstall Co., 635 F.2d 233, 237 (3rd Cir.1980), cert. denied, 454 U.S. 1142, 102 S.Ct. 999, 71 L.Ed.2d......
-
Bidlack v. Wheelabrator Corp., 91-2378
...1476, 1479-80 (6th Cir.1983); United Steelworkers v. Fort Pitt Steel Casting, 598 F.2d 1273 (3d Cir.1979); cf. In re White Farm Equipment Co., 788 F.2d 1186, 1193 (6th Cir.1986). The district court granted summary judgment for the company, and dismissed the suit, because "an examination of ......
-
Sprague v. General Motors Corp.
...137 L.Ed.2d 763 (1997) (an employer may "contractually cede[ ] its freedom" not to vest benefits). See also In re White Farm Equip. Co., 788 F.2d 1186, 1193 (6th Cir.1986), where we held that "the parties may themselves set out by agreement or by private design, as set out in plan documents......
-
On Second Thought: Modifying Retiree Health Plans - No Good Deed Goes Unpunished
...and certain aspects of multiple employer welfare arrangements (MEWAs), the Employee Retirement Income Security Act (ERISA) preempts any state law regulation of these benefits. Initially, some courts attempted to advance a theory that retiree medical benefits vest as a common law right upon retire......
-
Determining the nonmarital portion of pensions and retirement benefits.
...2006); Gafney v. Gafney, 965 So. 2d 1217 (Fla. 4th D.C.A. 2007). (9) 29 U.S.C. [section]1051(1); see also In re White Farm Equipment Co., 788 F.2d 1186 (6th Cir. (10) See 29 U.S.C. [section][section]1053(c) and 1054(g) for ERISA plans and for government plans within the state of Florida, FL......
-
Valuing economic damages in employment litigation from a plaintiff's perspective.
...201(1). Also see Anderson v. Alpha Portland Industries, Inc., 836 F.2d 1512 (8th Cir. Mo. 1988); and In re White Farm Equip. Co., 788 F.2d 1186 (6th Cir. (27) See In re Unisys Corp. Retiree Medical Ben., 57 F.3d 1255 (3d Cir. 1995); and Wise v. El Paso Natural Gas Co., 986 F.2d 929 (5th Cir......