Kerber v. Qwest Group Life Ins. Plan

• Decision Date: 02 June 2011
• Docket Number: No. 10–1349.,10–1349.
• Citation: 647 F.3d 950
• Parties: Edward J. KERBER; Nelson B. Phelps; Joanne West; Nancy A. Meister; Thomas J. Ingemann, Jr.; Martha A. Lensink; Samuel G. Strizich, individually, and as representative of plan participants and plan beneficiaries of the Qwest Group Life Insurance Plan, Plaintiffs–Appellants,v.QWEST GROUP LIFE INSURANCE PLAN; Qwest Employees Benefit Committee; Qwest Plan Design Committee; Qwest Communications International, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

647 F.3d 950

Edward J. KERBER; Nelson B. Phelps; Joanne West; Nancy A. Meister; Thomas J. Ingemann, Jr.; Martha A. Lensink; Samuel G. Strizich, individually, and as representative of plan participants and plan beneficiaries of the Qwest Group Life Insurance Plan, Plaintiffs–Appellants,

v.QWEST GROUP LIFE INSURANCE PLAN; Qwest Employees Benefit Committee; Qwest Plan Design Committee; Qwest Communications International, Inc., Defendants–Appellees.

No. 10–1349.

United States Court of Appeals, Tenth Circuit.

June 2, 2011.

Curtis L. Kennedy, Denver, CO, for Plaintiffs–Appellants.Christopher J. Koenigs (and Michael B. Carroll with him, on the brief), Sherman & Howard, LLC, Denver, CO, for Defendants–Appellees.Before KELLY, McKAY, and MATHESON, Circuit Judges.PAUL KELLY, JR., Circuit Judge.

This is an appeal from several orders of the district court dismissing Plaintiffs–Appellants' claims or granting summary judgment to Defendants–Appellees. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

Background

A. The Parties.

The Plaintiffs in this action are six participants in and two beneficiaries of a life insurance plan (the “Plan”) offered by Qwest Communications International. Aplt. Br. 1.¹ All parties agree that the Plan is an employee welfare benefit plan under the Employee Retirement Income Security Act of 1974 (“ERISA”) § 3(1), 29 U.S.C. § 1002(1). See id. at 6. We refer to all Defendants and predecessor companies collectively as “Qwest.”

The Plan provides, inter alia, life insurance benefits to certain classes of former Qwest employees. Plaintiffs Edward Kerber and Nelson Phelps retired in February 1990, and are classified for purposes of the Plan as “Pre–1991 Retirees.” 1 Aplt.App. 32–33. Plaintiff Samuel Strizich is the surviving spouse of Sharon Strizich, a Pre–1991 Retiree who died on March 20, 2007. Id. at 35. Mr. Strizich received a $10,000 life insurance benefit upon the death of his wife. Id.; see Kerber v. Qwest Group Life Ins. Plan, 656 F.Supp.2d 1279, 1282 n. 3 (D.Colo.2009). Plaintiffs Joanne West, Nancy Meister, and Thomas Ingemann, Jr. are considered “Post–1990 Retirees,” and Plaintiff Martha Lensink is the surviving spouse of Joseph Lensink, a Post–1990 Retiree who retired in 1997 and died on January 5, 2006. 1 Aplt.App. at 33–34. Ms. Lensink received a life insurance benefit of $10,000 upon her husband's death. Id. at 34. Plaintiffs brought this case as a class-action, but the district court denied class certification. 12 Aplt.App. 2588. This appeal presents no class-action issues.

This case centers around two actions taken by Qwest: (1) a retirement option (the “5+5 Option”) offered to employees in 1989, and (2) amendments to the Plan that occurred between 1997 and 2007. The retirement option forms the basis for the Pre–1991 Retirees' claims for equitable estoppel and material misrepresentation, while the amendments form the bases for claims by all Plaintiffs. The operative facts of the case, though somewhat lengthy, are largely undisputed.

B. The 5+5 Retirement Option.

In December 1989, Qwest offered an early retirement program, the 5+5 Option. 5 Aplt.App. 968. Qwest sent a packet of materials summarizing the benefits available under the 5+5 Option to eligible retirees, including Plaintiffs Kerber and Phelps. Id.; see 9 Aplt.App. 1775–1808. Those materials stated that employees who accepted the 5+5 Option would be entitled to life insurance benefits under the Plan and briefly described those benefits. 9 Aplt.App. 1784, 1798. However, the materials clearly stated, “While the plans listed below are the plans currently provided to eligible employees upon retirement, the Company reserves the right to amend or terminate any or all provisions in the future for any reason.” Id. at 1797.

In response to questions about the 5+5 Option, Qwest conducted a video conference that contained the following colloquy:

Moderator: ... There is a statement in some of the paperwork that people received in their packets that's raised some questions, and that is the statement that says the company reserves the right to change benefits. There are some people worried about that. Can you speak to that statement?

Human Resource Director Charlie Kamen: Sure. That's a typical reservation of rights statement that appears in virtually every employee benefit plan, not just [Qwest] benefit plans, but all companies' benefit plans. It is not intended to be divisive, it is not intended to be a below the board type of thing. What it is intended to do though, is it's intended to give the company the ability to modify the plans as circumstances and conditions change in the future. It's really intended to make the plans more meaningful not only for the employees but for the company.

See Kerber, 656 F.Supp.2d at 1279.

Plaintiffs Kerber and Phelps voluntarily retired under the 5+5 Option, as did Sharon Strizich. Id. at 1282 & n. 3.

On March 26, 1990, Qwest sent confirmation letters to employees who retired under the 5+5 Option. 5 Aplt.App. 968. The letters indicated that retirees were entitled to receive life insurance benefits under the Plan. See 3 Aplt.App. 500–01. However, the letters did not purport to describe the details of those benefits. See id.

C. The 1998 Plan Documents.

Before 1997, the Plan established a formula whereby life insurance proceeds remained constant until the retiree reached the age of 66, and then decreased over a number of years until it reached 50% of the original amount (the “Reduction Formula”). See 5 Aplt.App. 967–68 (describing the Reduction Formula); 3 Aplt.App. 624–25 (Formula as embodied in 1998 Plan). In 1997, the Plan was amended to include a “Minimum Benefits Provision.” See 5 Aplt.App. 968; 3 Aplt.App. 624–25 (minimum benefits provision in the 1998 Plan Documents); Kerber, 656 F.Supp.2d at 1283. The governing documents incorporating the Minimum Benefits Provision were issued in June 1998 (the “1998 Plan Documents”).

The Minimum Benefits Provision is the final sentence in subsection 2.6(a) of Article II of the Plan and provides,

2.6 Benefits for Eligible Retirees. An Eligible Retiree shall commence participation in the Plan on the first day of the month coinciding with or next following the date on which such former Employee becomes eligible to receive a pension or disability benefit from the [Qwest] Pension Plan.

(a) Basic Life Coverage. On the first day of the month coinciding with or next following the date upon which an Eligible Retiree attains age 66, the amount of Basic Life Coverage in effect at retirement shall be reduced annually by 10 percent until the last day of the month in which an Eligible Retiree attains age 70, at which time, such Eligible Retiree's Basic Life Coverage shall remain at 50 percent of the Basic Life Coverage amount in effect prior to his 66th birthday. Notwithstanding the foregoing, ... such Basic Life Coverage amounts shall not be reduced below certain minimum amounts set forth in Appendix 7....

3 Aplt.App. 624–25 (emphasis added).

Appendix 7, in turn, establishes a minimum benefit of $20,000 for retirees who retired before January 1, 1996, and died after December 31, 1996, and a minimum benefit of $30,000 for retirees who retired after January 1, 1996. Id. at 647.

The 1998 Plan Documents also contain a clause describing the company's ability to amend the Plan (the “Reservation of Rights Clause” or “ROR”). Id. at 638. The Reservation of Rights Clause is contained in Article X of the Plan and provides,

Amendment. Except to the extent limited by any applicable collective bargaining agreement, the Company reserves the right, in its sole discretion, to amend the Plan at any time, in any manner, including, without limitation, the right to amend the Plan to reduce, change, eliminate, or modify the type or amount of Benefits provided to any class of Participants.... Any such amendment of the Plan shall be effective on such date as the Plan Sponsor may determine; provided, however, that no amendment shall reduce the benefits of any Participant with respect to a loss incurred prior to the date such amendment is adopted.

Id. (emphasis added).

The last line of the ROR prohibits retroactive application of amendments that reduce benefits. Id. We refer to this provision as the “Prior Loss Proviso.”

At various times between 1998 and 2004, Qwest sent to plan participants letters confirming that they were eligible for life insurance coverage. 5 Aplt.App. 969; 4 Aplt.App. 688 (2001), 690 (2002), 693 (2003), 695 (2004). Specifically, Confirmation Statements sent between 2001 and 2004 confirmed that the plan participants were eligible for life insurance coverage. Those statements also provided, “The Company intends to continue these plans indefinitely; however, it reserves the right to amend, suspend, or discontinue them at any time, except for those who retired before 1991 and where prohibited by collective bargaining agreements.” 4 Aplt.App. 689 (2001), 692 (2002), 694 (2003), 696 (2004). The Confirmation Statements also indicated that the Plan Documents would govern in the event of a discrepancy between the two. Id.

D. Amendments to the Plan and Subsequent Actions.

The parties do not dispute that the power to amend the Plan lies with a group of Qwest employees designated as the Plan Design Committee (the “PDC”). In October 2005, the PDC convened to discuss amending the Plan, specifically reducing the life insurance benefit for Post–1990 Occupational Retirees. See 5 Aplt.App. 905. There is some confusion over exactly what action the PDC took that day. A document entitled “Plan Design Committee, Minutes and Resolutions October 14, 2005” and signed by the members of the PDC provides in relevant part,

Recommendation: That the Director, Employee Benefits, Health Life & Disability, Human Resources, or his delegate, be authorized to take all actions appropriate to implement for the 2006 plan year:

• Change the benefit available under the Qwest Group Life...