In re White Farm Equipment Co.

Decision Date09 September 1982
Docket NumberAdv. No. B81-0813.,Bankruptcy No. B80-3363
Citation23 BR 85
PartiesIn re WHITE FARM EQUIPMENT COMPANY, Debtor. Douglas J. HANSEN, et al., Plaintiffs, v. WHITE FARM EQUIPMENT COMPANY, et al., Defendants. The OFFICIAL CREDITORS' COMMITTEE OF the WHITE FARM EQUIPMENT CO., Intervenor/Third Party Plaintiff, v. Douglas J. HANSEN, et al., Third Party Defendants, and White Farm Equipment Company, Third Party Defendant.
CourtU.S. Bankruptcy Court — Northern District of Ohio

COPYRIGHT MATERIAL OMITTED

Robin Phelan, Baker Rector, Haynes & Boone, Dallas, Tex., for defendants White Farm Equipment Co.

Dennis M. O'Dea, Richard Jacobson, Keck, Mahin & Cate, Chicago, Ill., for the Official Creditor Committee of the White Farm Equipment Co.

Brian A. Bash, Kahn, Kleinman, Yanowitz & Arnson, Cleveland, Ohio, for the Employees Creditors Committee of the White Motor Corp.

William H. Baughman, Jr., Squire, Sanders & Dempsey, Cleveland, Ohio, for the White Motor Corp.

Russell C. Brown, Stolpestad, Brown & Smith, St. Paul, Minn., for plaintiffs.

Marc A. Silverstein, Gen. Counsel, TIC Investment Corp., Dallas, Tex., for the TIC Inv. Corp.

OPINION

MARK SCHLACHET, Bankruptcy Judge.

Arising in the White Farm Equipment Company ("WFE") reorganization case, this adversary proceeding concerns alleged violations of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. §§ 1001-1461 (1976 & Supp. IV 1980), occasioned when, effective May 1, 1981, WFE and additional defendants1 discontinued all noncontributory2 insurance coverages (the "Insurance Benefits")3 furnished through defendant White Motor Corporation Insurance Plan for Salary Employees ("Welfare Benefit Plan"), including its predecessor insurance plans, as to the salaried retirees of WFE (the "Retirees") and other beneficiaries thereunder.

Instituted by certain Retirees and surviving spouses of deceased Retirees (the "Plaintiffs"), this proceeding is currently before the Court on the joint motion of WFE and TIC Investment Corporation ("TIC") to dismiss the Plaintiffs' complaint on the ground that, inter alia, it fails to state a claim upon which relief can be granted, pursuant to Bankruptcy Rule 712(b); and the Plaintiffs' cross-motion for partial summary judgment on the issue of liability, pursuant to Bankruptcy Rule 756. For reasons set forth infra, the Court deems that WFE and TIC's motion should be treated as one for summary judgment and holds that summary judgment be granted thereon in their favor. In addition, the Plaintiffs' motion for summary judgment shall be denied.

BACKGROUND
A. Procedural History

Following the discontinuation of the Insurance Benefits, the Plaintiffs, on June 19, 1981, commenced this adversary proceeding by verified complaint as a class action on behalf of themselves and as class representatives on behalf of the other Retirees, surviving spouses of deceased Retirees, and remaining beneficiaries under the Welfare Benefit Plan. In their complaint the Plaintiffs allege that when the defendants (excepting the Equitable Life Assurance Company of the United States ("Equitable")) discontinued the Insurance Benefits, they breached their contractual and fiduciary obligations to the Retirees and members of the proposed class under the Welfare Benefit Plan in violation of ERISA, giving rise to a claim against such defendants for retroactive reinstatement of the Insurance Coverages. The Plaintiffs seek a declaratory judgment establishing, in substance, that the Retirees' claim arising out of the discontinuation of the Insurance Coverages is valid under ERISA and allowable in this title 11 case under 11 U.S.C. § 502. The Plaintiffs also seek to enjoin WFE, TIC, and the White Motor Corporation ("WMC") to reinstate, at their expense, the Insurance Benefits retroactively to May 1, 1981.4

On July 14, 1981, the Plaintiffs moved for a temporary restraining order and preliminary injunction enjoining the defendants to reinstate the Welfare Benefit Plan as requested in the complaint pendente lite. In support, the Plaintiffs submitted two affidavits of individual plaintiffs: (1) the Affidavit of Douglas J. Hansen, a Retiree, dated June 25, 1981 ("Hansen Affidavit I");5 and (2) the Affidavit of Pearl E.C. Lindhal, surviving spouse of a deceased Retiree, dated July 2, 1981 ("Lindhal Affidavit").

On July 23, 1981 a preliminary hearing was held at which time the parties entertained alternatives within the process of the litigation.6 Considerable complexities were indicated therein — in particular, class certification, entitlement to preliminary injunctive relief, priority of Retirees' claims upon various given assumptions, and discovery. The Court and the parties agreed to attack as a threshold question the legal sufficiency of the Retirees' claims.7 If such claims are insufficient, the complexities in the litigation would be avoided. The Court also addressed discovery, with the defendants agreeing to observe an accelerated discovery schedule.

On July 29, 1981, as noted supra, WFE and TIC jointly moved to dismiss the Plaintiff's complaint on the ground that, inter alia, it fails to state a claim under ERISA, i.e., the discontinuation of the Insurance Benefits and termination of the Welfare Benefit Plan as to the Plaintiffs and the proposed class do not give rise to a claim against the defendants.

On August 13, 19818 a pre-trial conference was held at which the Court and the parties established a procedure for hearing the motion to dismiss. At the Court's direction, notice was afforded all potential class members reciting (1) the pertinent procedural history of the WFE reorganization case and of the instant adversary proceeding (as well as the salient facts of the latter); (2) the claim asserted herein arising out of the discontinuation of the Insurance Benefits; (3) that on September 18, 1981 a hearing was to be held in this adversary proceeding relative to the validity and allowability of such claims pursuant to which the Court may make determinations thereon on a class basis; and (4) that the hearing would be open to all beneficiaries under the Welfare Benefit Plan and that they would be accorded the opportunity to be heard thereat. See Notice to Salaried Former Employees of White Farm Equipment Company.

On September 14, 1981, as noted supra, the Plaintiffs filed a cross-motion for partial summary judgment on the issue of liability, together with an annexed statement of facts in support, as to which, they state, "there can be no genuine issue." As additional bases for such motion, the Plaintiffs submitted their verified complaint to be considered as an affidavit and certain enumerated extra-pleading materials: the WFE Schedule of Debts; the Lindhal Affidavit; Hansen Affidavit I; the Disclosure Statements approved by the Court on August 20, 1981; and the Deposition of James H. Slife, WFE Vice President for Finance and Administration, taken on August 27, 1981 (the "WFE Deposition"), together with all exhibits made a part thereof.9 Plaintiffs' Motion for Partial Summary Judgment at 2-3.

In their statement of facts, the Plaintiffs made significant representations as to the posture of the proceeding, including that

a formal, written document known as the White Motor Corporation Insurance Plan for Salary Retirees sic either does not exist or cannot be found. Rather, the retiree insurance coverage benefits are described and summarized in booklets applicable to various groups of the Salary Retirees identified by plant location. (WFE Deposition, Exhibits 9 to 20) . . .

Plaintiffs' Statement of Facts in Support of Partial Summary Judgment Motion, para. 8 at 3 (emphasis added). The plaintiffs thus viewed discovery as to documents or other materials relating to the Welfare Benefit Plan to have been completed. Reliance is thus properly placed on the above materials for an assessment of the rights of the parties under the Welfare Benefit Plan.

B. The Hearing

As scheduled, on September 18, 1981 a hearing was held wherein the motion to dismiss and the motion for partial summary were considered. At the outset of the hearing, the Court stated its view of the issue presented:

The issue here seems to be whether the employer, the White Farm Equipment Company, may, under applicable law, terminate the welfare benefit plan described particularly in Exhibit A to Hansen Affidavit I10 . . . without breaching the rights of those employees who, prior to such termination had retired from White Farm, allegedly 756 employees.

Transcript ("TR.") at 7 (emphasis added). Subsequently, the Court, concerned with the substantial rights of the parties and unaware that "it is not unusual for such an unfunded plan . . . to consist of various booklets and documents issued by the employer to its employees," Levy v. Lewis, 635 F.2d 960, 969 (2d Cir. 1980) (Mansfield, J., concurring) (citations omitted), initiated dialogue with Plaintiffs' counsel respecting whether Exhibit A to Hansen Affidavit I sets forth the terms which the Court can assume constitute the arrangement between WFE and the Retirees as to the Welfare Benefit Plan. There was a lack of clarity in Plaintiffs' counsel's response. Sensing the Court's reliance on such materials before it, Plaintiffs' counsel then suggested, for the first time, that the clear language of his own exhibit be deemed immaterial by the Court. Tr. 65.

The Court did not intend to invite or inspire a strategic retreat from the proceedings theretofore painstakingly pursued by the Court and the parties. As detailed supra, the Plaintiffs advanced up to that point a fact pattern consisting in substantial measure of a reservation by WFE of the right to amend or terminate the Welfare Benefit Plan. Tr. 11. Thus, while it is true that "the contention of one party that there are no issues of material fact preventing entry of judgment in its favor does not bar that party from asserting that there are issues of fact sufficient to prevent...

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