United States Court of Appeals
Fifth Circuit
F I L E D
REVISED SEPTEMBER 21, 2006
August 30, 2006
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk
______________________
No. 06-20632
______________________
HALLIBURTON COMPANY BENEFITS COMMITTEE, In Its Capacity as Plan
Administrator of the Halliburton Energy Services, Inc. Welfare
Benefits Plan, including its constituent benefit program, the
Dresser Retiree Life and Medical Program; HALLIBURTON CO;
HALLIBURTON ENERGY SERVICES INCORPORATED WELFARE BENEFITS PLAN
Plaintiffs - Appellants
v.
JAMES GRAVES; PHIL GRIFFIN; PAUL M BRYANT, individually and as
representatives of a requested class of all similarly situated
persons
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Texas
Before KING, STEWART and DENNIS, Circuit Judges.
KING, Circuit Judge:
This class action, brought under the Employee Retirement
Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 (2000)
(“ERISA”), arises from the September 1998 merger of Dresser
Industries, Inc. into a wholly owned subsidiary (Halliburton
N.C., Inc.) of Halliburton Company pursuant to the terms of a
merger agreement among the three companies and the effect of the
merger agreement on the Dresser Retiree Medical Program, an
employee welfare benefit plan under 29 U.S.C. § 1002(1). As part
of the merger agreement, Halliburton agreed to maintain the
Dresser Retiree Medical Program for eligible participants, except
to the extent that any modifications to the program are
consistent with changes in the medical plans provided by
Halliburton for similarly situated active employees. In November
2003, Halliburton amended three subplans of the Dresser Retiree
Medical Program “to align the benefits provided to the
participants in the three subplans more closely with the benefits
provided to other Halliburton retirees.” Halliburton did not
make similar modifications to the plans for its own similarly
situated active employees.
After receiving written complaints from at least three
affected Dresser retirees challenging the validity of the
November 2003 amendments in light of the merger agreement,
Halliburton filed this action against the Dresser retirees in the
district court, seeking class certification of all participants
in the Dresser Retiree Medical Program and declarations that the
November 2003 amendments are valid and that the merger agreement
does not limit Halliburton’s right to amend or terminate the
Dresser retiree program. The parties filed cross-motions for
summary judgment, and on December 20, 2004, the district court
granted partial summary judgment in favor of the Dresser
retirees. The district court concluded that the merger agreement
modified the Dresser Retiree Medical Program and that Halliburton
2
must maintain the program for eligible participants and may amend
or terminate the program only if it makes the same changes to the
programs for its similarly situated active employees. On June
26, 2006, the district court certified its order pursuant to 28
U.S.C. § 1292(b). We granted Halliburton’s unopposed petition
for permission to appeal, and for the following reasons, we
AFFIRM.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Factual Background
In 1998, Dresser Industries, Inc. (“Dresser”), a Delaware
corporation in the oilfield services business, merged with
Halliburton N.C., Inc. (“Halliburton N.C.”), a newly formed
Delaware corporation and wholly owned subsidiary of Halliburton
Company (“Halliburton”), also a Delaware corporation in the
oilfield services business. The merger was accomplished under
the Delaware General Corporation Law. Prior to the merger,
Halliburton and Dresser separately had established welfare
benefit programs for employees and retirees. The Halliburton
Company Welfare Benefits Plan (“Halliburton Plan”) provided very
limited medical benefits for its retirees. On January 1, 1994,
Halliburton had amended its retiree program to eliminate medical
benefits for those retirees over the age of sixty-five who were
Medicare-eligible, unless the retiree had reached the age of
sixty-five by January 1, 1994. For the latter retirees, the
3
Halliburton Plan provided only a prescription drug benefit of $22
per month and eliminated all other medical benefits.
The retiree medical benefits provided by the Dresser Retiree
Medical Program were significantly greater than those provided by
the Halliburton Plan at the time of the merger. The Dresser
Retiree Medical Program consisted of separate subplans that
provided medical benefits to different groups of Dresser
retirees. It was governed by Dresser’s umbrella plan for welfare
benefits, the Dresser Industries, Inc. Welfare Benefit Plan, Plan
750 (“Dresser Plan 750”).1 On January 1, 1993, Dresser had
amended the Dresser Retiree Medical Program to exclude additional
1
The most recent iteration of Dresser Plan 750 is the 1995
version. The summary plan description in effect on the date of
the merger was “Your Benefits Handbook 1997, Plan 750 For Non-
Union Employees and Retirees, Effective January 1, 1997” with
minor changes found in “Your Dresser Benefits--1998/Enrollment
Information Retiree Union-Free Version.”
Dresser Plan 750 also governed Dresser’s other welfare
benefit programs, including the Dresser Executive Deferred
Compensation Plan, the Dresser Executive Life Insurance Program,
the Dresser Supplemental Executive Retirement Plan, and the
pension equalizer payments under the Dresser Retirement Savings
Plan.
In their brief, the Retirees allude to provisions in the
merger agreement affecting these other welfare benefit programs;
however, our jurisdiction applies to the order certified to this
court, and that order is limited to the merger agreement’s effect
on the Dresser Retiree Medical Program. See 28 U.S.C. § 1292(b)
(2000); see also Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S.
199, 205 (1996) (“As the text of § 1292(b) indicates, appellate
jurisdiction applies to the order certified to the court of
appeals . . . . [b]ut the appellate court may address any issue
fairly included within the certified order because ‘it is the
order that is appealable, and not the controlling question
identified by the district court.’”) (quoting 9 J. MOORE & B. WARD,
MOORE’S FEDERAL PRACTICE ¶ 110.25[1] (2d ed. 1995)).
4
retirees over the age of sixty-five, except for a defined group
of so-called “grandfathered” employees who remained eligible for
full medical benefits under the program after they turned sixty-
five.2 There were approximately 5500 participants in the Dresser
Retiree Medical Program when Halliburton and Dresser merged in
1998. Since the merger, the number of grandfathered employees
has been declining, and it is these employees who are the members
of the defendant class.3 Dresser Plan 750 specifically reserved
the right to amend or terminate any of its welfare benefit plans,
including the Dresser Retiree Medical Program.
In preparation for the merger between Halliburton and
Dresser, senior management of the two companies, along with their
financial and legal advisors, met on February 20-22, 1998, to
negotiate the terms of the merger agreement. At a meeting on
February 20, the parties discussed Dresser Plan 750, including,
inter alia, medical benefits for Dresser retirees.4 Mark Vogel,
2
The “grandfathered” employees fell into three categories:
(1) existing retirees with coverage; (2) active employees who met
the age and service requirements as of January 1, 1993; and (3)
specified active employees who could “grow in” to retiree
benefits if they completed the requisite years of service before
retiring. The first group had approximately 5000 employees, and
the second and third groups had approximately 500 employees
combined.
3
At oral argument, counsel for the Retirees estimated that
as of May 3, 2006, the Dresser Retiree Medical Program had
between 3000-4000 participants.
4
David Lesar, President and Chief Operating Officer of
Halliburton, Lester Coleman, Executive Vice President and General
Counsel of Halliburton, Donald Vaughn, President and Chief
5
an attorney with Weil, Gotshal & Manges, LLP, representing
Dresser, indicated in his notes from the meeting that David Lesar
(“Lesar”), then President and Chief Operating Officer of
Halliburton, “agreed to protect all [Dresser] salaried employees
who were grandfathered with respect to [the] old retiree medical
plan at no less benefits than active employees.” The notes from
the meeting were delivered to Lesar and Lester Coleman
(“Coleman”), Executive Vice President and General Counsel of
Halliburton, at 7:00 p.m. that same day.
Shortly after the negotiations concluded, on February 25,
1998, the companies executed the Agreement and Plan of Merger
(the “merger agreement” or “agreement”) by and among Halliburton,
Halliburton N.C., and Dresser. On September 29, 1998, the
effective date of the agreement, Halliburton N.C. merged with and
into Dresser. The agreement specified that “[a]s a result of the
Merger, the separate corporate existence of [Halliburton N.C.]
shall cease and [Dresser] shall continue as the Surviving
Corporation.” It further explained that “all the property,
rights, privileges, powers and franchises of [Halliburton N.C.]
and [Dresser] shall vest in the Surviving Corporation, and all
debts, liabilities and duties of [Halliburton N.C.] and [Dresser]
shall become the debts, liabilities and duties of the Surviving
Operating Officer of Dresser, and Paul Bryant, Vice President of
Human Resources for Dresser, were among those present at the
meeting.
6
Corporation.” Under the terms of the agreement, Dresser’s
shareholders received one share of newly issued Halliburton
common stock for each share of Dresser common stock.
The agreement itself recited that the respective boards of
directors of Halliburton and Dresser had approved the merger.
The agreement was signed by Lesar on behalf of Halliburton and
William Bradford (“Bradford”), then Chairman and Chief Executive
Officer of Dresser, on behalf of Dresser. On June 25, 1998, the
Halliburton and Dresser shareholders approved the agreement at
separate meetings. The agreement was to be governed by and
construed in accordance with Delaware General Corporation Law.
This appeal primarily concerns three provisions in the
merger agreement, two of which deal with employee benefit plans
and one of which addresses the parties in interest to the merger
agreement. The two provisions concerning employee benefit plans
are found in section 7.09, entitled “Assumption of Obligations to
Issue Stock and Obligations of Employee Benefits Plan;
Employees.” First, section 7.09(g)(i) states that:
(g) [Halliburton] shall and shall cause the Surviving
Corporation and each Subsidiary of the Surviving
Corporation to take all corporate action necessary to:
(i) maintain with respect to eligible participants
(as of [September 29, 1998]) the [Dresser] retiree
medical plan, except to the extent that any
modifications thereto are consistent with changes
in the medical plans provided by [Halliburton] and
its subsidiaries for similarly situated active
employees . . . .
Following this provision, section 7.09(h) provides that:
7
Subject to Section 7.09(g), until the third anniversary
of the Effective Time [of the merger agreement] (the
“Benefits Maintenance Period”) [Halliburton] shall and
shall cause the Surviving Corporation and each Subsidiary
of the Surviving Corporation to provide each employee of
[Dresser] or any of its Subsidiaries at the Effective
Time (“Company Participants”) with employee benefits and
compensation after the Effective Time that are
substantially comparable to similarly situated employees
of [Halliburton] and its Subsidiaries.
The parties also included a section covering the parties in
interest to the merger agreement. Section 10.07 states that the
agreement shall inure solely to the benefit of each party and
that nothing in the agreement is intended to confer upon any
other person any right, benefit, or remedy. It also provides an
exception to its general prohibition on third-party
beneficiaries:
Notwithstanding the foregoing and any other provision of
this Agreement, and in addition to any other required
action of the Board of Directors of [Halliburton] a
majority of the directors . . . serving on the Board of
Directors of [Halliburton] who are designated by
[Dresser] pursuant to Section 7.13 shall be entitled
during the three year period commencing at the Effective
Time (the “Three Year Period”) to enforce the provisions
of Sections 7.09 and 7.13 on behalf of the Company’s
officers, directors and employees, as the case may be.
Such directors’ rights and remedies under the preceding
sentence are cumulative and are in addition to any other
rights and remedies that they may have at law or in
equity, but in no event shall this Section 10.07 be
deemed to impose any additional duties on any such
directors. . . .
Following the merger, the Halliburton Plan and Dresser Plan
750 were separately maintained. Because the welfare plans
differed in many respects, proper administration of the plans
posed a significant challenge. For Dresser Plan 750, this
8
responsibility fell, at least in part, on Paul Bryant (“Bryant”),
the former Dresser Vice President of Human Resources who became
the Halliburton Shared Services Vice President of Human Resources
after the merger. On May 14, 1999, almost eight months after the
effective date of the merger, Bryant submitted a memorandum and a
notebook to senior management, including, inter alios, Bradford,
Coleman, and Celeste Colgan (“Colgan”), Halliburton’s Vice
President of Administration. The memorandum and the notebook,
entitled “Dresser Legacy--Employee Pay and Benefit Obligations,
Merger Agreement Section 7.09(g),” were prepared, and, in the
case of the memorandum, signed, in the regular course of Bryant’s
employment as Vice President at Halliburton. In the memorandum,
Bryant stated that he had prepared the notebook “to assist in
complying with the Merger Agreement, Section 7.09(g).” Bryant
also noted that “[s]ince [he] was the primary figure from Dresser
dealing with pay and benefit matters at the Merger negotiations,
[he] thought it would be helpful to provide this material before
[he] retired.” With regard to the Dresser Retiree Medical
Program and section 7.09(g)(i), the provision in the merger
agreement concerning the retirees’ program, Bryant explained
that:
During the merger negotiations, Dresser wanted to ensure
that the Dresser Retiree Medical plan was kept similar to
the current plan but recognized that the future was
unpredictable. Thus, wording was included that gave
Halliburton the ability to make changes to the Dresser
Retiree Medical plan as long as the same changes were
being made to active employees. For example, if business
9
conditions caused Halliburton to increase active employee
contributions 20% and raise the minimum deductible to
$1,000, the same actions could be taken to the Dresser
Retiree Medical plan participants.
There is no indication in the record that Halliburton or any
senior management of Halliburton receiving the memorandum and
notebook disputed Bryant’s interpretation of the Dresser Retiree
Medical Program or that administration of the retiree program was
being carried out contrary to Bryant’s interpretation. Rather,
Halliburton’s correspondence indicates that it was mindful of its
obligations to Dresser retirees under the merger agreement. For
example, on February 16, 1999, Colgan wrote a letter to Clint
Ables (“Ables”), one of the Dresser retirees, in response to
Ables’s request for a copy of the Dresser Summary Plan
Description for the retiree medical program. Colgan explained
that although she was enclosing a copy of the 1997 handbook--the
version existing before the 1998 merger--that version “contains
the benefit information pertaining to coverage currently extended
to Dresser ‘grandfathered’ retirees.” She also noted that
Halliburton “is mindful of its obligation to ‘maintain with
respect to eligible participants . . . [Dresser’s] retiree
medical plan except to the extent that any modifications thereto
are consistent with changes in the medical plans provided by
[Halliburton] and its subsidiaries for similarly situated active
employees.’”
Less than a year after the effective date of the merger,
10
Halliburton started taking action to amend Dresser’s employee
benefit plans, including Dresser Plan 750. On July 16, 1999,
Halliburton agreed to assume the sponsorship of, adopt, and
continue Dresser Plan 750,5 along with other pension and welfare
benefit plans sponsored by Dresser as of January 1, 1999.
Included in this agreement was Halliburton’s promise to assume
“all powers, rights, duties, obligations, and liabilities of
Dresser” under the plans. The agreement also amended the plans
to vest the administration of the plans in the Halliburton
Company Benefits Committee and the power to amend or terminate
the plans in the Chief Executive Officer of Halliburton. The
agreement was executed by officers of Halliburton and was to
retroactively amend the Dresser plans effective January 1, 1999.
On December 31, 2002, Halliburton decided to combine the
separate welfare benefit plans by merging the Halliburton Plan
5
After the merger with Dresser, Halliburton automatically
could have succeeded Dresser as the plan sponsor under the terms
of Dresser Plan 750. Dresser Plan 750 contains a provision
entitled “Employer Successor,” which states that “[a]ny successor
entity to an Employer, by merger, consolidation, purchase or
otherwise, shall be substituted hereunder for such Employer.”
The plan defines “employer” as the “company,” and “company” as
“Dresser Industries, Inc. (d.b.a. Dresser) or any successor
entity by merger, consolidation, purchase, or otherwise unless
such successor entity elects not to adopt the plan.” (emphasis
added). In light of the terms of the merger agreement, which
named Dresser as the surviving corporation to Halliburton N.C.
and provided that Dresser shall possess all rights and
obligations as the surviving corporation, Halliburton apparently
elected not to adopt the plan through the merger agreement. The
July 1999 agreement therefore was necessary to substitute
Halliburton as the plan sponsor and give Halliburton all of
Dresser’s rights and obligations under the plan.
11
with Dresser Plan 750 and renaming it the Halliburton Energy
Services, Inc. Welfare Benefits Plan (“HESI Plan”). On January
1, 2003, Halliburton amended the HESI Plan so that various
subplans of Dresser Plan 750, including the Dresser Retiree
Medical Program, became constituent benefit programs of the HESI
Plan. Under the HESI Plan, “the Company reserve[d] the absolute
right to amend the Plan and any or all Constituent Benefit
Programs.”
In November 2003, over five years after the merger,
Halliburton, acting through its plan administrator, amended three
subplans of the Dresser Retiree Medical Program.6 As Halliburton
explained to the Dresser retirees:
Halliburton has maintained separate retiree medical plans
for Halliburton and Dresser retirees since the time of
the merger in 1998. The goal of future changes to the
Company’s retiree medical plans is to achieve parity for
all retirees. The changes described below to the Dresser
Retiree Medical Plan are intended to address the current
variations between the Halliburton and the Dresser
Retiree Medical Plans.
The amendments provided that effective January 1, 2004,
Halliburton’s contributions to the cost of medical coverage would
be frozen at the 2003 contribution amounts and that plan
participants would be responsible for any increase in the cost of
coverage. The amendments also provided that effective January 1,
2005, Dresser retirees who had attained the age of sixty-five and
6
Halliburton amended Subplans 501, 901, and 902, all of
which were listed in the HESI Plan as constituent benefit
programs for Dresser retirees.
12
were Medicare-eligible would be eligible for prescription drug
coverage only and that all other medical benefits would be
discontinued. Halliburton’s prescription drug coverage included
a monthly subsidy of $22 per covered adult toward the cost of
prescription drug coverage, which was the same subsidy provided
to Halliburton retirees with prescription drug only coverage. In
its 2003 annual report, Halliburton estimated that the amendments
decreased Halliburton’s obligation by $93 million in future
medical benefit costs.
On December 8, 2003, before the effective dates of the plan
amendments, Bryant, who had since retired, wrote Lesar, who had
since become Halliburton’s Chief Executive Officer and Chairman
of the Board. In his letter, Bryant asked Lesar to withdraw the
November amendments, contending that the amendments violated
section 7.09(g)(i) of the merger agreement because no comparable
modifications were made to the plans for Halliburton’s similarly
situated active employees. Lesar forwarded Bryant’s letter to
the Halliburton Company Benefits Committee (“Halliburton Benefits
Committee” or “Committee”) for consideration. On January 21,
2004, Michele Mastrean (“Mastrean”), the Committee chairperson,
responded to Bryant by letter, stating that the Committee was
denying his request to withdraw the November 2003 amendments
because it had concluded that Halliburton’s amendments to the
retiree program were consistent with its obligations under the
merger agreement. Specifically, the Committee determined that
13
section 7.09(g)(i) only limited Halliburton’s otherwise
unfettered right to amend the Dresser Retiree Medical Program for
a period of three years from the effective date of the merger
agreement, as provided in section 10.07. Accordingly, the
Committee concluded that there was nothing in the merger
agreement limiting its right to amend the Dresser Retiree Medical
Program.
B. Procedural History
On January 21, 2004, the same date as Mastrean’s letter to
Bryant, the Halliburton Benefits Committee initiated this
declaratory action in the district court against Bryant, James
Graves, and Phil Griffin, all of whom are participants in the
Dresser Retiree Medical Program, individually and as
representatives of a requested class. The Committee’s complaint
requested certification of a class of all participants (the
“Retirees”) in the Dresser Retiree Medical Program, i.e., the so-
called “grandfathered employees,” and sought declarations that
(1) Halliburton’s November 2003 amendments to the Dresser Retiree
Medical Program are permissible and do not violate the terms or
provisions of the HESI Plan, the merger agreement, or ERISA; and
(2) the merger agreement, including section 7.09(g)(i), does not
limit Halliburton’s right to amend or terminate the Dresser
Retiree Medical Program. The Committee invoked 29 U.S.C.
§ 1132(a)(1)(B), explaining that the “participants’ right to seek
14
judicial clarification of their right to future benefits arises
exclusively under [this section in] ERISA.”
On May 12, 2004, the Retirees filed counterclaims and third-
party claims against the Halliburton Benefits Committee and
Halliburton (collectively, “Halliburton”), requesting, inter
alia, declaratory and injunctive relief prohibiting any
modifications to the Dresser Retiree Medical Program “to the
extent any such modifications are inconsistent with medical
benefit plans provided to similarly situated active Halliburton
employees, and specifically prohibiting the implementation of the
November 2003 amendments to the Dresser Retiree Medical Plan.”
On August 18, 2004, the district court certified the class
to “consist[] of all people who were eligible to participate,
directly or indirectly, in the Dresser Retiree Medical Plan on
December 31, 1998.” On September 10, 2004, the parties filed
cross-motions for summary judgment. The Retirees’ motion for
partial summary judgment requested the district court to find as
a matter of law that the merger agreement requires Halliburton to
maintain the Dresser Retiree Medical Program in accordance with
section 7.09(g)(i) of the merger agreement. Halliburton’s motion
for summary judgment asked the district court to declare that:
(1) the no-third-party-beneficiary clause in the merger agreement
bars the Retirees from enforcing the terms of the merger
agreement; (2) only the parties to the merger agreement and the
directors designated in section 10.07 could enforce the merger
15
agreement, and the three-year window within which the directors
designated in section 10.07 were entitled to enforce section
7.09(g)(i) had expired; and (3) the merger agreement imposes no
limitation on Halliburton’s right to amend or terminate the
Dresser Retiree Medical Program. Halliburton also requested the
district court to dismiss the Retirees’ counterclaims with
prejudice.
On December 20, 2004, the district court granted partial
summary judgment in favor of the Retirees. The district court
found that the merger agreement modified the Dresser Retiree
Medical Program based on the signatures of the officers and the
approval of the agreement by the boards of directors and the
shareholders of both companies. According to the district court,
even if the merger agreement itself did not amend the retiree
program, Halliburton “waited until November 2003 to change the
plans for former Dresser workers” and “Halliburton’s wait shows
that it recognized the validity of the plan amendments for
employees that stemmed from the merger.” The district court
ordered that “Halliburton must maintain the Dresser Retiree
Medical Program for eligible participants and may adjust benefits
in that program only if it makes identical changes to benefits
for similarly situated active employees.”
On December 23, 2004, at the request of Halliburton, the
district court entered a separate order entitled “final
judgment,” which stated that “[t]he partial judgment dated
16
December 20, 2004, is severed and made final.” On January 24,
2005, Halliburton filed a notice of appeal.
C. Subsequent Proceedings
On June 21, 2006, this court dismissed Halliburton’s appeal
for lack of jurisdiction. See Halliburton Co. Benefits Comm. v.
Graves, No. 05-20088, 2006 WL 1751045 (5th Cir. June 21, 2006)
(unpublished). We concluded that the district court’s partial
summary judgment order neither disposed of any particular claim,
nor evidenced the district court’s intention to sever any
specific claim, as required by FED. R. CIV. P. 21, but instead
decided a legal issue common to the claims of both parties. Id.
at **2-3. We decided that we therefore lacked jurisdiction to
decide the merits of the district court’s interlocutory order
because the district court’s order was not “final” within the
meaning of 28 U.S.C. § 1291. Id. at *3.
On June 23, 2006, the Retirees moved the district court to
amend its order on partial summary judgment to include the
certification language contemplated by 28 U.S.C. § 1292(b) to
facilitate immediate appellate review. On June 26, 2006, the
district court amended its order to provide that it was “of the
opinion that [its order originally entered on December 20, 2004]
involves a controlling question of law as to which there is
substantial ground for difference of opinion and an immediate
appeal from the order may materially advance the ultimate
17
termination of the litigation, as contemplated by 28 U.S.C.
§ 1292(b) and FED. R. APP. P. 5(a)(3).” On July 5, 2006, within
ten days after the district court entered its amended order,
Halliburton filed an unopposed petition for permission to appeal,
which we granted. See 28 U.S.C. § 1292(b); FED. R. APP. P.
5(a)(3).
II. DISCUSSION
On appeal, Halliburton argues that section 7.09(g)(i) of the
merger agreement does not limit its right to amend, modify, or
terminate the Dresser Retiree Medical Program. Halliburton
contends that the district court’s contrary conclusion errs in
several respects. First, Halliburton maintains that the merger
agreement did not effect a plan amendment to the Dresser Retiree
Medical Program because the agreement was not signed by Dresser’s
Vice President of Human Resources, thus failing to follow the
amendment procedure in Dresser Plan 750. Second, Halliburton
asserts that under the plain language of the no-third-party-
beneficiary clause in section 10.07, the Retirees cannot enforce
any provision of the merger agreement, including section
7.09(g)(i). Halliburton claims that even if the merger agreement
did in fact amend the Dresser Retiree Medical Program, only the
parties to the merger agreement and the directors designated in
section 10.07 were entitled to enforce section 7.09(g)(i), and
the three-year window within which the directors could do so has
18
expired. Finally, Halliburton argues that the district court’s
order requiring Halliburton to maintain the program amounts to an
impermissible vesting of the Retirees’ benefits because there is
no temporal limitation on Halliburton’s requirement to continue
benefits under the program.
The Retirees respond that section 7.09(g)(i) amended the
Dresser Retiree Medical Program to limit the manner in which
Halliburton can make future amendments. More specifically, the
Retirees claim that section 7.09(g)(i) gave them a “right of
nondiscrimination” such that Halliburton cannot modify or
terminate the retiree program unless it makes the same changes to
the plans for similarly situated active employees of Halliburton.
The Retirees argue that the merger agreement meets all of the
procedural requirements set forth in Dresser Plan 750 for making
a plan amendment to the Dresser Retiree Medical Program, and that
in any event, Halliburton ratified the plan amendment by its
actions following the merger with Dresser. The Retirees further
contend that the no-third-party-beneficiary clause cannot deprive
them of their right to seek judicial clarification of the terms
of the program because it is ERISA that grants them that right
and not the merger agreement. According to the Retirees,
Halliburton’s argument that any amendment effected a three-year
obligation enforceable only by the parties to the agreement and
certain directors is not supported by the text of section
7.09(g)(i), which does not contain any temporal limitation on the
19
amendment to the retiree program and does not disclaim
enforcement by plan participants. Finally, the Retirees assert
that construing section 7.09(g)(i) as a plan amendment does not
constitute a vesting of their benefits because the amendment
still allows Halliburton to modify or terminate their benefits or
the plan as long as it makes the same changes to the benefits or
the plans of similarly situated active employees.
We will address each argument in turn. In making these
determinations, we review questions of law de novo. See Nickel
v. Estes, 122 F.3d 294, 298 (5th Cir. 1997) (reviewing
interpretation of ERISA plan terms de novo); Arleth v. Freeport-
McMoran Oil & Gas Co., 2 F.3d 630, 633 (5th Cir. 1993) (reviewing
interpretation of merger agreement governed by Delaware General
Corporation Law de novo).
A. Effect of the Merger Agreement on Dresser Retiree Medical
Program
1. Consequences of the Merger Agreement
Inherent in Halliburton’s argument that section 7.09(g)(i)
does not limit its right to amend the Dresser Retiree Medical
Program is the assumption that it possesses the right to amend or
terminate the retiree program in the first place. Because this
right is not so apparent under the terms of the merger agreement,
we begin here.
When companies merge under Delaware General Corporation Law,
the surviving corporation succeeds to both the rights and
20
obligations of the constituent corporation, including rights and
obligations of every nature, whether they be in contract or in
tort. See DEL. CODE. ANN. tit. 8, § 259(a) (2001); 15 WILLIAM MEADE
FLETCHER, FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS
§§ 7082, 7115 (perm. ed., rev. vol. 1999) [hereinafter 15 FLETCHER
CYCLOPEDIA]. Such rights and obligations include those associated
with a company’s welfare benefit plan. Cf. EDWARD P. WELCH & ANDREW
J. TUREZYN, FOLK ON THE DELAWARE GENERAL CORPORATION LAW § 259.1 (2006)
(stating that the surviving or new corporation has “sole
possession of all rights and powers of the constituent
corporations”) (emphasis added); 15 FLETCHER CYCLOPEDIA § 7115
(noting that obligations assumed include those arising from
contracts of every kind). One of the rights generally reserved
under a welfare benefit plan is the company’s right to amend or
terminate the plan. See Curtiss-Wright Corp. v. Schoonejongen,
514 U.S. 73, 78 (1995) (noting that because ERISA does not create
any substantive entitlement to employer-sponsored health benefits
or any other kind of welfare benefits, “[e]mployers or other plan
sponsors are generally free under ERISA, for any reason at any
time, to adopt, modify, or terminate welfare plans”).
Dresser Plan 750 included such a provision, reserving the
right for the company to amend or terminate its welfare benefit
programs, including the Dresser Retiree Medical Program, at any
time. Halliburton did not, however, succeed to Dresser’s right
to amend or terminate its welfare plans via the merger agreement
21
or Delaware law. Rather, the merger agreement specified that
“the separate corporate existence of [Halliburton N.C.] shall
cease and [Dresser] shall continue as the Surviving Corporation.”
The agreement also explained that Dresser, as the surviving
corporation, shall succeed to “all the property, rights,
privileges, powers and franchises” and “all debts, liabilities
and duties” of the two merged corporations. It was not until
January 1999, three months after the effective date of the
merger, that Halliburton, as the parent corporation, acquired
Dresser’s rights and obligations under its employee benefit
plans, including Dresser’s right to amend or terminate its
welfare benefit plans. In a separate agreement dated July 16,
1999,7 Halliburton agreed to assume all of Dresser’s employee
benefit plans, including Dresser’s welfare plans governed by
Dresser Plan 750. In addition to assuming the sponsorship of all
employee benefit plans, Halliburton acquired “all powers, rights,
duties, obligations, and liabilities of Dresser” under the plans,
which included, inter alia, Dresser’s right to amend or terminate
the plans. It is this post-merger agreement--and not the merger
agreement itself–-that gives Halliburton the right to amend or
terminate the Dresser Retiree Medical Program.
7
Although Halliburton’s separate agreement to assume,
adopt, and amend Dresser’s employee benefit plans is dated July
16, 1999, the agreement specified that it was to be effective as
of January 1, 1999, which was approximately three months after
the effective date of the merger.
22
The post-merger agreement not only gave Halliburton a right
to amend or terminate the retiree program, but it also imposed a
concomitant obligation on Halliburton to maintain the program
according to its terms. Cf. 15 FLETCHER CYCLOPEDIA § 7115 (noting
that obligations assumed include those arising from contracts of
every kind). The terms of the retiree program are at the center
of this dispute, as the parties disagree over whether section
7.09(g)(i) of the merger agreement amended the retiree program in
such a way as to limit Halliburton’s otherwise unfettered right
to amend or terminate the plan. We therefore must determine
whether section 7.09(g)(i) effectively amended the Dresser
Retiree Medical Program so that Halliburton may amend or
terminate the program only to the extent it makes the same
changes to the plans for its similarly situated active employees.
2. Merger Agreement as a Plan Amendment
a. Amendment by Plan Procedure
In order to amend a welfare benefit plan governed by ERISA,
the employer must “provide a procedure for amending such plan,
and for identifying the persons who have authority to amend the
plan.” 29 U.S.C. § 1102(b)(3). ERISA imposes no additional
formalities on plan amendments. See Curtiss-Wright Corp., 514
U.S. at 80 (stating that ERISA “requires only that there be an
amendment procedure”). In particular, there is no requirement
that a document claimed to be an amendment to a welfare plan be
23
labeled as such. See Horn v. Berdon, Inc. Defined Benefit
Pension Plan, 938 F.2d 125, 127 (9th Cir. 1991); see also JOHN F.
BUCKLEY, ERISA LAW ANSWER BOOK 5-7 (5th ed. 2006) [hereinafter ERISA
LAW ANSWER BOOK] (“[A]ny act that is directed to a provision of an
ERISA plan may be deemed to constitute a plan amendment even
though it does not recite that it is intended to amend the plan
and it is not included in a plan document.”). Clearly then, a
provision in a merger agreement could amend a welfare plan, even
if it is not labeled as a plan amendment. See Beck v. Dillard
Dep’t Stores, Inc., 1991 WL 72784, at *1 (E.D. La. May 1, 1991)
(unpublished) (stating that the companies “were at liberty to
clarify their existing Plan in the context of the merger” and
noting that the merged company’s severance policy was clarified
as part of the merger agreement); cf. Miss. Power Co. v. Nat’l
Labor Relations Bd., 284 F.3d 605, 622 (5th Cir. 2002)
(anticipating that an obligation to continue the retirees’
medical insurance coverage or to maintain the type or terms of
coverage might “be found in some other document”). However, only
an amendment executed in accordance with the plan’s procedures is
effective. Williams v. Plumbers & Steamfitters Local 60 Pension
Plan, 48 F.3d 923, 926 (5th Cir. 1995); cf. Curtiss-Wright Corp.,
514 U.S. at 85 (“[W]hatever level of specificity a company
ultimately chooses, in an amendment procedure or elsewhere, it is
bound to that level.”).
The amendment procedure in Dresser Plan 750, the governing
24
plan for the Dresser Retiree Medical Program, provides that
“[t]he Company may amend, modify, change, revise, discontinue or
terminate the Plan or any Benefit Agreement at any time by
written instrument signed by the Vice President, Human
Resources.” Another provision in the plan reiterates that “[t]he
Company shall have overall responsibility for the establishment,
amendment and termination of any Benefit or of the Plan . . . .”
When an amendment procedure says the plan may be amended by
“[t]he Company,” “principles of corporate law provide a ready-
made set of rules for determining, in whatever context, who has
authority to make decisions on behalf of a company.” Curtiss-
Wright Corp., 514 U.S. at 80. In making this determination, we
are mindful that
[t]he answer will depend on a fact-intensive inquiry,
under applicable corporate law principles, into what
persons or committees within [the corporation] possessed
plan amendment authority, either by express delegation or
impliedly, and whether those persons or committees
actually approved the new plan provision . . . . If the
new plan provision is found not to have been properly
authorized when issued, the question would then arise
whether any subsequent actions . . . served to ratify the
provision ex post.
Id. at 85 (internal citation omitted).
Under corporate law principles, officers generally have
authority to take action on behalf of the company when that
action is approved by the board of directors. See 2 WILLIAM MEADE
FLETCHER, FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS § 437
(perm. ed., rev. vol. 2006) [hereinafter 2 FLETCHER CYCLOPEDIA]
25
(stating that an officer’s authority as an agent for the
corporation “may be implied from [his] conduct and the
acquiescence of the directors”). Drawing on these principles, we
have no trouble concluding that section 7.09(g)(i) of the merger
agreement amended the Dresser Retiree Medical Program to provide
that Halliburton must maintain the retiree program for eligible
participants except to the extent that any modifications are
consistent with changes in the medical plans provided by
Halliburton for similarly situated active employees. The
agreement was signed by Bradford, Dresser’s Chief Executive
Officer and Chairman of the Board of Directors, and approved by
Dresser’s Board of Directors. These individuals had authority to
act on behalf of the company, and their actions effectively
amended the retiree program. See id. § 439 (“A resolution of the
board of directors is sufficient to show express authority in a
corporate agent or officer . . . .”).
Halliburton nevertheless maintains that section 7.09(g)(i)
could not have amended the retiree program because the merger
agreement was not signed by Dresser’s Vice President of Human
Resources. Halliburton contends that “an act by ‘the Company’ is
not sufficient; Dresser’s procedure requires a writing by the
Vice President of Human Resources.” Halliburton misreads
Dresser’s amendment provision, which vests the authority “to
amend, modify, change, discontinue or terminate” the benefit
programs in the company itself and not in the Vice President of
26
Human Resources. The reference to the Vice President constitutes
a delegation of authority for one way in which “[t]he Company”
may amend the plan. It does not, however, constitute the only
way in which the company may amend the plan. Cf. id. § 495
(“[T]he appointment of such an officer does not mean that the
board has completely abdicated its authority.”) (citing In re
Walt Disney Co. Derivative Litig., 2005 WL 2056651, at *49 n.574
(Del. Ch. Aug. 9, 2005) (unpublished)). Under corporate law
principles, Dresser could revoke its delegation of authority and
act to amend the plan in some other manner. See id. § 437.10 (“A
principal who employs an agent always retains the power to revoke
the agency.”); id. § 495 (“[T]he board constitutes the
corporation and does not . . . exercise a delegated authority.”).
This interpretation of the Dresser amendment provision is
consistent not only with corporate law principles, but also with
other provisions in the plan. Section 6.14, entitled “Action by
the Company,” provides that
[a]ny action by the Company pursuant to any of the
provisions of this Plan shall be evidenced by a
resolution of its Board of Directors over the signature
of its secretary or assistant secretary, by written
direction of the Chairman of the Board of Directors, or
by written instrument executed by any person authorized
by the Board to take such action.
The plan amendment procedure essentially designated the latter--
i.e., “written instrument executed by any person authorized by
the Board to take such action”--as the way in which the company
could amend the plan. It stated that “[t]he Company may amend
27
. . . the Plan or any Benefit Agreement at any time by written
instrument signed by the Vice President.” However, as evidenced
by the plan provision on delegation of responsibility, the
company had the authority not only to “delegate, from time to
time, all or any part of its responsibilities under the Plan to
such person or persons as it may deem advisable,” but also to
“revoke any such delegation or responsibility.” Put another way,
a “written instrument executed by any person authorized by the
Board to take such action” was only one of the ways in which
Dresser could act to amend the plan. Dresser always had the
authority to revoke the Vice President’s authority and to
evidence its action to amend the plan in some other authorized
way, such as by resolution of the board of directors or by
written direction of the chairman of the board of directors.
Accordingly, Dresser’s Board of Directors’ approval and
Bradford’s signature on the merger agreement, as the Chairman of
the Board of Directors, were more than sufficient to constitute
an action by the company to amend the plan. Cf. ERISA LAW ANSWER
BOOK 5-7 (“[I]t would be difficult to argue that an action by the
board of directors of an entity would not, even in the absence of
specific authority, constitute a valid act of amendment of the
plan.”).
Halliburton’s position that Dresser could amend its welfare
plans only through a signed writing of the Vice President of
Human Resources is especially curious in light of its own
28
actions. On at least two occasions following the merger,
Halliburton purportedly amended Dresser Plan 750 without a
written instrument signed by the Vice President of Human
Resources. First, on July 16, 1999, Halliburton amended Dresser
Plan 750 to name the Halliburton Company Benefits Committee as
the plan administrator and to vest the power to amend or
terminate the welfare plans in the Chief Executive Officer of
Halliburton. That amendment was signed by Lesar and not by the
Vice President of Human Resources. Similarly, on December 31,
2002, Halliburton made several amendments to Dresser Plan 750,
none of which was signed by the Vice President. Thus, as
illustrated by its own actions, even Halliburton has recognized
that under the amendment provision in Dresser Plan 750, the
Dresser welfare plans may be amended by procedures other than a
writing signed by the Vice President of Human Resources.
b. Amendment by Ratification
In any event, even if the Vice President’s signature had
been required for section 7.09(g)(i) to amend the retiree
program, Halliburton’s subsequent actions served to ratify the
provision ex post. See Curtiss-Wright Corp., 514 U.S. at 85 (“If
the new plan provision is found not to have been properly
authorized when issued, the question would then arise whether any
subsequent actions, such as the executive vice president’s
letters informing respondents of the termination, served to
29
ratify the provision ex post.”); see also 2A WILLIAM MEADE FLETCHER,
FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS § 764.10 (perm. ed.,
rev. vol. 2001) [hereinafter 2A FLETCHER CYCLOPEDIA] (“A corporation
may bind itself by ratifying an act done by an agent of its
subsidiary company.”). Under the doctrine of ratification, “[a]
corporation may render itself liable for unauthorized acts of its
officers by subsequently ratifying them.” 2 FLETCHER CYCLOPEDIA
§ 434; see Depenbrock v. Cigna Corp., 389 F.3d 78, 83 (3d Cir.
2004) (“The doctrine of ratification provides that an improperly
authorized amendment may be ratified ex post by subsequent
acts.”).
Halliburton ratified section 7.09(g)(i) as an amendment to
the Dresser Retiree Medical Program in at least two ways.8
First, the shareholders of Halliburton and Dresser approved the
merger agreement on June 25, 1998, four months after the
8
Halliburton argues that this court cannot consider “parol
evidence” in determining whether section 7.09(g)(i) amended the
Dresser Retiree Medical Program. Halliburton is correct that
extrinsic evidence is not admissible to interpret unambiguous
plan documents. See ERISA LAW ANSWER BOOK 2-8 (noting that “[t]he
unambiguous written provisions of a plan must control, and
extrinsic evidence cannot be introduced to vary express terms of
a plan”).
However, evidence that tends to show subsequent
ratification of a plan amendment is admissible. See 2A FLETCHER
CYCLOPEDIA § 778 (“Where the act of a corporate officer or agent
was unauthorized or irregular, any competent and material
evidence is admissible which tends to show a subsequent
ratification by officers having authority to ratify or by
shareholders where they may ratify. . . . If the ratification was
implied, the conduct of the corporate officers and directors
tending to show implied ratification is admissible.”).
30
agreement was executed, thereby ratifying the amendment to the
extent it was unauthorized. See 2A FLETCHER CYCLOPEDIA § 764 (“The
shareholder may ratify unauthorized or irregular acts of the
directors or of other corporate officers . . . by vote at a
shareholders’ meeting . . . .”); cf. 2 FLETCHER CYCLOPEDIA § 437
(noting that the corporation acts through the action of its
shareholders and managing board).
Second, Halliburton administered its obligations under the
Dresser Retiree Medical Program consistent with section
7.09(g)(i). In the five years following the merger agreement,
Halliburton maintained separate retiree medical plans for
Halliburton and Dresser retirees, and admitted to doing so in a
November 2003 letter to the Retirees. Prior to November 2003,
Halliburton never attempted to amend the retiree program in a way
that was inconsistent with its obligation under section
7.09(g)(i). In fact, Halliburton’s correspondence on the
provision shows that the company was mindful of its obligations
under the merger agreement. For example, Colgan’s February 16,
1999, letter to Ables, one of the Dresser retirees, noted that
Halliburton was mindful of its obligation to maintain the retiree
medical plan, except to the extent it made identical
modifications to the medical plans for similarly situated active
employees. Therefore, to the extent it is necessary,
Halliburton’s ex post actions ratified section 7.09(g)(i) as a
valid plan amendment.
31
B. Enforceability of Section 7.09(g)(i) as a Plan Amendment
1. Effect of the No-Third-Party-Beneficiary Clause
Halliburton maintains that under the plain language of the
no-third-party-beneficiary clause in section 10.07 of the merger
agreement, the Retirees cannot enforce any provision of the
agreement, including section 7.09(g)(i). Halliburton argues that
even assuming the agreement amended the Dresser Retiree Medical
Program, only the parties to the merger agreement and the
directors designated in section 10.07 were entitled to enforce
section 7.09(g)(i), and the three-year window within which the
directors could do so has expired.
We cannot agree. First, Halliburton’s contention that the
Retirees are precluded by section 10.07 from enforcing section
7.09(g)(i) wrongfully equates a plan participant’s enforcement of
a plan right under ERISA with a third party’s enforcement of a
provision in a contract. The Retirees are not seeking to enforce
a breach of contract claim under the merger agreement. As they
recognize, principles of preemption prevent them from doing so.
Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 62 (1987) (holding
that a contract claim is preempted by ERISA if the claim
“relate[s] to [an] employee benefit plan”). Instead, they seek a
clarification of their rights to future benefits under the terms
of the retiree program. See 29 U.S.C. § 1132(a)(1)(B) (stating
that a civil action may be brought by a participant or
32
beneficiary under ERISA “to enforce his rights under the terms of
the plan, or to clarify his rights to future benefits under the
terms of the plan”). The detailed provisions of § 1132(a)(1)(B)
“set forth a comprehensive civil enforcement scheme” that was
“intended to be exclusive.” Pilot Life Ins. Co. v. Dedeaux, 481
U.S. 41, 54 (1987). Simply put, enforcement of a plan’s
provisions, including any amendments thereto, falls exclusively
in ERISA’s remedial scheme. See Morales v. Pan Am. Life Ins.
Co., 914 F.2d 83, 87 (5th Cir. 1990) (“ERISA’s civil enforcement
provision creates an exclusive remedial scheme focusing on the
terms of the plan.”). To adopt Halliburton’s argument that a
provision in a contract, or more specifically, a no-third-party-
beneficiary clause, can trump rights prescribed by ERISA would
fly in the face of the exclusive remedial scheme prescribed by
Congress for plan participants and beneficiaries to enforce
rights under employee benefit plans.9 Cf. Dallas County Hosp.
9
Halliburton relies on two cases, neither of which is
controlling here. First, Halliburton cites In re Fairchild
Indus., Inc. & GMF Invs., Inc., ERISA Litig., 768 F. Supp. 1528,
1533 (N.D. Fla. 1990), a case in which the district court
rejected the plaintiff’s argument that a purchase agreement
constituted a plan amendment “[b]ecause ERISA prohibits the
amendment of an employee benefit plan through informal written
documents, or by any other means except as specified in the plan
documents themselves . . . .” The court noted that its
conclusion was “buttressed by the contracting parties’ clearly
expressed intent not to create any third party rights by
executing the agreement.” Id. at 1533.
The district court’s reliance on the no-third-party-
beneficiary clause was not dispositive to its holding; rather, it
relied on the informality of the purported amendment and the fact
that the amendment was not executed in accordance with the plan
33
Dist. v. Assocs.’ Health & Welfare Plan, 293 F.3d 282, 289 (5th
Cir. 2002) (stating that whether a party is a beneficiary under a
contract, which is not itself an ERISA plan, “is of no relevance
in determining whether it is an ERISA beneficiary”).
Second, Halliburton’s claim that only certain parties were
entitled to enforce section 7.09(g)(i) for a three-year period is
not supported by the express language in the merger agreement.10
Section 10.07 provides that notwithstanding its prohibition on
third-party beneficiaries, certain directors are entitled “to
documents, concluding that “the Purchase Agreement could not
legally operate to amend the plan documents.” Id. Such is not
the case here, where the parties executed section 7.09(g)(i) in
accordance with the amendment procedures in Dresser Plan 750. In
addition, to the extent In re Fairchild holds that ERISA imposes
formalities on plan amendments, the Supreme Court rejected such
an approach in Curtiss-Wright Corp., 514 U.S. 73.
Moreover, we cannot give any weight to Halliburton’s
reliance on LaFata v. Raytheon Co., 147 F. App’x 258, 261 (3d
Cir. 2005) (unpublished), because that decision has nothing to do
with amendments to an ERISA plan.
10
Before the district court, Halliburton initially took
the position that section 7.09(g)(i) of the merger agreement had
in fact amended the plan, but that it had done so for only a
three-year period. See 8 R. 292-306, Am. Compl. ¶ 16 (stating
that “[c]ertain provisions of the Halliburton/Dresser Merger
Agreement described permissible amendments to Dresser’s welfare
benefit programs during a three-year period following the
effective date of the merger”); id. ¶ 31 (“The Merger Agreement
contains certain provisions that limited Halliburton’s ability to
change or terminate the Dresser Retiree Program benefits for a
period of three years.”); id. ¶ 33 (“As a result of these
provisions [including section 7.09(g)(i)], Halliburton committed
to maintain the Dresser Retiree Program, save for changes
consistent with changes to the benefits of ‘similarly situated
active employees,’ for a period of three years.”). In front of
this court, however, Halliburton has argued that the merger
agreement did not amend the retiree program, but that if it did,
it did so for only three years pursuant to section 10.07.
34
enforce the provisions of Sections 7.09 and 7.13 on behalf of
[Dresser’s] officers, directors, and employees” during the three-
year period following the effective date of the merger. The
problem with Halliburton’s argument is that it does not give
effect to the language in section 7.09(g)(i), the provision
directed at the retiree medical plan. The explicit language in
section 7.09(g)(i) does not contain any temporal limitation on
its enforcement and does not disclaim enforcement by plan
participants. Rather, it simply states that Halliburton shall
cause the Surviving Corporation to take all corporate action
necessary to maintain the Dresser Retiree Medical Program,
“except to the extent that any modifications thereto are
consistent with changes in the medical plans provided by
[Halliburton] and its subsidiaries for similarly situated active
employees.”
A comparison of section 7.09(g)(i) with the section
succeeding it, section 7.09(h), provides further support that the
parties did not intend to impose any enforcement limitations on
the retiree program, other than the one expressly provided for in
section 7.09(g)(i). Section 7.09(h) requires Halliburton to
provide Dresser employees with benefits comparable to similarly
situated Halliburton employees “until the third anniversary of
the effective time” of the merger agreement. Section 7.09(h) is
significant because it illustrates that the parties knew how to
limit the duration of Halliburton’s obligation for Dresser
35
employees, in connection with section 10.07 of the agreement. In
drafting the sections in 7.09, the parties carefully drew a
distinction between employees and retirees. To construe
“employees” in section 10.07 to include “retirees” in order to
impose a three-year limitation on the obligations under the
retiree program would render section 7.09(g)(i) meaningless and
unnecessary in light of section 7.09(h). We decline to read a
three-year requirement into section 7.09(g)(i).
2. Consequences of the Plan Amendment
Finally, Halliburton misconstrues section 7.09(g)(i) as a
grant of “permanent benefits.” Halliburton argues that section
7.09(g)(i) violates the prohibition in the merger agreement on
vested benefits and that, in any event, there is no clear
intention to vest benefits under section 7.09(g)(i) as required
by Spacek v. Mar. Ass’n, 134 F.3d 283, 293 (5th Cir. 1998),
abrogated on other grounds by, Cent. Laborers’ Pension Fund v.
Heinz, 541 U.S. 739 (2004). Section 7.09(g)(i) states that
Halliburton must maintain the Dresser Retiree Medical Program,
“except to the extent that any modifications thereto are
consistent with changes in the medical plans provided by
[Halliburton] and its subsidiaries for similarly situated active
employees.” To argue that this provision constitutes vesting
amounts to a misunderstanding of what it means to “vest” a right
or benefit under ERISA. An employer “vests” a benefit under
36
ERISA when it intends to confer unalterable and irrevocable
benefits on its employees, and it does so by using clear and
express language. See Spacek, 134 F.3d at 293 (stating that
“courts may not lightly infer an intent on the part of a plan to
voluntarily undertake an obligation to provide vested,
unalterable benefits”) (internal alterations, quotation marks,
and citation omitted). Nothing in section 7.09(g)(i) requires
Halliburton to maintain the retiree program indefinitely; rather,
Halliburton is free, at any time and for any reason, to amend or
terminate the program, as long as it does the same for its
similarly situated active employees.11 Because Halliburton may
modify or terminate the program, the benefits have not vested.
See Murphy v. Keystone Steel & Wire Co., 61 F.3d 560, 565 (7th
Cir. 1995) (“If a contract provides that benefits can be
terminated, then those benefits do not vest.”).
Nor is it problematic that section 7.09(g)(i) precludes
future amendment or termination of the plan, except as consistent
with the provision’s terms. Employers generally are free under
11
Accordingly, section 7.09(g)(i) does not violate the
other terms in the merger agreement. Sections 4.13(j) and
5.13(j) of the agreement make clear that the merger agreement
does not “create or give rise to any additional vested rights.”
Under section 6.02(a)(i) and (b)(i) of the agreement, Dresser and
Halliburton covenanted not to amend any employee benefit plans to
vest any employee benefits under such plans. That section
7.09(g)(i) amended the Dresser Retiree Medical Program is not
inconsistent with these provisions because the amendment does not
give rise to vested rights, but merely limits the way in which
Halliburton can amend or terminate the retiree program.
37
ERISA to modify or terminate plans, but if the plan sponsor cedes
its right to do so, it will be bound by that contract. See
Vasseur v. Halliburton Co., 950 F.2d 1002, 1006 (5th Cir. 1992);
see also Hughes v. 3M Retiree Med. Plan, 281 F.3d 786, 790 (8th
Cir. 2002) (“An employer offering welfare benefits may
unilaterally modify or terminate benefits at the employer’s
discretion, so long as the employer has not contracted an
agreement to the contrary.”); 2 MICHAEL J. CANAN, QUALIFIED RETIREMENT
PLANS § 24:134 (2006) (“[Welfare benefit plans] can be amended or
terminated by the employer provided there is no contractual
obligation that prevents such an amendment.”). This court has
recognized that a reservation-of-rights clause in a plan
document, which allows a company to amend or terminate a plan at
any time, “cannot vitiate contractually vested or bargained-for
rights. To conclude otherwise would allow the company to take
away bargained-for rights unilaterally.” Int’l Ass’n of
Machinists & Aerospace Workers v. Masonite Corp., 122 F.3d 228,
233 (5th Cir. 1997) (emphasis added).
We decline to allow Halliburton to unilaterally take away
the “bargained-for rights” that Dresser and Halliburton
negotiated and made on the retiree program as part of their
merger agreement. The parties were free to impose contractual
obligations on the right to amend or terminate the Dresser
Retiree Medical Program, and they did. See id. Because of these
limitations, Halliburton cannot alter the retiree program, except
38
as consistent with the plan as amended by section 7.09(g)(i).
III. CONCLUSION
For the foregoing reasons, we AFFIRM the Amended Order on
Partial Summary Judgment of the district court.
39