Sengpiel v. B.F. Goodrich Co., No. 97-3832

• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)
• Writing for the Court: McKEAGUE
• Citation: 156 F.3d 660
• Parties: 22 Employee Benefits Cas. 1817, Pens. Plan Guide (CCH) P 23946T Glen H. SENGPIEL, Donald E. Kelly, and Donald R. Gottschalk, Plaintiffs-Appellants, v. The B.F. GOODRICH COMPANY, The B.F. Goodrich Pension Plan, The B.F. Goodrich Life Insurance Plan, The B.F. Goodrich Hospital-Surgical Medical Basic Plan, The B.F. Goodrich Prescription Drug Benefit Plan, The B.F. Goodrich Major Medical Plan, Uniroyal Goodrich Tire Company, Uniroyal Goodrich Pension Plan, The Uniroyal Goodrich Tire Company Health Care Plan, The Uniroyal Goodrich Tire Company Prescription Drug Plan, The Uniroyal Goodrich Tire Company Life Insurance Plan, and Michelin North America, Inc., Defendants-Appellees.
• Docket Number: No. 97-3832
• Decision Date: 18 September 1998

Page 660

156 F.3d 660 22 Employee Benefits Cas. 1817,
Pens. Plan Guide (CCH) P 23946T Glen H. SENGPIEL, Donald E. Kelly, and Donald R. Gottschalk,
Plaintiffs-Appellants,
v.
The B.F. GOODRICH COMPANY, The B.F. Goodrich Pension Plan,
The B.F. Goodrich Life Insurance Plan, The B.F. Goodrich
Hospital-Surgical Medical Basic Plan, The B.F. Goodrich
Prescription Drug Benefit Plan, The B.F. Goodrich Major
Medical Plan, Uniroyal Goodrich Tire Company, Uniroyal
Goodrich Pension Plan, The Uniroyal Goodrich Tire Company
Health Care Plan, The Uniroyal Goodrich Tire Company
Prescription Drug Plan, The Uniroyal Goodrich Tire Company
Life Insurance Plan, and Michelin North America, Inc.,
Defendants-Appellees. No. 97-3832. United States Court of Appeals,
Sixth Circuit. Argued July 29, 1998.
Decided Sept. 18, 1998.

Page 662

John L. Wolfe (argued and briefed), Akron, OH, for Plaintiffs-Appellants Glen H. Sengpiel, Donald E. Kelly and Donald R. Gottschalk.

James A. Rydzel (argued and briefed), Jones, Day, Reavis & Pogue, Cleveland, OH; Theodore E. Laszlo (briefed), The B.F. Goodrich Company, Richfield, OH, for Defendants-Appellees The B.F. Goodrich Co., The B.F. Goodrich Pension Plan, The B.F. Goodrich Life Insurance Plan, The B.F. Goodrich Hospital Surgical Medical Basic Plan, The B.F. Goodrich Prescription Drug Benefit Plan and The B.F. Goodrich Major Medical Plan.

Ronald S. Okada (briefed), John J. McGowan, Jr. (argued and briefed), Baker & Hostetler, Cleveland, OH, for Defendants-Appellees Uniroyal Goodrich Pension Plan, The Uniroyal Goodrich Tire Company Health Care Plan, The Uniroyal Goodrich Tire Company Prescription Drug Plan, The Uniroyal Goodrich Tire Company Life Insurance Plan and Michelin North America, Inc.

Before: SUHRHEINRICH and DAUGHTREY, Circuit Judges; McKEAGUE, District Judge. ^*

OPINION

McKEAGUE, District Judge.

This litigation arises out of a corporate transaction in which B.F. Goodrich ("BFG") spun off its tire division to a new company that it had formed as a joint-venture with the Uniroyal Tire Company ("Uniroyal"). As part of this spin-off transaction, BFG transferred its obligation to provide certain retirees' pension and welfare benefits to the new company. The principal issues on appeal are whether, in effecting this transfer, BFG violated its fiduciary duties under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001, et seq. ("ERISA"), and whether the transferred retirees were denied benefits promised to them. The district court granted summary judgment in favor of defendants, finding that BFG did not act in a fiduciary capacity when it transferred the pension and welfare plan liabilities and that plaintiffs' contract-based ERISA claims failed because their welfare benefits did not

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vest at the time of their retirement. We affirm.

I.

Plaintiffs, Glen H. Sengpiel, Donald R. Gottschalk, and Donald E. Kelly, are retirees of defendant B.F. Goodrich. At the time of their retirement, each plaintiff worked in BFG's corporate department. Sengpiel retired in 1976 from his position as Corporate Director of Employee Relations; Gottschalk retired in 1981 from his position as Corporate Employee Relations Representative; and Kelly retired in 1982 from his position as a foreman in plant cleaning in one of BFG's facilities. ¹

In 1972, prior to ERISA's enactment, BFG distributed a binder to its employees entitled, "Design for Protection, B.F. Goodrich Salaried Benefit Program." The binder contained brochures describing five benefits programs: Hospitalization and Surgical, Pension, Life Insurance, Major Medical Insurance, and Prescription Drug. Only the major medical plan expressly reserved BFG's right to modify or discontinue the benefits offered.

In 1977, in conformance with the newly-enacted ERISA, BFG prepared the Company's first summary plan descriptions ("SPDs"), which it distributed to all salaried and wage employees in a portfolio. The first booklet in the portfolio, entitled "Highlights," summarized the benefits offered by BFG. The first paragraph of the Highlights booklet stated: "While the Company expects to continue these benefits indefinitely, it reserves the right at its option to change or discontinue any or all of the programs at any time." However, none of the individual SPDs in the portfolio contained a reservation of rights clause. Sengpiel had been retired a few months when the portfolio was distributed, but as Corporate Director of Employee Relations he was aware of the language in the Highlights booklet prior to his retirement. In 1981, BFG distributed revised SPDs and a new Highlights booklet containing the same reservation of rights clause. Again, none of the individual SPDs contained a reservation of rights provision. Gottschalk and Kelly retired in 1981 and 1982, respectively. In 1986, BFG sent an SPD for the Retiree Health Care Plan to all retirees, including plaintiffs, which contained the following clause: "The B.F. Goodrich Company expects to continue the Health Care Plan indefinitely but reserves the right to amend, suspend or terminate the Plan at any time."

In January 1986, BFG and Uniroyal reached an agreement to spin off their respective tire operations into a joint venture to be called Uniroyal Goodrich Tire Company ("UGTC"). Under this plan, BFG and Uniroyal would own UGTC in equal parts and each company would transfer all the assets and liabilities of its tire business to the new company. The liabilities included the pension and welfare benefit obligations to tire-related retirees. To accomplish this transfer, BFG split its retirement program into four separate plans (Salaried Tire, Wage Tire, Salaried Non-Tire, and Wage Non-Tire). All retirees who had retired from a department associated with BFG's tire division were assigned to a Tire pension plan.

In addition to transferring liability for the pension and welfare benefits of retirees who worked in the tire division, BFG decided that it was necessary to transfer the benefits liabilities for a portion of the corporate staff's retirees. The corporate staff serviced many different divisions, including the tire division. BFG concluded that based on its records, it was impossible to determine which retirees had worked most closely with the tire division throughout the course of their careers. Accordingly, BFG decided to select randomly a percentage of the corporate retirees that would be approximately equivalent to the percentage of BFG's business that had been devoted to tires, which was 42.54 percent. BFG then devised a method of selecting these corporate retirees whereby those retirees with social security numbers ending in 4254 or lower were assigned to the Tire

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pension and welfare benefit plans that were then transferred to UGTC. Pursuant to ERISA requirements, BFG transferred funds sufficient to support its pension obligations to the transferred retirees. There being no similar ERISA requirement for welfare benefit obligations, however, BFG did not transfer any funds to UGTC for the transferred retirees' welfare benefits.

A provision in the joint-venture agreement between BFG and Uniroyal required UGTC to establish and adopt employee welfare benefit plans comparable to the plans offered by BFG and Uniroyal. The provision also specified that UGTC was to "assume all liability of Goodrich and Uniroyal for benefits under their present or past welfare plans or those of their predecessors for active, former and retired employees of the Goodrich Tire Business or the Uniroyal Tire Business."

Several of the retirees protested the transfer, including plaintiffs, both at the time the transaction was entered into and again in 1987 when BFG decided to sell its interest in UGTC to a private investment firm. Plaintiffs testified at their depositions that BFG's chief executive officer assured them that they would continue to be treated the same as retirees who remained under the BFG plan. ²

In 1990, BFG amended its pension and welfare benefit plans for retirees by raising the deductible amount from $100 to $150. This increase was partially offset by a $40 increase in the retirees' monthly pension benefits. Plaintiffs were not impacted by these changes, however, because they had been transferred to the UGTC rolls as of 1986.

In 1995, UGTC reduced retiree health and life insurance benefits by raising deductibles and co-payment maximums, decreasing life insurance benefits, and imposing other changes in connection with Medicare coverage. ³ Also in 1995, UGTC was merged into Michelin North America, Inc. ("Michelin").

Plaintiffs do not challenge UGTC's right to reduce their benefits, as the UGTC plans (now sponsored and maintained by Michelin) have always expressly reserved the employer's right to amend the benefit plans. Rather, plaintiffs claim that defendants violated ERISA in transferring responsibility to pay their benefits to UGTC in the first instance.

II.

We review the district court's grant of summary judgment de novo. See, e.g., Walbro Corp. v. Amerisure Cos., 133 F.3d 961, 966 (6th Cir.1998). Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

Plaintiffs brought numerous claims before the district court stemming from the reduction of their welfare benefits. ⁴ On appeal,

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however, plaintiffs raise only two arguments. First, plaintiffs argue that the district court erred in finding that BFG did not violate its fiduciary duties under ERISA. Second, plaintiffs challenge the district court's conclusion that their contract-based ERISA claims failed as a matter of law because their welfare benefits were not vested at the time of their retirement. We address each of these arguments in turn.

A.

Plaintiffs argue that...