Chiles v. Ceridian Corp., 95-6056

Page 1505

95 F.3d 1505

22 Employee Benefits Cas. 1403,

Pens. Plan Guide (CCH) P 23926E

Leo W. CHILES, Gloria Herren, Helen L. Byrd, Joy L. Oleo Phyllis McMillan, Robert D. Hunter, Barbara Jeffries, Glorice Biglow, Jacqueline Steele, Plaintiffs-Appellants, v. CERIDIAN CORPORATION; Seagate Technologies, foreign corporations, Defendants--Appellees.

No. 95-6056.

United States Court of Appeals Tenth Circuit.

Sept. 18, 1996.

Mark Hammons of Hammons & Associates, Oklahoma City, OK, for Plaintiffs-Appellants.

Charles W. Ellis (G. Neal Rogers with him, on the brief), of Lawrence & Ellis, P.A., Oklahoma City, OK, for Defendants-Appellees.

Before BALDOCK, HENRY and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.

Plaintiffs, a certified class of employees who receive benefits under a long term disability plan, appeal from summary judgment denying them health care benefits under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"). The issues presented are whether the plaintiffs have vested rights to company-paid health insurance as long as they remain disabled and, if not, whether the plan administrator had sufficient reason to change the plan and require the covered employees to pay their own premiums for coverage. The district court found that these benefits were not vested and that the employer properly exercised its right to discontinue paying the premiums.

On appeal, both parties point to the plan documents setting out the plaintiffs' benefits and, particularly, the summary plan descriptions ("SPDs") describing those plans; each finds language supporting its interpretation. Our inquiry is guided by these documents and federal ERISA law. Our jurisdiction is founded on 28 U.S.C. § 1291.

BACKGROUND

The plaintiffs are former employees of Imprimis, a division of Control Data. Control Data provided its nonunionized employees, including those working for Imprimis, benefits under a number of ERISA plans. The plans gave employees the option of enrolling in health and dental coverage, life insurance and disability benefit insurance. Enrolled employees made periodic payments for their coverage. Control Data maintained plan documents for each of the four benefit programs (plan "master documents"), and provided covered employees with SPDs, which we are told describe in language comprehensible to the average participant the terms and conditions of the plan.

In September 1989 Control Data sold Imprimis to Seagate Technology. Prior to the sale, plaintiffs had all been deemed disabled and were receiving long term disability benefits under the Control Data Long Term Disability Plan ("LTD Plan"). The summary plan description at the time of sale provided:

While on Long-Term Disability Status the company will pay the premiums for all the company-sponsored benefits (medical, life, and dental) for which you and your dependents were enrolled before your disability began. The company will continue paying all premiums until you and your dependents are no longer eligible for the plans.

As part of the sale Seagate agreed to administer the plaintiffs' rights "according to the terms of the Control Data Plan," and Control Data transferred to Seagate assets to cover projected liabilities from the LTD Plan. Seagate thereafter created a new LTD plan ("Seagate LTD Plan") to cover the employees that had participated in the Control Data plan, but did not provide coverage for new participants. The Seagate LTD Plan thus covered a closed set of participants.

In a letter to employees regarding the impending sale of Imprimis to Seagate, Control Data notified plaintiffs that it would continue the health, dental and life insurance plans after the sale, and that "[a]s provided under the current program, Control Data will continue to pay the premiums on your behalf for these plans. Under the program, Control Data has reserved the right to change or cancel it at any time." Aplt.App. 217. While all aspects of the administration of the LTD Plan transferred to Seagate, Control Data continued to administer the health, dental, and life insurance plans. Sometime after the sale of Imprimis, Control Data changed its name to Ceridian Corporation. In September 1992 Control Data/Ceridian informed the former Imprimis employees receiving LTD benefits and enrolled in health care coverage that, beginning in January 1993, the health care plan would be amended to require that plaintiffs pay the same portion of the health care premiums as Control Data/Ceridian's active employees.

The company-paid health care premiums claimed by the plaintiffs are referenced in both the documents of Control Data's Health Care Plan and its LTD Plan. Although plaintiffs also claim that they have vested rights to company-paid dental and life insurance coverage as long as they qualify for long term disability, we focus on the health care coverage because it is the only plan for which plaintiffs are now required to pay under the disputed amendment. The Health Care Plan master document specifically provides that the employer will bear the entire cost of health care coverage during any period an employee is on approved disability. This provision is reflected in the SPD summarizing the Control Data Health Care Plan.

Under the LTD Plan, employees who qualify for long term disability are entitled to a benefit of up to 60% of their previous salary. Unlike the master plan document for the Health Care Plan, the LTD Plan master document does not refer to health care coverage during disability. Although the master document is silent, in addition to the SPD provision quoted above, the LTD Plan SPD also states that the company promises to continue to pay premiums on company sponsored benefits while the employee is on "Rehabilitation Status." A chart in the SPD reiterates the company's promise to pay the employee's premium while on disability and rehabilitation. The plan documents for the dental and life insurance plans also note that the cost of coverage for those enrolled would be paid by Control Data during the employee's disability.

All of Control Data's plans contain amendment and termination provisions. The SPD to each of the four plans states: "Control Data expects to continue the [Long-Term Disability/Health/Dental/Life] Plan indefinitely, but must reserve the right to change or discontinue it if it becomes necessary. This would be done only after careful consideration." This summary is not a verbatim recitation of the rights to amend or terminate found in the master plan documents. Those documents allowed plan amendment "if deemed advisable" by Control Data, and retained the employer's right to terminate "at any time." The LTD Plan's reserved rights provision includes an additional feature not found in the documents for the medical, dental, or life insurance benefit plans. The LTD Plan master document notes that, notwithstanding the termination of the LTD Plan, a participant who was totally disabled on the effective date of termination "shall continue to receive benefits in accordance with the terms of the Plan." This promise is reflected in the SPD, which states: "If the group Long-Term Disability Plan terminates, and if on the date of such termination you are totally disabled, your Long-Term Disability benefits and your claim for such benefits will continue as long as you remain totally disabled as defined by the plan."

Plaintiffs brought this action under 29 U.S.C. § 1132(a)(1)(B) on behalf of "former employees of Imprimis Technology, Inc. who were, as of January 1, 1993, receiving long-term disability (LTD) benefits pursuant to the LTD plan administered by Seagate and who were covered by the health care plan administered by Ceridian." They sought relief against defendants for breach of contract and fiduciary duties. By agreement of the parties, the district court certified the class. ¹ Both parties moved for summary judgment. The district court granted defendants' motion and entered judgment against plaintiffs. Plaintiffs timely appealed.

DISCUSSION

We review the grant of summary judgment de novo, applying the same legal standard used by the district court under Fed.R.Civ.P. 56(c). James v. Sears, Roebuck & Co., 21 F.3d 989, 997-98 (10th Cir.1994). Summary judgment is appropriate if "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In applying the standard, we construe the factual record and all reasonable inferences from the record in the light most favorable to the party opposing summary judgment. Blue Circle Cement, Inc. v. Board of County Comm'rs, 27 F.3d 1499, 1503 (10th Cir.1994).

We turn to plaintiffs' claimed errors. First, they argue that by its terms, the LTD Plan vests in an employee the right to have health insurance premiums paid by the company when she qualifies for long-term disability status. Stated in a different fashion, once the LTD benefits vest, an employee is guaranteed a premium waiver for as long as qualification for disability or rehabilitation status continues--the plan sponsor may not unilaterally alter vested benefits. Second, plaintiffs contend that even if the right to health care premiums did not vest when an employee qualified for long-term disability, the LTD Plan guaranteed that benefits would vest for all those on long-term disability at the time the LTD Plan was terminated. Plaintiffs assert the LTD Plan terminated at the time Control Data/Ceridian sold Imprimis to Seagate. Finally, even assuming the right to have health care premiums paid did not vest, plaintiffs submit that a question of material fact exists over whether it became "necessary" for Ceridian to eliminate the benefit.

A. Did the health benefit premium payments vest once plaintiffs qualified for long-term disability?

In regulating plans, ERISA distinguishes between two types of employment benefits, welfare benefits and pension benefits. 29 U.S.C. §...