Fulghum v. Embarq Corporation
785 F.3d 395
10th Cir.2015Background
- Former Sprint/Embarq retirees (class) sued after Defendants reduced/eliminated post-retirement medical and life insurance benefits announced in 2005–2008. Plaintiffs alleged (1) contractual vesting of lifetime benefits under ERISA plan documents (SPDs/Plans), (2) breach of fiduciary duty by misrepresentation/concealment, and (3) age-discrimination under the ADEA.
- Defendants moved for summary judgment on many claims; the district court granted summary judgment in part and denied other parts; Rule 54(b) certification followed, and the plaintiffs appealed.
- Defendants grouped 32 SPDs into categories and sought judgment as to claims arising from the 30 SPDs they identified; dispute arose over whether summary judgment improperly dismissed claims based on other SPDs not addressed in Defendants’ motion.
- Central contract-law question: whether any SPD contained “clear and express” language creating vested (lifetime) welfare benefits that could not be unilaterally amended or terminated.
- Fiduciary-duty issue: whether Plaintiffs’ § 1104(a)(1) claims alleging fraud-triggered tolling of the six-year statute of repose in 29 U.S.C. § 1113 were timely; whether Rule 9(b) pleading deficiencies warranted dismissal at summary judgment stage.
- ADEA issues: (a) disparate-impact challenge to reductions in retiree life insurance (with Defendants invoking the RFOA defense), and (b) challenge to elimination/reduction of retiree health benefits for Medicare-eligible retirees (Defendants invoked EEOC regulation exempting such changes).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SPDs contain clear, express promises of vested lifetime health or life benefits | SPDs’ language (e.g., “coverage ends when you die”) and other statements create a promise of lifetime benefits; ambiguities construed against drafter | SPDs, read as a whole, include explicit reservation-of-rights (ROR) clauses allowing amendment/termination; wording does not unequivocally promise lifetime vested benefits | Court: No clear-and-express promise in the 30 SPDs at issue; affirm summary judgment as to claims arising from those SPDs; ROR and context negate vesting promise |
| Whether Defendants’ summary-judgment motion extinguished claims premised on other SPDs/CBAs not identified in the motion | Plaintiffs: summary judgment should not have been entered for class members whose claims rest on SPDs or CBAs the motion did not address | Defendants: moved only on claims tied to identified SPDs; argued mapping showed coverage | Held: Reversed as to any class members whose vesting claims arise (in whole or part) from SPDs not specifically identified in Defendants’ motion; those claims were not adjudicated properly on summary judgment |
| Whether Plaintiffs’ breach-of-fiduciary-duty fraud claims are time-barred under § 1113 or subject to tolling for fraud/concealment; whether Rule 9(b) required dismissal | Plaintiffs: fraud-based fiduciary claims fall within § 1113’s “fraud or concealment” exception (timely); discovery and summary-judgment record suffice to evaluate fraud; Rule 9(b) dismissal improper at summary-judgment stage | Defendants: § 1113’s exception applies only to fraudulent concealment of breaches; Plaintiffs failed to plead fraud with Rule 9(b) particularity -> claims untimely and dismissible | Held: The § 1113 “fraud or concealment” clause is an exception to the six-year repose and covers both fraud-based breach claims and fraudulent concealment (terms read disjunctively). The district court erred in dismissing fraud-based fiduciary claims on Rule 9(b) grounds at summary judgment; those fraud-based § 1104 claims are revived for further proceedings |
| Whether reductions/terminations of retiree life and Medicare-eligible health benefits violated the ADEA (disparate impact) | Plaintiffs: life and health reductions disproportionately affected older employees; ADEA applies; EEOC regulation and RFOA standards should not permit the changes | Defendants: life-insurance reductions justified by reasonable factors other than age (RFOA); regulation 29 C.F.R. §1625.32(b) exempts reductions for Medicare-eligible retirees | Held: Life-insurance claim fails—Defendants proved the reductions were based on a reasonable factor other than age; summary judgment for Defendants. Health-benefit claims for Medicare-eligible retirees fail because EEOC regulation expressly permits such changes; summary judgment for Defendants |
Key Cases Cited
- Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73 (1995) (welfare benefit plans generally may be amended or terminated unless benefits are vested)
- Deboard v. Sunshine Mining & Ref. Co., 208 F.3d 1228 (10th Cir. 2000) (employer communications promising lifetime health coverage can create vested welfare benefits when language is unequivocal)
- Chiles v. Ceridian Corp., 95 F.3d 1505 (10th Cir. 1996) (ERISA vesting requires clear and express plan language; ROR clauses interpreted broadly)
- CIGNA Corp. v. Amara, 563 U.S. 421 (2011) (SPDs are part of ERISA plan documents and can bear on plan interpretation)
- Meacham v. Knolls Atomic Power Lab., 554 U.S. 84 (2008) (burden on employer to prove reasonableness of RFOA defense under ADEA disparate-impact framework)
- In re Unisys Corp. Retiree Med. Benefit ERISA Litig., 58 F.3d 896 (3d Cir. 1995) (promise of lifetime benefits may be read as qualified by employer’s reservation-of-rights)
- Rasenack ex rel. Tribolet v. AIG Life Ins. Co., 585 F.3d 1311 (10th Cir. 2009) (contra proferentem applies on de novo ERISA plan review)