McGann v. H & H Music Co.

• Decision Date: 04 November 1991
• Docket Number: No. 90-2672,90-2672
• Citation: 946 F.2d 401
• Parties: 60 Empl. Prac. Dec. P 41,868, 60 USLW 2324, 14 Employee Benefits Cas. 1729, 2 NDLR P 131 John McGANN, Plaintiff-Appellant, v. H & H MUSIC COMPANY, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 401

946 F.2d 401

60 Empl. Prac. Dec. P 41,868, 60 USLW 2324,

14 Employee Benefits Cas. 1729, 2 NDLR P 131

John McGANN, Plaintiff-Appellant, v. H & H MUSIC COMPANY, et al., Defendants-Appellees.

No. 90-2672.

United States Court of Appeals Fifth Circuit.

Nov. 4, 1991.

Joseph J. Garcia, New York City, Helen Brattin, Donald L. Skipwith, Houston, Tex., Paula Ettelbrick, Thomas B. Stoddard, New York City, for John McGann.

Robert L. Liebrose, Atty., AARP, Washington, D.C., for amicus-AARP.

Mark A. Huvard, Harberg, Huvard & Bisk, Houston, Tex., for H & H Music Co., and Brook Mays Music Co. Mary H. Smith, Richard M. Law, Scott M. Owen, Dunn, Kacal, Adams, Papas & Law, Houston, Tex., for General American Life Ins.

Appeal from the United States District Court for the Southern District of Texas.

Before GARWOOD, JONES, and BARKSDALE, Circuit Judges.

GARWOOD, Circuit Judge:

Plaintiff-appellant John McGann (McGann) filed this suit under section 510 of the Employee Retirement Income Security Act of 1974, Pub.L. No. 93-406, 88 Stat. 832 (29 U.S.C. §§ 1001-1461) (ERISA), against defendants-appellees H & H Music Company (H & H Music), Brook Mays Music Company (Brook Mays) and General American Life Insurance Company (General American) (collectively defendants) claiming that they discriminated against McGann, an employee of H & H Music, by reducing benefits available to H & H Music's group medical plan beneficiaries for treatment for acquired immune deficiency syndrome (AIDS) and related illnesses. The district court granted defendants' motion for summary judgment on the ground that an employer has an absolute right to alter the terms of medical coverage available to plan beneficiaries. 742 F.Supp. 392. We affirm.

FACTS AND PROCEEDINGS BELOW

McGann, an employee of H & H Music, discovered that he was afflicted with AIDS in December 1987. Soon thereafter, McGann submitted his first claims for reimbursement under H & H Music's group medical plan, provided through Brook Mays, the plan administrator, and issued by General American, the plan insurer, and informed his employer that he had AIDS. McGann met with officials of H & H Music in March 1988, at which time they discussed McGann's illness. Before the change in the terms of the plan, it provided for lifetime medical benefits of up to $1,000,000 to all employees.

In July 1988, H & H Music informed its employees that, effective August 1, 1988, changes would be made in their medical coverage. These changes included, but were not limited to, limitation of benefits payable for AIDS-related claims to a lifetime maximum of $5,000. ¹ No limitation was placed on any other catastrophic illness. H & H Music became self-insured under the new plan and General American became the plan's administrator. By January 1990, McGann had exhausted the $5,000 limit on coverage for his illness.

In August 1989, McGann sued H & H Music, Brook Mays and General American under section 510 of ERISA, which provides, in part, as follows:

"It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, ... or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan ..." 29 U.S.C. § 1140.

McGann claimed that defendants discriminated against him in violation of both prohibitions of section 510. ² He claimed that the provision limiting coverage for AIDS-related expenses was directed specifically at him in retaliation for exercising his rights under the medical plan and for the purpose of interfering with his attainment of a right to which he may become entitled under the plan.

Defendants, conceding the factual allegations of McGann's complaint, moved for summary judgment. ³ These factual allegations include no assertion that the reduction of AIDS benefits was intended to deny benefits to McGann for any reason which would not be applicable to other beneficiaries who might then or thereafter have AIDS, but rather that the reduction was prompted by the knowledge of McGann's illness, and that McGann was the only beneficiary then known to have AIDS. ⁴ On June 26, 1990, the district court granted defendants' motion on the ground that they had an absolute right to alter the terms of the plan, regardless of their intent in making the alterations. The district court also held that even if the issue of discriminatory motive were relevant, summary judgment would still be proper because the defendants' motive was to ensure the future existence of the plan and not specifically to retaliate against McGann or to interfere with his exercise of future rights under the plan.

DISCUSSION

McGann contends that defendants violated both clauses of section 510 by discriminating against him for two purposes: (1) "for exercising any right to which [the beneficiary] is entitled," and (2) "for the purpose of interfering with the attainment of any right to which such participant may become entitled." In order to preclude summary judgment in defendants' favor, McGann must make a showing sufficient to establish the existence of a genuine issue of material fact with respect to each material element on which he would carry the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

At trial, McGann would bear the burden of proving the existence of defendants' specific discriminatory intent as an essential element of either of his claims. Kimbro v. Atlantic Richfield Co., 889 F.2d 869, 881 (9th Cir.1989) (employee must prove employer's specific intent to retaliate for employee's exercise of rights under plan), cert. denied, --- U.S. ----, 111 S.Ct. 53, 112 L.Ed.2d 28 (1990); Clark v. Resistoflex Co., a Div. of Unidynamics Corp., 854 F.2d 762, 770 (5th Cir.1988) (employee must prove specific intent to interfere with employee's pension rights); Dister v. Continental Group, Inc., 859 F.2d 1108, 1111 (2d Cir.1988) (section 510 claimant must prove specific intent to engage in activity prohibited by section 510); Gavalik v. Continental Can Co., 812 F.2d 834, 851 (3d Cir.) (claimant must prove specific intent to violate ERISA), cert. denied, 484 U.S. 979, 108 S.Ct. 495, 98 L.Ed.2d 492 (1987). Thus, in order to survive summary judgment McGann must make a showing sufficient to establish that a genuine issue exists as to defendants' specific intent to retaliate against McGann for filing claims for AIDS-related treatment or to interfere with McGann's attainment of any right to which he may have become entitled.

Although we assume there was a connection between the benefits reduction and either McGann's filing of claims or his revelations about his illness, there is nothing in the record to suggest that defendants' motivation was other than as they asserted, namely to avoid the expense of paying for AIDS treatment (if not, indeed, also for other treatment), no more for McGann than for any other present or future plan beneficiary who might suffer from AIDS. McGann concedes that the reduction in AIDS benefits will apply equally to all employees filing AIDS-related claims and that the effect of the reduction will not necessarily be felt only by him. He fails to allege that the coverage reduction was otherwise specifically intended to deny him particularly medical coverage except "in effect." He does not challenge defendants' assertion that their purpose in reducing AIDS benefits was to reduce costs.

Furthermore, McGann has failed to adduce evidence of the existence of "any right to which [he] may become entitled under the plan." The right referred to in the second clause of section 510 is not simply any right to which an employee may conceivably become entitled, but rather any right to which an employee may become entitled pursuant to an existing, enforceable obligation assumed by the employer. "Congress viewed [section 510] as a crucial part of ERISA because, without it, employers would be able to circumvent the provision of promised benefits." Ingersoll-Rand Co. v. McClendon, --- U.S. ----, 111 S.Ct. 478, 485, 112 L.Ed.2d 474 (1990) (emphasis added).

McGann's allegations show no promised benefit, for there is nothing to indicate that defendants ever promised that the $1,000,000 coverage limit was permanent. The H & H Music plan expressly provides: "Termination or Amendment of Plan: The Plan Sponsor may terminate or amend the Plan at any time or terminate any benefit under the Plan at any time." There is no allegation or evidence that any oral or written representations were made to McGann that the $1,000,000 coverage limit would never be lowered. Defendants broke no promise to McGann. The continued availability of the $1,000,000 limit was not a right to which McGann may have become entitled for the purposes of section 510. ⁵ To adopt McGann's contrary construction of this portion of section 510 would mean that an employer could not effectively reserve the right to amend a medical plan to reduce benefits respecting subsequently incurred medical expenses, as H & H Music did here, because such an amendment would obviously have as a purpose preventing participants from attaining the right to such future benefits as they otherwise might do under the existing plan absent the amendment. But this is plainly not the law, and ERISA does not require such "vesting" of the right to a continued level of the same medical benefits once those are ever included in a welfare plan. See Moore v. Metropolitan Life Insurance Co., 856 F.2d 488, 492 (2d Cir.1988).

McGann appears to contend that the reduction in AIDS benefits alone supports an inference of specific intent to retaliate against him or to interfere with his future exercise of rights under the plan. McGann characterizes as evidence of an individualized intent to discriminate the fact that AIDS was the...