James v. Pirelli Armstrong Tire Corp.

• Decision Date: 17 September 2002
• Docket Number: No. 00-6475.,00-6475.
• Citation: 305 F.3d 439
• Parties: Clay K. JAMES, et al., Plaintiffs-Appellants, v. PIRELLI ARMSTRONG TIRE CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

305 F.3d 439

Clay K. JAMES, et al., Plaintiffs-Appellants, v. PIRELLI ARMSTRONG TIRE CORPORATION, Defendant-Appellee.

No. 00-6475.

United States Court of Appeals, Sixth Circuit.

Argued: March 21, 2002.

Decided and Filed: September 17, 2002.

COPYRIGHT MATERIAL OMITTED

Hugh C. Howser, Jr. (argued and briefed), Kara E. Shea (briefed), Miller & Martin, LLP, Nashville, TN, for Appellants.

Richard L. Colbert (argued and briefed), Colbert & Winstead, Nashville, TN, for Appellee.

Before BATCHELDER and CLAY, Circuit Judges; ALDRICH, District Judge.^*

OPINION

CLAY, Circuit Judge.

Plaintiffs, twenty-one former employees of Defendant Pirelli Armstrong Tire Corporation ("Pirelli" or "the company") or its predecessor in interest, Armstrong Rubber Company ("Armstrong"), appeal from the judgment dismissing their claims of breach of fiduciary duty arising under the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001-1461. During the relevant time periods, Plaintiffs were salaried employees or retired salaried employees at Pirelli's plant in Madison, Tennessee. For the reasons set forth below, we REVERSE the district court's judgment and REMAND the case for further proceedings.

BACKGROUND

Pirelli is a Delaware corporation with headquarters in New Haven, Connecticut, and is in the business of tire production. Pirelli bought the Madison, Tennessee plant from Armstrong in 1988. Pirelli provided medical benefits for its salaried employees and retired salaried employees through group insurance policies with Connecticut General Life Insurance Company, including a 1980 policy, a 1984 policy, and a 1988 policy. Pirelli had the right to terminate the 1980 policy by giving the insurance company advance written notice, as well as the right to amend the policy with the insurance company's approval. In 1981, Armstrong gave its salaried employees a Summary Plan Description ("SPD"), which stated as follows under the heading "Termination of Insurance":

Your insurance will terminate when you are no longer a member of an eligible class of employees, when the group policy terminates or when you are no longer working for the employer, whichever happens first. However, if you retire, your life insurance and your Medical Care Benefits (other than pregnancy benefits) will be continued until the employer stops payment of premiums for you.

The insurance for a family member terminates when your insurance terminates, or when the family member is no longer eligible, whichever happens first. Under certain circumstances, it may be possible to continue part or all of your insurance during temporary lay-off, plant closures or leave of absence or when you are unable to work because of sickness or injury. It may also be possible for the insurance to continue on your family members after your death. See your Benefit Plan Administrator for this information.

The 1981 SPD contained no other language regarding modification or termination of medical benefits. The 1984 and 1988 policies had the same or substantially the same provisions regarding cancellation and amendment, and the 1981 SPD was relied upon until 1989, when Pirelli distributed a new SPD. This SPD contained a provision in which Pirelli reserved the right to modify or terminate the plan at any time. Under the section concerning the Comprehensive Medical Insurance Plan, the 1989 SPD provided:

D. WHEN YOUR COVERAGE ENDS

Please refer to Section L of the Handbook for details concerning termination of coverage under this Plan.

Similarly, in the section about the Prescription Drug plan, the 1989 SPD provides:

C. WHEN COVERAGE ENDS

Please refer to Section L of the Handbook for details concerning the termination of your coverage in the event you cease to be an active employee. In certain circumstances you may be able to continue to have coverage and this is explained.

However, Section L of the handbook, entitled Termination of Benefits, was left blank when the 1989 SPD was distributed, and Pirelli never issued any materials to be placed in that space. Despite being presented to employees in 1989, the 1989 SPD was not actually implemented until 1993.

From 1986 through 1990, Armstrong and Pirelli, in an effort to reduce their salaried workforce, encouraged employees to take early retirement. After acquiring the Madison plant, Pirelli held a series of meetings in December of 1989, with groups of salaried employees to encourage eligible employees to take early retirement. During these meetings, salaried employees were given copies of the 1989 SPD and were encouraged to consider retirement before the end of 1990 to avoid anticipated increases in the cost of health insurance and other major changes in employees' health insurance benefits, effective January 1, 1991, when an increase in the cost of health insurance was expected to go into effect.

Thereafter, in July of 1990, Pirelli put into effect an Optional Pension/Severance ("OPS") plan, again seeking to encourage early retirement by providing various incentives. Pirelli provided written descriptions of the OPS plan to its salaried employees and required all salaried employees to attend one of several mandatory meetings. Pirelli corporate headquarters also provided information about the OPS plan for Pirelli's plant managers to disseminate to salaried employees at these meetings. The information included a script for the plant manager to read to the salaried employees at the group meetings, a slide presentation and a recorded audio presentation. At these meetings, Charles Wright, the plant manager, read the scripted presentation, while Shirley Pike, the Assistant Employee Relations Manager, and a human resources liaison since 1987, made a slide presentation and a recorded audio presentation, and answered employees' questions. Salaried employees were told in the script read by plant manager Wright that "[o]ur plan affords many of you the opportunity to act now to obtain a $100/$200 deductible during retirement and not be affected by the upcoming changes in retirement insurance." (J.A. at 108.) Wright testified that he told the salaried employees that their medical benefits would not change during their retirement. Employees also received a copy of a letter from Paul C. James, Pirelli's President, and a written description of the OPS plan. These materials informed the employees that early retirees would receive the benefit of the lowest deductible ($100/$200) and maximum out-of-pocket expense amounts ($300/$400) available for salaried employees, that they would receive these reduced deductibles and maximum out-of-pocket expenses "during retirement," and that they would not be affected by the upcoming changes in retirement insurance. Employees were generally told to bring any questions they might have to Pike, and many of them did just that.

In answering employees' questions, Pike consulted the company's current SPD and personnel policy directive book, and if those sources did not provide an answer she would call corporate headquarters for assistance. Pike testified that her actions were in conformity with the procedures established by Armstrong and Pirelli. However, Pike admitted that she did not have the OPS plan documents in her Nashville office — in fact, she had never seen or read them during her employment with Armstrong and Pirelli. According to Pike, the OPS plan documents were in the corporate office in New Haven, Connecticut and were not available for examination in the Employee Relations Department in Nashville.

When employees who were at meetings with Pike asked her how long their benefits would last, she would tell them: during retirement. In her testimony, Pike defined "retirement" to mean during their lifetimes and the lives of their spouses unless the latter remarried. (J.A. at 350.) Pike also informed employees that their benefits would remain unchanged during their lifetimes. When employees asked Pike about language in the SPD that allowed the company to alter or amend the plan, Pike stated that it was written for the benefit of Pirelli to enable the company to change insurance carriers. As Pike put it, "If I had that discussion, I am sure I would have talked about insurance carrier." (J.A. at 354-55.) Although Pike could not remember if anyone from corporate headquarters inquired to determine whether she was disseminating accurate information, she admitted that no one from the company told her that her statement that medical benefits would remain unchanged during their lifetimes and that of their spouses unless they remarried was inaccurate because Pirelli reserved the right to change the OPS plan. Pike also admitted that she did not know whether she had the role of a fiduciary relating to the dissemination of information about the OPS plan to the company's employees because she was not sure what a "fiduciary" is. Pike added that to the best of her knowledge, the company provided her with truthful and accurate information to present to the employees and the plan beneficiaries, and that the company advised her to answer questions posed by employees about the benefits so as not to mislead them. In any event, Pike testified that she did not intentionally mislead any employees with the information that she provided to them.

However, as acknowledged by Pirelli's General Counsel and Secretary, Sherwood Willard, it would have been prudent for Pike to have read the OPS Plan and to have had a copy of it in her office because she was responsible for providing accurate information to employees about the terms and conditions thereof. Willard also admitted that if Pike told employees that the company could not change their benefits during retirement, then she was not providing accurate information. Willard further acknowledged that if Pike told employees that the language in the SPD concerning the company's right to alter or amend the OPS Plan meant that the company could change insurance carriers, then that...