Matthews v. Chi. Transit Auth.

• Decision Date: 05 May 2016
• Docket Number: No. 117638 , No. 117728., No. 117713 ,117638
• Citation: 402 Ill.Dec. 1,51 N.E.3d 753
• Parties: Jerry MATTHEWS et al., Appellees and Cross–Appellants, v. CHICAGO TRANSIT AUTHORITY et al. (Retirement Plan for Chicago Transit Authority Employees et al., Appellants and Cross–Appellees).
• Court: Illinois Supreme Court

51 N.E.3d 753

402 Ill.Dec. 1

Jerry MATTHEWS et al., Appellees and Cross–Appellants

v.CHICAGO TRANSIT AUTHORITY et al. (Retirement Plan for Chicago Transit Authority Employees et al., Appellants and Cross–Appellees).

No. 117638

No. 117713

No. 117728.

Supreme Court of Illinois.

May 5, 2016.

J. Timothy Eaton and Elizabeth E. Babbitt, of Taft Stettinius & Hollister LLP, Katherine S. Paulson, Elliott M. Bacon, Alexander S. Vesselinovitch and Daniel J. Polatsek, of Katten Muchin Rosenman LLP, Richard W. Burke and Aaron H. Stanton, of Burke, Warren, MacKay & Serritella, P.C., and James D. O'Connell, all of Chicago, and David R. Godofsky, of Alston & Bird, LLP, of Washington, DC, for appellants Retirement Plan et al.

J. Peter Dowd, Justin J. Lannoye, George A. Luscombe III and Elizabeth L. Rowe, all of Dowd, Bloch, Bennett & Cervone, of Chicago, for appellants Jerry Matthews et al.

James P. Daley, David M. Novak and James D. Thomas, of Jackson Lewis P.C., and Karen G. Seimetz, Stephen L. Wood, and Rachel L. Kaplan, all of Chicago, for appellant Chicago Transit Authority.

Roger Huebner, of Springfield, and Stephen R. Patton, Corporation Counsel, of Chicago (Benna Ruth Solomon, Jane Elinor Notz, Myriam Zreczny Kasper and Sara K. Hornstra, of counsel), for amicus curiae Illinois Municipal League et al.

Joseph M. Gagliardo, Thomas S. Bradley and Lawrence Jay Weiner, of Laner Muchin, LTD., of Chicago, for amicus curiae Northeast Regional Commuter Railroad Corporation.

OPINION

Justice FREEMAN

delivered the judgment of the court, with opinion:

¶ 1 At issue in this appeal is the enforceability of plaintiffs' rights to retiree health care benefits as set forth in the 2004 collective bargaining agreement (CBA) between the Chicago Transit Authority (CTA) and Amalgamated Transit Union Locals 241 and 308 (collectively, the Transit Unions), the labor unions that represented CTA's bus and rail employees for purposes of collective bargaining. After the 2004 CBA expired, the retiree health care benefits were the subject of an interest arbitration award. That award, which modified the retiree health care benefits, was accepted by the CTA and the Transit Unions. Plaintiffs brought suit to challenge the implementation of that award.

¶ 2 Plaintiffs filed a putative class action complaint asserting claims for breach of contract, promissory estoppel, breach of fiduciary duty, and declaratory relief. In addition, plaintiffs claimed that the terms of the arbitration award modifying the retiree health care benefits were unenforceable because they violate article XIII, section 5, of the Illinois Constitution of 1970

(Ill. Const.1970, art. XIII, § 5 ), commonly referred to as the pension protection clause.

¶ 3 The circuit court of Cook County ruled that the retired CTA employees had standing to challenge the modifications to their retiree health care benefits, but the current CTA employees lacked standing to assert that challenge. On the merits, the circuit court dismissed the complaint in its entirety for failure to state a claim upon which relief could be granted.

¶ 4 Plaintiffs appealed, and the appellate court affirmed in part and reversed in part. 2014 IL App (1st) 123348, 381 Ill.Dec. 44, 9 N.E.3d 1163

. The appellate court upheld the circuit court's ruling that the current CTA employees lacked standing but held that the CTA retirees had a vested right to receive the retiree health care benefits that were provided in the prior CBA and had stated a claim for breach of that contract. The appellate court also held that the retired CTA employees were entitled to pursue their claims for promissory estoppel against the CTA.

¶ 5 Defendants brought this appeal, seeking reversal of the lower courts' rulings with respect to the standing of the CTA retirees and the sufficiency of their claims for breach of contract and promissory estoppel. Plaintiffs cross-appeal, arguing that the lower courts erred in ruling that the current employees lack standing to challenge the health care modifications. For the reasons that follow, the judgment of the appellate court is affirmed in part, reversed in part, and the cause is remanded for further proceedings.

¶ 6 BACKGROUND

¶ 7 The individual plaintiffs are five current and retired employees of the CTA who began working for the CTA prior to 2001. In their complaint, they seek to bring claims on behalf of themselves and two putative classes. Plaintiff Jerry Williams retired in 2006 and seeks to represent a class of retirees (Class I) who were hired before September 5, 2001, and retired before January 1, 2007. The remaining plaintiffs seek to represent a class of CTA employees and retirees (Class II) who were hired before September 5, 2001, and retired after January 1, 2007, or remain current employees of the CTA. These plaintiffs include Jerry Matthews and Tommy Sams, who are alleged to be current employees of the CTA, and Cynthia Boyne and Charles Brown, who retired after January 1, 2007. Each class purportedly consists of more than 7000 people.

¶ 8 Defendants are the CTA, the Retirement Plan for CTA Employees, the Board of Trustees of the Retirement Plan for CTA Employees, the Retiree Health Care Trust, and the Board of Trustees of the Retiree Health Care Trust.

¶ 9 The CTA is a “political subdivision, body politic and municipal corporation” created in 1945 by the Metropolitan Transit Authority Act (70 ILCS 3605/3 (West 2010)

). The Retirement Plan for CTA Employees (Retirement Plan) is the entity established by section 22–101 of the Illinois Pension Code (40 ILCS 5/22–101 (West 2010) ) to provide specified retirement benefits to retired CTA employees, which are set forth in a Retirement Plan Agreement. The Board of Trustees of the Retirement Plan (Retirement Plan Board) was established on January 18, 2008, by section 22–101(b) of the Pension Code (40 ILCS 5/22–101(b) (West 2010)) to administer the Retirement Plan. The Retiree Health Care Trust (Health Trust) was established on January 18, 2008, by section 22–101B(b) of the Pension Code (40 ILCS 5/22–101B(b) (West 2010)) to provide health care benefits to CTA retirees. The Board of Trustees of the Health Trust (Health Trust Board) was established on January 18, 2008, by section 22–101B(b)(1) of the Pension Code (

40 ILCS 5/22–101B(b)(1)

(West 2010)) to administer the Health Trust.

¶ 10 The CTA employs both union and nonunion employees, including members of the Transit Unions, which collectively bargain with the CTA regarding employee wages, working conditions, and retirement benefits. The CBAs between the CTA and the Transit Unions consist of a series of Wages and Working Conditions Agreements (WWCAs), each of which is subject to periodic modification through collective bargaining. Two such WWCAs are at issue in this case. The 2004 WWCA became effective January 1, 2004, with a term extending through December 31, 2006. The 2007 WWCA became effective January 1, 2007, with a term extending through December 31, 2011.

¶ 11 Section 19.2 of the 2004 WWCA includes a provision allowing for modification of its terms, stating: “Either of the parties hereto shall have the right to open this Agreement for modifications and[/] or additions to be effective January 1, 2007, or any anniversary date thereafter by written notice to the other party sixty (60) days prior to such anniversary date.” Section 19.2 further provides: “All conditions of this Agreement are to continue in full force and effect until changed, revised or amended from time to time by agreement of the parties or by the decision of the Board of Arbitration.” Section 20.2 of the 2007 WWCA has identical language, except that the effective date of modifications is “January 1, 2012, or any anniversary date thereafter.”

¶ 12 Incorporated into each WWCA is the Retirement Plan Agreement, a contract concerning retirement benefits that was first agreed to by the CTA and the Transit Unions in 1949. Article 18 of both the 2004 and 2007 WWCAs provides that the Retirement Plan Agreement is incorporated in full into the WWCA “in all respects and for all purposes, including future proposals for revision in the Plan and in the negotiation or arbitration of proposed revisions.” Correspondingly, the Retirement Plan Agreement provides that it “is part of the Wage[s] and Working Conditions Agreement between the parties hereto. This Agreement can be changed only in accordance with the provisions of the aforesaid Wage[s] and Working Conditions Agreement.” Collectively, the WWCA and the Retirement Plan Agreement constitute the CBA.

¶ 13 Prior to May 16, 1980, the CTA contributed up to $40 per retiree per month toward the retiree's health insurance premium. On May 16, 1980, an arbitration panel chaired by Harry J. Dworkin issued an interest arbitration award¹ (the Dworkin award), which ordered the Retirement Plan Agreement to be amended. Regarding one such amendment, the award stated: “Effective [upon] the issuance of the Award, the [Chicago Transit] Authority will no longer contribute up to $40.00 per month toward the retiree's Group Hospital Surgical premium.” Instead, the award ordered the Retirement Plan to pay up to $60 per month toward the retiree's Group Hospital Surgical premium until January 1, 1981, when the Retirement Plan would pay up to $75 per month.

¶ 14 The retiree health care benefit was added to the Retirement Plan Agreement in 1980 as a new section 20.12. Section 20.12(a) of the Retirement Plan Agreement, as amended through December 31, 2003, provides:

“(a) Effective December 1, 1989, a sum will be paid in an amount sufficient to provide insurance coverage for all retirees under the Group Hospital Surgical Major Medical Plan or the Health Maintenance Organization premium, but said sum shall not exceed the premium cost to the [Retirement] Plan effective for such coverage for a retiree on December 31, 2003. This benefit terminates when the retiree attains age 65.”

¶ 15 In 2006, the Transit Unions and the CTA met to negotiate the...