The opinion of the court was delivered by: LECHNER
This is a class action brought by plaintiffs Judd Alexander and Richard Edwards on behalf of themselves and persons similarly situated (collectively, the "Plaintiffs") against defendants Primerica Holdings, Inc. ("Primerica Holdings"), the Board of Directors of Primerica (the "Board of Directors"), James Dimon ("Dimon"), Irwin Ettinger ("Ettinger"), John Fowler ("Fowler") and ABC ("ABC") (collectively, "Primerica").
Plaintiffs brought suit to declare and enforce their asserted rights to medical insurance benefits, life insurance benefits and survivor income benefits under a retirement welfare benefits plan (the "Plan") established by the American Can Company ("American Can"), a predecessor of Primerica. Plaintiffs claim Primerica has violated the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., by modifying the Plan.
A. The Parties and the Plan
Primerica Holdings is a corporation organized under the laws of the State of Delaware; it maintains its principal place of business in the State of Connecticut. Amended Complaint, P 5. Dimon, Ettinger and Fowler are or were members of the Board of Directors of Primerica Holdings. Id., P 8. Primerica Holdings is the surviving entity of a merger between Primerica Holdings and Primerica Corporation ("Primerica Corporation") in December 1988. Id., P 6. Primerica corporation was organized under the laws of the State of New Jersey and, until April 1987, was known as American Can.
Id. Plaintiffs are either retired salaried employees of American Can or their surviving spouses. Id., PP 3-4, 11.
Beginning in 1957, American Can maintained the Plan which is a retirement welfare benefits plan for qualified salaried employees who retired. Id., P 21. The terms of the Plan were set forth in a series of summary plan descriptions (the "SPDs") which, pursuant to ERISA, must be furnished to Plan beneficiaries. See 29 U.S.C. § 1022. The benefits under the Plan included a pension, life insurance and medical insurance. Amended Complaint, P 21.
It is uncontroverted Plaintiffs are former salaried employees and that their surviving spouses are eligible to receive retirement welfare benefits under the Plan. It is also uncontroverted Plaintiffs received benefits under the Plan. Plaintiffs' allegations that "repeated representations were made to employees and retirees alike" that their retirement benefits would be provided by Primerica "for life" are, however, contested.
Id., P 22.
promised the Plaintiffs by various means, including oral representations, publications, documents, brochures and a general course of dealing that it would provide Plaintiffs with the protection and security of the American Can Retirement Program, including lifetime pension, life insurance and lifetime medical insurance benefits upon retirement and that the lifetime medical insurance benefits would be so provided at a fixed, nominal cost to retirees.
Id., P 23 (emphasis added). Plaintiffs further allege these benefits were "irrevocable upon retirement" and that American Can could neither unilaterally terminate any of the benefits nor unilaterally increase the cost of the medical insurance coverage.
Id., PP 25-27.
Plaintiffs allege that American Can "at no time reserved to itself the right to unilaterally terminate" benefits under the Plan or to increase the cost of those benefits. Id., PP 26-27. The SPDs, for their part, neither expressly prohibit nor expressly provide for raising the amounts of the mandatory contributions. All but one SPD, however, contain the following provision:
The Company expects to continue this Plan indefinitely, but necessarily reserves the right to amend, modify, or discontinue the Plan in the future in conformity with applicable legislation. . . .
Affidavit of Sal Giudice, dated 6 March 1991, Ex. A at 5.
In addition, it appears most employees of American Can signed one of two forms upon registering for coverage under the Plan. These forms indicate the contribution amount for retirees was understood to be subject to change. See Letter from Harry Kurzweil, dated 8 October 1992 (the "8 Oct. 1992 Letter"), at 2-3 (attached as Exhibit E to Kurzweil Aff.).
The first form ("Form A"), is a one page form entitled "Deduction Authorization -- Comprehensive Medical Plan Coverage For Retirees Receiving Benefits Under the American Can Company Plan For Salaried Employees." See id. Form A contains the following:
I understand that the monthly charge for this coverage is subject to change in the future. If the cost of this coverage is changed, I will be notified in advance and given the option of continuing my coverage at the new monthly cost or terminating my coverage.
I request and authorize you to direct Bankers Trust Company . . . to deduct from retirement payments I receive under the . . . Plan amounts equal to the coverage I have indicated above and to pay these amounts to American Can. . . . This authorization will continue to apply until canceled by me by written notice. . . . This authorization will not remain in effect if American Can discontinues extending medical coverage to me and/or to my eligible dependant.
The second form ("Form B") is a shorter version of Form A, entitled "Deduction Authorization Card For Retired Employees Who Are Receiving Benefits Under the American Can Company Retirement Plan For Salaried Employees and Who Desire To Obtain Major Medical Insurance Plan Coverage." Id. Form B contains the statement: "I want [the] Major Medical Insurance Plan coverage indicated by my check mark." Id. Form B then offers the retiree three options to choose from: (a) "Retiree with spouse ($ 7.10 $ 2.72 for each dependant child)," (b) "Retirees Only ($ 3.55 per month initially)" and (c) "Retiree with Spouse ($ 7.10 per month initially)." Id. (emphasis added). Form B also contains language similar to Form A:
On or about 9 January 1989, Primerica notified Plan beneficiaries it was increasing the amount of their monthly mandatory contributions to the group medical insurance plan. Amended Complaint, P 30. The contributions were increased from the then current amount of $ 5.00 per covered individual per month to $ 50.00 per covered individual per month. Id. The increase went into effect on 1 February 1989. Id. The contributions were and are automatically deducted from each Plan beneficiary's monthly pension check unless Primerica was or is notified the beneficiary intended to terminate his or her coverage. Id. Some members of the Plaintiffs' class apparently opted to terminate coverage under the Plan following the February 1989 increase. Subsequently, Plaintiffs commenced this suit against Primerica.
B. The Complaint and Class Certification
On 14 December 1989, Plaintiffs filed their complaint (the "Complaint"). The Complaint contained six counts -- four counts under common law contract theories of recovery (the "Common Law Contract Counts"), as well as two counts under ERISA for breach of fiduciary duty and failure to disclose reservation of rights. See Complaint, PP 28-71. In the Complaint, Plaintiffs demanded a "trial by jury as to all issues so triable." Id. at 31.
On 31 August 1990, Plaintiffs moved for class certification. See Notice of Motion, filed 31 August 1990. Primerica opposed the motion for certification because, inter alia, it argued the Common Law Contract Counts could not be litigated on a class-wide basis. On 15 October 1990, the motion for certification was denied without prejudice for the purpose of permitting the parties to submit briefs on whether the Common Law Contract Counts were preempted by ERISA. See Order, filed 15 October 1990.
In lieu of briefs concerning the pre-emption question, Plaintiffs requested and were given leave to file the Amended Complaint. See Order of Magistrate Judge Ronald J. Hedges, filed 31 January 1991. The Amended Complaint deleted the four Common Law Contract Counts and, instead, asserted four counts under ERISA. Thereafter, on 13 May 1991, Primerica stipulated to class certification. See Consent Order Regarding Certification (the "Consent Order"), filed 13 May 1991. Plaintiffs' class was certified as consisting of:
. . . All salaried retirees of American Can and their spouses, and the spouses of all deceased former employees of American Can, excluding those salaried retirees (and their spouses or surviving spouses) who were designated by American Can, as retirees of its "Packaging Sector" in connection with the sale of the packaging operations of American Can to Triangle Industries.
C. Motion For Summary Judgment
On 25 July 1991, summary judgment was granted in favor of Primerica. See Letter-Opinion, filed 25 July 1991 (the "25 July 1991 Decision"), 47; Order, filed 25 July 1991, at 1-2. On appeal, the circuit reversed and remanded the case. See Alexander v. Primerica Holdings, Inc., 967 F.2d 90, 96 (3d Cir. 1992). The circuit concluded that the SPDs did not unambiguously set forth a reservation of the right by Primerica to reduce future benefits and that this ambiguity was a question of fact to be resolved at trial. Id. The case was remanded for "an interpretation of the [SPDs] in light of all relevant evidence and for the district court's further consideration of the retirees' claims." Id. at 95 (emphasis added). The circuit explained:
Because a Plan document does not exist and because the [SPDs] are ambiguous,
the district court, as the trier of fact, must determine whether the Plan provided lifetime benefits upon retirement. . . . In interpreting an ambiguous ERISA plan, a court may consider the intent of the plan's sponsor, the reasonable understanding of the beneficiaries, and past practice, among other things. In this regard, we note that the retirees' affidavits and documents, if believed by the district court, are sufficient to show that the Plan promised lifetime irreducible benefits.
Id. at 96 (citations omitted).
D. Subsequent Changes to the Plan
On 8 October 1992, Primerica notified the court and counsel for Plaintiffs that it again intended to change their benefits under the Plan. See 8 Oct. 1992 Letter at 5-6. The 8 Oct. 1992 Letter stated in pertinent part:
As we mentioned at the conference on September 22, 1992, recent accounting rule changes will require Primerica to record as a liability the value of all retiree welfare benefits, including life insurance and medical insurance. This rule, known as FAS 106, takes effect no later than January 1, 1993. . . .
We have reviewed the evidence produced in discovery since remand and we are of the view that the record supports Primerica's - position that the reservation of rights in the [SPDs] was intended to permit the Company to change the cost of benefits to retirees. . . .
Primerica does not believe it should be required to book the significant liability required by FAS 106 -- effectively acting as though it had lost the case -- only because the litigation will not be resolved before the rule takes effect. Consequently, the Company will soon announce that, effective January 1, 1993, the members of the class will be offered, at full cost to the participants, several welfare plan options, including (1) the benefits plan under which they are presently covered, and (2) other group health and life insurance plans similar to those offered to all other Primerica retirees.
On 26 October 1992, Primerica notified its retirees of the additional changes in benefits. See Letter from Kevin T. O'Reilly, dated 26 October 1992 (the "26 Oct. 1992 Letter"). The 26 Oct. 1992 Letter stated:
With this letter, we are notifying you of an additional change in your rates; but, we are offering you some additional coverage choices as well.
Effective January 1, 1993, retirees in the Primerica Group Insurance Plan for Retired Salaried Employees will begin paying premiums to cover 100% of the cost of continuing medical coverage. This decision is in line with Primerica's policy on medical coverage for retirees in those of its subsidiaries that offer continuing coverage.
The 26 Oct. 1992 Letter estimated the cost of the various program options for retirees as follows. The New Plan, available only to retirees over sixty-five, would cost $ 50.00 per person per month. Id. The CCC/SB plan would cost $ 296.00 per month to retirees under 65 and $ 100.00 per month to retirees sixty-five and over. Id. The cost of maintaining the Current Medical Plan would be $ 326.00 per month to retirees under sixty-five and $ 144.00 per month to retirees sixty-five and over. Id. The 26 Oct. 1992 Letter also recognized that "since the premiums for all of these programs are designed to cover 100% of the total cost, each is subject to increase in the future." Id.
Finally, the 26 Oct. 1992 Letter indicated that a number of additional benefits would be eliminated. Id. at 2. Specifically, Primerica informed its retirees in the 26 Oct. 1992 Letter that (1) the practice of "reimbursing certain retirees for part of the cost of Medicare Part B" and (2) all "retiree life insurance coverage" would be eliminated, effective 1 January 1993. Id.
On 2 December 1992, Primerica sent a follow-up letter to Plaintiffs further explaining the Plan changes. See Letter from O'Reilly, dated 2 December 1992 (the "2 Dec. 1992 Letter"), at 1-3. The cost to Plaintiffs of the various medical benefits options remained unchanged from the 26 Oct. 1992 Letter. See 2 Dec. 1992 Letter at 1-2. However, the 2 Dec. 1992 Letter further indicated that Plaintiffs'
election to continue medical coverage through Primerica after 1992 [had to be] received . . . by the close of business, Wednesday, December 23, 1992. If no election [was] received by that deadline, it [would be] assumed that [the individual] wished to discontinue [his/her] medical coverage and ...