Opinion ID: 217949
Heading Depth: 2
Heading Rank: 7

Heading: Breach of Fiduciary Duty: Claim 2 of the SAC.

Text: Claim 2 of the SAC alleges that Qwest misrepresented to Pre-1991 Retirees that under the 5+5 Option their life insurance benefits could not be reduced below the amount set forth in the Minimum Benefits Provision. See 5 Aplt.App. 979-80. The district court granted summary judgment to Qwest, holding that each of the alleged material misrepresentations either was not a misrepresentation, was immaterial, or was not relied upon by the Plaintiffs. Kerber, 656 F.Supp.2d at 1288. The Tenth Circuit has not adopted a test for breach of fiduciary duty claims premised on material misrepresentations. The district court employed the Third Circuit's test as expressed in Daniels v. Thomas & Betts Corp., 263 F.3d 66, 73 (3d Cir.2001). See Kerber, 656 F.Supp.2d at 1287. Plaintiffs urge us to adopt the Third Circuit's test as set forth in In re Unisys Corp. Retiree Medical Benefits ERISA Litigation, 579 F.3d 220 (3d Cir.2009), Aplt. Br. 55, while Qwest cites a First Circuit case for the proposition that informal communications contradicted by the underlying plan documents cannot form the basis for a material misrepresentation claim, Aplee. Br. 52 (citing Balestracci v. NSTAR Elec. & Gas Corp., 449 F.3d 224, 233-34 (1st Cir.2006)). In this case, we need not determine what version of the test to adopt. Under any test, the Plaintiffs would be required to allege a material misrepresentation. See, e.g., Unisys, 579 F.3d at 228; Moore v. LaFayette Life Ins. Co., 458 F.3d 416, 433 (6th Cir.2006) (internal quotation marks and citation omitted); Hammond v. Reynolds Metals Co., 219 Fed.Appx. 910, 916-17 (11th Cir.2007) (unpublished); Ballone v. Eastman Kodak Co., 109 F.3d 117, 122 (2d Cir.1997). Because, as we discuss below, the statements on which Plaintiffs rely are not material misrepresentations, we affirm the district court's grant of summary judgment on Claim 2. On appeal, Plaintiffs point to three alleged material misrepresentations in support of Claim 2: (1) a description of the insurance plan sent to employees as part of the 5+5 Option (the Insurance Plan Description or IPD), (2) statements made during a video conference (Video Conference) intended to explain the 5+5 Option, and (3) confirmation statements sent to retirees in 2001 through 2004 (Confirmation Statements). [2] See Aplt. Br. 48-51, 54. We address each in turn.
In December 1989, Qwest sent a packet of information to employees describing the benefits available under the 5+5 Option. 8 Aplt.App. 1639; 9 Aplt.App. 1797. Included in this information was an Insurance Plan Description (IPD). See 9 Aplt.App. 1797. The first page of the IPD stated, in bolded text, While the plans listed below are the plans currently provided to eligible employees upon retirement, the Company reserves the right to amend or terminate any or all provisions in the future for any reason. Id. at 1797. The next page, in the sub-part labeled Group Life Insurance Program, provided, your Basic coverage ... continues at no cost to you. The amount of coverage is based on one times your pay immediately prior to retirement (rounded up to the next $1,000). However, your coverage will be reduced by 10% beginning on your 66th birthday and each year thereafter up to a maximum reduction of 50% at age 70. Id. at 1798. The district court held that the IPD clearly indicated that Qwest retained the right to amend the Plan, and therefore did not constitute a material misrepresentation. Kerber, 656 F.Supp.2d at 1289. As that is the only reasonable reading, we agree. The first page of the IPD unambiguously states that the plans described are the plans then provided by Qwest, and that Qwest reserves the right to amend or terminate any or all provisions in the future for any reason. 9 Aplt.App. 1797. The statement regarding the maximum reduction of 50% by age 70 clearly indicates that the benefits will not be reduced by the formula below 50%it is not a promise that Qwest would not amend the Plan. Id. at 1798. Accordingly, the Insurance Plan Description does not constitute a material misrepresentation and cannot form the basis for Plaintiffs' breach of fiduciary duty claim.
In response to questions about the 5+5 Option, Qwest conducted a question-and-answer video conference. See Kerber, 656 F.Supp.2d at 1283. The following colloquy appeared in the video: Moderator: ... There is a statement in some of the paperwork that people received in their packets that's raised some questions, and that is the statement that says the company reserves the right to change benefits. There are some people worried about that. Can you speak to that statement? Human Resource Director Charlie Kamen: Sure. That's a typical reservation of rights statement that appears in virtually every employee benefit plan, not just U.S. West benefit plans, but all companies' benefit plans. It is not intended to be divisive, it is not intended to be a below the board type of thing. What it is intended to do though, is it's intended to give the company the ability to modify the plans as circumstances and conditions change in the future. It's really intended to make the plans more meaningful and more affordable not only for the employees but for the company. Id. (emphasis added). Plaintiffs argue that the statement by Mr. Kamen represented that Qwest did not reserve the right to amend or terminate the Plan, and that the video conference reflected an effort to conceal the possible adverse consequences of the ROR in order to induce retirees into accepting the 5+5 Option. Aplt. Br. 52. Thus, Plaintiffs assert that this segment of the video conference constitutes a material misrepresentation. Id. at 53. They argue that the reduction of the life insurance coverage does not make the Plan more meaningful and/or more affordable for retirees. Id. at 54-55. The district court held that the video conference was not a misrepresentation, as it clearly indicated that Qwest maintained the right to alter or terminate the Life Benefit. Kerber, 656 F.Supp.2d at 1289. Again, we agree. Even assuming, without deciding, that an oral statement that contradicts unambiguous, written plan language could form the basis of a material misrepresentation claim, the statements in the video conference are not misrepresentations. But see Ladouceur v. Credit Lyonnais, 584 F.3d 510, 512-513 (2d Cir. 2009) (holding that oral statements that contradict clear plan language cannot form the basis for material misrepresentation claims). In the video conference, Mr. Kamen unequivocally states that the ROR is intended to give the company the ability to modify the plans as circumstances and conditions change in the future. Kerber, 656 F.Supp.2d at 1283. This statement correctly explains the ROR: the company retains the ability to modify the Plan as conditions change. Mr. Kamen then notes that the ROR is intended to make the Plan more meaningful and more affordable not only for the employee, but for the company. Id. Again, this statement is correct: the ROR clause permitted Qwest to modify the Plan both to benefit retireesas it did in 1997 by adding the Minimum Benefits Provisionand to make it more affordable to the company, as it did by reducing the Basic Life Coverage to a flat $10,000. The video conference is completely accurate, and therefore cannot constitute a material misrepresentation. This is particularly true where, as here, the various written documents unambiguously reserve in Qwest the right to amend or terminate the Plan.
In 2001 through 2004, Qwest mailed Confirmation Statements to retirees. See 4 App. 688 (2001), 690 (2002), 693 (2003), 695 (2004). These statements confirmed that life insurance coverage was available under the Plan, and contained a statement noting that Qwest reserved the right to amend or terminate Plan benefits except for those who retired before 1991. See, e.g., id. at 688-89. However, the Confirmation Statements also stated that The exact details of these plans are included in the legal plan documents that govern them. If there's a discrepancy between this worksheet and the plan documents, the plan documents will govern. See, e.g., id. at 689. The district court held that although the Confirmation Statements contained misrepresentationsthat Qwest could not amend the Plan as to Pre-1991 RetireesPlaintiffs failed to allege reliance on those statements. Kerber, 656 F.Supp.2d at 1292. Thus, the district court held, even assuming the misrepresentations were material, summary judgment for Qwest was appropriate because an allegation of detrimental reliance was required to sustain a breach of fiduciary duty claim premised on material misrepresentations. Id. We need not decide whether detrimental reliance is a required element of a claim for breach of fiduciary duty premised on material misrepresentations. The misrepresentations in the Confirmation Statements were not material, and therefore summary judgment to Qwest on this issue was appropriate. [3] A misrepresentation is material `if there is a substantial likelihood that it would mislead a reasonable employee in making an adequately informed [retirement] decision.' Horn v. Cendant Operations, Inc., 69 Fed.Appx. 421, 428 (10th Cir.2003) (unpublished) (quoting Jordan v. Fed. Exp. Corp., 116 F.3d 1005, 1015 (3d Cir.1997)). In this case, all Plaintiffs asserting Claim 2 retired in or before 1991. See 1 Aplt.App. 32-34; 5 Aplt.App. 959 (asserting Claim 2 on behalf of only Pre-1991 Retirees). The first of the Confirmation Statements were sent nearly a decade later, in 2001. See 4 Aplt.App. 688. Therefore, any misrepresentations in the Confirmation Statements could not have informed Plaintiffs' retirement decisions in any way. Accordingly, the misrepresentations in the Confirmations Statements were immaterial, and summary judgment to Qwest was appropriate. Indeed, we doubt whether any of the alleged misrepresentations are material. On appeal, Plaintiffs strongly emphasize that they do not challenge Qwest's ability to terminate the Basic Life Coverage. Aplt. Br. 17. Rather, they argue only that Qwest could not amend the Basic Life Coverage below the amount set forth in the Minimum Benefits Provision. Id. We fail to see how misrepresentations regarding Qwest's ability to decrease life insurance coverage would effect a reasonable employee's retirement decision, where Qwest admittedly retains the right to terminate life insurance coverage. We would think that a reasonable employee who knew that Qwest could terminate life insurance coverageyet still retired under the 5+5 Optionwould make the same decision even with the knowledge that Qwest could reduce that same coverage. In any event, the record reveals that the only actual misrepresentation made by Qwestcontained in the Confirmation Statements first distributed in 2001was not material, as it was issued nearly ten years after Plaintiffs decided to retire and not obtain other life insurance. Therefore, the district court correctly granted summary judgment to Qwest on Claim 2 of the SAC. AFFIRMED.