Ogden v. Michigan Bell Telephone Co.

Decision Date16 October 1984
Docket NumberNo. 83-CV-0482.,83-CV-0482.
Citation595 F. Supp. 961
PartiesNorbert A. OGDEN, et al., Plaintiffs, v. MICHIGAN BELL TELEPHONE COMPANY, a Michigan corporation, and Dan Grady, Defendants.
CourtU.S. District Court — Western District of Michigan


Michael Kubacki, Detroit, Mich., Francis M. Fitzgerald, Mount Clemens, Mich., Theresa M. Smith, Detroit, Mich., John F. O'Grady, Saginaw, Mich., for plaintiffs.

Robert M. Vercruysse, Barbara S. Kendzierski, Constance M. Ettinger, Detroit, Mich., for defendants.


PHILIP PRATT, District Judge.

Plaintiffs commenced this action seeking retirement benefits allegedly denied in violation of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Sec. 1001 et seq., and Michigan Common Law. Plaintiffs have amended their complaint twice. The second amendment was in response to this Court's decision granting defendant Michigan Bell Telephone Company's ("Michigan Bell") motion for partial dismissal pursuant to Fed.R.Civ.Proc., Rule 12(b)(6). Ogden v. Michigan Bell Telephone Co., 571 F.Supp. 520 (E.D.Mich. 1983). Plaintiffs' complaint now contains two counts. Count I alleges a violation of fiduciary duties imposed by ERISA on plan fiduciaries. See 29 U.S.C. § 1104. Count II avers a claim under 29 U.S.C. § 1132(a)(1)(B). Presently before the Court is defendants' motion to dismiss part of Count II pursuant to Rule 12(b)(6).

Plaintiff alleges the following facts.1 Michigan Bell has from time to time offered its employees enhanced severance benefits under its Management Income Protection Plan ("MIPP"). Michigan Bell has used the MIPP selectively to encourage voluntary terminations by its employees, particularly those eligible for early retirement. Whenever Michigan Bell's Vice President of Personnel designates a group of employees as affected by a "resizing opportunity," the eligible employees may accept the offer of MIPP benefits at any time within the designated period. After this designated period lapses, MIPP benefits are unavailable until another "resizing opportunity" is announced.

MIPP benefits were first offered to Michigan Bell employees in the period between October 1, 1980 and December 1, 1980. Plaintiffs allege that defendant Dan Grady, the fiduciary of MIPP, thereafter informed them that MIPP benefits would never again be available. He allegedly stated that anyone considering retirement should not wait for another offering of MIPP benefits. Plaintiffs retired from their employment with Michigan Bell between March 1, 1982 and June 1, 1982 acting in reliance upon Grady's statements. On June 17, 1982, however, Michigan Bell announced that MIPP benefits would be available to employees who terminated their employment between June 1, 1982 and July 31, 1982. Although more than 800 Michigan Bell employees obtained MIPP benefits by accepting this offer, plaintiffs were ineligible for these benefits because of their earlier retirements.

Plaintiffs' first amended complaint contained three counts. Count I asserted a claim for breach of fiduciary duties in violation of ERISA. After an allegation that defendants breached their fiduciary duties, plaintiffs included six "sub-counts", A through F, which purported to be examples of the ways in which defendants breached their duties. Plaintiffs entitled each of the sub-counts with terms which are commonly associated with common law cause OF ACTION, i.e., sub-count A was entitled "equitable estoppel"; sub-count B alleged "breach of employment contract"; sub-count C claimed a "breach of employment contract"; sub-count D averred a cause for "promissory estoppel"; sub-count E set for a claim based on "innocent misrepresentation"; sub-count F asserts a claim for negligence." Previously, defendants brought a motion to dismiss these sub-counts asserting that they were state causes of action preempted by ERISA. The plaintiffs contended that sub-counts A through F were not intended to assert state law claims, but instead alleged facts which would show a breach of fiduciary duty under ERISA. Plaintiffs argued that a body of federal common law has developed to augment the requirements found in ERISA.2 Plaintiffs reasoned that federal courts must refer to state common law in developing the federal common law on this subject which accounted for the sub-counts found in Count I.

This Court ruled that sub-counts B, C, D and E be dismissed because those allegations do not state a claim for breach of fiduciary duty under ERISA. ERISA creates two duties of a fiduciary: (i) the fiduciary must discharge his duties solely in the interest of the plan's participants, and for the exclusive purpose of providing benefits and defraying the costs of administering the plan; and (ii) the fiduciary must perform his duties with reasonable care. See 29 U.S.C. § 1104.3 Since these were the exclusive bases for recovery under ERISA, the Court ordered that those sub-counts which did not conform to those requirements be dismissed. Since the statute expressly established the duties of a fiduciary, the plaintiffs could not look elsewhere to create other duties.

Count III of the first amended complaint averred a common law action for fraud. This count was also dismissed because the broad preemption of ERISA, as provided in 29 U.S.C. § 1144(a), precluded such claims.4

Although Count II of the first amended complaint incorporated sub-counts A through F of Count I by reference, defendant previously did not challenge the validity of any cause averred in that count. In plaintiffs' second complaint, the sub-counts are specifically set forth in Count II. According to plaintiffs, Count II asserts a cause of action under section 1132(a)(1)(B) of ERISA. Sub-count A is entitled "Equitable Estoppel" and states that defendants made material representations to plaintiffs regarding the unavailability of the MIPP, that those statements were knowingly false, that they were made with the intent of plaintiffs acting in reliance thereon, that plaintiffs did act in reliance thereon, and that plaintiffs were thereby injured. Sub-count B is labeled "Breach of Employment Contract" and asserts that defendants made statements of company policy that the MIPP benefits would not be made available again, that the "oral and written representations by the defendants became part of the employment contracts of the plaintiffs," and that Michigan Bell breached that contract by effectuating a resizing opportunity between June 1, 1982 and July 31, 1982. Sub-count C is captioned "Breach of Contract to Retire" and states in pertinent part:

2. Statements of the Defendants that no MIPP benefits would again be available had the purpose and effect of encouraging voluntary terminations of employees who would otherwise have waited until MIPP benefits were offered.
3. In exchange for the Plaintiffs' terminations, the Defendants promised that the plaintiffs would receive the same benefits by retiring immediately that they would receive if they were to terminate at a later date.
4. By the act of voluntarily terminating employment, the plaintiffs accepted the Defendants' offer for a unilateral contract, and the Defendants thereby were obligated to pay MIPP benefits to the Plaintiffs if MIPP benefits were again made available by the Defendants. The Defendants' failure to pay MIPP benefits has breached the contract ...

Subcount D is titled "Promissory Estoppel" which contends that the defendants' statements that MIPP benefits would no longer be offered were reasonably relied upon by plaintiffs, that defendants should have reasonably expected such reliance, that the statements induced plaintiffs to retire earlier than they would have, and that the early termination benefited Michigan Bell. Sub-count E is named "Innocent Misrepresentation" and states the "representations and announcements made by the Defendants to the Plaintiffs regarding MIPP benefits were made in the context of the employment relationship and in a context of negotiation over benefits to be paid ...", that the statements about the future unavailability of the MIPP were false, that these statements actually deceived plaintiffs, that such reliance injured the plaintiffs, and that the plaintiffs' loss inured to the benefit of defendants. Finally, subcount F is labeled "Negligence" and claims that defendants assumed a duty to use reasonable care in advising their employees about the availability of MIPP benefits, that in representing that MIPP benefits would not be available again defendants breached that legal duty, and that the breach was a proximate cause of the damages suffered by plaintiffs.

Defendants have moved for dismissal of sub-counts A through F of Count II pursuant to Rule 12(b)(6). Defendants contend that plaintiff is precluded from asserting these claims by the Court's previous ruling concerning Count I. Defendants claim that these are merely state causes of action which are preempted by ERISA and not actionable.

Plaintiffs' original response was similar to their answer to defendants' motion to dismiss parts of Count I. Plaintiffs argued that Count II is brought under Section 1132(a)(1)(B) of ERISA which contemplates a federal common law that adopts state law concepts. Plaintiffs' position was that all the concepts in sub-counts A through F were actionable as independent causes of action. Plaintiffs contended: "State law concepts appear throughout Count II because these state law concepts are the only logical source of the federal common law of contract applicable to claims for benefits under employee benefit plans." Plaintiff's Response Brief, at page 7. After oral arguments on defendants' motion were heard, plaintiffs filed a supplemental brief which asserted: "Whether or not the state law headings in Count II of the amended cause of action are retained, it is proper for the court to look to those considerations in: 1. Deciding if the MIPP plan was impliedly amended; and 2. Construing the...

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