DANIEL WARMENHOVEN v. NETAPP, INC.; NETAPP EXECUTIVE MEDICAL RETIREMENT PLAN
No. 19-16960
United States Court of Appeals, Ninth Circuit
September 13, 2021
D.C. No. 5:17-cv-02990-BLF
FOR PUBLICATION
Appeal from the United States District Court for the Northern District of California Beth Labson Freeman, District Judge, Presiding
Argued and Submitted February 10, 2021 San Francisco, California
Before: Morgan Christen and Bridget S. Bade, Circuit Judges, and Gary Feinerman,* District Judge.
Opinion by Judge Feinerman
SUMMARY**
ERISA
The panel affirmed in part and vacated in part the district court‘s summary judgment in favor of defendants on retired executives’ claims that termination of the NetApp Executive Medical Retirement Plan violated ERISA because they had been promised lifetime benefits.
Only one plaintiff appealed. The panel affirmed the district court‘s judgment as to plaintiff‘s direct claim for benefits under
The panel vacated the judgment as to plaintiff‘s alternative claim for equitable relief under
COUNSEL
J. Phillip Martin (argued) and Eric C. Kastner, Kastner Kim LLP, Mountain View, California; Robert L. Rusky, San Francisco, California; for Plaintiff-Appellant.
Laurie J. Hepler (argued), Greines Martin Stein & Richland LLP, San Francisco, California; Clarissa A. Kang and Angel L. Garrett, Trucker Huss, San Francisco, California; for Defendants-Appellees.
FEINERMAN, District Judge:
In 2005, NetApp, Inc. created the NetApp Executive Medical Retirement Plan, an employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA“),
Only Warmenhoven appeals. We have jurisdiction pursuant to
Background
I. The Plan‘s Creation and Termination
Warmenhoven was NetApp‘s Chief Executive Officer from 1994 to 2009 and, after stepping down as CEO, served as Executive Chairman of NetApp‘s Board of Directors until 2014, formally retiring in April 2015. In 2003, at the request of another senior NetApp executive, Warmenhoven asked the company‘s Human Resources department to explore the creation of an executive retiree health plan. After extensive consideration, the Board‘s Compensation Committee adopted the Plan effective May 2005.
Some ten years later, in November 2015, the Compensation Committee decided to close the Plan to any new participants and to explore alternatives to the Plan for existing participants. At that time, nine executives and eighteen dependents were receiving health insurance benefits under the Plan. The parties’ dispute over what motivated the Compensation Committee‘s decision—NetApp asserts that the Plan‘s increasing costs made the benefit unsustainable at a time when it was laying off thousands of employees, while Warmenhoven charges that NetApp‘s rationale was pretextual—is immaterial to this appeal.
In April 2016, the Compensation Committee decided to terminate the Plan. Under a new “Amended and Restated Plan,” NetApp would reimburse participating retirees like Warmenhoven for the cost of purchasing health insurance themselves from 2017 through 2019, and then pay them a lump sum at the Plan‘s termination on December 31, 2019. NetApp management met with the retirees to inform them of the Amended Plan, and the retirees expressed their disapproval. Despite the opposition from retirees, NetApp went forward with the Amended Plan, giving formal notice to Warmenhoven by letter dated November 16, 2016. The Amended Plan took effect on January 1, 2017.
II. Documentation of the Plan‘s Terms
As discussed below, the default rule under ERISA is that employers may freely terminate welfare benefit plans like the Plan. See
To support his view, Warmenhoven relies primarily on a series of PowerPoint presentations that summarized the Plan for participating executives. Although at least seven versions of the PowerPoint were created over the years, Warmenhoven personally saw only two.
The first was an April 2005 PowerPoint created by NetApp Human Resources to describe the Plan to NetApp management, including Warmenhoven in his role as CEO. The PowerPoint stated that the Plan would provide medical coverage to “a defined group of retiring executives as a fully-insured plan.” It also stated that any company acquiring NetApp would be required to provide an equivalent plan “for the lives of the eligible employees.” NetApp does not dispute that, as the PowerPoint suggested, it intended as of April 2005 to maintain the health insurance benefit for the participants’ lifetimes.
The second version of the PowerPoint that Warmenhoven saw was a March 2014 version prepared shortly before his retirement. That version stated that the “Executive Medical Retirement Plan [was] adopted by [NetApp] as a method to retain a defined group of senior executives.” In more explicit terms than the April 2005 version, the March 2014 version promised that the “Plan provides medical benefits for the retiree‘s lifetime” and that “[n]o retiree contributions [are] required.”
As further support for his view that he had been promised lifetime benefits, Warmenhoven points to NetApp‘s public disclosures in filings with the Securities and Exchange Commission (“SEC“). Like the PowerPoints, NetApp‘s SEC disclosures stated that the Plan would provide lifetime healthcare benefits to participants. For instance, a 2016 disclosure stated that “[c]overage continues through the duration of the lifetime of the retiree or the retiree‘s spouse, whichever is longer.” The record does not contain evidence that Warmenhoven personally reviewed the SEC filings, but the filings do show that, as late as April 2016, NetApp was telling the public that it intended to cover its retired executives’ healthcare for their lifetimes.
NetApp focuses attention on a third category of documents: the certificates of coverage prepared by the health insurance companies with which NetApp contracted to administer the Plan. NetApp hired Cigna to administer the Plan at its inception in 2005. Cigna composed a separate certificate for each year it administered the Plan, from 2005 to 2012. In 2013, NetApp replaced Cigna with UnitedHealthcare (“UHC“), and UHC composed certificates for the Plan from 2013 to 2016. As with the April 2005 and March 2014 PowerPoints, Warmenhoven personally received a copy of the 2015 UHC certificate.
The certificates of coverage primarily concerned the details, which are not pertinent here, of health coverage for the calendar year in question. The important provisions for present purposes addressed Plan administration: how coverage was paid for, who managed the Plan, and who had the authority to alter the Plan‘s terms. See
Notably, each certificate of coverage included at least one provision granting NetApp the authority to terminate benefits under the Plan at any time—directly contradicting the PowerPoints’ promises of lifetime benefits. For example, the ERISA disclosure in the 2005 Cigna certificate stated:
The Employer as Plan Sponsor reserves the right to, at any time, change or terminate benefits under the Plan, to change or terminate the eligibility of classes of employees to be covered by the Plan, to amend or eliminate any other plan term or condition, and to terminate the whole plan or any part of it.
The 2015 UHC certificate likewise stated: “Your employer, as the Plan Sponsor, has the right to amend or terminate this Plan at any time.”
III. Procedural History
Warmenhoven and six other retired executives filed this lawsuit in May 2017, bringing two claims under ERISA. The first claim alleged that the PowerPoints operated to vest lifetime benefits and sought recovery of those benefits directly under
After conducting discovery, the parties cross-moved for summary judgment. The district court granted NetApp‘s motion, denied the plaintiffs’ motion, and entered judgment for NetApp. Gomo v. NetApp, Inc., No. 17-cv-022990-BLF, 2019 WL 4346581 (N.D. Cal. Sept. 12, 2019). As to the
Six of the seven plaintiffs timely appealed. After a mediation conference, we granted the motions of five plaintiffs to dismiss their appeals. Warmenhoven, the sole remaining appellant, seeks reversal only of the grant of summary judgment to NetApp, not the denial of his summary judgment motion.
Discussion
I. Claim for Benefits Under § 1132(a)(1)(B)
To avoid summary judgment on his
“Plan document” is a term of art under ERISA. It does not mean any writing related to a plan; rather, it means the formal “written instrument” that ERISA requires for each employee benefit plan.
Warmenhoven submits that the PowerPoint presentations were plan documents that could and did vest lifetime healthcare benefits. He does not argue, however, that the PowerPoints met the criteria for a written instrument under
Warmenhoven‘s argument is unpersuasive. As we explained in Cinelli, the line of
Given the limited reach of the decisions he invokes, Warmenhoven must be understood as arguing that there was no ERISA-compliant written instrument for the Plan, and therefore that NetApp should be held to the less formal promises it made in the PowerPoints to provide lifetime health insurance benefits. Cinelli forecloses that theory by holding that only a written instrument satisfying the requirements of
In Cinelli, an insurance policy certificate stated that the policy was terminable at any time, but a company board resolution stated that the benefit was fully vested. 61 F.3d at 1440-41. We noted that it was “clear that an insurance policy may constitute the ‘written instrument’ of an ERISA plan,” and asked whether the board resolution was “also a plan document.” Id. at 1441. We held that the board resolution was “not a plan document” because it did not meet the criteria for a written instrument set forth in
The upshot of Cinelli is that only a written instrument satisfying the
criteria); Gable, 35 F.3d at 857 (applying
Ignoring these precedents, Warmenhoven does not argue that the PowerPoints met the four requirements for “plan documents” under
II. Claim for Breach of Fiduciary Duty Under § 1132(a)(3)
Warmenhoven‘s second claim alleges in the alternative that, if the PowerPoint presentations did not vest lifetime benefits, he is entitled under
A civil action may be brought . . . (3) by a participant . . . (B) to obtain other appropriate
equitable relief (i) to redress [any act or practice which violates any provision of Title I of ERISA or the terms of the plan] or (ii) to enforce any provisions of [Title I] or the terms of the plan.
A. Remediable Wrong
Warmenhoven‘s theory of remediable wrong is that NetApp, a plan fiduciary, misrepresented the Plan‘s terms by promising in the PowerPoints that the Plan provided lifetime benefits even though the written instrument included no such guarantee. Warmenhoven argues that NetApp thus violated
As we have held, “fiduciaries breach their duties if they mislead plan participants or misrepresent the terms or administration of a plan.” Barker v. Am. Mobil Power Corp., 64 F.3d 1397, 1403 (9th Cir. 1995) (per curiam). For example, in Varity Corp. v. Howe, 516 U.S. 489 (1996), a corporation spun off failing divisions into a new company and, despite knowing that the new company would likely fail, induced employees to transfer their benefits to the new company through false promises that the benefits would remain secure. Id. at 493-94. The Supreme Court held that the corporation‘s conduct violated its fiduciary duties as a plan fiduciary, reasoning that “[t]o participate knowingly and significantly in deceiving a plan‘s beneficiaries in order to save the employer money at the beneficiaries’ expense is not to act ‘solely in the interest of the participants and beneficiaries.‘” Id. at 506 (quoting
In Varity, unlike here, the plan fiduciary intended to mislead plan participants to the fiduciary‘s benefit and the participants’ detriment. That distinction grounded the district court‘s holding here that NetApp had committed no remediable wrong: “An employer‘s honest statements of present intention to provide benefits at a particular level do not give rise to liability for breach of fiduciary duties, simply because the employer later changes the benefits.” Gomo, 2019 WL 4346581, at *12.
To support its holding, the district court relied heavily on Frahm v. Equitable Life Assurance Society of the United States, 137 F.3d 955, 960 (7th Cir. 1998), which held that Varity recognizes a
Our circuit‘s law holds otherwise. As a general matter, we have rejected the use of tort law to ground the
More to the point, we expressly rejected in Mathews the analogy to fraud that the Seventh Circuit found compelling in Frahm. The employer in Mathews argued that “the plaintiffs must show scienter as they would if they were suing under the common law cause of action for deceit,” that is, “knowledge or belief on the part of the defendant that the representation is false.” 362 F.3d at 1183 (alteration omitted). Such evidence of knowing deceit is what the district court demanded of Warmenhoven here: “Plaintiffs have not submitted any evidence, and none appears in the record, suggesting that NetApp did not intend to provide lifetime medical benefits under the Plan when it was adopted.” Gomo, 2019 WL 4346581, at *12. Yet, as we explained in Mathews, “[i]n articulating Ninth Circuit law in this area, we have followed a line of cases from our sister circuits that does not require a showing of intent.” 362 F.3d at 1183.
In James v. Pirelli Armstrong Tire Corp., 305 F.3d 439 (6th Cir. 2002), one of the out-of-circuit cases we approved in Mathews, company management made repeated oral promises that, if employees took early retirement, their health benefits would continue unchanged “during retirement” and “during their lifetimes.” Id. at 443-44. But in fact, the plan documents allowed amendments to the health benefit plan, and, after the plaintiff employees retired, the company raised the costs to them of securing health benefits. Id. at 442, 444-45. The Sixth Circuit held that the company thereby breached its fiduciary duty under
Returning to our precedents, the health care plan in King denied coverage for a substantial medical bill on the ground that the participant had reached her lifetime cap on benefits. 871 F.3d at 737-38. We held that the participant had a viable fiduciary duty claim, explaining that although the plan documents could be interpreted to impose a lifetime benefit cap, id. at 734-36, the documents’ lack of clarity on that point violated the employer‘s and the plan‘s fiduciary duties of disclosure, id. at 745. In support, we observed that “[f]iduciaries breach their duties [under
Under our circuit‘s precedents, then, Warmenhoven‘s fiduciary duty claim survives summary judgment on the remediable wrong issue, as there is a genuine dispute of material fact as to whether NetApp incorrectly represented to Plan participants that the Plan provided lifetime
The district court also held that Warmenhoven‘s fiduciary duty claim failed because he could have examined the certificates of coverage—which provided that the Plan could be terminated at any time—to dispel any misunderstanding arising from the PowerPoints. In Pirelli, the Sixth Circuit rejected the notion that “a reservation of rights provision in the plan” automatically insulates the employer from liability under
The district court read our decision in Pisciotta v. Teledyne Industries, Inc., 91 F.3d 1326 (9th Cir. 1996), to hold otherwise, citing it for the proposition that “a reservation of rights contained in the Plan document is effective if the document was available for review.” Gomo, 2019 WL 4346581, at *12 (citing Pisciotta, 91 F.3d at 1331). But Pisciotta did not so hold as to a fiduciary duty claim under
In sum, that NetApp lacked an intent to deceive and that Warmenhoven could have reviewed the certificates of coverage do not necessarily defeat his
B. Appropriate Equitable Relief
After holding that no reasonable factfinder could conclude that Warmenhoven suffered a remediable wrong, the district court declined to address whether he would be entitled to appropriate equitable relief to redress any such wrong. 2019 WL 4346581, at *13. Warmenhoven‘s initial brief does not address the remedy prong, either. NetApp argues that Warmenhoven thereby forfeited any argument that the district court‘s treatment of the remediable wrong prong prejudiced him, requiring that summary judgment on the
We rejected a materially identical argument in Rodriguez v. Hayes, 591 F.3d 1105 (9th Cir. 2010), and do so again here. The appellees in Rodriguez argued for affirmance of the district court‘s judgment on a ground not reached by the district court and contended that the appellant had waived any opposition to that argument by not anticipating it in his initial brief. Id. at 1118 & n.6. We disposed of the appellees’ “groundless” contention in a footnote:
We have previously held that the failure of a party in its opening brief to challenge an alternate ground for a district court‘s ruling given by the district court waives that challenge. . . . Petitioner does not waive a challenge to any ground for [the district court‘s ruling] in its opening brief on appeal that was not relied on in the district court‘s order.
Id. at 1118 n.6. NetApp is thus wrong to suggest that an appellant must address all possible alternate grounds for affirmance—even those not ruled upon by the district court—in an opening brief.
Beyond forfeiture, the parties do not discuss the merits of the remedy prong. In CIGNA Corp. v. Amara, 563 U.S. 421 (2011), the Supreme Court identified three traditional equitable remedies available under
Conclusion
The district court‘s judgment is AFFIRMED IN PART as to Warmenhoven‘s