Warmenhoven v. NetApp, Inc.

• Decision Date: 13 September 2021
• Docket Number: No. 19-16960,19-16960
• Citation: 13 F.4th 717
• Parties: Daniel WARMENHOVEN, Plaintiff-Appellant, v. NETAPP, INC.; NetApp Executive Medical Retirement Plan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

13 F.4th 717

Daniel WARMENHOVEN, Plaintiff-Appellant,

v.NETAPP, INC.; NetApp Executive Medical Retirement Plan, Defendants-Appellees.

No. 19-16960

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 10, 2021 San Francisco, California

Filed September 13, 2021

J. Phillip Martin (argued) and Eric C. Kastner, Kastner Kim LLP, Mountain View, California; Robert L. Rusky, San Francisco, California; for Plaintiff-Appellant.

Laurie J. Hepler (argued), Greines Martin Stein & Richland LLP, San Francisco, California; Clarissa A. Kang and Angel L. Garrett, Trucker Huss, San Francisco, California; for Defendants-Appellees.

Before: Morgan Christen and Bridget S. Bade, Circuit Judges, and Gary Feinerman,^* District Judge.

FEINERMAN, District Judge:

In 2005, NetApp, Inc. created the NetApp Executive Medical Retirement Plan, an employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 – 1461, to provide health insurance benefits to its retired senior executives. In 2016, NetApp implemented a phased termination of the Plan. Daniel Warmenhoven and six other retired executives sued NetApp and the Plan (together, "NetApp"), alleging that terminating the Plan violated ERISA because they had been promised lifetime benefits. The suit asserted two distinct ERISA claims: (1) a direct claim for benefits under § 1132(a)(1)(B) ; and (2) an alternate claim for equitable relief under § 1132(a)(3) to redress NetApp's alleged misrepresentations that the Plan would provide lifetime benefits. The district court granted summary judgment to NetApp on both claims.

Only Warmenhoven appeals. We have jurisdiction pursuant to 28 U.S.C. § 1291. We affirm the district court's judgment as to Warmenhoven's § 1132(a)(1)(B) claim, vacate the judgment as to his § 1132(a)(3) claim, and remand for further proceedings on the § 1132(a)(3) claim.

Background

I. The Plan's Creation and Termination

Warmenhoven was NetApp's Chief Executive Officer from 1994 to 2009 and, after stepping down as CEO, served as Executive Chairman of NetApp's Board of Directors until 2014, formally retiring in April 2015. In 2003, at the request of another senior NetApp executive, Warmenhoven asked the company's Human Resources department to explore the creation of an executive retiree health plan. After extensive consideration, the Board's Compensation Committee adopted the Plan effective May 2005.

Some ten years later, in November 2015, the Compensation Committee decided to close the Plan to any new participants and to explore alternatives to the Plan for existing participants. At that time, nine executives and eighteen dependents were receiving health insurance benefits under the Plan. The parties’ dispute over what motivated the Compensation Committee's decision—NetApp asserts that the Plan's increasing costs made the benefit unsustainable at a time when it was laying off thousands of employees, while Warmenhoven charges that NetApp's rationale was pretextual—is immaterial to this appeal.

In April 2016, the Compensation Committee decided to terminate the Plan. Under a new "Amended and Restated Plan," NetApp would reimburse participating retirees like Warmenhoven for the cost of purchasing health insurance themselves from 2017 through 2019, and then pay them a lump sum at the Plan's termination on December 31, 2019. NetApp management met with the retirees to inform them of the Amended Plan, and the retirees expressed their disapproval. Despite the opposition from retirees, NetApp went forward with the Amended Plan, giving formal notice to Warmenhoven by letter dated November 16, 2016. The Amended Plan took effect on January 1, 2017.

II. Documentation of the Plan's Terms

As discussed below, the default rule under ERISA is that employers may freely terminate welfare benefit plans like the Plan. See 29 U.S.C. § 1051(1) (exempting welfare benefit plans from ERISA's vesting provisions). Warmenhoven filed this suit on the view that NetApp had promised him that the health insurance benefits offered under the Plan would last for his lifetime, overriding the default rule that welfare benefits do not vest.

To support his view, Warmenhoven relies primarily on a series of PowerPoint presentations that summarized the Plan for participating executives. Although at least seven versions of the PowerPoint were created over the years, Warmenhoven personally saw only two.

The first was an April 2005 PowerPoint created by NetApp Human Resources to describe the Plan to NetApp management, including Warmenhoven in his role as CEO. The PowerPoint stated that the Plan would provide medical coverage to "a defined group of retiring executives as a fully-insured plan." It also stated that any company acquiring NetApp would be required to provide an equivalent plan "for the lives of the eligible employees." NetApp does not dispute that, as the PowerPoint suggested, it intended as of April 2005 to maintain the health insurance benefit for the participants’ lifetimes.

The second version of the PowerPoint that Warmenhoven saw was a March 2014 version prepared shortly before his retirement. That version stated that the "Executive Medical Retirement Plan [was] adopted by [NetApp] as a method to retain a defined group of senior executives." In more explicit terms than the April 2005 version, the March 2014 version promised that the "Plan provides medical benefits for the retiree's lifetime" and that "[n]o retiree contributions [are] required."

As further support for his view that he had been promised lifetime benefits, Warmenhoven points to NetApp's public disclosures in filings with the Securities and Exchange Commission ("SEC"). Like the PowerPoints, NetApp's SEC disclosures stated that the Plan would provide lifetime healthcare benefits to participants. For instance, a 2016 disclosure stated that "[c]overage continues through the duration of the lifetime of the retiree or the retiree's spouse, whichever is longer." The record does not contain evidence that Warmenhoven personally reviewed the SEC filings, but the filings do show that, as late as April 2016, NetApp was telling the public that it intended to cover its retired executives’ healthcare for their lifetimes.

NetApp focuses attention on a third category of documents: the certificates of coverage prepared by the health insurance companies with which NetApp contracted to administer the Plan. NetApp hired Cigna to administer the Plan at its inception in 2005. Cigna composed a separate certificate for each year it administered the Plan, from 2005 to 2012. In 2013, NetApp replaced Cigna with UnitedHealthcare ("UHC"), and UHC composed certificates for the Plan from 2013 to 2016. As with the April 2005 and March 2014 PowerPoints, Warmenhoven personally received a copy of the 2015 UHC certificate.

The certificates of coverage primarily concerned the details, which are not pertinent here, of health coverage for the calendar year in question. The important provisions for present purposes addressed Plan administration: how coverage was paid for, who managed the Plan, and who had the authority to alter the Plan's terms. See 29 U.S.C. § 1102(b) (requiring that an ERISA plan's written instrument disclose this information). For example, the 2005 Cigna and 2015 UHC certificates each included a section devoted to those disclosures, titled "ERISA Required Information" in the Cigna certificate and "ERISA Statement" in the UHC certificate.

Notably, each certificate of coverage included at least one provision granting NetApp the authority to terminate benefits under the Plan at any time—directly contradicting the PowerPoints’ promises of lifetime benefits. For example, the ERISA disclosure in the 2005 Cigna certificate stated:

The Employer as Plan Sponsor reserves the right to, at any time, change or terminate benefits under the Plan, to change or terminate the eligibility of classes of employees to be covered by the Plan, to amend or eliminate any other plan term or condition, and to terminate the whole plan or any part of it.

The 2015 UHC certificate likewise stated: "Your employer, as the Plan Sponsor, has the right to amend or terminate this Plan at any time."

III. Procedural History

Warmenhoven and six other retired executives filed this lawsuit in May 2017, bringing two claims under ERISA. The first claim alleged that the PowerPoints operated to vest lifetime benefits and sought recovery of those benefits directly under § 1132(a)(1)(B). The second claim, brought in the alternative to the first, arose under § 1132(a)(3), which allows suits for equitable relief to redress ERISA violations. The plaintiffs alleged that, if the Plan did not grant them vested lifetime benefits, then NetApp had misrepresented the nature of the Plan, in violation of the fiduciary duties it owed them as a plan administrator under § 1104(a)(1). Under the second claim, the plaintiffs sought several forms of equitable relief: an injunction ordering continued benefits, reformation of the plan documents, estoppel, and surcharge.

After conducting discovery, the parties cross-moved for summary judgment. The district court granted NetApp's motion, denied the plaintiffs’ motion, and entered judgment for NetApp. Gomo v. NetApp, Inc. , No. 17-cv-022990-BLF, 2019 WL 4346581, at *13 (N.D. Cal. Sept. 12, 2019). As to the § 1132(a)(1)(B) claim, the district court held that the PowerPoints were not "plan documents," and therefore that their language could not vest lifetime benefits. Id. at *5–6. Instead, the court held, the certificates of coverage were the controlling plan documents, and they allowed free amendment of the Plan. Id. at *7–9. As to the § 1132(a)(3) claim, the court held that NetApp had committed no breach of fiduciary duty because it had no intent to deceive and because the plaintiffs could have examined the certificates of coverage to dispel any misunderstanding arising from the PowerPoints. Id. at *11–13.

Six of the seven plaintiffs...