Adams v. Freedom Forge Corp.

Opinions of the United

2000 Decisions States Court of Appeals

for the Third Circuit

3-7-2000

Adams v. Freedom Forge Corp

Precedential or Non-Precedential:

Docket 99-3570

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Filed March 7, 2000

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 99-3570

DAVID L. ADAMS; AARON F. ANDREWS; PAUL A.

ARCHIBALD; LYNN E. AURAND; DOROTHY E. BAKER;

CHARLES BANSHIERE; JOHN O. BASHORE; ALBERT L.

BASOM; VAUGHN K. BAUMGARDNER; RONALD L.

BECKWITH; WILLIAM K. BELL, JR.; CHARLES E.

BENDER; JOSEPH G. BERRIER; EDWARD W. BICKEL;

CLARENCE R. BOREMAN, JR.; HARRY BRADLEY, JR.;

JOHN H. CLARK; JOSEPH R. CLOSE; JOHN A.

CLOUSER; CHARLES W. CONDO; H. RAY CONFER;

THOMAS J. CONNARE; DONALD G. COOK; RONALD W.

CRAWFORD; GLEN F. CRISSMAN; GERALD W.

CRISSWELL; CHARLES R. CRUIKSHANK; WILLIAM L.

CUMMINGS; FRANK J. DAVIDHEISER; WILLIAM A.

DAVIS; DAVID S. DOWNING; GERALD G. DUMM;

RICHARD H. EATON; PAUL E. EMMERLING; PHILIP H.

ERB; GERALD ERB; ROY J. FREED; MARVIN E. FULTZ;

CLARENCE GALVIN; RALPH A. GAUL, JR.; FRANK H.

GEISSINGER; JAMES T. GILBERT; HARVEY W. GILBERT,

JR.; ROBERT W. GILLILAND; GENE M. HAGENBERGER;

LARRY L. HARSHBARGER; JAMES L. HARSHBARGER;

CARL L. HARTSOCK; EDWIN E. HEISTER; JOSEPH E.

HELLER; DAVID S. HERST; T. LEWIS HETRICK; WILLIAM

L. HILE; DONALD HORNER; JOHN B. HOSTETLER;

MELVIN H. HUGHES; MRS. BOYD HUNTER; RONALD N.

JOHNSON; JOHN I. JOHNSON; FRANK B. KELLER; JOHN

R. KELLY; DONALD E. KNEPP; DENNIS D. KNEPP; MRS.

FRED KREBS; CHARLES W. LEEPER; GARY M. LEEPER;

EUGENE F. LINGLE; HARRIET MARTHOUSE; MRS.

CLARE MARTIN; LARRY C. MCCOY; LOIS M. MCKEE;

RICHARD D. MCMUNN; JOHN E. METZGER; CHESLEY S.

MIDDLETON; FRED MITCHELL; RICHARD L. MOORE;

HAROLD C. MUMMAH; CLARENCE B. NALE;

JOE F. NORMAN; JAMES L. NORRIS; JOSEPH M.

OLNICK; MRS. PHIL PACINI; MRS. JOHN PACINI; MELVIN

E. PARKER, JR.; HERBERT PECHT; GEORGE W. PITZER;

RICHARD J. QUILTER; JAY A. REAM; DON E. RICHARD;

FRED D. RHINEHELDER; CHARLES RIGHTER;

FERDINANDO ROSS; CALVIN E. ROTHROCK; ROBERT R.

RUNTAGH; JOHN E. SEARER; MRS. EDWARD SHANNON;

WAYNE E. SHEAFFER; RONALD J. SHOEMAKER; PAUL

SIMONETTI; DONALD W. SMITH; ROSS L. SMITH;

DONALD H. SNYDER; JAMES L. SNYDER; GLEN C.

SOLT; WILLIAM M. STEELE; JOHN W. STUCK; DAVID L.

SULOFF; ROBERT SWARTZELL; EDWARD M.

THOMPSON; S. L. TREASTER; IRVIN S. TUBBS; WILBUR

C. ULSH; RONALD I. VANADA; GILBERT H. VARNER;

GARY L. WAGNER; HARRY M. WAGNER; RICHARD S.

WAGNER; WILLIAM L. WAGNER; GENE M. WAGNER;

JAMES E. WILHELM; HENRY F. WILSON; LEE M.

WILSON; HAROLD E. WOLFGANG; ROBERT R. WRAY;

PAUL WRIGHT; DAVID W. WYCOFF; FRANK C. YOCUM,

JR.; HARRY G. NORTON; WILLIAM J. BEERS;

JOSEFA R. LINGLE

v.

FREEDOM FORGE CORPORATION, Appellant

On Appeal From the United States District Court

For the Middle District of Pennsylvania

(D.C. Civ. No. 99-cv-00446)

District Judge: Honorable Yvette Kane

Argued: November 5, 1999

Before: BECKER, Chief Judge, GREENBERG,

and CUDAHY,* Circuit Judges.

(Filed March 7, 2000)

_________________________________________________________________

* Honorable Richard D. Cudahy, United States Circuit Judge for the

Seventh Circuit, sitting by designation.

2

LEO A. KEEVICAN, JR., ESQUIRE

CLARE M. GALLAGHER, ESQUIRE

WALTER G. BLEIL, ESQUIRE

(ARGUED)

ALLAN W. BROWN, ESQUIRE

Doepken, Keevican & Weiss

600 Grant Street

USX Tower, 58th Floor

Pittsburgh, PA 15219

Counsel for Appellant

Freedom Forge Corporation

ALLEN C. WARSHAW, ESQUIRE

(ARGUED)

MARY PATRICIA PATTERSON-

LAVERY, ESQUIRE

ELLIOT D. RAFF, ESQUIRE

JENNIFER L. MURPHY, ESQUIRE

Duane, Morris & Heckscher

305 North Front Street

P.O. Box 1003, 5th Floor

Harrisburg, PA 17108-1003

Counsel for Appellees

OPINION OF THE COURT

BECKER, Chief Judge.

This ERISA appeal arises from an order of the District

Court for the Middle District of Pennsylvania granting a

preliminary injunction to approximately 136 former

employees of Freedom Forge Corporation (and to surviving

spouses of former employees), who are individually named

plaintiffs in a suit seeking to require Freedom Forge to

continue funding the health benefits plan currently in place

for retirees and spouses. The preliminary injunction

requires funding pending trial. The gravamen of the

plaintiffs' claim is that Freedom Forge induced them into

early retirement with oral assurances that their health

insurance benefits would continue essentially unmodified

until death, without informing them that it actually

3

retained the power to amend or eliminate the benefits

program altogether. In doing so, the plaintiffs contend,

Freedom Forge breached its duties as an ERISA fiduciary

by misrepresenting and omitting material facts.

This suit was prompted by Freedom Forge's

announcement that it would be switching from a self-

insured benefits program with no premiums to a managed

care system in which retirees would be able to choose

among plans. Almost all of the choices that would provide

health care comparable to that which they now receive

would require the plaintiffs to pay monthly premiums.

Shortly after filing suit, the plaintiffs moved for a

preliminary injunction, alleging that they would be

irreparably harmed if Freedom Forge changed the plans,

and asserting that they were reasonably likely to succeed

on the merits. After a hearing, the District Court granted

the requested preliminary injunction.

This appeal primarily presents the important question

whether a district court, faced with a large group of

plaintiffs whom the court determines are reasonably likely

to succeed on the merits, may grant a preliminary

injunction to the entire group of plaintiffs if there is

evidence that some, but not all, of the plaintiffs will suffer

irreparable harm. At the preliminary injunction hearing,

only eleven of the approximately 136 plaintiffs testified,

while none of the other plaintiffs presented evidence that

they were threatened with irreparable harm or were

similarly situated to those who testified. We conclude that

the demanding requirements for a preliminary injunction

do not yield to numbers. The vast majority of the plaintiffs

did not present sufficient evidence upon which the court

could find that they faced irreparable harm. Accordingly, we

will vacate the preliminary injunction as to all but three of

the plaintiffs for failure to meet the essential irreparable

harm requirement of a preliminary injunction.

Because we find that three of the plaintiffs have

adequately established that they are threatened with

irreparable harm, we also consider, and affirm (as to two of

them), the District Court's determination that they were

reasonably likely to succeed on the merits. Their claim

appears to fall squarely within the framework established

4

by In re Unisys Corp. Retiree Med. Benefits"ERISA"

Litigation, 57 F.3d 1255 (3d Cir. 1995), which held that it

is a breach of fiduciary duty for an employer to knowingly

make material misleading statements about the stability of

a benefits plan.

I. Facts and Procedural History

A. The Parties and the Proposed Change in the Plan

The plaintiffs are retired employees, and surviving

spouses of employees, of the Burnham, Pennsylvania

facility of Freedom Forge Corporation's Standard Steel

Division. Since 1975, Freedom Forge has provided health

benefits to retirees and their spouses through a self-insured

plan--the Freedom Forge Corporation Welfare Benefit Plan

for Salaried Employees and Retirees of the Standard Steel

Division (the "Plan"). The Plan, administered by

Metropolitan Life Insurance Company until 1988, is now

administered by a third-party administrator, Blue Cross

and Blue Shield. It is a self-insured plan, as Freedom Forge

pays for the cost of retiree health coverage, and pays the

administrator to process claims. Although the Plan

beneficiaries are responsible for paying a yearly deductible

and copayments if necessary, they do not have to pay

premiums.

Early in 1999, Freedom Forge announced that it intended

to switch from the Plan to a system of coverage through

managed care programs. Under the proposal, retirees under

age 65 would be switched to Keystone Health Plan Central

coverage, and would be required to pay a portion of their

premiums, ranging from $30 to $90. Those older than 65

would be able to choose between two different plans: (1) a

plan with no premium payments required, but a $10 co-

payment per prescription and limited annual benefits of

drug prescriptions ($1250); and (2) a plan with $20 to $40

monthly premiums, $10 to $20 co-payment per 30-day

supply of prescription drugs, and drug benefits limited to

$2500 a year. The retirees immediately protested.

Approximately 130 retirees and spouses thereupon joined

in this ERISA-based suit. They allege that Freedom Forge

5

owed them a duty, as their fiduciary, not to mislead them

about their benefits under the Plan; that Freedom Forge

breached that duty by misleading them into thinking they

would never have to pay premiums; and that this breach

harmed them by inducing them to retire early and

otherwise rely on the assurances.

The plaintiffs moved for a preliminary injunction to

require Freedom Forge to maintain the preexisting plan

pending suit.1 At the hearing, two Freedom Forge

administrators (Robert Robinson, Manager of Compensation

and Benefits since 1979, and Thomas McGuigan, Vice

President of Human Resources and Administration)

testified, and the plaintiffs introduced deposition testimony

of Gerald Sieber, who had been in charge of pension

administration at the Burnham facility from 1978 to 1993.

Eleven of the plaintiffs also testified. Plaintiffs' counsel

explained: "We're not going to call 130 witnesses. We are

going to, because of the time limitations, call what we

believe is a representative sample of the plaintiffs."

However, he adduced no evidence that the eleven witnesses

were representative of the other retirees and surviving

spouses.

The evidence presented at the preliminary injunction

hearing established that in 1982 and 1991, Freedom Forge

developed "voluntary job elimination programs" ("VJEPs") to

encourage voluntary retirement.2 The controversy centers

around the terms and tenor of the formal and informal

communications made to potential retirees about these

programs.

_________________________________________________________________

1. The plaintiffs also moved for class certification, and the court

requested briefing on the issue. The defendants objected. As of the date

of the appeal, no class certification determination had been made.

2. There is some dispute about the motive for instituting the VJEPs.

Freedom Forge claims that the VJEPs were attempts to help potential

retirees because they allowed them to retire with benefits, instead of

firing them outright, which Freedom Forge retained the right to do. The

plaintiffs contend that Freedom Forge intended to eliminate the older

workers and could not otherwise do so without incurring potential

liability for age discrimination. The motive, whatever it may have been,

does not affect our analysis of the parties' rights and duties.

6

B. The Representations to the Plaintiffs

1. Oral Communications

To introduce the VJEPS, Freedom Forge held meetings

describing the programs and their benefits. Gerald Sieber

testified via deposition that it was his job to meet with

prospective retirees and brief them on the retirement

benefits to which they were entitled. Sieber, along with

other members of the benefits administration team, also

met informally with potential retirees and answered their

questions. Sieber testified that he knew that health

insurance was very important to people considering

retirement, that it was "always discussed" and that "I would

get a lot of questions on it. I think it was a very major

factor, especially if one was approaching early retirement, it

was a major factor in determining whether they were going

to take early retirement or not."

Sieber testified that he told employees that they (and

their surviving spouses) would be insured for their

lifetimes. He acknowledged that he told people that the

benefits would be free of monthly charge. Although he later

testified that he did not use those words ("free of any

monthly charge"), he explained:

I would normally say, your program of health

insurance benefits continues as it is, with the

exception of dental coverage . . . and the fact that the

retiree program contained some different allowances for

certain parts of the program . . . I think all the retirees

knew that--potential retirees knew that since they did

not pay any monthly insurance premiums as active

employees, they were not expected to pay any

premiums as retirees.

Sieber acknowledged that he never told employees that

their plans would or could change. He provided potential

retirees with booklets, including those listed infra, which he

called summary plan descriptions ("SPDs") (this is an

ERISA term of art, referring to the document required by

ERISA to inform beneficiaries about their rights under a

plan, see 29 U.S.C. S 1022). These booklets outlined the

structure of the retirement benefits plans and included no

7

explicit reservation of rights. Sieber testified that he

thought that the summary plan descriptions for salaried

employees did not apply to retirees.

Robert Robinson testified that he believed that the

company always had the right to change or terminate the

programs in which the retirees were enrolled, but that he

never told any retirees or potential retirees of that right

during the relevant time period. He stated that he did not

inform them of the termination right because the intention

was to provide coverage for the rest of the beneficiaries'

lives.

The testifying retirees gave slightly different accounts of

the content of Sieber's (and others') assurances, but they

uniformly claimed that they were left with the impression

that they would have lifelong insurance at the company's

expense. For example, Stanley Treaster testified that he and

his wife were told by Sieber that they would get full health

benefits from the company until he turned 65, and that the

company would then pay for a supplement so that, along

with medicare benefits, they would be fully covered.

Treaster represented that he was never told that he would

have to pay premiums. Many of the plaintiffs testified that

they relied on these assurances in making their decision to

retire. For example, Albert Basom related that he took early

retirement in 1982 after a "man-to-man meeting with Jerry

Sieber in his office." He testified that Sieber told him that

he would have no-cost health coverage for life, for himself

and his wife. He also said that he "definitely" was

influenced by the promised health benefits, and that he

would not have been able to retire without them.

2. Written Communications

As part of the VJEP project, Freedom Forge sent out

letters in 1982 announcing the plans that stated that early

retirees would have

continuation of full Hospitalization, Surgical and Major

Medical coverage under the `Program of Hospital and

Physicians' Services and Major Medical Expense

Benefits' for retirees to age 65. Thereafter, you and

8

your spouse are covered by the `Program of Hospital

and Medical Benefits Supplementing Medicare.'

There was no explicit reference, in either this letter or the

programs referenced therein, to the fact that the company

retained the right to amend or cancel the programs. The

company sent out similar letters in 1991.3

Freedom Forge also issued two distinct kinds of

documents detailing plan benefits. First, in 1981, 1986,

and 1993, it distributed a booklet, which conformed with

the ERISA SPD requirements, entitled "Program of

Insurance Benefits for Eligible Salaried Employees" to all

employees and retirees.4 Each booklet included a clear

disclaimer informing all beneficiaries that Freedom Forge

retained the right to amend or eliminate the Plan without

the consent of the beneficiaries.5 These booklets each

include a section discussing the medical coverage for

"Pensioners, Employees Receiving Long Term Disability

Benefits and Surviving Spouses" stating that pensioners

(and the other named individuals) would be enrolled in the

"Company Paid Program" or the "Program Supplementing

Medicare." Additionally, Freedom Forge issued booklets

describing health benefit programs for retirees and their

spouses with titles that, according to the retirees, suggested

_________________________________________________________________

3. These letters promised continued coverage under the "Program of

Health Care" and the "Program of Hospital and Medical Benefits

Supplementing Medicare." It is unclear to what these programs refer, but

at all events there was no indication in this letter that Freedom Forge

retained the right to amend or cancel the benefit plans.

4. There was no evidence that any of the plaintiffs either had or had not

read them.

5. This reservation accords with the actual terms of the Plan. According

to Article 7 of the Plan, Freedom Forge

reserves the right at any time and from time to time. . . to amend,

suspend, or terminate the Plan or any Component Plan for any

reason, in whole or in part, and to adopt any amendment or

modification thereto, all without the consent of any Employee or

other person. However, the Company shall not have the right to

amend or terminate this Plan or any Component Plan or any Benefit

with respect to Benefit claims already incurred at the time of

amendment, suspension, or termination.

9

they were self-contained programs, and specifically

intended for pensioners.6 Unlike the other booklets, these

did not include explicit language reserving the company's

right to unilaterally amend or eliminate the benefits.7

The plaintiffs assert that they believed that they were not

"salaried employees" and therefore not controlled by the

1981, 1986, and 1993 booklets. Each booklet was self-titled

a "Program of Insurance Benefits for Eligible Salaried

Employees" (emphasis added). Instead, they relied solely on

statements of company representatives, the letters

describing the VJEPS, and those booklets directed at

retirees for information about their benefit programs. Since

none of the pensioner-directed booklets prior to 1994 stated

that Freedom Forge retained the right to amend the Plan,

and the plaintiffs claim to have been orally assured that

they would be covered in the same way for life, they

represent that they thought that the company could not

unilaterally change or amend their benefits. Plaintiff Ross

Smith, for example, testified that he understood that the

special booklets about benefits for pensioners replaced

those for active salaried employees. When asked whether

there was a distinction conveyed to him between active and

pensioned employee benefit programs, he answered,"Oh

yes. There always was. That's why there are separate

booklets for the different categories of pensioners." He

remembered that the benefits administrators "specifically

went over these things [the benefits] because they were

kind of unbelievable to us, that they would make this offer."

_________________________________________________________________

6. These booklets included the: "Program of . . . Benefits, Salaried

Pensioners & Surviving Spouses Eligible for Medicare" (1988); "Program

of . . . Benefits, Pensioners and Surviving Spouses--Retired Prior to

December 31, 1986, Not Eligible for Medicare" (1988); and the

"Comprehensive Major Medical Plan, Standard Steel Pensioners and

Surviving Spouses--Retired After December 31, 1986" (1988).

7. Two 1988 programs for "Salaried Pensioners & Surviving Spouses" do

include provisions about continuation after termination with the caveat,

"[t]his continuation provision does not apply if Standard Steel - Division

of Titanium Metals Corporation of America replaces this Program with

another program. In this event, all benefits will cease on the date this

Program is terminated." There is no description of how, or under what

circumstances, a "replacement" or "termination" would take place.

10

In 1994, Freedom Forge published booklets that were

clearly applicable to retirees that contained the reservation

of rights language. However, all of the testifying plaintiffs

(except Snyder) had retired by that time.

C. Testimony Concerning Irreparable Harm

Some of the eleven plaintiffs at the preliminary injunction

hearing also testified about ways in which they would be

irreparably harmed absent an injunction. Albert Basom

testified that he takes medication for Paget's disease, a

bone disease affecting his right leg. He stated that he

currently pays $5 every three months for prescription drugs

that would otherwise cost $1072. Basom testified that if he

chose the no-premium option, he would have to pay more

than $1000 dollars extra every three months. He testified

that he would be unable to afford the medication under the

circumstances and would have to stop taking it. The

resulting brittleness in his bones could lead to a broken leg,

confining him to a wheelchair.8

Stanley Treaster testified that he retired early in 1991 as

part of an incentive package. He said the proposed plan

"would really kill me, really, that way, because I couldn't

afford it . . . I'm on nine medications, three inhalers, and

insulin." He stated that he is on an $804 per month

pension, and currently pays $5 for three months'

medication; the new program, he testified, would destroy

his budget and make it impossible for him to take

medication, including the insulin he takes twice a day.

Donald Snyder testified that he receives a $1098 per

month pension. He has had five back operations, electrodes

in his spine, blood pressure problems, stomach problems,

and needs extensive medication. He estimated that if the

new plan were put in place, his medication costs would

_________________________________________________________________

8. If he took another option, he would have to pay less in prescription

costs (probably around $1500), but an additional $20 premium every

month, resulting in a total of about $1740 a year, as opposed to $20 a

year. Although the mathematical estimates appear inaccurate, the

District Court apparently credited the underlying claim that his

prescription would cost $1072 every three months.

11

skyrocket from $5 every three months to $400 a month

after the first quarter, i.e., for nine months out of the year.

Of the other eight plaintiffs at the preliminary injunction

hearing, a few testified that they were concerned about

having to switch some or all of their doctors under the new

plan. Joe Norman testified that he was very concerned

about the cost effects of the new program, as well as the

prospect of switching from an ophthalmologist who had

treated him since the 1970s. Ronald Beckwith testified that

his wife would have to switch her gynecologist, urologist,

and orthopedist. He predicted the cost difference would be

significant for him, and stated that he was on afixed

income. Charles Cruikshank, who has a heart condition,

testified that the new program would affect him because it

would require him to switch his primary care physician and

his cardiologist and to drive farther for his bi-annual

checkup.

Others testified primarily about the financial burden.

Robert Swartzell testified that he and his wife would have

to pay significantly more for prescription drugs. Marjorie

Krebs testified that she was concerned about the effect of

the higher costs, especially for medication, and that she

was concerned because there was a history of breast cancer

in her family. Ross Smith testified that "my wife and I have

been very fortunate physically, but none of us know what

tomorrow will bring." He testified that he was on a fixed

income, and he was worried that the premiums might

increase, but he did not testify that he would be unable to

pay them. David Suloff said that he was worried about

rising premiums and changing Medicare and Social

Security policies in the future. He noted that he was not on

a fixed income at the time, but he was sure he would be in

the future. Joseph Heller testified about the assurances

given him, but adverted to no threatened harm.

A preliminary injunction was entered for the plaintiffs,

collectively, on June 30, 1999. Freedom Forge timely

appealed. We have appellate jurisdiction under 28 U.S.C.

S 1292(a)(1).

II. Irreparable Harm

In order to obtain a preliminary injunction, plaintiffs

must show both (1) that they are likely to experience

12

irreparable harm without an injunction and (2) that they

are reasonably likely to succeed on the merits. A court may

not grant this kind of injunctive relief without satisfying

these requirements, regardless of what the equities seem to

require. See AT&T v. Winback & Conserve Program, Inc., 42

F.3d 1421, 1427 (3d Cir. 1994); Acierno v. New Castle Cty.,

40 F.3d 645, 653 (3d Cir. 1994); In re Arthur Treacher's

Franchisee Litig., 689 F.2d 1137, 1143 (3d Cir. 1982). If

relevant, the court should also examine the likelihood of

irreparable harm to the nonmoving party and whether the

injunction serves the public interest. See AT&T v. Winback,

42 F.3d at 1427. A preliminary injunction is reviewed for

abuse of discretion. Questions of law are reviewed de novo,

while questions of fact are reviewed for clear error. Frank

Russell Co. v. Wellington Mgmt. Co., 154 F.3d 97, 101 (3d

Cir. 1998).

A. General Standards

The irreparable harm requirement is met if a plaintiff

demonstrates a significant risk that he or she will

experience harm that cannot adequately be compensated

after the fact by monetary damages. See Frank's GMC Truck

Center, Inc. v. General Motors Corp., 847 F.2d 100, 102-03

(3d Cir. 1988). This is not an easy burden. See, e.g., Morton

v. Beyer, 822 F.2d 364, 371-72 (3d Cir. 1987). In Morton,

the plaintiff was suing for unlawful discharge, and claimed

that he would be irreparably harmed unless he were to be

employed pending suit, because his wages were his sole

source of income. We acknowledged that Morton was likely

to succeed on the merits. However, notwithstanding the

plaintive (and understandable) problems that Morton faced,9

_________________________________________________________________

9. Morton explained the problems of going without a wage:

Well, I have myself, I have two sons, my older son is in, goes down

to the University of Virginia. I have car payment, mortgage,

insurance, you know, everything that most people have, in the

course of a day. I have charges at Bamberger's and Penney's,

different stores.

I have a loan, two loans, I have one at the Capitol Bank, one with

the Chase Manhattan for my son. I guess in the everyday, you

know, the everyday expenses that everybody has, food, utilities.

822 F.2d at 371-72.

13

we reversed the district court's injunction order because

"[a]lthough we are not insensitive to thefinancial distress

suffered by employees whose wages have been terminated,

we do not believe that loss of income alone constitutes

irreparable harm." Id. at 372. The nature of the remedy was

"purely economic in nature and thus compensable in

money." Id. Recognizing that the request for money alone

itself does not foreclose a claim of irreparable injury, see

id., we concluded that there must be something uniquely

threatening about the particular loss of money. In Morton,

we were guided by the Supreme Court's explanation that

an insufficiency of savings or difficulties in immediately

obtaining other employment--external factors common

to most discharged employees and not attributable to

any unusual actions relating to the discharge itself--

will not support a finding of irreparable injury, however

severely they may affect a particular individual.

Sampson v. Murray, 415 U.S. 61, 92 n.68 (1974) (emphasis

added).

B. The District Court's Approach

The District Court was satisfied that the plaintiffs had

connected the monetary harm to a specific harm that could

not be remedied after the fact. It noted that "several" of the

plaintiffs

testified that their incomes were so limited that the

higher copayments and premiums of the proposed

plans would require them to forego essential medical

care. This testimony established immediate and

irreparable harm. . . . Plaintiffs--many of whom live on

fixed incomes and would face a Hobson's choice

between paying for basic necessities or needed, costly

medications--have established that they would suffer

like harm if the proposed modifications were to take

effect.

We agree that if all the plaintiffs had presented evidence

that they would have to forego medical care because of the

heightened costs of the new health plan, each would have

established irreparable harm. The difficulty with the

14

District Court's conclusion, however, is that only a small

percentage of the plaintiffs testified, and that even among

those who did, many did not present any evidence (or even

make an assertion) that they would have to forego medical

care or other necessities if the proposed change were to

take effect. There was thus no basis for inference-drawing.

Instead of making a case-by-case determination that each

plaintiff demonstrated irreparable harm, or pointing to

evidence that strongly indicated that all similarly situated

Freedom Forge retirees necessarily risk some form of

irreparable harm, the court dealt with the plaintiffs as a

unit and concluded that because several of them probably

risked irreparable harm, that was sufficient to satisfy that

prong of the preliminary injunction test.10

In making this determination, and in the absence of clear

Third Circuit precedent, the District Court understandably

relied on several retiree health insurance cases from other

courts that have required little or no showing of

particularized risk of irreparable harm. For example, it cited

the Court of Appeals for the First Circuit which had"no

difficulty" finding that a preliminary injunction was

appropriate in a case similar to this one, in which retirees

disputed their former employer's power to cease paying

their insurance premiums. United Steelworkers of America,

AFL-CIO v. Textron, Inc., 836 F.2d 6, 8 (1st Cir. 1987). That

court took note of the "generally believed facts" that:

(1) most retired union members are not rich, (2) most

live on fixed incomes, (3) many will get sick and need

_________________________________________________________________

10. In a supplemental letter to this court, the plaintiffs objected that

"Freedom Forge . . . did not raise in the court below the issues of

whether plaintiffs should be required to produce individualized proof of

irreparable harm. Nor did it raise the related question of the extent to

which the testimony given could be generalized to all of the plaintiffs."

See also United States v. Anthony Dell'Aquilla, Enters. and Subsidiaries,

150 F.3d 329, 335 (3d Cir. 1998) ("[A]bsent exceptional circumstances,

an issue not raised in district court will not be heard on appeal."). We

reach the issue, however, because the burden is clearly on the moving

party to prove all elements required for a preliminary injunction, see

Acierno v. New Castle Cty., 40 F.3d 645, 653 (3d Cir. 1994), and because

it is important to clarify the authorities, which may be in disarray, on

this significant aspect of preliminary injunctions.

15

medical care, (4) medical care is expensive, (5) medical

insurance is, therefore, a necessity, and (6) some

retired workers may find it difficult to obtain medical

insurance on their own while others can pay for it only

out of money that they need for other necessities of life.

Id. The court eschewed invocation of the doctrine of judicial

notice, which could not by its terms apply, see Fed. R.

Evid. 201, and grounded its injunction-affirming holding in

a single conclusory affidavit of an AFL-CIO president and

"[c]ommon sense," which "suggests that generally believed

facts (or something like them) are true." Id.

Other courts have achieved essentially the same result by

allowing the judge to treat plaintiffs--and the risks

attending them--in an aggregate way, and to rely on

generally believed facts not in evidence. In Shalk v.

Teledyne, Inc., 751 F.Supp. 1261 (W.D. Mich. 1990), aff 'd,

948 F.2d 1290 (6th Cir. 1991), for example, the court

granted a preliminary injunction requiring the company to

pay insurance premiums pending suit in part because"the

uncertainty posed by the lack of knowing just how much

money will be needed to cover medical expenses . . . poses

irreparable harm in the financial planning burden which it

places on plaintiffs," id. at 1268, and"[i]t is self-evident, to

the Court at least, that a cost shift to retirees of what

defendants themselves claim will be approximately $90,000

per month [total], constitutes irreparable harm," id. at

1267. This reasoning is congruent with Textron , supra, and

that of several other courts, as described in the margin.11

_________________________________________________________________

11. See, e.g., Golden v. Kelsey Hayes Co., 845 F.Supp. 410 (E.D. Mich.

1994) (granting preliminary injunction requiring defendant to continue

previous insurance plan and citing Textron approvingly where numerous

retirees, though not retirees from every affected division of a company,

presented the court with affidavits detailing the hardship they would

undergo without a preliminary injunction), aff 'd, 73 F.3d 648 (6th Cir.

1996); Mowbray v. Kozlowski, 725 F.Supp. 888 (W.D. Va. 1989) ("The

class includes approximately some 9,000 members. If a stay is granted,

some number of these will be faced with the difficult decision of either

forgoing needed medical attention, forgoing other expenditures, or

disposing of enough of their property to come within the guidelines as to

assistance, which guidelines are the very substance of this action.

Failure to obtain needed medical care could result in the death of some

16

While these cases have a certain intuitive appeal, they do

not withstand rigorous scrutiny. The law does not take

judicial notice of matters of "common sense," and common

sense is no substitute for evidence. A preliminary

injunction may not be based on facts not presented at a

hearing, or not presented through affidavits, deposition

testimony, or other documents, about the particular

situations of the moving parties. The elasticity that the

opposite conclusion would permit would essentially shift

the burden to the defendant to disprove widely believed

facts and would turn the preliminary injunction balancing

process on its head.

In lieu of (or in addition to) "common sense," many of

these cases pursue an additional approach, resting a

preliminary injunction for many on the testimony of a few.

This is not inappropriate so long as the plaintiffs lay an

adequate foundation from which one could draw inferences

that the testifying plaintiffs are similarly situated--in terms

of irreparable harm--to all the other plaintiffs. When a

court, such as the District Court, concludes that there is

clear evidence that most, but not all, individuals will be

harmed, it treats each individual only as part of an

aggregate; in contrast, when a court infers a risk of harm

_________________________________________________________________

class members. Surely this is substantial, if not irreparable harm."

(emphasis added); Shultz v. Teledyne, Inc., 657 F.Supp. 289, 293 (W.D.

Pa. 1987) ("We have had testimony in this case indicating that retirees

on fixed incomes will suffer financial hardship and in some cases will be

unable to pay for individual health insurance coverage. Some individuals

indicated that they would forego medical care for themselves and their

families due to their inability to pay for either the insurance coverage

or

the direct cost of medical care. We believe that plaintiffs in this case

have established that they will suffer a risk of irreparable harm.")

(emphasis added); Mamula v. Satrolloy, 578 F.Supp. 563, 577 (S.D. Ohio

1983) ("The adequacy of a monetary award to a person unable to afford

health insurance coverage rests on the assumption that the person will

seek and obtain necessary medical care, will pay for the medical care

received at that time, and will simply be recompensed later by the

defendant when a judgment is rendered against it. Such an assumption

could have some validity if the costs of medical services and

hospitalization in today's society were well within the financial reach of

the average worker.").

17

to all individuals although only a few testify, it is reasoning

inductively. The former mode of analysis is unacceptable;

the latter is the daily work of fact-finders. In short, in the

absence of a foundation from which one could infer that all

(or virtually all) members of a group are irreparably

harmed, we do not believe that a court can enter a mass

preliminary injunction.

An important factor animating our holding is our respect

for the extraordinary nature of the preliminary injunction

power. We have repeatedly insisted that the use of judicial

power to arrange relationships prior to a full determination

on the merits is a weighty matter, and the preliminary

injunction device should not be exercised unless the

moving party shows that it specifically and personally risks

irreparable harm. See, e.g., Campbell Soup Co. v. ConAgra

Inc., 977 F.2d 86, 91 (3d Cir. 1992); Frank's GMC Truck

Center, 847 F.2d at 102-03. The Supreme Court, moreover,

has instructed that the tool of the preliminary injunction

should be reserved for "extraordinary" situations. Sampson,

415 U.S. at 88, 92. And as we have previously stated, "[t]he

dramatic and drastic power of injunctive force may be

unleashed only against conditions generating a presently

existing actual threat." Holiday Inns of America, Inc. v. B &

B Corp., 409 F.2d 614, 618 (3d Cir. 1969) (emphasis added).12

In this vein, we have also insisted that the risk of

irreparable harm must not be speculative. See, e.g., Acierno

v. New Castle Cty., 40 F.3d 645 (3d Cir. 1994). 13 For many

_________________________________________________________________

12. See also, e.g., Wyrough & Loser, Inc. v. Pelmor Labs., Inc., 376 F.2d

543, 547 (3d Cir. 1967) ("[T]he black letter rule" is that "an injunction

is

an extraordinary remedy to be granted pendente lite only upon a

showing of the likelihood of irreparable harm before the case is resolved

on the merits."); Warner Bros. Pictures v. Gittone, 110 F.2d 292 (3d Cir.

1940) ("We have pointed out frequently that the granting of a preliminary

injunction is an exercise of a very far-reaching power, never to be

indulged in except in a case clearly demanding it.").

13. Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797 (3d

Cir.

1989) (district court abused its discretion in granting a preliminary

injunction when there was no hard evidence that could have led the

court to believe that a broken contract would force one party to go out

of business); Marxe v. Jackson, 833 F.2d 1121 (3d Cir. 1987) (district

18

if not most of the plaintiffs in this case, the risk of

irreparable harm seems speculative given the evidence

presented to the District Court. The plaintiffs rely on the

common sense approach of Textron to reason that most of

these retirees probably cannot afford the premiums. This

speculation cannot support an injunction--especially given

the evidence of the relatively low premiums in the proposed

plans.

Moreover, the plaintiffs all but concede that not all of

them are threatened with irreparable harm. At the hearing,

for example, counsel for the plaintiffs stated that"most,"

not all, of the plaintiffs retired under early retirement plans.

He stated that Sieber met with "most" plaintiffs to discuss

"most" claim programs and that "most of these people are

on fixed income." The assertions of counsel were borne out

by the testimony; some, but not all, plaintiffs testified that

they were on fixed incomes. A few, but not most, testified

that they would be forced to forego medical care. The

District Court itself used qualified language in its decision

("many" of the plaintiffs live onfixed incomes; "several" of

the testifying plaintiffs stated that their incomes were

limited) (emphasis added).

Based on this record, we conclude there was insufficient

evidence from which the District Court could infer that all

the plaintiff-retirees and their spouses (in whose favor the

injunction ran) were in such financial straits that they

would be forced to choose between medical care and other

necessities. In order to obtain a preliminary injunction that

would apply to each one of them, the plaintiffs would have

_________________________________________________________________

court erred in finding irreparable harm when there was weakly alleged

possibility that, in claim of retaliatory discharge, being kept out of the

workplace threatened to discourage coworkers from testifying; such a

charge could constitute irreparable harm, but more specific facts

indicating the existence of such a threat needed to be presented); United

States v. Com. of Pennsylvania, 533 F.2d 107 (3d Cir. 1976) (threatened

effect on ability to provide medical care too attenuated to constitute

irreparable harm); A.L.K. Corp. v. Columbia Pictures Indus., Inc., 440

F.2d

761 (3d Cir. 1971) (threatened loss of "theatre momentum" not

sufficiently concrete to require Columbia Pictures to deliver promised

film before adjudication of meaning of contract).

19

had to present affidavits or other evidence from which one

could at least infer that each of them was so threatened.

Instead, the plaintiffs only presented evidence from which a

court could infer that some of them were threatened with

harm. In holding that this is insufficient to support a

preliminary injunction, we recognize that such orders are

sought when an emergency threatens, and that the moving

party may not be able to marshal extensive evidence. That

does not mean, however, that proof by association in a law

suit, or proof by "common sense," will suffice.14

The plaintiffs have identified one case in which we appear

to have granted a preliminary injunction for a large group

of plaintiffs without requiring evidence that the parties were

similarly threatened, but we are not persuaded by the

citation. In United Steelworkers of America v. Fort Pitt Steel

Casting, 598 F.2d 1273 (3d Cir. 1979), we upheld a

preliminary injunction that required an employer to pay

insurance premiums during a strike. We stated:

If the risk of "water pipes freezing" can constitute

irreparable injury, See Celotex Corp. v. Oil Workers,

516 F.2d 242, 247 (3d Cir. 1975), then surely the

possibility that a worker would be denied adequate

medical care as a result of having no insurance would

constitute "substantial and irreparable injury." Id.

Moreover, the risk of irreparable injury was not

appreciably lessened merely because the employees

allegedly would remain covered for 30 days after

premium payments were terminated and because the

employees thereafter would have the option to convert

to individual policies. There was no assurance at the

time the injunction was issued that the strike would

end within 30 days; thus there was a significant risk

that absent an injunction, the employees would be

without insurance coverage. In addition, the likelihood

that all of the employees could have exercised their

right to obtain individual policies was problematic,

because while the employees were on strike, they were

not collecting their wages.

_________________________________________________________________

14. In situations where the proof would be redundant and waste

everyone's resources, the nonmoving party could, of course, choose to

stipulate to irreparable harm.

20

Id. at 1280.

Although we appeared to treat the plaintiffs as a

collective, it seems that in that case--where the employees

risked losing not only all their insurance but also their jobs

--the court had sufficient evidence from which to infer that

such loss constituted a risk of irreparable harm for all, or

practically all, the employees. In contrast, we know the

evidence upon which the District Court relied here, and we

find it wanting. At all events, the Fort Pitt panel did not

confront the issue we discuss today.

We do not think that the precept that multiple plaintiffs

must adduce evidence from which it might be inferred that

each of them is threatened with harm will be a serious

hurdle to plaintiffs. Simple affidavits should typically

suffice. Moreover, in many instances, the defendant will be

incapable of severing its conduct towards one plaintiff from

that towards another. In an injunction forbidding a town to

build a wall, for example, the wall applies equally to all who

are harmed by it, and only one plaintiff need demonstrate

likelihood of success and irreparable harm in order to

forestall construction. Likewise, if numerous riparian

landowners bring suit asking for an injunction against a

company dumping toxic substances into a lake, it does not

matter that only one or two plaintiffs can show irreparable

harm, for the court cannot possibly divine which toxics

invaded which plaintiff 's waterfront. As Heraclitus noted in

ancient days, one "could not step twice into the same

rivers; for other waters are ever flowing on to you." Quoted

in J. Bartlett, Familiar Quotations 62:14 (Justin Kaplan

ed., 16th ed. 1992). In the case at bar, in contrast, Freedom

Forge's counsel stated at oral argument that the company

may continue the old plan for some pensioners while

shifting the others to the proposed plan.15

_________________________________________________________________

15. It goes without saying that we lay out only a general framework, fully

aware that there may be unanticipated circumstances in which a

particular (direct or inferential) demonstration of harm by each plaintiff

will be unworkable.

21

C. Switching Doctors as Irreparable Harm

Plaintiffs urge a separate basis for finding irreparable

harm. They point to the testimony of several plaintiffs who

stated that they would have to switch health care providers,

which they view, at least potentially, as an emotionally and

medically risky move. They argue that this harmflows from

the alleged fiduciary breach, and that a preliminary

injunction is necessary to prevent it. Although they do not

aver that any company executive ever promised anyone that

they would never have to switch doctors, the plaintiffs

contend that such a promise inhered in the general

assurance that the overarching health plan structure would

not change.

There are two problems with this argument. First, the

gravamen of the complaint is that the plaintiffs were

promised that their insurance would be maintained, not

that they would never have to switch physicians. Their

harm is therefore insufficiently related to the complaint and

does not deserve the benefits of protective measures that a

preliminary injunction affords. Cf. John Leubsdorf, The

Standard for Preliminary Injunctions, 91 Harv. L. Rev. 525,

541 (1978) ("Not even all irreparable harm, but only

irreparable harm to legal rights, should count.").

Second, the hassle of switching doctors, although

emotionally draining, is not the kind of "irreparable harm"

contemplated by the preliminary injunction standard. In

the rapidly changing world of health care, numerous plans

have switched to managed care, requiring employees and

other plan beneficiaries to change doctors. We are not

prepared to hold, in the absence of a highly particularized

and compelling demonstration of hardship, that irreparable

harm flows from such a plan change simpliciter . There are

many rearrangements--not just scrimping and saving

rearrangements--that individuals involved in a legal battle

must endure pending the conclusion of a suit, and very few

will be without some anguish. As we have stated,

"injunctions will not be issued merely to allay the fears and

apprehensions or to soothe the anxieties of the parties."

Campbell Soup Co. v. ConAgra, Inc., 977 F.2d 86, 92 (3d

Cir. 1992) (quoting Continental Group, Inc. v. Amoco

Chemicals Corp., 614 F.2d 351, 359 (3d Cir. 1980)).

22

Because the plaintiffs have presented no evidence that

the doctors available to them under the new plan are in any

way inadequate, or that the mere transfer from one

physician to another is medically risky for any individual

plaintiff, we will not hold that a preliminary injunction is

appropriate based on the change-of-physician argument.

Moreover, if we were to recognize this argument for some

plaintiffs, a fortiori this approach could not be generalized

to all the plaintiffs.

D. Class Certification Issues

The plaintiffs further contend that since they have sought

class certification, see supra note 1, they should be treated

as a class pending the court's determination on that issue.

Some courts have uncritically treated a group as a

collective when a would-be class has petitioned for

certification. See, e.g., Hinckley v. Kelsey-Hayes Co., 866

F.Supp. 1034 (E.D. Mich. 1994). In Hinckley, the court

found irreparable harm to the 500 plaintiffs when only one

of the two named plaintiffs in the proposed class presented

evidence of threatened harm, and none demonstrated that

money would not be an effective compensation. See id. at

1044-45. The court based its order, in part, on the fact that

it was dealing with a potential class. "[T]he court will take

into consideration the irreparable harm faced by putative

class members before class certification because of the

nature of injunctive relief at this stage of the litigation." Id.

Likewise, in Lapeer Cty. Medical Care Facility v. Michigan,

765 F.Supp. 1291, 1301 (W.D. Mich. 1991), the court

treated a group of noncertified plaintiffs as a class. The

court analogized the preliminary injunction order to

dismissal orders and compromise negotiations, in which a

court can treat a non-certified potential class as a unit. Cf.

Musto v. American General Corp., 615 F.Supp. 1483, 1504-

05 (M.D. Tenn. 1985), rev'd on other grounds, 861 F.2d 897

(6th Cir. 1988) (treating certified class collectively for

irreparable harm determination).

We disagree. We see no reason why the pendency of a

class action certification petition should alter our analysis.

We have no basis on which to judge the viability of the

class certification request, which we understand to be

23

contested. Merely petitioning for class certification cannot

provide plaintiffs the right to be treated collectively.

Furthermore, a class action determination focuses on

similarities between the legal claims of the parties, see

Fed. R. Civ. P. 23(a), while a preliminary injunction

determination, by requiring a showing of irreparable harm,

depends in many cases (including this one) on

circumstances entirely independent of legal rights: the

particular resources available to each member of the class

to weather hardships pending a trial.

E. Irreparable Harm - Conclusion

In view of the foregoing discussion, it is necessary that

we vacate the preliminary injunction as to all of the

nontestifying plaintiffs. There is simply insufficient evidence

of irreparable harm as to those plaintiffs. This conclusion

does not mean, however, that we must uphold the

preliminary injunction for all the testifying plaintiffs.

Rather, only three of the testifying plaintiffs met the high

preliminary injunction standard. Basom and Treaster

effectively demonstrated that they would not be able to

afford the medicine they need if the new plan is put into

effect pending trial. Snyder is a close case, but we will defer

to the District Court's discretion in this matter, and its

decision that he risked irreparable harm. Therefore if

Basom, Treaster, and Snyder meet the "likelihood of

success on the merits" requirement, we will uphold the

preliminary injunction as applied to them.16 However,

_________________________________________________________________

16. In opposition to the grant of a preliminary injunction for any

plaintiff,

Freedom Forge submits that the new plans do a better job, overall, of

assuring good health care to the plaintiffs. Whether or not this is true,

on this record we cannot determine which is the better plan for the

plaintiffs. We are also wary of accepting the company's (or the

plaintiffs')

vision of which is the better overall plan at the preliminary injunction

stage, especially when the parties are struggling over particular, not

general, aspects. See Shalk v. Teledyne, Inc. , 751 F.Supp. 1261, 1267

(W.D. Mich. 1990) ("[D]efendants claim that the current Teledyne Plus

Plan offers coverage which is `substantial and in many respects better

than the prior plan. . . .' This argument is of no consequence. It is not

this Court's task to decide which health plan is`better.' ") (emphasis in

original).

24

several of the testifying plaintiffs (Swartzell, Krebs, Norman,

Heller, Cruikshank) did not testify to any particular facts

that would make the switching of plans cause them

irreparable harm. None stated that he or she was on a fixed

income, or that he or she would be unable to pay. At all

events, there was insufficient evidence that any of these

plaintiffs was threatened with a financial burden that

would force them to eschew medical treatment or other

necessities such as food or shelter. Therefore, we will vacate

the preliminary injunction as applied to them.

Our most difficult decisions concern those plaintiffs who

testified to serious financial burdens, but did not represent

that they would have to forego medical treatment. Smith

and Beckwith testified that they were on fixed incomes;

Suloff said that he would be on a fixed income in the

future. But given the relatively low level of the additional

payments under the proposed plans, we can not conclude

that the testimony of a plaintiff that he or she is on a fixed

income is sufficient evidence from which a court can infer

irreparable harm. As we discussed supra, there must be

some specific harm identified that flows from the actual

financial burden in a given case. Therefore, we must also

vacate the order of the District Court as to these plaintiffs

for failure to demonstrate irreparable harm.

III. Probability of Success on the Merits

The balance of this opinion applies only to those

remaining three plaintiffs--Basom, Treaster, and Snyder--

who provided sufficient evidence of irreparable harm. As to

them, we must determine whether the District Court

abused its discretion in concluding that they were

reasonably likely to succeed on the merits.

ERISA provides that "a fiduciary shall discharge his

duties with respect to a plan solely in the interest of the

participants and beneficiaries." 29 U.S.C.S 1104(a)(1). The

fiduciary may not, in the performance of these duties,

"materially mislead those to whom the duties of loyalty and

prudence are owed." In re Unisys Corp. Retiree Med.

Benefits "ERISA" Litig., 57 F.3d 1255, 1261 (3d Cir. 1995).

See also Curcio v. John Hancock Mut. Life Ins. Co. , 33 F.3d

25

226, 238 (3d Cir. 1994); Bixler v. Central Pa. Teamsters

Health and Welfare Fund, 12 F.3d 1292, 1300 (3d Cir.

1994); Fischer v. Phila. Elec. Co., 994 F.2d 130 (3d Cir.

1993). A plan administrator, like Sieber and other Freedom

Forge administrators, acts as a fiduciary when explaining

plan benefits and business decisions about plan benefits to

its employees. See Unysis, 57 F.3d at 1261 n.10.17

An employee may recover for a breach of fiduciary duty

if he or she proves that an employer, acting as afiduciary,

made a material misrepresentation that would confuse a

reasonable beneficiary about his or benefits, and the

beneficiary acted thereupon to his or her detriment. See id.

at 1264. Having made such representations, a company

cannot insulate itself from liability by including unequivocal

statements retaining the right to terminate plans at any

time in the SPDs. See id. Moreover, a fiduciary may not

remain silent when he or she knows that a reasonable

beneficiary could rely on the silence to his or her detriment.

See Bixler, 12 F.3d at 1300 ("Th[e] duty to inform . . .

entails not only a negative duty not to misinform, but also

an affirmative duty to inform when the trustee knows that

silence might be harmful.").

The facts of this case, described supra, are so much like

those in Unisys, the landmark case in this area, that we

need spend but little time addressing this prong of the

preliminary injunction standard. In Unisys, as here, the

company announced a significant change in its benefit plan

scheme, after which beneficiaries were to shoulder the

responsibility of paying premiums that had previously been

the exclusive responsibility of the company. The Unisys

plaintiffs objected, noting that their SPD included the

statement that: "Coverage continues for you for life and for

your dependents while they remain eligible provided you

don't stop the contributions for their coverage." 57 F.3d at

1259 (emphasis in original). They also adduced evidence, as

_________________________________________________________________

17. A fiduciary includes any person who "exercises any discretionary

authority or discretionary control respecting management of such plan"

and any person who "has any discretionary authority or discretionary

responsibility in the administration of such plan." 29 U.S.C.

S 1002(21)(A).

26

here, that they had been informally promised "lifetime"

benefits without any reference to a reservations of rights.

See id.

Unisys acknowledged the statements regarding lifetime

coverage in the SPDs, but defended on the grounds that

elsewhere in the SPDs it explicitly retained the right to

amend or change the plans at any time. Relying on the

principle that "when a plan administrator explains plan

benefits to its employees, it acts in a fiduciary capacity," id.

at 1261, we concluded that the conflicting statements could

give rise to an action under ERISA because ERISA plan

administrators have an independent fiduciary obligation

"not to misinform employees through material

misrepresentations and incomplete, inconsistent, or

contradictory disclosures." Id. at 1264. We concluded that

a misrepresentation is material if "there is a substantial

likelihood that it would mislead a reasonable employee in

making an adequately informed retirement decision." Id.

A. Unisys and Plaintiffs Basom and Tre aster

In this case, as in Unisys, the plaintiffs do not deny that

there is an explicit reservation of the right to terminate or

amend at any time within the booklets for active employees.

They contend, however, that they reasonably believed that

the active employees' booklets did not apply to them. In

support of this contention, the plaintiffs presented evidence

that Freedom Forge distributed separate booklets

summarizing the benefits of pensioners and surviving

spouses that included no explicit reservation of the power

to amend or change the programs.18 Freedom Forge

responds that the lack of reservation clauses in the

booklets is immaterial because the booklets were not

_________________________________________________________________

18. Although some of those booklets did contain a reference to the

possible termination of the programs by Freedom Forge, these references

did not describe a process for unilateral program termination that would

alert a potential retiree to the instability of his or her benefits: "This

continuation provision does not apply if Standard Steel - Division of

Titanium Metals Corporation of America replaces this Program with

another program. In this event, all benefits will cease on the date this

Program is terminated." See supra note 7.

27

actually summary plan descriptions. Although we agree

that the form and title of a document may be considered

when determining whether a beneficiary could reasonably

rely on the statements therein, conflicting assertions cannot

be ignored because they are not in the formal ERISA

document. Unisys did not rely on the official nature of the

SPDs to conclude that the company had breached its duty,

and based its decision in part on the informal

communications of Unisys management. See id. at 1261-

65.

Freedom Forge further contends that the booklets

directed at "Eligible Salaried Employees," which included

explicit reservations of rights, applied to both those who

were active employees and those who were on pensions. It

notes the absence, in the "informal" booklets introduced

into evidence by the plaintiffs, of ERISA-required details,

such as the name of the plan administrator and the means

of complaint, the lack of which makes them something less

than SPDs. The question before us, however, is not what

the booklets actually were, but what they would appear to

be to a reasonable employee. The "informal" booklets that

the plaintiffs introduced into the record are titled

"Programs," suggesting a parallel status with the "formal"

booklets, also entitled "Programs." Furthermore, the

plaintiffs presented testimony of several retirees who stated

they were told and believed that the "Salaried Employees"

booklets did not apply to them. Gerald Sieber, whose

responsibility it had been to explain retirement benefits,

testified that he thought that the retiree booklets, and not

the "Salaried Employees" booklets, defined the rights of the

retirees. Finally, the plaintiffs note that the"Salaried

Employees" booklets include descriptions of several benefits

(such as dental) that do not apply to pensioners, suggesting

that they were not relevant to retirees.

In response to these arguments, Freedom Forge

acknowledges that were it to eliminate benefits altogether,

that might make the misrepresentations actionable. It

submits, however, that since it only intends to amend the

Plan and shift the costs, there was no actual

misrepresentation when its representatives promised

"health benefits . . . for life." Freedom Forge also

28

emphasizes that health care itself has never been"free" in

that beneficiaries have always had to pay copayments and

deductibles. However, some of the testimony at the hearing

indicated that the Freedom Forge employees' understanding

of the promise of life-long health insurance was that they

would never have to pay premiums. The District Court

found this testimony credible, and it is supported by the

record; hence, we do not disturb its conclusion. Given the

substantial rearrangement of the rights and duties

regarding health insurance proposed by Freedom Forge, we

are convinced that there was sufficient evidence that the

proposed changes, if effected, would countermand the

promises of health care for life.

Finally, Freedom Forge suggests that it should not be

liable because it did not anticipate that it would change the

plans, so that the misleading statements were made

without the requisite scienter. We encountered, and

rejected, a like defense in Unisys. See 57 F.3d at 1265

n.15. There, we recognized that the company had no reason

to expect, at the time it distributed the misleading SPDs,

that the plans would be modified. However, because Unisys

was aware that it retained the right to modify, a knowing

failure to clarify the material information about the

retention of power was a breach of its fiduciary duty. We

indicated that in order for a company to avoid liability on

the grounds that it did not expect to change or eliminate a

plan, the change or elimination would have to be, at least,

"completely unanticipated." Id. As in Unisys, Freedom Forge

had sufficient awareness of the power to change the Plan.

See id. ("[T]he company had the foresight to draft and

incorporate reservation of rights clauses into its retiree

medical plans, which expressly gave the company the right

to terminate the plans if they became onerous.").

Based on Unisys, we conclude that the plaintiffs

presented sufficient evidence of statements that would

cause "a substantial likelihood" of "misleading a reasonable

employee in making an adequately informed retirement

decision" and hence that Basom and Treaster are

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reasonably likely to succeed on the merits of their breach

claim. See id.19

B. Unisys and Plaintiff Snyder

Unlike the other two remaining plaintiffs, the case of

Donald Snyder is not controlled by Unisys because

although he went on disability in 1983, he did not retire

until 1999, more than four years after Freedom Forge

began publishing booklets for retirees that included a

strong reservation of rights. Snyder averred that in 1983 he

was told that he and his wife would be taken care of for the

rest of their lives. Unlike the other plaintiffs, who retired

early, he produced no evidence of detrimental reliance on

these misrepresentations. He presumably went on disability

involuntarily and there is no evidence that he retired early.

Since the lawyers for both sides were dealing with the

plaintiffs collectively, the peculiar nature of his claim was

not briefed. Although we do not foreclose the possibility

that Snyder could adduce facts to state a claim for breach

of fiduciary duty under ERISA, the facts before the District

Court after the preliminary injunction hearing do not

suffice to support a conclusion that he is reasonably likely

to succeed on the merits.

_________________________________________________________________

19. Freedom Forge has asserted that, regardless of the strength of

plaintiffs' Unisys argument, they are barred from pursuing any claim by

ERISA's statute of limitations. This is a matter of considerable

difficulty

and implicates sophisticated questions about whether the statute begins

to run at the date of the misrepresentations, the date of the plan

amendment, or some other date, as well as the issues left unresolved in

Kurz v. Philadelphia Elec. Co., 96 F.3d 1544 (3d Cir. 1996), about the

anatomy and scope of the fraudulent concealment doctrine, see id. at

1552 n.5. The District Court concluded that the claims were not likely

to be barred by the statute. However, Freedom Forge's counsel conceded

at oral argument that the statute of limitation defense was not before the

court of appeals "as a substantive statute of limitations argument." As

he noted, "[t]his court will have opportunity in the next Unisys

litigation

to rule on whether or not that statute of limitations [argument] is

substantively correct." Therefore, we do not reach these statute of

limitations questions at this time.

30

IV. Conclusion

For the foregoing reasons, we will affirm the District

Court's order as to Basom and Treaster, but will vacate the

preliminary injunction as it applies to all others.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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