Gomo v. NetApp, Inc.

Background

The plaintiffs were former NetApp employees who claimed entitlement to lifetime medical benefits under NetApp’s Executive Retiree Health Plan, an employee welfare-benefit plan governed by the Employee Retirement Income Security Act (ERISA). The plan began in 2005 and was described in PowerPoint presentations as providing company-paid, unlimited lifetime medical benefits for eligible senior executives and their families.

In 2016, NetApp amended the plan effective January 1, 2017. The amended plan changed the arrangement from fully insured coverage to a health reimbursement arrangement for individual insurance premiums through December 31, 2019, and provided that the plan would then terminate. NetApp agreed to provide participating retirees a lump sum equal to two years of projected health-care premium costs.

The plaintiffs brought two ERISA claims. Claim 1 sought a determination under ERISA section 502(a)(1)(B) that they had a vested right to lifetime medical benefits. Claim 2, brought under ERISA section 502(a)(3), alleged that NetApp breached fiduciary duties by misrepresenting the benefits and sought equitable relief.

Claim 1: Lifetime benefits

The parties filed cross-motions for summary judgment, a procedure allowing judgment without a trial when no genuine dispute about an important fact exists and one side is entitled to judgment under the law.

The court held that the PowerPoint presentations were informal summaries, not the ERISA plan documents. They did not include the required provisions concerning plan administration, amendment procedures, and the authority to amend the plan. The court rejected the plaintiffs’ argument that a less demanding standard applied.

The court held that the CIGNA and United Healthcare certificates of coverage were the plan documents. The certificates identified the source of benefits, described plan administration, addressed funding and payments, and reserved the employer’s right to amend or terminate the plan. The court found immaterial certain inconsistencies in the certificates, including statements that employees shared plan costs even though NetApp paid the costs and differences in the plan names.

Because the certificates did not guarantee lifetime benefits and expressly allowed amendment or termination, the court concluded that the plaintiffs had no vested right to lifetime medical benefits. The court also stated that even if NetApp had failed to provide a required written summary plan description, that failure would not entitle the plaintiffs to the requested lifetime benefits. Defendants’ motion for summary judgment was granted as to Claim 1, and plaintiffs’ motion was denied as to Claim 1.

Claim 2: Fiduciary-duty allegations

The plaintiffs alleged that NetApp falsely represented that the benefits were lifetime benefits even though the plan could later be amended or canceled. The court explained that ERISA section 502(a)(3) can provide equitable remedies such as changing plan terms, enforcing certain promises, or monetary compensation for harm caused by a fiduciary’s breach.

The court rejected defendants’ argument that the plan was a “top-hat” plan exempt from certain ERISA requirements. The court concluded that the retiree health plan was not primarily a deferred-compensation plan and therefore was not a top-hat plan.

On the merits of Claim 2, however, the court found no evidence that NetApp intended to deceive the plaintiffs when it adopted the plan. The evidence showed that NetApp initially intended to provide lifetime medical benefits but later faced increasing projected plan liabilities and changed the plan. The court held that an employer’s honest statement of its present intention to provide benefits does not by itself establish a fiduciary breach merely because the employer later changes those benefits.

The court also found that the plaintiffs were sophisticated senior executives, that the PowerPoint presentations referred to insurance documents, and that the plaintiffs received retirement materials that generally included the certificates of coverage. Because those certificates clearly reserved the right to amend or terminate the plan, the court held that no reasonable factfinder could conclude that NetApp misled the plaintiffs. Defendants’ motion for summary judgment was granted as to Claim 2, and plaintiffs’ motion was denied as to Claim 2.

Other matters and disposition

The court granted defendants’ request for judicial notice of specified Securities and Exchange Commission filings and a Department of Labor fact sheet. It overruled the plaintiffs’ evidentiary objections to several defense submissions, including expert opinions and testimony concerning the certificates of coverage.

The court did not need to decide whether Robert Salmon had standing because defendants were entitled to summary judgment even if he had standing. The court nevertheless stated that Salmon had not enrolled in the plan and therefore appeared not to be a participant, beneficiary, or fiduciary; it said summary judgment against him would also be warranted on that basis.

Judge Beth Labson Freeman’s final order granted defendants’ motion for summary judgment and denied plaintiffs’ motion for summary judgment.