McPeek v. Beatrice Co.

Citation936 F. Supp. 618
Decision Date30 July 1996
Docket NumberNo. C 92-4017-MWB.,C 92-4017-MWB.
CourtU.S. District Court — Northern District of West Virginia
PartiesJames W. McPEEK, Louis Bock, Fred Alberts, Marjorie Amick, Martin Becker, Patricia Bennett, Frances Benson, Lucille Birch, Alfred Bose, Harold Bristol, Milton Bristol, Leonard Brown, Jack Brummond, John Bulzak, Manuel Coury, Josie Dais, Elmer Devries, Ceroga Dorashkevich, Darrell Elkins, Harold Frerichs, Leatha Graves, Aurelia Groth, Harold Guthmiller, Carl Guy, Louis Hebert, Ted Isom, Frank Jerman, Harlan Jones, Gerald Krause, Stanley Lake, Charles Lucas, Anton Leubken, Clarance Woods, John Michalsky, Robert Netley, Darrell Omara, Vera Powell, Soccorra Rol, August Treft, Marie Vaa, Louise Verschoor, Hollas Watkins, Kenneth Williams, Charles L. Larson, and John Holincheck, Plaintiffs, v. BEATRICE COMPANY, Defendant.

COPYRIGHT MATERIAL OMITTED

Patricia K. Wengert of Smith, McElwain & Wengert, Sioux City, Iowa, for Plaintiffs.

Roger J. Miller of McRath, North, Mullin & Kratz, P.C., Omaha, Nebraska, and Jeffrey R. Mohrhauser of Rawlings, Nieland, Probasco, Killinger, Ellwanger, Jacobs & Mohrhauser, Sioux City, Iowa, for Defendant.

MEMORANDUM OPINION AND ORDER REGARDING MOTION FOR SUMMARY JUDGMENT
                                         TABLE OF CONTENTS
                  I. INTRODUCTION AND BACKGROUND ...................................... 621
                 II. FINDINGS OF FACT ................................................. 621
                III. STANDARDS FOR SUMMARY JUDGMENT ................................... 624
                 IV. CONCLUSIONS OF LAW ............................................... 626
                     A. Background on ERISA ........................................... 626
                
                     B. Vesting of Benefits ........................................... 627
                        1. Coverage Under the Plan .................................... 628
                        2. Vesting of Prescription Drug Benefits ...................... 629
                     C. Claim Under the Labor Management Relations Act ................ 631
                  V. CONCLUSION ....................................................... 632
                

BENNETT, District Judge.

In an action brought under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, Plaintiffs, beneficiaries under an employee benefit and pension plan ("The Plan"), challenge changes made to the Plan which require them to obtain maintenance level supplies of prescription drugs through a mail order service. Although Plaintiffs characterize this case as merely being the simple enforcement of the principle that "a deal is a deal is a deal," such a characterization assumes the threshold issue of the existence of a "deal" which might be enforced under the rubric of ERISA. Thus, before enforcement may be had here, the court is called upon to determine what "deal" existed under ERISA.

I. INTRODUCTION AND BACKGROUND

Plaintiffs, all former union members and beneficiaries under the Plan, filed their complaint against Defendant Beatrice Company ("Beatrice") on April 2, 1992, following Beatrice's decision to switch to a mail-order service for maintenance prescription drugs for its retirees. Plaintiffs challenge the switch to mail-order maintenance drugs. In count I of the original complaint, Plaintiffs allege that Beatrice's actions constitute an unauthorized modification of the Plan in violation of ERISA, 29 U.S.C. §§ 1132(a)(1), 1104, and 1109. Count II of the original complaint asserted a claim that Beatrice's actions constitute a breach of the collective bargaining contracts in violation of the Labor Management Relations Act, 29 U.S.C. § 185(a). On November 25, 1994, Plaintiffs amended the complaint to add a number of individual plaintiffs to this action. Subsequently, on May 23, 1995, Plaintiffs amended their complaint again. In their second amended complaint Plaintiffs allege that Beatrice has violated Iowa Code section 514C.5 by requiring Plaintiffs to employ a mail order system for obtaining maintenance prescription drugs. On October 16, 1995, the court granted Defendant Beatrice's Motion for Partial Summary Judgment and Motion to Dismiss. The court concluded that ERISA preempted Plaintiffs' state law claim based on a violation of Iowa Code section 514C.5. The court further concluded that the extra-contractual damages for emotional distress damages sought by Plaintiffs under ERISA were not appropriate equitable relief authorized under ERISA. Therefore, Beatrice's motion to dismiss Plaintiffs' claims for emotional distress under ERISA was granted.

Beatrice has now moved for summary judgement on Plaintiffs' remaining claims. Beatrice makes four distinct arguments in its motion. First, Beatrice asserts that Plaintiffs do not have a contractually vested right to receive benefits under the Plan. Second, Beatrice contends that the mail order service program that it has implemented for maintenance level medications is consistent with the terms of the Plan. Third, Beatrice asserts that it is entitled to summary judgment on Plaintiffs' LMRA claim since it was not a party to the Union contract. Finally, Beatrice asserts that it is entitled to summary judgment on Plaintiffs' request for actual damages.

A hearing on Beatrice's Motion for Summary Judgment was held on July 26, 1996. At the hearing Plaintiffs were represented by Patricia K. Wengert of Smith, McElwain & Wengert, Sioux City, Iowa. Beatrice was represented by Roger J. Miller of McRath, North, Mullin & Kratz, P.C., Omaha, Nebraska, and Jeffrey R. Mohrhauser of Rawlings, Nieland, Probasco, Killinger, Ellwanger, Jacobs & Mohrhauser, Sioux City, Iowa. This matter is now deemed fully submitted.

II. FINDINGS OF FACT

For the purposes of this summary judgment motion only, the court finds the following facts:

Plaintiffs are retirees of Swift & Company ("Swift") who retired prior to January 1, 1979. Plaintiffs were employed at Swift's meat packing facility in Sioux City, Iowa, and were union members covered by selective bargaining agreements between Swift and the Amalgamated Meat Cutters and Butcher Workmen of North America or the United Food and Commercial Workers International Union ("the Union"). Defendant Beatrice maintains and administers certain self-funded benefit plans for retirees of Esmark, Inc. ("Esmark"), and its subsidiary, Swift.

Esmark was acquired by Beatrice in 1984. The Plan at issue here was first formulated and made available to Swift employees during the 1976-79 Swift & Company Master Agreement with Amalgamated Meat Cutters and Butcher Workmen of North America ("The 1976-79 Master Agreement").1 Under the 1976-79 Master Agreement, the Plan provides for participants to receive a prescription drug card which enables participants to obtain covered drugs.2 The Plan incorporates by reference the coordination of benefits provision contained in the Hospital, Surgical, Medical, Polio Plan for employees, as set forth in the Exhibit III of the 1976-79 Master Agreement. See 1976-79 Master Agreement at 130. The Plan does not prohibit the utilization of mail order services for the attainment of covered prescription drugs. The Plan does not specify or prohibit the manner by which participants obtain covered prescription drugs. The Plan excludes payment for prescriptions of more than thirty-four days or one hundred units. As it existed under the 1976-79 Master Agreement, the Plan was not available to retirees.

The Plan was continued in the 1979-82 Swift & Company Master Agreement with Amalgamated Meat Cutters and Butcher Workmen of North America ("The 1979-82 Master Agreement").3 The Plan was extended in the 1979-82 Master Agreement to include employees who retired after August 31, 1979. Retirees under the Plan, however, are required to pay a deductible of $1.75 per prescription or refill.4 The Plan continued to exclude payment for prescriptions of more than thirty-four days or one hundred units.5 The Plan does not have any specific permanent prohibition on refills of covered prescription drugs. Drugs prescribed in quantities greater than a thirty-four day supply or one hundred doses are considered to be "maintenance drugs."6

The 1979-82 Master Agreement included a clause limiting its duration:

Except as otherwise provided, all of the provisions of this Agreement shall take effect as of September 1, 1979, and shall remain in effect until September 1, 1982, and from year to year thereafter, provided, however, that this Agreement may be terminated on September 1, 1982, or on September 1, of any year thereafter by either party by written notice mailed to the Company at its general office, or to the Union at its national headquarters at least sixty (60) days prior to September 1, 1982, or prior to September 1 of any year thereafter.

The 1979-82 Master Agreement at 98.

In October 1979, Esmark retirees received a letter from Esmark notifying them of change in their pension benefits.7 The letter stated in relevant part:

We are pleased to inform you that Esmark, as a matter of company policy, and with the agreement of the United Food and Commercial Workers International Union AFL-CIO, has been extended the following increased medical benefits, effective September 1, 1979:
1. Medicare B reimbursement will be increased from $7.20 per month to $8.70 per month for those pensioners and their spouses who are eligible for such coverage.
2. The company will issue a prescription drug card to each pensioner which will specify a flat deductible amount of $1.75 for each prescription. Further details will be supplied when the cards are issued. After the cards are issued, prescription drugs will no longer be part of your Major Medical coverage.

October 1979, letter from Esmark at 1.8

Prior to 1979, prescription drug benefits were available to retirees only through the Major Medical Plan for Pensioners. The Major Medical Plan for Pensioners was included in the 1976-79 Master Agreement as Exhibit VIII(P), and it provided in relevant part:

HOSPITAL-MEDICAL-SURGICAL PLAN FOR PENSIONERS
The Company shall make available at its
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