Ayres v. National Bank of Fredericksburg
| Decision Date | 03 August 1994 |
| Docket Number | Civ. A. No. 3:94CV327. |
| Citation | 860 F. Supp. 1114 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | Patricia L. AYRES, et al., Plaintiffs, v. NATIONAL BANK OF FREDERICKSBURG, Defendant. |
Douglas Michael Nabhan, Robert Dean Perrow, Theodore J. Edlich, IV, Williams, Mullen, Christian & Dobbins, P.C., Richmond, VA, for plaintiffs.
Samuel Morton Brock, III, Daryl Eugene Webb, Jr., Mays & Valentine, Richmond, VA, for defendant.
THIS MATTER comes before the Court on the defendant's Motion to Dismiss and/or for Summary Judgment,1 and Motion to Strike Jury Demand.2 For the reasons stated herein, summary judgment will be granted in favor of the defendant. The preliminary injunction issued June 10, 1994, will be lifted, and the Order and Memorandum Opinion of the same date will be withdrawn.
The plaintiffs are 25 retired employees ("the Retirees") of The National Bank of Fredericksburg ("the Bank"). They filed this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., seeking a declaratory judgment and other relief requiring the Bank to continue to make health insurance premium payments for the Retirees under the Bank's employee welfare benefit plan. In an Order and Memorandum Opinion dated June 10, 1994, the Court issued a preliminary injunction directing the defendant to continue its current practice of providing health insurance coverage, pending a trial on the merits. The defendant now seeks to have the case dismissed and the injunction lifted.
Under the plaintiffs' version of the facts, the Bank has paid in full all health insurance premiums for retirees of the Bank and their dependents since 1978. The Retirees claim the Bank told them that these benefits would be available for the duration of their lives. The promise allegedly was made to induce workers to become employed and to remain employed with the Bank.
On September 28, 1993, the Bank's Board of Directors passed a resolution pursuant to which the Bank's current retirees would not be permitted to participate in the Bank's health insurance plan after September 30, 1994. The Board of Directors further decided that the Bank would make no financial contribution toward the cost of health insurance for its retirees after March 31, 1994. These decisions were communicated to all retirees of the Bank by letters dated October 8, 1993. (Affidavit of John B. Daniel, ¶ 9.)
On February 22, 1994, the Board of Directors amended its decisions of September 28, 1994, by extending the time for participation by retirees in the Bank's health insurance plan and the time for which it would make a financial contribution to retiree health insurance coverage by one month in each case, or until October 31, 1995, and April 30, 1994, respectively. This decision was communicated to all retirees of the Bank on March 11, 1994. (Daniel Aff., ¶ 10.)
According to the plaintiffs, the Bank never told them that it reserved the right to terminate its payment of their health insurance. The Bank also allegedly never supplied them with a "summary plan description" of the pension plan as required by ERISA. The plaintiffs further claim that all of them live on a fixed income, which affects their ability to pay premiums. The amount each will be required to pay will vary.
Count I of the Complaint alleges a violation of an employee welfare benefit plan, under section 502(e)(1) of ERISA, 29 U.S.C. § 1132(e)(1). Count II seeks relief under the theory of promissory estoppel to the extent federal common law supplements ERISA.
At the hearing on the motion for a preliminary injunction, one of the Retirees testified that, in her former capacity as a Bank vice president for personnel, the Bank's president told her that all retirees were guaranteed lifetime medical insurance premium payments. She testified that she recognized the significance of his promise, and that she made the same promise on the Bank's behalf to other employees. In addition, although she once made premium payments on her spouse's policy, she testified that she dropped the policy in reliance on the Bank's lifetime guarantee. She and other Retirees, including a former vice president for operations, testified that not only did the defendant promise them lifetime premium payments, it acted consistently with the guarantee for 15 years, until it announced in October 1993 that the practice would cease.
In response to these allegations, the defendant submitted the affidavit of John B. Daniel, who is the Bank's current Vice President for Personnel. In the affidavit, Daniel states "the Bank has never made a promise, contract or other form of commitment to its employees or retirees that they would be provided free lifetime health insurance coverage under any circumstances." (Daniel Aff., ¶ 8)
One written document expressly reserved the right to terminate such benefits. Daniel states that "the Bank's Employee Handbook never contained a policy regarding health insurance benefits for the Bank's retirees until the one which was distributed in May 1992 which set forth a general policy regarding welfare, pension and other benefits for retirees which was approved by the Board of Directors." (Daniel Aff. ¶ 6) The relevant portion of the Employee Handbook that was distributed in May 1992 stated: (See Exh. B.)
The Bank's attempted reservation of rights in 1992 notwithstanding, the plaintiffs testified that they relied on the defendant's promise. According to their evidence, that reliance included refraining from seeking other insurance at lower premiums and from seeking other employment. In addition, as stated earlier, at least one plaintiff dropped dual coverage in reliance on the guarantee. Moreover, former vice presidents in charge of personnel and operations explained that they assisted in formulating the policy and communicated it to other employees. Explaining the Bank's deliberative process, they testified that the lifetime guarantee was regarded as an attractive substitute for the low amount of the pension itself.
Summary judgment is proper if, viewed in the light most favorable to the nonmoving party, "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Ross v. Communications Satellite Corp., 759 F.2d 355, 364 (4th Cir.1985). The essence of the inquiry that the court must make is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). Summary judgment is proper "if the evidence is such that a reasonable jury could not return a verdict for the nonmoving party." Id. at 248, 106 S.Ct. at 2510.
The Bank first argues that the plaintiffs cannot prevail on their claim for free lifetime health insurance benefits in the absence of a written plan instrument, complying with ERISA, which clearly and expressly establishes those rights. According to the Bank, employers may terminate "employee welfare benefit plans,"3 such as this one, at will. The plaintiff responded to this argument at the preliminary injunction stage. It relied on Keffer v. H.K. Porter Co., 872 F.2d 60 (4th Cir.1989), where the Fourth Circuit ruled that lifetime retirement benefits for retirees subject to a collective bargaining agreement survived the expiration of the agreement. However, the subsequent case of Pierce v. Security Trust Life Ins. Co., 979 F.2d 23 (4th Cir.1992), presents compelling reasons for ruling in the Bank's favor.
In Pierce, twelve retired employees of the Security Trust Life Insurance Company ("Security") brought an action to contest an amendment which Security made to their ERISA plan ("the 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.
Beginning in 1975, the Plan itself provided that the employer could modify, change or terminate benefits unilaterally. Id. at 24. Subsequently, the Plan was amended approximately 20 times, including an amendment in 1978 in which Security provided for free medical coverage to its retirees. Security never distributed the Plan to the retirees, but instead distributed a Summary Plan Description ("SPD") in 1980 that failed to advise the retirees that the benefits could be terminated unilaterally. Id. In 1984, it redistributed the SPD containing the requisite notification that the benefits could be terminated unilaterally.
The court of appeals ruled, inter alia, that because Security made changes only after the required notice was given to the retirees, "such benefits were terminable at will by the employer." Id. at 29. The court, relying on Sutton v. Weirton Steel Div. of Nat'l Steel Corp., 724 F.2d 406 (4th Cir.), cert. denied 467 U.S. 1205, 104 S.Ct. 2387, 81 L.Ed.2d 345 (1984) and Reichelt v. Emhart Corp., 921 F.2d 425 (2d Cir.), cert. denied 501 U.S. 1231, 111 S.Ct. 2854, 115 L.Ed.2d 1022 (1991), indicated that even if the notice had not been given in 1984, the result would remain the same because of the nature of the benefits involved:
Under Sutton and Reichelt, it is arguable that, since the medical benefits under the plan were not vested the employer could change such benefits without any...
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