Miller v. Lay Trucking Co., Inc., S 82-495.

• Decision Date: 08 April 1985
• Docket Number: No. S 82-495.,S 82-495.
• Citation: 606 F. Supp. 1326
• Parties: James W. MILLER, John A. Miller, William M. Schmidt, James Goodloe, Ernest E. Van Kirk, Henry Boyd, Neal T. Zentmire, Gilbert Bond, Max Bell, Alfred Koth, Michael Pender and Robert L. Snyder, Plaintiffs, v. The LAY TRUCKING COMPANY, INC., Jack Lay, the Bankers Life Company, Dennis Kessler, Lay Trucking Company, Inc. Union Employees Retirement Plan, Defendants.
• Court: U.S. District Court — Northern District of Indiana

606 F. Supp. 1326

James W. MILLER, John A. Miller, William M. Schmidt, James Goodloe, Ernest E. Van Kirk, Henry Boyd, Neal T. Zentmire, Gilbert Bond, Max Bell, Alfred Koth, Michael Pender and Robert L. Snyder, Plaintiffs, v. The LAY TRUCKING COMPANY, INC., Jack Lay, the Bankers Life Company, Dennis Kessler, Lay Trucking Company, Inc. Union Employees Retirement Plan, Defendants.

No. S 82-495.

United States District Court, N.D. Indiana, South Bend Division.

April 8, 1985.

COPYRIGHT MATERIAL OMITTED

Thomas J. Brunner, Jr., South Bend, Ind., for plaintiffs.

James W. Oberfell, South Bend, Ind., Martin W. Kus, LaPorte, Ind., for defendants.

Dennis Kessler, pro se.

MEMORANDUM AND ORDER

ALLEN SHARP, Chief Judge.

Plaintiffs, James W. Miller, John A. Miller, William M. Schmidt, James Goodloe, Ernest E. Van Kirk, Henry Boyd, Neal T. Zentmire, Gilbert Bond, Max Bell, Alfred Koth, Michael Pender and Robert L. Snyder, initiated this action on October 29, 1982, alleging violations of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1101, et seq., breach of contract and common law fraud. As relief from this court, plaintiffs seek a declaratory judgment against defendants with respect to violations of various ERISA provisions, damages pursuant to ERISA, punitive damages in the amount of $500,000, specific performance of the alleged contract entered into between the parties in 1979, attorney fees and the costs of the suit. Jurisdiction of this court is predicated upon federal question jurisdiction, 28 U.S.C. § 1331 and, more specifically, 29 U.S.C. § 1132 providing for civil enforcement of ERISA and for jurisdiction of the district courts of the United States. Jurisdiction over the state claims is grounded on a theory of pendent claim jurisdiction. United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). This case was tried before the court sitting without a jury on February 25 and 26, 1985 in South Bend, Indiana. In accord with the Seventh Circuit Judicial Council Resolution dated October 4, 1984, post trial briefs were submitted to this court on March 11, 1985. This memorandum and order constitutes this court's findings of fact and conclusions of law for purposes of Fed.R.Civ.P. 52(a).

I.

In 1979, plaintiffs were employed as truck drivers and mechanics for defendant, Lay Trucking Company, Inc. (Lay Trucking) and as such were all members of the General Teamsters, Chauffeurs and Helpers Union Local 298 (Teamsters). At that time, plaintiffs were subject to, and participants in, a pension program administered by the Central States Pension Fund of the Teamsters. In 1977, Jack Lay became concerned about the excessive cost of the Teamsters Health, Welfare and Pension Funds offered through the Central States fund and sought ways to reduce those costs by converting to a private plan. Thereafter, Dennis Kessler approached Lay with a proposal for a private pension plan which would reduce the costs to the company. After having investigated several other plans, Kessler proposed the Bankers Life program as that which would best accommodate the needs of Lay Trucking. Lay advised Kessler that such a plan would be attractive to the company if it offered to his employees pension benefits equal to or better than those offered by the Central States Fund.

In later winter or early spring of 1979, plaintiffs were approached by Lay about transferring the company's pension and health and welfare plans from Central States to the new plan issued by Bankers Life. At the initial meeting, Lay told plaintiffs that the major reason for the change in plans was financial. He informed them that the company could no longer pay the excessive premiums to the Central States fund and, therefore, would be forced to close its doors if the plan was not converted to a private pension plan. It was at this meeting that Dennis Kessler was introduced to the drivers and the mechanics. Kessler made a presentation on behalf of the Bankers Life plan and responded to plaintiffs' questions. At this time Kessler did identify himself as a Bankers Life agent,¹ and passed out written literature outlining the plan.

Because the plaintiffs were skeptical about switching plans and requested more information, Kessler compiled benefit information drawn from Bankers Life home office in Des Moines, Iowa. Based on such information, in July 1979 he presented each plaintiff with a "benefit display sheet." Each sheet stated what each plaintiff's monthly benefit "will be" at the date of his normal retirement. There was no indication on these sheets that the stated monthly benefits were projections or estimates. However, during Kessler's presentation of the program, he informed all present that the year to year benefits were based upon anticipated manual defined benefits of future Teamster's contract negotiations.

On August 11, 1979, plaintiffs, against the recommendation of their bargaining agent, Harold Schutte, voted to change to the private pension plan offered by Kessler. Plaintiffs were informed at that meeting that the vote had to be submitted to the Teamsters' Central States Drivers Council for approval. If rejected by that group, another notification meeting would be called. On August 22, 1979, Lay, on behalf of the company, applied for a group annuity pension contract with Bankers Life. That agreement became effective on September 1, 1979.

However, on September 5, 1979, the Teamsters Council informed the local union that it would not authorize any company pulling out of the Central States Pension Fund. Negotiations continued between the representatives of the local union and Lay Trucking to obtain approval from the Central States Fund for a change in the pension plan. On March 1, 1980, a second ratification meeting was held which was attended by plaintiffs, their bargaining agents, Lay and Kessler. Once again, Kessler explained the insurance plan and answered the questions propounded by plaintiffs individually or their bargaining agents. A vote was taken by plaintiffs and the Bankers Life plan was accepted. Lay Trucking made the change to the private pension plan retroactive to September 1, 1979, the date upon which it had begun paying premiums to Bankers Life.

In addition to the monthly payment amounts, the Bankers Life program was superior to the Central States plan in other ways. The change of plans in itself would allow the company to continue operation. The vesting requirements, retirement age qualification, absence of a "non-compete" clause,² and spousal benefits were all better than the same benefits under the Teamsters' plan. Moreover, the financial integrity of Bankers Life Company was perceived by plaintiffs as being better than the Central States Fund.

Lay believed that Kessler was to administer the plan. The position of administrator required both a formal appointment and the payment of a designated fee. Although Kessler received neither the appointment nor the fee, he did perform certain administrative duties with respect to the pension plan, particularly distributing display sheets and answering questions by plaintiffs with respect to the proposed pension plan. During the period of time between the beginning of the plan and late 1982, Kessler communicated with Lay and represented himself in the communications as the administrator of the Lay Trucking Company, Inc. Union Employees Retirement Plan. The annuity agreement given by Kessler to Lay for his signature stated that the plan administrator was the "Lay Trucking Company, Inc. Union Employees". No individual was listed as the administrator. Lay was unaware that he was under any responsibility to administer the Bankers Life plan and did not in fact discuss the possibility of assuming that role until Kessler left Indiana in 1982. At that time Lay had to take upon himself the administrative duties of the private plan.

In the first quarter of 1980, plaintiffs received a second set of benefits display sheets prepared by Kessler which showed the same benefit levels as stated in July 1979. These sheets, as well as the ones produced in July 1979, followed the format for benefit display sheets used by Bankers Life and incorporated benefit data received from Bankers Life home office in Des Moines. The 1980 display sheets did include the word "estimated" in one portion of the report.

On January 1, 1981, almost a year and a half after they had voted to switch plans, plaintiffs received benefit display sheets indicating benefits different from those quoted on July 1, 1979. These display sheets disclosed that plaintiffs were entitled to monthly benefits in an amount approximately one-half of that stated before the vote to change plans.

Plaintiffs contacted their union representatives in order to resolve the discrepancy in benefit levels. The union representatives, in turn, contacted Jack Lay. In response to the inquiry, Lay issued a memorandum indicating that the amounts stated for the monthly pension benefits at the time of negotiations "were correct."

Kessler received copies of the summary plans for use by the plaintiffs in early January 1980. He was aware that federal law required participants in the Bankers Life Plan to be informed of the provisions of the new plan, including its benefit levels, within 90 days from the date they became subject to the plan but he did not believe that Lay was aware of such requirement nor did he so inform Lay.³ Kessler put the documents in the trunk of his car for about a week and then delivered them to Lay. Sometime thereafter Lay returned the booklets to Bankers Life to correct a printing error and distributed them after such error was corrected. The summary plans from the Teamsters were always a year or so late so Lay was not sure when he distributed the booklets. Plaintiff, James Miller, testified that plaintiffs received the summaries of the Bankers Life plan in September 1982, shortly before this lawsuit was filed.

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