966 F.2d 1443 (4th Cir. 1992), 90-1101, Pierce v. Security Trust Life Ins. Co.
| Date | 02 July 1992 |
| Docket Number | 90-1101. |
| Citation | 966 F.2d 1443 |
| Parties | Eart E. PIERCE; Joseph F. Pippen, Sr.; Robert A. Borum; L. A. Pair; Jack C. Gann; Robert R. Knopf; S. Ray Mottesheard; Edward R. Strickland; Walter Kaczorowski; Joseph F. Lecato; Isabelle B. Shaw; Helen Barnes; Irving M. Mayo, Plaintiffs-Appellees, v. SECURITY TRUST LIFE INSURANCE COMPANY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Page 1443
Editorial Note:
This opinion appears in the Federal reporter in a table titled "Table of Decisions Without Reported Opinions". (See FI CTA4 Rule 36 regarding use of unpublished opinions)
Argued: March 7, 1991
As Amended July 22, 1992.
Appeal from the United States District Court for the Eastern District of Virginia, at Norfolk. John A. MacKenzie, Senior District Judge. (CA-89-661-N)
Argued: Conrad Moss Shumadine, Willcox & Savage, P.C., Norfolk, Virginia, for Appellant.
Joseph Lawrence Lyle, Jr., Kaufman & Canoles, Virginia Beach, Virginia, for Appellees.
On Brief: Randy D. Singer, Annemarie D. Clary, Kevin L. Keller, Willcox & Savage, P.C., Norfolk, Virginia; Donald I. N. McKenzie, Joseph A. Sowell, III, Waller, Lansden, Dortch & Davis, Nashville, Tennessee, for Appellant.
E.D.Va.
REVERSED AND REMANDED.
Before RUSSELL and HALL, Circuit Judges, and HILL, Senior Circuit Judge of the United States Court of Appeals for the Eleventh Circuit, sitting by designation.
OPINION
PER CURIAM:
This case presents issues arising from an ERISA action brought by twelve retired employees of the defendant Security Trust Life Insurance Company ("Security") to contest an amendment which Security made to the employees' ERISA plan. In 1988, after the plaintiffs had retired, Security amended the ERISA plan to require the retiree employees to contribute, beginning as of January 1, 1989, a portion of the cost of their medical and hospital benefits plan. Security made this amendment pursuant to the power granted the employer under the plan to terminate, modify or change the terms of the ERISA plan. Plaintiffs paid the required contributions under protest, and later instituted this action in the United States District Court for the Eastern District of Virginia for a declaration of the invalidity of the amendment and for recovery of any contributions made by them under protest and by reason of such amendment. As there were no factual disputes, both sides moved for summary judgment, and the district court received written and oral arguments. By Order dated August 10, 1990, the district court found unlawful Security's amendment requiring the retired participants to contribute a part of the cost of their hospital and medical benefits. The court also ordered Security to reimburse plaintiffs for their contributions made subsequent to January 1, 1989, and to reinstate the prior non-contributing nature of the coverage. Security now appeals. We reverse.
I.
In 1975, after Congress enacted the Employees Retirement Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1988), officials of Security executed pursuant to the ERISA statute two benefit plan documents naming Security as fiduciary with authority to control and manage the operation and administration of the Plan, including the authority to amend or terminate the Plan. The Plan itself provided that the employer could modify, change or terminate the benefits unilaterally. Prior to this action, the benefits plan had been amended approximately twenty times, including the amendment in 1978 whereby Security enlarged the coverage by providing free medical coverage to its retirees. It was this amendment which provided the basis for the plaintiffs' action. Security's Chairman stated of this amendment, "Though we know you understand that your Company cannot offset the erosion of inflation on your retirement income, this benefit is added to help and to show again our appreciation for your past service to [Security]."
Security never distributed the Group Plan to plaintiffs, but, in compliance with ERISA requirements, Security prepared and distributed in 1980 to all retirees and employees a Summary Plan Description ("SPD"), which set out for Security's employees and retirees their rights and benefits. The SPD did not advise the retirees or existing employees that the Plan's welfare ("Hospital and Medical") benefits were subject to modification, change or termination unilaterally by the employer. However, the SPD declared, "This booklet describes the essential features on your group medical plan as they apply to you, but it should not be understood to be a complete or detailed statement of your rights under the plan. If you have any questions about the plan, you should contact the Personnel Department."
In 1984, Security provided employees, including retired employees, with a new SPD entitled "Your Group Insurance Plan." Unlike the 1980 SPD, this 1984 SPD advised employees that their Plan could be changed or terminated by the employer unilaterally. The language of the SPD relating the employer's power to modify the Plan included this statement: "Plan Termination Security hopes and expects to continue the Plan indefinitely. Every effort has been made to arrange the Plan so that it will meet future conditions. However, to protect [defendant] against unforeseen conditions, [defendant] reserves the right to change or terminate the Plan at any time."
After the Plan acquired a new insurance policy covering hospital and medical benefits in 1986, Security again distributed a booklet entitled, "[Defendant's] Medical Expense Insurance Plan," which provided in a boxed, bold, italicized note in the "Loss of Benefits" section:
An amendment or termination may affect not only the coverages of active employees (and their covered dependents) but also former employees who retired, died or otherwise terminated employment (and their covered dependents) and of any covered persons who began a program of treatment or became hospitalized prior to the amendment or termination.
Because medical insurance costs drastically increased between 1978 and 1988, Security decided in the latter year to amend the Plan to make it partially contributing, and to require retirees under this amendment to pay approximately 25% of the cost of the Plan-i.e., either $30 or $95 per month, depending on whether the Plan was for individual or family coverage. 1 The plaintiffs objected to such changes and sued to void them. Upon motions for summary judgment by both parties, the district court entered its order granting judgment in favor the plaintiffs. Security has appealed.
II.
The district court began its opinion granting summary judgment in favor of the plaintiffs by declaring that Security had in 1978 amended its medical plan to provide "free medical coverage" to its retirees, and had also issued at least five annual benefit summaries stating the terms and provisions of its ERISA benefits plan, which statements, according to the district court, "could be interpreted as stating that free retirement benefits [including non-contributory medical benefits] were '100% vested.' " The court further found that certain employees in Security's personnel department had told retirees that their "medical coverage [was] 'for life.' " According to the court's findings, Security did not mention in any communication to the retirees "its right to amend or terminate the plan" until the issuance of its "summary plan description ... sometime between 1984 and 1986." The court found that the employer's failure to provide notice of its right to amend the Plan until the 1984 SPD was a violation of ERISA which could not be remedied by a disclaimer. The court also found that Security did not take any action to amend the terms governing the medical benefits so as to require a contribution by the retirees until April 15, 1988.
On the basis of these findings, the district court concluded that Security had
failed to comply with ERISA's statement and disclosure requirements ... [and] Security [had] compounded its malfeasance by providing employees with misleading annual benefit summaries which indicated that the retiree's benefits appearing on the page, including non-contributory medical benefits w[ere] '100 ested' ... [and] topped these actions off by telling employees who had questions about their plan to 'contact the Personnel Department,' Defendant's Exhibit 13, and then telling those who did that retirement benefits were provided by the company at no cost for the life of the retirees.
Govani v. Bricklayers, Masons and Plasterers Local No. 5 Pension Fund, 732 F.2d 250, 252 (1st Cir. 1984). The district court appears to have avoided the necessity of finding reliance and prejudice by declaring that "in instances where the company wholly fails to inform its employees that their benefits are subject to change at the employer's whim, reliance and prejudice are to be presumed." The district court proceeded to conclude that "Security may choose to include the plaintiffs in future plan amendments increasing the level of medical coverage; it may choose not to as well. The company may not, however, condition the plaintiff's receipt of future medical coverage on contributions towards the cost of the plan." (Emphasis in original). The court ordered the company "to reimburse the plaintiffs for their contributions [made towards the cost of such medical benefits] and to reinstate the non-contributory nature of the plaintiffs' current medical coverage."
The district court opinion is the subject of this appeal.
III.
All parties agree that decision herein is controlled by the provisions of the Employees Retirement Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1988). That Act requires that any employee benefits plan be based upon "a written instrument," 29 U.S.C. § 1102(a)(1). We agree with the district court, however, that it is not sufficient simply for the employer have a written plan. There are...
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