The opinion
Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
7-15-1996
In Re: New Valley
Precedential or Non-Precedential:
Docket 95-5140
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 95-5140
IN RE: NEW VALLEY CORPORATION,
Debtor
SENIOR EXECUTIVE BENEFIT PLAN PARTICIPANTS;
RICHARD L. CALLAGHAN; ALEXANDER J. CHISHOLM;
W. LEE ELKINS; ROBERT M. FLANAGAN;
ROBERT F. GARBARINI; ARTHUR A. GARMAN;
WALTER GIRARDIN; DELMAR HARMON;
J. WILLIAM HARRINGTON; JOHN P. HUNT;
JOHN A. HOLLANSWORTH; GERALD P. KENT;
D. D. LLOYD; RUSSELL W. MC FALL;
JOHN W. R. POPE, JR.; HERBET SALTER,
Estate of; STEVE SMISZKO; PHILLIP SCHNEIDER;
BERNARD WEITZER
v.
NEW VALLEY CORPORATION
Senior Executive Benefit Plan Participants
and Walter E. Girardin, Alexander J.
Chisholm, S. E. Smiszko, John A. Hunt, Arthur
Garman, Gerald P. Kent, Delmar Harmon, Robert
R. Garbarini, Walter L. Elkins, Walter E.
Girardin, Philip Schneider, J. William
Harrington, John A. Hollansworth, Bernard
Weitzer, John W. R. Pope, Jr., Robert M.
Flanagan, Douglas D. Lloyd, H. E.
Salter/Barbara Orr Salter, Richard L.
Callaghan, and Russell W. McFall,
Appellants.
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 94-cv-02405)
Argued December 11, 1995
Before: BECKER, ROTH and LEWIS, Circuit Judges
(Opinion Filed July 15, 1996)
George J. Cotz, Esq. (Argued)
185 Arch Street
Box 396
Ramsey, New Jersey 07446
Donald W. Reeder, Esq.
Box 630
10 S. Franklin Turnpike
Ramsey, New Jersey 07446
Attorneys for Appellants
Myron D. Rumeld, Esq. (Argued)
Deidre A. Grossman, Esq.
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Frank Vecchione, Esq.
Crummy, Del Deo, Dolan, Griffinger & Vecchione
Professional Corporation
One Riverfront Plaza
Newark, New Jersey 07102
Attorneys for Appellee
OPINION OF THE COURT
ROTH, Circuit Judge:
Appellants, participants in two top hat pension plans,
filed claims in bankruptcy court seeking benefits after their
employer had been declared bankrupt and terminated the plans.
The bankruptcy court dismissed their claims, relying on a clause
in the plan documents that reserved the company's right to amend
or terminate the plans "at any time for any reason." The
bankruptcy court found this language clear and unambiguous, and
it refused appellants' proffer of extrinsic evidence to show that
the clauses did not represent the original understanding of the
parties. The district court affirmed. We will reverse and
remand.
We conclude that the record in this case, viewed in the
light of the special nature of top hat plans, distinguishes this
case from prior decisions in which we have held a clause
reserving the right to terminate or amend unambiguous and
controlling. See In re Unisys Corp. Retiree Medical Benefit
"ERISA" Litig., 58 F.3d 896 (3d Cir. 1995); Hozier v. Midwest
Fasteners, Inc., 908 F.2d 1155, 1163-64 (3d Cir. 1990).
Therefore, we hold on the facts of this case that the bankruptcy
court should have permitted the appellants to present extrinsic
evidence in support of their allegations. We will remand to the
district court with instructions to remand to the bankruptcy
court to conduct the necessary evidentiary hearing.
I.
Appellants are former executives and highly paid
personnel of Western Union Corporation ("Western Union") who
participated in two top hat plans designed to provide deferred
retirement income and other retirement benefits to a select group
of employees. As discussed more fully below, top hat plans
represent a special category of benefit plans created under ERISA
to provide these types of benefits to select employees. After
the employees had retired, Western Union's successor, New Valley
Corporation ("New Valley"), terminated the plans. Appellants
responded with this action for benefits. The facts are
essentially undisputed.
In the mid-1970s, the first rumblings of technological
revolution were felt in the communications industry. Western
Union had suffered financial reverses in the early part of the
decade, and its Board of Directors ("Board") perceived a need to
attract new executives to the company and to retain the key
executives that it had. The Board viewed an enhanced benefits
and compensation package as the principal means to that end.
In early 1977, the Board began discussing a
supplemental benefits package entitled the Senior Executive
Benefit Plan ("SEBP" or "SEB Plan"). The SEB Plan would provide
a select group of high-level employees with supplemental pension
benefits, deferred compensation benefits, and supplemental
medical benefits. The plan was designed to achieve the
previously identified goal of retaining Western Union's top
management personnel and luring talented candidates to the
company.
The initial draft of the plan was prepared by Gerald
Kent, then Vice President-Employee Relations, in a form that
substantially resembled the "SEBP Plan Summary" later distributed
to the executives selected to participate. This document
described the plan benefits in some detail but made no mention of
any reservation of the company's unilateral right to amend or
terminate the plan. Based on this summary, the Board approved
the plan on August 23, 1977. The Board's minutes similarly
omitted any mention of a right to amend.
After the Board's action, Western Union distributed
copies of the Plan Summary to potential participants. As noted,
the Plan Summary contained nothing indicating that Western Union
reserved the right to amend or terminate the plan. Western Union
also held meetings with the participants to discuss the plan.
Appellants allege that at these meetings they were informed that
they would earn the promised benefits by continuing their
employment with Western Union until retirement and that the
benefits could not be taken away after retirement. Throughout
the initial stages of plan proposal, development, adoption,
negotiation, and acceptance, no reservation of the right to amend
or terminate existed.
Western Union's General Counsel, Richard C. Hostetler,
drafted the formal plan. The formal plan document, introduced
five months later at a board meeting on February 28, 1978,
included an article which reserved the right to amend or
terminate the plan at any time. The text of this article,
Article 12, reads:
12. Amendment and Termination. The Board of
Directors may amend or terminate the Plan at
any time for any reason and thereafter
Participants and their estates and dependents
shall have only such rights under the Plan,
if any, as shall be specifically provided for
by the Board of Directors under the Plan as
amended or terminated.
All subsequent versions of the plan contained this provision.
However, none of the versions of the plan contained an
integration clause.
Appellants are prepared to offer Mr. Hostetler's
testimony that Article 12 was included in the SEBP formal
document as "boiler plate" language that had been contained in
all of Western Union's employee benefit plan documents. Mr.
Hostetler would also testify that at the Board meeting where
Article 12 was discussed, the general understanding was that the
provision could not be used to change or terminate benefits after
retirement. Appellants further allege that during a series of
meetings held to discuss particular provisions in the Plan which
might be of concern, Mr. Kent told them Article 12 could not be
used to change or terminate their benefits after retirement.
Appellants likewise contend that this understanding was conveyed
to executives recruited by the company. Accordingly, although
the plans as adopted contained the termination "at any time"
language, the appellant's understanding of that provision was
informed by these representations.
In 1979, a separate plan was created for Walter E.
Girardin ("Girardin Plan"). The motivation for the Girardin Plan
was much the same as for the SEBP, to retain a key executive. At
the time, Western Union faced a potentially difficult transition
from its long-standing Chairman and CEO, Russell McFall, to his
successor, Robert M. Flanagan. Girardin, who had worked for
Western Union for more than 40 years, had been passed over for
the CEO position. When Girardin announced his decision to
retire, the Board decided that he should be kept on for at least
a year so that his skill and experience could help in the
transition. Western Union offered Girardin an enhanced benefits
package to induce him to remain with the company. After some
negotiating, Girardin accepted. Although the Girardin Plan was
adopted separately and at a date later than the SEB Plan, its
substantive provisions were identical. It ultimately met the
same fate as the SEBP. Both plans will be discussed together.
After appellants had retired, New Valley terminated the
plans, relying on Article 12 for its authority. Appellants
believe that, under the original agreement underlying the plan
documents, such action was impermissible. Appellants therefore
contend that New Valley breached the SEBP and Girardin contracts.
Alternatively, appellants urge that New Valley be estopped from
terminating their benefits because of the promises Western Union
made to the plan participants. Appellants allege a variety of
damages from the breach of contract, framed alternatively as
detrimental reliance on Western Union's promise. Their claims
include leaving secure employment with other companies to join
Western Union, declining employment offers from other companies
to remain at Western Union, uprooting families and moving to New
Jersey to become eligible for the SEBP, taking early retirement
based on plan benefits, and declining to pursue other retirement
options because of the plan.
The procedural history of this case began in the
bankruptcy court. At the time New Valley terminated the plans,
its creditors had placed it in Chapter 11 bankruptcy. Appellants
therefore responded to the denial of benefits by filing proofs of
claims in the bankruptcy proceeding, rather than by following the
traditional course of a suit in district court for benefits under
29 U.S.C. 1132(a). In pursuing their claims, appellants argued
that Article 12 had to be considered in the context in which it
was created and that, when taken in that context, it was
ambiguous. They asked for a hearing in which they could support
their claims with extrinsic evidence, including the testimony of
Mr. Hostetler.
The bankruptcy court disallowed appellants' claims,
relying principally on Article 12 of the plans. The bankruptcy
court described appellants' proposed construction of Article 12
as plainly at variance with the terms in the plans. In re New
Valley Corp., Ch. 11 Case No. 91-27704, Oral Decision with
respect to Omnibus Objection No. 5 at 7 (Bankr. D.N.J. Apr. 8,
1994) (hereinafter "Bankruptcy Court Opinion"). The court held
that the plans had been validly terminated pursuant to Article
12. Id.
The district court affirmed the bankruptcy court's
decision, holding that the exemption of top hat plans from
ERISA's writing requirement would not permit a departure from the
plain meaning of Article 12, that Article 12 could not reasonably
be interpreted to mean the plans vested at retirement, and that
the bankruptcy court properly refused to hold an evidentiary
hearing on the intent of the parties. Senior Executive Benefit
Plan Participants v. New Valley Corp. (In re New Valley Corp.),
Adv. No. 94-2405, slip op. at 19-20 (D.N.J. January 18, 1995)
(hereinafter "District Court Opinion"). This appeal followed.
II.
The bankruptcy court heard this action pursuant to 28
U.S.C. 157. The district court had subject matter jurisdiction
over the initial appeal under 28 U.S.C. 158(a). This court has
jurisdiction over the appeal from the district court pursuant to
28 U.S.C. 158(d). We exercise plenary review over the district
court's determinations and over the bankruptcy court's
conclusions of law. We review the bankruptcy court's findings of
fact for clear error. Fellheimer, Eichen & Braverman v. Charter
Technologies, Inc., 57 F.3d 1215, 1223 (3d Cir. 1995).
III.
The principal issue before us is not whether the
appellants can recover as a matter of law, but rather whether
they can present evidence to establish that they bargained for a
contractual set of benefits instead of a pension terminable at
New Valley's whim any time after their retirement. We hold that
appellants should have the opportunity to clarify the meaning of
their benefits contract through a proffer of extrinsic evidence.
Their claims will then succeed or fail based on the evidence
presented to the fact finder.
A.
As a threshold matter, we have little difficulty
concluding that ERISA provides the framework for our analysis.
ERISA's coverage extends broadly to include all employee benefit
plans. See Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923,
929 (3d Cir. 1985). The SEB and Girardin Plans are clearly
ERISA plans. See 29 U.S.C. 1002(3) (defining "employee benefit
plan"); Miller v. Eichleay Engineers, Inc., 886 F.2d 30, 33 n.7
(3d Cir. 1989).
Finding ERISA applicable, however, is only an initial
step. The far more important determination is to locate the SEB
and Girardin Plans within ERISA's landscape. Both plans at issue
are top hat plans, a fact that has crucial implications for this
case. "A top hat plan is a 'plan which is unfunded and is
maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly
trained employees.' 29 U.S.C. 1051(2), 1081(a)(3), and
1101(a)(1)." Miller, 886 F.2d at 34 n.8; see also 29 U.S.C.
1002(36), 1003(b). The elements of this definition make the top
hat category a narrow one. Not only must the plan be unfunded
and exhibit the required purpose, it must also cover a "select
group" of employees. This final limitation has both quantitative
and qualitative restrictions. In number, the plan must cover
relatively few employees. In character, the plan must cover only
high level employees. Because of these limitations, top hat
plans form a rare sub-species of ERISA plans, and Congress
created a special regime to cover them.
The dominant characteristic of the special top hat
regime is the near-complete exemption of top hat plans from
ERISA's substantive requirements. Section 1051(2) exempts top
hat plans from ERISA's minimum participation standards, minimum
vesting standards, and various other content requirements.
Section 1081(a)(3) exempts top hat plans from ERISA's minimum
funding requirements. Section 1101(a)(1) exempts top hat plans
from ERISA's fiduciary responsibility provisions, including the
requirement of a written plan, the need to give control of plan
funds to a trustee, the imposition of liability on fiduciaries,
and limitations on transactions and investments. Section
1051(2) exempts top hat plans from ERISA's reporting and
disclosure requirements upon promulgation of the proper
administrative regulations. These regulations are in place. 29
C.F.R. 2520.104-23 (1995) (establishing minimal alternative
reporting requirements for top hat plans); Pane v. RCA Corp., 868
F.2d 631, 637 (3d Cir. 1989); see generally Barrowclough, 752
F.2d at 930-31. As a result, top hat plans are covered only by
ERISA's enforcement provisions. Kemmerer v. ICI Americas, Inc.,
70 F.3d 281, 286-87 (3d Cir. 1995), cert. denied, ___ U.S. ___,
64 U.S.L.W. 3776, 64 U.S.L.W. 3778 (May 20, 1996); Barrowclough,
752 F.2d at 931, 935, 937.
Although all of these provisions are important in
defining the top hat category, one specific exemption from this
list has particular importance for the current dispute: top hat
plans are excluded from ERISA's writing requirement. Other ERISA
plans, by contrast, are governed by a stringent writing
requirement: "Every employee benefit plan shall be established
and maintained pursuant to a written instrument." 29 U.S.C.
1102(a)(1). This provision has formed the cornerstone of a
series of decisions by this and other courts limiting litigants
to the language of the plan document. See Hozier v. Midwest
Fasteners, Inc., 908 F.2d 1155, 1163-64 (3d Cir. 1990) (citing
cases). Under this interpretation, 1102(a)(1) essentially
operates as a strong integration clause, statutorily inserted in
every plan document covered by the fiduciary duty provisions.
Like any common law integration clause, 1102(a)(1) makes the
plan document the entire agreement of the parties and bars the
introduction of parol evidence to vary or contradict the written
terms. See Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619
F.2d 1001, 1010 n.9 (3d Cir. 1980) (discussing integration
clauses and parol evidence rule).
Top hat plans are exempt from 1102(a)(1). As a
result, top hat agreements can be partially or exclusively oral.
They may, of course, be integrated by their own terms, just as
they may contain any provision to which the parties agree. They
do not, however, gain the benefit of statutory additions such as
1102(a)(1). Consequently, Hozier and other cases which limit
employees strictly to the terms of the plan document are
inapposite. Top hat plans are instead governed by general
principles of federal common law. Barrowclough, 752 F.2d at 936.
Here, that law is the federal common law of contract.
Both parties agree that the plans in question are top
hat plans. Both the SEB Plan and the Girardin Plan therefore
exist in the unique top hat category of ERISA coverage and
exemption. They are exempt from the writing requirement of
1102(a)(1), and federal common law developed under the aegis of
ERISA governs their enforcement.
Applying the federal common law of contract, we believe
that the bankruptcy court erred in construing the plan documents.
A court cannot interpret words in a vacuum, but rather must
carefully consider the parties' context and the other provisions
in the plan. Moreover, extrinsic evidence should have been
considered to determine whether an ambiguity existed, especially
in the absence of an integration clause in the plan.
Whether a document is ambiguous presents a question of
law properly resolved by this court. Stendardo v. Federal Nat'l
Mortgage Ass'n, 991 F.2d 1089, 1094 (3d Cir. 1993). Our
precedents clearly establish the steps involved in resolving a
contractual ambiguity.
To decide whether a contract is ambiguous, we
do not simply determine whether, from our
point of view, the language is clear.
Rather, we "hear the proffer of the parties
and determine if there [are] objective
indicia that, from the linguistic reference
point of the parties, the terms of the
contract are susceptible of different
meanings." Sheet Metal Workers, 949 F.2d at
1284 (brackets in original) (quoting Mellon
Bank, N.A. v. Aetna Business Credit, Inc.,
619 F.2d 1001, 1011 (3d Cir.1980)). Before
making a finding concerning the existence or
absence of ambiguity, we consider the
contract language, the meanings suggested by
counsel, and the extrinsic evidence offered
in support of each interpretation. Id.;
Mack Trucks, 917 F.2d at 111; see alsoRestatement (Second) of
Contracts 223 cmt.
b (1981) ("There is no requirement that an
agreement be ambiguous before evidence of a
course of dealing can be shown . . ..").
Extrinsic evidence may include the structure
of the contract, the bargaining history, and
the conduct of the parties that reflects
their understanding of the contract's
meaning.
Teamsters Indus. Employees Welfare Fund v. Rolls-Royce Motor
Cars, Inc., 989 F.2d 132, 135 (3d Cir. 1993). And once a
contract provision is found to be ambiguous, extrinsic evidence
must be considered to clarify its meaning. See Hullett v.
Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 111 (3d Cir.
1994); Taylor v. Continental Group Change in Control Severance
Pay Plan, 933 F.2d 1227, 1234 (3d Cir. 1991).
Neither the bankruptcy court nor the district court
followed these steps. Both instead adopted, and then misapplied,
a "four corners" approach to the contract. Mellon Bank, 619 F.2d
at 1011 ("Under a 'four corners' approach a judge sits in
chambers and determines from his point of view whether the
written words before him are ambiguous."). Since Mellon Bank,
however, this court has required the judge to hear the proffer of
the parties and consider extrinsic evidence to determine whether
there is an ambiguity, and then to resolve or clarify any
ambiguity that may exist.
B.
Our interpretation of the SEB and Girardin top hat
plans is assisted by our recent decision in Kemmerer v. ICI
Americas, Inc., 70 F.3d 281, 286-87 (3d Cir. 1995), cert. denied,
___ U.S. ___, 64 U.S.L.W. 3776, 64 U.S.L.W. 3778 (May 20, 1996).
The unilateral contract theory in Kemmerer supports appellants'
explication of the plans as a whole and of Article 12 in
particular.
In Kemmerer, we interpreted a top hat plan that
permitted plan participants to elect a payment schedule by which
they would receive their benefits. The plaintiffs elected an
extended payment schedule and later retired. The company then
unilaterally terminated the plan, paying the remaining amounts
due the participants in three annual installments. 70 F.3d at
285. The participants sued, the district court found a breach,
and we affirmed.
After concluding that top hat plans were subject to
ERISA, we turned to contract principles to resolve the dispute.
Id. at 287. Examining the contract as a whole, we found a
unilateral contract which created vested rights in those
employees who accepted the offer it contained by continuing in
the company's employment until retirement. Id. "Under
unilateral contract principles, once the employee performs, the
offer becomes irrevocable, the contract is completed, and the
employer is required to comply with its side of the bargain."
Id. In response to ICI's argument that the contract did not
restrict its right to terminate the plan, we observed,
even when a plan reserves to the sponsor an
explicit right to terminate the plan,
acceptance by performance closes that door
under unilateral contract principles (unless
an explicit right to terminate or amend after
the participants performance is reserved).
"Any other interpretation . . . would make
the Plan's several specific and mandatory
provisions ineffective, rendering the
promises embodied therein completely
illusory."
Id. at 287-88 (emphasis added) (quoting Carr v. First Nationwide
Bank, 816 F.Supp. 1476 (N.D. Cal. 1993)). In our view, the
company's claim to an unfettered right to terminate in the face
of specific grants of benefits "ha[d] no basis in contract law"
and was "more than minimally unfair." Id. at 287.
Like the payout system set forth in Kemmerer, the post-
retirement benefits of the New Valley plan can be construed as
creating a unilateral contract offer that the employees accepted
by working faithfully until retirement, at which time the
benefits would vest. Thus, the plan may not be terminated unless
an explicit right "to terminate . . . after the participant's
performance is reserved." Kemmerer, 70 F.3d at 287-88.
In the current case, the plan documents do contain
language that could be interpreted as reserving a right for New
Valley to terminate even after retirement: the plan says it can
be terminated "at any time." As a matter of plain language, New
Valley contends, this phrase is unambiguous. But this is not
necessarily so. A common example shows that the meaning of "at
any time" depends on the context. Suppose an employer and
employee enter into a contract stating that employee will work
forty hours per week for $500, payable at the end of the week.
The contract further states that employment is at will and
employer can change employee's wages "at any time." After
working a week, employee goes to pick up her pay check. Employer
informs employee that it has exercised its right to change her
wages "at any time," and will be paying her $300 for that week's
work. Despite the seemingly unambiguous "at any time" language,
it seems reasonable that an employee would not expect the
reduction in salary to take place post-performance. Although
this is not our situation, it makes clear that the words "at any
time" may admit of more than one reasonable interpretation.
The appropriate question, then, is whether "at any
time" is unambiguous in this context. The benefits at issue in
this case, like the wages in our hypothetical case, are payable
entirely after performance. As in the wage scenario, agreeing to
allow New Valley to terminate the benefits even after retirement
would make this "contract" largely illusory. Although parties
are free to enter into illusory agreements, the unlikelihood that
they will do so when significant benefits are at stake may render
a term ambiguous. In this context, the unlikelihood that the
Appellants agreed to allow New Valley to terminate their
retirement benefits at its whim, coupled with Appellants'
reasonable alternative interpretation of "at any time" (until
performance), supports the argument that the term is ambiguous.
If New Valley desired to clearly indicate its ability to
terminate benefits even after performance, in the face of likely
expectations to the contrary, it could have simply added the
words "including after retirement" to the plan.
Moreover, in the current case, as in Kemmerer, other
provisions in the plan point to a binding contractual agreement.
For example, the plan documents contain several "specific and
mandatory provisions" promising what appear to be benefits which
vest on retirement. These provisions include Article 4, Deferred
Compensation Benefit; Article 5, Supplemental Disability Benefit;
and Article 6, Supplemental Medical Benefits. The language
quoted here is taken from the original 1977 plan.
Article 4 states: "A deferred compensation benefit
will be paid upon the death of any Participant after retirement
on pension . . . ." Article 5 states: "Any Participant entitled
to receive [basic benefits] whose Total Service at the date of
disability exceeds five years, will receive . . . a supplemental
disability benefit . . . ." Article 6 states: "(a) Following
termination of active employment on account of disability, a
Participant may obtain supplemental medical benefits . . . . (b)
In the event of death . . ., the dependents of that Participant
may obtain medical benefits . . . . (c) Dental benefits will be
provided at no cost to [qualified participants]." App. at 33-34
(emphasis added). The mandatory language of these provisions
denotes benefits that will be provided by the company once the
participant retires, i.e., benefits that vest at retirement.
Other provisions provide less definite support for
vested benefits. Article 3 states the requirements for a
participant to receive a supplemental benefit. These
requirements include participation in the Basic Contributory Plan
during employment, followed by retirement and receipt of a
pension under the Basic plan. Article 3 also states the method
for calculating the supplemental pension. This provision implies
that a pension calculated in this manner will be given to those
participants who satisfy these requirements.
Article 10, Suspension of Benefits, also provides
indirect support for vesting at retirement. This article makes
no mention of post-retirement actions that could result in
termination of benefits. It discusses only "engag[ing] in any
activity or conduct which, in the judgment of the Committee, is
prejudicial to the best interests of the Corporation or its
subsidiaries." Id. at 34. While this omission is not
conclusive, it is consistent with a pension that vests on
retirement.
"An ambiguous contract is one capable of being
understood in more senses than one . . .. Before it can be said
that no ambiguity exists, it must be concluded that the
questioned words or language are capable of [only] one
interpretation." American Flint Glass Workers Union, AFL-CIO v.
Beaumont Glass Co., 62 F.3d 574, 581 (3d Cir. 1995) (quoting
Landtect Corp. v. State Mut. Life Assur. Co., 605 F.2d 75, 80 (3d
Cir. 1979)). Based on the two interpretations offered by the
parties, we cannot say that here. By numerous indicia -- (1)
that the words "at any time" are inconclusive; (2) that the right
to terminate even after retirement would render the provisions
for benefits largely illusory; and (3) that the plan contains
numerous specific and mandatory provisions -- the contract
language appears ambiguous. These factors, coupled with the oral
representations made by New Valley to the plaintiffs (that the
plan did not permit termination after retirement) and the fact
that we are dealing with an unintegrated top hat plan, convinces
us that an ambiguity exists as to whether there was a right to
terminate after retirement (or only before). Our opinion is thus
a narrow one, informed by this concatenation of factors.
Construing the plan document "as a whole," see Alexander v.
Primerica Holdings, Inc., 967 F.2d 90, 93 (3d Cir. 1992), we find
appellants understanding of Article 12 at least equally plausible
as New Valley's interpretation.
Because appellants have demonstrated ambiguity in the
plan, the bankruptcy court should have permitted appellants to
present extrinsic evidence to clarify its meaning. See Hullett
v. Towers, Perrin, Forster & Crosby, Inc., 38 F.2d 107, 111 (3d
Cir. 1994); Taylor v. Continental Group Change in Control
Severance Pay Plan, 933 F.2d 1227, 1234 (3d Cir. 1991). Evidence
of the parties' intent, such as that proffered by appellants, is
directly relevant to this issue. Smith v. Hartford Ins. Group,
6. F.3d 131, 139 (3d Cir. 1993) ("[t]o choose between these
competing meanings, we can consider extrinsic evidence of the
parties' understanding of that term"); see also Taylor, 933 F.3d
at 1233 (noting "the reasonable understanding of the
beneficiaries, as well as the intent of the employer, may be
admissible to clarify ambiguities [in an ERISA plan term]").
C.
The bankruptcy court should also consider appellants'
promissory estoppel claims in light of their proffered extrinsic
evidence. We have recognized the viability of estoppel claims
against ERISA plans in general, see Rosen v. Hotel & Restaurant
Employees and Bartenders Union, 637 F.2d 592, 598 (3d Cir.),
cert. denied, 454 U.S. 898 (1981), and against top hat plans in
particular, Pane v. RCA Corp., 868 F.2d at 630.
To establish a claim for equitable estoppel under
ERISA, a plaintiff must prove: (1) a material representation,
(2) reasonable and detrimental reliance upon the representation,
and (3) extraordinary circumstances. Curcio v. John Hancock Mut.
Life Ins. Co., 33 F.3d 226, 235 (3d Cir. 1994). In the context
of this case, the first two elements are particularly germane.
Because top hat plans can be partially or exclusively oral, top
hat participants may reasonably rely on oral representations of
benefits, even in the face of a termination clause like Article
12.
On remand, the bankruptcy court should address these
issues. Analysis of appellants' estoppel claims will necessarily
be affected by the interpretation given Article 12.
D.
In reaching these conclusions, we are well aware of our
decision in In re Unisys Corp. Retiree Medical Benefit "ERISA"
Litig., 58 F.3d 896 (3d Cir. 1995), which reached a different
conclusion about the validity of a similar termination clause in
the context of a different type of ERISA plan. We do not believe
that Unisys can control the uniquely narrow category of top hat
benefit plans on these different facts.
First, unlike the welfare benefits at issue in Unisys,
top hat plans are exempt from ERISA's writing requirement, 29
U.S.C. 1102(a)(1). The rationale behind this distinction seems
straight-forward. The potentially expansive size and scope of
welfare benefit plans makes a writing requirement necessary as a
practical matter of plan administration. Our decision in Unisys,
for example, addressed a large scale employee welfare plan that
provided a variety of benefits to approximately 21,000 employees
at all levels. 58 F.3d at 899 n.4. Top hat plans, by contrast,
cover narrow groups of select individuals. Because of the
limited number of employees involved and their place in the
organizational hierarchy, top hat plans can be exempted from the
writing requirement without inviting administrative difficulties.
In terms of distinguishing Unisys, the exemption of top
hat plans has importance beyond this practical rationale. As
noted, supra, the writing requirement has formed the basis of a
series of cases limiting employee-litigants to the language of
plan documents. See Hozier v. Midwest Fasteners, Inc., 908 F.2d
1155, 1163-64 (3d Cir. 1990) (citing cases). The provision
buttressed our decision in Unisys, where we noted that
ERISA's framework ensures that employee
benefit plans be governed by written
documents and summary plan descriptions,
which are the statutorily established means
of informing participants and beneficiaries
of the terms of their plan and its benefits.
See, e.g., Hozier v. Midwest Fasteners, Inc.,
[908 F.2d 1155, 1160 (3d Cir. 1990)], Confer
v. Custom Engineering Co., 952 F.2d 41 (3d
Cir. 1991), cert. denied, 503 U.S. 938
(1992); Hamilton v. Air Jamaica, Ltd., 945
F.2d 74 (3d Cir. 1991), cert. denied, 503
U.S. 938 (1992); 29 U.S.C. 1022(a)(1).
Accordingly, any retiree's right to lifetime
medical benefits under a plan can only be
found if it is established by the terms of
the plan documents.
58 F.3d at 902. We later explained that under this provision,
"the written terms of the plan documents control and cannot be
modified or superseded by the employer's oral undertakings." Id.
In the context of top hat plans, however, Unisys's statements are
simply not true. The writing requirement does not apply. Unisysis not
controlling.
Second, the exemption of top hat plans from ERISA's
fiduciary provisions creates an important difference from Unisysin terms
of the remedy available. Top hat employees have rights
only under the contract. Where a contract action fails, they
have no recourse. Welfare benefit plan participants, by
contrast, enjoy an action for breach of fiduciary duty. We held
in In re Unisys Corp. Retiree Medical Benefit "ERISA" Litig., 57
F.3d 1255 (3d Cir. 1995), cert. denied, ___ U.S. ___, 116 S.Ct.
1316 (1996), that welfare plan participants retained a cause of
action for breach of fiduciary duty, despite the same general
right to terminate or amend held fatal to the participants'
contractual claim in the related Unisys case discussed here, 58
F.3d 896. Top hat participants have no such alternative remedy.
They must seek their remedy in contract law. Contractual
provisions must therefore be enforced with care.
Third, the very different nature of the benefits at
issue in Unisys distinguishes that case from this. In Unisys,
employees participated in an unfunded welfare benefit plan that
promised ongoing medical benefits "for life." The benefits were
payable as compensation while the employees worked and then
continued on into retirement. After the participants retired,
the company terminated the plan, relying on a general reservation
of the right to modify or terminate "at any time" and "for any
reason." The district court held the reservation of the right to
terminate clear and unambiguous. It therefore rejected the
participants' breach of contract and equitable estoppel claims
and entered summary judgment for the employer. Id. at 898. We
affirmed.
Although the language of the termination clause in
Unisys was similar to the clause here, syntax is not
determinative. This case involves benefits that are not payable,
at all, until after retirement. In contrast to the benefits in
Unisys, which were ongoing medical benefits available during
working years and continuing into retirement, the benefits here
became available only upon retirement. As we have noted,
agreeing to terms allowing these benefits to be terminated even
after retirement would make the "agreement" illusory. Thus,
because interpreting the words "at any time" to include "after
retirement" seems less reasonable in this context, the words are
more likely to be ambiguous in this case.
These distinctions (and the others noted above) show
the important differences between the plans examined here and
those examined in Unisys. In addition, we note that our decision
in Unisys recognized its own limitations.
We do not hold that a reservation of rights
will always prevail over a promise of
benefits. Due to the abundance of ERISA plan
and the differing benefits these plans
provide, each case must be considered fact
specific and the court must make its
determination of the benefits provided based
on the language of the particular plan it has
been called upon to review.
Id. at 904 n.11. We merely add to this general caution a caveat
about the type of plan that the court must review. Here, in the
context of a top hat plan, Unisys's holding does not apply.
IV.
For the foregoing reasons, we will vacate the order of
the district court and remand the matter with direction to vacate
the order of the bankruptcy court and further remand to the
bankruptcy court to hear appellants proffered evidence on the
meaning of Article 12. We intimate no belief as to the ultimate
meaning of Article 12, nor the eventual success of appellant's
claims.