Poole v. Waterbury

Decision Date30 September 2003
Docket Number(SC 16856)
Citation831 A.2d 211,266 Conn. 68
CourtConnecticut Supreme Court

Sullivan, C. J., and Borden, Norcott, Katz, Palmer, Vertefeuille and Zarella, Js. Brian Clemow, with whom were Gary S. Starr and Sheila A. Huddleston, for the appellants (named defendant et al.).

Linda L. Morkan, with whom were Richard F. Vitarelli and Stephen W. Aronson, for the appellants (defendant Waterbury financial planning and assistance board et al.).

Francis J. Grady, with whom was Dana B. Lee, for the appellees (plaintiffs).

Eric R. Brown filed separate briefs for the Waterbury Retired Educators' Association and the Connecticut Council of Police Unions, Council 15, AFSCME, AFLCIO, as amici curiae.



The dispositive issue in this appeal1 is whether the trial court properly concluded that the plaintiffs, a group of 114 retired firefighters and widows of retired firefighters2 for the named defendant, the city of Waterbury (city), have a vested right to the specific medical benefits prescribed under the collective bargaining agreement in effect at the time that the firefighters retired. The defendants3 claim that the trial court improperly: (1) construed the collective bargaining agreements as providing the plaintiffs with a vested lifetime right to the specific medical benefits they had at the time of the retirees' retirement; (2) concluded that No. 01-1 of the 2001 Special Acts (S.A. 01-1)4 did not authorize the defendant oversight board; see footnote 3 of this opinion; to modify the plan; and (3) granted permanent injunctive relief in the form of reinstatement of the specific medical benefits in light of the city's financial crisis. We conclude that, although the plaintiffs have a vested right to medical benefits generally, they do not have a vested right to the specific benefits prescribed in the collective bargaining agreement in effect at the time of the retirees' retirement. Accordingly, we reverse the judgment of the trial court.

The record reveals the following facts and procedural history. For some time prior to 1986, the city provided medical benefits to retired city firefighters, but those benefits were not included expressly in the city's collective bargaining agreements. Beginning in 1986, the city and the Waterbury Fire Fighters Association, Local 1339 (union), a labor union in which each of the retirees was a member until his retirement, negotiated a series of collective bargaining agreements, each of which included a provision for retirees' medical benefits, effective: July 1, 1986, through June 30, 1989 (1986 agreement); July 1, 1989, through June 30, 1992 (1989 agreement); July 1, 1992, through June 30, 1995 (1992 agreement); and July 1, 1995, through June 30, 1999 (1995 agreement).5 The 1986 agreement provided, in article XXXIII, § 16, that the city "shall continue in full force and effect the benefits for each retiree and each employee who retires or dies after July 1, 1986, his spouse, and each eligible dependent of such retiree or employee . . . ." The provision thereafter set forth the scope of the benefits, a basic plan supplemented by various home and office, major medical and prescription drug riders (indemnity plan),6 which was to be provided "at no cost to those eligible" pursuant to article XXXIII, § 16a, of the agreement.7 The 1989, 1992 and 1995 agreements provided similar indemnity plans, but referred only to providing such benefits to employees who retired after the execution of the agreement, and not to those employees who already had retired. The 1995 agreement imposed two additional terms: (1) § 16 of article XXXIII provided that the prescribed "medical benefits for retirees . . . may be substituted for similar — but in no event, less — medical benefits if the City and the Coalition of City Unions agree on a modified insurance plan for City employees"; and (2) § 17 of that article mandated participation in medicare for retirees who had attained the age of sixty-five, had received medical benefits under the agreement and were eligible for medicare, with the city providing supplemental insurance. At the expiration of the 1995 agreement in June of 1999, the city and the union had not yet agreed on terms for a successor agreement. After negotiations failed to result in a consensus, the matter was submitted for binding arbitration.

During the course of the negotiations between the city and the union, the state legislature determined that it had to take certain action because, as a result of many years of gross fiscal mismanagement, the city was in a state of financial crisis. See S.A. 01-1, § 1. Specifically, the city had underfunded its pensions for years and was paying its pension liabilities out of the city's general fund. In addition, the city had been paying health care benefits, the cost of which were rapidly rising, out of the city's general fund. As a result of these and other liabilities, the city's bond rating had been downgraded. The crisis threatened not only the city, but also the fiscal reputation of the state, which acts essentially as guarantor of certain of the city's obligations.

To address the crisis, the legislature enacted S.A. 01-1, effective upon its passage on March 9, 2001. See footnote 4 of this opinion. In accordance with the special act, the city was required to undertake certain fiscal and management controls. As a further measure, the legislature created the oversight board to ensure that order was restored to the city's finances. S.A. 01-1, §§ 10 and 11. The special act confers broad authority on the oversight board to take the necessary measures to accomplish this goal. S.A. 01-1, § 11. The oversight board's authority encompasses, inter alia, the power to set aside city contracts, under certain circumstances, and to serve as the arbitration panel with respect to labor contracts subject to binding arbitration. S.A. 01-1, § 11 (a) (5) and (b) (7).

Pursuant to its authority, the oversight board acted as the arbitrator in the collective bargaining dispute between the city and the union. On December 14, 2001, the oversight board issued an arbitration award prescribing the city's obligations, effective retroactively from July 1, 1999, through June 30, 2004 (1999 agreement). Article XXXIII, § 16, of the 1999 agreement set forth the following terms regarding medical benefits: "Those employees who are participating in the City's medical insurance plan at the time of retirement . . . shall be eligible to participate in such medical insurance plan which the City provides to its active bargaining unit employees, as such plans may change pursuant to any successor collective bargaining agreement, subject to the same conditions as may exist at any time for such active employees." Under the 1999 agreement, active employees, and therefore retirees, received medical benefits pursuant to a managed care plan with a preferred provider organization, rather than the traditional indemnity plan provided under previous agreements. Additional changes under the 1999 agreement included, inter alia, a requirement of a small copayment for office and home visits.

On March 14, 2002, the plaintiffs filed in the Superior Court an application for prejudgment remedy, seeking temporarily to enjoin the defendants from altering the plaintiffs' existing medical benefits. The plaintiffs also filed the complaint in this action, seeking temporary and permanent injunctive relief, as well as damages, and alleging that the defendants' conduct constituted: (1) a breach of contract; (2) an ultra vires act; (3) a taking under the state and federal constitutions; and (4) an impairment of contract rights in violation of the federal constitution. Thereafter, the parties stipulated that the temporary injunction hearing also would serve as the hearing on the plaintiffs' claim for permanent injunctive relief. At hearings on the matter, the court heard testimony from various city officials and several of the plaintiffs as to the city's prior practices with respect to the provision of specific medical benefits to retirees. The court also heard testimony from city officials regarding the city's financial crisis and the various measures the city had taken as a result, which affected the plaintiffs, other city employees and city residents generally.

On August 14, 2002, the trial court issued its memorandum of decision, concluding that the defendants had breached the plaintiffs' vested contractual right to the specific indemnity plan provided under the pre-1999 collective bargaining agreements. In its memorandum of decision, the trial court first examined the factual context in which the issues arose. It recognized the magnitude of the financial crisis facing the city and noted the oversight board's estimate of $2 million in savings resulting from the conversion of all of the city's retired employees to managed health care plans. The court concluded that "[t]he failure of the city to bring prudent cost controls to retiree health benefits will create serious difficulties for the city in enacting the types of conservative budgets mandated by [S.A.] 01-1." The court then noted certain differences in cost and availability of services and service providers between the managed care plan provided under the 1999 agreement and the indemnity plan provided under the pre-1999 agreements. The court concluded that, "[although] a managed health care plan is inherently less flexible than a traditional indemnity plan, it is by no means certain from the evidence that a given beneficiary will always fare worse under the new health care plan . . . ." Nonetheless, the court concluded that "[t]he plaintiffs here have succeeded in showing that there are significant differences between the traditional indemnity plans currently provided to them and the proposed managed care plan. The court cannot conclude that...

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