INTERN. UNION, UNITED AUTO., ETC. v. Mack Trucks, Civ. A. No. 85-7417.

• Decision Date: 08 February 1990
• Docket Number: Civ. A. No. 85-7417.
• Citation: 733 F. Supp. 938
• Parties: INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW v. MACK TRUCKS, INC.
• Court: U.S. District Court — Eastern District of Pennsylvania

733 F. Supp. 938

INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW v. MACK TRUCKS, INC.

Civ. A. No. 85-7417.

United States District Court, E.D. Pennsylvania.

February 8, 1990.

COPYRIGHT MATERIAL OMITTED

Richard Markowitz, Philadelphia, Pa., for plaintiff.

Edward T. Ellis, Philadelphia, Pa., for defendant.

FINDINGS OF FACT, DISCUSSION, CONCLUSIONS OF LAW, AND ORDER

HUYETT, District Judge.

Plaintiff International Union, United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW" or "the Union") brought this equitable action under section 301 of the Labor Management Relations Act, 29 U.S.C. § 185. The Union seeks a permanent injunction to prevent defendant Mack Trucks, Inc. ("Mack" or "the Company") from changing the health insurance carrier that provides coverage for its employees without the mutual consent of the Union.

I. INTRODUCTION

The UAW filed this complaint along with a motion for a preliminary injunction on December 26, 1985. It sought to enjoin Mack from implementing a proposed change from health insurance coverage with Blue Cross/Blue Shield to Equitable Life Assurance Society ("Equitable")¹. The UAW contended that, under the terms of the collective bargaining agreement between the parties, Mack could not change its health insurance carrier without the Union's consent.

After negotiation, the Union withdrew its motion for a preliminary injunction, and the parties agreed to exchange information and to meet to discuss the planned shift to Equitable. The UAW sought to submit the dispute to binding arbitration, but Mack contended that the dispute was not subject to arbitration under the collective bargaining agreement.

After further negotiations, it appeared that the parties could not resolve their differences. This action thus proceeded to a non-jury trial on the issue of whether the UAW was entitled to a permanent injunction. After the UAW rested its case and Mack moved for a directed verdict pursuant to Rule 50(a) of the Federal Rules of Civil Procedure, I granted Mack's motion in a ruling from the bench.

Later, I issued Findings of Fact, Discussion, and Conclusions of Law which set forth in more detail my reasoning for granting the directed verdict in favor of Mack. Based only on evidence submitted by the UAW, I concluded that Mack breached the collective bargaining agreement by changing its health insurance carrier from Blue Cross/Blue Shield to Equitable without the consent of the UAW. Nonetheless, I concluded that the UAW failed to demonstrate that its members were harmed by Mack's technical violation of the contract and, considering the equities, the UAW was not entitled to a permanent injunction.

The UAW appealed, and, in an opinion dated June 5, 1987, the Third Circuit Court of Appeals held that the UAW was harmed because it had lost a bargaining chip, which could have been traded for other benefits from Mack. International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW v. Mack Trucks, Inc., 820 F.2d 91, 95 (3d Cir.1987). Therefore, the court concluded that the Union had established sufficient evidence of harm to make out a prima facie case necessary for a permanent injunction and, thus, that I erred in directing a verdict against the Union and in favor of the Company. Id. at 98. In remanding the case for further proceedings, the court stated that "we will not (as the UAW requests) order the district court presently to grant that equitable relief, since the directed verdict precluded Mack from introducing evidence to counter the Union's case." Id. at 98.

On October 4, 1989, Mack presented its case to this court with four witnesses. In rebuttal, the UAW presented one witness, Jack Derry, an International Representative of the UAW.

Upon consideration of all the evidence, as well as the parties' pre-trial submissions and post-trial submissions, I now conclude that Mack did not breach the collective bargaining agreement by changing its health insurance carrier from Blue Cross/Blue Shield to Equitable without the consent of the UAW. What follows are my findings of fact, discussion, and conclusions of law in support of this conclusion.

II. FINDINGS OF FACT

A. Background and Parties

1. Plaintiff, the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America, UAW, is an unincorporated association, commonly known as a labor union, with offices located at 8000 East Jefferson Avenue, Detroit, Michigan. The UAW is a labor organization representing employees in an industry affecting commerce within the meaning of Section 2(5) of the National Labor Relations Act, as amended, 29 U.S.C. § 152(5). Stipulation No. 1.

2. Defendant, Mack Trucks, Inc., is a Pennsylvania corporation with offices located at 2100 Mack Boulevard, Allentown, Pennsylvania. Mack is an employer engaged in an industry affecting commerce within the meaning of section 2(2) of the National Labor Relations Act, as amended, 29 U.S.C. § 152(2). Stipulation No. 2.

3. At the time this lawsuit was filed, Mack and the UAW were parties to a master collective bargaining agreement and several local collective bargaining agreements which covered the terms and conditions of employment for certain employees of Mack. The master agreement in effect when this lawsuit was filed was by its terms effective from October 30, 1984 to May 4, 1987. Stipulation No. 3.

4. The life, disability, and health insurance program in effect for the UAW employees under the 1984 Master Agreement are set forth in Appendix B of the Master Agreement Defendant's Exhibit 2, as modified by the documents negotiated and agreed to by the Union and Mack and signed on November 7, 1984. Defendant's Exhibit 6.

5. On May 4, 1987, the 1987 Master Agreement superseded the 1984 Master Agreement. The provisions of the 1984 Master Agreement that apply to this lawsuit are unchanged in the 1987 Master Agreement. The 1987 Master Agreement is by its terms effective until October 27, 1992. Stipulation No. 3.

6. The Appendix B life, health, and disability insurance program covers approximately 6,900 active employees and their families and approximately 3,300 retirees or surviving spouses of Mack retirees. Stipulation No. 6.

7. Prior to the 1984 Master Agreement, Appendix B of the Master Agreement contained two provisions that restricted Mack's right to select the insurance carrier for its health benefits program. First, Article I, section 2 provided that the Company would "continue in force for the duration of this Program its present group insurance contracts and Blue Cross/Blue Shield contracts." Plaintiff's Exhibit 2, p. 121. Second, Article III, sections 1, 2, and 3 provided that the parties could, by mutual agreement, substitute specific benefit plans of other organizations providing the same benefits as those provided by Blue Cross/Blue Shield. Plaintiff's Exhibit 2, pp. 151, 152, & 153-154; see also Stipulation No. 5.

B. Employee Benefit Terminology

8. A "provider," in the nomenclature of employee benefits and health care, is a medical practitioner, like a physician, or an organization, like a hospital, that delivers medical treatment or care. 1989 Trial Transcript at 12.

9. A "carrier," in the nomenclature of employee benefits and health care, is an organization that an employer works with to either administer or both administer and insure a health benefits plan for employees. 1989 Trial Transcript at 11. Typically, a carrier is a commercial insurance company. 1989 Trial Transcript at 11. Blue Cross/Blue Shield and the Equitable are examples of carriers. 1989 Trial Transcript at 68.

10. A "fee-for-service plan" or "traditional plan," in the nomenclature of employee benefits and health care, is an indemnity type of medical plan in which the carrier pays fees either to providers who have rendered services to covered beneficiaries or to beneficiaries who have already paid the provider for services covered under the plan. Under a fee-for-service plan, an employee or other beneficiary is free to choose his or her own health care provider. 1989 Trial Transcript at 12.

11. An "alternate delivery system," in the nomenclature of employee benefits and health care, is a managed health care plan that delivers cost-effective health care by restricting the freedom of the employee or other beneficiary to select his or her own health care provider and also by controlling access to health care by utilization of review, second opinions, and similar means. 1989 Trial Transcript at 13-14. A health maintenance organization ("HMO") and a preferred provider organization ("PPO") are examples of alternative delivery systems. 1989 Trial Transcript at 13.

12. The terms "carrier" and "delivery system" are not synonyms and are not used interchangeably in the employee benefits and health care field. 1989 Trial Transcript at 14-15). However, it is customary practice for a carrier to establish or sponsor an alternative deliver system, either at a specific client's request or on a speculative basis in order to attract customers and sell insurance products. 1989 Trial Transcript at 15.

C. The 1984 Mack-UAW Master Agreement Negotiations

13. In 1984, Mack undertook an evaluation of its health insurance programs as the result of significant increases in the costs that it had been experiencing under its health benefits administration contract with Blue Cross/Blue Shield. 1989 Trial Transcript at 70-72. Mack retained the consulting firm of Deloitte, Haskins & Sells to assist in its evaluation and to provide it with recommendations on how to deliver health care benefits on a more cost effective basis. 1989 Trial Transcript at 17; Defendant's Exhibit 7.

14. In late August or early September of 1984, the Company met with Deloitte, Haskins & Sells to discuss recommendations with respect to Mack's health benefits plan. 1989 Trial Transcript at 19-20....