Deboard v. Sunshine Mining & Refining Co. ( 2000 )

UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
R. CHARLES DEBOARD; LILLIAN J.
DEBOARD; WILLIAM T. WOOD;
MARY E. WOOD; LUCILLE M.
KISTLER; KNOX VAN HOY;
MARTHA VAN HOY,
Plaintiffs-Appellees and Cross-
Appellants,
v. No. 97-6226
No. 97-6249
SUNSHINE MINING AND REFINING
COMPANY; SUNSHINE PRECIOUS
METALS INC.; WOODS RESEARCH
AND DEVELOPMENT
CORPORATION,
Defendants-Appellants and Cross-
Appellees.
____________________________
R. CHARLES DEBOARD; LILLIAN J.
DEBOARD; WILLIAM T. WOOD;
MARY E. WOOD; LUCILLE M.
KISTLER; KNOX VAN HOY;
MARTHA VAN HOY,
Plaintiffs-Appellants,
v. No. 98-6020
SUNSHINE MINING AND REFINING
COMPANY; SUNSHINE PRECIOUS
METALS INC.; WOODS RESEARCH
AND DEVELOPMENT
CORPORATION,
Defendants-Appellees.
ORDER
Filed May 2, 2000
Before TACHA, BRISCOE, and MURPHY, Circuit Judges.
These matters are before the court on appellants’ petition for rehearing with
suggestion for rehearing en banc. Upon review, the panel grants rehearing for the limited
purpose of correcting the court’s slip opinion filed on April 5, 2000. An amendment has
been made in the section entitled “Plaintiffs’ cross-appeals,” subsection “Extent of
coverage under new plan.” Accordingly, a revised published opinion is attached to this
order. The panel otherwise denies the petition.
The suggestion for rehearing en banc was transmitted to all of the judges of the
court who are in regular active service as required by Fed. R. App. P. 35. As no member
of the panel and no judge in regular active service on the court requested that the court be
polled, the suggestion is denied.
Entered for the Court
PATRICK FISHER, Clerk of Court
By:
Keith Nelson
Deputy Clerk
2
F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAY 2 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
R. CHARLES DEBOARD; LILLIAN J.
DEBOARD; WILLIAM T. WOOD;
MARY E. WOOD; LUCILLE M.
KISTLER; KNOX VAN HOY;
MARTHA VAN HOY,
Plaintiffs-Appellees and Cross-
Appellants,
v. No. 97-6226
No. 97-6249
SUNSHINE MINING AND REFINING
COMPANY; SUNSHINE PRECIOUS
METALS INC.; WOODS RESEARCH
AND DEVELOPMENT
CORPORATION,
Defendants-Appellants and Cross-
Appellees.
____________________________
R. CHARLES DEBOARD; LILLIAN J.
DEBOARD; WILLIAM T. WOOD;
MARY E. WOOD; LUCILLE M.
KISTLER; KNOX VAN HOY;
MARTHA VAN HOY,
Plaintiffs-Appellants,
v. No. 98-6020
SUNSHINE MINING AND REFINING
COMPANY; SUNSHINE PRECIOUS
METALS INC.; WOODS RESEARCH
AND DEVELOPMENT
CORPORATION,
Defendants-Appellees.
APPEAL FROM UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D.C. No. CIV-95-1117-A)
Gayla C. Crain, of Epstein, Becker & Green, P.C., Dallas, Texas (Michael P. Butler, of
Epstein, Becker & Green, P.C., Dallas, Texas; and Bruce C. Jones, of Evans, Keane,
Boise, Idaho, with her on the brief), for the appellants.
Kirk D. Fredrickson (Jean A. McDonald with him on the brief), of McDonald &
Fredrickson, P.C., Oklahoma City, Oklahoma, for the appellees.
Before TACHA, BRISCOE, and MURPHY, Circuit Judges.
BRISCOE, Circuit Judge.
Plaintiffs, former employees of a corporate subsidiary of defendant Sunshine
Mining & Refining Company, filed this action under the Employment Retirement Income
Security Act (ERISA), 29 U.S.C. § 1001 et seq., seeking to enforce promises of life-time
insurance benefits made to them by their former employer as inducements to early
retirements. Defendants appeal from the district court’s entry of partial summary
2
judgment and its subsequent entry of judgment in favor of plaintiffs. Defendants also
appeal the district court’s award of fees and costs to plaintiffs. Plaintiffs have filed two
cross-appeals challenging various aspects of the district court’s judgment, the amount of
the fee award, and the district court’s refusal to grant plaintiffs’ post-trial motion to
enforce judgment. We exercise jurisdiction pursuant to 28 U.S.C. § 1291. As regards
defendants’ appeal, we affirm. As regards plaintiffs’ cross-appeals, we affirm in all
respects except for (1) the health insurance coverage issue, which we reverse and remand
for entry of judgment consistent with this opinion, and (2) the fee award, which we
reverse and remand to the district court for further consideration.
I.
Plaintiffs Charles Deboard, William Wood, Lucille Kistler, and Knox Van Hoy are
former employees of Woods Petroleum Corporation (Woods), a corporation formerly
based in Oklahoma City, Oklahoma. On July 31, 1985, Woods merged with, and became
a wholly owned subsidiary of, Sunshine Mining & Refining Company (Sunshine). As
part of the merger (which was described in the record as more akin to a hostile takeover),
Sunshine agreed not to terminate or modify any existing Woods’ employee welfare
benefit plans for a period of ten years.
On August 22, 1985, Woods distributed a memorandum to its employees
explaining that, due to a “cyclical downturn” in the oil and gas industry, cost-cutting
measures would be required by all four of Sunshine’s oil and gas subsidiaries, including
3
Woods. The memorandum further explained that a task force had been formed to
consider and evaluate various options to restructure Sunshine’s oil and gas group. App. at
143. On September 11, 1985, Woods distributed a follow-up memorandum to its
employees informing them, in pertinent part, of a “voluntary early retirement subsidy”
intended by management to help reduce costs. Id. at 110. The memorandum indicated
that “[e]ligible Woods’ personnel [could] elect to retire early with additional vesting
rights only during a ‘window period’ beginning September 18, 1985 and ending October
31, 1985.” Id. The memorandum further indicated management was “working on and
w[ould] finalize the details of a program which w[ould] provide an incentive to a wider
group of people who m[ight] voluntarily elect to retire early with higher vesting rights,”
and “[t]he details w[ould] be announced” the following week. Id.Within a week, Woods issued at least two memoranda outlining the details of the
voluntary early retirement subsidy. Under what Woods termed a “Rule of 70”
qualification, any employee whose age and years of service plus five years equaled 70 or
greater was eligible to take advantage of the subsidy.1 Eligible employees expressed
reluctance to participate in the voluntary early retirement subsidy because of concern
about the handling of post-retirement insurance benefits.
On October 3, 1985, Woods sent letters to all employees eligible for the proposed
1
This apparently differed from Woods’ normal retirement qualification in that it
allowed employees to add five years to their age/years of service.
4
Rule of 70 early retirement subsidy, including plaintiffs.2 The letters stated:
For informational purposes only, this letter serves to advise you and
your spouse of insurance entitlements which you would be eligible to
receive should you voluntarily elect to retire during the window period
under the Rule of 70 plan (the “Plan”).
First, the Plan provides that you and your eligible dependents would
be entitled to receive health care under our current group hospitalization
plan with Massachusetts Mutual, fully paid for at Woods Petroleum
Corporation’s expense until the time of your death. At that time, the
hospitalization insurance would continue in full force for one year from the
anniversary date of the retiree’s death for the retiree’s spouse at no cost to
your spouse. However, within the year period from the date of the retiree’s
death, should the spouse remarry, all coverage would cease immediately.
After the year passes, the spouse may elect to convert to a private plan with
Massachusetts Mutual with the cost being borne 100% by the spouse.
During your lifetime, you would simply submit your claims for
reimbursement to the Company (via the Personnel Department) as you do
now. Once converted to a private plan, your premiums and claims would be
handled direct with the insurance carrier instead of Woods Petroleum
Corporation.
Secondly, you would be allowed to continue participation in the
Group Dental Plan at company expense with the same procedure for claim
reimbursement as indicated above. Once you are deceased, however, there
would be no further benefits or automatic rights of conversion to a private
plan for your dependents in the Dental Plan.
Third, as a part of our Group Plan coverage, you would also be
covered for $10,000 life insurance on you and $5,000 on your spouse with
Security Connecticut, with the premiums for these coverages also paid by
the Company.
Something that you do need to keep in mind, once you become age
65, you would need to submit your claims first to Medicare, as it would then
become the primary carrier. You would then submit any amounts not paid
by Medicare to Massachusetts Mutual as the secondary carrier. (Be sure
that you apply for Medicare upon turning age 65.)
2
One of the plaintiffs, Lucille Kistler, was mailed an identical letter dated October
2, 1985. App. at 1318. For purposes of convenience, we will refer collectively to the
letters as the “October 3, 1985 letters” or “the October 3 letters.”
5
If there is anything else that we can do to assist you with your pre-
retirement planning, do not hesitate to call upon us.
Id. at 116-17. Based upon the representations in the October 3 letters, plaintiffs Deboard,
Wood, and Kistler voluntarily retired from the company effective October 31, 1985.
These plaintiffs and their spouses subsequently received medical, dental, and life
insurance benefits, at company expense, through July 1995.
On July 14, 1986, Woods distributed a memo to employees and retirees outlining
various modifications to the health, life, and dental insurance programs. Id. at 1326. In
particular, the memo stated employees would “be required to contribute to the premium
payments for dependent coverage only, at a rate of $20.00 per month beginning August 1,
1986.” Id. On July 18, 1986, Woods distributed a memo to all retirees stating, in
pertinent part, as follows:
The correspondence you received last week describing the changes
to our group health, life, and dental plans was for informational purposes to
keep you appraised (sic) of the changes that will be impacting on you as
well as our active employees.
The item . . . which described the requirement for employees to
begin contributing $20 per month for family coverage is not applicable to
our current retirees; but, may affect future retirees.
Id. at 1329.
In the fall of 1986, Woods offered a second voluntary retirement subsidy to those
employees who satisfied the “Rule of 70.” The second subsidy differed slightly in that no
spousal life insurance was offered, and eligible retirees had to pay $20 per month for
dependent health care coverage (consistent with the August 1, 1986, changes to the health
6
insurance plan for employees). Plaintiff Van Hoy inquired about the second subsidy and
was informed by Woods’ personnel director that, with the exception of the two noted
differences, the terms and conditions of the subsidy were identical to those described in
the October 3, 1985, letters. Plaintiff Van Hoy chose to participate in the second subsidy
and retired effective December 31, 1986. Van Hoy and his spouse subsequently received
benefits, at company expense (save for the $20 monthly co-pay on Mrs. Van Hoy’s
medical insurance premiums), through July 1995.
Woods was the plan sponsor until July 31, 1986. Effective August 1, 1986,
Sunshine adopted and consolidated medical coverage for itself and its subsidiaries,
including Woods, into group policies issued by Massachusetts Mutual Life Insurance
Company (which had previously issued group policies to Woods for its Welfare Plan).
Thereafter, Sunshine effectively acted as the administrator for all of the plans at issue.
On April 26, 1995, Woods (which had since been renamed Woods Research &
Development Corporation), sent letters to plaintiffs and their spouses stating:
This letter is to inform you of changes to your Woods retiree
insurance coverage effective August 1, 1995. As you know, Sunshine
Mining Company (Sunshine) acquired Woods Petroleum Corporation on
July 31, 1985. Pursuant to Section 6.16 of the Agreement and Plan of
Reorganization, Sunshine agreed not to terminate any employee benefit
plans (including health and welfare plans) for a period of 10 years.
Sunshine has elected not to terminate your retiree medical insurance
provided you pay a premium equal to the cost to continue your coverage
after July 31, 1995 (the expiration of the 10 year period). Your dental
insurance and retiree and dependent life insurance coverage will cease as of
August 1, 1995.
In 1994, due to the prolonged slump in silver prices, the continuing
7
escalation in medical insurance cost and the need to reduce production and
overhead costs, Sunshine eliminated retiree medical and dental coverage for
its existing hourly and staff workforce and certain retired hourly employees.
Sunshine is offering you the option of continuing your coverage by paying a
monthly premium of $499.56 for you and your spouse. This premium will
be adjusted annually to reflect any changes in Sunshine’s cost to provide
this coverage or changes to medical insurance provided. Sunshine may
amend or terminate this coverage upon 60 days written notice to you.
To continue your medical insurance coverage, you must return the
enclosed election form by July 31, 1995 to [Sunshine].
Id. at 151.
In a letter to Sunshine dated May 15, 1995, plaintiff Wood questioned the benefit
termination decision. Wood attached a copy of his October 3, 1985, letter from Woods,
and stated he agreed to accept early retirement under the Rule of 70 Plan only because of
Woods’ offer to provide him and his spouse with lifetime health, dental, and life
insurance benefits. On May 30, 1995, Woods responded to Wood with the following
letter:
The Rule of 70 Plan that you retired under in 1985 was offered by
Woods Petroleum Corporation (“Woods”) and was only available to Woods
employees who were participants in the Woods Petroleum Corporation
Employee Pension Plan. Your retiree life and medical benefits were also
provided pursuant to a Woods policy. On July 31, 1995, Sunshine Mining
& Refining Company’s obligation to continue Woods’ employee benefit
plans ceases.
Id. at 156.
Plaintiffs Deboard and Wood hired counsel, and by letter dated June 29, 1995,
opposed Sunshine’s decision to terminate their insurance coverage under the Rule of 70
Plan. The letter requested that Sunshine provide Deboard and Wood with various
8
documents concerning the plans, provide them with a statement of specific reasons for
termination of their insurance coverage, notify them of any additional information
necessary to decide the issue, and provide or disclose any other procedures with which
they should comply. Woods responded on July 11, 1995, by providing copies of various
documents pertaining to the insurance plans at issue, but it did not alter or further explain
the decision to discontinue payment of insurance premiums on behalf of plaintiffs.
Plaintiffs filed suit against defendants on July 25, 1995, seeking declaratory and
injunctive relief, as well as compensatory damages. On March 13, 1996, plaintiffs moved
for summary judgment. Defendants responded with a cross-motion for summary
judgment. On July 22, 1996, the district court granted plaintiffs’ motion in part, denied it
in part, and denied defendants’ motion in its entirety. In pertinent part, the district court
concluded “there [wa]s no genuine issue of material fact regarding whether the ‘Rule of
70 Plan’ existed as a separate plan under ERISA,” but that “genuine issues of material
fact exist[ed] as to whether Defendants either misrepresented the duration of benefits
under the plan, or improperly amended the plan.” Id. at 670. The district court further
concluded defendants violated ERISA by failing to provide plaintiffs Deboard and Wood
with copies of the merger agreement between Sunshine and Woods, which defendants
claimed gave them authority to discontinue the payment of insurance premiums on behalf
of plaintiffs. Id.The remaining aspects of the case proceeded to trial and the district court orally
9
entered its findings of fact and conclusions of law on October 31, 1996. The district court
found in favor of plaintiffs on their claims of breach of fiduciary duty and for entitlement
to continuing payment of benefit insurance premiums by defendants. Id. at 1291. The
court ordered that plaintiffs “be restored to their status as to company-defrayed health
insurance premiums as that status was in effect on the day after their respective
retirements.” Id. at 1299. With respect to dental and life insurance coverage, the district
court found “the October Three plan [wa]s not explicit about the lifetime aspect of . . .
company-paid premiums,” and concluded plaintiffs were entitled to no remedy with
respect to those plans. Id. The district court did not impose any penalties on defendants
for failing to timely provide plaintiffs Deboard and Wood with copies of the merger
agreement.
Plaintiffs moved for fees and costs, and defendant filed a cross-motion for partial
recovery of fees and costs. The district court awarded attorney fees in the amount of
$95,795.44 to plaintiffs.
II.
Defendants’ appeal
Appellate jurisdiction/timeliness of appeal
Plaintiffs have moved to dismiss a portion of defendants’ appeal for lack of
jurisdiction. According to plaintiffs, defendants had thirty days from the district court’s
February 19, 1997, resolution of defendants’ cross-motion for fees and costs to appeal the
10
underlying judgment on the merits. Because defendants waited until after the district
court’s resolution of plaintiffs’ fee request, plaintiffs contend defendants’ notice of appeal
is effective only as to the portion of the judgment pertaining to plaintiffs’ fee request (i.e.,
the only portion of the judgment entered within thirty days of the notice of appeal).
Rule 4 of the Federal Rules of Appellate Procedure sets forth “mandatory and
jurisdictional” time requirements for appealing a judgment in a civil case. Browder v.
Director, Dep’t of Corrections of Illinois, 434 U.S. 257, 264 (1978). In pertinent part,
Rule 4 provides3:
(a)(1) Except as provided in paragraph (a)(4) of this Rule, in a civil
case in which an appeal is permitted by law as of right from a district court
to a court of appeals the notice of appeal required by Rule 3 must be filed
with the clerk of the district court within 30 days after the entry of the
judgment or order appealed from . . . .
***
(4) If any party files a timely motion of a type specified immediately
below, the time for appeal for all parties runs from the entry of the order
disposing of the last such motion outstanding. This provision applies to a
timely motion under the Federal Rules of Civil Procedure:
***
(D) for attorney’s fees under Rule 54 if a district court under
Rule 58 extends the time for appeal; [or]
(E) for a new trial under Rule 59 . . . .
As referenced in Rule 4, Rule 58 of the Federal Rules of Civil Procedure allows a district
court, before a notice of appeal has been filed, to “order that [a] motion [for taxation of
costs and fees] have the same effect under Rule 4(a)(4) of the Federal Rules of Appellate
3
Rule 4 was modified effective December 1, 1998. We have relied on the prior
version of Rule 4 in effect at the time the relevant procedural events in this case occurred.
11
Procedure as a timely motion under Rule 59.” Id.Here, defendants did not rely on the basic thirty-days-from-entry-of-judgment
“window” provided by Federal Rule of Appellate Procedure 4(a)(1), which would have
given them thirty days from the entry of judgment on January 6, 1997, or until February 6,
1997, to file their notice of appeal. Instead, defendants sought to extend the time for
filing their notice of appeal by moving the district court to order, pursuant to Federal Rule
of Civil Procedure 58, that their cross-motion for fees and costs “have the same effect
under Rule 4(a)(4) of the Federal Rules of Appellate Procedure as a timely-filed motion
under Rule 59.” App. at 887. Because the district court granted defendants’ motion, the
thirty-day period for filing a notice of appeal did not begin to run until “the entry of the
order disposing of” defendants’ cross-motion for fees and costs.4 Fed. R. App. P. 4(a)(4).
The timeliness of defendants’ appeal turns on when the district court’s order
disposing of their cross-motion for fees and costs was “entered” for purposes of Rule
4(a)(4). Federal Rule of Appellate Procedure 4(a)(7) provides that an “order is entered
4
Defendants contend once the district court ordered that their cross-motion for
fees would have the same effect for purposes of Rule 4(a)(4) as a Rule 59 motion, the
time period for filing a notice of appeal did not begin to run until all outstanding fee
motions were resolved. This contention finds no support in the language of Rule 4(a)(4).
Although the time period for filing a notice of appeal does not begin to run until all of the
types of motions listed in Rule 4(a)(4) are resolved by the district court, fee motions
qualify only if “a district court under Rule 58 extends the time for appeal.” Fed. R. App.
P. 4(a)(4)(D). Here, the district court did not order that resolution of plaintiffs’ motion
for fees would extend the time for appeal. Thus, the thirty-day period for filing a notice
of appeal began to run upon the resolution of the single outstanding Rule 4(a)(4) motion,
i.e., defendants’ cross-motion for fees.
12
within the meaning of . . . Rule 4(a) when it is entered in compliance with Rules 58 and
79(a) of the Federal Rules of Civil Procedure.” Fed. R. App. P. 4(a)(7). In turn, Federal
Rule of Civil Procedure 58 provides, in pertinent part, that “[e]very judgment shall be set
forth on a separate document,” and “is effective only when so set forth and when entered
as provided in Rule 79(a).” Fed. R. Civ. P. 58; see Bankers Trust Co. v. Mallis, 435 U.S.
381, 384 (1978) (noting purpose of Rule 58 is to eliminate confusion as to exactly when
the time for filing a notice of appeal begins to run); Clough v. Rush, 959 F.2d 182, 184-
85 (10th Cir. 1992) (discussing history and purpose of Rule 58).
Although the district court issued an order on February 19, 1997, denying
defendants’ cross-motion for fees, that order did not meet the requirements of Rule 58. In
particular, the order was six pages long and contained legal analysis and reasoning. See
Clough, 959 F.2d at 185 (concluding 15-page order containing legal analysis and
reasoning did not satisfy Rule 58 requirements). Thus, the order “could not, standing
alone, trigger the appeal process.” Id. In reaching this conclusion, we recognize that
many courts have held a separate document is unnecessary in situations where a district
court issues an order denying a Rule 59 or Rule 60(b) motion. See Marre v. United
States, 38 F.3d 823, 825 (5th Cir. 1994); Wright v. Preferred Research, Inc., 937 F.2d
1556, 1560 (11th Cir. 1991); Hollywood v. City of Santa Maria, 886 F.2d 1228, 1231 (9th
Cir. 1989); Charles v. Daley, 799 F.2d 343, 347-48 (7th Cir. 1986). But see Fiore v.
Washington Co. Comm. Mental Health Ctr., 960 F.2d 229, 234-35 (1st Cir. 1992).
13
Without deciding that particular issue, we conclude that, because motions for attorney
fees are separate from and collateral to any decision on the merits, see White v. New
Hampshire, 455 U.S. 445, 451-52 (1982), they should be accorded the same dignity under
Rule 58 as judgments on the merits. Just as a judgment on the merits must always be
accompanied by a separate document, so should a district court’s order denying or
granting a motion for fees.
Having examined the record on appeal, it is our conclusion that Rule 58’s separate
document requirement was not actually satisfied in this case. Although the district court
issued a one-page judgment on June 9, 1997, that document was narrowly confined to the
granting of plaintiffs’ fee request. Thus, the district court’s denial of defendants’ cross-
motion for fees was not “entered” in accordance with Rule 58, and the thirty-day time
period for appealing that denial and the underlying judgment never began to run.
Nevertheless, since there is “no question . . . as to the finality of the district court’s
decision,” either on the merits or as to the defendants’ cross-motion for fees, we may
properly exercise jurisdiction over all of the issues raised in defendants’ appeal pursuant
to 28 U.S.C.§ 1291. Bankers Trust, 435 U.S. at 382-88; Burlington Northern R.R. Co. v.
Huddleston, 94 F.3d 1413, 1416 n.3 (10th Cir. 1996).
Creation of new employee welfare benefit plan
During the course of the proceedings, the district court granted partial summary
14
judgment in favor of plaintiffs, concluding the uncontroverted facts demonstrated the
October 3, 1985, letters created a new ERISA plan, separate from the employee welfare
benefit plan already in existence at Woods. On appeal, defendants challenge this ruling,
contending “Woods did not intend to create a new and separate ERISA plan via the
October 3rd letter, but merely described in the October 3rd letter the very same benefits to
which Plaintiffs and others similarly situated were entitled under” Woods’ existing
medical insurance plan. Defs.’ Opening Br., at 15. According to defendants, the existing
medical plan contained a clause affording Woods the right to amend or terminate the plan
at any point. Based upon this alleged clause, defendants contend plaintiffs had no vested
rights in lifetime insurance benefits, leaving defendants free to subsequently alter the plan
and require plaintiffs to pay their own insurance premiums.
We review a district court’s grant of summary judgment de novo, applying the
same legal standard used by the district court pursuant to Federal Rule of Civil Procedure
56(c). See McKnight v. Kimberly Clark Corp., 149 F.3d 1125, 1128 (10th Cir.1998). We
also apply a de novo standard in determining whether ERISA governs a particular
insurance policy or set of insurance benefits. Gaylor v. John Hancock Mut. Life Ins. Co.,
112 F.3d 460, 463 (10th Cir. 1997).
Section 1132(a) of ERISA provides, in relevant part, that a participant or
beneficiary of a “plan” may bring suit “to recover benefits due to him under the terms of
his plan . . . .” 29 U.S.C. § 1132(a)(1)(B). As used in ERISA, the term “plan” includes
15
“employee welfare benefit plans,” 29 U.S.C. § 1002(3), which are plans “established or . .
. maintained for the purpose of providing . . . medical, surgical, or hospital care or
benefits, or benefits in the event of sickness, accident, disability, [or] death . . . .” 29
U.S.C. § 1002(1). Defendants do not dispute that plaintiffs’ retirement insurance benefits
are provided under an employee welfare benefit plan governed by ERISA. Instead,
defendants dispute the district court’s conclusion that the October 3, 1995, letters created
a new employee welfare benefit plan, separate from the one that already existed at Woods
and provided benefits to employees and retirees.
It is without question that an employer can have more than one employee welfare
benefit plan for purposes of ERISA. See, e.g., McMahon v. Digital Equip. Corp., 162
F.3d 28, 33 (1st Cir. 1998) (employer’s short-term disability benefits program included
three plans); Silverman v. Mut. Benefit Life Ins. Co., 138 F.3d 98, 100 n.1 (2d Cir.)
(employer established separate plans for union and non-union employees), cert. denied,
119 S. Ct. 178 (1998); Smith v. Ameritech, 129 F.3d 857, 860 (6th Cir. 1997) (employer
offered two plans which provided disability benefits to employees); Weir v. Federal Asset
Disposition Ass’n, 123 F.3d 281, 284-86 (5th Cir. 1997) (employer adopted three
severance plans that provided benefits independent of each other). In Chiles v. Ceridian
Corp., 95 F.3d 1505 (10th Cir. 1996), we were asked to determine whether four benefit
plan documents should be treated as creating four separate plans or one comprehensive
plan for purposes of ERISA. Although we cited various factors relevant to the
16
determination in that case, we emphasized the ultimate question was whether the
evidence, considered as a whole, evinced an intent on the part of the company to establish
one plan or four plans. Id. at 1511.
Applying Chiles in this case, we conclude the uncontroverted evidence submitted
by the parties in connection with their summary judgment motions demonstrates Woods
did, in fact, intend to create a new employee welfare benefit plan for those persons who
took advantage of the voluntary early retirement subsidy. Prior to offering the voluntary
early retirement subsidy, Woods had in place an employee welfare benefit plan offering
health, dental, and life insurance coverage to its employees. Notably, the Summary Plan
Description (SPD) for that plan was poorly drafted. Although the SPD stated that “health
and dental benefits are paid for mainly by your employer,” App. at 274, it said nothing
about the extent to which Woods would cover those premiums, nor did it say anything
about lifetime insurance benefits to employees and/or retirees. There is no support for
defendants’ assertion that Woods’ existing employee welfare benefit plan allowed for the
insurance benefits now at issue in this case. In accordance with the terms of the October
3, 1985, letters, we conclude Woods intended to create a new benefit plan for a specific
group of employees, i.e., those employees who agreed to participate in the voluntary early
retirement subsidy. Although defendants emphasize the letters opened with the phrase
“[f]or informational purposes only,” the language of the letters clearly indicates an intent
on the part of Woods to provide plaintiffs with lifetime health insurance benefits, and
17
thereby to create a new limited benefit plan for plaintiffs. Moreover, the uncontroverted
evidence indicates it was precisely the lifetime guarantee of insurance benefits that
induced plaintiffs to participate in the voluntary early retirement subsidy.
In reaching this conclusion, we note the October 3 letters satisfied the minimum
requirements for establishing an ERISA plan. Not only did the letters specify a funding
mechanism for the plan (i.e., that Woods would pay the health insurance premiums), they
also allocated ongoing operational and administrative responsibilities to the employer.
See Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12 (1987). In particular, Woods was
required under the plan to regularly pay the health, dental, and life insurance premiums
for plaintiffs, and was further required to allocate company resources to do so. Thus, in
the words of the Supreme Court, the plan placed “periodic demands” on Woods’ assets,
“creat[ing] a need for financial coordination and control.” Id. In addition to the periodic
demands on Woods’ assets, the plan also required Woods to keep track of when each
retiree died because the plan expressly provided for more limited survival benefits for
surviving spouses of retirees. Aside from establishing an administrative scheme, the
documents sufficiently described the intended benefits (lifetime health insurance benefits,
etc.), the intended class of beneficiaries (persons participating in the voluntary early
retirement subsidy), and the procedures for receiving benefits. Siemon v. AT&T Corp.,
117 F.3d 1173, 1178 (10th Cir. 1997). Finally, “in light of all the surrounding facts and
circumstances, a reasonable employee would [have] perceive[d] an ongoing commitment
18
by the employer to provide employee benefits.” Belanger v. Wyman-Gordon Co., 71 F.3d
451, 455 (1st Cir. 1995).
We note other circuits have found the existence of ERISA plans under similar
circumstances. For example, in Williams v. Wright, 927 F.2d 1540 (11th Cir. 1991), the
court held a letter to a single employee outlining pension and insurance benefits the
employee would receive upon retirement created both an employee pension benefit plan
and an employee welfare benefit plan for purposes of ERISA. Even though (as here) the
payment of benefits occurred out of the employer’s general funds rather than a separate
trust, the court held the employer could not evade the requirements of ERISA where the
facts otherwise demonstrated the existence of a plan. Id. at 1544. Similarly, in Cvelbar v.
CBI Illinois Inc., 106 F.3d 1368 (7th Cir. 1997), the court concluded a written agreement
entered into by plaintiff, a management employee, and defendant, the employer/bank,
constituted an ERISA plan because it provided for continuing severance benefits upon
plaintiff’s termination. Id. at 1375-79.
In sum, we agree with the district court’s conclusion that the October 3 letters
created a new employee welfare benefit plan for purposes of ERISA.5 See generally
5
Although not specifically discussed by the parties, it is arguable there was a third
ERISA plan created in the fall of 1996 when the company offered the second buyout
program to its employees, including plaintiff Van Hoy. Assuming, arguendo, that a third
plan was created, we conclude its terms were substantially similar to the plan created in
the fall of 1995 via the October 3 letters (save for the $20 monthly co-pay requirement for
dependent health care coverage).
19
Elmore v. Cone Mills Corp., 23 F.3d 855, 861 (4th Cir. 1994) (holding an “informal plan
may exist independent of, and in addition to, a formal plan as long as the informal plan
meets” all of the necessary requirements under ERISA).
Terms of the new employee welfare benefit plan
As a fall-back argument, defendants contend even if the October 3 letters created a
new employee welfare benefit plan for purposes of ERISA, the new plan effectively
incorporated a clause in the existing plan allowing Woods the right to amend or terminate
at any time. For reasons outlined below, we find it unnecessary to conclusively determine
whether that clause was incorporated into the new plan because, even if it was, the clause
is ambiguous and does not provide Woods with the right to revoke its promise to pay
plaintiffs’ health insurance premiums.
Although ERISA pension plans are subject to mandatory vesting requirements, see
29 U.S.C. § 1053, ERISA employee welfare benefit plans are not subject to such
standards, and employers are generally free to amend or terminate these plans unilaterally
(assuming the plan provides for this right). See Curtiss-Wright Corp. v. Schoonejongen,
514 U.S. 73, 78 (1995). Nevertheless, an employer and employee may contract for vested
post-employment welfare benefits. See Chiles, 95 F.3d at 1510; In re White Farm Equip.
Co., 788 F.2d 1186, 1193 (6th Cir. 1986).
In deciding whether an ERISA employee welfare benefit plan provides for vested
20
benefits, we apply general principles of contract construction. In particular, “the Supreme
Court has directed us to interpret an ERISA plan like any contract, by examining its
language and determining the intent of the parties to the contract.” Capital Cities/ABC,
Inc. v. Ratcliff, 141 F.3d 1405, 1411 (10th Cir.) (citing Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 112-13 (1989)), cert. denied, 525 U.S. 873 (1998). If we determine
“the plan language is ambiguous, we may look at extrinsic evidence.” Id.Here, Massachusetts Mutual Life Insurance Company, the insurer for Woods’
employee welfare benefit plan, issued an SPD in March 1985. The first page of the SPD
(after the cover page) contains three separate headed paragraphs:
INTRODUCTION
This booklet is the Summary Plan Description of your employee benefit
plan. This summary tells how you may become and remain a plan member.
Your health and dental insurance benefits are paid for mainly by your
employer. Massachusetts Mutual Life Insurance Company pays certain
amounts above what your employer pays, and has full responsibility for
claim funding upon termination of the group policy. The plan’s benefits are
described, including any limitations or exclusions that may affect your right
to benefits. The procedure to claim plan benefits is also discussed.
Plan Sponsor and Plan Administrator
Woods Petroleum Corporation
3817 Northwest Expressway
Suite 700
Oklahoma City, OK
The plan provides medical and dental expense benefits. Should you have
any question about the plan, contact the plan administrator’s office. They
will explain the benefit plan to you and help you present any claim for
benefits.
The Insurer
The plan benefits are provided through a group insurance policy. That
21
policy was issued to the plan sponsor by Massachusetts Mutual Life
Insurance Company, called the “insurer” in this summary. Though the plan
is intended to continue, it can be changed or terminated without the consent
of the plan members. Your insurance policy rights, in such an event, are
shown in this summary. If you wish to review the complete policy, please
see the plan sponsor.
App. at 274.6
Although defendants contend this language clearly provided them with the right to
alter or terminate plaintiffs’ benefits at any time, we disagree. We note that the only
reference to changing or terminating the plan is contained under the heading “The
Insurer,” which refers exclusively to Massachusetts Mutual. In our view, this language
and its placement were simply intended to emphasize that Massachusetts Mutual retained
the right to terminate or modify the group policy purchased by Woods for its employees.
Had the parties intended for Woods, the plan sponsor, to be able to modify or terminate the
plan, we believe the SPD should have said so under the heading “Plan Sponsor and Plan
Administrator” (or somewhere other than under the heading “The Insurer”).7
Given the ambiguities in the clause cited by defendants, we turn to extrinsic
evidence of the parties’ intent to create vested insurance benefits. For many of the reasons
6
The district court accurately described the language of the SPD as “muddy and
baffling.” App. at 1295.
7
In other cases, the SPD’s at issue have more clearly provided the employer/plan
sponsor the right to amend or terminate. See, e.g., Sprague v. General Motors Corp., 133
F.3d 388, 401 (6th Cir.) (en banc) (stating SPD specifically provided that General Motors,
the employer/plan sponsor, “reserve[d] the right to amend, change or terminate the Plans
and Programs described in this booklet”), cert. denied, 524 U.S. 923 (1998).
22
already discussed, we conclude the terms of the October 3 letters demonstrate an intent on
the part of defendants to provide plaintiffs with vested insurance benefits. In particular,
the letters unequivocally indicated persons taking advantage of the early retirement plan
would be provided with health insurance for their lifetimes, at company expense.
Although the letters indicated they were for “informational purposes only,” nowhere was
there a reference to the SPD, nor was there any other indication that the benefits described
in the letters could be unilaterally altered by the company at a later date. We conclude the
conduct of the parties also demonstrates an intent to create vested insurance benefits. For
example, in July 1986, defendants altered the terms of its plan for existing employees,
requiring employees to pay $20 per month for dependent health insurance coverage.
Notwithstanding the change to the existing plan, defendants made no attempt to alter the
new plan and continued to provide plaintiffs with dependent coverage at company
expense. Indeed, for nearly ten years, defendants provided plaintiffs and their spouses
with health insurance coverage at company expense. Finally, when defendants attempted
to alter the plan in 1995, they did not purport to rely on the above-cited clause in the SPD,
or on any other supposed right under ERISA to unilaterally modify the new plan. Instead,
defendants relied on a section of the merger agreement between Woods and Sunshine,
pursuant to which Sunshine agreed not to terminate or modify, for a period of ten years,
any existing Woods’ employee welfare benefit plans.
In conclusion, we agree with the district court that defendants intended, at the time
23
they offered early retirement to plaintiffs, to create vested rights to lifetime health
insurance coverage.
Fee award
Although defendants have also challenged the district court’s award of fees in favor
of plaintiffs, they argue only that the fee award should be reversed in the event the
underlying judgment in favor of plaintiffs is reversed. Because we find no merit to
defendants’ appeal, we likewise reject their attack on the fee award.
Plaintiffs’ cross-appeals
Extent of coverage under new plan
Plaintiffs contend the district court erred in determining the relief to which they
were entitled under the new plan. In particular, plaintiffs contend the district court erred in
failing to order defendants to provide them with the same level and type of health
insurance benefits promised them at the time of their retirement (plaintiffs claim
defendants are now attempting to provide them with the cheapest health insurance they can
purchase). Plaintiffs also contend “[i]t is manifest from the language of the October 1985
letters that dental coverage and life insurance coverage would be provided for the lifetimes
of the Rule of 70 Plan participants,” and “[t]here is no basis in the record to support the
district court’s refusal to reinstate these coverages along with the medical insurance
coverage.” Pls.’ Opening Br., at 37.
24
“A court must review [a] decision denying benefits under an ERISA plan de novo
‘unless the benefit plan gives the administrator or fiduciary discretionary authority to
determine eligibility for benefits or to construe the terms of the plan.’” Capital Cities, 141
F.3d at 1408 (quoting Firestone, 489 U.S. at 115). Because the documents relating to the
new plan do not confer discretionary authority on defendants to determine entitlement to
benefits, the district court properly applied a de novo standard in interpreting the plan. See
id. In turn, we apply a de novo standard of review to “[q]uestions of law, such as a court’s
interpretation of an ERISA plan when the plan’s terms are clear and there is no grant of
interpretive authority to a plan administrator – or even the preliminary determination
whether an ERISA’s plan language is silent or ambiguous . . . .” Sunbeam-Oster Co.
Group Benefits Plan v. Whitehurst, 102 F.3d 1368, 1373 (5th Cir. 1996). Any factual
findings made by the district court, “such as the intent of the parties regarding an ERISA
plan, are reviewed for clear error.” Id.Turning first to the dental and life insurance coverage, the October 3 letters
provided plaintiffs would be “allowed to continue participation in the Group Dental Plan
at company expense,” and “would also be covered for $10,000 life insurance on
[themselves] and $5,000 on [their] spouse[s] with Security Connecticut, with the
premiums for these coverages also paid by the Company.” App. at 116. Nothing in this
language suggests an intent on the part of defendants to create vested rights in dental and
life insurance coverage. We conclude the district court did not err in refusing to grant
25
relief to plaintiffs on their claims for dental and life insurance coverage.
The more difficult issue is what type of health insurance coverage was
contemplated by the new plan. The October 3 letters provided:
[T]he Plan provides that you and your eligible dependents would be entitled
to receive health care under [Woods’] current group hospitalization plan
with Massachusetts Mutual, fully paid for at Woods Petroleum
Corporation’s expense until the time of your death. At that time, the
hospitalization insurance would continue in full force for one year from the
anniversary date of the retiree’s death for the retiree’s spouse at no cost to
your spouse. However, within the year period from the date of the retiree’s
death, should the spouse remarry, all coverage would cease immediately.
After the year passes, the spouse may elect to convert to a private plan with
Massachusetts Mutual with the cost being borne 100% by the spouse.
During your lifetime, you would simply submit your claims for
reimbursement to the Company (via the Personnel Department) as you do
now. Once converted to a private plan, your premiums and claims would be
handled direct with the insurance carrier instead of Woods Petroleum
Corporation.
***
Something that you do need to keep in mind, once you become age
65, you would need to submit your claims first to Medicare, as it would then
become the primary carrier. You would then submit any amounts not paid
by Medicare to Massachusetts Mutual as the secondary carrier. (Be sure that
you apply for Medicare upon turning age 65.)
App. at 116-17. The district court implicitly concluded the letters were ambiguous
regarding the extent of health insurance coverage to be provided to plaintiffs. It then
found, after presumably reviewing the extrinsic evidence, that the parties did not intend a
particular type or level of coverage.
After carefully examining the appellate record, we conclude the district court erred
in finding that the parties intended nothing with respect to the extent or type of health
26
insurance coverage to be afforded plaintiffs under the Rule of 70 plan. The October 3
letters specifically indicated that plaintiffs would be provided the same health insurance
benefits as Woods’ current employees. Further, the extrinsic evidence presented by the
parties clearly and unequivocally indicated that, for a period of approximately ten years
following implementation of the Rule of 70 plan, Sunshine afforded plaintiffs a level of
health insurance coverage consistent with that provided to Sunshine’s current employees.
Thus, both the language of the October 3 letters and the parties’ conduct flies directly in
the face of the district court’s finding. Even assuming, arguendo, the evidence was
equivocal regarding the parties’ intent on this point, we believe the ambiguity should have
been construed in favor of plaintiffs. See, e.g., Morton v. Smith, 91 F.3d 867, 871 n.1 (7th
Cir. 1996) (“The federal common law of ERISA . . . provide[s] that ambiguous terms in
benefit plans should be construed in favor of beneficiaries” where there is “an absence of
conclusive evidence about intent.”).
We conclude plaintiffs are entitled to the same type of coverage, at defendants’
expense, as provided to defendants’ current salaried employees.8 If defendants were to
change coverage for their current employers, such changes would also affect plaintiffs.
Defendants could not, however, place plaintiffs in a low-cost insurance plan while
8
The record suggests this is how the parties have effectively interpreted the plan
since its inception. In particular, the record indicates that at some point after 1985,
defendants changed insurers from Massachusetts Mutual to Blue Shield of Idaho, but
continued to provide plaintiffs with the same coverage as provided to defendants’
employees.
27
simultaneously providing a higher level of service and benefits to their current employees.
Given our interpretation of the new plan, it is necessary to reverse the district
court’s judgment on this point and remand the case to the district court for entry of
judgment consistent with this opinion.
District court’s refusal to impose penalties on defendants
In ruling on the parties’ cross-motions for summary judgment, the district court
concluded defendants violated § 1024(b)(4) of ERISA and were subject to penalties for
failing to provide plaintiffs Wood and Deboard, upon request, with copies of the 1985
merger agreement between Woods and Sunshine (which defendants had originally relied
on to justify their decision to discontinue paying plaintiffs’ insurance premiums). App. at
669-70. However, the district court ordered that the “[a]mount of penalty, if any, is left to
trial.” Id. at 670. At trial, plaintiffs introduced an exhibit (Exhibit 54) outlining the
maximum penalties allowable under 29 U.S.C. § 1132(c) for the violation found by the
district court, as well as other similar violations not cited by the district court. Supp. App.
at 264-66. According to that exhibit, the district court had authority to award $4,643,200
in penalties. Id. at 266. At the conclusion of the bench trial, the district court decided not
to impose any penalties on defendants for their violation of ERISA’s document disclosure
requirements. In support of its decision, the district court concluded (1) plaintiffs’
calculation of entitlement to penalties was “padded,” “absolutely preposterous,” and not
28
filed in good faith; (2) plaintiffs filed this case shortly after requesting the merger
agreement, had access to discovery under the Federal Rules of Civil Procedure, and could
have obtained the agreement that way; (3) “there was no sinister intent behind”
defendants’ response, “nor any credible showing . . . of any cover-up about the company’s
reasons for taking the action[s]” at issue; and (4) any purpose to be served by invoking the
disclosure rules was subsumed in the disposition of this case. Id. at 1299-1301.
Plaintiffs challenge the district court’s refusal to grant any monetary penalties. In
particular, plaintiffs contend the district court erred in relying on the absence of prejudice
to plaintiffs, and the lack of bad faith on the part of defendants in failing to provide the
requested documents. Plaintiffs further argue that even if those factors were relevant, the
evidence demonstrates both that they were prejudiced by defendants’ failure to produce the
requested merger agreement, and that defendants’ failure was a product of bad faith. As
for Exhibit 54, plaintiffs contend it was not “padded,” but was an outline of the maximum
penalties the district court had authority to impose. Finally, plaintiffs argue the district
court misunderstood the legislative purposes of § 1132(c), i.e., “to avoid rather than
promote litigation and its attendant discovery battles.” Pls.’ Opening Br., at 42.
A district court’s assessment of, or refusal to assess, penalties under 29 U.S.C.
§ 1132(c) is reviewed for an abuse of discretion. See 29 U.S.C. § 1132(c)(1)(B)
(specifically emphasizing that district court, “in its discretion,” may order statutory
penalties); Wilcott v. Matlack, Inc., 64 F.3d 1458, 1461 (10th Cir. 1995). Under this
29
standard, we will reverse only if we have a definite and firm conviction that the district
court made a clear error of judgment or exceeded the bounds of permissible choice in the
circumstances. Moothart v. Bell, 21 F.3d 1499, 1504 (10th Cir. 1994).
Reviewing the record on appeal, we conclude the district court did not abuse its
discretion in choosing not to impose penalties on defendants. Although plaintiffs are
correct that neither prejudice nor bad faith is required for a district court to impose
penalties under 29 U.S.C. § 1132(c), the presence or absence of these factors can certainly
be taken into account by a district court in deciding whether to exercise its discretion and
impose a penalty. See Moothart, 21 F.3d at 1506. Thus, the district court did not err in
relying on these factors. Moreover, the district court’s findings concerning prejudice and
bad faith are not clearly erroneous. As for the district court’s characterization of Exhibit
54, there is support in the record for the district court’s conclusion. As noted, the district
court concluded defendants failed to provide a single document (the merger agreement),
yet Exhibit 54 referred to numerous other documents that defendants allegedly failed to
produce. Finally, we find no merit to plaintiffs’ assertion that the district court failed to
appreciate the purpose of penalties under § 1132(c).
Amount of fee award
Plaintiffs contend the district court erred in establishing the amount of the fee
award. More specifically, plaintiffs contend they should have been allowed to recover fees
30
reasonably expended in pursuit of all their claims, not just the claims on which they
prevailed at trial.
Under ERISA, a district court “in its discretion may allow a reasonable attorney’s
fee and costs of action to either party.” 29 U.S.C. § 1132(g)(1). In deciding whether to
exercise its discretion and award fees, a district court should consider the following
nonexclusive list of factors: (1) the degree of the offending party’s culpability or bad faith;
(2) the degree of the ability of the offending party to satisfy an award of attorney fees; (3)
whether or not an award of attorney fees against the offending party would deter other
persons acting under similar circumstances; (4) the amount of benefit conferred on
members of the plan as a whole; and (5) the relative merits of the parties’ positions. Pratt
v. Petroleum Prod. Management Inc. Employee Sav. Plan & Trust, 920 F.2d 651, 664
(10th Cir. 1990). We review a district court’s fee decision for an abuse of discretion.
Thorpe v. Retirement Plan of the Pillsbury Co., 80 F.3d 439, 445 (10th Cir. 1996).
In support of their motion for fees and costs, plaintiffs submitted an affidavit from
counsel requesting $158,145.75 in fees. App. at 778. The district court granted plaintiffs’
motion in part, concluding “plaintiffs should be awarded a reasonable attorney’s fee for
their success in gaining reinstatement of health insurance benefits for participants and
beneficiaries of the Rule of 70 Plan.” Id. at 895. The district court agreed with
defendants, however, that it “should exclude time spent by plaintiffs’ counsel on patently
meritless issues.” Id. at 897. In particular, the district court concluded plaintiffs should
31
not recover fees for their “quest for a lump-sum payment characterized as ‘restitutionary
recovery of future benefits’ [which] was obviously without merit,” or their “quest for an
assessment of exorbitant penalties under 29 U.S.C. § 1132(c)(1).” Id. The district court
further concluded the amount sought by plaintiffs was unreasonable because they (1)
chose to employ four attorneys, even though the case did not warrant that many attorneys,
and (2) sought fees for time spent by their attorneys conferring about the case. Id. at 898-
99. Accordingly, the district court directed plaintiffs to “submit an amended affidavit of
counsel . . . containing an itemization of attorney’s fees for which defendants may
reasonably be charged consistent with this order.” Id. at 899. Plaintiffs complied with the
district court’s order and submitted an amended affidavit of counsel requesting
$127,727.75 in fees. Id. at 901. After reviewing the amended affidavit, the district court
concluded plaintiffs’ request was still “excessive,” was not in complete compliance with
the prior order, and needed to be reduced. The district court concluded “a percentage
reduction [wa]s the best way to reach a reasonable sum,” id., and reduced their fee request
by 25%, resulting in a total fee award of $95,795.44. Id. at 902.
We find no abuse of discretion on the part of the district court in determining
plaintiffs’ fee award. The district court carefully considered and weighed each of the five
relevant factors. In particular, it considered the relative merits of the parties’ positions on
each claim asserted by plaintiffs and chose to deny fees to plaintiffs for time expended on
two claims. Although different judges might have chosen to grant fees to plaintiffs for
32
their failure to report claim, we find no abuse of discretion on the part of the district court
in choosing otherwise. Indeed, the district court’s reasons for choosing not to grant fees
on that claim strike us as entirely reasonable:
Plaintiffs’ quest for an assessment of exorbitant penalties under 29
U.S.C. § 1132(c)(1) was . . . lacking in merit. The Court ruled as a matter of
law before trial that a particular document should have been furnished to
certain plaintiffs, and reserved for later decision the issue of what penalty (if
any) should be assessed on account of defendants’ nonproduction. Plaintiffs
chose that opportunity to generate a laundry list of materials that could have
been encompassed by their request for documents and an elaborate
calculation of fines applicable to those documents. By the time of trial,
plaintiffs’ calculation exceeded three million dollars. This was ridiculous.
A presentation to the Court concerning the penalty issues to be decided at
trial could easily have been prepared by a knowledgeable ERISA attorney
within two hours’ time.
App. at 897-98.
Having said this, we nevertheless conclude it is necessary to reverse and remand the
fee award in light of our decision regarding the extent of health care coverage to which
plaintiffs are entitled under the Rule of 70 plan. Because our decision in this regard alters
the amount of benefits conferred on plan members, and likewise alters the relative merits
of the parties’ positions, we conclude the district court should reevaluate the amount of
fees to which plaintiffs are entitled and determine whether an increased award is
appropriate.
Denial of motion to enforce judgment
On October 1, 1997 (after the entry of final judgment and the filing of notices of
33
appeal), defendants issued a memorandum to plaintiffs indicating there would be a change
in health insurance coverage for those plaintiffs over the age of 65. Supp. App. at 151.
More specifically, the memorandum indicated plaintiffs over the age of 65 would be
provided with health insurance coverage, at defendants’ expense, “by BlueLincs HMO, a
subsidiary of Blue Cross and Blue Shield of Oklahoma, through a program called
‘BlueLincs Senior.’” Id.Plaintiffs responded to the proposed change in coverage by filing a motion to
enforce judgment.9 Supp. App. at 118. Plaintiffs asked the district court “to direct the . . .
defendants to cease and desist from this threatened action to eliminate their supplemental
health benefits and to continue to provide medical benefits to the Medicare-eligible
plaintiffs consistent with those provided to other Rule of 70 Plan participants and required
by the outstanding order” of the court. Id. at 124. On December 4, 1997, the district court
denied plaintiffs’ motion, apparently treating the motion as a motion for clarification of
judgment under Fed. R. Civ. P. 60(a). The court noted it had “previously found that the
9
According to plaintiffs, this change in coverage meant changing from the
previous fee-for-service plan, in which plaintiffs could visit any doctor of their choice, to
an HMO plan, under which plaintiffs would have to seek and receive prior approval
before visiting a particular doctor. Plaintiffs also contend the BlueLincs program “is
offered to any Medicare-eligible individual free of charge,” and thus costs defendants
little or nothing to provide. In short, plaintiffs contend the BlueLincs program is “merely
a free substitute for Medicare made available to persons who are willing to surrender
control over the selection of the type and manner of the health care they receive in return
for such course of medical treatment as may be determined by the HMO.” Pls.’ Opening
Br. at 31.
34
Rule of 70 Plan did not promise lifetime medical benefits at a particular level of coverage,”
or “of a particular type.” Id. at 233. The district court further concluded the change in
coverage proposed by defendants “neither shift[ed] any cost to plaintiffs nor terminate[d]
medical insurance coverage; it merely alter[ed] the manner in which health care services
w[ould] be provided to Medicare/HMO-enrollee plaintiffs.” Id. Although the district court
acknowledged plaintiffs’ motion arose “from a lack of clarity in the Court’s prior findings,”
more specifically “imprecise language in the judgment,” it emphasized plaintiffs’ counsel
had prepared the judgment. Id. at 234.
On appeal, plaintiffs contend the district court erred in failing to grant their motion.
As with their separate attack on the underlying judgment, plaintiffs contend that under the
language of the October 3 letters they are entitled to the same type and level of coverage
provided to them at the time of their retirement. We find it unnecessary to address these
arguments, however, in light of our decision regarding the extent of health care coverage to
which plaintiffs are entitled under the Rule of 70 plan.10
III.
Plaintiffs’ motion to dismiss is DENIED. As regards defendants’ appeal, we
10
We note that the district court must nevertheless determine, on remand, whether
the BlueLincs coverage is consistent with our interpretation of the plan. In other words,
the district court must determine whether the BlueLincs program provides plaintiffs with
the same type of coverage that defendants’ current employees receive. If the answer to
that question is “no,” then defendants may not, consistent with the terms of the plan,
purport to provide plaintiffs with health insurance coverage under the BlueLincs program.
35
AFFIRM. As regards plaintiffs’ cross-appeals, we AFFIRM in all respects except for (1)
the health insurance coverage issue, which we REVERSE and REMAND for entry of
judgment consistent with this opinion, and (2) the fee award, which we REVERSE and
REMAND to the district court for further consideration.
36