Opinion
No. 99 Civ. 2970 (BSJ).
October 24, 2000.
OPINION ORDER
Introduction
This action is brought pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq., by former employees who retired under various circumstances from defendant Empire Blue Cross and Blue Shield ("Empire") between 1989 and July 1998. The case involves the same reduction of life insurance benefits under Empire's employee benefits plan that was the basis of related and consolidated lawsuits brought by another group of former Empire employees which the Court has recently decided in Byrnes v. Empire Blue Cross Blue Shield, 2000 WL 1538605 (S.D.N.Y. Oct. 18, 2000).
As in Byrnes, plaintiffs here seek to enforce the terms of a life insurance plan provided by Empire to its retiring employees as those terms existed before July of 1998, when Empire significantly lowered the amount of its life insurance benefit to retirees. Plaintiffs seek injunctive and declaratory relief under §§ 502(a)(1) and 502(a)(3) of ERISA to enforce their rights under the life insurance plan and to clarify their entitlement to future benefits. Plaintiffs also seek monetary relief under § 502(a)(1) for Empire's wrongful reduction of their benefits, under §§ 404(a)(1)(A), (B) and (D) for breaches of fiduciary duty, and under §§ 502(a)(1) and 502(c)(1) for failure to timely provide benefits information summaries to the plaintiffs. Plaintiffs have also asserted a claim of promissory estoppel and seek to enjoin Empire from further reducing their benefits or retaliating against them. Plaintiffs now move for summary judgment pursuant to Fed.R.Civ.P. 56; defendants oppose and cross-move for summary judgment.
Background
This case differs from Byrnes primarily because these plaintiffs argue that the contractual promises vesting their life insurance benefits derive from different sources than the plaintiffs in Byrnes. The Byrnes plaintiffs relied upon the descriptions of life insurance benefits in employee handbooks distributed by Empire in the early years of their employment prior to 1987. Plaintiffs here ask the Court to find that Empire promised to provide vested life insurance benefits to them based upon exit letters sent to them as retiring employees and based upon representations made by Empire in 1992 during administrative proceedings brought by other former Empire employees involving unemployment insurance benefits. This difference does not alter the result in this case from the result in Byrnes. For a fuller discussion of the general background common to both cases, see Byrnes.
This lawsuit is brought by fifty-three former employees of Empire, many of whom retired under different circumstances. However, despite these differences, all of the plaintiffs rely on the same arguments. Because none of the arguments prevails, the Court does not address the claims as to each individual plaintiff.
Summary Judgment Standard
Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Gallo v. Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir. 1994). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing United States v. Diebold, Corp., 369 U.S. 654, 655 (1962)). Summary judgment is improper if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir. 1994). Nonetheless, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).
I.
Because Empire's plan involves life insurance, it is classified as an ERISA welfare plan. See 29 U.S.C. § 1002(1). The benefits provided by a welfare plan generally are not vested and an employer can amend or terminate a welfare plan at any time. American Fed'n of Grain Millers, AFL-CIO v. International Multifoods Corp., 116 F.3d 976, 979 (2d Cir. 1997). Although there is no automatic vesting of benefits under an ERISA welfare plan, an employer can vest benefits contractually. Id. at 980 ("if an employer promises vested benefits, that promise will be enforced. ")
In this case plaintiffs offer only informal communications as evidence to support their claim that Empire contractually vested the life insurance benefit in them. Empire on the other hand has provided formal summary plan descriptions which demonstrate that Empire explicitly retained the right to modify or terminate the plaintiffs' benefits. Accordingly, plaintiffs' claims that Empire contractually vested benefits in them must fail.
First, the plaintiffs argue that exit letters they received as retiring employees vested their retiree life insurance benefit by contractual promise and rendered it unalterable. Plaintiffs' memorandum of law in support of this motion provides only a general model of the exit letters, which states in pertinent part:
We would like you to know that some of our employee benefits will still be available to you and your spouse during your lifetimes as you retire early on [date]. For this reason, we want you to have the details in writing for your records. . . The company provided life insurance that you have under our group program with New York Life Insurance Company will also be continued. You are presently insured for [$ amount dependent on retiree's salary]. This amount will be reduced by 10% on your retirement date [retirement date of retiree], and will continue to be reduced by 10% of the original face value during the next four anniversaries of your retirement, each [anniversary date of retirement], until it reaches [$ amount of pre-retirement salary], where it will remain constant for life.
(Pl.'s Memo. at 6.) (emphasis added).
Second, the plaintiffs argue that the 1992 administrative proceedings support their claim that Empire never indicated to them that their life insurance benefit might be eliminated or reduced in the future. Specifically, they point to the testimony of Michael Kent, Empire's Vice President of Human Relations, that Empire had no intention of modifying or eliminating the retiree life insurance benefit. (Pl.'s Memo, at 9.) Plaintiffs also cite a finding of fact by the Unemployment Insurance Appeal Board which stated "There was no indication that the normal benefits to which employees had or could become entitled would be eliminated or reduced at some later date." (Pl.'s Memo Ex. 11.) Plaintiffs further note that Empire incorporated that finding of fact in its Brief when the claimants appealed the Board's determination.
Empire responds that plaintiffs' rights are not governed by the exit letters or by the submissions and testimony, but rather by various official summary employee benefit plan descriptions distributed to the plaintiffs which expressly state that Empire had the right to modify or terminate plaintiffs' life insurance benefit. For those plaintiffs who retired in the regular course of business Empire has submitted as it did in Byrnes the employee handbook entitled "Your Handbook." Your Handbook was prepared and distributed to Empire's employees sometime before 1989, when none of the plaintiffs here had yet retired. (Ex. 0 to Becker Aff.) Your Handbook contained a description of Empire's group life insurance plan which explicitly reserved Empire's right to modify, reduce or eliminate the retiree life insurance benefits under the plan. The portion describing the life insurance benefit reads:
your basic life insurance will be reduced by 10% as of your retirement date, and by an equal amount on each of the next four anniversaries of your retirement date so that 50% of your life insurance coverage remains in force for the rest of your life, at no cost to you.
(Ex. 0 to Becker Aff., p. 36.) Six pages later, on the bottom of page 42, Your Handbook notes "[o]ther important information about your Group Life Insurance Plan and its administration can be found in the section entitled "Benefit Administration.' Id. at 42. In the Benefit Administration section, under the subheading "Plan Termination Provisions," Your Handbook notes:
Empire Blue Cross and Blue Shield maintains the Plans for the exclusive benefits of its employees. The company expects and intends to continue the Plans in your Benefits Program indefinitely, but reserves its right to amend each of the Plans at any time.Id. at 68.
As in Byrnes, Empire argues that the rights of the employees who retired in the regular course of business are governed by the Your Handbook SPD, because Your Handbook was the relevant summary description of Empire's employee benefit plan when those plaintiffs retired. The Court agrees and notes that the Your Handbook SPD contains a provision expressly reserving Empire's right to amend or terminate the life insurance benefit.
Another group of plaintiffs did not retire in the regular course of business but instead accepted an early retirement offer from Empire known as the Voluntary Separation Opportunity Program ("VSOP"). Again, as inByrnes, Empire has submitted The VSOP plan documents describing the plan participants' benefits. That summary contains an explicit reservation of rights clause, which provides:
The Corporation reserves the right to amend and/or terminate the VSO Program at any time for any purpose. The Corporation also reserves the right to announce new and different plans and programs as business needs require, although there are no plans to do so at this time.
(Ex. C to Pacernik Aff.)
A third group of plaintiffs accepted an offer of early retirement from Empire known as the Voluntary Incentive Program ("VIP"). The documents describing the benefits for program participants also include an express reservation of rights clause, which provides "Empire also reserves the right to announce new and different plans and programs as business needs require." (Ex. D to Pacernik Aff.)
At least one plaintiff retired pursuant to a workforce reduction and signed a Separation Agreement and General Release which provides that "Empire reserves the right to change or eliminate, at any time, these retiree medical and life insurance benefits." This agreement also provides that it is the sole and complete understanding between the parties. (Ex. E to Pacernik Aff.)
Finally, Empire also provided the plaintiffs who had not yet retired in 1993 with individual benefits summaries which were given to all Empire employees in that year. The summaries described the levels of the employees' individual benefits, including the life insurance benefit. (Ex. R to Becker Aff.) Those individual benefits summaries also clearly provide "Empire Blue Cross and Blue Shield reserves the right to change or terminate the Plans in whole or in part at any time." Id.
Based upon the summary plan documents submitted by Empire and described above, the Court finds that each plaintiff's right to life insurance benefits is governed by a document containing unambiguous language that expressly notifies the plaintiffs of Empire's right to change any of the benefits it offers at any time. Neither the exit letters nor any other evidence submitted by plaintiffs is sufficient to support their claim that Empire contractually vested life insurance in them, because those letters and representations constitute informal communications under ERISA. When viewed against the formal SPDs submitted by Empire, the SPDs must prevail. See Joyce v. Curtiss-Wright Corp., 171 F.3d 130, 133 (2d Cir. 1999) (court looks to the relevant ERISA plan documents to determine whether employer promised vested benefits to the plaintiffs); Moore v. Metropolitan Life Ins. Co., 856 F.2d 488, 492 (2d Cir. 1988) ("Congress intended that plan documents and the SPDs exclusively govern an employer's obligations under ERISA plans.")
That the exit letters which plaintiffs cite do not qualify as plan documents or summary plan descriptions and therefore do not govern plaintiffs' rights is abundantly clear. 29 U.S.C. § 1022 (b) sets forth the statutorily required elements of an ERISA summary plan description:
The summary plan description shall contain the following information: The name and type of administration of the plan . . . the name and address of the person designated as agent for the service of legal process, if such person is not the administrator; the name and address of the administrator; names, titles and addresses of any trustee or trustees (if they are persons different from the administrator); a description of the relevant provisions of any applicable collective bargaining agreement; the plan's requirements respecting eligibility for participation and benefits; a description of the provision providing for nonforfeitable pension benefits; circumstances which may result in disqualification, ineligibility or denial or loss of benefits; the source of financing of the plan and the identity of any organization through which benefits are provided; the date of the end of the plan year and whether the records of the plan are kept on a calender, policy, or fiscal year basis; the procedures to be followed in presenting claims for benefits under the plan including the office at the Department of Labor through which participants and beneficiaries may seek assistance. . . .
Although the retiree exit letters do note the identity of the organizations through which benefits are provided, most letters contain none of the other statutorily required elements. Because they contain so few of the required elements, the letters cannot be considered summary plan descriptions. See, e.g., Pocchia v. Prudential Ins. Co., 74 F. Supp.2d 240, 247 n. 4 (E.D.N.Y. 1999) (document containing only three of the 12 statutorily required categories of information was not an SPD) The exit letters are more akin to individual benefits summaries, which describe the effect of Empire's life insurance plan on the individual employees by setting forth the employee's final salary and calculating the amounts by which the life insurance benefit will decrease in the years following retirement. Such individual benefits summaries do not constitute substantive terms of the general life insurance plan or an SPD describing the life insurance plan. See Fitch v. Chase Manhattan Bank, N.A., 64 F. Supp.2d 212, 225 (W.D.N.Y. 1999) (holding that erroneous individual benefits summary did not entitle employee to increased benefits). Instead, such summaries constitute informal communications which are incapable of amending Empire's life insurance plan and do not affect Empire's power to modify or terminate the plan. See id. at 226 (individual summaries are informal communications); Moore, 856 F.2d at 492 ("ERISA plans cannot be amended as a result of informal communications between an employer and plan beneficiaries."). Thus Empire's reserved right to modify or terminate the life insurance benefit is not undermined by the fact that some of the exit letters cited by plaintiffs did not specifically mention that expressly reserved right; the letters are informal communications rather than SPDs or plan documents.
The Court notes that of the three exit letters provided to the Court, two contain an express reservation of Empire's right to modify or terminate the life insurance benefit and one does not. (See letters, Pl.'s Memo. Ex. 8; Def.'s Ex. F to Pacernik Aff.) This fact serves to illustrate one of the primary reasons informal communications such as these cannot govern the plaintiffs' rights: If the Court made its determination of the plaintiffs' entitlement to benefits based on the differing exit letters in this case, similarly situated employees would have vastly different rights.
Therefore in determining whether Empire contractually promised vested life insurance benefits to the plaintiffs, the Court looks not to those exit letters and other representations but rather to the relevant plan documents and SPDs. The Court has decided in Byrnes that the unambiguous provisions reserving Empire's right to modify or terminate the benefit contained in Your Handbook and the VSOP, VIP and severance agreements negate any other isolated language in those documents which employees might read as a contractual promise of vested welfare benefits. Accordingly, plaintiffs' rights had not vested and Empire was free as a matter of law to reduce plaintiffs' retiree life insurance benefit to $7500.
The exit letters and representations cited by the plaintiffs are at best extrinsic evidence and cannot be invoked to create an ambiguity which is not evident in the plan documents and SPDs themselves. ERISA "bar[s] consideration of extrinsic evidence where a welfare benefit plan unambiguously reserves the plan administrator's right to amend and terminate the plan." Moore, 856 F.2d at 492 n. 1.
This Court is mindful that Empire's decision to reduce the plaintiffs' life insurance benefit works a hardship on them, as it does for the plaintiffs in Byrnes. However, Empire consistently and expressly reserved the right to amend or terminate the benefit program before any of the plaintiffs retired. As a result, Empire never expressed an intention to vest the life insurance benefits in the plaintiffs and therefore did not violate a contractual promise or ERISA provision when it exercised its expressly reserved rights to diminish the benefit. Plaintiffs' motion for summary judgment on its claims to enforce the terms of the life insurance plan and for wrongful reduction of benefits under §§ 502(a)(1) and (a)(3) of ERISA, 29 U.S.C. § 1132(a)(1) and (a)(3) is denied and defendant's cross motion for summary judgment on those claims is granted.
II.
Plaintiffs also claim that Empire breached its fiduciary duty under ERISA §§ 404(a)(1)(A), (B), and (D) by misleading the plaintiffs about their benefits and violated § 104 of ERISA in its responses to plaintiffs who had written Empire for a clarification of their rights in the wake of Empire's decision to modify their life insurance benefits. These claims are identical to the claims asserted by the plaintiffs inByrnes and for the reasons stated more fully in that case, summary judgment in favor of Empire is granted.
III.
Lastly, plaintiffs claim that they relied detrimentally on a promise of life insurance benefits and that Empire is now estopped from denying them the benefits they claim they are due. In the Second Circuit, the principles of estoppel can apply in ERISA cases only under extraordinary circumstances. See Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 78 (2d Cir. 1996) (citing Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir. 1993)). The other elements of a promissory estoppel claim in an ERISA action are: (1) a promise, (2) reliance on the promise, (3) injury caused by the reliance, and (4) an injustice if the promise is not enforced. See id. at 79.
As in Byrnes, the plaintiffs here cannot establish the necessary elements of a promissory estoppel claim. First, the estoppel claims in this case, as in Byrnes, are premised on the breach of a promise that Empire never made: The promise of vested lifetime benefits. Empire only expressed a precatory desire to continue to provide the retiree life insurance to its employees while unambiguously reserving the right to amend or terminate plaintiffs' retiree life insurance. By exercising that right, Empire breached no promise.
Second, plaintiffs have also failed to establish the existence of extraordinary circumstances in this case. To satisfy the extraordinary circumstances requirement, a plaintiff must demonstrate a promise that the defendant reasonably should have expected to induce action or forbearance on the plaintiff's part. See id.; Aramony v. United Way Replacement Benefit Plan, 191 F.3d 140, 154 (2d Cir. 1999) (making a promise in order to induce particular action for an employer's benefit only later to renege on the promise could amount to extraordinary circumstances); Berg v. Empire Blue Cross and Blue Shield, 105 F. Supp.2d 121, 130 (E.D.N.Y. 2000) (plaintiff must plead something more than reliance on a promise to the plaintiff's detriment, such as an employer intentionally inducing the employee not to purchase other insurance). Plaintiffs' extraordinary circumstances argument differs from that in Byrnes because some of the plaintiffs have alleged more than that they relied generally on the benefits offered by Empire in deciding whether to continue working there. The early retirees have alleged that Empire induced them into the particular action of retiring early by promising them life insurance benefits in severance packages. However, the primary evidence plaintiffs cite to support their allegation of inducement to retire are the retiree exit letters, which could not have served as an inducement for plaintiffs to retire because the letters clearly show that they were received after the plaintiffs had made the decision to retire.
Furthermore, the retirement life insurance benefit that Empire offered in its various early retirement programs is exactly the same as the benefit offered to employees who retire in the normal course of events. Because Empire's alleged promise of continued life insurance benefits in its early retirement packages did not promise the plaintiffs a benefit to which they would not otherwise be entitled in the normal course of business, the promise does not constitute the type of "remarkable consideration" to induce the plaintiffs' early retirement which would support a finding of extraordinary circumstances. See Devlin v. Transportation Communications Int'l Union, 173 F.3d 94, 103 (2d Cir. 1999) (discussing Schonholz, 87 F.3d at 78)
Accordingly, plaintiffs' motion for summary judgment on its estoppel claim is denied and Empire's cross-motion on that claim is granted. Furthermore, defendant's motion for summary judgment on plaintiffs' claim for an injunction is granted. As the foregoing analysis demonstrates, the plaintiffs cannot prevail on the merits of their claims and are therefore not entitled to injunctive relief.
Conclusion
Plaintiffs' motion for summary judgment is denied; Empire's cross-motion for summary judgment is granted. The Clerk is directed to enter judgment in favor of the defendant and to close the case.