Arndt v. Wheelabrator Corp.

• Decision Date: 15 May 1991
• Docket Number: No. S89-360 (RLM).,S89-360 (RLM).
• Citation: 763 F. Supp. 396
• Parties: Lawrence J. ARNDT, et al., Plaintiffs, v. The WHEELABRATOR CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of Indiana

763 F. Supp. 396

Lawrence J. ARNDT, et al., Plaintiffs, v. The WHEELABRATOR CORPORATION, Defendant.

No. S89-360 (RLM).

United States District Court, N.D. Indiana, South Bend Division.

May 15, 1991.

COPYRIGHT MATERIAL OMITTED

Barry A. Macey, Indianapolis, Ind., Charles S. Leone, South Bend, Ind., for plaintiffs.

Timothy W. Woods, James H. Pankow, Robert W. Mysliwiec, South Bend, Ind., Roger K. Quillen, Robert C. Christenson, David R. Kresser, Atlanta, Ga., for defendant.

MEMORANDUM AND ORDER

MILLER, District Judge.

A group of retirees, spouses, and children contend that a series of expired collective bargaining agreements guaranteed them health benefits at certain levels for life. They contend that the defendant violated the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, and the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., by modifying those health benefits after the agreements expired. The defendant employer contends that nothing in the agreements or the plan documents indicates an intention to preclude such a modification. Both sides have moved for summary judgment. For the reasons that follow, the court concludes that the law of this circuit compels judgment for the defendant employer.

I.

The Wheelabrator Corporation operated a manufacturing plant in Mishawaka, Indiana for many years until it closed the facility in 1988. During the plant's operation, its production and maintenance employees were represented by United Auto Workers ("UAW") Local 995, and its research and development employees by UAW Local 5. The UAW locals negotiated contracts with Wheelabrator on behalf of current and retired employees. The first contract providing health insurance for retirees was in 1962.

The 1965 agreement contained a provision that, "Those employees who have retired since September 22, 1959 will have the full cost of their Blue Cross-Blue Shield coverage paid by the Company after they attain 65 years of age...." There was no express provision that this benefit was established for the life of the retirees, but a letter to retirees from the Director of Industrial Relations shortly after this contract was signed stated that:

Effective on January 1, 1966, the Company will pay the full cost of your Blue Cross-Blue Shield premium.

Effective on July 1, 1966, and thereafter during your lifetime, the Company will continue to pay the full cost of your Blue Cross-Blue Shield premium; but you will be re-enrolled in a Company group program which, combined with Medicare provisions taking effect on that date, will provide a level of benefits equal to those offered active employees.

From 1965 until 1987, retiring employees received a form letter entitled "Your Benefits As A Union Retiree of Wheelabrator-Frye Inc." from the personnel administrator, which stated that, "Both you and your spouse will be covered for health insurance for the remainder of your lives." In response to inquiries regarding the status of coverage, Wheelabrator assured retirees that they were covered for life.

Glenn Fulmer, a union negotiator as well as Wheelabrator's Manager of Labor Relations from 1970 to 1982, testified that he normally met with employees before their retirement and told them that they would have the same level of insurance benefits for life that they had as active employees. This was his understanding from his negotiations. However, Mr. Fulmer's superior, Ralph E. Sanford, stated in his affidavit that neither he nor Mr. Fulmer had authority to make such a statement or to commit Wheelabrator to such a position, and further that it was not Mr. Fulmer's responsibility to explain benefits to retirees.

In the 1968 collective bargaining agreement, the Medicare supplement was expanded to provide that, "Such supplemental benefits shall be continued for the spouse after the death of the retiree." Subsequent collective bargaining agreements continued to expand the retirees' health insurance coverage. In 1982, the agreement between Wheelabrator and Local 995 made several amendments to the benefits provided, but the section covering retirees' health insurance was unchanged. It did state that:

In case of a plant closing, the Company agrees that employees eligible to retire with paid up insurance but who lack (1) one year of either age or service, will be considered eligible.

In the opinion of the UAW's chief negotiator, this meant that if the plant closed, those within a year of eligibility for retirement would have their health insurance premiums paid for life. At the ratification meeting, the Union explained the amended agreement to its members in a document, which stated:

INSURANCE — If plant closes, all those eligible to retire at the time of closing, plus those within one (1) year of being eligible to retire, will receive all insurance benefits for life.

The last collective bargaining agreement between Wheelabrator and UAW Local 995, which covered active and retired production and maintenance employees, was effective from September 24, 1985 to September 24, 1988. The last agreement between Wheelabrator and UAW Local 5 covering active and retired research and development employees was effective from January 6, 1986 to December 1, 1988. Article 14, Section 5 of each agreement provided for hospital and surgical insurance coverage for employees who retired before January 1, 1986. Like the 1965 agreement, this section stated that employees who retired since September 22, 1959 would have the full cost of their Blue Cross-Blue Shield coverage paid after attaining age 65 and provided for a Medicare supplement to provide benefits equal to those provided for active and retired employees age 65 and over. The supplemental benefits were to be continued for the spouse after the death of the retiree. In addition to this provision, the agreement had a separate provision for health insurance coverage for employees who retired after January 1, 1986, which provided a vesting schedule and stated that, "This coverage will be provided to the retiree and spouse at no cost for life." No such statement appeared in the provision for employees retiring before 1986.

On March 1, 1989, Wheelabrator reduced the health insurance benefits for its pre-1986 retirees. Wheelabrator's president issued a letter dated February 9, stating in part:

As you know, the union contract in effect when you or your spouse retired provided you with the same health insurance benefits available to active employees of The Wheelabrator Corporation. That contract has now expired....

First, the medical plan will include deductibles and coinsurance payments that apply to all expenses including prescription drugs.... Second, we have had to eliminate the dental, vision, and hearing benefits.

An attachment to this letter set forth the comparison of the new and old insurance plans. The deductible was doubled, the maximum benefit rose from $150,000.00 per insured to $500,000.00 per insured, and the percentage of the costs paid decreased from 100% to 80%, with many types of costs requiring a deductible for the first time. An out-of-pocket maximum of $1,200.00 per individual or $2,400.00 per family was added to the plan. The summary plan description outlining the coverage stated that, "The Wheelabrator Corporation may terminate, suspend, withdraw, amend, or modify the Plan in whole or in part at any time."

II.

The retirees and their spouses bring this class action seeking restoration of benefits, damages for lost benefits, medical expenses incurred due to lost benefits, damages for mental distress, costs, and attorney fees.

A.

Count I of their complaint alleges that Wheelabrator breached its collective bargaining agreement in violation of the LMRA because the collective bargaining agreement gave retirees and their spouses a life-long right to insurance benefits that were not to be reduced. Wheelabrator contends that the court lacks subject matter jurisdiction over the claim in Count I, and that Count I fails to state a claim because the agreements under which Count I is brought expired by their own terms in 1988 before Wheelabrator changed the retirees' benefits.

As to Count I, Wheelabrator contends that the action under the LMRA should be dismissed because the contracts on which it is based expired by their own terms before the action accrued. The LMRA provides in part:

Suits for violation of contracts between an employer and a labor organization ... may be brought in any district court of the United States having jurisdiction of the parties....

29 U.S.C. § 185(a).

Most of the parties' arguments presented addressed the summary judgment motions. Wheelabrator did argue that this court lacks jurisdiction of the LMRA claim in Count I and Count I fails to state a claim because of the expiration of the agreements, but the court has not found in the cases upon which Wheelabrator relies a holding that an LMRA action should be dismissed pursuant to Fed.R.Civ.P. 12(b)(1) or 12(b)(6) because of the expiration of the agreements. It appears that the determination of the parties' intent as to the duration of the collective bargaining agreements' terms is more properly made in a summary judgment motion than a motion to dismiss. Further, paragraphs 11 and 12 of the amended complaint allege that Wheelabrator was obligated to provide retirees the same level of benefits for life. Therefore, Count I should not be dismissed for failure to state a claim.

B.

Count II alleges that Wheelabrator violated ERISA by failing to administer their employee welfare benefit plans according to their terms and by breaching its fiduciary duty with respect to the benefit plans and participants. Wheelabrator claims entitlement to judgment as a matter of law because the plaintiffs cannot show that Wheelabrator was required to provide the same level of benefits to the retirees for life, and it is undisputed that Wheelabrator did not waive its flexibility to alter the benefit plans.

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