Sorensen v. Saint Alphonsus Regional Medical Center, Inc.

118 P.3d 86, 141 Idaho 754, 35 Employee Benefits Cas. (BNA) 2442, 23 I.E.R. Cas. (BNA) 166, 2005 Ida. LEXIS 110

• Court: Idaho Supreme Court
• Decided: June 24, 2005
• Docket: 30476
• Status: Published

Opinions

SCHROEDER, Chief Justice.

This case involves claims by Patricia Sorensen (Sorensen) that Saint Alphonsus Regional Medical Center, Inc. (StAl’s) and Trinity Health Corporation (Trinity) breached contractual, fiduciary and certain tort duties to her in providing her the early retirement benefits to which she was entitled as an employee of St. Al’s. The district court granted summary judgment in favor of Sorensen on her contract, fiduciary duty and negligence claims. After a trial, the jury returned a verdict in favor of Sorensen in the amount of $83,750.72, $50,000 of which was attributable to emotional distress damages. The district court denied St. Al’s and Trinity’s post-trial motions and granted Sorensen’s motion for costs and attorney fees. St. Al’s and Trinity appeal.

I.

FACTUAL AND PROCEDURAL BACKGROUND

Sorensen worked as a registered nurse for St. Al’s from 1977 until March of 2002. In December of 1999, she met with the Human Resource Benefits Specialist for St. Al’s to discuss retirement options. Sorensen participated in a retirement benefit plan (the Holy Cross Retirement Program) offered by St. ATs, through St. Al’s then parent corporation, Holy Cross Health Systems. In 2000, Holy Cross Health Systems merged with Mercy Health Systems to create Trinity. Trinity developed a new retirement plan in 2002. However, Sorensen’s rights with respect to her retirement benefits continued to be governed by the language of the Holy Cross Retirement Plan. The actual Plan document was kept in Trinity’s home offices in Indiana. The document available for review locally was entitled “The Holy Cross Retirement Plan, Eligibility, Service, Distributions, Participation, Vesting, Benefits, Retirement” (Summary Plan). Relying on the language of the Summary Plan, the Benefits Specialist informed Sorensen that she would be eligible to receive early retirement benefits if she reduced her work scíiedule to less than 960 hours per year. Sorensen was an employee at will.

In May of 2000 Sorensen elected to receive her early retirement benefits and reduced her work schedule to less than 960 hours per year. She received the benefits and worked part-time until March of 2002. Early in 2002 Sorensen’s supervisor told her that she needed to meet with the Benefits Specialist to discuss possible changes to her early retirement benefits. Sorensen met with the Benefits Specialist in February and was given a letter from Trinity. The letter informed Sorensen that she could not work part-time and continue receiving early retirement benefits based on Trinity’s belief that Sorensen’s arrangement and similar arrangements threatened the tax-exempt status of the retirement plan. Trinity required Sorensen to elect one of two options: 1) suspend the monthly early retirement benefits and continue working; or 2) terminate employment for four months with St. Al’s and continue receiving the early retirement benefits. According to an agreement with the IRS, Sorensen could return to the part-time employment after the four months. Sorensen was required to make her election by March 31 or she would be deemed to have elected option one. Sorensen terminated her employment with St. Al’s on March 31, 2002.

In May of 2002 Sorensen filed suit against St. Al’s and Trinity (collectively referred to as Trinity unless otherwise noted) for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duties, negligence, negligent and/or intentional infliction of emotional distress, bad faith and fraud. The parties filed cross motions for summary judgment. The district court determined that: (1) St. Al’s was a party to the contract and a proper party in this case; (2) Indiana law governed the interpretation of the Plan, but the tort claims were governed by Idaho law; (3) the Summary Plan governed as the document relied upon by Sorensen when she made her decision to accept early retirement benefits; (4) the Summary Plan language unambiguously enabled Sorensen to continue working part-time and still receive early retirement benefits; and (5) Trinity was estopped from unilaterally changing the agreement Sorensen had with it based on the Summary Plan language.

The district court granted summary judgment in favor of Sorensen on her breach of contract claim, making the following determinations: (1) Trinity failed to take reasonable measures to ensure that Sorensen obtained the benefit of the agreement she had with Trinity under the Summary Plan. Consequently, Trinity breached the implied covenant of good faith and fair dealing; (2) the Benefits Specialist failed to provide complete and accurate information to Sorensen, a Plan beneficiary, thus establishing a claim for breach of fiduciary duties; (3) concerning the fraud claim, genuine issues of material fact existed as to whether Trinity deliberately knew the falsity of the information provided to Sorensen; (4) Trinity had a duty to provide Sorensen with accurate information that was separate from the duties it had to her under the contract, and the economic loss rule was not applicable in this case since there was a special relationship between Sorensen and Trinity. The district court granted summary judgment in favor of Sorensen on her negligence claim; (5) there was no ruling on the intentional infliction of emotional distress claim, but Sorensen did not raise the issue again at trial or on appeal; (6) neither party was granted summary judgment on the claim for negligent infliction of emotional distress; (7) Trinity’s motion to dismiss Sorensen’s bad faith claim was granted; and (8) whether or not Sorensen failed to mitigate her damages was a question of fact for the jury.

After trial on the damages issue, the jury returned a verdict in favor of Sorensen for $83,750.72, $50,000 of which was attributable to emotional distress damages. Trinity filed a motion for judgment notwithstanding the verdict and a motion for a new trial. The district court ruled that a causal connection had been established between Trinity’s conduct and Sorensen’s lost wages. Further, Idaho’s Workers’ Compensation Law did not apply in this case, and Sorensen was not required to put on medical testimony to support her emotional distress claim where she was able to testify that she suffered from headaches, gastric problems, insomnia and panic attacks.

The district court refused to grant the motion for judgment notwithstanding the verdict and the motion for a new trial. The district court awarded costs and attorney fees to Sorensen under Idaho Code (I.C.) §§ 12-120(3) and (1). An Amended Judgment was entered, awarding Sorensen damages in the amount of $83,750.72, $1,210.27 in costs as a matter of right, $1,792.00 in discretionary costs and $40,383.00 in attorney fees for a total judgment of $127,135.99. Trinity appealed.

II.

TRINITY’S MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT SHOULD HAVE BEEN GRANTED

Trinity’s motion for judgment notwithstanding the verdict involved determinations by the district court prior to trial in motions for summary judgment which bound the jury in its determinations and decisions made during the trial itself. It is necessary to determine the propriety of the pre-trial rulings as well as the evidence at trial.

A. Standard of Review

The standard of review on appeal from an order granting summary judgment is the same standard as that used by the district court in ruling on the motion for summary judgment. Tolley v. THI Co., 140 Idaho 253, 259, 92 P.3d 503, 509 (2004). Summary judgment is proper where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Id.; I.R.C.P. 56(c). The facts will be liberally construed and all inferences will be drawn in favor of the non-moving party. Id. The fact that parties have filed cross-motions for summary judgment does not change the standard employed by the court in reviewing whether or not issues of material fact exist. Intermountain Forest Management, Inc. v. Louisiana Pacific Corp., 136 Idaho 233, 235, 31 P.3d 921, 923 (2001). Each party’s motion must be evaluated on its own merits. Id.

B. Trinity, not Sorensen, was entitled to summary judgment on Sorensen’s breach of contract and breach of the implied covenant of good faith and fair dealing claims.

The district court determined that the Summary Plan controlled the resolution of this case and that the Summary Plan conflicted with the Plan. Further, Trinity was estopped from unilaterally changing the pension benefits after Sorensen had vested in those benefits. Based on this analysis, the district court granted summary judgment in favor of Sorensen on her breach of contract and breach of the implied covenant of good faith and fair dealing claims.

1) The Breach of Contract claim.

The first issue to be resolved in any breach of contract claim is defining what the contract is between the parties. The Plan was the contract between Sorensen and Trinity, not the Summary Plan. The Summary Plan states in several places that the Plan has the final say on any issue relating to an employee’s retirement benefits. The Summary Plan states, “The descriptions in this booklet are based on the plan’s legal document which has the final word on any question about how the plan works.” Further, ‘Tour rights are governed solely by the official plan document. It is important, therefore, to ask questions and get clarification on any matters about which you are uncertain. A copy of the plan document is available for you upon request and without charge from your Benefits Coordinator/Human Resource Department.” The Plan expressly required a full termination of employment prior to receiving early retirement benefits.

The Summary Plan was not the contract between Sorensen and Trinity. Trinity’s actions are in accordance with the language of the Plan and cannot form the basis for a breach of contract action.

ERISA does not apply in this case because the pension plan at issue is a qualified church plan and is therefore exempt from ERISA. However, the parties agree that ERISA principles, such as protecting benefits in which an employee has vested and the protection of plan assets, are relevant to this case. The parties also agree that some case law interpreting ERISA holds that where a Summary Plan description and a Plan conflict, the Summary Plan will control if the employee has relied on the Summary Plan. Heidgerd v. Olin Corp., 906 F.2d 903 (2nd Cir.1990); Brush Wellman, Inc. v. Montes, 295 F.Supp.2d 785 (N.D.Ohio 2003). However, a summary plan description is a requirement for employee benefit plans governed by ERISA. 29 U.S.C. § 1022. The Summary Plan in this case was not required. It was voluntarily created for employees by Trinity. The ERISA cases elevating the Summary Plan over the Plan document are less persuasive. Again, the Summary Plan pointed out in several places that the official Plan controlled an employees’ eligibility for benefits.

2) The claim of equitable estoppel.

Four elements are required in order to establish a claim for equitable estoppel: 1) there must be a false representation or concealment of a material fact made with actual or constructive knowledge of the truth; 2) the party asserting estoppel did not and could not have discovered the truth; 3) there was intent that the misrepresentation be relied upon; and 4) the party asserting estoppel relied upon the misrepresentation or concealment to his or her prejudice. Willig v. State, Dept. of Health & Welfare, 127 Idaho 259, 261, 899 P.2d 969, 971 (1995); Tommerup v. Albertson’s, Inc., 101 Idaho 1, 5, 607 P.2d 1055, 1059 (1980). “All of the above factors are of equal importance and there can be no estoppel absent any of the elements.” Tommerup, 101 Idaho at 6, 607 P.2d at 1060.

Trinity reserved the right to make changes to the pension plan and to correct mistakes. The Summary Plan states that, “Holy Cross Resources, Inc. reserves the right to terminate any kind of benefit not protected by law, or change or end this plan at any time, in its sole discretion.” It cannot be said that Trinity made a “false representation or concealment” by attempting to enforce the language of the Plan when it discovered the Summary could be interpreted to incorrectly state the Plan’s ehgibility requirements for early retirement benefits. Sorensen was on notice that her retirement benefits were governed by the Plan and subject to modification.

There is a flaw in the conclusion that Sorensen reasonably relied to her detriment on any representations made by Trinity. The interpretation of the Summary Plan resulted in a benefit flowing to Sorensen, i.e., the ability to receive early retirement benefits while continuing to work part-time. She was not entitled to this benefit under the Plan. She received a benefit, not a prejudice, by misinterpretation of the Plan. Sorensen was not prejudiced by Trinity’s action and is unable to establish the fourth element of equitable estoppel.

C. Sorensen was not entitled to summary judgment on the breach of contract claim.

Trinity has never asked that Sorensen return the early retirement benefits she received for nearly two years. Trinity seeks to enforce the terms of the Plan and correct the error it made in the Summary Plan. Trinity’s desire to adhere to the terms of the contract between the parties, and in doing so protect the Plan from adverse action by the IRS, does not breach that contract. The summary judgment in favor of Sorensen on her breach of contract claim was improper. Summary judgment should have been granted in favor of Trinity. Sorensen’s claim of breach of the implied covenant of good faith and fair dealing fails since that claim depended for its existence on the success of Sorensen’s contract claim.

D. The district court erred in granting summary judgment in favor of Sorensen on her breach of fiduciary duty and negligence claims because she did not suffer damage.

The district court granted summary judgment in favor of Sorensen on claims for breach of fiduciary duty and negligence. “To establish a claim for breach of fiduciary duty, plaintiff must establish that defendants owed plaintiff a fiduciary duty and that the fiduciary duty was breached.” Tolley v. THI Co., 140 Idaho 253, 261, 92 P.3d 503, 511 (2004). In cases governed by ERISA, it is clear that a plan administrator is a fiduciary to plan participants and has a duty to provide full and accurate information to them. Abbruscato v. Empire Blue Cross & Blue Shield, 274 F.3d 90, 102-03 (2nd Cir.2001). The Holy Cross Retirement Plan is a church plan and exempt from ERISA, but both the Plan and the Summary Plan refer to fiduciary obligations to the plan and to participants. Section 11.4 of the Plan, beginning at page 43, states:

Neither the Plan Administrator, Plan Sponsor, Employer, Trustees, or any agent thereof or other party charged with responsibility under the Plan shall be liable for its own act, or failure to act, unless such individual or organization has caused actual loss to the Plan or to a Participant or beneficiary by failing properly to discharge a fiduciary duty or responsibility expressly imposed upon such individual or organization.

The Summary Plan also states, “[t]he people who are responsible for the operation of the Retirement Plan are called ‘fiduciaries’ of the plan. They have a duty to operate your plan prudently and in the interest of you and other plan participants and beneficiaries.” There was a fiduciary relationship between Trinity and Sorensen.

Arguably Trinity breached a fiduciary duty to Sorensen. Trinity created the Summary Plan, which conflicted with the Plan, and interpreted the Summary Plan to provide early retirement benefits to Sorensen while she continued to work part-time. Trinity failed to provide Sorensen with complete and accurate information about her retirement benefits by drafting a Summary Plan that seemed to allow her to continue working part-time and then providing her with benefits to which she was not entitled for two years. The fact is she received more than she was entitled to receive. She was offered the option to lay off work for four months and then return to work part-time with her retirement benefits. She was an employee at will who could have been terminated in any event. Any loss of money during that four months was more than offset by the two years of benefits she received as a consequence of the misinformation she was provided.

While it is not dispositive of Sorensen’s right to recover, it is clear that Trinity had the obligation to proceed as it did once the mistake was discovered. It has a fiduciary duty to all participants in the Plan. Failure to rectify the error would have endangered the qualified status of the Plan with the IRS which would adversely impact other beneficiaries in violation of Trinity’s duty to protect the Plan.

With respect to Sorensen’s negligence claim, summary judgment in her favor was also improper. In Gibson v. Hardy, 109 Idaho 247, 250, 706 P.2d 1358, 1361 (Ct.App.1985), the Court of Appeals noted that, “[n]egligence arises out of some duty imposed by law, irrespective of any contract.” Citing Taylor v. Herbold, 94 Idaho 133, 483 P.2d 664 (1971). The court continued by stating that, “ ‘one owes the duty to every person in our society to use reasonable care to avoid injury to the other person in any situation in which it could be reasonably anticipated or foreseen that a failure to use such care might result in such injury.’ ” Id. (quoting Alegria v. Payonk, 101 Idaho 617, 619, 619 P.2d 135, 137 (1980) (emphasis omitted)). In determining whether a party is negligent, his or her conduct is judged against that of an ordinarily prudent person acting under the same conditions and circumstances. Id.

Trinity owed a duty to Sorensen that existed outside of their contract to use reasonable care in providing her with accurate information regarding her retirement benefits. It was negligent to provide Sorensen with inaccurate information in the Summary Plan and in the Benefits Specialist’s interpretation of the Summary Plan. However, again, she received more benefits than those to which she was entitled. She was an employee at will. She had no contractual right to employment for the four-month period. The negligence was not a proximate cause of damage.

Sorensen had choices. She could terminate her employment with St. Al’s for a period of four months and receive the retirement benefits, after which time she could return to part time employment with retirement benefits. She could work full time without retirement benefits for approximately a year and then work full time, part time, or not at all and receive greater retirement benefits. After receiving benefits to which she was not entitled for two years it cannot be said that Trinity’s negligence caused her damage.

E. The Jury Verdict — negligent infliction of emotional distress.

1. Standard of Review

When it appears to the reviewing court that the verdict is either not supported by substantial and competent evidence — or is against the clear weight of the evidence or, in other words, if upon its review of the evidence in the record the reviewing court determines that reasonable minds could not differ on issues of fact — then those issues become questions of law upon which the court may freely rule. Boel v. Stewart Title Guar. Co., 137 Idaho 9, 12, 43 P.3d 768, 771 (2002).

What remains in this case is the claim for the negligent infliction of emotional distress. The initial act of misadvising Sorensen of her retirement/employment rights did not cause her emotional distress. It was the subsequent act of attempting to correct that misinformation. Sorensen testified about insomnia, anxiety, headaches and gastric problems. The fundamental problem in this claim is that Sorensen was an employee at will who could be terminated at any time with or without cause absent a violation of public policy. No violation of public policy is implicated in this case. She had no guarantee of part-time employment while she received retirement benefits. She cannot obtain emotional distress damages for being offered the option of leaving employment for four months when St. Al’s could simply terminate her with no explanation. It appears that after the mistake was discovered she was actually offered more than she was ever entitled to — retirement and a job after a four-month break in employment with St. Al’s. She cannot convert an employment at will into a guarantee of employment and obtain emotional distress damages for being told she needed to terminate employment with St. Al’s for four months to continue receiving early retirement benefits.

III.

CONCLUSION

The judgment entered in the district court is reversed. Trinity is awarded costs. No attorney fees are allowed.

Justices TROUT and EISMANN concur.