In ERISA litigation challenging an employer's decision to terminate a retiree health plan, the Ninth Circuit rejected an employee's ERISA benefits claim that the employer promised (through multiple PowerPoint presentations) to provide health benefits to retiree-executives for life (Warmenhoven v. NetApp, Inc., (9th Cir. Sept. 13, 2021)). However, the Ninth Circuit returned a related ERISA fiduciary breach claim to the district court for further proceedings.

The plaintiff in this case was his employer's CEO and later the executive chairman of its board of directors before retiring in 2015. During the CEO's tenure, his employer's compensation committee adopted an ERISA-governed executive medical retirement plan to provide insured health coverage to its retired senior executives. After the CEO retired and became covered under the executive medical plan, the compensation committee (citing cost increases) terminated the plan. Under a successor plan, the employer initially reimbursed retirees for the cost of replacement health coverage for three years and gave them a lump sum amount upon terminating the original plan.

The CEO and other executives sued the employer under ERISA:

A district court ruled in the employer's favor on both claims, and the CEO timely appealed.

On appeal, the Ninth Circuit agreed with the district court that the CEO's ERISA benefits claim failed. The CEO argued that PowerPoint presentations summarizing the retiree health plan (and prepared by the employer's human resources department) demonstrated the employer's promise to provide lifetime retiree health benefits to the CEO and other executives. According to the CEO, the PowerPoints therefore overrode the general rule that ERISA health benefits do not vest (see Legal Update, Supreme Court Rejects Yard-Man Inference about Vesting of Lifetime Non-Pension Retiree Benefits through CBAs). The employer, however, argued that the plan's insurance certificates of coverage granted the employer authority to terminate plan benefits at any time—thereby expressly contradicting the PowerPoints' guarantees of lifetime benefits.

Rejecting the CEO's argument, the Ninth Circuit reasoned that a contractual agreement for vesting of ERISA health benefits must be found in the governing plan documents. Moreover, only a written instrument that met ERISA's four-part test for an employee benefit plan could vest lifetime benefits. Under that four-part test, for example, a plan must include a method for funding benefits and procedures for plan administration and amending the plan (ERISA § 402(b) (29 U.S.C. § 1102(b))). The CEO, however, failed to argue that the PowerPoints met the four requirements for being a plan document under ERISA. As a result, the Ninth Circuit held that the district court correctly rejected his benefits claim.

However, the Ninth Circuit vacated the district court's conclusion in the employer's favor regarding the CEO's ERISA fiduciary breach claim. The CEO asserted that he had a "remediable wrong" under ERISA because the employer and plan misrepresented the plan's terms by promising in the PowerPoints that the plan provided lifetime benefits—even though the written plan instruments did not include this guarantee.

The district court concluded that the employer did not commit a fiduciary breach through honest representations of its present intent to provide benefits at a certain level merely because the employer later changed the benefits. The district court interpreted such a claim as requiring intentional deceit on the employer's part. Disagreeing, the Ninth Circuit observed that its precedents do not require an intent to deceive for ERISA fiduciary breach claims. As a result, the Ninth Circuit concluded that:

The Ninth Circuit therefore returned the CEO's ERISA fiduciary breach claim to the district court for further proceedings.

As this case illustrates, whether an employer has committed to providing vested health benefits (which is frequently an issue in retiree medical litigation) is a matter of contract interpretation involving the governing plan documents. Although the CEO's benefits claim, based on promises derived from PowerPoints, was not a success, it's notable that his fiduciary breach claim will live to see another day and further consideration at the district court level. In part, this is because the federal courts have shown a willingness in recent years to consider a broader range of equitable remedies regarding fiduciary breach claims under ERISA Section 502(a)(3). (For more information, see ERISA Litigation Toolkit.)