Vallone v. Cna Financial Corp.

• Decision Date: 15 July 2004
• Docket Number: No. 03-2090.,03-2090.
• Citation: 375 F.3d 623
• Parties: Michael J. VALLONE, Joyce E. Heidemann and James J. O'Keefe, Plaintiffs-Appellants, v. CNA FINANCIAL CORPORATION, a/k/a CNA Casualty of Illinois, and the Continental Insurance Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

375 F.3d 623

Michael J. VALLONE, Joyce E. Heidemann and James J. O'Keefe, Plaintiffs-Appellants, v. CNA FINANCIAL CORPORATION, a/k/a CNA Casualty of Illinois, and the Continental Insurance Company, Defendants-Appellees.

No. 03-2090.

United States Court of Appeals, Seventh Circuit.

Argued November 6, 2003.

Decided July 15, 2004.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

William J. Sneckenberg (argued), Stuart M. Brody, Sneckenberg & Associates, Chicago, IL, for Plaintiffs-Appellants.

Ronald J. Kramer (argued), Seyfarth Shaw, Chicago, IL, for Defendants-Appellees.

Before CUDAHY, MANION and ROVNER, Circuit Judges.

CUDAHY, Circuit Judge.

This case involves another episode in the widespread efforts of corporations to reduce their liabilities by cutting back on retiree benefits. The law in this circuit is well-established, but this does nothing to cushion the hardship of pensioners faced with a new drain on their limited resources.

In late 1991, The Continental Insurance Company (Continental) offered an early retirement package to some of its employees as a cost containment initiative. Michael J. Vallone, Joyce E. Heidemann and James J. O'Keefe (collectively, the plaintiffs) are three of the 347 Continental employees who accepted the early retirement package (the early retirees), which included the "lifetime" welfare benefit at issue in this case, a Health Care Allowance (HCA). In 1995, Continental was acquired by CNA Financial Corporation (CNA). In 1998, CNA notified the early retirees that as of January 1, 1999, their HCA benefit would be terminated. The plaintiffs challenged this decision by complaining to the Plan Administrator of CNA's retirement plan, to no avail. They subsequently brought suit, alleging claims of wrongful denial of benefits under the Employee Retirement Income Security Act (ERISA), breach of contract, estoppel and a breach of fiduciary duty. The district court granted summary judgment to the defendants on all claims, and we now affirm.

I. Background

A. Factual and Legal Background

In November 1991, Continental offered a Voluntary Special Retirement Program (VSRP) to its employees who had 85 years of combined age and service (with minima of 55 years of age and 10 years of service). The VSRP included a monthly Health Care Allowance (HCA), a welfare benefit that was offered to all retirees. However, the HCA benefit offered as part of the VSRP differed from the HCA benefit available to regular retirees. It is the nature of this difference that is at issue here. Accompanying the VSRP were explanatory materials, some of which the plaintiffs claim expressed Continental's intent to vest the HCA benefit, and others which CNA claims did just the opposite. The potential early retirees were also told, both orally and in writing, that the HCA benefit would be a "lifetime benefit." The plaintiffs are three of the 347 Continental employees who accepted early retirement under the VSRP in early 1992. Continental was acquired by CNA in 1995.

All went smoothly until August 1998, when CNA notified the early retirees that their HCA benefit would be eliminated as of January 1, 1999. The plaintiffs complained by telephone to CNA officials and were told that the Plan Administrator's decision was appropriate and final. Believing they had no practical recourse under the administrative appeal procedures made available to them by the general retirement plan, the plaintiffs sued CNA in a purported class action on behalf of Continental employees who elected to retire under the VSRP, bringing claims of violation of § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B) for wrongfully failing to pay benefits (Count II), breach of fiduciary duty in violation of § 404 of ERISA, 29 U.S.C. § 1104 (Count III), breach of ERISA and common law bilateral contracts (Count IV) and promissory estoppel (Count V).¹

Two other putative class members, Bernard A. Serek and Thomas L. Jones, had submitted written appeals to CNA's Plan Administrator, in which they argued that the VSRP documents created a contract or entitlement that prohibited unilateral termination of their HCA benefits. Serek and Jones received substantially the same response as did the plaintiffs. Because Serek and Jones had exhausted their administrative claims, the district court found that the plaintiffs were excused on grounds of futility from the requirement that they exhaust their own administrative claims. (Appellants' Short Appx., Memorandum Op. and Order 11/10/99 (11/10/99 Order) at 7-8.) However, because the plaintiffs had not themselves complied with the administrative review procedures, the district court was unwilling to allow them to "start from scratch in federal court." (Appellants' Short Appx., Memorandum Op. and Order 5/16/00 (5/16/00 Order) at 4.) Thus, purportedly on the basis that the evidence relevant to evaluating a Plan Administrator's discretionary decision to deny benefits is limited to those materials available to the Plan Administrator, the district court (at least initially) stayed discovery on all of the plaintiffs' claims and limited its review to the administrative record of Serek's and Jones's complaints. Id. at 4-5. Broader discovery was later allowed with respect to the fiduciary duty claim, though summary judgment was granted to CNA on the other three claims. (Appellants' Short Appx., Memorandum Op. and Order 12/28/00 (12/28/00 Order) at 3 n.3, 13.) The district court eventually granted summary judgment to CNA on the fiduciary duty claim as well. (Appellants' Short Appx., Memorandum Op. and Order 3/28/03 (3/28/03 Order) at 7.)

The plaintiffs now appeal the district court's decision to limit discovery to the administrative record on three of its claims and from its grant of summary judgment on all counts. CNA appeals the district court's decision to widen the scope of discovery with respect to the plaintiffs' breach of fiduciary duty claim, though this would matter only if we were to reverse the district court's grant of summary judgment on that claim.

B. Documents and Oral Representations

The retirement package in this case involves a complicated construction of enhancements to the general retirement plan in effect at the time. Not surprisingly, the parties disagree about which documents (and oral representations) created the VSRP and its enhanced HCA benefit at issue here. Continental's general retirement plan documents — which (together with their reservations of rights clauses) CNA argues are part of the VSRP — include the 1990 Comprehensive Health Care and Dental Plan of the Continental Corporation (1990 Plan) (R. 109-1, ex. 1), Your Benefits in 1991 (1991 General Summary Plan Description (SPD)) (R. 109-1, ex. 4), A Guide for Benefits for Employees Considering Retirement During 1991 (1991 Retirement Guide) (R. 109-1, ex. 6), A Guide for Employees Considering Retirement During 1992 (1992 Retirement Guide) (R. 109-1, ex. 7) and Retiree Benefits in 1991 (1991 Retiree SPD) (R. 109-1, ex. 8). Additionally, between the time the plaintiffs (and other early retirees) complained about the termination of their HCA benefit and the time the Plan Administrator rendered his decision on the formal appeals of other early retirees, CNA amended the 1990 Plan and created the 1996 Continental Insurance Company Retiree Group Medical and Dental Plan (1996 Plan) (R. 109-1, ex. 3), which became effective in October 1998. Continental also supplied the early retirees with several documents at the time it solicited their participation in the VSRP. These documents (the VSRP Documents) include a covering memorandum dated November 21, 1991 (VSRP Covering Memo) (R. 109-2, ex. 9), A Brief Description of the Voluntary Special Retirement Program (Brief Description Newsletter) (R. 109-2, ex. 12), the 1992 Retirement Guide, a personalized calculation worksheet (R. 109-2, ex. 10), a payment election form (R. 109-2, ex. 11), an acceptance/rejection form (R. 109-2, ex. 13) and a retiree benefit elections form (R. 109-2, ex. 14).

Continental is also alleged to have made oral representations to the potential early retirees regarding the nature of the HCA benefit. During group and individual meetings that took place in late 1991 between Continental's human resources representatives and eligible employees in various locations around the country, the HCA was consistently described as a "lifetime" benefit.² Heidemann, who was an assistant vice president of human resources for the Great Lakes region and an officer of the company at the time of her retirement, testified at deposition that she had been told by her superiors in human resources that the HCA benefit was a "lifetime" benefit. (R. 118-2, tab 1, Heidemann dep. at 145, 164.) She could not recall anyone ever telling her that the VSRP benefits were irrevocable. Id. at 147. She strongly believed the VSRP was separate and distinct from the general retirement plan, and since no one in human resources ever told her the benefits could be revoked, id., and none of the documents specifically discussing the VSRP contained a disclaimer, id. at 163, 218-19, she assumed that the "lifetime" benefits were irrevocable. When Heidemann presented the VSRP to the eligible employees in her region (including Vallone), she represented the benefits as being for "your lifetime" but did not say anything about their irrevocability. (R. 118-2, tab 2, Vallone dep. at 77-79, 82.)

The district court, from the perspective of the evidence most favorable to the plaintiffs, determined that eligible employees were told that the benefits were for their own and their spouses' lifetimes; that they were not told the benefits could be changed or revoked (although they were referred to documents that reserved those rights); that they were not told the "lifetime" benefits were irrevocable, but they nevertheless concluded that the benefits were irrevocable for reasons similar to Heidemann's reasons; that this conclusion was material...