In re White Farm Equipment Co.
| Decision Date | 20 September 1984 |
| Docket Number | Civ. A. No. C82-3209. |
| Citation | 42 BR 1005 |
| Parties | In re WHITE FARM EQUIPMENT COMPANY, Debtor. Douglas J. HANSEN, Raymond Borrell, Louis P. Ellery, Anthony G. Obermeier, Pearl C. Lindahl, and Lenor Knutson, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. WHITE FARM EQUIPMENT COMPANY, T.I.C. Investment Corporation, White Motor Corporation, White Motor Corporation Insurance Plan for Salaried Employees, and The Equitable Life Assurance Society of the United States, Defendants-Appellees. |
| Court | U.S. District Court — Northern District of Ohio |
Russell C. Brown, Stolpestad, Brown & Smith, Saint Paul, Minn., for plaintiffs-appellants.
Robin E. Phelan, Haynes & Boone, Dallas, Tex., for defendants-appellees.
Retired employees and spouses of deceased retired employees ("the retirees") of White Farm Equipment Company ("White Farm"), formerly a reorganizing entity under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq., commenced an action seeking retroactive reinstatement of health and welfare benefits which were terminated by White Farm's successor. The Bankruptcy Court granted summary judgment to White Farm and the other defendants and dismissed the complaint. 23 B.R. 85. On appeal, this Court reverses.
The District Court's appellate jurisdiction rests on 28 U.S.C. § 1581, as enacted by the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353, 98 Stat. 333. Since Fed.R.Civ.P. 56(c)2 applies to adversary bankruptcy proceedings under Bankruptcy Rule 7056, an appellate court "must therefore view the evidence in the light most favorable to the non-moving party to determine whether a genuine issue of material fact existed . . .", Hasan v. CleveTrust Realty Investors, 729 F.2d 372, 374 (6th Cir.1984), and affirm only if the moving party was entitled to judgment as a matter of law. Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).
The retirees were employed by White Farm while the company was an affiliate of the White Motor Corporation ("White Motor"). This dispute concerns the White Motor Corporation Insurance Plan for Salary Employees ("Welfare Benefit Plan" or "the Plan"), a non-funded, non-contributory benefit plan3 which provided life, health and welfare insurance, prescription drugs, hearing aid benefits and dental care to retirees and their eligible dependents; it included predecessor plans extending benefits to employees or corporations acquired by White Farm. White Motor served as Plan Administrator, Agent for Service of Legal Process, and the Plan Sponsor. The Equitable Life Assurance Society of the United States ("Equitable") was the insurer of the Plan; White Motor, as self-insurer, was an additional insurer under the Prescription drug portion of the Plan. White Motor also sponsored, and Equitable served as insurer of, the White Motor Corporation Pension Plan for Salary Employees ("Pension Plan"), a funded defined benefit plan administered by a committee and trustee. The Pension Plan is not at issue in this case.
The formal documents containing the actual terms of the Welfare Benefit Plan are not part of the record, despite the retirees' efforts to obtain copies of them during the abbreviated discovery permitted by the Bankruptcy Court. Instead, available information concerning the Plan derives solely from printed materials and booklets distributed by White Farm to its employees from 1970 through 1978. These include two booklets entitled "Your Group Insurance Plan," dated June 1, 1970 ("1970 Booklets"), and "Benefits After Retirement for Salary Retirees," dated January of 1978 ("1978 Booklet").
The 1970 Booklets describe insurance provided by Equitable and carry the explicit disclaimer that they are "not the contract of insurance."4 The booklets discuss life, health, and welfare insurance. They differentiate between different categories of salaried employees and appear to have been prepared for distribution to both active and retired employees. The booklets link benefits to continuing employment, explain the effect of a termination of employment, and distinguish between benefits "before your retirement" and "after your retirement."
The 1978 Booklet is addressed specifically to retired employees. It too summarizes formal documents containing the controlling benefit provisions, and carries a disclaimer similar to the one in the 1970 Booklets.5 The booklet describes both the Welfare Benefit Plan and the Pension Plan; its table of contents is divided into three substantive categories, "Pension", "Life Insurance", and "Health Care". Much of the information in the booklet makes no distinction between the Welfare Benefit Plan and the Pension Plan, and its summary of an alleged cancellation clause refers to both plans:
The Company fully intends to continue your plans indefinitely. However, the Company does reserve the right to change the Plans, and, if necessary, discontinue them. If it is necessary to discontinue the Pension Plan, the assets of the Pension Fund will be used to provide benefits according to the Plan document.
No similar clause appears in the 1970 Booklets.
White Motor filed for reorganization on September 4, 1980. White Farm also petitioned for, and was granted, bankruptcy court protection and status as a debtor-in-possession. On December 19, 1980, White Motor sold White Farm to White Farm USA, Inc., a wholly-owned subsidiary of T.I.C. Investment Corporation ("TIC"). TIC entered into an agreement with White Motor entitled "Assignment and Assumption of Liabilities," under which TIC assumed White Motor's obligations to White Farm employees and retirees under the Welfare Benefit Plan.
In a letter dated December 19, 1980, the president of White Farm, R.E. Kidder, assured the retirees that their benefits would continue.6 However, four months later, on March 31, 1981, White Farm sent the retirees a second letter, announcing that all non-contributory retiree insurance would be terminated on May 1, 1981. Penned by Robert A. Fuller, the executive vice president and chief operating officer, the letter stated in part:
White Farm offered the retirees the opportunity to continue their insurance coverage by paying for it themselves — $72.85 monthly premium for a single retiree, $140.75 for a retiree and spouse, and $158.03 for a family.
On July 29, 1981, the retirees commenced their adversary proceedings in the Bankruptcy Court by filing a verified complaint. The class action sought legal, equitable and declaratory relief under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001 et seq., and the Declaratory Judgment Act, 28 U.S.C. § 2201. The six named plaintiffs included four retirees and two surviving spouses of deceased retirees. They sued on behalf of more than 750 retirees and surviving spouses who were receiving retirement benefits under the Welfare Benefit Plan prior to May 1, 1981. The defendants were White Farm, White Motor, TIC, and Equitable.
The complaint contended that by terminating the Plan the defendants "breached their contractual obligation to plaintiffs and all other members of the class arising out of defendants' undertaking to furnish such insurance under the Welfare Benefit Plan as part of the compensation of the class members as employees of White Farm," and also "breached their fiduciary obligations, in violation of § 404 and § 406 of ERISA, 29 U.S.C.A. § 1104(a) and 1106 . . ." For relief, the retirees sought certification of a class; declaratory judgments that the Plan was governed by ERISA and breached in violation of ERISA; orders reinstating the Plan retroactive to May 1, 1981 and enjoining the defendants from terminating it; additional orders establishing the retirees as creditors holding high priority claims against the White Farm and White Motor estates; and other relief. On July 14, 1981, the retirees supplemented their pleadings with a motion for a temporary restraining order and a preliminary injunction retroactively reinstating benefits and enjoining termination of the Welfare Benefit Plan.
The Bankruptcy Court held a preliminary hearing at which "The Court and the parties agreed to attack as a threshold question the legal sufficiency of the Retirees' claims." Bankruptcy Court Opinion ("Opinion") at 4. White Farm and TIC then moved to dismiss the complaint, arguing that ERISA — which all parties agreed governed employee welfare benefit plans — contained no provision prohibiting termination of White Farm's Welfare Benefit Plan. The...
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