Baumgardner v. Smurfit-Stone Container Corp.
| Decision Date | 02 December 2004 |
| Docket Number | Civil No. 04-730-JO. |
| Citation | 347 F.Supp.2d 927 |
| Parties | Richard BAUMGARDNER; et al., Plaintiffs, v. SMURFIT-STONE CONTAINER CORPORATION, a Missouri corporation, Defendant. |
| Court | U.S. District Court — District of Oregon |
Thomas K. Doyle, Bennett Hartman Morris & Kaplan, LLP, Portland, OR, for Plaintiffs.
Andrew M. Altschul, Altschul Law Office, P.C., Joel A. Mullin, Stoel Rives, Portland, OR, for Defendant.
Plaintiffs Richard Baumgardner, Christine Devine, Gary Nathan, and Mike Mitchell bring this action against defendant Smurfit-Stone Container Corporation alleging four claims: 1) breach of collective bargaining agreements in violation of § 301 of the Labor Management Relations Act ("LMRA"); 2) breach of common law fiduciary duty; 3) violations of Oregon wage laws, ORS 652.120 et seq; and 4) equitable estoppel under the Employment Retirement Income Security Act ("ERISA").
This court has jurisdiction pursuant to the judicial review provision of the LMRA, 29 U.S.C. § 185, the judicial review provision of ERISA, 29 U.S.C. § 1132(e), as well as supplemental jurisdiction under 28 U.S.C. § 1367. Before the court is defendant's motion to dismiss (# 7) all claims with the exception of Baumgardner's and Devine's LMRA § 301 claims. In their response (# 15) to defendant's motion, plaintiffs request leave to amend their complaint. For the reasons discussed below, defendant's motion is GRANTED IN PART and DENIED IN PART, and plaintiffs' request for leave to amend is GRANTED.
Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. A complaint will survive a Rule 12(b)(6) challenge unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle the plaintiff to relief. No. 84 Employer-Teamster Joint Council Pension Trust Fund v. Am. West Holding Corp., 320 F.3d 920, 931 (9th Cir.2003). In deciding a Rule 12(b)(6) motion, the court accepts all allegations of material fact as true and construes the allegations in the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001).
The "facts" at this stage are taken from plaintiffs' complaint. The complaint establishes two groups of plaintiffs.1 The first group, "plaintiff employees," are "early retirees" — former employees of defendant's Oregon City and Newberg mills who retired between 1989 and 2001 and were between ages 55 and 65 at the time of retirement. The second group, "plaintiff dependents," are current or former spouses of the early retirees. At all relevant times, plaintiff employees were covered by a series of collective bargaining agreements ("CBAs") between defendant and local chapters of the Association of Western Pulp and Paper Workers ("AWPPW").
According to plaintiffs, defendant executed a CBA in 1995 with AWPPW Local 60 ("1995 Agreement") and another CBA in 1997 with AWPPW Local 68 ("1997 Agreement"). In these agreements, defendant agreed to provide health and welfare benefits to employees and eligible dependents, and all plaintiffs became beneficiaries of the Smurfit-Stone Paper Health and Welfare Benefit Plan ("Plan").2 Each CBA described, among other things, covered services, levels of beneficiary coverage and co-payment responsibility, and distribution of premiums between defendant and Plan beneficiaries.
In the fall of 2003, defendant was informed by its third-party provider of services under the Plan that it would not renew in 2004 the Plan option in which plaintiffs were enrolled. On October 27, 2003, defendant informed plaintiffs by letter that their coverage would terminate at the end of the year, and plaintiffs would need to select new coverage. The letter offered plaintiffs two options for continued coverage, to be effective January 1, 2004. In response, in May 2004, plaintiffs brought this action alleging, among other things, that defendant's change in coverage constituted a breach of the CBAs. Plaintiffs seek an injunction to prevent defendant from changing their coverage under the Plan and damages for their out-of-pocket expenses.
Defendant argues that the LMRA § 301 claims of plaintiffs Nathan and Mitchell fail because the 1995 Agreement provides no vested rights to benefits.3 Central to this issue are the following provisions of the 1995 Agreement:
GROUP COVERAGE FOR EARLY AND DISABILITY RETIREES
Effective January 1, 1989, early retirees between the ages of 55 and 65 ... and their eligible dependents as previously defined, will be covered under the [Plan] until the retiree reaches age 65.
If the spouse is younger than the retiree, coverage under the [Plan] will be provided for the spouse and eligible dependent children until the spouse reaches age 65. In the event of the retiree's death before the spouse reaches age 65, the Company will continue coverage under the [Plan] for the spouse and eligible dependent children until the spouse reaches age 65 or remarries whichever occurs first.
. . . . .
It is hoped that this Plan will be continued indefinitely but, as is customary in group plans, the Plan Administrator may terminate, suspend, withdraw, amend or modify the Plan in whole or in part at any time, subject to the applicable provisions of the group insurance policy.
Affidavit of Andrew Altschul ("Altschul Aff."), Ex. 1 at 17-18 (emphasis added).
The 1997 Agreement, covering putative class representatives Baumgardner and Devine, contains nearly identical language conferring benefits, but lacks the reservation of rights provision. Altschul Aff., Ex. 2 at 10-11. Because of this difference between the two agreements, defendant has not moved to dismiss the LMRA § 301 claims of plaintiffs Baumgardner and Devine. Defendant does, however, seek dismissal of all other claims for all plaintiffs.
Section 301 of the LMRA authorizes suits for violations of CBAs between an employer and a labor organization.4 Vested benefits under a CBA "may not be altered without [plaintiffs'] consent." Allied Chem. & Alkali Workers of Am. v. Pittsburgh Plate Glass Co., 404 U.S. 157, 181 n. 20, 92 S.Ct. 383, 30 L.Ed.2d 341 (1971). At issue is whether plaintiffs' medical benefits constituted vested benefits under the terms of the 1995 Agreement. If the 1995 Agreement unambiguously reserved to defendant the right to modify health benefits, plaintiffs have no vested rights, and no § 301 claim will lie. Bower v. Bunker Hill Co., 725 F.2d 1221, 1223 (9th Cir.1984). On the other hand, if there is any ambiguity as to the rights created by the 1995 Agreement, dismissal at this stage is improper. See id. at 1223-24. (summary judgment improper where CBA language was ambiguous).5
Further, if the language of the 1995 Agreement is ambiguous, the court may consult extrinsic evidence to help resolve the ambiguity. Id. When construing CBAs, the admissibility of extrinsic evidence is a substantive issue of federal common law, to be developed with reference to the policies of national labor law. Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456-57, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957).6 The Ninth Circuit has noted the prominent role of extrinsic evidence in courts' construction of CBAs:
When the operation of an ordinary contract is not clear from its language, a court generally may consider extrinsic evidence to determine the intent of the parties in including that language. See generally, 3 Corbin on Contracts § 536, at 27-28 (1960). That principle is applied with even greater liberality in the case of a CBA. In ascertaining the intent of the parties to a CBA,
Ariz. Laborers, Teamsters & Cement Masons Local 395 Health & Welfare Trust Fund v. Conquer Cartage Co., 753 F.2d 1512, 1517-18 (9th Cir.1985) (emphasis omitted) (quoting Laborers Health & Welfare Trust Fund v. Kaufman & Broad, 707 F.2d 412, 418 (9th Cir.1983)).
Relying primarily on two cases, Cinelli v. Sec. Pac. Corp., 61 F.3d 1437 (9th Cir.1995), and Turner v. Local Union No. 302, Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am., 604 F.2d 1219 (9th Cir.1979), defendant contends that the 1995 Agreement unambiguously precludes plaintiffs' benefits from vesting. I disagree, and find neither case particularly helpful. In Cinelli, the court held that an employer's life insurance benefits plan unambiguously reserved to the employer the right to discontinue plaintiff's insurance benefits. Defendant's reliance on Cinelli, however, is misplaced. The plan at issue in Cinelli not only contained a provision reserving the right for the employer to terminate benefits, but it also contained a "discontinuation provision," which provided that insurance of "any employee under this policy shall terminate upon discontinuance of the policy." Cinelli, 61 F.3d at 1444. Thus, the Cinelli plan explicitly conditioned life insurance benefits on the continued existence of the life insurance policy. Id. Defendant points to no comparable provision in the 1995 Agreement.
Moreover, the plan at issue in Cinelli was an ERISA plan, whereas plaintiffs' alleged entitlement to benefits arises out of a CBA.7 It is well-settled that, "unless an employer contractually cedes its freedom, it is generally free under ERISA, for any reason at anytime, to adopt, modify, or terminate its welfare plan." Inter-Modal Rail Employees Ass'n v. Atchison, Topeka & Santa Fe Ry. Co., 520 U.S. 510, 515, 117 S.Ct. 1513, 137 L.Ed.2d 763 (1997) (internal quotations and citations omitted) (contrasting the specific...
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