Bland, Lou v. Fiatallis North Amer , 401 F.3d 779 ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-2703
LOU BLAND, EDWARD HODGEMAN, GERALDINE
ROSATO, ERVIN SHORES, and RICHARD HORCHER,
Plaintiff-Appellants,
v.
FIATALLIS NORTH AMERICA, INC., CASE NEW
HOLLAND, INC., and CNH HEALTH AND
WELFARE PLAN,
Defendants-Appellees.
____________
Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 02-CV-69—James B. Zagel, Judge.
____________
ARGUED JANUARY 19, 2005—DECIDED MARCH 15, 2005
____________
Before CUDAHY, MANION and EVANS, Circuit Judges.
CUDAHY, Circuit Judge. A “lifetime” can be a slippery
concept in the context of retiree benefits litigation under the
Employee Retirement Income Security Act (“ERISA”), 42
U.S.C. §§ 1001 et seq. (2005). This case asks us to consider,
on the heels of Vallone v. CNA Financial Corporation, 375
F.3d 623 (7th Cir. 2004), whether designating retiree
2 No. 04-2703
benefits as “lifetime”really means “for life.” Unlike previous
cases, where the interpretation of explicit “lifetime” lan-
guage was constrained by reservation of rights clauses
allowing an employer to modify or terminate retiree welfare
benefits, the plan documents at issue here contain no such
limiting language. Accordingly, we find that the “lifetime”
language, as used here, is ambiguous as to vesting, and so
we reverse the grant of summary judgment to the defendant
and remand this case for further proceedings.
I.
The plaintiffs in the present case are former retired
salaried and hourly employees of Fiatallis North America,
Inc. (“FANA”), who retired in the late 1970s through 1988
and their surviving spouses. Most are at least eighty years
of age and are presumably on fixed incomes. Before or upon
their retirement, each of the plaintiffs received documents
known as “summary plan descriptions” (“SPDs”) that
described the medical and dental benefits that they would
receive and that allegedly contained explicit promises that
retirees and their spouses would continue to receive these
benefits at little or no cost until their death.
Of the five SPDs at issue in this case, three refer to
salaried employees, and two address hourly employees. We
will discuss the SPDs in the chronological order of their
issuance. An SPD related to a “Benefit for Retired Salaried
Employees Plan,” which covers retired salaried employees
who retired after Dec. 31, 1976, provides that health insur-
ance and dental “. . . coverage remains in effect as long as
your or your surviving spouse are living.” The SPD related
to a “Group Health Plan for Salaried Active Employees,”
dated January of 1978 and distributed to active salaried
employees, states in pertinent part that upon retirement
“benefits continue to be paid for by the Company,” and that
employees who wish to continue major medical coverage
No. 04-2703 3
must “continue to pay [their] share of the cost.”1 With respect
to retirees’ spouses, the plan document states that the
“spouse and any eligible dependents . . . can continue the
protection” until the spouse “dies, remarries, or is covered
by another employee’s group plan”; spouses are “required to
make monthly payments for both Basic and Major Medical
coverage.” The two plan documents applicable to hourly
employees are essentially identical. The “Health Benefits
Plan” and “Benefits for Retired Hourly Employees Plan”
documents, created in January of 1978 and distributed to
hourly employees at FANA’s Carol Stream and Deerfield
plants, both state that “. . . [b]enefits are provided to help
you meet the expense of illness, injury, and other similar
emergencies within your family” and that “[i]f a retired
employee dies, the surviving spouse will have basic coverage
continued for his or her lifetime at no cost.” Finally, plan
documents dated March and April of 1985, titled “Benefit
Fact Sheets,”2 that were provided to salaried employees
affected by the shutdown of FANA’s Springfield plant, state
that “[s]alaried employees for retirement will have the
retired employee benefits in effect prior to March 1, 1985.”3
None of these documents contain express reservation of
rights clauses.
In the mid-1980s, FANA and its Italian parent corpo-
ration sought advice from three outside law firms as to
whether these retiree plan benefits were vested. The em-
ployer had in mind an “onion solution” to deal with rising
insurance costs, under which retiree benefits would be grad-
1
Plaintiffs contend that this SPD was in effect for active salaried
employees from January of 1978 through March or April of 1985.
2
These documents were never designated by FANA as SPDs.
3
Plaintiffs assert that the Benefit Fact sheets referenced the
benefits described in the Benefit for Retired Salaried Employees
Plan.
4 No. 04-2703
ually peeled away. Lou Bland, a named retiree plaintiff,
who served as a former vice-president and member of the
Employee Benefits Committee, received copies of documents
discussing the onion solution in the course of his employ-
ment, and retained these documents upon retirement.
In 1989, FANA published another SPD for active employ-
ees that altered the description of plan benefits and expressly
reserved the right to amend benefits; this document did not
state that these changes were effective with respect to re-
tirees, and no plaintiff received it. Late in 2000, however, the
plaintiffs received plan documents containing new benefit
descriptions, which stated that costs for medical and dental
coverage would dramatically increase as of February 1,
2001 and warned that benefits could be modified even after
retirement.4
Angered by these modifications, plaintiffs filed suit in
Illinois state court, contending that FANA had unilaterally
4
The new “BenefitSelect” Medical Plan implemented on February
1, 2001, increased retiree cost-sharing features. While it contained
hospitalization, X-ray, ambulance, emergency room, and office
visit coverages similar to those in the pre-1989 plans, it imple-
mented a preferred provider network system. Non-Medicare-
eligible retirees were offered PPO, POS, HMO, and basic protec-
tion, and Medicare-eligible retirees were offered a non-network
plan. Retirees who elected PPO in-network benefits had many of
the same coverage levels for many items as provided under the
pre-1989 plan, with costs being covered at rates of 90 to 100
percent and with co-payments between $10 and $25. The POS and
HMO plans varied in coverage levels and deductibles, depending
on residence. Finally, the non-network plan contained a $500
annual deductible and covered 70% of the expenses found in the
network plan. The new BenefitSelect Dental Plan changed the
percentage of covered expenses depending on whether retirees
elected the PPO or the traditional plan, with some levels of
coverage (such as for dentures, bridgework, fillings, and crowns)
remaining the same or substantially similar.
No. 04-2703 5
reduced vested benefits by greatly increasing the cost to
retirees. The case was then removed by FANA to federal
district court. After discovery began, the plaintiffs uncov-
ered documents discussing the “onion solution,” and turned
the documents over to defense counsel on the grounds that
the documents might be privileged. FANA then requested
a protective order claiming that the documents were priv-
ileged as attorney-client communications or work product
and moved for the appointment of a magistrate judge to
determine privilege issues. After conducting an in camera
review, the magistrate judge entered a recommendation
that most of the documents, including portions discussing
the onion solution, were protected and inadmissible since
they contained communications including attorney advice
and relating exclusively to amendment or termination of
the plan. The magistrate also rejected the plaintiffs’ claims
that numerous exceptions to the privilege applied.
After the district court accepted the magistrate’s recom-
mendations, the plaintiffs filed an amended complaint al-
leging that FANA had established a new health plan less
favorable to plaintiffs in February of 2001 in breach of
ERISA contract obligations and that FANA had made oral
and written promises vesting health benefits that had been
breached, thus violating ERISA fiduciary duties and the
principles of estoppel. The plaintiffs never sought to certify
any class under Fed. R. Civ. P. 23. The parties then filed
cross-motions for judgment on the pleadings as to the al-
leged breach of the ERISA contract obligations claim. The
district court awarded judgment on the pleadings to FANA,
and the plaintiffs then voluntarily dismissed their other
claims without prejudice in order to pursue an appeal of the
ruling relating to the alleged breach of ERISA contract
obligations. After the district court questioned whether
these matters were in fact ripe for appeal, the plaintiffs
agreed to voluntarily dismiss their breach of fiduciary duty
and estoppel claims with prejudice. Thus, the only issues
6 No. 04-2703
before us are whether the plan documents contain language
that unambiguously vested ERISA contract rights or that
is so ambiguous as to require a trial on the issue of vesting.
There is a further question whether the district court erred
in not admitting certain documents into evidence under
exceptions to the privilege doctrine.
We review the decision to grant FANA’s motion for
judgment on the pleadings de novo. Forseth v. Village of
Sussex, 199 F.3d 363, 368 (7th Cir. 2000).
II.
A.
Today’s employment market is heavily impacted by the
abruptly rising cost of health care, and the ensuing in-
creases in health insurance premiums. The plan documents
in the present case, created in the 1970s and 1980s, likely
were the product of a social reality different from that now
prevailing. Before 1980, employers in many cases, in granting
health benefits, did not consider a possible need to modify
them in the future. Only later with “spiraling medical costs,
heightened foreign competition, epidemic corporate take-
overs and the declining bargaining power of labor” was
thought given to modifying benefits granted to retirees. See
Bidlack v. Wheelabrator Corp., 993 F.2d 603, 613 (7th Cir.
1993) (Cudahy, J., concurring). Thus, at the time the
relevant plan documents were created, there may not have
been much thought given to any language affecting possible
future changes in benefits. This expectation has now
changed, and many courts have rejected retirees’ attempts
to show that their benefits have vested under the language
of plan documents. Meanwhile, retirees living on limited
fixed incomes can be squeezed by unanticipated increases
in medical costs. It is with this historical context in mind
that we turn to the question whether the FANA plan docu-
ments vested retiree health benefits here.
No. 04-2703 7
Under ERISA, employee benefit plans are classified either
as welfare benefit plans or as pension plans. See 29 U.S.C.
§§ 1002(1), 1002(2)(A) (2005). Pension plans provide retire-
ment income to employees or allow employees to defer the
receipt of income until or beyond the termination of the cov-
ered employment. 29 U.S.C. § 1002(2)(A) (2005). Welfare
benefits, on the other hand, provide “medical, surgical, or
hospital care or benefits, or benefits in the event of sickness,
accident, disability, death or unemployment. . . .” 29 U.S.C.
§ 1002(1) (2005). While pension benefits are subject to strict
vesting requirements, welfare benefits such as health and
life insurance are vested only if the plan contract so pro-
vides. 29 U.S.C. § 1051(1) (2005). See also Curtiss-Wright
Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995) (“Nor does
ERISA establish any minimum participation, vesting, or
funding requirements for welfare plans as it does for pension
plans.”) (citation omitted); Bidlack v. Wheelabrator Corp.,
993 F.2d 603, 604-05 (7th Cir. 1993) (“ERISA does not require
the vesting of health or other ‘welfare’ benefits as it does
pension benefits.”) (citations omitted). Thus, employers are
“generally free . . . for any reason at any time, to adopt,
modify or terminate welfare plans.” Curtiss-Wright Corp.,
514 U.S. at 78.
Welfare benefits may vest, however, when employers elect
to enter into a private contract with employees as set forth
in benefit plan documents. See Inter-Modal Rail Employees
Ass’n v. Atchison, Topeka, & Santa Fe Ry. Co., 520 U.S. 510(1997) (noting that an employer may “contractually cede [ ]
its freedom” not to vest benefits). If welfare benefits “vest at
all, they do so under the terms of a particular contract.”
Vallone v. CNA Financial Corp., 375 F.3d 623, 632 (7th Cir.
2004) (citing Pabst Brewing Co. v. Corrao, 161 F.3d 434, 439
(7th Cir. 1998)). An ERISA plan is a contract. Herzberger v.
Standard Ins. Co., 205 F.3d 327 (7th Cir. 2000) (quoting
Anstett v. Eagle-Picker Industries, Inc., 203 F.3d 501, 503
(7th Cir. 2000)). Therefore, “[t]he question before us is
8 No. 04-2703
essentially one of contract interpretation,” and so federal
principles of contract construction apply. Diehl v. Twin
Disc, Inc., 102 F.3d 301, 305 (7th Cir. 1996). Under these
rules, a document should be read as a whole with all its
parts given effect, and related documents must be read
together. Murphy v. Keystone Steel & Wire Co., 61 F.3d 560,
565 (7th Cir. 1993) (citations omitted). In addition, “we will
give contract terms their ‘ordinary and popular sense’ and
avoid resort to extrinsic evidence when faced with unambigu-
ous language.” Diehl, 102 F.3d at 305. “Contract language
is unambiguous if it is susceptible to only one reasonable
interpretation.” Murphy, 61 F.3d at 566 (citations omitted).
Only if the language of the plan document is ambiguous and
these ambiguities are not clarified elsewhere in the docu-
ment may we consider evidence of the parties’ intent that is
extrinsic to the writing. Vallone, 375 F.3d at 632-33.
Upon vesting, benefits become forever unalterable, and
because employers are not legally required to vest benefits,
the intention to vest must be found in “clear and express
language” in plan documents. Inter-Modal Rail Employees
Ass’n, 520 U.S. at 515. See also Vallone, 375 F.3d at 632(stating that . . . “a modification that purports to vest wel-
fare benefits must be contained in the plan documents and
must be stated in clear and express language.”); Sengpiel v.
B.F. Goodrich Co., 156 F.3d 660, 667 (6th Cir. 1998)
(stating that “the intent to vest . . . must be found in the
plan documents and must be stated in clear and express
language”); UAW v. Skinner Engine Co., 188 F.3d 130, 139
(3d Cir. 1999) (stating that “an employer’s commitment to
vest such benefits is not to be inferred lightly and must be
stated in clear and express language”). Plan language should
be read “in an ordinary and popular sense,” construed as if
by a “person of average intelligence and experience.” Grun v.
Pneumo Abex Corp., 163 F.3d 411, 420 (7th Cir. 1998).
We have rejected the position that documents must use
the word “vest” or some variant of it, or that the relevant
No. 04-2703 9
writings must “state unequivocally” that the employer is
creating rights that will not expire, since a court should not
refuse to enforce a contract simply because the parties fail
to use the “prescribed formula.” Bidlack, 993 F.2d at 607. In
addition, the same principles apply to a vesting analysis
whether the retiree benefits are provided under a collective
bargaining agreement or under summary plan documents,
since “the same underlying considerations are present
irrespective of the particular type of document at issue.”
Skinner Engine Co., 188 F.3d at 139. See also Rossetto v.
Pabst Brewing Co., Inc., 217 F.3d 539, 541 (7th Cir. 2000)
(stating that the issue in Rossetto was “when a right to
health benefits that is granted to retired workers by a
collective bargaining agreement (or an ERISA plan, but that
is not this case) survives the termination of the agreement.”)
(emphasis added).
This circuit has held that there is a presumption against
vesting when there is “silence” that “indicates that welfare
benefits are not vested.” Vallone, 375 F.3d at 632. See also
Rossetto, 217 F.3d at 544 (“Our presumption against
vesting . . . kicks in only if all the court has to go on is
silence.”). Significantly, this presumption is not an eviden-
tiary presumption, but an “exploding presumption” that
disappears in the face of evidence. Rossetto, 217 F.3d at 543
(citing Bidlack, 993 F.2d at 607, 609).
B.
As Judge Posner remarked in Rossetto, the presumption
against vesting is defeated by “any positive indication of
ambiguity, something to make you scratch your head.” 217
F.3d at 544. The language contained in the plan documents
before us certainly makes us scratch our heads.
“Lifetime” language is found in three plan documents.
Thus, the “Benefit for Retired Salaried Employees Plan”
10 No. 04-2703
document covering retired salaried employees who retired
after Dec. 31, 1976, provides that health insurance and
dental “. . . coverage remains in effect as long as you or your
surviving spouse are living.” In addition, the “Health
Benefits Plan” and “Benefits for Retired Hourly Employees
Plan” documents distributed to hourly employees at FANA’s
Carol Stream and Deerfield plants state that “[i]f a retired
employee dies, the surviving spouse will have basic cov-
erage continued for his or her lifetime at no cost.” Finally,
the “Benefit Fact Sheets” provided to salaried employees
affected by shutdown of FANA’s Springfield plant state that
employees would have “the retired employee benefits in
effect prior to March 1, 1985,” which plaintiffs contend were
those established in the “Benefit for Retired Salaried
Employees Plan,” noted above.
But other language in the plan documents is compara-
tively weak. The January 1978 “Group Health Plan for Active
Salaried Employees” document simply assures active sal-
aried employees that “benefits continue to be paid for by the
company,” and that spouses and dependents “can continue
the protection.” And the two plan documents directed to
hourly employees merely state that “benefits are provided”
for retirees. Significantly, there is no express reservation of
rights clause in any of the plan documents.
To further complicate the matter, the question arises
whether the “Benefits for Retired Salaried Employees Plan”
document may be applied to employees who retired after
the “Group Health Plan for Active Salaried Employees” was
established. The district court found that the “Benefits for
Retired Salaried Employees” Plan governed only the claims
of salaried employees who retired in 1977 and later stated
that this plan was replaced in January of 1978 by the
“Group Health Plan for Active Salaried Employees.” The
district court also concluded with respect to the 1985 “Benefit
Fact Sheets” that they referenced only the January 1978
“Group Health Plan For Active Salaried Employees,” and
No. 04-2703 11
not the “Benefits for Retired Salaried Employees Plan” of
1976 vintage. We are doubtful, however, that such conclu-
sions can be reached on summary judgment.
Whatever plans were in effect at any given time, the “life-
time” language in the plan documents leads us to conclude
that they are not silent as to vesting, but merely somewhat
vague; however, they are clear enough to vitiate the pre-
sumption against vesting. The absence of a reservation of
rights clause distinguishes this case from Vallone, and the
“lifetime” language used in the plan documents is stronger
and more explicit than language in comparable cases. See
Senn v. United Dominion Indus., Inc., 951 F.2d 806, 816
(7th Cir. 1992) (holding that language stating welfare ben-
efits “will continue” did not create ambiguity as to vesting).
See also Skinner Engine Co., 188 F.3d at 141, 143 (holding
that plan language stating that health benefits “will con-
tinue” and life insurance “shall remain” at the same level
did not unambiguously express an intent to vest benefits for
life because there was no durational language, and the
language was not ambiguous because it merely indicated a
continuation of prior practice and policies). And the language
before us is either similar to or more explicit than language
that we and other courts have found to be at least ambigu-
ous with respect to vesting. See Rossetto, 217 F.3d at 546(finding latent ambiguity in collective bargaining agree-
ments conferring benefits upon retirees consisting either of
medigap insurance or in line with the coverage given to
active employees and stating that benefits would continue
for retirees’ dependents until the sixth month after the
retirees’ death); Diehl, 102 F.3d at 306 (holding that a
separate agreement containing “lifetime” benefits language
stating that retirees would be “entitled [to health benefits]
for the lifetime of the petitioner” modified a reservation of
rights clause incorporated from another agreement and that
retirees were thus entitled to welfare benefits for their
lifetimes); Bidlack, 993 F.2d at 606 (construing as ambigu-
12 No. 04-2703
ous collective bargaining agreement language providing
that retired employees “will have the full cost” of health
insurance coverage “paid by the Company” after age 65 and
that benefits “shall be continued” for spouses after the
retirees’ deaths, and finding ambiguity in plan language
stating that retirees and spouses “will be covered for the
remainder of your lives” at no cost); Int’l Assoc. of Machinists
and Aerospace Workers, Woodworkers Division, AFL-CIO v.
Masonite, 122 F.3d 228, 233 (5th Cir. 1997) (construing as
ambiguous language incorporated into collective bargaining
agreement stating that retirees were entitled to comprehen-
sive medical benefits “until the death of the retired employee”);
UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983) (con-
struing as ambiguous the statement that the “Company will
provide insurance benefits equal to the active group benefits
for retirees and their spouses”). Diehl goes so far as to
intimate that “lifetime” language may be unambiguous, since
such language “stands apart from language we have consid-
ered in similar cases in recent years” in which “we are more
commonly asked to find an intent to create lifetime entitle-
ments despite terms that are ambiguous or completely silent
on the issue.” 102 F.2d at 306.
Further, in the absence of a reservation of rights clause, we
are convinced (not surprisingly) that in the case before us
“lifetime” is durational, meaning “for life.” In Vallone, we
acknowledged alternatively that “lifetime” in the context of
“lifetime benefits” could be construed as “good for life unless
revoked or modified.” 375 F.3d at 633. However, we also
noted that this construction of “lifetime” was most plausible
if the plan documents included a reservation of rights clause,
as was the case in Vallone. Id. This is because the presence
of a reservation of rights clause fundamentally alters the
interpretation of “lifetime” language; both the clause and the
“lifetime” language must be read together, creating a tension
that is best relieved by finding that retirees are entitled to
benefits for life, but that this entitlement is subject to change
No. 04-2703 13
at the employer’s will. See UAW v. Rockford Powertrain, Inc.,
350 F.3d 698, 704 (7th Cir. 2003) (“We must resolve the
tension between the lifetime benefits clause, and the plan
termination and reservation of rights clauses, by giving
meaning to all of them. Reading the document in its entirety,
the clauses explain that although the plan . . . entitles
retirees to health coverage for the duration of their lives . . .
the terms of the plan— including the plan’s continued
existence—are subject to change at the will of” the em-
ployer). In the absence of a reservation of rights clause,
interpreting “lifetime” as being limited by the employer’s
continuing willingness to provide benefits is unreasonable. In
fact, Vallone appears to limit the interpretation of “lifetime”
as “lifetime subject to change” to cases in which there is a
reservation of rights clause. Id. at 634 (stating that “the
‘lifetime’ nature of a welfare benefit does not operate to vest
that benefit if the employer reserved the right to amend or
terminate the benefit.”) (emphasis added).
We thus hold that, under Vallone and its antecedents, the
presence of “lifetime” language in several of the FANA plan
documents—language uncontradicted by the agreement
read in its entirety—defeats summary judgment. Vallone,
375 F.3d at 637 (quoting Rossetto, 217 F.3d at 547) (“If there
is language in the agreement to suggest a grant of lifetime
benefits, and the suggestion is not negated by the agree-
ment read as a whole, the plaintiff is entitled to a trial.”).
This holding is consonant with the decisions of other
circuits. See Abbruscato v. Empire Blue Cross & Blue
Shield, 274 F.3d 90, 98 (2d Cir. 2001) (reversing grant of
summary judgment to defendant plan and holding that,
in the absence of reservation of rights clause, “lifetime” life
insurance benefits in early retirement plans were “am-
biguous and susceptible to interpretation as a promise of
vested benefits”); Devlin v. Empire Blue Cross & Blue
Shield, 274 F.3d 76, 85 (2d. Cir. 2001) (stating that, where
there was no reservation of rights clause, “ ‘lifetime’ lan-
14 No. 04-2703
guage . . . is sufficient to created a triable issue of fact as to
whether Empire promised to vest retiree life insurance
benefits at the stated level.”). On remand, if the judge or jury
concludes that the ambiguous language establishes vesting,
the decisionmaker must also determine whether all retiree
benefits have vested, or if only certain groups of plaintiffs
enjoy vested benefits.
III.
In holding that the language of several of the plan doc-
uments is ambiguous as to vesting, of course we open the
door to consideration of extrinsic evidence. However, con-
siderations of privilege may not allow that door to open very
far, since the opening may be constrained by the magistrate
judge’s conclusion that most of the documents to which
plaintiffs seek to gain access are protected by the attorney-
client and/or work-product privileges.
A.
The appropriate standard of review of a district court’s
findings of fact regarding claims of attorney-client privilege
is the clearly erroneous standard. United States v. Evans,
113 F.3d 1457, 1461 (7th Cir. 1997). On appeal, the plaintiffs
seek to undermine the claims of attorney-client privilege by
relying on two exceptions to that privilege doctrine. The
plaintiffs first argue that they should be permitted access
to the privileged documents under the breach of fiduciary
duty exception. Under that exception, a fiduciary of an
ERISA plan “must make available to the beneficiary, upon
request, any communications with an attorney that are
intended to assist in the administration of the plan.” In re
Long Island Lighting Co., 129 F.3d 268, 272 (2d Cir. 1997).
This exception is premised on the theory that the attorney-
client privilege should not be used as a shield to prevent
No. 04-2703 15
disclosure of information relevant to an alleged breach of
fiduciary duty. Harper-Wyman Co. v. Conn. Gen. Life Ins.
Co., 1991 WL 62510 (N.D. Ill. April 17, 1991).
The magistrate judge determined that the fiduciary
exception was not available here since the amendment or
termination of plan benefits is not a fiduciary action. In-
itially, it is questionable whether the fiduciary exception is
even applicable, since the plaintiffs voluntarily dismissed
their breach of fiduciary duty claim with prejudice, and
thus should perhaps not get the benefit of the exception. In
any event, we cannot find that the magistrate judge erred
in concluding that an employer acts as a fiduciary only
when it undertakes plan management or administration.
An employer acts in a dual capacity as both the manager of
its business and as a fiduciary with respect to unaccrued
welfare benefits, is free to alter or eliminate such benefits
without considering employees’ interests and does not owe
its employees a fiduciary duty when it amends or abolishes
unaccrued benefits. Young v. Standard Oil, Inc., 849 F.2d
1039, 1045 (7th Cir. 1988). Decisions relating to the plan’s
amendment or termination are not fiduciary decisions. See
Hughes Aircraft Co. v. Jacobsen, 525 U.S. 432, 443-44 (1999)
(stating that since “employers or other plan sponsors are
generally free under ERISA, for any reason at any time, to
adopt, modify, or terminate welfare plans,” “[w]hen employers
undertake those actions, they do not act as fiduciaries, but
are analogous to the settlors of a trust.”) (quotation marks
and citations omitted); In re Long Island Lighting Co., 129
F.3d at 272. Plan management, after all, consists of such
activities as “investment of pension funds and communica-
tions to employees about plan administration.” King v.
National Human Resource Committee, 218 F.3d 719, 724
(7th Cir. 2000). In addition, we have previously held that
amending plan benefits, such as by spinning off plan assets
to a new plan, does not implicate fiduciary responsibilities.
Id.16 No. 04-2703
B.
The plaintiffs also seek to obviate the work-product doc-
trine through two exceptions: a “crime/fraud” exception and
an “extraordinary need” exception. The magistrate judge
stated that the plaintiffs had dropped the crime/fraud ex-
ception in their sur-reply, and so did not address that argu-
ment. For this reason, we deem this argument waived.
The plaintiffs also assert that they have a substantial
need for the documents protected as work-product, claiming
that these documents prove that FANA knew its medical
benefits were vested as of 1984, and that the plaintiffs
would encounter substantial hardship in obtaining the
material through alternative means under Fed. R. Civ. P.
26(b)(3). See Hickman v. Taylor, 329 U.S. 495 (1947). The
magistrate judge has not yet addressed these issues. We are
not unsympathetic to these concerns, and would ask the
district court to carefully consider them.
IV.
We therefore hold that the “lifetime” language in several
of the FANA plan documents is at least ambiguous as to
whether some or all of the retiree benefits are vested. Here,
there is no reservation of rights clause to constrain the in-
terpretation of explicit “lifetime” language. If any retiree
benefits are in fact vested, then additional determinations
will have to be made with respect to which benefits are
vested, or whether the 2001 modifications to retiree benefits
effectively cut off retirees’ rights. Accordingly, we REVERSE
the grant of summary judgment to the defendant and
REMAND this case for further proceedings consistent with
this opinion.
No. 04-2703 17
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—3-15-05