Retiree Medical Benefits:

  • In Bender v. Newell Window Furnishings, Inc., No. 11-1335, 2012 U.S. App. LEXIS 9003 (6th Cir. May 3, 2012), the Sixth Circuit held that the defendant was bound as a successor liable under earlier collective bargaining agreements, which provided certain retirees with vested rights to companypaid health insurance and/or Medicare Part B premium reimbursements. First, the Sixth Circuit affirmed the district court’s ruling that the defendant was a successor-in-interest to prior collective bargaining agreements because, in related litigation, the defendant admitted that it was a successorin- interest with respect to healthcare benefits under the prior collective bargaining agreements, and certain agreements reflected the employer’s assumption of “all collective bargaining agreements and all Liabilities associated therewith,” expressly including liabilities associated with employee benefit plans. Next, the court determined that the right to company-paid health insurance had vested for certain employees. The Sixth Circuit rejected the defendant’s argument that the CBAs incorporated by reference reservation-of-rights language in the summary plan descriptions. The court also rejected the defendant’s claim that such language in the SPDs was operative in and of itself because competing language in the SPDs reaffirmed that the CBAs would control in the event of a conflict. In addition, the court found that full reimbursement of Medicare Part B premiums vested for certain employees as evidenced by a written settlement agreement and extrinsic evidence, including deposition testimony, affidavits, letters to employees, and a due diligence memorandum. Finally, the Sixth Circuit affirmed the district court’s rejection of the defendant’s statute of limitations defense because there had not been a “clear repudiation” of the promised health benefits within the analogous state statutory period.
  • In Alday v. Raytheon Co., No. 08-16984, 2012 U.S. App. LEXIS 10169 (9th Cir. May 21, 2012), the Ninth Circuit reaffirmed its 2010 opinion, holding that Raytheon expressly agreed to provide 100% company-paid healthcare coverage for eligible retirees and that this obligation survived the expiration of the collective bargaining agreements that originally gave rise to the obligation. The applicable collective bargaining agreements from 1990, 1993, 1996, and 1999 required Raytheon to pay 100% of the health insurance premiums for employees who retired under the plan’s “contributory option,” whereby they contributed three percent of their compensation, until the retiree reached age 65. In 2004, Raytheon amended the policy and began charging retirees monthly premiums for their health insurance coverage. In finding that the CBAs’ terms unambiguously established a contractual right to premiumfree health insurance until the retirees reached the age of 65, the Ninth Circuit dismissed Raytheon’s argument that reservation-of-rights clauses in the applicable plan documents allowed for Raytheon’s unilateral modification or termination of the premium payments for the retirees. Specifically, the court concluded that the CBAs did not incorporate the plans’ reservation-ofrights clauses with respect to Raytheon’s payment of the health insurance premiums. Instead, the Ninth Circuit found that these provisions related to the employer’s right to change the benefits provided under the plan - i.e., the terms of payment for medical services - rather than the payment of the health insurance premiums themselves.
  • In Beaty v. Continental Auto. Sys. U.S. Inc., No. 10-cv-2440, 2012 WL 1886134 (N.D. Ala. May 21, 2012), the district court granted final approval of a $23.8 million settlement in a class action alleging that defendant failed to provide retiree medical benefits guaranteed by agreements reached between the participants’ union (UAW) and the participants’ predecessor employers. In 2004, Chrysler sold its Huntsville, AL plant to Siemens. Prior to the sale, the UAW and Siemens agreed that the sale was contingent upon Siemens providing health benefits that “mirrored” those provided to UAW-represented Chrysler employees; this agreement included any successors to Siemens. In 2007, Continental acquired Siemens and the Huntsville plant. Plaintiffs claimed that Continental had not provided “mirrored” health benefits to Huntsville retirees. The settlement agreement between Continental and the participants requires that the settlement funds be added to a voluntary employee benefit association trust established between the UAW and Chrysler for the benefit of Huntsville retirees. The settlement also requires that benefits flowing from the trust for Huntsville retirees “mirror” the benefits provided to other UAW-represented Chrysler retirees.

Employer Stock:

  • In Lanfear v. Home Depot, Inc., --- F.3d ----, 2012 WL 1580614 (11th Cir. May 8, 2012), the Eleventh Circuit affirmed dismissal of an ERISA class action related to a company-stock fund offered in a retirement plan sponsored by Home Depot. After the company’s share price dropped on news that insider misconduct may have overstated earnings, participants sued various plan fiduciaries asserting that they (1) breached their duty of prudence by permitting ongoing investments in company stock, and (2) breached their duty of loyalty by making misleading statements in company SEC filings, which were incorporated by reference in participant communications. The district court granted defendants’ motion to dismiss, applying the so-called “Moench presumption” (named for the Third Circuit decision first adopting it) that ongoing company-stock investments were prudent if plan terms required a company-stock investment option. Joining several other circuits, the Eleventh Circuit held that the Moench presumption limits judicial review of company-stock investments to an abuse-of-discretion standard. Significantly, the court endorsed application of Moench to a motion to dismiss, although the court emphasized that the presumption had no evidentiary weight. The court held that the Moench presumption “embodies the notion of an outcome favored by the law; it prescribes who is to win in almost all of the circumstances that can be envisioned – not all, but almost all.” The court thus rejected plaintiffs’ prudence claims based on substantial short-term fluctuations in the company’s share price, observing that the settlor’s directions, as embodied in plan terms, reflect an intent to invest in company stock over the long term. The court also rejected the participants’ claims for breach of the duty of loyalty, which were based primarily on allegedly misleading information in SEC filings, because defendants were not acting as fiduciaries when they drafted, filed and distributed these materials. Finally, the court rejected class complaints that defendants should have informed them about the improper activities, concluding that there is no general duty to disclose nonpublic corporate information.
  • In Fisher v. JP Morgan Chase & Co., 10-1303-cv, 2012 WL 1592208 (2d Cir. May 8, 2012), the Second Circuit Court of Appeals (by summary order) upheld the district court’s decision dismissing plaintiffs’ ERISA “stock-drop” case. Plaintiffs alleged, among other things, that defendants negligently permitted participants of the JP Morgan Chase & Co. 401(k) plan to purchase and hold company stock at a time when the fiduciaries of the plan knew or should have known that it was imprudent to do so and that defendants misrepresented/failed to disclose material facts to plan participants about the company stock. In affirming the lower court’s dismissal of the lawsuit, the Second Circuit applied the Moench presumption of prudence at the pleadings stage, finding that the complaint did not allege “dire circumstances” that warranted the plan fiduciaries removing the company stock as an investment option under the plan. Moreover, the court held with respect to plaintiffs’ disclosure claim that plan fiduciaries have no duty to disclose non-public information about company stock to plan participants. Furthermore, even if there were misrepresentations made in the company’s SEC filings, the “defendants who signed or prepared the SEC filings were acting in a corporate, rather than ERISA fiduciary, capacity…” and as such, they could not be liable under ERISA.

Claims for Benefits:

  • In Fleisher v. Standard Insurance Co., --- F.3d ----, 2012 WL 1739710 (7th Cir. May 17, 2012), the Third Circuit affirmed dismissal of a participant’s claim that defendant Standard should not have offset long-term disability benefits by amounts he was receiving under another disability policy. At issue was whether the Standard plan, which allowed reductions for amounts received under another “group insurance policy,” authorized deductions for disability payments received under a separate disability policy held by plaintiff. Since the plan terms gave the administrator interpretive discretion, the court applied an abuse-of-discretion standard of review, and held that the plan administrator reasonably concluded that the other policy, which plaintiff obtained through his trade association, was “group insurance.” This, the court concluded, also made application of the deduction an appropriate use of the administrator’s discretion. One judge dissented, arguing that the case should be remanded for the lower court “to explore and determine the equitable factors in play,” such as whether to apply the doctrine of contra proferentem (i.e., the premise that ambiguous terms in contracts are construed against the drafter) and whether the administrator’s determination frustrated reasonable expectations of the insured. Addressing the dissent’s vigorous disagreement, the majority noted that these principles were not germane to abuse-ofdiscretion review, and stated that “[w]hether we would reach a different interpretation under de novo review is … irrelevant.”
  • In Hamburg v. Life Ins. Co. of N. Am., 2012 WL 1698160 (5th Cir. May 15, 2012), the court rejected a disability claimant’s appeal seeking a remand to the plan administrator to take additional evidence, because plaintiff failed to present the evidence during a protracted administrative review. The district court had limited its consideration to the record before the plan administrator, instead of considering a determination by the Social Security Administration (SSA) that plaintiff was disabled. On that record, the district court dismissed plaintiff’s claim. Noting that plaintiff had several opportunities to furnish the SSA decision to the administrator, the Fifth Circuit held that the administrative record “consists of relevant information made available to the administrator … in a manner that gives the administrator a fair opportunity to consider it.” Given the administrator’s offer to reconsider the claim and its request for new documentation, the Fifth Circuit characterized as “simply inexcusable” plaintiff’s failure to furnish the administrator with the SSA determination letter, and affirmed dismissal of the denial of disability benefits.