DeGeare v. Alpha Portland Industries, Inc.

• Decision Date: 03 March 1988
• Docket Number: No. 87-1170,87-1170
• Citation: 837 F.2d 812
• Parties: Chester DeGEARE, et al., Appellants, v. ALPHA PORTLAND INDUSTRIES, INC., and The Equitable Life Assurance Society of the United States, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 812

837 F.2d 812

Chester DeGEARE, et al., Appellants, v. ALPHA PORTLAND INDUSTRIES, INC., and The Equitable Life Assurance Society of the United States, Appellees.

No. 87-1170.

United States Court of Appeals Eighth Circuit.

Submitted Oct. 15, 1987.

Decided Jan. 26, 1988.

Rehearing Denied March 3, 1988.

Jay E. Sushelsky, St. Louis, Mo., for appellants.

Thomas E. Wack, St. Louis, Mo., for appellees.

Before McMILLIAN, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and BEAM, Circuit Judge. ^*

FLOYD R. GIBSON, Senior Circuit Judge.

Plaintiffs appeal from the judgment of the district court ¹ in favor of Alpha Portland Industries, Inc. (Alpha) and The Equitable Life Assurance Society of the United States (Equitable) in this case involving the Employee Retirement Income Security Act, 29 U.S.C. Sec. 1001 et seq. (ERISA). Plaintiffs are a class of former salaried employees of Alpha's cement division who retired prior to May 1, 1982. This suit resulted from Alpha's decision to terminate all retiree health and life insurance benefits on May 1, 1982. Plaintiffs alleged that the welfare benefits vested upon retirement and thus were not terminable. After a bench trial the district court held that Alpha, as plan administrator, did not act arbitrarily and capriciously when it terminated retiree welfare benefits because the evidence did not show that the benefits were vested for the lifetime of the retirees. Because we agree that plaintiffs' benefits are not vested, we affirm the judgment of the district court except as to the matter of the refunded insurance premiums.

I. BACKGROUND

The district court's extensive factual findings appear at 652 F.Supp. 946 (E.D.Mo.1986). Plaintiffs do not take issue with the facts as found by the district court. Although Alpha unilaterally began providing insurance and health benefits for its salaried non-union employees in 1946, plaintiffs primarily rely on language appearing in the 1973 and later plan documents in support of their argument that their benefits are vested for life.

In 1973, 1976, and 1978 Alpha distributed formal plan documents describing its insurance and health programs. Each program document provided that:

Commencing on and after the Effective Date, except as stated otherwise, the Company will provide for * * * all Retirees, retired on or after the Effective Date, and their Dependents the Group Insurance Program set out herein. Insurance coverages under the Prior Programs not hereinafter provided shall be continued to the extent applicable to Retirees and their Dependents in accordance with the provisions of the Prior Programs as if fully set out herein and as the same may now or hereinafter be amended, modified or supplemented.

In November 1977 Alpha sent to its salaried retirees a document captioned "Retirement Income Plan-Insurance and Health Program-Summary Plan Description for Retired Salaried Employees." The document stated, in part:

Circumstances Which Could Result in Benefit Loss--Since you have completed all of the plans' eligibility requirements for the benefits you are now receiving or are scheduled to receive--as explained to you when your retirement commenced--the only possible event in which you could lose your benefits or part of your benefits under the plans would be if the plans were terminated. If the plans were ever to be terminated, the benefits to be provided thereafter would be limited to those which could be provided by the available assets of the retirement plan, as allocated in accordance with the requirements of the new law, and the retirement plan insurance * * * While Alpha hopes to be able to maintain the plans indefinitely, it must necessarily reserve the right to terminate the plans should business conditions ever warrant it.

In January 1978 active, but not retired, Alpha salaried employees were provided a summary plan description (hereinafter "1976 SPD") which provided in part, that "[i]f you retire with 10 or more years of service on or after January 1, 1976, you will continue to receive the Hospital/Surgical and Major Medical portion of plan coverage. Coverage will continue for the remainder of your life."

In July 1978 an SPD containing the identical language was distributed to active salaried employees. This document (hereinafter "1978 SPD") applied "to those actively employed or who retire on or after May 1, 1978."

Both the 1976 and 1978 SPDs also state that "[t]he Company expects and intends to continue this plan indefinitely but reserves the right to end or amend it. If the plan is terminated by the Company, benefits will be paid for bills incurred prior to the termination date of the plan and for individuals whose coverage would continue due to disability."

At trial the district court also considered extrinsic evidence to determine whether benefits are vested. For example, Alpha's personnel manager, Robert Bonstein, routinely sent a letter to employees who were about to retire stating that welfare benefits "will continue" or "will be continued", but not stating for how long. The court also considered live and deposition testimony that Bonstein told employees at two of Alpha's cement plants scheduled to be closed that they should pursue other means of obtaining insurance. Bonstein testified that he never promised any salaried employee or retiree lifetime welfare benefits. The court also discredited the testimony of a former Alpha vice-president which stated that providing lifetime benefits was Alpha's policy.

Further, the court considered the conduct of the plaintiffs at various times and found it to be inconsistent with their theory that benefits are vested. For example, Alpha received no objections from retirees to the statements in the 1976 and 1978 SPDs reserving to Alpha the right "to end or amend" the plan. Also, no one objected when Alpha began coordinating its benefits with other benefits to which the retirees were entitled (such as Medicare), thereby reducing the amount to be paid by Alpha. Similarly, Alpha received no objections to Bonstein's suggestions that employees of soon-to-be-closed cement plants should look elsewhere for insurance coverage.

II. DISCUSSION

A. Standard of Review

As a threshold issue plaintiffs argue that the district court erroneously gave deference to the plan administrator's decision to terminate benefits. The court held that "the judgment of the plan administrator prevails so long as it is not arbitrary and capricious." 652 F.Supp. at 961. Initially, we note that plaintiffs invited the district court to apply this standard. Further, the clear weight of federal authority supports giving deference to the plan administrator's decision if it is based on factual considerations or the language of the plan. See, e.g., Bance v. Alaska Carpenters Retirement Plan, 829 F.2d 820, 823 (9th Cir.1987); Adcock v. Firestone Tire & Rubber Co., 822 F.2d 623, 626 (6th Cir.1987); Holt v. Winpisinger, 811 F.2d 1532, 1535-36 (D.C.Cir.1987); Anderson v. Ciba-Geigy Corp., 759 F.2d 1518, 1521 (11th Cir.), cert. denied, 474 U.S. 995, 106 S.Ct. 410, 88 L.Ed.2d 360 (1985); Jestings v. New England Tel. & Tel. Co., 757 F.2d 8, 9 (1st Cir.1985); LeFebre v. Westinghouse Elec. Corp., 747 F.2d 197, 204 (4th Cir.1984); Dennard v. Richards Group, Inc., 681 F.2d 306, 313-14 (5th Cir.1982); Quinn v. Burlington Northern, Inc., 664 F.2d 675, 678 (8th Cir.1981), cert. denied, 456 U.S. 928, 102 S.Ct. 1976, 72 L.Ed.2d 444 (1982); Carter v. Central States, etc., 656 F.2d 575, 576 (10th Cir.1981); Wardle v. Central States, etc., 627 F.2d 820, 823-24 (7th Cir.1980), cert. denied, 449 U.S. 1112, 101 S.Ct. 922, 66 L.Ed.2d 841 (1981); Riley v. MEBA Pension Trust, 570 F.2d 406, 410 (2d Cir.1977). In the Third Circuit, however, no deference is given where the plan administrator is also the employer and the issues involve contract interpretation. Bruch v. Firestone Tire & Rubber Co., 828 F.2d 134, 144 (3d Cir.1987).

In the present case we believe the district court correctly gave deference to the plan administrator's decision. In any event, we believe the administrator and the district court correctly construed the plan documents as not providing retirees with lifetime welfare benefits.

B. Merits

Plaintiffs argue that the district court erroneously placed on them the burden of proving that they are entitled to lifetime benefits. They further argue that the burden should be on Alpha to justify the termination and that their benefits vested as a matter of law upon retirement because welfare benefits are status benefits. Precisely the same arguments were made by the plaintiffs and rejected by this court in Anderson v. Alpha Portland Indus., 836 F.2d 1512 (8th Cir.1988). In Anderson we held that the burden is on plaintiffs to prove that they are entitled to lifetime benefits and that no inference of an intent to vest can be presumed from the fact that the benefits are retirement benefits. ² Id., at 1516-17.

Plaintiffs argue that the case relied upon by the district court in allocating the burden of proof, UFCW Local 105-A v. Dubuque Packing Co., 756 F.2d 66 (8th Cir.1985), is inapplicable because it involved a collective bargaining agreement whereas the present case does not. We are not persuaded that the form in which the plan appears or the procedure it goes through prior to adoption should have any bearing on the burden of proof. Regardless of whether the plan documents were the subject of negotiation, the plaintiffs must establish their case by a preponderance of the evidence if they are to prevail. Further, it is especially important that plaintiffs bear the burden of proof in cases such as this where the benefits in question are unilaterally provided by the employer. Accepting plaintiffs' argument would lead to the anomalous result that Alpha would have to prove a negative--that it did not promise lifetime benefits--everytime plaintiffs choose to file a lawsuit.

The main issue in this case simply is whether pla...