Shy v. Navistar Int'l Corp.

• Decision Date: 14 April 2021
• Docket Number: Case No. 3:92-cv-0333
• Parties: ART SHY, et al., Plaintiffs, v. NAVISTAR INTERNATIONAL CORPORATION, et. al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

ART SHY, et al., Plaintiffs, v. NAVISTAR INTERNATIONAL CORPORATION, et. al., Defendants.

Case No. 3:92-cv-0333

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

April 14, 2021

JUDGE WALTER H. RICE

DECISION AND ENTRY OVERRULING PHASE I OF DEFENDANTS' MOTION TO REFORM THE 1993 CONSENT DECREE BASED ON NAVISTAR'S CURRENT FINANCIAL STANDING AND THE EVOLUTION OF THE HEALTHCARE MARKETPLACE (DOC. #537), INCLUDING FINDINGS OF FACT AND CONCLUSIONS OF LAW; ENTIRETY OF MOTION TO REFORM (DOC. #537) OVERRULED

Defendants, Navistar International Corporation and Navistar, Inc. (collectively, "Navistar" or "Company"), have filed a Motion to Reform the 1993 Consent Decree ("Motion" or "Motion to Reform"), pursuant to Fed. R. Civ. P. 60(b), Doc. #537.¹ A response opposing the Motion to Reform was filed by the Supplemental Benefit Committee of the Navistar International TransportationCorp. ("SBC"), Doc. #542, and by Plaintiff, International Union, United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW"), Doc. #543. Bredhoff & Kaiser, PLLC ("Bredhoff"), has also filed a response "solely on its own behalf and not on behalf of any client," Doc. #541.²

Navistar and the UAW have filed post-hearing briefs, proposed findings of fact and conclusion of law, Doc. ##553, 554, 554-1, and replies. Doc. ##555 and 556.

For the reasons set forth below, the Court overrules Navistar's Motion for Reform based on Navistar's current financial standing and the evolution of healthcare since 1993. Accordingly, the entirety of the Motion to Reform is overruled.

I. Standard of Review and Representation of the Shy Class

A consent decree is both a contract between the parties and a judicial act with the prospective qualities of an injunction. Vanguards of Cleveland v. City of Cleveland, 23 F.3d 1013,1018 (6th Cir. 1994) (modification of consent decree extending promotions to supervisory positions of minorities in firefighting for twoadditional years affirmed). Because "[J]udicial approval of a consent decree places the power and prestige of the court behind the agreement reached by the parties," Williams v. Vukovich, 720 F.2d 909, 920 (6th Cir.1983), courts have a duty to "enforce, interpret, modify, and terminate their consent decrees as required by circumstance." Waste Mgmt. of Ohio, Inc. v. City of Dayton, 132 F.3d 1142, 1146 (6th Cir. 1997) (footnote omitted). To accomplish the goals of the decree, courts "are not bound under all circumstances by the terms contained within the four corners of the parties' agreement." Id. (citing NAACP Lorain v. Lorain Bd. of Educ., 979 F.2d 1141, 1148 (6th Cir.1992), cert. denied, Lorain Bd. of Educ. v. Ohio Dep't of Educ., 509 U.S. 905, 113 S.Ct. 2998 (1993). Rule 60(b) of the Federal Rules of Civil Procedure governs relief from final judgment and Rule 60(b)(5) pertains to modification of consent decrees stating, in relevant part, that "[O]n motion and just terms, the court may relieve a party. . . from a final judgment, order or proceeding [because] . . . applying it prospectively is no longer equitable." Id.

Navistar's Motion seeks a modification of the Consent Decree and cites to the two-part test announced by the Supreme Court in Rufo v. Inmates of the Suffolk County Jail, 502 U.S. 367, 112 S. Ct. 748 (1992), as the standard that should be applied. The UAW and SBC, however, contend that the "grievous wrong" standard in United States v. Swift & Co., 286 U.S. 106, 119, 52 S.Ct. 460, 464, (1932) ("Nothing less than a clear showing of grievous wrong evoked by new and unforeseen conditions should lead us to change what was decreed after years of litigation with the consent of all concerned"), is controlling. They further arguethat Rufo, which concerned a county sheriff's motion to modify a consent decree and his attempt to delay the construction of a new jail, is "institutional reform litigation"³ and inapplicable to private party litigation and the Consent Decree.

Although the Supreme Court rejected the "grievous wrong" standard in Rufo, it is unclear whether, as argued by Navistar, the Supreme Court rejected it in all cases involving the modification of consent decrees. Additionally, institutional reform litigation is vastly different from this litigation and the Consent Decree before this Court. Nevertheless, the Sixth Circuit has applied the Rufo standard in institutional reform litigation, Heath v. DeCourcy, 888 F.2d 1105, 1108-09 (6th Cir.1989; NAACP Lorain, 979 F.2d 1141; and Vanguards, 23 F.3d 1013, as well as to cases involving modification of consent decrees in non-institutional reform litigation. See, Northridge Church v. Twp. of Plymouth, 647 F.3d 606, 613-15 (6th Cir. 2011) (applying Rufo and Vanguards to motion to modify 1995 consent judgment where church had agreed to township's restrictions on its use of property); United States v. Wayne County, Mich., 369 F.3d 508, 513 (6th Cir. 2004) (Rufo standards apply to city's motion to amend negotiated consent decree with county and downriver communities resolving action under Clean Water Act).Additionally, and as noted by the UAW, the Sixth Circuit has indicated in dicta that the Rufo standard should not be limited to institutional reform litigation. Kalamazoo River Study Grp. v. Rockwell Int'l Corp. 355 F.3d 574, 588 (6th Cir. 2004) (in case involving allocation order in CERCLA action, Court noted in dicta, without detailed analysis, that Rufo should not be limited to and may apply to consent decrees involving private parties).

Because the Sixth Circuit applies Rufo in modification of consent decrees in non-institutional reform litigation, the Court will apply the Rufo two-part standard of review for Navistar's requested modification of the Consent Decree. Under this standard, Navistar must initially show that "a significant change in circumstances warrants revision of the decree." Rufo, 502 U.S. at 383. Assuming this is established, a court must then determine whether the proposed modification is "suitably tailored to the changed circumstance." Id., at 383.

A "significant change in circumstances" can be met "by showing [ ] a significant change either in factual conditions or in law." Id., at 384. "Modification of a consent decree may be warranted when changed factual conditions make compliance with the decree substantially more onerous" or "when a decree proves to be unworkable because of unforeseen obstacles." Id. A "significant change in circumstances" can also be established when enforcement "without modification would be detrimental to the public interest." Id.

In utilizing this "slightly more restrictive but flexible standard" of Rufo, Vanguards, 23 F.3d at 1018, the Consent Decree "should be construed to preservethe position for which the parties bargained." Id. (citations omitted). Therefore, the Court should not grant a modification of the Consent Decree "where a party relies upon events that actually were anticipated at the time it entered into the decree." Rufo, 502 U.S. at 385.

Finally, the UAW and the SBC assert that because notice, an opportunity to object and substitution of class representatives have not occurred pursuant to Fed. R. Civ. P. Rule 23(e), the due process rights of the Shy class are being violated. The issues in Phase I of Navistar's Motion, however, concern only evidence of Navistar's current financial standing and the evolution of the healthcare marketplace since 1993. These singular subjects affect no legal right of any absent class member; rather, they are preliminary inquiries, the answers to which would determine whether the Motion to Reform would be overruled without a further hearing being needed or whether, in the alternative, further evidence would be required, before which due process concerns would be thoroughly considered. At this stage, Navistar is merely submitting evidence supporting modification and is not altering any legal right of a class member. "Where no legal right would be hindered, . . .Rule 23(e)'s procedural protections do not apply for the simple reason that there is no risk that an absent class member will be legally harmed by approval of the modification." Keepseagle v. Vilsack, 102 F. Supp. 3d 306, 313 (D.D.C. 2015) (Rule 23(e) notice or hearing not required for modifying the administration of cy pres funds). Accordingly, because the subject matter of the evidentiary hearing in Phase I does not"materially alter" the approved Settlement Agreement, Rule 23(e), notice to the members of the Shy Class is not required.

II. Findings of Fact

Navistar's Motion seeks modification of the Consent Decree to create an independent adequately funded VEBA, insulating retirees from risks concerning Navistar's financial health and ending "a history of good-faith disputes between the parties." Doc. #537, PageID##5086-5090. Alternatively, Navistar seeks modification of the Consent Decree to (1) establish a defined contribution and improved governance structure, Id., PageID##5091-97; and (2) provide "objectivity and certainty around future profit sharing." Id., PageID##5097-5102.

Following extensive negotiation among the parties, Navistar filed a Motion to Reform. Pursuant to Sixth Circuit authority, Wayne Cty., Michigan, 369 F.3d at 511 ("The modification of a consent decree by a court without the consent of all parties to the agreement is indeed a signal event that requires a material change in circumstances that only a formal hearing and appropriate findings of fact can demonstrate."). On June 1, June 15, June 26 and July 1, 2020, an evidentiary hearing on Navistar's Motion was held.⁴ Evidence for this portion of the Motionwas limited to the following: (1) Navistar's current financial condition and (2) the evolution of the healthcare marketplace since 1993 ("Phase 1"). The hearing included testimony, by affidavit and in-person, via video-conferencing or telephonically, from the following individuals: (1) Walter Borst, Navistar's Executive Vice President and Chief...