Prater v. Ohio Educ. Ass'n

Citation505 F.3d 437
Decision Date03 October 2007
Docket NumberNo. 06-4393.,06-4393.
PartiesJames I. PRATER et al., Plaintiffs-Appellants, v. OHIO EDUCATION ASSOCIATION, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

ARGUED: David M. Cook, Cook, Portune & Logothetis, Cincinnati, Ohio, for Appellants. Rodger L. Eckelberry, Baker & Hostetler, Columbus, Ohio, for Appellee. ON BRIEF: David M. Cook, Robert E. Rickey, Stephen A. Simon, Cook, Portune

& Logothetis, Cincinnati, Ohio, for Appellant. Rodger L. Eckelberry, Manuel Jose Asensio III, Baker & Hostetler, Columbus, Ohio, for Appellee. Michael F. Saggau, Daniel W. Sherrick, Associate General Counsel, Detroit, Michigan, Lisa M. Smith, Samuel C. McKnight, Klimist, McKnight, Sale, McClow & Canzano, Southfield, Michigan, for Amici Curiae.

Before: SUTTON and McKEAGUE, Circuit Judges; FORESTER, District Judge.*

OPINION

SUTTON, Circuit Judge.

James Prater and several other retired employees of the Ohio Education Association ("OEA") claim that OEA improperly terminated their health benefits, which (they say) had become vested and irreducible through a series of collective bargaining agreements. Relying in part on our decision in Maurer v. Joy Technologies, Inc., 212 F.3d 907 (6th Cir.2000), the district court rejected the claims as a matter of law. Because we conclude that Maurer does not apply here, because after-the-fact unilateral summary plan descriptions cannot supercede the amendment provisions in a collective bargaining agreement and because the contracts are otherwise ambiguous about whether they promise lifetime, irreducible health benefits to employees upon their retirement, we reverse.

I.

In its capacity as a union, OEA represents teaching professionals throughout Ohio. Unions are employers too, however, and, in its capacity as an employer, OEA employs numerous individuals who are represented by two other unions: the Professional Staff Union ("PSU") and the Ohio Associate Staff Union ("OASU"). OEA has negotiated several collective bargaining agreements with these unions, and these agreements have provided for retiree healthcare benefits since 1978 for PSU retirees and since 1981 for OASU retirees. Plaintiffs Montgomery and Whaley, former associate staff employees of OEA, retired in 1999 and 2000, and they seek to represent a class of OASU retirees. Plaintiffs Thorley, Prater and Westfall, former professional employees of OEA, retired between 1984 and 1994, and they seek to represent a class of PSU retirees.

The OASU Agreements. When Montgomery and Whaley retired, the collective bargaining agreement for OASU employees said that it represented "the full and complete commitments between both parties and [could] be altered . . . only through the voluntary, mutual consent of the parties in a written and signed amendment." JA 1101. The agreement provided active employees with medical insurance covering "hospitalization; surgical; major-medical; out-patient X-ray; EKG; laboratory; prescription drug; dental; and optical." JA 1080. Retirees, the agreement said, "shall be included in the Association group in regard to: hospitalization; surgical; out-patient; and major-medical coverage," but, "[a]fter the retiree reaches age 65, the Association is required to provide only major-medical coverage." JA 1086. The collective bargaining agreement also required the company to give each employee "an individual contract guaranteeing the retiree health benefits at the time of retirement." Id.

The PSU Agreements. Like the OASU contract, the PSU collective bargaining agreements in force when Prater, Thorley and Westfall retired provided that changes could be made "only by an amendment properly signed and ratified by each party." JA 1387, 1501, 1566. The first provision for retiree benefits, in a subsection entitled "Continuation of Benefits," said that "[t]he Association shall continue to provide all benefits provided by Sections 11.0112 and 11.0113 of this Contract for each retired employee to age sixty-five." JA 1357 (Thorley); JA 1468 (Prater); see also JA 1547-48 (Westfall). The next subsection, entitled "Reimbursement for Cost of Medicare," said that OEA "shall reimburse each retired employee over age sixty-five . . . for the cost of Medicare Part B." Id. And under the next subsection, entitled "Supplement to Medicare," the agreement said that OEA "shall supplement the benefits of Medicare Parts A and B to provide benefits at a level equal to those benefits provided by Sections 11.0112 and 11.0113 of this Contract for each retired employee to age sixty-five." Id.

The Summary Plan Descriptions. OEA, like other employers, distributes summary plan descriptions to its employees to assist them in understanding the more detailed, complex and formal plan documents. Each of the summaries distributed to the plaintiffs contained reservation-of-rights clauses.

The summary distributed to the OASU retirees provided: "Retired employees may continue coverage, in accordance with the collective bargaining agreement . . . . While the employer expects retiree coverage to continue, the employer reserves the right to modify or discontinue retiree coverage at any time." JA 1832. Elsewhere the OASU summary said that OEA "may modify or amend the Plan from time to time in accordance with the provision of the collective bargaining agreement." JA 1851.

The reservation-of-rights clauses in the PSU summaries did not say that any modifications to benefits must be in accordance with the bargaining agreements. "The Plan Administrator," they said, "may change or eliminate benefits under the plan and may terminate the entire plan or any portion of it." JA 1934 (Thorley); JA 1976 (Prater); see also JA 2045 (Westfall).

The Dispute. For two decades, OEA provided most of its retirees with insurance to supplement Medicare after they reached 65. On March 1, 2004, OEA sent a letter to PSU employees informing them that OEA would honor its "contractual commitment[]" to reimburse retirees for Medicare Part B but would no longer pay for the "optional, supplemental coverage" it had been providing. JA 98. That same day, OEA sent a similar letter to OASU retirees, informing them that "OEA's obligation to provide coverage ceases" when each retiree reaches the age of 65. JA 138. On August 31, 2004, OEA terminated the retirees' supplemental coverage.

The OASU and PSU retirees filed this class action under Section 301 of the Labor Management Relations Act, claiming that the union had violated the collective bargaining agreements. OEA moved for summary judgment on the PSU retirees' claims for post-65 supplemental insurance, and it moved for summary judgment or partial summary judgment on the OASU retirees' claims for prescription drug, surgical, hospitalization and outpatient coverage. After the parties had filed their summary judgment papers, the retirees sought leave to amend their complaint to add several ERISA claims.

The district court held that the contracts unambiguously excluded the sought-after coverage. It reasoned that the "to age 65" clause in the PSU agreement "indicates a limitation on coverage available and is not at all ambiguous." D. Ct. Op. at 11. And it reasoned that the OASU agreement contained a "limitation on coverage [that] could not be more clear or unambiguous." Id. at 12. The court also held that the plan summaries reserved to OEA an unqualified right to alter or terminate the retirement benefits under Maurer, 212 F.3d at 919, and ultimately granted OEA's motion for summary judgment on all claims. D. Ct. Op. at 15-16. The court denied the retirees' motion for leave to amend because the litigation was at an advanced stage.

II.

At the same time that ERISA carefully regulates the vesting of pension benefits, it leaves the decision of whether employers will provide employees with healthcare benefits upon retirement to contract—a contract that may come in the form of a collective bargaining agreement, an at— will employment relationship or something in between. See UAW v. Yard-Man, Inc., 716 F.2d 1476, 1479 (6th Cir.1983); Sprague v. Gen. Motors Corp., 133 F.3d 388, 400 (6th Cir.1998); Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 579-80 (6th Cir.2006). In the past, the application of "ordinary principles of contract interpretation" to these different types of agreements, Yolton, 435 F.3d at 580, has raised a host of perplexing questions: What is required to establish an employer's commitment to provide lifetime benefits to retirees? What exactly are lifetime healthcare benefits? Does a promise of lifetime benefits mean that they cannot be reduced over the life of a retiree? What if the employer reduces health benefits for active employees or increases the cost of those benefits to active employees? What if the employer increases some health benefits for active employees but reduces others? Must the retiree take the bitter with the sweet? Or is it a ratchet—with only the improvements in health benefits available to the retiree but with no compulsion to take any reduction?

Happily for us, this case sidesteps these questions—at least for now. OEA concedes that, in the absence of a right to terminate retiree benefits under the reservation-of-rights clauses in the summary plan descriptions, a fact dispute exists over whether the retiree benefits provided for in the collective bargaining agreements survive the term of the agreements. That leaves two related but distinct disputes for us to resolve: (1) Are the retirees' claimed benefits among those enumerated in the collective bargaining agreements? (2) Did OEA's plan summaries give the union the right to terminate any health benefits provided for in the collective bargaining agreements?

A.

In interpreting collective bargaining agreements, we consider the language of the agreement, the context in which that language appears and other traditional canons of construction. McCoy v. Meridian Auto. Sys., 390 F.3d 417, 422 ...

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