In Fulghum v. Embarq. Corp., 785 F.3d 395 (10th Cir. 2015), the Tenth Circuit Court of Appeals considered the claims of a class of telephone company retirees whose life and health insurance benefits were reduced or eliminated by their former employers after the employees retired. The employer Defendants included Embarq Corporation and companies who became Embarq subsidiaries after its spin-off from Defendant Sprint Nextel. The Plaintiffs claimed they were entitled to vested lifetime benefits pursuant either to the terms of their various ERISA welfare benefit plans, or to fraudulent communications made to them by plan administrators. They filed claims for breach of contract and breach of fiduciary duty under ERISA, as well as claims under the Age Discrimination in Employment Act.
During their employment, the Plaintiffs had received summary plan descriptions (“SPDs”) that explained the benefits provided in their plans. The Defendants based motions for summary judgment on the SPDs, organizing 32 different identified SPDs into five separate groups, according to similarities of plan language and coverage. Fulghum, 785 F.3d at 402. They contended the class members against whom they sought judgment had retired under one of the identified SPDs, or under an SPD that was not included in one of the five groups, but was identical in all material respects to one of the identified SPDs. Id.
The Court first considered whether Defendants breached their contractual duties under ERISA to provide vested benefits because the terms of the plans, as expressed in the SPDs, promised lifetime benefits to the employees. Under ERISA, an employer is generally free to change, modify or terminate its welfare benefit plans for any reason at any time, unless the employer has contractually agreed to provide vested benefits. Fulghum, 785 F.3d at 402, citing Curtiss-Wright Corp. v. Schoonajongen, 514 U.S. 73, 78 (1995). An employer creates a contractual agreement by incorporating “clear and express language” promising vested benefits into a formal written ERISA plan, which can be done through SPD documents. Id. at 403.
After reviewing the SPDs submitted by Defendants and applying general principles of contract construction, the Tenth Circuit found that none of the SPDs in the five groups contained clear and express language promising vested benefits, and affirmed summary judgment on those claims based on the identified SPDs. The plans either contained language that expressly reserved the employers’ rights to change or terminate the described benefits, or they contained language that otherwise unambiguously contemplated future plan changes or terminations in a manner that could not reasonably be misinterpreted by...
