Schlosser v. Allis-Chalmers Corp.

• Decision Date: 28 November 1978
• Docket Number: No. 77-596,ALLIS-CHALMERS,77-596
• Citation: 86 Wis.2d 226,271 N.W.2d 879
• Parties: John H. SCHLOSSER and William E. Brown, Individually and as representatives of all retired employees of Allis-Chalmers Corporation, Plaintiffs-Respondents, v.CORPORATION, Defendant-Appellant.
• Court: Wisconsin Supreme Court

Page 879

271 N.W.2d 879

86 Wis.2d 226

John H. SCHLOSSER and William E. Brown, Individually and as representatives of all retired employees of Allis-Chalmers Corporation, Plaintiffs-Respondents, v. ALLIS-CHALMERS CORPORATION, Defendant-Appellant.

No. 77-596.

Supreme Court of Wisconsin.

Argued Oct. 2, 1978.

Decided Nov. 28, 1978.

Theophil C. Kammholz (argued), Chicago, Ill., for defendant-appellant; Laurence C. Hammond, Jr., Larry J. Martin and Quarles & Brady, Milwaukee, and Richard H. Schnadig and Vedder, Price, Kaufman & Kammholz, Chicago, Ill., on the briefs.

Richard C. Ninneman (argued), Milwaukee, for plaintiffs-respondents; Robert P. Harland, Michael J. Herbert and Whyte & Hirschboeck, S. C., Milwaukee, on the brief.

CALLOW, Justice.

This is an appeal from an interlocutory summary judgment adjudging the defendant Allis-Chalmers Corporation liable to the plaintiffs, a class of retired, salaried, nonunion employees, for breach of a contractual obligation to provide noncontributory (free) life insurance benefits to class members over age sixty-five. We conclude that the trial court did not abuse its discretion in allowing the action to proceed on behalf of the plaintiff class and that it properly granted the plaintiffs an interlocutory summary judgment as to liability.

In 1930 Allis-Chalmers made group life insurance available to its salaried, nonunion employees on a contributory basis. The employee was required to pay part of the premium before and after reaching age sixty-five. Effective January 1, 1956, the company amended its group life policy to provide noncontributory insurance for nonunion, salaried employees and retirees over age sixty-five. A retired president of Allis-Chalmers testified that the 1956 revision was made in response to increasing benefits extended to union employees and was also designed to attract and maintain high-quality personnel. The 1956 Metropolitan Insurance Company policy provision relating to free life insurance after age sixty-five was incorporated into a successor Aetna policy in September, 1972. While the Metropolitan and Aetna policies from 1956 to 1973 provided that salaried employees shall not be required to contribute to the cost of the insurance, the policies also provided that Allis-Chalmers could choose to terminate coverage of its retired employees.

Certificates issued to employees from 1956 through 1967 noted coverage would cease on the discontinuation of the policy or on the employee's termination for cause. After 1967 the certificates contained the additional provision that the policy may be amended or discontinued by Allis-Chalmers. Allis-Chalmers from time to time distributed various brochures and booklets stating that insurance after age sixty-five was free. The booklets also stated that Allis-Chalmers reserved the right to amend or terminate the plan. Upon an employee's retirement, the company would send a letter to the retiree describing the available benefits and stating that coverage would be continued without cost to the retiree.

By letter dated December 29, 1972, Allis-Chalmers informed members of the plaintiff class that effective February 1, 1973, the company would require them to contribute to the cost of the life insurance at the rate of one dollar per thousand for that part of the optional coverage which had been provided by Allis-Chalmers between 1956 and 1973 without cost.

This action by retired nonunion, salaried employees, on behalf of themselves and all such retired employees, was commenced by service of a summons on Allis-Chalmers on January 15, 1973. An amended complaint alleged that Allis-Chalmers' policy of providing free insurance to employees over sixty-five became part of the contract of employment which Allis-Chalmers breached by requiring contribution of the retirees and, alternatively, that the plaintiffs relied on the promise of free life insurance in becoming or continuing as an Allis-Chalmers employee, thus estopping Allis-Chalmers from requiring contribution. Allis-Chalmers demurred to the complaint on the ground that on the facts alleged the action was not properly maintainable as a class action. The trial court overruled the demurrer, and this court affirmed in Schlosser v. Allis-Chalmers Corp., 65 Wis.2d 153, 222 N.W.2d 156 (1974). After the defendant answered, denying that the action was maintainable as a class action, and denying liability, it reached a settlement with 2,070 of the 2,386 living retirees.

Following extensive discovery proceedings, the plaintiffs moved on January 5, 1977, for an interlocutory summary judgment determining that the defendant breached a contract with the plaintiffs by failing to provide free life insurance to those over age sixty-five. The plaintiffs brought a supplemental motion for summary judgment to confirm the appropriateness of the plaintiff class. On March 2, 1977, the defendant brought a motion for summary judgment in its favor. The court on May 31, 1977, decided that the action was properly maintainable on behalf of a class of salaried, nonunion employees of Allis-Chalmers who retired between January 1, 1956, and February 1, 1973, the heirs and personal representatives of such deceased persons, and the insurance beneficiaries of such deceased persons or their heirs or personal representatives. The court established the requirements for notice to the members of the class. The members could "opt-out" if they wished not to participate. The defendant moved for reconsideration and alternatively for an order requiring potential members to "opt-in" to the litigation or for an order dividing the plaintiff class into various subclasses. The court denied the defendant's motion on July 25, 1977, and approved the form of notice to the class members on August 9, 1977.

On January 4, 1978, the court issued a memorandum decision determining that under Wisconsin law the defendant breached a contract with the plaintiffs to provide free life insurance after age sixty-five. On February 2, 1978, the court rendered an interlocutory judgment in favor of the plaintiffs and denied the defendant's motion for summary judgment. The court issued an order determining the individuals in the plaintiff class. The judgment was entered February 13, 1978. From this judgment, Allis-Chalmers appeals.

There are two issues:

(1) Did the trial court err in determining that the action was properly maintainable on behalf of a class of salaried, nonunion employees of Allis-Chalmers who retired on or after January 1, 1956, and before February 1, 1973, and the heirs or personal representatives of such deceased persons, and the insurance beneficiaries of such deceased employees or their heirs and personal representatives?

(2) Did the trial court err in granting an interlocutory summary judgment determining that the defendant breached a contract with the plaintiff class by requiring members of the class over age sixty-five to make life insurance premium contributions and in denying the defendant's motion for summary judgment?

I

The Wisconsin class action rule, sec. (Rule) 803.08, Stats., permits one person to sue on behalf of others where "the question before the court is one of common or general interest of many persons or when the parties are very numerous and it may be impracticable to bring them all before the court." This rule is essentially the same as the class action provision embodied in former sec. 260.12, Stats.1973. See : Judicial Council Committee's Note, 1974, to sec. (Rule) 803.08, Stats., 67 Wis.2d at 650. In the first Schlosser Case, supra at 169, 222 N.W.2d 156, we said that sec. 260.12, Stats.1973, requires that the named parties have a right or interest in common with the class, that they be able to fairly represent the class interest, and that joinder of all members be impracticable. The determination whether the action may proceed as a class suit is addressed to the trial court's discretion. It involves a weighing of the benefits to be gained from disposing of the entire controversy in one proceeding against the difficulties inherent in a single action. Nolte v. Michels Pipeline Construction, Inc., 83 Wis.2d 171, 177, 265 N.W.2d 482 (1978); Schlosser v. Allis-Chalmers Corp., supra, 65 Wis.2d at 172, 222 N.W.2d 156. The defendant here argues that the trial court erred in striking the balance in favor of class treatment because individual questions of fact and law predominate over common ones. The defendant specifically contends that class treatment is inappropriate because: (1) some class members may have retired under a plan different from the Metropolitan-Aetna plan, which is the subject of this suit; (2) there were differing understandings of the plan by various class members; (3) there were differing representations made to different members; (4) there were differing circumstances surrounding the purported acceptance of the offer and reliance upon it; (5) the employment contracts of many class members had no relationship to Wisconsin thus making Wisconsin law inapplicable; and (6) that the trial court had no personal jurisdiction over nonresident plaintiffs.

Whether the differing factual circumstances pointed to by Allis-Chalmers render class treatment inappropriate depends on whether the suggested differences are material to the plaintiffs' claim. See, e. g.: Nolte v. Michels Pipeline Construction, Inc., 83 Wis.2d at 177-80, 265 N.W.2d 482. This court has characterized pension and profit sharing plans as constituting an offer of the stated benefits in exchange for the service of an employee. Upon the employee's completion of the required services, a binding contract is formed under which the employer is obligated to deliver the benefits under the terms of the plan. Rosploch v. Alumatic Corp. of America, 77 Wis.2d 76, 81-84, 87-88, 251 N.W.2d 838 (1977); Voigt v. South Side Laundry & Dry Cleaners, Inc., 24 Wis.2d 114, 116, 128 N.W.2d 411 (1964); Zwolanek v. Baker Manufacturing Co....