Russell v. Kern's Bakeries, Inc., 3:94-cv-0206.
| Decision Date | 22 December 1994 |
| Docket Number | No. 3:94-cv-0206.,3:94-cv-0206. |
| Parties | David H. RUSSELL, et al., Plaintiffs, v. KERN'S BAKERIES, INC., Defendant. |
| Court | U.S. District Court — Eastern District of Tennessee |
David L. Bacon, Knoxville, TN, for Plaintiffs.
Wilson S. Ritchie, Ritchie, Wise & Reeves, PC, Knoxville, TN; Robert R. Campbell, and Dean B. Farmer, Hodges, Doughty & Carson, Knoxville, TN; and Deborah A. Sudbury, and Douglas M. Towns, Jones, Day, Reavis & Pogue, Atlanta, GA, for Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In this civil action, the court heard all of the testimony and the closing arguments of counsel on Thursday, December 15, 1994. The court will state herein its findings of fact and conclusions of law in accordance with Fed.R.Civ.P. 52. The court may amend its findings, or make additional findings, upon the post-judgment motion of a party. Fed. R.Civ.P. 52(b).
For the reasons stated below, the court rules in favor of the defendant, Kern's Bakeries, Inc., in this civil action. The court will therefore direct the clerk to enter judgment for the defendant in this civil action, in accordance with these findings of fact and conclusions of law.
This civil action arises under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001, et seq. ("ERISA"). There is no dispute concerning the fact that the employee welfare benefit plan in question in this litigation is a plan covered by the provisions of ERISA, and that this court therefore has jurisdiction of the subject matter of this civil action, which arises under federal law. There is also no dispute concerning the fact that the plan in question, the Kern's Bakeries, Inc., Employee Health Benefit Plan, which became effective on October 1, 1989, falls into the ERISA category of a welfare benefit plan, as opposed to a pension benefit plan. This specific plan is a single-employer, self-funded plan which provides hospitalization and major medical benefits.
The plaintiffs in this civil action are retirees who worked for the defendant Kern's Bakeries, Inc., and who were covered by this welfare benefit plan. When they retired, in June 1992, the plan provided hospitalization and major medical benefits at no cost to retirees. However, in January 1994, George M. Curtis, the president of the defendant, wrote on behalf of the defendant to these and other retirees that Kern's Bakeries, Inc., could no longer afford to provide health care benefits to its retirees at no cost to retirees, and that the defendant would therefore require contributions from retirees for the maintenance of their coverage under the plan. In this letter, Mr. Curtis described a two-phase program for retiree contributions to the cost of this health care plan, with two levels of required contributions, one for Medicare-eligible retirees, and another for non-Medicare-eligible retirees. This litigation followed the plaintiffs' receipt of this letter.
In their complaint, as amended, the plaintiffs say that they retired from their employment by the defendant pursuant to a contract with the defendant under which all employees who accepted an offer of early retirement would have their hospitalization and major medical benefits provided by Kern's Bakeries, Inc. The plaintiffs concede, as they must, that the welfare benefit plan in question contains clauses which permit the defendant to amend or to terminate the plan at any time, and they concede, again as they must, that the plan was amended, by amendment # 008, dated March 3, 1994, to require contributions from all employees and from all retirees eligible for coverage under the plan.
To quote from the plaintiffs' trial brief, "The health plan documents in the possession and control of Defendant reserve the right by the Defendant to change the plan without agreement by the plan beneficiaries...." This is entirely consistent with the provisions of ERISA. See Musto v. American General Corporation, 861 F.2d 897, 906-07 (6th Cir.1988), cert. denied, 490 U.S. 1020, 109 S.Ct. 1745, 104 L.Ed.2d 182 (1989). The plaintiffs argue, however, that the defendant is estopped to rely on the plan language permitting amendment or termination of the plan, or to rely on any amendment to the plan.
In light of the facts that this civil action arises under ERISA, and that the theories under which the plaintiffs seek relief are promissory and equitable estoppel, the court ruled earlier that the plaintiffs' jury demand should be stricken. The relief sought by the plaintiffs in this civil action is equitable in nature. For example, in ¶ 5 of their ad damnum, the plaintiffs pray for "all benefits due ... under the provisions of the Welfare Benefit Plan of Kern's Bakery, Inc., retroactive to April 1, 1994," which is relief in the nature of restitution, an equitable remedy. In ¶ 6 of their ad damnum, the plaintiffs similarly pray for a declaration "that all rights and benefits due them are vested and nonforfeitable, including the right to have the Defendant pay the plaintiffs' health insurance premiums," which the court reads as a prayer for declaratory or injunctive relief.
In light of the relief sought by the plaintiffs, the law of this circuit, reviewed and restated in Bair v. General Motors Corporation, 895 F.2d 1094 (6th Cir.1990), holds that the plaintiffs have no right to trial by jury of this civil action. The plaintiffs, in arguing against the motion to strike their jury demand, relied on Sprague v. General Motors Corporation, 857 F.Supp. 1182 (E.D.Mich. 1994), and pointed to the distinction drawn in that case between general retirees who were bound by the provisions of a welfare benefit plan, and early retirees who were held to be entitled to continuing health insurance coverage at no cost to them, under theories of equitable and promissory estoppel. However, in Sprague, the district court adjudicated the issues presented without a jury, and held the claims based on estoppel theories to be claims for "other appropriate equitable relief" under 29 U.S.C. § 1132(a)(3) (emphasis added). Sprague therefore provides no authority for a right to trial by jury of the plaintiffs' claims in this civil action.
Turning to the substance of the plaintiffs' claims, as the district court in Sprague, supra, 857 F.Supp. at 1186, noted, citing authorities from the Court of Appeals for the Sixth Circuit, in the case of a welfare benefit plan, as opposed to a pension benefit plan, there is no statutory minimum vesting requirement, and therefore whether rights under a welfare benefit plan vest, and, if they do vest, the conditions under which they vest, depend solely on an agreement between an employer and its employees. Other applicable law under ERISA provides as follows. "It is well established that an employer who reserves the right to alter a plan may exercise that right." Gordon v. Barnes Pumps, Inc., 999 F.2d 133, 136 (6th Cir.1993) (citations omitted). It is also well established, according to the court of appeals in Gordon v. Barnes Pumps, "that the written terms of a plan may not be modified or superseded by oral assurances or other extrinsic evidence." Id. at 137 (citations omitted).
In Gordon v. Barnes Pumps, supra, the court rejected the plaintiffs' estoppel theory on precisely this ground, and on the ground that the plan itself provided that it could not be modified by any oral representations made at any time. It is also the law in this circuit that at least in the absence of any agreement to the contrary, an employer's unilateral amendment of a welfare benefit plan does not violate whatever fiduciary obligations the employer might have under ERISA. Pope v. Central States Southeast and Southwest Areas Health and Welfare Fund, 27 F.3d 211 (6th Cir.1994).
There is authority in this circuit for the application of an estoppel against a denial of health insurance benefits to retirees under an ERISA welfare benefit plan. In Armistead v. Vernitron Corporation, 944 F.2d 1287 (6th Cir.1991), the court of appeals upheld the district court's application of the theory of equitable estoppel to preserve retirees' health insurance benefits. However, the unique facts in Armistead v. Vernitron Corporation bear emphasis. In that case, the plaintiff retirees were covered originally by a benefit plan described in a booklet which included a reservation of the employer's right to amend or to terminate the plan. After the defendant's employees organized, the defendant and the employees' collective bargaining agent negotiated a collective bargaining agreement which included a reference to the welfare benefit plan as described in the pre-existing booklet.
After the execution of this collective bargaining agreement, another corporation purchased the plant at which the plaintiff retirees worked, and therefore became their employer. This new employer directed its provider of insurance benefits to produce a benefits package similar to the one in effect under the former employer, including retiree insurance benefits. However, the plan booklet produced by the new insurer omitted the language reserving a right to amend or to cancel the plan, and the new policy issued by this insurer provided for the continuance of insurance benefits after retirement "subject to the terms of the group policy."
A new round of collective bargaining between the new employer and its employees, including the plaintiff retirees before their retirement, did not produce any substantial changes in the pertinent documents. Three years later, another round of collective bargaining produced a new plan booklet, which, through what the employer admitted was an oversight, omitted all references to retiree health and life insurance benefits.
In Armistead v. Vernitron Corporation, when the defendant employer decided to close the plant at which the plaintiffs worked, a local personnel manager advised the plaintiffs not to retire until the plant closing, believing that this would...
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