Winnett v. Caterpillar, Inc.
| Decision Date | 16 September 2008 |
| Docket Number | No. 3:06-cv-00235.,3:06-cv-00235. |
| Citation | 579 F.Supp.2d 1008 |
| Parties | Gary T. WINNETT, Freda Jackson-Chittum, Casper R. Harris, William H. Dailey, Calvin E. Grogan, Kenneth C. Hammer, and Charles A. Waterfield, on behalf of themselves and others similarly situated, Plaintiffs, v. CATERPILLAR, INC., Defendant/Third-Party Plaintiff, v. International Union, UAW, et. al, Third-Party Defendants. |
| Court | U.S. District Court — Middle District of Tennessee |
Elizabeth A. Alexander, Kathryn E. Barnett, Mark P. Chalos, Lieff, Cabraser, Heiraann & Bernstein, LLP, Nashville, TN, Jamie S. Franklin, Michael M. Mulder, Shona B. Glink, Meites, Mulder, Mollica & Glink, Chicago, IL, Jay E. Sushelsky, Washington, DC, for Plaintiffs.
Columbus R. Gangemi, Jr., Derek Grady Barella, Joseph J. Torres, Winston & Strawn LLP, Chicago, IL, Lawrence Slade Eastwood, Jr., Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Nashville, TN, for Defendant/Third-Party Plaintiff.
Edmund L. Carey, Jr., Gerald E. Martin, David W. Garrison, Barrett, Johnston & Parsley, Nashville, TN, Joshua B. Shiffrin, Julia Penny Clark, W. Gary Kohlman, Bredhoff & Kaiser, PLLC, Washington, DC, for Third-Party Defendants.
Samuel Morris, Godwin, Morris, Laurenzi & Bloomfield, PC, Lisa M. Smith, Klimist, McKnight, Sale, McClow & Canzano, P.C., Southfield, MI, for Material Witness.
Currently pending before the court is a Motion for Preliminary Injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure filed by plaintiffs Gary T. Winnett, et al. and the subclass of retirees from Caterpillar Logistics Services ("CLS") division and surviving spouses of CLS retirees ("the CLS subclass"). (Docket No. 200). The plaintiffs allege that the subclass is entitled to a preliminary injunction because they have a vested right in no-cost retiree health care, and Caterpillar, Inc. ("Caterpillar" or "the Company") has not substantiated any of its affirmative defenses. Defendant Caterpillar has responded in opposition (Docket No. 240), and the plaintiffs have replied (Docket No. 253).
The court held a three-day evidentiary hearing on the plaintiff's motion, which is now ripe for decision. The parties also submitted post-hearing briefs (Docket Nos. 300, 301, 302, 303), which the court has considered.
The court finds the following facts:
UAW-Caterpillar Bargaining Regarding Retiree Health Care Benefits
In 1964, Caterpillar and the UAW first negotiated health care coverage for retirees. (Def.'s Ex. 23).2 According to UAW representatives James Atwood and Elliot Anderson, since then the retiree health care benefits have increased rather than decreased. (Tr. 37-38 Anderson, 163 Atwood). Both men testified that, although the UAW did not have authority to renegotiate vested benefits, it could negotiate increases to the pension and the medical benefits offered to current retirees. (Tr 49-50 Anderson, 162-63 Atwood). For example, in 1988, the UAW and Caterpillar negotiated improvements in durable medical equipment, dental care, prescription drugs, speech therapy, and the amount of Medicare B co-pay. (Tr. 50 Anderson). Anderson testified that, with each subsequent labor agreement, it was likely that their pension and medical benefits would be improved, just like the benefits of past retirees had been improved in previous contracts. (Tr. 49-50).
Caterpillar only identified one negotiated decrease to the retiree health care benefit: an increase in prescription drug co-pays in 1983. (Tr. 337-38 Broadbear). Gene Broadbear, who was in charge of negotiating on behalf of Caterpillar at that time, characterized the increase as a "modification," not a reduction. He testified that the amount was under $5 and relatively minor. (Id.) The UAW's Atwood put it a different way: "[A]ny reductions that we ever negotiated for retirees were offset by improvements to those retirees." (Tr. 163). He went on to explain that:
Well, for example, if the prescription drug co-pay was $2 and was increased to $3, if you go back and check, you'll find that, for example, in that same round of bargaining, the right to a 90 day supply of drugs instead of the $2, 30 day co-pay, you could get a mail order three month script for the same drugs for one co-pay.
So ... it was an improvement to the drug program, for example. But if you just looked at it on its face and said, well, it was $2 and you raised it to 3, that's certainly not a fair analysis of what happened.
(Tr. 163).
The retiree health care benefit was not set forth in the Central Labor Agreement ("CLA"), but in separate bargained-for agreements: the Insurance Plan Agreement ("IPA") and the attached Group Insurance Plan ("GIP"). (Pls.' Ex. 16). For twenty years, the language in Paragraph 5.15 of each year's GIP has remained largely intact. (Pls.' Ex. 2 and 4). The instant plaintiffs claim vested "no cost" retiree health care benefits under the 1988 GIP, which provided health care benefits for retirees and surviving spouses as follows:
5.15. Retirement Medical Insurance. Retired Employees who satisfy the requirements hereinafter set forth shall be entitled to the same benefits provided in this Section V as if they were Employees. Coverage in accordance with this paragraph 5.15 shall be provided without cost to any such retired Employee. Such benefits to the extent provided in this paragraph 5.15 will be provided after his retirement from active service for a retired Employee if he has at least 5 years of credited service under the Non-Contributory Pension Plan at his retirement and is eligible for the immediate commencement of a monthly pension under the Non-Contributory Pension Plan or would be eligible for such immediate commencement but for his election to defer commencement of his pension. Coverage shall take effect on his retirement date ...
* * *
Dependents' Coverage shall be in effect in accordance with this paragraph 5.15 while Personal Coverage is in effect with respect to (a) all Dependents of a retired Employee who were covered hereunder on the day preceding his retirement and (b) any person who becomes a Dependent after the retirement of a retired Employee if such retired Employee either was covered for Dependents' Coverage prior to retirement or had no Dependents prior to retirement, and such Dependents' Coverage will be continued following the death of a retired Employee for the remainder of his surviving spouse's life without cost. For purposes of this paragraph 5.15 only, the terms "Employee" and "Employee's", wherever appearing in other sections hereof, shall be deemed to read "retired Employee" and "retired Employee's", respectively.
(Pls.' Ex. 16).
In 1987, Caterpillar formed a subsidiary, Caterpillar Logistics Services, Inc., to market the Company's global warehousing and product distribution expertise to third-party customers. (Tr. 323 Broadbear). In order to supply its own manufacturing facilities, as well as its worldwide network of dealers and customers, Caterpillar had established a world-class warehousing and parts distribution operation. (Docket No. 244, Broadbear Decl ¶ 10; Tr. 323 Broadbear). CLS was designed to offer this recognized expertise to third-parties seeking such services. (Broadbear Decl. ¶ 11). One possible impediment to marketing this business, however, was that much of Caterpillar's domestic parts distribution network was located in UAW-represented facilities. (Tr. 324 Broadbear). For example, within the Central Labor Agreement facilities, Caterpillar operated four UAW-represented parts facilities: Morton, Illinois; Denver, Colorado; York, Pennsylvania; and Memphis, Tennessee. (Broadbear Decl. ¶ 12). Under the CLS marketing plan, these facilities would handle third party distribution work, in addition to their existing Caterpillar parts distribution work. (Id. ¶ 13). Caterpillar was concerned that third-parties would be reluctant to place their product in facilities that might be subject to UAW strikes unrelated to their businesses. In 1987-88, Caterpillar engaged the UAW in discussions about the establishment of an agreement to address this concern. (Id. ¶ 14).
The 1988 CLA expired for non-CLS employees on October 31, 1991. (Pls.' Ex. 15). As to those non-CLS employees, Caterpillar and the UAW agreed to extend the 1988 CLA until November 4, 1991, at which time the UAW went on strike. (Tr. 96-97 Atwood). At CLS locations, the 1988 CLA and benefits agreements did not expire and there was no strike. (Id.)
Caterpillar and the UAW extended the 1988 for CLS workers by an agreement called the CLS Agreement, executed in May 1988. . Under the CLS Agreement, the UAW guaranteed Caterpillar that certain parts system services to third parties would not be interrupted in the event of a strike. (Tr. 27-28, 94 Anderson). In exchange for the no-strike clause, the UAW hoped that the agreement would bring new jobs and maintain plants on the brink of closing. (Tr. 29, 94 Anderson). The UAW negotiated that, in the event of a strike, the 1988 CLA would remain in effect for CLS employees past its expiration date and until the ratification of a successor agreement for CLS employees. (Tr. 95 Atwood). Section 5(a) of the CLS Agreement states:
Upon expiration by its terms of a Labor Agreement between the parties applicable, in whole or in part, to Covered Employees, such Labor Agreement shall not be deemed to have expired but shall be deemed to continue in full force and effect in so far as it relates or applies to Covered Employees.
Upon completion of the negotiations for and ratification of a new Central Labor Agreement and all other Local Labor Agreements between the parties, all terms of the new Central Labor Agreement, except as modified by or...
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