Bell v. Xerox Corp.

52 F.Supp.3d 498

George BELL, Jean Bell, Adalbert Lux, Brigitta Lux, Charles Van Neil, Jeannette Van Neil, Patsy Pugliese, Alice Pugliese, Gerald Smart, Dorothy Smart, Herbert Oelkers, Richard Morrill, Ruth Morrill, Blair Hendershot, and Joan Hendershot, Plaintiffs

v.XEROX CORPORATION, Xerox Plan Administrator Committee, Lawrence M. Becker, Xerox Medical Plan, Xerox Dental Care Plan, and Xerox Corporation 1986 Enhanced Early Retirement Program, Defendants.

No. 13–CV–6586L.

United States District Court, W.D. New York.

Signed Oct. 2, 2014.

David Ross Pfalzgraf, Jr., Jason G. Ulatowski, Rupp, Baase, Pfalzgraf, Cunningham & Coppola LLC, Buffalo, NY, for Plaintiffs.

Margaret A. Clemens, Pamela S.C. Reynolds, Littler Mendelson, P.C., Rochester, NY, for Defendants.

DECISION AND ORDER

DAVID G. LARIMER, District Judge.

INTRODUCTION

Fifteen plaintiffs bring this suit under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1101 et seq. Defendants are Xerox Corporation (“Xerox”), three alleged employee welfare benefit plans, and the administrators of those plans.

The gist of plaintiff's claims is that they chose to participate in an early retirement program offered by Xerox in the 1980s, based in part on a promise that by doing so they would receive certain medical and dental benefits, at an unchanging level for the rest of their lives. Plaintiffs also allege that in 2008, defendants added a reservation-of-rights clause (“RORC”) to the materials provided to plaintiffs, indicating for the first time that, contrary to what plaintiffs had allegedly been promised, Xerox could modify or even terminate plaintiffs' medical and dental benefits.

Although plaintiffs' actual benefits have apparently not changed, they brought this action under ERISA, seeking to establish that defendants may not reduce their level of benefits, but must instead provide them with unchanging, unalterable, lifetime benefits.

Defendants have moved to dismiss the complaint, pursuant to Rules 12(b)(6) and 12(c) of the Federal Rules of Civil Procedure. For the reasons that follow, defendants' motion is granted in part and denied in part.

BACKGROUND

The fifteen plaintiffs comprise eight former employees of Xerox (“employee plaintiffs”) and seven of their spouses. Plaintiffs allege that in late 1986, the employee plaintiffs were offered early retirement, apparently as part of a cost-cutting measure by Xerox.

The employee plaintiffs were told that in consideration of their opting for early retirement, they would be provided with “lifetime coverage” for themselves and their spouses, under the plan governing their medical and dental benefits as it existed prior to 1984. Complaint ¶ 32; Complaint Ex. H (Dkt. # 1–9). Apparently that pre–1984 plan (which the parties refer to as the “Old Plan”) provided a higher level of benefits than the post–1984 plan. See Decl. of Lawrence Becker (Dkt. # 8) ¶¶ 5–9.

Prospective early retirees were allegedly informed, during seminars presented by Xerox, that if they accepted Xerox's offer they would receive “Pre–1984 coverage,” for themselves and their spouses, and that their spouses would continue to receive “lifetime coverage” in the event that the employees predeceased their spouses. Dkt. # 1–9 at 34. Plaintiffs were also advised that if they did not elect early retirement by December 19, 1986, they would be covered by the “new” retiree health care plans, and that this was their “ONLY Opportunity” for the pre-amendment plan.¹

The employee plaintiffs all opted for early retirement, allegedly based in part on their reliance on Xerox's representations concerning their lifetime medical and dental coverage. The employee plaintiffs all retired from Xerox in January 1987, as required to meet the terms of the early-retirement offer.

Plaintiffs allege, however, that in October 2008, they received from defendants enrollment materials for plan year 2009, that for the first time included a RORC. Although at this point there has been no change in plaintiffs' actual benefits, plaintiffs contend that the RORC puts their rights to unchanging benefits at risk.

Plaintiffs also allege that defendants have applied an unreasonable interpretation to certain plan language relating to the threshold at which plaintiffs' medical expenses will be covered in full. Plaintiffs allege that under the Old Plan, for employees who elected family medical coverage, 100% of eligible covered expenses would be paid as soon as the retiree and his family reached a 6% out-of-pocket maximum (based on the employee's pay in his final year) for medical expenses in any year. See Dkt. # 24–2 at 124 (Old Plan provision stating that the “Annual Out–of–Pocket Maximum” for health care coverage would be “6% of pre-retirement salary per member per calendar year”).

Plaintiffs allege that defendants have not lived up to this promise, but have required each family member to reach the 6% threshold. In other words, defendants refuse to aggregate family members' medical expenses in applying the 6% rule. See Dkt. # 30–1 at 9 (2009 enrollment bulletin provision stating that out-of-pocket maximum would be “6% of pre-retirement salary, per covered person per calendar year”) (emphasis added).

In addition, plaintiffs allege that they have requested that defendants provide them with certain documents concerning their benefits, and that defendants have not done so. Plaintiffs allege that defendants' response to their requests have been incomplete at best, and misleading at worst.

Based on these allegations, plaintiffs have brought this lawsuit against Xerox, the Xerox Plan Administrator Committee (“Committee”), Lawrence Becker (who is identified as the chairman of the Committee), the Xerox Medical Plan, the Xerox Dental Care Plan, and the Xerox Corp. 1986 Enhanced Early Retirement Program (“ERP”).

Plaintiffs assert four causes of action: (1) for a clarification of their right to future benefits under § 1132(a)(1)(B) ; (2) for enforcement of their right to benefits under § 1132(a)(1)(B), regarding the 6% out-of-pocket maximum; (3) a claim of promissory estoppel, to bar defendants from inserting a RORC into the terms of the plans; and (4) a claim against the Committee and Becker under § 1132(c), which permits the recovery of civil penalties against a plan administrator for failing to furnish, upon written request by a participant or beneficiary, certain types of plan-related documents. See Cultrona v. Nationwide Life Ins. Co., 748 F.3d 698, 706–07 (6th Cir.2014). Defendants have moved to dismiss the complaint, pursuant to Rules 12(b)(6) and 12(c) of the Federal Rules of Civil Procedure.

Defendants have moved to dismiss the complaint, on several grounds. Defendants contend that plaintiffs lack standing to sue, because they have not been denied benefits, nor have their benefits been reduced. They further contend that plaintiffs' claims under § 1132(a)(1)(B) is time-barred, that the ERP is not an ERISA-covered plan, and that defendants never promised plaintiffs unchanging, lifetime benefits. Defendants raise several other arguments in support of their motion, which will be addressed below.

DISCUSSION

I. Standing

Defendants contend that, as to their first cause of action for clarification of their right to future benefits, plaintiffs lack standing to sue, on the ground that the mere incorporation of a RORC into a welfare benefits plan does not give rise to an actual controversy. Defendants argue that the allegations of the complaint show that defendants have not reduced plaintiffs' benefits, and that there is no actual controversy before the Court.

Article III, Section 2, of the United States Constitution limits federal courts' jurisdiction to “cases” and “controversies.” As part of this limitation, parties seeking to bring suit in federal court must establish standing under Article III to assert their claims. See E.M. v. New York City Dep't of Educ., 758 F.3d 442, 449–50 (2d Cir.2014). In general, that means that the plaintiffs must allege facts showing that they have suffered an “injury in fact” caused by the defendants' conduct, that can be redressed by a decision favorable to the plaintiffs. Id.

As the Second Circuit has noted, “the courts of appeals have generally recognized that threatened harm in the form of an increased risk of future injury may serve as injury-in-fact for Article III standing purposes.” Baur v. Veneman, 352 F.3d 625, 633 (2d Cir.2003). While the court in Baur (which involved an alleged risk of contracting a fatal disease) stopped short of holding that enhanced risk generally qualifies as an “injury” sufficient to confer standing, the court cited, in support of its observation about the state of the law, the Seventh Circuit's decision in Johnson v. Allsteel, Inc., 259 F.3d 885, 888 (7th Cir.2001). In Johnson, the court held that the “increased risk that a plan participant faces” as a result of an ERISA plan administrator's increase in discretionary authority satisfies Article III injury-in-fact requirements. See Baur, 352 F.3d at 633 (citing Johnson, 259 F.3d at 888 ).

The court in Johnson explained that “[a]n increased amount of discretion opens up to the administrator administering the plan a greater range of permissible choices. This expanded range renders ‘less solid’ the participant's benefits by shifting risk to the participant. The increased risk the participant faces as a result is an injury-in-fact.” 259 F.3d at 888. See also Pisciotta v. Old National Bancorp, 499 F.3d 629, 634 (7th Cir.2007) (“As many of our sister circuits have noted, the injury-in-fact requirement can be satisfied by a threat of future harm or by an act which harms the plaintiff only by increasing the risk of future harm that the plaintiff would have otherwise faced, absent the defendant's actions”) (citing cases).

Applying those principles here, I conclude that plaintiffs' allegation that in October 2008, defendants, for the first time, added language in plaintiffs' annual enrollment materials containing a...