Fulghum v. Embarq Corp.

785 F.3d 395

William Douglas FULGHUM; Dorsey Daniel ; John Douglas Hollingsworth; Willie Dorman; Robert E. King ; Calvin Bruce Joyner; Timothy Dillon; Sue Barnes ; William Games; Betsy Bullock; Kenneth A. Carpenter ; Betty A. Carpenter; Carl W. Somdahl; Wanda W. Shipley; Laudie Colon McLaurin, individually and on behalf of all others similarly situated; James W. Britt, class representative (deceased); Carol Nelson, Administrator of the Estate of James W. Britt; Bessie M. Reveal, proposed substitute named plaintiff and class representative for James W. Britt; Donald Ray Clark, Plaintiffs–Appellants

v.EMBARQ CORPORATION; Embarq Retiree Medical Plan; Sprint Nextel Corporation; Embarq Mid–Atlantic Management Services Company, formerly known as Sprint Mid–Atlantic Telecom, Inc. ; Sprint Retiree Medical Plan; Group Health Plan for Certain Retirees and Employees of Sprint Corporation; Sprint Welfare Benefit Plan for Retirees and Non–Flexcare Participants; Sprint Group Life and Long–Term Disability Plans; Carolina Telephone and Telegraph Company, LLC, formerly known as Carolina Telephone and Telegraph Company; Group Life Accidental Death and Dismemberment and Dependent Life Plan for Employees of Carolina Telephone and Telegraph Company; Carolina Telephone and Telegraph Company Voluntary Employees' Beneficiary Association Sickness Death Benefit Plan; Randall T. Parker, as Plan Administrator for all of Employee Welfare Benefit Plans of Embarq Corporation and Carolina Telephone and Telegraph Company, LLC; Employee Benefits Committee of Embarq Corporation as Plan Administrator of the Embarq Retiree Medical Plan, Defendants–Appellees.

Thomas E. Perez, Secretary, United States Department of Labor; Secretary of Labor, Amicus Curiae.

No. 13–3230.

United States Court of Appeals, Tenth Circuit.

April 27, 2015.

Alan M. Sandals, Sandals & Associates, P.C., Philadelphia, PA, and Richard T. Seymour, Law Office of Richard T. Seymour, PLLC, Washington, DC (Scott M. Lempert, Sandals & Associates, P.C., Philadelphia, PA; Stewart W. Fisher, Glenn, Mills, Fisher & Mahoney, P.A., Durham, North Carolina; Mary C. O'Connell, Douthit Frets Rouse Gentile & Rhodes, LLC, Kansas City, MO; and Diane A. Nygaard, Kenner Nygaard Demarea Kendall, LLC, Kansas City, MO, with them on the briefs), for Plaintiffs–Appellants.

Christopher J. Koenigs, Sherman & Howard L.L.C., Denver, CO (Joseph J. Costello, Morgan, Lewis & Bockius LLP, Philadelphia, PA, and James P. Walsh, Jr., Morgan, Lewis & Bockius LLP, Princeton, NJ, with him on the brief), for Defendants–Appellees.

Stephen A. Silverman, U.S. Department of Labor, Washington, DC (M. Patricia Smith, Solicitor of Labor; G. William Scott, Acting Associate Solicitor, Plan Benefits Security Division; and Nathaniel I. Spiller, Counsel for Appellate and Special Litigation, U.S. Department of Labor, Washington, DC, with him on the brief), for Amicus Curiae.

Before LUCERO, MURPHY, and BACHARACH, Circuit Judges.

ORDER

This matter is before the court on appellees' Petition for Rehearing and Rehearing En Banc , as well as on the appellants' Petition for Rehearing and Rehearing En Banc . We also have responses from the parties to both petitions.

Upon consideration, the requests for panel rehearing are granted to the extent of the amendments made in the attached revised opinion. The clerk is directed to file the new decision effective the date of this order.

Both petitions, the responses, as well as the revised opinion, were also circulated to all of the judges of the court in regular active service who are not recused. As no judge on the panel or the court requested that a poll be called, the requests for en banc rehearing are both denied.

MURPHY, Circuit Judge.

I. Introduction

Plaintiffs-appellants represent a class of retirees (collectively “Plaintiffs”) formerly employed by Sprint–Nextel Corporation (“Sprint”), Embarq Corporation (“Embarq”), or a predecessor and/or subsidiary company of either Embarq or Sprint (collectively “Defendants”). Plaintiffs brought this suit after Defendants altered or eliminated health and life insurance benefits for retirees. Plaintiffs asserted Defendants (1) violated the Employee Retirement Income Security Act of 1974 (“ERISA”) by breaching their contractual obligation to provide vested health and life insurance benefits; (2) breached their fiduciary duty by misrepresenting the terms of multiple welfare benefit plans; and (3) violated the Age Discrimination in Employment Act (“ADEA”) and applicable state laws by reducing or eliminating health and life insurance benefits. Defendants sought summary judgment on the breach of fiduciary duty claims, the ADEA claims, the state-law age discrimination claims, and some of the contractual vesting claims. The district court granted Defendants' motions in part and Plaintiffs obtained a Rule 54(b) certification.

Exercising jurisdiction pursuant to 28 U.S.C. § 1291, this court concludes Defendants did not contractually agree to provide Plaintiffs with lifetime health or life insurance benefits and thus we affirm in part the grant of summary judgment as to the contractual vesting claims. To the extent the district court granted summary judgment against class members whose contractual vesting claims arise, in whole or in part, from summary plan descriptions (“SPD”s) other than those identified in Defendants' motion, we reverse the grant of summary judgment against those class members. We reverse the district court's dismissal of Plaintiffs' breach of fiduciary duty claims to the extent those claims are premised on a fraud theory. Finally, because Defendants' decision to reduce or terminate the group life insurance benefit was based on a reasonable factor other than age, their actions did not violate the ADEA and we affirm the grant of summary judgment in favor of Defendants on those claims. We likewise affirm the dismissal of Plaintiffs' ADEA claims involving the reduction or elimination of post-retirement health benefits for Medicare-eligible employees because an agency regulation expressly permits Defendants' actions.

II. ERISA Claims

A. Background

Seventeen named plaintiffs represent class members whose post-retirement health and life insurance benefits were reduced or eliminated by Defendants. Fulghum v. Embarq Corp., 938 F.Supp.2d 1090, 1097–99 (D.Kan.2013). The class “includes retired employees and their eligible dependents who retired before January 1, 2008 from Embarq or a business that became part of Embarq and who were participating in any of the retiree medical, prescription drug and life insurance benefit plans of Sprint Nextel Corporation and Embarq Corporation.” Id. at 1099 (quotation omitted). Defendants include: Sprint (formerly known as United Telecommunications, Inc. and Sprint Corporation), Embarq, Embarq Mid–Atlantic Management Services Company (formerly known as Sprint Mid–Atlantic Telecom, Inc.), Carolina Telephone & Telegraph (“CT & T”), Employee Benefits Committee of Embarq Corporation (the “Committee”), and Randall T. Parker. Id. Welfare benefit plans named as additional defendants include: Embarq Retiree Medical Plan, Sprint Retiree Medical Plan, Group Health Plan for Certain Retirees and Employees of Sprint Corporation, Sprint Welfare Benefit Plan for Retirees and Non–Flexcare Participants, Sprint Group and Long Term Disability Plans, Group Life Accidental Death and Dismemberment and Dependent Life Plan for Employees of Carolina Telephone and Telegraph Company, and Carolina Telephone and Telegraph Company Voluntary Employees' Beneficiary Association Sickness Death Benefit Plan (“VEBA”) (collectively the “Plans”). Id.

The actions giving rise to Plaintiffs' claims began in November 2005 when Sprint announced it was modifying prescription drug benefits for retirees eligible for Medicare Part D coverage. Id. Effective January 1, 2008, Embarq eliminated “company-sponsored medical coverage and the prescription drug subsidy provided to Medicare-eligible retirees and Medicare-eligible dependents of retirees.” Id. As to company-provided life insurance for retirees, basic coverage was eliminated for retirees participating in the VEBA plan and was capped at $10,000 for all other class members. Id. Plaintiffs filed suit in December 2007, challenging the reduction and/or elimination of their benefits. Id. at 1100. Defendants moved for summary judgment in March 2012.¹

Written SPDs explain the health and life insurance benefits available to the relevant named plaintiffs and class members. In their motions for summary judgment, Defendants organized thirty-two SPDs into five groups based on language and coverage similarities, id., asserting the relevant named plaintiffs and class members retired under an identified SPD or an SPD identical in all material respects to one of the identified SPDs. The district court analyzed Plaintiffs' contractual vesting claims by reference to Defendants' grouping and, on appeal, Plaintiffs do not challenge the district court's approach.² Accordingly, this court's analysis will also comport with Defendants' grouping.³

B. Standard of Review

Plaintiffs' complaint alleges Defendants contractually agreed to provide subsidized health and life insurance benefits to retirees for their lifetimes. Plaintiffs sought, inter alia, payment of past-due benefits and a determination of their right to future benefits. See 29 U.S.C. § 1132(a)(1)(B), (a)(3). We review the district court's grant of summary judgment in favor of Defendants on these claims de novo. Chiles v. Ceridian Corp., 95 F.3d 1505, 1511 (10th Cir.1996), abrogated on other grounds by CIGNA Corp. v. Amara, ––– U.S. ––––, 131 S.Ct. 1866, 179 L.Ed.2d 843 (2011).

C. Discussion

The plans at issue all provide health or life insurance benefits and, thus, are all welfare benefit plans under ERISA. 29 U.S.C. § 1002(1). Welfare benefit plans are not governed by ERISA's minimum vesting standards and employers “are generally free under ERISA, for any reason at any time, to adopt, modify,...