Boyer v. Douglas Components Corp.
| Decision Date | 06 April 1993 |
| Docket Number | No. 91-2098,91-2098 |
| Citation | 986 F.2d 999 |
| Parties | 16 Employee Benefits Cas. 1545 Claude BOYER, Jr., et al., Plaintiffs-Appellees, v. DOUGLAS COMPONENTS CORPORATION; Universal Components Corporation; Orion Management Consultants, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Kevin Preston (argued and briefed), Dresser, Marks, Svendsen, Oster & Bird, Sturgis, MI, for plaintiff-appellee.
Fred A. Ricks, Jr. (argued and briefed), McMahon, Berger, Hanna, Linihan, Cody & McCarthy, St. Louis, MO, for defendants-appellants.
Before: JONES and RYAN, Circuit Judges; and BROWN, Senior Circuit Judge.
This action under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461, arises out of defendant Universal Components' attempt to terminate the health insurance benefits of the plaintiffs, a group of its retired employees or spouses of deceased retired employees. Following a bench trial, the district court issued an opinion and an order, awarding the plaintiffs damages and enjoining the defendant, Universal Components, to provide health insurance benefits to the plaintiffs. 1 The defendant appeals from this order, contending that the district court erroneously concluded that the plaintiffs' benefits had vested and that therefore the plaintiffs are entitled to relief. 2
The plaintiffs are a group of non-union retirees or surviving spouses of non-union deceased employees of Universal Components, or of Universal's predecessor, the Douglas Division of the Scott & Fetzer Company.
Douglas Division was created in 1968 when it was purchased as a going concern by the Scott & Fetzer Company. From 1968 until 1984, Douglas Division employed a group of union employees, who worked for hourly wages, and a group of non-union employees who were paid on salary. Douglas Division provided health insurance benefits for union employees, retirees and their dependents pursuant to a series of written collective bargaining agreements. Douglas Division also provided health insurance for salaried (non-union) employees, retirees and their dependents, but there was no written agreement requiring it to do so. Aetna was the health care insurer for all of the company's retirees.
The terms of the health insurance plan for the retirees during the period that Douglas Division was owned by Scott & Fetzer were set out in plan booklets provided by Aetna. A booklet, effective November 1, 1976, provided: 3 "Your Employer hopes to continue the Plan indefinitely but, as with all group plans, the Plan may be changed or discontinued." J.A. at 236.
In 1979, Aetna revised the plan booklet, and the new Aetna plan became effective on November 1, 1979. Under the heading "Change or Discontinuance of Plan," the plan booklet provided: "It is hoped that this Plan will be continued indefinitely, but, as is customary in group plans, the right of change or discontinuance at any time must be reserved." J.A. at 258. With respect to retirement, the plan booklet stated:
If you retire on or after the effective date of this part of the plan, you will continue to be eligible for medical expense coverage for yourself and your dependents under the plan to the same extent as if you had not retired.
J.A. at 255. The 1979 Aetna plan remained in effect until 1984. Some of the plaintiffs, who are retired employees or surviving spouses of now deceased employees, became entitled to benefits while one of the two Aetna plans was in effect.
In an agreement dated January 31, 1984, the Scott & Fetzer Company sold its Douglas Division to Universal Components. Universal Components continued to provide health insurance to union and non-union employees, and to union and non-union retirees who retired before February 1, 1984, as well as to employees who retired after February 1, 1984. After Universal Components purchased Douglas Division, Universal Components replaced Aetna with Blue Cross and Blue Shield of Michigan ("BCBSM") as the health care insurer.
After BCBSM became the health insurer, Universal Components distributed BCBSM plan handbooks and plan outlines to its employees and retired employees. J.A. at 566, 568-69. The BCBSM handbook describes the benefits that the employees and retirees were entitled to receive under the BCBSM plan. However, the handbook states that it is merely a guide to BCBSM benefits:
This booklet is a guide to your Blue Cross and Blue Shield of Michigan coverage. It is not a contract or a detailed explanation of your benefits. Your contract, which is the governing instrument, contains a complete statement of benefits, limitations, terms, and exclusions.
J.A. at 386. There was no indication in the plan handbook when or whether the plan could be terminated. The outline is also silent on termination, but states This is an OUTLINE of your benefits. It is not a contract. While every effort has been made to make it accurate and complete, your official benefits and conditions are contained in the Certificates and Riders listed below:
. . . . .
These documents are available on request, but they are NOT needed to obtain benefits.
J.A. at 376. The documents to which the outline and the handbook refer are a number of certificates and riders which describe the exact benefits to which the plaintiffs are entitled under the plan. A document entitled "Group Operating Agreement between Douglas Corporation [now Universal Components Corporation] and Blue Cross and Blue Shield of Michigan" ("GOA") sets out the basic terms of the contractual relationship between Universal Components and BCBSM. A "Coverage Agreement," supplementing the GOA, states which riders and certificates are in effect between the parties. The GOA provides that either Universal Components or BCBSM may terminate the contract for coverage upon thirty days' notice. There is also an addendum to the GOA entitled "Retiree Agreement" under which BCBSM agreed to provide insurance coverage to Universal Components' retirees. The Retiree Agreement provides: "This addendum may be cancelled or amended by Blue Cross and Blue Shield of Michigan following thirty (30) days written notice to the Group or cancelled by the Group following thirty (30) days written notice to Blue Cross and Blue Shield of Michigan." J.A. at 300.
In an agreement dated October 17, 1989, Universal Components sold a large part of its operation to Douglas Autotech Corporation. Universal Components began losing money soon after this sale, so on February 20, 1990, Universal Components notified BCBSM that it intended to terminate coverage for non-union retirees. 4 On April 30, 1990, the president of Universal Components sent a letter to all of the non-union retirees who retired before December 14, 1989, the effective date of the sale to Douglas Autotech, and to all spouses of deceased retirees who had so retired notifying them that their health insurance would terminate on June 1, 1990. They were told that they would have to purchase insurance at their own expense, and most of them did so.
On May 31, 1990, the plaintiffs, acting individually, filed a six-count complaint in district court seeking a temporary restraining order, monetary and declaratory relief, and other injunctive relief. 5 Three of these counts, Counts I, V, and VI survive on appeal. Count I alleges breach of an ERISA plan and seeks monetary damages. Count V requests that the defendants be enjoined from terminating health care benefits, and Count VI seeks a declaration that the defendants wrongfully terminated health care benefits and that the plaintiffs are entitled to receive benefits for the rest of their lives and the lives of their spouses.
The district court held a four-day bench trial beginning on August 13, 1991. Eight of the plaintiffs testified to conversations they had with high-level officials of Douglas Division of Scott & Fetzer and Universal Components about the duration of their health insurance, and several of these high-level officials also testified. Two of those plaintiffs, wives of deceased retirees, testified that they were told that their health insurance benefits would continue for the rest of their lives or until they remarried. Four more of the plaintiffs testified that they were told that their health insurance benefits would continue, but they also admitted that no one told them that their benefits would continue for life. The other plaintiffs did not testify. Several high-level officials testified that neither Douglas Division nor Universal Components made representations to any of the plaintiffs that benefits would continue for life, but Donald Kornstein, a plaintiff and the former president of Douglas Division, testified that he told retiring non-union employees in their exit interviews that they would have health insurance for life.
On August 30, 1991, the district court issued an opinion, containing findings of fact and conclusions of law, and an order granting the plaintiffs injunctive, declaratory, and monetary relief. As we read the district court's opinion, it determined that the written agreements between BCBSM and Universal Components did not, by their terms, control the right of Universal Components to terminate health benefits coverage of retired employees, and that therefore such right was controlled by the verbal assurances of Universal Components' officials that the retired employees had such continued rights to coverage. The court therefore concluded that because the extrinsic evidence showed that the parties intended for the non-union employees' health insurance benefits to continue after retirement, the benefits must continue. Citing a decision from this court, International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America v. Yard-Man, Inc., 716 F.2d 1476, 1482-83 (6th Cir.1983), cert. denied, 465 U.S. 1007, 104 S.Ct. 1002, 79 L.Ed.2d...
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