Gaynor v. Ephrata Community Hosp.

• Decision Date: 23 June 1988
• Docket Number: Civ. A. No. 87-5529.
• Citation: 690 F. Supp. 373
• Parties: William B. GAYNOR, M.D. v. EPHRATA COMMUNITY HOSPITAL, Ephrata Community Hospital Insurance Committee, and Pension Plan for Employees of Ephrata Community Hospital.
• Court: U.S. District Court — Eastern District of Pennsylvania

690 F. Supp. 373

William B. GAYNOR, M.D. v. EPHRATA COMMUNITY HOSPITAL, Ephrata Community Hospital Insurance Committee, and Pension Plan for Employees of Ephrata Community Hospital.

Civ. A. No. 87-5529.

United States District Court, E.D. Pennsylvania.

June 23, 1988.

COPYRIGHT MATERIAL OMITTED

Michael D. Bull, David P. Miller, Blakinger, Byler, Thomas & Chillas, Samuel A. Goodley, Lancaster, Pa., for plaintiff.

Christopher Mattson, Christopher A. Stump, Barley, Snyder, Cooper and Barber, Lancaster, Pa., for defendants.

MEMORANDUM AND ORDER

CAHN, District Judge.

Plaintiff has sued defendants under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1982), for breach of fiduciary duties and for benefits allegedly due under the terms of a defined benefit pension plan (the plan) administered by the defendant insurance committee. The issues raised by defendants' motion for summary judgment center on two documents executed at different times on June 16, 1977. The first is an employment contract (the 1977 contract) between the plaintiff and defendant Ephrata Community Hospital covering the three-year period ending July 1, 1980. The second is a waiver and indemnity agreement (the 1977 waiver) executed by the plaintiff later the same day.

The employment contract contains the following provisions:

(2) ...

The Physician shall not be included in the Hospital's pension, hospitalization or other employee benefits, in effect during the term of this Agreement, to which the Hospital employees are entitled or subsequently become entitled.

. . . . .

(13) This document contains the entire agreement of the parties....

The waiver and indemnity agreement provides:

WHEREAS, Gaynor has not participated in the Hospital's pension plan, because of a series of private employment agreements between Gaynor and the Hospital dating from 1959; and

WHEREAS Gaynor has instructed Hospital, and plans in the future to instruct Hospital, to make the maximum contributions to his tax sheltered annuity permitted under Section 415 of the Internal Revenue Code; and

WHEREAS participation in the pension plan of the Hospital by Gaynor will cause the deductible contributions to the tax sheltered annuity to be reduced under Section 415 of the Internal Revenue Code.

NOW, THEREFORE, intending to be legally bound, Gaynor hereby waives any right to participate in any employee retirement plan of the Hospital as may have heretofore existed, exist now or in the future, and hereby waives and releases any right to claim any benefit under any such plan of the Hospital on account of services performed or to be performed for the Hospital.

. . . . .

Gaynor hereby agrees to indemnify and hold harmless the Hospital, its successors and assigns, on account of any claim for any liability of any kind whatsoever arising out of the exclusion of Gaynor from participation in the past, present or future employee retirement plan maintained by the Hospital.

Because I hold that these documents have a prospective effect that is different than the effect they have on benefits that may have accrued prior to their execution, the time periods separated by July 1, 1977 must be discussed separately.

Post-1977 Benefits

The plaintiff attempts to avoid the clear import of the contractual language waiving his right to participate in the plan during the term of the agreement by raising a claim of misrepresentation on the part of the defendants. The plaintiff claims that Leo G. Schmidt, the Hospital Administrator, told him that the plaintiff could not participate in the plan and also receive the tax-deferral benefits associated with annuity contracts purchased on his behalf pursuant to 26 U.S.C. § 403(b). The plaintiff also alleges that both the 1977 waiver and an identical waiver signed by him in 1980 (the 1980 waiver) contained several misrepresentations—namely, that the plaintiff had instructed and planned in the future to instruct the hospital to make the maximum allowable payments to purchase the annuity contracts on his behalf, and that participation by the plaintiff in the plan would cause the deductible amount of payments used to purchase the contracts to be reduced.

With respect to the period covered by the 1977 contract—that is, 1977 to 1980—plaintiff's arguments are easily refuted. Both the alleged oral misrepresentation of Leo Schmidt and the alleged written misrepresentations contained in the 1977 and 1980 waivers were made after the 1977 contract was signed. See Plaintiff's Brief in Opposition at 203. The plaintiff, therefore, could not have relied upon these representations in agreeing to be bound by the 1977 contract. The plaintiff, however, makes the additional argument that the defendants had an affirmative duty to initiate a discussion—or to suggest that the parties negotiate—with respect to the nonparticipation provision prior to allowing the plaintiff to sign the contract. During this discussion, at least as the plaintiff envisions it, the defendants would be required to make a "complete disclosure of the rights involved and the impact of the entire contract." Plaintiff's Brief in Opposition at 18.

Although an ERISA fiduciary has a duty "to inform participants and beneficiaries of their rights," Central States S.E. and S.W. Areas Pension Fund v. Central Transp., Inc., 472 U.S. 559, 580, 105 S.Ct. 2833, 2845, 86 L.Ed.2d 447 (1985), I have found no cases, and the plaintiff has cited none, establishing a general duty on the part of employers who are also ERISA trustees to give special emphasis to the issue of pension plan participation when bargaining with an employee over the terms of employment. Whether an employee will be a participant in the company's pension plan is a proper subject of bargaining. See Shaw v. Delta Airlines, Inc., 463 U.S. 85, 91, 103 S.Ct. 2890, 2897, 77 L.Ed.2d 490 (1983) ("ERISA does not mandate that employers provide any particular benefits, and does not itself proscribe discrimination in the provision of employee benefits."). Although in certain circumstances an employer/trustee may have a fiduciary duty to apprise an employee of all the ramifications of deciding not to participate in a pension plan, where the employee had the opportunity to consult with counsel and actually negotiated over and changed at least one major provision in the contract, there is no such duty.

The only remaining argument made by the plaintiff with respect to the 1977 contract is that the provision excluding him from the pension plan might not have been in the first draft of the contract and may have appeared only in the second draft. The plaintiff read the first draft carefully but only checked the second to make sure that a change with respect to how his salary was to be paid had been properly made. In his affidavit of March 18, 1988, the plaintiff stated, "I think that if the language had been included in this first draft of the contract excluding me from the pension plan and health care benefits, I would have noticed the same since the issue had never been previously discussed" (emphasis added). This statement is hardly unequivocal. Moreover, it is contradicted by plaintiff's testimony that he agreed in 1977 to be excluded from the pension plan because he "didn't think it was important." Deposition of William B. Gaynor, M.D. at 18-20. In light of the clear contractual language, plaintiff's negligence in failing to read the second draft of the contract, and plaintiff's contradictory testimony, plaintiff's statement that the pension plan provision may not have been in the first draft of the 1977 contract does not create a genuine issue of material fact sufficient to withstand summary judgment.

The plaintiff also signed employment contracts on June 17, 1980 (the 1980 contract), July 1, 1983 (the 1983 contract), and January 1, 1986 (the 1986 contract). The 1980 contract contains the same provision as the 1977 contract with respect to plaintiff's nonparticipation in the plan. In addition, the plaintiff signed a waiver and indemnity agreement on June 17, 1980 (the 1980 waiver) in substantially the same form as the 1977 waiver. In 1983 and 1986, the plaintiff did not sign a separate waiver and indemnity agreement but rather, language similar to that found in the 1977 and 1980 waivers was incorporated into the 1983 and 1986 contracts. The plaintiff argues that the nonparticipation provisions in the 1980, 1983 and 1986 contracts are invalid because of the continuing effect of the oral misrepresentation made in 1977 and because the plaintiff assumed he could not participate in the plan in light of the fact that he had signed the 1977 waiver.

No evidence has been submitted tending to support plaintiff's assertion that he assumed he could not participate in the plan because he had signed the 1977 waiver. Even if such evidence has been presented, there is no evidence that the defendants caused or induced plaintiff's erroneous assumption with respect to the legal effect of the 1977 waiver on subsequent contracts. Nor is there any evidence that the defendants had reason to know of plaintiff's mistake. The Restatement (Second) of Contracts § 153 states that a unilateral mistake renders a contract voidable, or gives the mistaken party a right to appropriate restitution, see comment e and § 158(1), only if "the other party had reason to know of the mistake or his fault caused the mistake." The duties established by ERISA, at least during negotiations with respect to an employee's participant status, do not require a contrary rule. With the exception of the minimum participation standards enumerated in 29 U.S.C. § 1052, an employer is free to define the universe of participants in any reasonable manner. See Shaw, 463 U.S. at 91, 103 S.Ct. at 2897. Plaintiff's mistaken belief, therefore, does not entitle him to relief.

Plaintiff's argument with respect to the continuing effect of the oral misrepresentation made in 1977 is also unavailing....