Helwig v. Kelsey-Hayes Co., Civ. A. No. 94-70036.

Citation857 F. Supp. 1168
Decision Date06 July 1994
Docket NumberCiv. A. No. 94-70036.
PartiesRichard HELWIG, Richard Bayless, August Boetsch, Donald Barber, Joseph Sorna, and Louis Kayser, Individually and on behalf of all others similarly situated, Plaintiffs, v. KELSEY-HAYES COMPANY, Defendant.
CourtUnited States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)

COPYRIGHT MATERIAL OMITTED

Diane M. Soubly, Richard E. Russel and Mark T. Nelson, Butzel Long, PC, Detroit, MI, for Kelsey-Hayes Co.

Andrew A. Nickelhoff and John R. Runyan, Detroit, MI, for Louis H. Kayser.

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS' MOTION FOR A PRELIMINARY INJUNCTION

GADOLA, District Judge.

This matter is before the court on plaintiffs' motion for a preliminary injunction pursuant to Rule 65(a) of the Federal Rules of Civil Procedure. Plaintiffs represent a proposed class of individuals seeking relief under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, from defendant Kelsey-Hayes Company. Plaintiffs are seeking reinstatement of retiree benefits that they allege they are due under the terms of a welfare benefit plan. The court held a hearing on plaintiffs' motion on June 8, 1994. For the reasons discussed below, the court will grant plaintiffs' motion.

I. Background

Plaintiffs are retired salaried employees of defendant or their surviving spouses and dependents.1 Plaintiffs represent a proposed class that numbers approximately 5,300 individuals. Defendant Kelsey-Hayes is a supplier and manufacturer of automotive parts that conducts business in several states. Plaintiffs claim that defendant breached its promise to provide them with lifetime retiree health coverage under the terms of previous benefit packages.

Over approximately the past two years defendant has instituted a number of changes to the health package that it provides to its salaried retirees. Plaintiffs now seek an injunction ordering defendant to reverse these changes. On January 1, 1992, defendant began requiring monthly contributions for health benefits for all retirees under the age of sixty-five. It also ceased medicare reimbursement for all salaried retirees, and it increased the prescription drug co-payment. On January 1, 1993, defendant again increased contributions that it required from retirees under sixty-five. The most significant changes to plaintiffs' health benefits occurred on January 1, 1994. Defendant instituted a twenty percent co-payment with an annual maximum of $2,000 per person and $4,000 per family. Retirees are now required to pay annual deductibles of $300 per person and $600 per family. Previously, plaintiffs were not required to pay either deductibles or co-payments. In addition, defendant required new monthly premiums of $2 per individual or $4 for family coverage, established a lifetime maximum of $500,000 in coverage, and again increased the prescription drug co-payment. Plaintiffs received notice of these changes in April of 1993.

Plaintiffs filed this action on January 5, 1994, four days after the effective date of defendant's latest changes to its salaried retiree health coverage. Plaintiffs are seeking an injunction ordering defendant to restore the benefits package that they were receiving prior to January 1, 1992. They claim that defendant made these changes to their health coverage in violation of an ERISA benefit plan as expressed in various booklets and summary plan descriptions that were distributed to employees. In addition, plaintiffs contend that the changes to their benefits plan constitute a breach of fiduciary duty under ERISA that requires defendant to enforce the plan according to its allegedly vested provisions. Finally, plaintiffs contend that the principle of equitable estoppel should apply to the enforcement of an ERISA plan based upon oral guarantees made to them by defendant's agents concerning the nature of retiree medical benefits that were promised to them.

Defendant contends that the master insurance agreements that established medical coverage for plaintiffs allow for termination with thirty days notice. Furthermore, defendant relies on a more recent summary plan distributed to retirees that reserves a right to terminate or alter the benefits plan to the company. In addition, defendant argues that neither a claim for equitable estoppel nor breach of fiduciary duties is stated in the context of a reduction in health insurance provided under an ERISA benefits plan.

II. Standard of Review for Preliminary Injunctions

Plaintiffs are seeking a preliminary injunction that requires defendant to reinstate the health benefits that it provided to retirees prior to implementing the modifications of the past two years. The decision of whether or not to issue a preliminary injunction lies within the discretion of the district court. CSX Transp., Inc. v. Tennessee State Bd. of Equalization, 964 F.2d 548, 552 (6th Cir.1992). When determining whether to issue a preliminary injunction, a district court should address four factors:

1. the plaintiff's likelihood of success on the merits of the action;
2. the irreparable harm to plaintiff that could result if the court does not issue the injunction;
3. whether the interests of the public will be served; and
4. the possibility that the injunction would cause substantial harm to others.

Forry, Inc. v. Neundorfer, Inc., 837 F.2d 259, 262 (6th Cir.1988); In re DeLorean Motor Co., 755 F.2d 1223 (6th Cir.1985); Mason County Medical Ass'n v. Knebel, 563 F.2d 256 (6th Cir.1977).

III. Likelihood of Success on the Merits

In order for plaintiffs to be successful in their motion for a preliminary injunction, they must establish a substantial likelihood of success on the merits of their underlying claims. Plaintiffs are seeking relief under: 29 U.S.C. § 1132(a)(1)(B) of ERISA for enforcement of a welfare benefit plan, 29 U.S.C. § 1103(a) of ERISA for breach of a fiduciary duty, and promissory estoppel. The court will now examine plaintiffs' likelihood of success under each of these claims of relief.

A. Enforcement of a Welfare Benefit Plan

ERISA makes a clear distinction between employee pension plans and employee welfare plans. Gill v. Moco Thermal Indus., Inc., 981 F.2d 858, 860 (6th Cir.1992); Armistead v. Vernitron Corp., 944 F.2d 1287, 1297 (6th Cir.1991). Pension plans provide for vested benefits, while "health insurance plans are employee welfare plans, for which there is no vesting requirement under ERISA." Gill, 981 F.2d at 860; Musto v. American Gen. Corp., 861 F.2d 897, 912 (6th Cir.1988), cert. denied, 490 U.S. 1020, 109 S.Ct. 1745, 104 L.Ed.2d 182 (1989). As in any other contract, however, the parties to a welfare benefits plan are free to agree to the vesting of health insurance coverage for retirees under an ERISA plan. In addressing a claim for vested retiree health benefits, the court "must look to the intent of the parties and apply federal common law of contracts to determine whether welfare benefits have vested." Gill, 981 F.2d at 860. In making this determination, the court must first look to the language contained in the "plan documents" in order to decide if plaintiffs' benefits are vested. Boyer v. Douglas Components Corp., 986 F.2d 999, 1005 (6th Cir. 1993); see Musto, 861 F.2d at 900-01 (court should look to "written instrument;" court also looked to other documents); In re White Farm Equipment Co., 788 F.2d 1186, 1193 (6th Cir.1986) (court examined summary booklets distributed to employees). "However, if the plan documents are ambiguous with respect to a particular term, then, under federal common law, a court may use traditional methods of contract interpretation to resolve the ambiguity, including drawing inferences and presumptions and introducing extrinsic evidence." Boyer, 986 F.2d at 1005.

In this case, the parties both rely on various insurance agreements, summary plan descriptions, and employee booklets in support of their contrary claims. Plaintiffs also rely on extrinsic evidence in the form of verbal assurances given to employees over the past twenty years. Before examining the particular documents, however, the court will discuss the various arrangements defendant had with several insurance companies to provide health coverage to salaried employees and retirees. Up until January 1, 1988, defendant contracted with Blue Cross and Blue Shield of Michigan ("Blue Cross") to provide health insurance. Beginning in 1988, defendant replaced Blue Cross with the Connecticut General Life Insurance Company ("CIGNA"). CIGNA was then replaced with the John Hancock Mutual Life Insurance Company ("John Hancock") in 1992. John Hancock is defendant's current health insurance provider.

In support of their claim for vested retiree health benefits, plaintiffs rely upon summary plan description booklets distributed to them, benefits summary certificates, and verbal assurances made by defendant's agents over the past twenty year period. On the other hand, defendant relies upon the provisions of the master insurance agreements, the language of certain summary description booklets, and certain agreements signed by over one hundred salaried employees allegedly releasing any claim to vested benefits. The court will examine in detail each of the documents presented to the court by the parties in determining the "intent" of the ERISA benefits plan for retirees.

Plaintiffs rely most heavily upon two employee booklets that were issued by defendant. At least as early as 1977, plaintiffs allege that defendant distributed a booklet entitled "Your Health Care Benefits as a Salaried Employe sic of the Kelsey-Hayes Company" to employees in its Detroit, Romulus, Jackson, and R & D facilities. Plaintiff's represent that this booklet is typical of the booklets distributed at Kelsey-Hayes facilities in other states. The booklet describes the health insurance plan for salaried employees, and it appears to be a summary plan description issued as required by 29 U.S.C....

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