Sprague v. General Motors Corp.
| Decision Date | 02 February 1994 |
| Docket Number | No. 90-CV-70010.,90-CV-70010. |
| Citation | 843 F. Supp. 266 |
| Parties | Robert D. SPRAGUE, et al., Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant. |
| Court | U.S. District Court — Western District of Michigan |
COPYRIGHT MATERIAL OMITTED
Raymond C. Fay, Christopher G. MacKaronis, Hillary L. Pettegrew, Bell, Boyd & Lloyd, Washington, DC, J. Douglas Peters, David R. Parker, Charfoos & Christensen, Detroit, MI, for plaintiffs.
Robert F. Walker, Ethan Lipsig, Elliot K. Gordon, Paul, Hastings, Janofsky & Walker, Santa Monica, CA, David M. Davis, Daniel G. Galant, Gen. Motors Corp., Detroit, MI, and Terence V. Page, Birmingham, MI, for defendant.
Table of Contents
Page
I. Background 269
II. Issue Presented 270
III. Contentions of the Parties 270
IV. The Class Action 271
V. History of Health Care and Early Retirement Benefits 273
A. Health Care Benefits 273
B. Early Retirement 274
VI. Summary of Evidence Concerning Information Given To Early Retirees 278
VII. Analysis 299
A. Did GM Contract with the Early Retirees? 300
B. What Evidence may be Relied on to Interpret the Contracts? 301
C. Did the Contracts Include Health Care? 306
D. What Health Care Benefits Were Promised? 308
VIII. Conclusion 319
Beginning in 1974, and continuing at least through 1988, General Motors Corporation (GM or the Corporation) used various incentive programs to encourage early retirement by salaried employees who were otherwise ineligible for full retirement benefits. Generally, the programs targeted employees between the ages of 55 and 60. In some cases, employees younger than 55 were given the option of layoff followed by early retirement. Plaintiffs represent a class of GM salaried early retirees who claim that GM breached its contractual promise to provide them with unreduced lifetime health care benefits at no cost to them.
The early retirement offers made by GM were designed to reduce the overall number of salaried employees on GM's payroll. From 1974 to 1987 GM went through a series of reorganization and down-sizing programs of which early retirement was an integral part.1 Some of the early retirement offers were directed to particular plants or divisions of GM; others were corporate-wide.
GM gave employees a strong incentive to retire early by offering enhanced retirement benefits. The nature and extent of those enhancements are the subject of this dispute. The early retirees claim that GM agreed to continue health care benefits at no cost to them throughout their retirement at the same level they received before retirement. GM denies this, and says that it promised only enhanced pension benefits.
Robert D. Sprague, together with 113 other named plaintiffs, filed a Complaint on August 8, 1989, stating that they represent a putative class of approximately 84,000 General Motors salaried retirees and their surviving spouses. The group was originally composed of both general and early retirees.
For purposes of this opinion, "general retirees" are those salaried retirees who voluntarily retired, either at age 65 or before, and were able to do so without GM's consent, pursuant to the terms of the General Motors Retirement Program for Salaried Employes. Under the Program, employees could retire without GM's consent as early as age 55 if they had at least ten years of service, and even earlier if they had worked for GM for thirty years or more. However, employees who took this type of early retirement received actuarially reduced or delayed pension benefits. General retirees also include employees who were involuntarily retired at GM's insistence, and those eligible for retirement due to total and permanent disability.
"Early retirees" include former GM salaried employees who voluntarily accepted one of GM's numerous early retirement offers made between 1974 and 1988. These retirements required the consent of both the employee and employer. All employees who retired prior to age 65 could be referred to as early retirees, and sometimes were in GM documents. This is true whether the employee voluntarily retired, was forced out by GM, or accepted a special early retirement offer. I will use the term in a narrower sense, as a generic term for all early retirees who accepted early retirement offers made by GM prior to 1988 that required both employer and employee consent.
Counts II and IV of the Complaint are its essence. In Count IV, plaintiffs complain that GM violated the terms of a contractual agreement it entered into with its early retirees when, in 1988, it modified certain health care benefits available to early retirees, by either reducing or eliminating them. Plaintiffs rely on principles of federal common law in support of this claim. In Count II, plaintiffs complain that GM violated the terms of its health care plan, and thus the Employee Retirement Income Security Act (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 made these changes, because it had previously agreed not to adversely modify the health care benefits early retirees receive.
The Complaint also alleges breach of fiduciary duties in violation of 29 U.S.C. § 1104 (Count III), and promissory estoppel (Count V). Finally, it alleges that GM failed to maintain plan documentation as required by ERISA, 29 U.S.C. § 1102 (Count I), refused to supply information requested by beneficiaries in violation of 29 U.S.C. § 1132(c) (Count VI), and failed to comply with requirements for summary plan descriptions, 29 U.S.C. §§ 1022, 1024, 29 C.F.R. §§ 2520.102-2, 2520.102-3 (Count VII).
In late 1990 the parties filed cross-motions for partial summary judgment. GM moved for dismissal of Count II. Plaintiffs moved for summary judgment on behalf of certain early retirees on Counts IV and V. On July 29, 1991, I issued an Opinion and Order granting General Motors' motion in part, and denying plaintiffs' motion. Sprague v. General Motors Corp., 768 F.Supp. 605 (E.D.Mich.1991). That opinion is incorporated herein by reference. I granted summary judgment as to general retirees, but denied it for early retirees. Finally, I dismissed Count III of plaintiffs' Complaint.
On November 4, 1991, I certified a class of approximately 50,000 salaried early retirees, over GM's objection. The class includes all salaried employees who took early retirement, or agreed to take early retirement, prior to March 1, 1988, or their surviving spouses. I designated four subclasses: (1) Early retirees who signed "long-form" statements of acceptance of early retirement; (2) early retirees who signed "short-form" statements of acceptance of early retirement; (3) early retirees who signed "statements of intent to retire"; and (4) early retirees who signed neither a statement of acceptance nor a statement of intent to retire.
The parties filed a second set of partial summary judgment motions in 1992. As to these motions, I concluded that the case should go to trial for subclasses (1) and (2) on Counts II and IV only. All other claims, other than Count III which had been previously dismissed, including a prayer for damages, were held in abeyance. I also denied plaintiffs' motion for a jury trial.
Did GM, in the period from 1974 to 1988, contract with its early retirees to vest in them certain health care benefits by promising them and their spouses that such health care benefits would continue for their lifetimes, at no cost to the retirees and their spouses, in exchange for the acceptance by the early retirees of early retirement?
Plaintiff class relies on the undisputed fact that their early retirements had to be mutually agreed to by both themselves and GM. Unlike the general retirees who had a right to retire under the ERISA plan, plaintiff class could not take early retirement unless GM agreed, and GM could not force early retirement unless the retirees agreed.2 This mutual agreement was reflected in statements of acceptance early retirees were required to sign.
Plaintiff class contends that these statements of acceptance, by which they gave up lucrative jobs and in some cases released GM from any claims of unlawful termination, cemented a contractual agreement between themselves and GM for certain retirement benefits, including health care. GM argues that it never intended nor conveyed to its putative early retirees an intent to vest lifetime health care benefits as part of its early retirement offer. It contends that the offer consisted of nothing more than actuarially unreduced pension benefits. The various special early retirement programs were amendments to its retirement income benefit plan — a plan designed to provide retirement income, not health care. The health care program, it argues, was a separate and distinct ERISA plan. According to GM, it provided health care to retirees by virtue of the fact that they were retirees, not because they were early retirees. Thus, GM argues, the health care benefits were subject to the same terms and conditions, including GM's right to amend, as for general retirees.
Plaintiff class claims that early retirement was presented to its members as a special package deal that included health care, separate and distinct from the regular GM retirement program. They...
To continue reading
Request your trial
-
Sprague v. General Motors Corp.
...to have made a bilateral contract with each early retiree to vest health care benefits at retirement, Sprague v. General Motors Corp., 843 F.Supp. 266, 299 (E.D.Mich.1994) ("Sprague II "); these bilateral contracts were held to be enforceable as ERISA plans or as modifications to the genera......
-
Armbruster v. K-H Corporation
...been affirmed by a three-judge panel of the appellate court. See Fuller, 168 F.R.D. at 596-597 & n. 14, citing Sprague v. General Motors, 843 F.Supp. 266 (E.D.Mich. 1994), aff'd, 92 F.3d 1425 (6th Cir.1996). The three-judge panel's affirmance was subsequently vacated on rehearing en banc, 1......
-
Perez v. Aetna Life Ins. Co.
...(6th Cir.1988) (statements in plan summary are binding even if they conflict with language of plan itself); Sprague v. General Motors Corp., 843 F.Supp. 266, 307 (E.D.Mich.1994) ("benefit plan ambiguities must be construed in the employees' favor," citing Edwards ...
-
Sprague v. General Motors Corp.
...(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 ......