Opinion ID: 799219
Heading Depth: 3
Heading Rank: 3

Heading: Vesting of Medical Insurance Benefits

Text: Pre-1986. Five CBAs used the same language to establish medical insurance programs for employees, including `group insurance benefits, paid by the Company and underwritten by Aetna Life Insurance Company.' Bender, 725 F.Supp.2d at 646 (citations omitted). Each CBA provided that `[t]he benefits of the program are set forth in a booklet and policy, a copy of each to be available to every employee.' Id. The CBAs also expressly extended `[t]he same benefits [to retirees] as for the employees and their dependents' and specifically stated that `[t]he Company agree[d] to pay the cost of such insurance for the retiree and his dependents.' Id. As defendants point out, the 1982 CBA negotiated by Cooper provided that retiree medical insurance would be the same as for employees and dependents as of July 1, 1980. Also, spouses and eligible dependents of deceased retirees could remain under Kirsch Group Medical Coverage at Company expense provided that spouses did not remarry or become eligible for insurance through another employer. [8] 1986 to 1993. Three CBAs between 1985 and 1993 provided retirees with the same benefits as for the employees and their dependents as of January 1, 1986, namely group insurance paid by the Company. This granted the same health insurance benefits as above, except that the CBAs required retirees aged 62 to 65 to pay $20 per month toward the cost of such insurance (as would spouses and dependents of deceased retirees who were eligible to remain under the Cooper Comprehensive Health Care Plan). Also, as above, the CBAs each referred to a booklet and policy as setting forth the benefits of the program. However, the 1993 CBA also included a negotiated end to health insurance benefits for future retirees. Specifically, effective with retirements on or after January 1, 1994, the CBA provided for a maximum of five years of post-retirement medical coverage, no coverage for the retiree or spouse past the age of 65, and monthly contributions toward the cost of the plan in an amount to be set when the employee retired. In fact, as noted above, no claim for medical insurance benefits is made on behalf of class members in the third group (post-1993 retirements). This change is nonetheless relevant because these negotiated changes contrast with the simultaneous continuation of health insurance benefits for employees retiring prior to the change. That is, the 1993 CBA expressly provided that Employees retiring prior to January 1, 1994, (Deletion) will be covered under the Cooper Industries Comprehensive Retiree Medical Plan (1/93 GWI), but, will have the same cost effective health benefits as those being granted active employees as of January 1, 1986.  (Emphasis added.) Again, retirees aged 62 to 65 would pay $20 per month toward the cost of such insurance for the retiree and his dependents (as would spouses and dependents of deceased retirees who were eligible to remain under the Cooper Comprehensive Health Care Plan). Further, the CBA provided that employees who retire before January 1, 1994, will retain retirement medical coverage under the Cooper Comprehensive Retiree Medical Plan and will receive a lump sum wage payment of $300 upon retirement. The district court found, and the extrinsic evidence established, that the prospective reduction of post-retirement healthcare benefits offered an obvious incentive for employees to retire before January 1, 1994 (and resulted in a greater than usual number of retirements at the end of 1993). Bender, 725 F.Supp.2d at 647. Intent and Durational Clauses. The district court found that the provisions granting retiree health insurance benefits suggested that, once retired, those benefits would continue indefinitely and without cost; except for those who retired under the CBAs that expressly limited the duration or required specific contributions toward the cost. Defendants argued in the district court that there was no vesting because each of the CBAs provided that [t]he insurance program as set forth in Exhibit A is agreed to for the duration of this contract.  (Emphasis added.) However, [a]bsent specific durational language referring to retiree benefits themselves, courts have held that the general durational language says nothing about those retiree benefits. Noe, 520 F.3d at 554. Unlike the specific limitation on the duration of health insurance for those retiring on or after January 1, 1994, this language was general in nature and did not create ambiguity regarding the intention that medical insurance benefits continue for those who had already retired. See Maurer, 212 F.3d at 917-18. Rather, the district court concluded that plaintiffs had met their burden of demonstrating that the CBAs unambiguously gave bargaining-unit employees who retired prior to January 1, 1994, a vested right to health insurance benefits. In addition, as discussed below, the district court also found that even if ambiguous, the extrinsic evidence was overwhelmingly one-sided in favor of lifetime vesting of medical insurance benefits for those claiming benefits based on retirements prior to January 1, 1994 (pre-1986 and 1/1/86-12/31/93). We turn to the defendants' principal arguments.
First, defendants contend that the CBAs do not reflect an intention to vest because reservation-of-rights language in three summary plan descriptions (SPDs) were incorporated into the CBAs such that it would stand on equal footing with the provisions from which vesting might be inferred. The incorporation language defendants rely upon, which is the same in each CBA, stated that the benefits of the program are set forth in a booklet and policy, a copy of each to be available to every employee. The district court did not address defendants' argument, which is based on dicta from Schreiber v. Philips Display Components Co., 580 F.3d 355, 365 n. 12 (6th Cir.2009). In Schreiber, the district court found the durational language to have unambiguously precluded vesting. Reversing, this court found there was ambiguity that should have led the district court to consider the SPDs regardless of whether the subsequently issued SPDs may be properly regarded as extrinsic evidence of the parties' original intent. Id. In dicta that followed, the court suggested that repeated references to the SPDs in the CBA at issue in Schreiber may be enough to incorporate by reference portions of the SPDs into the CBA. Courts generally cite contract language that is more explicit in its action [of incorporation], though in some cases they have found mere references to SPDs and plan booklets sufficient to incorporate by reference. Int'l Ass'n of Machinists and Aerospace Workers v. ISP Chems., Inc., 261 Fed.Appx. 841, 847-48 (6th Cir.2008) (unpublished disposition); see also 11 Williston on Contracts § 30.25(4th ed.) (Interpretation of several connected writings). Compare Yolton, 435 F.3d at 580 (looking to a durational clause in the CBA stating the insurance plan `will run concurrently with [the CBA] and is hereby made part of this Agreement.' (quoting the CBA)), and Int'l Union, UAW v. Aluminum Co. of Am., 932 F.Supp. 997, 1001 (N.D.Ohio 1996) (Separate booklets describing these benefits are incorporated herein and made a part of this Agreement.), with Bailey v. AK Steel Corp., 2006 WL 2727732 at  1 (S.D.Ohio Sept. 22, 2006) (unpublished disposition) (Each CBA incorporates by reference the health benefit plan ...). Id. Lastly, this court added that the district court would have been on solid ground had it interpreted the SPDs alongside the CBA before reaching the ambiguity issue. Id. Here, the CBAs refer to a booklet and policy, but do not include any explicit language of incorporation. Nor does the dicta in Schreiber compel a finding of reversible error based on this reference. In fact, in another case upon which the defendants rely, the district court acknowledged the Schreiber decision but concluded that simply referring to an SPD that was to be distributed to qualifying employees was not sufficient to constitute incorporation by reference. See Moore v. Menasha Corp., 724 F.Supp.2d 795, 804 n.3 (W.D.Mich.2010) ( appeal pending No. 10-2171). Finally, defendants' reliance on United Steelworkers of America v. Commonwealth Aluminum, 162 F.3d 447, 449 (6th Cir.1998), is misplaced. Although the question in that case had to do with the arbitrability of grievances related to the denial of group benefits, the CBA in that case expressly stated that the group insurance booklets  are incorporated herein and made a part of this Labor Agreement by such reference. Id. (emphasis added). No similar explicit incorporation language has been identified in this case. The district court did not err in rejecting the defendants' incorporation-by-reference argument. Nonetheless, both Schreiber and Moore indicate that when no incorporation is found, the SPDs may be considered as extrinsic evidence in evaluating the intent to vest retiree welfare benefits.
Defendants argue, in the alternative, that the district court erred in concluding that reservation-of-rights language found in the three SPDs themselves did not preclude the vesting of retiree health insurance benefits. See Reese, 574 F.3d at 323-24; Prater, 505 F.3d at 444-45; McCoy v. Meridian Auto. Sys., Inc., 390 F.3d 417, 424-25 (6th Cir.2004). This line of cases recognizes an exception to the general ruleapplicable to collective bargaining agreementsthat `an existing contract cannot be unilaterally modified.' Prater, 505 F.3d at 443 (Were it otherwise, the option of either party to modify a contract unilaterally would defeat the essential purpose of reaching an agreement in the first placeto bind the parties prospectively.). The exception arose out of the holding in Maurer that a widely distributed SPD, issued after the CBA had been signed, prevented retiree health benefits from vesting because the union had failed to contest the SPD's express reservation of the right to curtail or eliminate coverage for any treatment, procedure, or service regardless of whether [the employee is currently] receiving treatment.  Maurer, 212 F.3d at 913 (emphasis added). That is, once the unqualified unilateral right was asserted in the SPD, `the Union was obligated to grieve or enter suit' if it disagreed with the employer's assertion of authorityeven if that assumption of authority came after the effective date of the relevant collective bargaining agreement. Prater, 505 F.3d at 444 (quoting Maurer, 212 F.3d at 919). However, as explained in Prater, to read Maurer broadly would run headlong into the rule that a plan summary `cannot vitiate contractually vested or bargained-for-rights. ' Prater, 505 F.3d at 444 (citation omitted). As a result, the Maurer exception for unilateral modification has been expressly limited to `unqualified reservation-of-rights language,' that claims a `unilateral right by the employer to terminate coverage without regard to existing or future collective bargaining agreements.' Id. (citations omitted). Although this standard is necessarily case specific, McCoy, Prater, and Reese each found the reservation of rights were not sufficiently unqualified so as to fairly be expected to prompt an immediate protest by the union. [9] The reasons given in those cases included: (1) that the SPD acknowledged that termination or modification would be subject to the provisions of any applicable CBA ( McCoy and Prater ), or that any conflict would be governed by the official plan documents or labor agreements ( Reese ); (2) that, unlike in Maurer, the reservation of rights did not assert an explicit right to terminate coverage for even current treatment ( Prater ); and (3), [p]erhaps most importantly, the CBA expressly provided that it could not be amended without mutual signed consent of the parties ( Prater ). Elaborating on the last of these, we explained that the prohibition on unilateral modification in the CBA meant that the union could not be required to protest the SPD as long as the summary does not explicitly renounce the [CBA]. Prater, 505 F.3d at 445. [10] Aetna Summary. Defendants rely specifically on a provision from the first booklet, a 1978 Aetna Group Plan (Aetna Summary) covering various group insurance benefits, including medical insurance, which stated among its general provisions: Change or Discontinuance of PlanIt is hoped that this Plan will be continued indefinitely, but, as is customary in group plans, the right of change or discontinuance at any time must be reserved. Also, after specifying the benefits for the various group plans, a separate summary stated: Your contributions toward the cost of the contributory coverages provided by this Plan will be deducted from your pay and they are subject to change. Despite defendants' comparison to Maurer, the Aetna reservation of rights did not specifically claim a unilateral right to terminate coverage without regard for existing or future CBAs. Cooper SPDs. Defendants also rely on a Cooper Industries Health Care PlanRetired Employees marked with 10/89-STD on the back (1989 Cooper SPD) and a Cooper Industries Comprehensive Retiree Medical Plan marked 1/93 GWI (1993 Cooper SPD). Defendants contend, in particular, that the 1989 Cooper SPD mandates reversal of the judgment with respect to all post-1985 retirees ( i.e., the 1986 to 1993 group). Under the heading background information, the 1989 Cooper SPD states: Amendment or Termination of the Plan: Although the Company expects to continue the Plan in its present form, the Company may amend the Plan from time to time, or it may terminate the Plan altogether at some point. Amendments to the Plan could result in changes in the benefit eligibility rules under the Plan, and in the benefit provisions under the Plan. A termination of the Plan could mean that all benefit payments immediately cease, or that benefit payments would be discontinued at some future date. An amendment or termination of the Plan could affect your eligibility for benefits under the Plan. The Company will notify you if it changes or terminates the Plan. The exact same language was used in the 1993 Cooper SPD. The district court found that this reservation was not sufficiently unqualified because the SPDs otherwise reaffirmed that the CBAs would control any conflict. Bender, 725 F.Supp.2d at 659 (relying on Prater and Reese ). Specifically, both Cooper SPDs included the same introductory provisions explaining, in part, that: This booklet is a `plain language' summary of your retiree health care benefits.... The highlights of the plan in easy to understand language appear in this space at the beginning of each section. This introduction concluded with the following explanation: At the top of each section is a brief explanation of the information in that section. This is followed by a general explanation of important information you should know about the plan. Sometimes, when plain language is used to explain the provisions of what is essentially a legal document, disagreements arise between the meaning given in the explanation and the wording of the legal document. We do not expect that to happen, but if it should, the wording in the legal document will apply. (Emphasis added.) Attempting to distinguish Prater and Reese, defendants argue that the deference given to a legal document in this provision must mean deference to the formal plan rather than to the CBA. It is true that the SPDs in Prater and Reese specifically acknowledged that the CBAs would control. But, the record in this case does not appear to contain any formal plan associated with the Cooper SPDs, and the CBAs provided health insurance benefits as set forth in a booklet and policy. The district court did not err in finding that the Cooper SPDs did not include an unqualified assertion of a unilateral right to end retiree medical insurance benefits without regard for existing or future CBAs. [11] However, even when the Maurer exception does not apply, the summaries nonetheless serve as extrinsic evidence regarding the extent of the employer's promise of future healthcare benefits and whether the parties intended the benefits to vest. Prater, 505 F.3d at 445.
The district court found that the parties unambiguously intended that retiree health insurance benefits would vest for bargaining-unit retirees (and their eligible spouses and dependents) who retired prior to January 1, 1994, but that, even if the CBAs were deemed to be ambiguous, the entire record of extrinsic evidence demonstrates, without a single contradictory voice, that the parties intended to vest lifetime retiree healthcare benefits. Bender, 725 F.Supp.2d at 661. We agree. The district court's statement of facts outlined the extensive extrinsic evidence with respect to both medical insurance benefits, id. at 649-51, and Medicare Part B reimbursements, id. at 651-52. Later, the district court succinctly summarized the extrinsic evidence regarding vesting of medical insurance benefits as follows: Individuals from both sides of the bargaining table, including members of company management and Union representatives, testified at deposition and stated in affidavits that the company and the employees intended to provide retirees with fully paid, vested, lifetime medical benefits. Mr. Keasey, a participant in most of the negotiations and a drafter of the collective bargaining agreements; Ms. McCurry, the administrator of health insurance and pension benefits at the Sturgis plant; Mr. Lampe, another main participant in the collective bargaining agreement negotiations; and Mr. Oetman, an International Representative for the union at the Sturgis plant from 1984 through 1995, all stated that the Union and the company intended to vest lifetime group health insurance for the retirees. The letters Cooper Industries sent to employees of the Sturgis plant on their retirement, the company's economic offers from various negotiations, and the retirement applications also demonstrate this intent. Even Defendants' own due diligence at the time of purchase shows that the agreements vested lifetime benefits. Its attorneys' summary of the retiree medical and life insurance benefits states that union employees who retired before January 1, 1994, are entitled to [l]ifetime retiree coverage of medical benefits. Id. at 661. Defendants protest the district court's characterization of the due diligence memo prepared in connection with Newell's purchase of Kirsch from Cooper as being directly adverse to their position. As the district court explained, only two pages of that memo have been disclosed because they were provided to Great West Life in connection with the transfer of insurance coverage from Aetna. However, defendants' argumentthat this memo described the benefits as lifetime benefits but never said they were vested, inalterable or immutableis not persuasive and does not undermine its value as extrinsic evidence that the parties had intended retiree health insurance benefits to vest. Nor does the reservation-of-rights language in the 1997 letter sent to Kirsch retirees, or in the SPDs discussed above, overcome the heavily one-sided evidence that the parties intended health insurance benefits would vest for those who retired prior to January 1, 1994.