Winnett v. Caterpillar Inc

Decision Date22 June 2010
Docket NumberNo. 08-6236.,08-6236.
Citation609 F.3d 404
PartiesGary T. WINNETT, Freda Jackson-Chittum, Casper R. Harris, William H. Dailey, Calvin E. Grogan, Kenneth C. Hammer, Charles A. Waterfield and Michael J. Finn, on behalf of themselves and others similarly situated, Plaintiffs-Appellees,v.CATERPILLAR, INC., Defendant-Appellant.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED: Joseph J. Torres, Winston & Strawn LLP, Chicago, Illinois, for Appellant. Michael M. Mulder, Meites, Mulder, Mollica & Glink, Chicago, Illinois, for Appellees. ON BRIEF: Joseph J. Torres, C.R. Gangemi, Jr., Winston & Strawn LLP, Chicago, Illinois, Steffen N. Johnson, Winston & Strawn LLP, Washington, D.C., for Appellant. Michael M. Mulder, Paul W. Mollica, Meites, Mulder, Mollica & Glink, Chicago, Illinois, Elizabeth Alexander, Lieff, Cabraser, Heimann & Bernstrin, Nashville, Tennessee, William T. Payne, John Stember, Pamina Ewing, Stember, Feinstein, Doyle & Payne, LLP, Pittsburgh, Pennsylvania, Jay E. Sushelsky, AARP Foundation Litigation, Washington, D.C., for Appellees.

Before MARTIN, ROGERS and SUTTON, Circuit Judges.

The court delivered a PER CURIAM opinion. MARTIN, J. (p. 415), delivered a separate concurring opinion.

OPINION

PER CURIAM.

At stake in this interlocutory appeal are the claims of one subclass of plaintiffs in an ongoing class-action lawsuit against Caterpillar for allegedly breaching its promise to provide “lifetime cost-free retiree health care.” R.61, ¶ 2. The district court preliminarily enjoined Caterpillar to provide the subclass-275 plaintiffs who retired from a Caterpillar subsidiary between 1992 and 1998-with this benefit. Because the statute of limitations bars the claims of this subclass, we reverse.

I.

In 1987, Caterpillar formed a subsidiary, Caterpillar Logistics Services (CLS), to market its warehousing and product distribution services to third parties. Caterpillar's warehousing and distribution services are located in UAW-represented facilities, and, when CLS was formed, CLS employees were subject to the 1988 collective bargaining agreement (the 1988 CBA) between UAW and Caterpillar. Among other benefits, the 1988 CBA purported to provide lifetime, cost-free healthcare to retirees and their surviving spouses. To bolster the marketability of CLS's services, Caterpillar and the UAW agreed that CLS's services to third parties would not be interrupted during any UAW strikes at Caterpillar facilities. Caterpillar and the UAW also agreed that, in the event of a strike, the 1988 CBA would govern CLS employees during negotiation of a new CBA, and that any new CBA would apply to CLS employees. The possibility of applying a new CBA to CLS retirees-those who retired between 1992 and the ratification of a new UAW-Caterpillar CBA-was not discussed.

The 1988 CBA expired in 1991, and in 1991, during negotiations over a new CBA, the UAW instituted several strikes. One aspect of the UAW-Caterpillar dispute turned on Caterpillar's proposal to cap retiree medical benefits in return for increased pension benefits. Consistent with their agreement, CLS employees did not participate in the strikes, and they continued to receive benefits under the 1988 CBA. On March 16, 1998, a new CBA between UAW and Caterpillar (the 1998 CBA) was ratified. Between January 1, 1992 and the ratification of the 1998 CBA on March 16, 1998, a few hundred CLS employees retired, known here as the CLS retirees or subclass.

In March 1998, Caterpillar gave the CLS subclass notice of benefits changes brought about by the new CBA, including increases in the basic pension benefit rate, an additional early retirement allowance, and lump-sum payments to retirees, as well as an increase in prescription drug co-pays and a limit on adding new dependents. The 1998 CBA also established a managed care network, under which Caterpillar would reimburse 100% of expenses for medical services by a preferred provider in the managed care network but only 70% of such expenses for services by a non-network provider. While the 1988 CBA purported to provide free lifetime healthcare benefits for retirees, the 1998 CBA “limited” [c]ompany contributions” for medical benefits “as of the year 2000 for those employees retired after January 1, 1992.” A-1600.

On April 20, 1998, Caterpillar told the UAW that CLS employees who retired during the 1992-98 labor dispute would “prospectively be eligible for the same pension and benefit provisions as other employees who retired under the terms and conditions [in the 1998 CBA].” R.246-10. By May 1, 1998, the CLS subclass thus received the 1998 CBA's increased basic pension rates, plus additional early retirement allowance and lump-sum pension payments, and was subject to the 1998 CBA's cap on retiree healthcare costs. And by June 1, 1998, the subclass was subject to the 1998 CBA's managed care network.

In November 1999, Caterpillar mailed the members of the CLS subclass a Summary Plan Description (SPD) that outlined the benefits changes in the 1998 CBA. The SPD noted the increases in basic pension rates, additional early retirement allowance, and lump-sum pension payments, as well as the increase in prescription drug co-pays, the limit on adding new dependents, and the imposition of a managed care network. As to the cap on retiree healthcare benefits, the SPD said:

Company contributions for health care benefits for employees who retired on or after January 1, 1992 are capped at the average annual cost per individual in 1997 projected to 1999. Thereafter, the Company will continue to pay up to that amount each year for retiree health care benefits. If costs rise above that amount, beginning January 1, 2000, retirees will be required [to] contribute towards the cost of health care benefits in the form of a monthly premium.
Note: The VEBA (Voluntary Employee Benefit Association) Trust Fund assets will be used to cover retiree premiums after the year 2000 until trust assets are depleted. Once that fund is depleted, monthly premium contributions from retirees will be required. A-1658-59.

In 2004, when the VEBA fund was nearly depleted, Caterpillar began deducting a monthly healthcare premium from the pensions of CLS subclass members. In June 2006, Caterpillar began charging the CLS subclass deductibles, out-of-pocket charges and coinsurance charges up to certain maximums.

On March 28, 2006, the CLS subclass and other Caterpillar retirees filed this lawsuit against Caterpillar under § 301 of the Labor-Management Relations Act, 29 U.S.C. § 185, and § 502 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132. As amended, the complaint alleges that Caterpillar breached the 1988 CBA's commitment to provide free, unalterable, lifetime healthcare benefits for retirees when it (1) charged retirees and their surviving spouses a premium for healthcare benefits, (2) “increased charges for drug prescription co-pays, deductibles, and other out-of-pocket expenses,” and (3) made “reductions in retiree healthcare.” R.61, ¶ 29-30, ¶ 59. Caterpillar moved to dismiss the lawsuit, contending that the six-year statute of limitations barred it because the plaintiffs' claims accrued in 1998 when Caterpillar applied the new CBA to them. The district court denied the motion because

the wording of Caterpillar's communications regarding retiree benefits ... was so indefinite and contingent on future events, it could hardly have been clear to the plaintiffs that, years before the defendant actually began to make the challenged deductions, the plaintiffs had suffered an injury and that the statute of limitations on their claims had begun to run.

Winnett v. Caterpillar, Inc., 496 F.Supp.2d 904, 927-28 (M.D.Tenn.2007).

The CLS subclass moved for a preliminary injunction to prevent Caterpillar from charging CLS retirees and their surviving spouses premiums, deductibles, and other medical care payments. Caterpillar opposed the motion, reiterating its argument that the claims were time-barred and contending that Caterpillar never made a promise of lifetime, unalterable, free healthcare benefits to the CLS employees. In 2008, the court granted the preliminary injunction. 579 F.Supp.2d 1008. The court held that the CLS subclass had shown a likelihood of success on the merits because the evidence indicated that they had a vested right to lifetime cost-free medical care. Id. at 1034. The court held that the CLS subclass would suffer irreparable harm without injunctive relief because class members testified that they had delayed medical treatment due to the costs of obtaining it. Id. at 1035-36. The court held that an injunction would not substantially harm Caterpillar due to the company's financial stability. Id. at 1037. And the court held that an injunction would advance the public interest. Id. at 1038.

The court also held that new evidence introduced in connection with the preliminary injunction motion “did not change, and, in fact bolster[ed] its earlier decision that the CLS subclass's claims were not time-barred. Id. at 1040. In the court's words:

From 1992 until late 2004, retirees had every reason to believe that future negotiations between the UAW and Caterpillar would prevent Caterpillar from implementing the caps [on retiree healthcare costs]. From the very beginning, Caterpillar described the caps as a possibility dependent and contingent on future events. This indefinite and uncertain language continued until October 10, 2004, when Caterpillar began deducting retiree health care premium charges from the CLS retirees' pensions.

Id. Caterpillar's imposition of the managed-care network and other changes from the 1998 CBA, the court reasoned, together with the CLS subclass's acceptance of these changes, did not trigger the accrual of the claims because the changes were “minor” and did not put the CLS subclass on notice that Caterpillar was repudiating a vested right to lifetime cost-free health care. Id. at 1041. “Es...

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