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Hatmaker v. Consolidated Nuclear Security, LLC

United States District Court, E.D. Tennessee

May 30, 2018

BETTY HATMAKER and CHARLENE EDWARDS, Plaintiffs,
v.
CONSOLIDATED NUCLEAR SECURITY, LLC, Defendant.

          MEMORANDUM OPINION

          THOMAS A. VARLAN CHIEF UNITED STATES DISTRICT JUDGE.

         Before the Court is defendant's motion for summary judgment [Doc. 27]. Plaintiffs responded in opposition to the motion [Doc. 32], and defendant replied [Doc. 33]. For the reasons explained below, defendant's motion will be granted and this case will be dismissed.

         I. BACKGROUND

         Plaintiffs are individuals who were employed at various times by contractors for the Y-12 National Security Complex in Oak Ridge, Tennessee (“Y-12”).[1] These contractors include Union Carbide, Martin Marietta, Lockheed Martin, BWXT, Babcock & Wilcox, LLC, and Consolidated Nuclear Security, LLC, among others (collectively “contractors”). Defendant Consolidated Nuclear Security, LLC (“CNS”) is the current contractor operating and administering the healthcare plans for retirees of the predecessor contractors.

         Plaintiffs contend that employees were attracted to positions with the contractors, in part, because of the retirement program. They assert that many employees accepted lower levels of compensation, in comparison to employment they could have obtained elsewhere, based on an understanding derived from representations made by the contractors that they were earning a valuable package of retiree benefits-including healthcare benefits-which would provide security and stability during retirement.

         The contractors entered into a series of agreements with plaintiffs providing for terms and conditions of employment. The agreements provide healthcare benefits, which include medical, prescription, dental, vision, Medicare subsidy, life insurance, and other related benefits. The agreements also covered spouses and surviving spouses of retired employees, as well as certain defined dependents. Generally, retirees, their spouses, and their defined dependents that are entitled to a pension under the pension plan are eligible for healthcare benefits upon retirement.

         Over the years, several different individual contracts were executed that defined the healthcare benefits the employees would receive. As each new contractor took over the previous one, it adopted the provisions of these agreements. At no time prior to January 1, 2015, were any of the terms of the previous employment agreements, and specifically the provisions of retiree healthcare benefits, ever rejected by an incoming contractor.

         Some of the prior contractors adopted an early retirement program. Plaintiffs contend the contractors represented to employees that accepting early retirement would enable them to retain their healthcare benefits and avoid application of any future changes to the benefits. According to plaintiffs, this was a powerful motivator for those eligible employees to accept early retirement.

         Plaintiffs allege that during retirement seminars and exit interviews, and more generally throughout their years of employment at Y-12, employees were misinformed about the level of healthcare benefits and out-of-pocket costs they would be subjected to at the time they ended their employment. In their complaint, plaintiffs detail a number of representations made to them regarding the retirement healthcare benefits. Those representations include, but are not limited to, the following: (1) retirees “would be able to keep the exact policy” they had as employees; (2) “healthcare benefits would continue [after retirement] at the levels they had been while” actively employed; (3) “premium amount might increase slightly”; (4) retirees “would have comparable health care benefits through retirement”; (5) “those under age 65 could continue in their retirement plan after retirement”; (6) “[n]o changes were expected”; (7) “group coverage managed by the company would continue until . . . death”; (8) “healthcare benefits could not be terminated”; (9) the plan was “guarantee[d]”; (10) employees “were told often and regularly that [they] would continue to receive the same benefits for life” [Doc. 1 ¶ 32; see, e.g., Doc. 32-1 pp. 22, 26, 45-46]. Plaintiffs contend that statements such as these induced employees to believe that they would continue to receive company-subsidized medical and prescription-drug benefits for their lifetimes at the levels that were in place at the time they retired. Plaintiff Charlene Edwards retired in 2006, and plaintiff Betty Hatmaker retired in 2010.

         On July 1, 2014, CNS became the contractor responsible for operating Y-12. On January 1, 2015, defendant made several changes to the healthcare and welfare benefits of plaintiffs which significantly altered the cost, coverage, and value of the benefits. The change in benefits had the following effects on plaintiffs: (1) increased premiums for medical and drug prescription benefits; (2) significant reductions in the level of coverage for medical services and prescription drug benefits; (3) the inability to obtain or maintain alternative medical and/or prescription drug coverage at a reasonable cost due to their now advanced ages and impaired health conditions.

         Plaintiffs acknowledge that the contractors retained the ability to reduce or terminate the retiree healthcare benefits at any time. Plaintiffs, however, assert that employees and agents of the previous contractors, acting in a fiduciary capacity, made numerous misrepresentations regarding lifetime rights to post-retirement healthcare benefits that would remain unchanged from the levels they had as active employees. Plaintiffs do not allege that CNS made misrepresentations regarding their retirement benefits.

         Plaintiffs bring this action on behalf of Y-12 retirees and other beneficiaries of the plans seeking to either restore their healthcare benefits to the levels that existed prior to January 1, 2015, or to be reimbursed for the value of the increased out-of-pocket costs and the reduction in the level of benefits as a result of the changes. Plaintiffs allege that CNS breached its fiduciary duty arising under the Employment Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001, et seq.

         Defendant filed a motion to dismiss [Doc. 6], which the Court granted with regard to each of plaintiffs' claims except for a misrepresentation claim brought pursuant to 29 U.S.C. § 1132(a)(3) [Doc. 19]. Defendant now moves for summary judgment on the remaining misrepresentation claim [Doc. 27]. Plaintiffs responded in opposition to the motion [Doc. 32], and defendant replied [Doc. 33].

         II. ...


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