Sprague v. General Motors Corp.

• Decision Date: 14 August 1996
• Docket Number: Nos. 94-1896,s. 94-1896
• Citation: 92 F.3d 1425
• Parties: , 35 Fed.R.Serv.3d 1258, 20 Employee Benefits Cas. 1665, Pens. Plan Guide (CCH) P 23,925 Robert D. SPRAGUE, et al., Plaintiffs-Appellees, Cross-Appellants, v. GENERAL MOTORS CORPORATION, Defendant-Appellant, Cross-Appellee. to 94-1898 and 94-1937.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1425

92 F.3d 1425

65 USLW 2160, 35 Fed.R.Serv.3d 1258,

20 Employee Benefits Cas. 1665,

Pens. Plan Guide (CCH) P 23,925

Robert D. SPRAGUE, et al., Plaintiffs-Appellees, Cross-Appellants, v. GENERAL MOTORS CORPORATION, Defendant-Appellant, Cross-Appellee.

Nos. 94-1896 to 94-1898 and 94-1937.

United States Court of Appeals, Sixth Circuit.

Argued Aug. 3, 1996.

Decided Aug. 14, 1996.

Christopher G. Mackaronis (briefed), Raymond C. Fay (argued and briefed), Hillary L Pettegrew (briefed), Bell, Boyd & Lloyd, Washington, DC, J. Douglas Peters, Charfoos & Christensen, Detroit, MI, for Robert D. Sprague in Nos. 94-1896 to 94-1898.

Christopher G. Mackaronis (briefed), Raymond C. Fay (argued and briefed), Hillary L. Pettegrew (briefed), Bell, Boyd & Lloyd, Washington, DC, for Robert D. Sprague in No. 94-1937.

Stephen M. Shapiro (argued & briefed), Mayer, Brown & Platt, Chicago, IL, Kenneth S. Geller, Mayer, Brown & Platt, Washington, DC, Robert F. Walker, Elliot K. Gordon, Paul, Hastings Janofsky & Walker, Santa Monica, CA, for General Motors Corp.

Susan M. Green, Karen L. Handorf (argued), U.S. Dept. of Labor, Office of the Solicitor, Plan Benefits Sec. Div., Washington, DC, Nancy E. Monarch (briefed), U.S. Dept. of Labor, Office of the Solicitor, Washington, DC, for Secretary of Labor.

Mary Ellen Signorille (briefed), American Ass'n of Retired Persons, Washington, DC, for American Ass'n of Retired Persons in No. 94-1896.

David M. Heilbron (briefed), Leslie Landau (briefed), Page B. Barnes, McCutchen, Doyle, Brown & Enersen, San Francisco, CA, for Chamber of Commerce of the U.S., Michigan Manufacturers Ass'n, ERISA Industry Committee.

Before LIVELY, MARTIN and DAUGHTREY, Circuit Judges.

BOYCE F. MARTIN, Jr., Circuit Judge.

A putative plaintiff class of more than 84,000 non-union retirees ¹ of the General Motors Corporation filed suit under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001, et seq., seeking a judgment requiring General Motors to furnish them with basic health care coverage at no cost for their lifetimes and the lifetimes of their surviving spouses. In their complaint, the plaintiffs alleged that General Motors violated the terms of its health care plan and the Employee Retirement Income Security Act by reducing or eliminating certain health care coverages beginning in 1988. The plaintiffs also claimed that the changes constituted a breach of General Motors' fiduciary duties under the Employee Retirement Income Security Act. The plaintiffs asserted separate causes of action arising from the same changes based on breach of contract and equitable or promissory estoppel. In addition, the plaintiffs alleged that General Motors violated the requirements of the Employee Retirement Income Security Act by failing to maintain its health care plan pursuant to a written instrument; refusing or failing to supply requested information; and failing to comply with requirements for summary plan descriptions.

In a series of opinions and orders, the district court: (1) held that General Motors unambiguously reserved to itself the right to modify health care coverages, and thus did not agree in the general plan documents to provide salaried retirees with vested health care benefits; (2) dismissed plaintiffs' claim that the 1988 changes constituted a breach of General Motors' fiduciary duties under the Employee Retirement Income Security Act; (3) certified a class of early retirees; (4) held that the class of early retirees was not entitled to a jury trial; (5) held that General Motors bilaterally contracted to provide vested health care benefits to the early retirees; (6) held that General Motors was estopped from modifying health benefits as to the early retirees but not as to the general retirees; and (7) granted limited injunctive relief prohibiting General Motors from implementing some of the contested modifications during the pendency of this appeal.

Final judgment in the case was rendered on August 4, 1994, and the parties filed timely notices of appeal. For the reasons set forth below, we AFFIRM the district court's rulings in part, REVERSE the district court's rulings in part, and REMAND for further proceedings consistent with this opinion.

I.

The background of this case is complex, and has been set forth in Sprague v. General Motors Corp., 768 F.Supp. 605 (E.D.Mich.1991) (Sprague I ), Sprague v. General Motors Corp., 804 F.Supp. 931 (E.D.Mich.1992) (Sprague II ), Sprague v. General Motors Corp., 823 F.Supp. 442 (E.D.Mich.1993) (Sprague III ), Sprague v. General Motors Corp., 843 F.Supp. 266 (E.D.Mich.1994) (Sprague IV ), and Sprague v. General Motors Corp., 857 F.Supp. 1182 (E.D.Mich.1994) (Sprague V ). We repeat the district court's recitation of those facts necessary to an understanding of this appeal.

In 1964, General Motors began to pay the full cost of basic hospital, medical, and surgical insurance for salaried retirees. This benefit was extended to most surviving spouses in 1968. General Motors also offered salaried retirees and surviving spouses an additional layer of coverage under its Comprehensive Medical Expense Insurance Program. ² General Motors provided these coverages through arrangements with various private insurance companies. Some of the arrangements were memorialized in written contracts of insurance between the insurance carrier and General Motors, while others were not. All carriers provided participants with certificates of insurance detailing the terms of coverage. ³

In 1985, General Motors became self-insured and the use of insurance certificates was discontinued. Instead, General Motors drafted a document entitled "The General Motors Health Care Insurance Program for Salaried Employees." This document, together with subsequent writings announcing coverage changes, described General Motors' health care coverage plan post-1985.

Over the years, General Motors communicated its health care coverage plan to employees and retirees by means of summary booklets. Prior to 1974, General Motors periodically published a booklet entitled "The GM Insurance Program For Salaried Employees." With the enactment of the Employee Retirement Income Security Act in 1974, the method of supplying participants with plan summaries changed. Thereafter, General Motors published a plan summary entitled "Highlights of Your GM Benefits." In addition, when the Employee Retirement Income Security Act began requiring summary plan descriptions in 1977, General Motors began to publish a booklet entitled "Your Benefits in Retirement." This booklet apparently served as and continues to serve as the summary plan description for benefits provided to salaried employees.

Several summary booklets distributed to General Motors' salaried employees and retirees contained statements informing participants that General Motors would pay the full cost of basic health care coverage during their retirement. ⁴ Most booklets also contained statements, however, warning participants that their benefits were subject to change. With the exception of the 1966 and 1974 summary booklets, and the 1977 and 1980 versions of "Your GM Benefits," each summary contained a provision arguably reserving General Motors' right to modify or terminate its health insurance program. ⁵ In addition to these booklets, General Motors distributed various documents to individuals who retired early under various special early retirement programs offered by the company beginning in 1974.

In 1974, General Motors instituted a program of Special Early Retirement with enhanced benefits for pension-eligible employees as an inducement for their departure from the company. The company also offered other types of early retirement packages over the years. Many early retirees signed statements of acceptance evidencing their agreement to accept General Motors' offer of early retirement. In some of these statements, the early retirees affirmed that they had reviewed the applicable benefits and accepted them. In exchange, the retirees gave up their jobs and many promised to release General Motors from liability for certain causes of action potentially connected with their early departures. Prior to signing these forms, many early retirees were given benefit summaries describing the health care benefits they would receive during retirement.

In 1987, General Motors announced modifications in its health care program, to become effective in 1988 for salaried employees, retirees and surviving spouses. Under the modified program, participants who opt for traditional fee-for-service coverage are required to pay an annual $200 individual or $250 family deductible for basic coverage. After the annual deductible is met, participants are responsible for a 20% co-payment for most basic services, until the annual out-of-pocket expense equals a maximum of $500. Combined, the deductibles and co-payments require participants to pay an annual maximum of $750 in medical bills that were previously paid by General Motors. In addition, several other changes were made to General Motors' health care program at the same time. For example, vision and hearing aid coverages were eliminated and then later made available subject to co-payments and deductibles. In addition, Comprehensive Medical Expense Program deductibles were increased, and General Motors increased the monthly contribution required of Comprehensive Medical Expense Program participants. General Motors also instituted several benefit increases. These changes are the basis of the plaintiffs' suit.

II.

Turning to the merits of this appeal, we first address the parties' claims that the district court erred in its class certification decisions. In Sprague I, the district court held that General Motors' plan documents unambiguously set forth the company's right to modify health care coverages, and did not vest in the employees the right to any particular level of health care benefits upon...