Sprague v. General Motors Corp., 90-CV-70010.
| Decision Date | 29 July 1991 |
| Docket Number | No. 90-CV-70010.,90-CV-70010. |
| Citation | 768 F. Supp. 605 |
| Parties | Robert D. SPRAGUE, et al., Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant. |
| Court | U.S. District Court — Western District of Michigan |
Raymond C. Fay, Bell, Boyd & Lloyd, Washington, D.C., J. Douglas Peters, David R. Parker, Charfoos & Christensen, Detroit, Mich., Roger J. Thomas, Law Office of Michael Gordon, Washington, D.C., for plaintiffs.
Robert F. Walker, Ethan Lipsig, Elliot K. Gordon, Paul, Hastings, Janofsky & Walker, Santa Monica, Cal., David M. Davis, Daniel G. Galant, General Motors Corp., Detroit, Mich., Terence V. Page, Birmingham, Mich., for defendant.
This is a compelling case for interlocutory appeal. I certify it herewith, pursuant to 28 U.S.C. § 1292(b). A putative plaintiff class of more than 84,000 non-union ("salaried") retirees of the General Motors Corporation ("GM"), sues under the Employee Retirement Income Security Act of 1974 ("ERISA"). They seek a judgment which would require GM to furnish them with basic health care coverage at no cost to them for their lifetimes, and for the lifetimes of their surviving spouses. At issue is whether plaintiffs' health care benefits vested, i.e., became immutable upon retirement, or whether GM is free to reduce those benefits.
In this opinion I find that benefits under GM's health care plan for salaried retirees (the "plan") did not vest upon retirement. But I find that GM may have entered into bilateral contracts to provide such benefits to approximately 40,000 so-called "early retirees." Accordingly, I dismiss the claims of general retirees, but allow the claims of early retirees to proceed.
It does not appear to be wise or expedient to try this protracted case before there is a resolution of applicable law. Specifically, I find that there is substantial uncertainty in the case law whether ERISA preempts early retirees from claiming that GM bilaterally contracted with them to vest health care benefits that were otherwise not vested under general plan documents. If plaintiffs are allowed to proceed on this claim, it will be necessary to conduct extensive discovery to determine the terms and conditions of 40,000 alleged bilateral contracts. Before going down that path, it is prudent to determine whether the U.S. Court of Appeals for the Sixth Circuit will agree that the early retirees can state a cause of action. Accordingly, I certify the following questions of law:
Although I do not believe that there is a substantial difference of opinion in the case law as to the first question, it must be reached before the second question can be resolved because the early retirees need not rely on bilateral contracts if the Sixth Circuit finds that they have vested benefits under general plan documents. I therefore certify both questions for interlocutory appeal.
On August 8, 1989, plaintiff Robert D. Sprague, together with 113 other named plaintiffs, filed a complaint in the United States District Court for the Central District of California against their former employer, GM, alleging that GM had violated their rights under ERISA, 29 U.S.C. §§ 1001 et seq. The named plaintiffs filed the complaint as a purported class action pursuant to Federal Rule of Civil Procedure 23, and claim to represent over 84,000 salaried retirees or their surviving spouses. On November 27, 1989, Judge William D. Keller ordered the action transferred to this court pursuant to 28 U.S.C. § 1404(a).
The essence of the complaint is that GM violated the terms of its health care plan, and thus ERISA §§ 402, 502(a)(1)(B) and 502(a)(3), 29 U.S.C. §§ 1102, 1132(a)(1)(B) and 1132(a)(3), when it reduced or eliminated certain health care coverages in 1988. (Complaint, Count II).
Plaintiffs also claim that the changes implemented in 1988 constitute a breach of GM's fiduciary duties arising under Section 404 of ERISA, 29 U.S.C. § 1104. (Complaint, Count III). Plaintiffs assert separate causes of action, arising from the same changes in health care coverages, based on breach of contract and equitable or promissory estoppel claims arising under "ERISA federal common law." (Complaint, Counts IV and V). Finally, plaintiffs allege that GM violated the requirements of ERISA by failing to maintain its health care plan pursuant to a written instrument, ERISA § 402(a), 29 U.S.C. § 1102(a); refusing or failing to supply requested information, ERISA § 502(c), 29 U.S.C. § 1132(c); and failing to comply with requirements for summary plan descriptions.
The matter is before me on cross-motions for partial summary judgment.1 GM moves for summary judgment on Count II, arguing that the coverage modifications instituted in 1988 do not constitute violations of its plan because retirees did not have vested benefits under the plan.
Plaintiffs move for summary judgment on Counts IV and V of the complaint in favor of early retirees based on bilateral contracts which allegedly contain GM's promise to provide early retirees with vested health care benefits.
For reasons set forth below, GM's motion for summary judgment is GRANTED as to general retirees but DENIED as to early retirees. Plaintiffs' motion is DENIED.
In 1964, GM began to pay the full cost, i.e., the insurance premiums, for basic hospital, medical, and surgical insurance for salaried retirees. In 1968, this benefit was extended to most surviving spouses. GM also offered salaried retirees and surviving spouses an additional layer of coverage under its Comprehensive Medical Expense Insurance Program (CMEIP).2 CMEIP participants were required to pay co-payments, deductibles, and a portion of the insurance premiums.
GM provided these coverages through arrangements it had with various private insurance companies throughout the country. Some of these arrangements were memorialized in written contracts of insurance between the carrier and GM; others were not. All insurance carriers provided participants with certificates of insurance detailing the terms of coverage.
When GM became self-insured in 1985, the use of insurance certificates was discontinued. Thereafter, GM drafted a document entitled "The General Motors Health Care Insurance Program for Salaried Employees." This document, together with subsequent writings which announced changes in coverage, describe GM's post-1985 health care coverage plan.
The primary way GM has communicated its health care coverage plan to employees and retirees is through summary booklets. Prior to 1974 GM periodically published a booklet entitled "The GM Insurance Program For Salaried Employees." With the enactment of ERISA in 1974, the method of supplying participants with plan summaries was changed. Thereafter GM published a plan summary entitled "Highlights of Your GM Benefits." In addition, commencing in 1977, when summary plan description ("SPDs") were first required by ERISA, GM began to publish a booklet entitled "Your Benefits in Retirement," which served and continues to serve as the summary plan description for benefits provided to salaried employees.
Several of the summary booklets distributed to GM salaried employees and retirees contain statements informing participants that GM will pay the full cost of basic health care coverage during their retirement. For example, the 1968 booklet entitled "The General Motors Insurance Program for Salaried Employees" and its successor version issued in 1971 both contain provisions which state:
If you retire ... and are eligible to receive retirement benefits under the provisions of the GM Retirement Program for Salaried Employees, you may keep your basic hospital, surgical and medical expense coverages in effect.... GM will pay the full monthly premium or subscription charge for such coverage.
A 1974 booklet entitled "Highlights of Your GM Benefits" contains a heading entitled "After Retirement, Your Insurance Coverages Can Be Continued As Follows" and states:
Hospital-Medical Coverages: Your basic coverages will be provided at Corporation expense for your lifetime (except for voluntary retirement between ages 55 and 60 when combined years of age and credited service total less than 85). Dental coverages cannot be continued.
A 1977 booklet entitled "Your Benefits In Retirement" contains a section entitled "Your Health Care Benefits," and includes this question and answer:
That same booklet also contains a section that reads:
Similar or identical statements are contained in numerous other booklets distributed by GM or its insurance carriers through the years.
However, these booklets also contain statements warning participants that their benefits are subject to change. Except for the booklet issued between 1974 and 1977,3 each booklet contains a provision similar to one of the following:
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