Owens v. Storehouse, Inc., 91-8696

• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)
• Writing for the Court: Before HATCHETT and DUBINA, Circuit Judges, and GODBOLD; DUBINA
• Citation: 984 F.2d 394
• Parties: 61 Empl. Prac. Dec. P 42,079, 61 USLW 2542, 16 Employee Benefits Cas. 1737, 3 NDLR P 349 Richard OWENS, Plaintiff, Aaron Durall Beavers, Executor of the estate of Richard Owens, deceased, Plaintiff-Appellant, v. STOREHOUSE, INC., and Klais and Company, Inc., Defendants-Appellees.
• Docket Number: No. 91-8696,91-8696
• Decision Date: 25 February 1993

Page 394

984 F.2d 394 61 Empl. Prac. Dec. P 42,079, 61 USLW 2542,
16 Employee Benefits Cas. 1737, 3 NDLR P 349 Richard OWENS, Plaintiff,
Aaron Durall Beavers, Executor of the estate of Richard
Owens, deceased, Plaintiff-Appellant,
v.
STOREHOUSE, INC., and Klais and Company, Inc., Defendants-Appellees. No. 91-8696. United States Court of Appeals,
Eleventh Circuit. Feb. 25, 1993.

Page 396

Chip Rowan, Steven D. Caley, Atlanta, GA, for plaintiff-appellant.

Michael T. Isbell, Lambda Legal Defense & Educ. Fund, Ruth E. Harlow, American Civil Liberties Union Foundation, New York City, for amicus curiae American Public Health Ass'n, et al.

Richard L. Robbins, Judith A. O'Brien, Sutherland, Asbill & Brennan, Atlanta, GA, for defendants-appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before HATCHETT and DUBINA, Circuit Judges, and GODBOLD, Senior Circuit Judge.

DUBINA, Circuit Judge:

Richard Owens ("Owens") sued his former employer, Storehouse, Inc. ("Storehouse"), claiming that Storehouse's modification of its employee health plan to include a lifetime benefits cap of $25,000 for AIDS-related claims violated section 510 of the Employee Retirement Income Security Act of 1974, Pub.L. No. 93-406, 88 Stat. 829, as amended, 29 U.S.C. §§ 1001-1461 ("ERISA"). ¹ The district court granted summary judgment in favor of Storehouse. 773 F.Supp. 416 We affirm.

I. BACKGROUND

Storehouse owns a chain of retail specialty furniture stores and employs nearly 160 persons full-time. In 1988, Storehouse sponsored an employee welfare benefit plan within the meaning of ERISA, 29 U.S.C. § 1002(1) ("the Plan"). ² The Plan provided group hospital and medical benefits up to a lifetime maximum of $1,000,000 per employee. Owens worked for Storehouse in 1988 and participated in the Plan. In November 1988, Owens was diagnosed with Acquired Immune Deficiency Syndrome ("AIDS"). Shortly thereafter, Storehouse's insurer notified Storehouse of its intent to cancel Storehouse's policy because of the high incidence of AIDS in the retail industry generally and among Storehouse's plan members in particular. At the time, five Storehouse employees had AIDS. Negotiations followed, and the insurer renewed the policy but with drastic changes: the new policy provided less coverage, was more costly, and was guaranteed for six months only. Moreover, the new policy required Storehouse to remain self-insured for the first $75,000 in AIDS-related claims, as opposed to $25,000 for all other plan participants.

Faced with the added possibility that at the end of the six month term it would be self-insured for all claims up to $1,000,000 per employee, Storehouse sought another carrier. Its insurance broker advised Storehouse that it could insure its plan only by placing a maximum lifetime limit on coverage of AIDS and AIDS-related illnesses. Storehouse accepted this advice and modified the Plan to include a $25,000 cap

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on all AIDS-related medical claims. ³ The modifications were made pursuant to the Plan's express terms, which stated in part:

The full, absolute and discretionary right is reserved in the Plan for the Plan Sponsor to amend, modify, suspend, withdraw, discontinue or terminate the Plan in whole or in part at any time for any and all participants of the Plan.

The Plan at 45.

Despite the cap, Storehouse paid $116,324 for Owens' AIDS-related claims. ⁴ Because of the dwindling financial condition of Storehouse and the Plan, however, Storehouse notified Owens that in the future it would adhere strictly to the terms of the modified plan. It then forwarded Owens an additional $7,500 as a "transitional" benefit.

Owens filed suit in federal district court, alleging that Storehouse's modification of its medical benefits plan violated section 510 of ERISA and state law. Section 510 states:

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.

Owens sought a temporary restraining order to prevent Storehouse from denying his AIDS-related claims. The district court denied his motion, finding that both ERISA and the express terms of the Plan gave Storehouse the right to impose such a limitation. The parties conducted expedited discovery and submitted cross-motions for summary judgment. During the course of discovery, Owens died and Beavers was substituted as plaintiff. The district court granted summary judgment for Storehouse on all of the ERISA and state law claims. Beavers then perfected this appeal, limiting it to the claim asserted under section 510 of ERISA only.

II. ANALYSIS

A district court must grant summary judgment if the moving party shows that there is no genuine dispute regarding any material fact and it is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). We review a district court's grant of summary judgment de novo, Thompson v. Metropolitan Multi-List, Inc., 934 F.2d 1566, 1570 (11th Cir.1991), and apply the same legal standards as those that controlled the district court, Real Estate Financing v. RTC, 950 F.2d 1540, 1543 (11th Cir.1992). As there are no material fact issues in dispute, we must decide whether the district court's determinations were proper as a matter of law. See West v. Greyhound Corp., 813 F.2d 951, 954 (9th Cir.1987).

Section 510 of ERISA prohibits discrimination against any plan member "for exercising any right to which he is entitled under the provisions of the 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. Beavers claims that Storehouse's modification of the Plan to include a lifetime AIDS-related benefits cap discriminated against Owens under both prongs of section 510. Beavers' claims cannot be supported.

ERISA does not prohibit a company from terminating previously offered benefits that are neither vested nor accrued. Phillips v. Amoco Oil Co., 799 F.2d 1464, 1471 (11th Cir.1986), cert. denied, 481 U.S. 1016, 107 S.Ct. 1893, 95 L.Ed.2d 500 (1987). Unlike pension benefits,

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welfare benefit plans neither vest nor accrue. See 29 U.S.C. § 1051(1); Vasseur v. Halliburton Co., 950 F.2d 1002, 1006 (5th Cir.1992); Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1160 (3rd Cir.1990). This is because Congress determined that vesting requirements for welfare plans "would seriously complicate the administration and increase the cost of plans whose primary function is to provide retirement income." H.R.Rep. No. 807, 93rd Cong., 2d Sess. 60, reprinted in 1974 U.S.C.C.A.N. 4639, 4670, 4726; S.Rep. No. 383, 93rd Cong., 1st Sess. 51 reprinted in 1974 U.S.C.C.A.N. 4890, 4935. ⁵ Instead, Congress intended employers to be free to create, modify, or terminate the terms and conditions of employee welfare benefit plans as inflation, changes in medical practice and technology, and the costs of treatment dictate. Moore v. Metropolitan Life Ins. Co., 856 F.2d 488, 492 (2nd Cir.1988); see also Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 732, 105 S.Ct. 2380, 2385, 85 L.Ed.2d 728 (1985) (ERISA "does not regulate the substantive content of welfare-benefit plans").

Nevertheless, Beavers argues that employers may not change the terms of their employee insurance programs to affect a...