La Rocca v. Borden Inc

• Decision Date: 30 July 2001
• Docket Number: Nos. 00-2386,00-2387,s. 00-2386
• Citation: 276 F.3d 22
• Parties: (1st Cir. 2002) ANTONIETTA LAROCCA, et al., Plaintiffs, Appellants/Cross-Appellees, v. BORDEN, INC., Defendant, Appellee/Cross-Appellant, and NORTHERN TRUST COMPANY, Defendant, Appellee. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 22

276 F.3d 22 (1st Cir. 2002)

ANTONIETTA LAROCCA, et al., Plaintiffs, Appellants/Cross-Appellees, v. BORDEN, INC., Defendant, Appellee/Cross-Appellant, and NORTHERN TRUST COMPANY, Defendant, Appellee.

Nos. 00-2386, 00-2387

United States Court of Appeals For the First Circuit

Heard July 30, 2001

Decided January 8, 2002

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Richard G. Stearns, U.S. Circuit Judge

[Copyrighted Material Omitted] Robert S. Wolfe, with whom Wolfe Associates was on brief, for appellants.

Mark W. Batten, with whom Bingham Dana, LLP was on brief, for appellees.

Before Torruella, Circuit Judge, Gibson,^* Senior Circuit Judge, and Lipez, Circuit Judge.

LIPEZ, Circuit Judge.

This case concerns the remedies due for violations of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461. The parties have stipulated that Borden, Inc. improperly terminated the plaintiffs from Borden's Total Family Protection Plan (hereafter "the Plan") of life, health, dental, and disability insurance. They only dispute the remedy due under the law. Borden contends that the plaintiffs are only due reinstatement in the Plan, and reimbursement for expenses incurred that would have been covered by the Plan. For the most part, the district court agreed with this position. On appeal, plaintiffs assert that this remedy is inadequate and that they are entitled to additional equitable relief. On cross-appeal, Borden challenges the one element of the district court's award which could not be characterized as benefits due under the terms of the Plan--an equitable award of medical costs to an estate, in trust for the hospital-creditor, even though the estate was no longer legally obliged to pay those costs. We deny the plaintiffs' appeal and rule for Borden on the cross-appeal.

I.

Antonietta LaRocca is the named plaintiff in a group of sixty retired workers (and some of their relatives) who alleged violations of ERISA by their former employer, Borden, Inc.¹ The plaintiffs alleged that Borden illegally terminated health, life, disability, and dental insurance due to them under the terms of the Plan.² Borden and Plan beneficiaries fund the Plan with contributions. Borden administers the Plan and acts as fiduciary. Borden also determines eligibility for benefits.³ In addition to covering the plaintiffs when they were employed at Borden, the Plan also provided for benefits to be paid to them upon their retirement.

The plaintiffs are former Borden employees eligible for retiree benefits who worked in Borden's Deran Confectionary Division (and their covered relatives). Borden sold this division to Great American Brands (GAB) on April 8, 1993. The sales contract stipulated that GAB was to continue benefits equivalent to those provided under the Plan. On June 27, 1994, GAB declared bankruptcy under Chapter 11. Concerned that GAB would be unable to honor its commitment, the plaintiffs sought benefits from Borden unsuccessfully.

As a result of this denial, several of the plaintiffs did not have insurance when they were ill. One of the plaintiffs, Guiseppe Paone, received a liver transplant before dying on June 16, 1994. His medical bills at the New England Medical Center (NEMC) totaled $258,571.42. NEMC sought payment from his estate, but did not sue for the debt. A statute of repose subsequently rendered the Paone estate immune from liability for the debt.

The New England Confectionery Company (NECCO) purchased the relevant GAB assets on September 1, 1994, and offered health insurance to the thirty-one plaintiffs who accepted employment with the firm. Twenty-one of them decided to participate.

On October 11, 1994, many of the plaintiffs filed with Borden an appeal of the denial of benefits. After unsuccessful settlement efforts, the plaintiffs filed a complaint on November 17, 1995 in the federal court for the District of Massachusetts. During discovery, the parties stipulated that Borden improperly terminated the plaintiffs from the Plan. Unable to agree on a settlement, however, they requested the district court's assistance in determining the remedies available under ERISA by filing cross-motions for partial summary judgment. The central question was whether the plaintiffs were eligible for equitable relief beyond the relief offered by Borden in settlement negotiations. After holding a hearing on the motions, the district court issued a Memorandum and Order on March 20, 1998 essentially siding with Borden's position on the proper remedies. The district court ordered one remedy not offered by Borden: that the company "reimburse the bills incurred by plaintiff Guiseppe Paone, such sums to be paid to his estate in trust for the benefit of New England Medical Center."

Over a year after this ruling, the plaintiffs moved to amend their complaint to allege violations of state law and the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. The district court denied the motion. On September 25, 2000, it entered an Order and Final Judgment incorporating its earlier ruling.

On appeal, the plaintiffs demand further equitable relief pursuant to ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), including the cash value of the premium payments that Borden avoided by failing to pay them. They also appeal the denial of their third motion to amend their complaint. On cross-appeal, Borden claims that the court cannot award full medical expenses to Guiseppe Paone's estate because the estate no longer has a legal obligation to pay these bills. We address the demand for further equitable relief in Part II, Borden's cross-appeal in Part III, and the denial of the motion to amend in Part IV.

II.

The parties have stipulated to a joint statement of material facts. The issue that we review here--the proper scope of remedies due to the plaintiffs--is a legal issue that we review de novo. We first compare the remedies demanded by the plaintiffs with the relief ultimately awarded by the district court. We then turn to the statutory language in order to assess the legal basis for this relief. Applying this language and judicial interpretations of it, we conclude that the plaintiffs are only entitled to the relief ordered by the district court.

A. Plaintiffs' Demands for Relief

On February 4, 1997, Borden filed an Offer of Judgment offering the plaintiffs several forms of relief. Prospectively, Borden offered reinstatement of each plaintiff to the Plan. Retrospectively, Borden offered to pay medical bills paid or still due and to pay the excess of any copayments or premiums for replacement insurance over the amounts the plaintiffs would have paid under the Plan.

The plaintiffs demanded significantly more. They proposed retrospective relief designed not only to compensate those terminated from the Plan for replacement insurance coverage and to reimburse them for out-of-pocket medical expenses, but also to force Borden to disgorge the amount by which the company was "unjustly enriched" by failing to pay for insurance coverage after the improper terminations.⁴ The plaintiffs' expert assessed the gross value of the coverage wrongfully withheld at $5,565,723 as of October 19, 1998. Given that the plaintiffs would have paid $2,762,352 in employee contributions due the Plan, the plaintiffs' expert estimated that the net value of the employer's contribution left unpaid by Borden was $2,803,371.

Plaintiffs further argued that Borden's proposed prospective relief was inadequate because many of them distrust Borden, Inc., and the Plan it sponsors. These plaintiffs have developed close relationships with other insurance plans and the health care providers covered by them. For them, plaintiffs argued, "monetary relief" should be made "available to the retirees and their spouses as an alternative remedy" because many of the plaintiffs "do not wish to leave their current insurer" (emphasis in the original). Therefore, the plaintiffs requested that the court order, "at the option of each plaintiff," either reinstatement to the Plan or payment of the future value of Plan coverage.

With one exception, the district court agreed with Borden's position on the scope of the available remedies. To redress past harms, the district court ordered Borden 1) to reimburse the plaintiffs for medical expenses that they incurred which would have been covered by the Plan; 2) to pay the difference between plaintiffs' payments for substitute insurance and the amount they would have paid had they continued membership in the Plan, and 3) to pay the medical expenses of Guiseppe Paone (the one exception). The district court ordered Borden to treat "[e]ach of the plaintiffs...as if he or she had retired on April 8, 1993, with an effective retirement date of May 1, 1993." The district court chose the April 8, 1993 date because Borden sold the Deran division to GAB on this date and ostensibly arranged for GAB to continue benefits equivalent to those provided under the Plan.

To provide prospective relief, the district court ordered Borden to give the plaintiffs the opportunity for reinstatement to the Plan. It did not give the plaintiffs the option of choosing the cash value of insurance coverage instead of reinstatement.

Any plaintiff who did not waive retiree coverage under the Borden, Inc. Total Family Protection Plan ("The Plan"), who was not terminated from the Plan for nonpayment of premiums or other failure to comply with Plan requirements (such failure not to include working for a successor employer), and who has requested reinstatement to the Plan in accordance with the Court's orders, will be deemed eligible for retiree medical insurance and retiree life insurance under the terms of the Plan as if he or she had retired effective May 1, 1993. Plaintiffs who have elected reinstatement will be responsible for health insurance premiums and other contributions at levels they would...