Shy v. Navistar Int'l Corp.

• Decision Date: 14 December 2012
• Docket Number: Nos. 11–3215,11–4143.,s. 11–3215
• Citation: 701 F.3d 523
• Parties: Art SHY, et al., Plaintiffs–Appellees, v. NAVISTAR INTERNATIONAL CORPORATION; Navistar International Transportation Corporation, n/k/a Navistar, Inc.; Navistar Financial Corporation; Harco National Insurance Company; Navistar International Transportation Corp. Health Plan; Indianapolis Casting Corporation, Defendants–Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

701 F.3d 523

Art SHY, et al., Plaintiffs–Appellees,

v.NAVISTAR INTERNATIONAL CORPORATION; Navistar International Transportation Corporation, n/k/a Navistar, Inc.; Navistar Financial Corporation; Harco National Insurance Company; Navistar International Transportation Corp. Health Plan; Indianapolis Casting Corporation, Defendants–Appellants.

Nos. 11–3215, 11–4143.

United States Court of Appeals, Sixth Circuit.

Argued: Oct. 4, 2012.

Decided and Filed: Dec. 14, 2012.

ARGUED:Cary R. Perlman, Latham & Watkins LLP, Chicago, Illinois, for Appellants. Jeremiah A. Collins, Bredhoff & Kaiser, P.L.L.C., Washington, D.C., for Appellees. ON BRIEF:Cary R. Perlman, Latham & Watkins LLP, Chicago, Illinois, Laurence H. Levine, Laurence H. Levine Law Offices, Chicago, Illinois, David P. Pierce, Coolidge Wall Co., L.P.A., Dayton, Ohio, for Appellants. Jeremiah A. Collins, Julia Penny Clark, Bredhoff & Kaiser, P.L.L.C., Washington, D.C., Frederick G. Cloppert, Jr., Columbus, Ohio, for Appellees.

Before: SILER and COOK, Circuit Judges; STEEH, District Judge. ^*

OPINION

SILER, Circuit Judge.

The class action plaintiffs (“Shy Class”) initiated the current litigation by seeking an injunction against Navistar International Corp. (“Navistar”), claiming that Navistar's unilateral move to substitute Medicare Part D into their medical plan violated the parties' 1993 settlement agreement (the “Agreement”). The district court found that Navistar's actions were in violation of the Agreement and ordered Navistar to reinstate, retroactively, the prescription drug benefit that was in effect before Navistar made the unilateral substitution.

On appeal, Navistar raises three issues. First, whether Navistar has discretionary authority to construe and interpret the Health Benefit Program. Second, whether the Agreement grants Navistar the power to substitute Medicare Part D for the prescription drug plan described in the Agreement. And third, whether the district court erred when it ordered Navistar to retroactively reinstate the prescription drug benefit from the Agreement. For the reasons that follow, we AFFIRM.

I.

This case originated as a class action lawsuit in 1992 when Navistar attempted to reduce its costs for retired employee health and life insurance benefits. Navistar asserted that it would soon become insolvent if it were unable to reduce its retiree health and life insurance obligations. In 1993, the U.S. District Court for the Southern District of Ohio approved the Agreement between the parties. Shy v. Navistar Int'l Corp., No. C–3–92–333, 1993 WL 1318607, at *12 (S.D.Ohio May 27, 1993). The district court entered a judgment adopting the Agreement as a consent decree while retaining continuing jurisdiction over the parties for the purposes of enforcing and administrating the Agreement.

The Agreement established the Retiree Health Benefit and Life Insurance Plan (the “Plan”). In turn, the Plan established the Health Benefit Program Summary Plan Description (the “Manual”). The Manual contains a description of the health benefits and is furnished to all beneficiaries.

Through the Manual, the Agreement divides health benefits into two different plans for retirees: Medical Plan 2 for those who are eligible for Medicare and Medical Plan 1 for those who are not eligible. The Manual describes Plan 2 as a “Medicare supplement plan that helps pay for expenses covered by Medicare, but not paid in full by the government program.” Plan 2 participants who enroll in Medicare Part B are required to pay the Medicare Part B premium. Additionally, any Plan 2 participants who are eligible for Medicare but who are required to pay the Medicare Part A premium (because of social security benefit ineligibility or other reasons), “are encouraged to enroll and pay the required” premium because Plan 2 benefits are payable as if Medicare Part A coverage were in effect. Plan 2 also has a monthly premium and an annual out-of-pocket maximum.

After a participant has paid the annual out-of-pocket maximum, Plan 2 covers 100% of the difference between the Medicare-approved expenses and the amount that Medicare actually pays. In sum, Medicare eligible retirees were required to make three types of payments for health insurance benefits under the Agreement: (1) monthly premiums for Medicare Part B; (2) monthly premiums for Medical Plan 2; and (3) the annual out-of-pocket maximum.

A prescription drug benefit was also provided under the Agreement. The Prescription Drug Plan is presented in a separate section of the Manual and the benefits provided are identical for both Plan 1 and Plan 2. The participants are required to pay up to an $8.00 co-pay for a 30–day supply of any generic prescription drug and up to an $18.00 co-pay for a 30–day supply of any brand-name prescription drug. After the co-pay, which does not count toward the Plan 2 annual out-of-pocket maximum, any further costs for prescription drugs is generally covered under the Prescription Drug Plan. The Prescription Drug Plan covers all legend drugs and certain prescribed, non-legend drugs. A legend drug is defined as one required by federal law to bear the legend “Caution: Federal Law prohibits dispensing without a prescription.”

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, which created Medicare Part D, became effective in 2006. SeePub. L. No. 108–173, 117 Stat. 2066 (codified in scattered sections of 42 U.S.C.). In September 2005, Navistar sent a letter to all Medicare-eligible retirees stating that Medicare beneficiaries could stay in their current plan (coverage under Medical Plan 2) and choose not to enroll in the new Medicare Part D because their current coverage equaled or exceeded the new Medicare drug benefit. Then, in 2010, Navistar announced that Plan 2 participants would receive primary prescription drug coverage through Medicare Part D, effective July, 1, 2010. The announcement required Plan 2 participants to pay the Medicare Part D premiums, which were $35.00 per month at the time. The announcement also stated that participants would be enrolledin the SilverScript plan offered by CVS Caremark, and only the drugs on the SilverScript plan formulary would be covered. Participants were required to pay for the entire cost of any prescription drug that was not on the SilverScript formulary, even if it was previously covered under the Prescription Drug Plan in the Manual.

In 2010, the Shy Class filed a motion to compel Navistar to comply with the Agreement. In February 2011, the district court sustained the plaintiffs' motion for an injunction in part, declaring that Navistar was without authority to unilaterally substitute Medicare Part D for the prescription drug benefit adopted by the parties in the Agreement, and overruled the motion for an injunction in part by denying the plaintiffs injunctive relief. Navistar appealed the ruling, resulting in case number 11–3215.

In April 2011, at the court's request, both parties tendered to the court position papers concerning the need and appropriateness of additional orders in connection with the February 2011 district court order. Subsequently, in September 2011, the district court ordered Navistar to immediately reinstate, retroactively, the prescription drug benefit that was in effect before Navistar unilaterally substituted Medicare Part D. The district court ordered Navistar to reimburse the plaintiffs for the Medicare Part D premiums that had been paid in the interim and any extra cost for the prescriptions that were filled under Medicare Part D. Navistar again appealed, resulting in case number 11–4143.

II.

Generally, we review a district court's interpretation of a consent decree de novo. Nat'l Ecological Found. v. Alexander, 496 F.3d 466, 476 (6th Cir.2007). However, where the court is reviewing an interpretation of a consent decree by the district court that crafted the judgment, the standard of review is more accurately described as “deferential de novo.” Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 371–72 (6th Cir.1998); see also Brown v. Neeb, 644 F.2d 551, 558 n. 12 (6th Cir.1981) (the district judge's interpretation of a consent decree deserved deference where that judge oversaw and approved the consent decree); G.G. Marck & Assocs. v. Peng, 309 Fed.Appx. 928, 935 (6th Cir.2009) (“[W]e give some deference to a district court's interpretation of a consent decree where that court was involved in creating the decree.”).

Navistar argues that because Judge Rice, the district court judge who made the orders below, did not personally draft the Agreement, his interpretation of the consent decree is due no deference. In Sault Ste. Marie Tribe of Chippewa Indians v. Granholm, we ruled that the district judge's interpretation was due no deference because he was not the district judge who oversaw and approved the original consent decree. 475 F.3d 805, 810 (6th Cir.2007). However, nine years earlier, we did give deference to an interpretation by the district court judge who oversaw and drafted the same consent decree. Engler, 146 F.3d at 371–72. Therefore, the distinction is not whether the district judge personally drafted the consent decree, but whether the district judge “oversaw and approved” the consent decree and later interpreted the same consent decree. Brown, 644 F.2d at 558 n. 12.

Here, Judge Rice, whose interpretation of the Agreement is at issue on appeal, oversaw and approved the original settlement agreement/consent decree. Therefore, his interpretation “deserves deference” because “[f]ew persons are in a better position to understand the meaning of a consent decree than the district judge who oversaw and approved it.” Id.

III.

The Plan is a registered employee health benefit plan under the Employee Retirement Income Security Act (ERISA). The Agreement established Navistar as the “named fiduciary” within the meaning of 29 U.S.C. § 1102(a)(2) and the plan “administrator” within...