Alexander v. Primerica Holdings, Inc.

• Decision Date: 06 May 1993
• Docket Number: Civ. A. No. 89-5151 (AJL).
• Citation: 822 F. Supp. 1099
• Parties: Judd ALEXANDER and Richard Edwards, on behalf of themselves and as representatives of a Class of persons similarly situated, Plaintiffs, v. PRIMERICA HOLDINGS, INC. formerly known as Primerica Corporation, The Board of Directors of Primerica Holdings, Inc., James Dimon, Irwin Ettinger, John Fowler, John Doe 1-10 (being individual members of the Primerica Holdings, Inc. Board of Directors), and ABC (being the administrator of the American Can Salaried Retiree Group Insurance Plan), Defendants.
• Court: U.S. District Court — District of New Jersey

822 F. Supp. 1099

Judd ALEXANDER and Richard Edwards, on behalf of themselves and as representatives of a Class of persons similarly situated, Plaintiffs, v. PRIMERICA HOLDINGS, INC. formerly known as Primerica Corporation, The Board of Directors of Primerica Holdings, Inc., James Dimon, Irwin Ettinger, John Fowler, John Doe 1-10 (being individual members of the Primerica Holdings, Inc. Board of Directors), and ABC (being the administrator of the American Can Salaried Retiree Group Insurance Plan), Defendants.

Civ. A. No. 89-5151 (AJL).

United States District Court, D. New Jersey.

May 6, 1993.

Gerald A. Liloia, Stuart Peim, David P. Arciszewski, Robert D. Towey, Charles A. Weiss, Riker, Danzig, Scherer, Hyland & Perretti, Morristown, NJ, for plaintiffs.

Harvey Kurzweil, Dewey Ballantine, New York City, and Donald A. Robinson, Robinson, St. John & Wayne, Newark, NJ, for defendants.

OPINION

LECHNER, District Judge.

This is a class action brought by plaintiffs Judd Alexander and Richard Edwards on behalf of themselves and persons similarly situated (collectively, the "Plaintiffs") against defendants Primerica Holdings, Inc. ("Primerica Holdings"), the Board of Directors of Primerica (the "Board of Directors"), James Dimon ("Dimon"), Irwin Ettinger ("Ettinger"), John Fowler ("Fowler") and ABC ("ABC") (collectively, "Primerica").¹ Plaintiffs brought suit to declare and enforce their asserted rights to medical insurance benefits, life insurance benefits and survivor income benefits under a retirement welfare benefits plan (the "Plan") established by the American Can Company ("American Can"), a predecessor of Primerica. Plaintiffs claim Primerica has violated the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., by modifying the Plan.

Jurisdiction is specifically alleged in the Amended Complaint under section 502 of ERISA, 29 U.S.C. §§ 1132(a)(1)(B), 1132(a)(2) and 1132(a)(3)(A) & (B). Amended Complaint, ¶ 2. It is presumed jurisdiction is also alleged under 29 U.S.C. § 1132(e).² Currently before the court is a motion by Plaintiffs to disqualify the law firm of Dewey Ballantine ("Dewey Ballantine") as attorneys for Primerica.³ For the reasons that follow, the motion by Plaintiffs is denied.

Facts

A. The Parties and the Plan

Primerica Holdings is a corporation organized under the laws of the State of Delaware; it maintains its principal place of business in the State of Connecticut. Amended Complaint, ¶ 5. Dimon, Ettinger and Fowler are or were members of the Board of Directors of Primerica Holdings. Id., ¶ 8. Primerica Holdings is the surviving entity of a merger between Primerica Holdings and Primerica Corporation ("Primerica Corporation") in December 1988. Id., ¶ 6. Primerica Corporation was organized under the laws of the State of New Jersey and, until April 1987, was known as American Can.⁴ Id. Plaintiffs are either retired salaried employees of American Can or their surviving spouses. Id., ¶¶ 3-4, 11.

Beginning in 1957, American Can maintained the Plan which is a retirement welfare benefits plan for qualified salaried employees who retired. Id., ¶ 21. The terms of the Plan were set forth in a series of summary plan descriptions (the "SPDs") which, pursuant to ERISA, must be furnished to Plan beneficiaries. See 29 U.S.C. § 1022. The benefits under the Plan included a pension, life insurance and medical insurance. Amended Complaint, ¶ 21.

It is uncontroverted Plaintiffs are former salaried employees and that their surviving spouses are eligible to receive retirement welfare benefits under the Plan. It is also uncontroverted Plaintiffs received benefits under the Plan. Plaintiffs' allegations that "repeated representations were made to employees and retirees alike" that their retirement benefits would be provided by Primerica "for life" are, however, contested.⁵ Id., ¶ 22.

Plan beneficiaries are required to make mandatory monthly contributions to cover a portion of the cost of the Plan. Apparently, the amount of the monthly mandatory contributions which Plan beneficiaries are required to make was, until 1 February 1989, $5.00 per covered Plan participant.⁶Id., ¶ 30. Plaintiffs allege Primerica's predecessor, American Can, had agreed the amount of those contributions would never increase. Plaintiffs allege American Can

promised the Plaintiffs by various means, including oral representations, publications, documents, brochures and a general course of dealing that it would provide Plaintiffs with the protection and security of the American Can Retirement Program, including lifetime pension, life insurance and lifetime medical insurance benefits upon retirement and that the lifetime medical insurance benefits would be so provided at a fixed, nominal cost to retirees.

Id., ¶ 23 (emphasis added). Plaintiffs further allege these benefits were "irrevocable upon retirement" and that American Can could neither unilaterally terminate any of the benefits nor unilaterally increase the cost of the medical insurance coverage.⁷ Id., ¶¶ 25-27.

Plaintiffs allege that American Can "at no time reserved to itself the right to unilaterally terminate" benefits under the Plan or to increase the cost of those benefits. Id., ¶¶ 26-27. The SPDs, for their part, neither expressly prohibit nor expressly provide for raising the amounts of the mandatory contributions. All but one SPD, however, contain the following provision:

The Company expects to continue this Plan indefinitely, but necessarily reserves the right to amend, modify, or discontinue the Plan in the future in conformity with applicable legislation....

Affidavit of Sal Giudice, dated 6 March 1991, Ex. A at 5.

In addition, it appears most employees of American Can signed one of two forms upon registering for coverage under the Plan. These forms indicate the contribution amount for retirees was understood to be subject to change. See Letter from Harry Kurzweil, dated 8 October 1992 (the "8 Oct. 1992 Letter"), at 2-3 (attached as Exhibit E to Kurzweil Aff.).

The first form ("Form A"), is a one page form entitled "Deduction Authorization— Comprehensive Medical Plan Coverage For Retirees Receiving Benefits Under the American Can Company Plan For Salaried Employees." See id. Form A contains the following:

I understand that the monthly charge for this coverage is subject to change in the future. If the cost of this coverage is changed, I will be notified in advance and given the option of continuing my coverage at the new monthly cost or terminating my coverage.

I request and authorize you to direct Bankers Trust Company ... to deduct from retirement payments I receive under the ... Plan amounts equal to the coverage I have indicated above and to pay these amounts to American Can.... This authorization will continue to apply until canceled by me by written notice.... This authorization will not remain in effect if American Can discontinues extending medical coverage to me and/or to my eligible dependant.

Id. (emphasis added).

The second form ("Form B") is a shorter version of Form A, entitled "Deduction Authorization Card For Retired Employees Who Are Receiving Benefits Under the American Can Company Retirement Plan For Salaried Employees and Who Desire To Obtain Major Medical Insurance Plan Coverage." Id. Form B contains the statement: "I want the Major Medical Insurance Plan coverage indicated by my check mark." Id. Form B then offers the retiree three options to choose from: (a) "Retiree with spouse ($7.10 + $2.72 for each dependant child)," (b) "Retirees Only ($3.55 per month initially)" and (c) "Retiree with Spouse ($7.10 per month initially)." Id. (emphasis added). Form B also contains language similar to Form A:

I request and authorize you to direct Bankers Trust Company ... to deduct from retirement payments I receive under the ... Plan amounts equal to charges for such Major Medical Insurance Plan coverage and to pay over such amounts to American Can.... This request and authorization will continue to apply until canceled by me by written notice ... notwithstanding any changes in benefits or charges or any cessation of my coverage not communicated to you.

Id. (emphasis added).

On or about 9 January 1989, Primerica notified Plan beneficiaries it was increasing the amount of their monthly mandatory contributions to the group medical insurance plan. Amended Complaint, ¶ 30. The contributions were increased from the then current amount of $5.00 per covered individual per month to $50.00 per covered individual per month. Id. The increase went into effect on 1 February 1989. Id. The contributions were and are automatically deducted from each Plan beneficiary's monthly pension check unless Primerica was or is notified the beneficiary intended to terminate his or her coverage. Id. Some members of the Plaintiffs' class apparently opted to terminate coverage under the Plan following the February 1989 increase. Subsequently, Plaintiffs commenced this suit against Primerica.

B. The Complaint and Class Certification

On 14 December 1989, Plaintiffs filed their complaint (the "Complaint"). The Complaint contained six counts—four counts under common law contract theories of recovery (the "Common Law Contract Counts"), as well as two counts under ERISA for breach of fiduciary duty and failure to disclose reservation of rights. See Complaint, ¶¶ 28-71. In the Complaint, Plaintiffs demanded a "trial by jury as to all issues so triable." Id. at 31.

On 31 August 1990, Plaintiffs moved for class certification. See Notice of Motion, filed 31 August 1990. Primerica opposed the motion for certification because, inter alia, it argued the Common Law Contract Counts could not be litigated on a class-wide basis. On 15 October 1990, the motion for certification was denied without prejudice for the purpose of permitting the parties to submit briefs on whether the Common Law Contract Counts were preempted by ERISA. See Order,...