Grappone v . Combined Services et a l . CV-03-512-PB 07/29/04
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Kathy A . Grappone & James R. Grappone
v. Civil No. 03-512-PB Opinion No. 2004 DNH 114 Combined Services, LLC & Blue Cross and Blue Shield of Vermont, Inc.
MEMORANDUM AND ORDER
Kathy Grappone, an employee of Combined Services, LLP
(“Combined Services”) and her husband, James Grappone, challenge
her employer’s termination of its retiree health care benefits
plan. Had the program not been discontinued, she anticipated
taking early retirement and participating, with her husband, in
the free health care plan offered by Combined Services. She
claims in her complaints and in a motion for summary judgment
that the termination was a breach of contract and violated the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29
U.S.C. § 1132 e t . seq. I disagree. Under ERISA, employees are
free to change or terminate employee welfare plans unless they have contracted otherwise. Combined Services did not contract
away its right to alter or terminate its retiree health care
benefits plan.1 Accordingly, I deny Grappone’s motion for
summary judgment.
I. BACKGROUND
Kathy Grappone works at Combined Services. She claims that
she has worked for the company and its parents or affiliates
since 1969. Under the benefits package that was in existence in
2003, Combined Services offered free health care benefits to
retirees who had worked for the company for fifteen years. The
Summary Plan Description (“SPD”) states in a section titled
“Retiree Medical Benefit Plans” provided that
Early retirees (age 55-64) can annually elect the BlueChoice New England plan, or receive an opt-out payment of $1,200. Retirees over age 65 can annually elect MediComp III (a Medicare Supplemental plan) or receive an opt-out payment of $600.
1 Defendant Blue Cross and Blue Shield of Vermont, Inc, moved to dismiss on the ground that it is not a proper party. Plaintiffs agreed in their Objection (Doc. N o . 1 0 ) . The motion is therefore granted as to Blue Cross and Blue Shield of Vermont without discussion.
-2- (Def.’s Mot. Dismiss Ex. A at 4 ) . 2 The “Eligibility” section of
the non-pension portion of the SPD stated
Eligibility for retiree medical benefits is based on attaining age 55 with 15 years of service while actively employed. . . . If an employee has worked for one of Combined Services LLC’s parent BCBS organizations prior to employment with Combined Services LLC, the earlier date of employment will be used when determining eligibility.
(Id.). The section of the SPD entitled “Substantive Plan” lists
three plans available for current employees to choose from, and
then states
Early retirees have a choice of BlueChoice New England plan or receiving an opt out payment. Combined Services LLC has reserved the right to change the plan in the future.
(Id. at 5 ) .
By letter dated September 5 , 2003, Combined Services
discontinued its retiree health care benefits for people that
were not retired as of October 1 , 2003. It offered a lump sum
2 Both parties have provided identical copies of the 2003 SPD, and plaintiffs have not challenged its authenticity. Further, the plaintiffs quote from the SPD in their complaint. Accordingly, the documents effectively merge into the pleadings, and I may rely on them without converting the motion to dismiss into one for summary judgment. Beddall v . State Street Bank & Trust Co., 137 F.3d 1 2 , 17 (1st Cir. 1998); Shaw v . Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996).
-3- payment based on years of service to those employees who would
have been eligible upon retirement under the earlier plan. Kathy
Grappone did not accept the payment, and instead brought this
action against Combined Services and Blue Cross and Blue Shield
of Vermont, asserting that the termination of the retirement
health care benefits plan violated ERISA. The defendant has
moved to dismiss, and the Grappones have moved for summary
judgment.
II. STANDARD OF REVIEW
When I consider a motion to dismiss for failure to state a
claim, I must accept the plaintiff’s well-pled factual
allegations as true, “draw all reasonable inferences [from the
complaint] in the plaintiff’s favor and determine whether the
complaint, so read, sets forth facts sufficient to justify
recovery on any cognizable theory.” Martin v . Applied Cellular
Tech., Inc., 284 F.3d 1 , 6 (1st Cir. 2002). Despite the liberal
pleading requirements established by the federal rules, I need
not accept subjective characterizations, bald assertions, or
unsubstantiated conclusions. See Correa-Martinez v . Arrillaga-
-4- Belendez, 903 F.2d 4 9 , 52-53 (1st Cir. 1990); Dewey v . Univ. of
N.H., 694 F.2d 1 , 3 (1st Cir. 1982). I will dismiss an action
based on a Fed. R. Civ. P. 12(b)(6) motion for failure to state a
claim when the complaint, viewed in the light most favorable to
the plaintiffs, shows no set of facts which could entitle them to
relief. TAG/ICIB Services, Inc. v . Pan Am. Grain Co., 215 F.3d
172, 175 (1st Cir. 2000).
III. ANALYSIS
ERISA requires employers to provide employees with a summary
of their benefits plan. ERISA, 29 U.S.C. § 1132. Welfare
benefits, such as retiree health care benefits, generally may be
changed, amended or terminated by the employer without violating
ERISA. See, 29 U.S.C. §§ 1002(1), 1051(1); Curtiss-Wright Corp.
v . Schoonejongen, 514 U.S. 73 (1995). Pursuant to a contract,
however, employers and employees may agree that welfare benefit
plans cannot be terminated or changed in any way. Member Servs.
Life Ins. C o . v . Am. Nat’l Bank & Trust Co., 130 F.3d 9 5 0 , 954
(10th Cir. 1997). In resolving the present motion, I apply
federal common law contract principles, informed by ERISA’s
-5- purposes of promoting the interests of employees in benefit plans
and protecting contractually defined benefits. Feifer v .
Prudential Ins. C o . of Am., 306 F.3d 1202, 1210-11 (2d Cir. 2002)
(“[t]he question whether and when benefits vest is a matter of
contractual interpretation”) (citations omitted); Member Servs.
130 F.3d at 954.
The Grappones assert that the change in the plan took away
their vested rights in the retiree medical care plans in
violation of ERISA. They make two arguments in support of their
claim. First, they argue that Combined Services was required to
reserve a right to terminate the program which it failed to d o .
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Grappone v . Combined Services et a l . CV-03-512-PB 07/29/04
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Kathy A . Grappone & James R. Grappone
v. Civil No. 03-512-PB Opinion No. 2004 DNH 114 Combined Services, LLC & Blue Cross and Blue Shield of Vermont, Inc.
MEMORANDUM AND ORDER
Kathy Grappone, an employee of Combined Services, LLP
(“Combined Services”) and her husband, James Grappone, challenge
her employer’s termination of its retiree health care benefits
plan. Had the program not been discontinued, she anticipated
taking early retirement and participating, with her husband, in
the free health care plan offered by Combined Services. She
claims in her complaints and in a motion for summary judgment
that the termination was a breach of contract and violated the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29
U.S.C. § 1132 e t . seq. I disagree. Under ERISA, employees are
free to change or terminate employee welfare plans unless they have contracted otherwise. Combined Services did not contract
away its right to alter or terminate its retiree health care
benefits plan.1 Accordingly, I deny Grappone’s motion for
summary judgment.
I. BACKGROUND
Kathy Grappone works at Combined Services. She claims that
she has worked for the company and its parents or affiliates
since 1969. Under the benefits package that was in existence in
2003, Combined Services offered free health care benefits to
retirees who had worked for the company for fifteen years. The
Summary Plan Description (“SPD”) states in a section titled
“Retiree Medical Benefit Plans” provided that
Early retirees (age 55-64) can annually elect the BlueChoice New England plan, or receive an opt-out payment of $1,200. Retirees over age 65 can annually elect MediComp III (a Medicare Supplemental plan) or receive an opt-out payment of $600.
1 Defendant Blue Cross and Blue Shield of Vermont, Inc, moved to dismiss on the ground that it is not a proper party. Plaintiffs agreed in their Objection (Doc. N o . 1 0 ) . The motion is therefore granted as to Blue Cross and Blue Shield of Vermont without discussion.
-2- (Def.’s Mot. Dismiss Ex. A at 4 ) . 2 The “Eligibility” section of
the non-pension portion of the SPD stated
Eligibility for retiree medical benefits is based on attaining age 55 with 15 years of service while actively employed. . . . If an employee has worked for one of Combined Services LLC’s parent BCBS organizations prior to employment with Combined Services LLC, the earlier date of employment will be used when determining eligibility.
(Id.). The section of the SPD entitled “Substantive Plan” lists
three plans available for current employees to choose from, and
then states
Early retirees have a choice of BlueChoice New England plan or receiving an opt out payment. Combined Services LLC has reserved the right to change the plan in the future.
(Id. at 5 ) .
By letter dated September 5 , 2003, Combined Services
discontinued its retiree health care benefits for people that
were not retired as of October 1 , 2003. It offered a lump sum
2 Both parties have provided identical copies of the 2003 SPD, and plaintiffs have not challenged its authenticity. Further, the plaintiffs quote from the SPD in their complaint. Accordingly, the documents effectively merge into the pleadings, and I may rely on them without converting the motion to dismiss into one for summary judgment. Beddall v . State Street Bank & Trust Co., 137 F.3d 1 2 , 17 (1st Cir. 1998); Shaw v . Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996).
-3- payment based on years of service to those employees who would
have been eligible upon retirement under the earlier plan. Kathy
Grappone did not accept the payment, and instead brought this
action against Combined Services and Blue Cross and Blue Shield
of Vermont, asserting that the termination of the retirement
health care benefits plan violated ERISA. The defendant has
moved to dismiss, and the Grappones have moved for summary
judgment.
II. STANDARD OF REVIEW
When I consider a motion to dismiss for failure to state a
claim, I must accept the plaintiff’s well-pled factual
allegations as true, “draw all reasonable inferences [from the
complaint] in the plaintiff’s favor and determine whether the
complaint, so read, sets forth facts sufficient to justify
recovery on any cognizable theory.” Martin v . Applied Cellular
Tech., Inc., 284 F.3d 1 , 6 (1st Cir. 2002). Despite the liberal
pleading requirements established by the federal rules, I need
not accept subjective characterizations, bald assertions, or
unsubstantiated conclusions. See Correa-Martinez v . Arrillaga-
-4- Belendez, 903 F.2d 4 9 , 52-53 (1st Cir. 1990); Dewey v . Univ. of
N.H., 694 F.2d 1 , 3 (1st Cir. 1982). I will dismiss an action
based on a Fed. R. Civ. P. 12(b)(6) motion for failure to state a
claim when the complaint, viewed in the light most favorable to
the plaintiffs, shows no set of facts which could entitle them to
relief. TAG/ICIB Services, Inc. v . Pan Am. Grain Co., 215 F.3d
172, 175 (1st Cir. 2000).
III. ANALYSIS
ERISA requires employers to provide employees with a summary
of their benefits plan. ERISA, 29 U.S.C. § 1132. Welfare
benefits, such as retiree health care benefits, generally may be
changed, amended or terminated by the employer without violating
ERISA. See, 29 U.S.C. §§ 1002(1), 1051(1); Curtiss-Wright Corp.
v . Schoonejongen, 514 U.S. 73 (1995). Pursuant to a contract,
however, employers and employees may agree that welfare benefit
plans cannot be terminated or changed in any way. Member Servs.
Life Ins. C o . v . Am. Nat’l Bank & Trust Co., 130 F.3d 9 5 0 , 954
(10th Cir. 1997). In resolving the present motion, I apply
federal common law contract principles, informed by ERISA’s
-5- purposes of promoting the interests of employees in benefit plans
and protecting contractually defined benefits. Feifer v .
Prudential Ins. C o . of Am., 306 F.3d 1202, 1210-11 (2d Cir. 2002)
(“[t]he question whether and when benefits vest is a matter of
contractual interpretation”) (citations omitted); Member Servs.
130 F.3d at 954.
The Grappones assert that the change in the plan took away
their vested rights in the retiree medical care plans in
violation of ERISA. They make two arguments in support of their
claim. First, they argue that Combined Services was required to
reserve a right to terminate the program which it failed to d o .
They claim, therefore, that the failure to reserve a right to
terminate was equivalent to a contract to vest the benefits.
Second, they argue that their right to retirement welfare
benefits vested when Kathy Grappone was first hired as a long-
term employee. I address each of these arguments in turn.
A. Reservation of Right to Amend
The Grappones first argue that Combined Services could not
terminate the benefits at issue because it did not expressly
reserve its right to terminate the benefits in the plan and the
SPD. I disagree. In Curtiss-Wright Corp. v . Schoonejongen, 514
-6- U.S. 7 3 , 78 (1995), the Supreme Court held that “[e]mployers or
other plan sponsors are generally free under ERISA, for any
reason at any time, to adopt, modify, or terminate welfare
plans.” Unless the plan documents themselves contain an express
waiver of the right to amend or terminate, the plan sponsor may
in fact terminate all welfare benefits without implicating ERISA.
The Grappones have not highlighted any provision in the plan or
the SPD that purports to waive the right to terminate.3
Therefore, the termination of the welfare benefit was valid as to
people in whom it had not yet vested.
B. Vesting of Rights
The Grappones also argue that the SPD gave them a vested
right to receive the benefits at issue. I disagree. The
relevant plan language describes health benefits that are
available to retirees. It does not purport to guarantee that the
3 The Grappones point to one express reservation in the SPD of a right to change which benefit plan would be available to retirees, claiming that it acts as an implicit waiver of the right to terminate the whole program. I disagree. “Until benefits have vested, employers may modify them or terminate them, whether or not they have reserved the right to do s o . Helwig v . Kelsey-Hayes Co., 93 F.3d 243, 248 (citing Curtiss- Wright Corp., 514 U.S. 7 3 ) .
-7- same benefits will be made available to future retirees. Because
Kathy Grappone was not eligible for retirement when Combined
Services terminated the retiree health benefits, her right to
receive the benefits never accrued. See Wise v . El Paso National
Gas Co., 986 F.2d 929, 937-38 (5th Cir. 1993); Algren v . Pirelli
Armstrong Tire Corp., 197 F.3d 915, 916 (8th Cir. 1999). Thus,
Combined Services appropriately rejected plaintiffs’ claim that
their right to receive the benefits in the future had vested.
In the final analysis, Combined Services eliminated the
Grappones’ expected benefit, not their vested or even accrued
benefit. Such an elimination is prohibited neither by ERISA, nor
by a reasonable reading of the plan documents. See, e.g.,
Campbell v . BankBoston N.A., 327 F.3d 1 , 9 (1st Cir. 2003).
IV. CONCLUSION
For the reasons discussed above I deny plaintiff’s motion
for summary judgment (Doc. n o . 1 1 ) . This reasoning leads me to
the conclusion that the defendant is entitled to prevail. It has
moved to dismiss on similar grounds. I , however, propose to
treat their motion as one for summary judgment, and will grant
-8- summary judgment to the defendants unless the plaintiffs respond
within 20 days.
SO ORDERED.
Paul Barbadoro Chief Judge
July 2 9 , 2004
cc: Mark H . Puffer Debra Dyleski-Najjar
-9-