Court Opinion

ID: 3004135
Source: CourtListenerOpinion
Date Created: 2015-09-24 22:35:56.823231+00
Date Added: 2024-06-11T12:11:33.623934
License: Public Domain

In the

United States Court of Appeals
               For the Seventh Circuit

Nos. 09-2445 & 09-2553

IGNACY G REEN, P ATRICK C OOPER,
and all those similarly situated,
                                                 Plaintiffs-Appellees,
                                                   Cross-Appellants,

                                  v.

T HE UPS H EALTH AND W ELFARE P ACKAGE
FOR R ETIRED E MPLOYEES, U NITED P ARCEL S ERVICE
OF A MERICA , INC . and P LAN A DMINISTRATOR,

                                             Defendants-Appellants,
                                                   Cross-Appellees.

            Appeals from the United States District Court
        for the Northern District of Illinois, Eastern Division.
            No. 09 C 00616—Matthew F. Kennelly, Judge.

   A RGUED D ECEMBER 7, 2009—D ECIDED F EBRUARY 10, 2010

 Before C UDAHY, W OOD , and E VANS, Circuit Judges.
  E VANS, Circuit Judge. In this class-action lawsuit, the
plaintiffs, participants in the UPS Health and Welfare
2                                       Nos. 09-2445 & 09-2553

Package for Retired Employees (Plan) due to their
former employment with UPS as members of the Interna-
tional Brotherhood of Teamsters (IBT) Local 705, claim
that the defendants, United Parcel Service of America,
Inc., the Plan, and its administrator (we will refer to
them collectively as UPS), raised the amount of health
insurance contributions required of the Local 705 retirees
in violation of the Plan and, consequently, the Employee
Retirement Income Security Act (ERISA), 29 U.S.C.
§ 1104(a)(1)(D). Specifically, the Local 705 retirees argue
that the Plan’s requirements that (1) if a threshold cost
was met, all retirees would “share equally in the cost . . .
by making an additional contribution” and (2) the addi-
tional contributions would not be implemented until
after the expiration of the “current collective bargaining
agreement” prohibit UPS from collecting additional
contributions from them until 2013. UPS, on the other
hand, asserts that the Plan can reasonably be inter-
preted to allow collections before that time.
  After a bench trial, the district court found that the
Local 705 retirees had the better of the argument
regarding the first clause at issue but not the second. The
court therefore enjoined UPS from collecting additional
contributions from the Local 705 retirees in excess of the
minimum contribution required for all IBT retirees
under the Plan—but only until further order of the
court, not until 2013. We review the district court’s con-
clusions of law de novo and its findings of fact for clear
error. Cerros v. Steel Techs., Inc., 288 F.3d 1040, 1044 (7th Cir.
2002) (citing Fed. R. Civ. P. 52(a)(6)). The district court’s
findings of fact, however, are not in dispute. We begin
there.
Nos. 09-2445 & 09-2553                                         3

  UPS employs IBT members and negotiates collective
bargaining agreements (CBAs) with IBT’s international
union and separately with a few IBT locals, like Local 705.1
Under the 2002 CBA between UPS and Local 705 (expiring
July 31, 2008), UPS agreed to provide health insurance
to retirees during the term of the agreement “as outlined
in the new UPS Health & Welfare Package Summary
Plan Description.” Unlike the CBA, the Summary Plan
Description (SPD) covered all IBT retirees (with a few
exceptions), not just the Local 705 retirees.
  Under the heading entitled “Contribution,” the SPD
provided that “[a]ll retired employees are responsible
for a $50 per month contribution for their medical cover-
age,” which covered “the retired employee, spouse and
any eligible dependent children.” Under the next
heading, entitled “Average Annual Cost,” the SPD stated
as follows:
    The average annual cost per participant is defined as
    the total claims paid by the Plan in a calendar year,
    divided by the total number of Plan participants
    during that year. Each retired employee, each spouse,
    and each eligible dependent would be considered
    a Plan participant.
    If the average annual cost per participant exceeds
    $6,250, each retired employee will share equally in the

1
  At oral argument, counsel for the retirees explained that Local
705 negotiates separately because it is a large union with
a comparable amount of bargaining power.
4                                    Nos. 09-2445 & 09-2553

    cost above the $6,250 maximum by making an additional
    contribution.
    The $6,250 maximum cost per participant is subject
    to future negotiations. If required, the additional
    contributions would not be implemented until after the
    expiration of the current collective bargaining agreement.
(Emphasis added.)
  Beginning in 2006, the average annual cost per partici-
pant exceeded $6,250. In October 2007, UPS sent a Sum-
mary of Material Modifications (SMM) to all IBT retirees,
stating this fact and also advising that “each retired
employee will share equally in the cost above the $6,250
maximum by making an additional contribution. There-
fore, effective January 1, 2008, the per retiree contribu-
tion of $50 per month will increase to $114.33 per
month.” At the time of this notice, UPS was negotiating
a new CBA with IBT’s international union. After the
parties reached a tentative agreement but before ratifica-
tion, the international union asserted complaints over
the increase in retiree contributions. UPS eventually
agreed (although not in writing) not to collect additional
contributions from the international union retirees
until after the expiration of their newly bargained CBA.
  Members of Local 705 also complained about the
October 2007 SMM. Their complaint, however, was that
the notice was premature because their negotiations for
a new CBA would not even begin until the summer of
2008 (and their current CBA would not expire until
July). As a result, in December 2007, UPS sent a revised
Nos. 09-2445 & 09-2553                                    5

SMM to the Local 705 retirees only. That notice stated
as follows:
    The average cost per participant for the UPS Health
    and Welfare Package for Retired Employees has ex-
    ceeded $6,250.
    As explained in the SPD (Summary Plan Description),
    when the cost per participant exceeds $6,250, each
    retired employee will share equally in the cost above
    the $6,250 maximum by making an additional contri-
    bution.
    That additional cost will be effective after the expira-
    tion of the current collective bargaining agreement.
(Emphasis added.) UPS received no complaints about
this SMM.
  During the CBA negotiations, a Local 705 representa-
tive asked UPS’s finance liaison whether the previous
SPD for the Plan was current with respect to the new
CBA. UPS’s liaison responded that it was. Local 705
did not propose raising the $6,250 cap or deferring the
collection of additional contributions from retirees, nor
did UPS raise the issue. The new CBA became effective
August 1, 2008, for a five-year period. Like the 2002
CBA, the 2008 CBA did not directly address the issue
of retiree contributions but rather simply incorporated
the SPD, which continued to state that additional con-
tributions would not be collected until the expiration of
the “current” CBA.
 In January 2009, UPS sent another notice to the
Local 705 retirees, stating that the average annual cost per
6                                    Nos. 09-2445 & 09-2553

participant had risen above the $6,250 cap. The notice
also advised that, after February 1, 2009, instead of a flat-
rate $50 per month, each Local 705 retiree would be
required to contribute $157.58, $315.17, or $472.75 per
month, depending on whether their family members
were also covered. Consistent with the oral agreement
between UPS and IBT’s international union, other IBT
retirees did not receive this notice and continued to pay
only $50 per month.
  Shortly thereafter, the Local 705 retirees filed this class-
action lawsuit and brought a motion for temporary
and preliminary injunctive relief, which the parties con-
verted to a bench trial on the merits pursuant to Federal
Rule of Civil Procedure 65(a)(2). The district court found
in favor of the Local 705 retirees on their claim that
UPS violated the SPD by collecting additional contribu-
tions from them without also collecting from the other
IBT retirees. The court found against the Local 705
retirees, however, on their claim that UPS violated the
SPD by collecting additional contributions during the
term of the 2008 CBA. The final order enjoined
UPS from collecting additional contributions from the
Local 705 retirees until further order of the court but did
not enjoin UPS from collecting additional contributions
through July 2013, as requested by the Local 705 retirees.
Both parties appealed.
  The parties agree that, because the dispute involves
plan interpretation, and the Plan grants UPS discretion
to interpret its terms, the district court properly applied
the deferential arbitrary and capricious standard. See
Nos. 09-2445 & 09-2553                                    7

Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 461
(7th Cir. 2001). A plan administrator’s interpretation
is not arbitrary and capricious if it falls within the range
of reasonable interpretations. See Carr v. Gates Health Care
Plan, 195 F.3d 292, 294 (7th Cir. 1999); Exbom v. Central
States, Se. & Sw. Areas Health & Welfare Fund, 900 F.2d
1138, 1142-43 (7th Cir. 1990). Interpretations that “contro-
vert the plain meaning of a plan,” however, may be
overturned. Swaback v. Am. Info. Techs. Corp., 103 F.3d
535, 540 (7th Cir. 1996).
  The first issue is whether the district court correctly
concluded that UPS violated the SPD by collecting addi-
tional contributions from the Local 705 retirees without
collecting from other IBT retirees covered by the Plan.
The SPD states that “[i]f the average annual cost per
participant exceeds $6,250, each retired employee will
share equally in the cost above the $6,250 maximum
by making an additional contribution.” UPS contends
that this provision allows it to collect additional con-
tributions from the Local 705 retirees even though it is not
collecting additional contributions from other IBT
retirees because the phrase “share equally” concerns
how the Plan calculates average costs, not how it collects
additional contributions. The district court found that
this interpretation contradicts the plain language and
was therefore arbitrary and capricious. We agree.
  The SPD states that each retired employee will “share
equally . . . by making an additional contribution.” As the
district court pointed out, UPS’s interpretation effectively
negates the last clause of the provision. The provision
8                                    Nos. 09-2445 & 09-2553

plainly refers to how all retirees will contribute—that is,
equally by making an additional payment—not how the
Plan will calculate average costs. The latter subject is
dealt with in the SPD’s preceding paragraph, which
states that “[t]he average annual cost per participant is
defined as the total claims paid by the Plan in a calendar
year, divided by the total number of Plan participants
during that year.” UPS concedes that only some retirees
are making additional contributions because UPS has
agreed not to collect additional contributions from the
IBT international retirees until 2013. All retirees are not
therefore “shar[ing] equally” because the method by
which they must share equally—that is, “by making an
additional contribution”—has been nullified.
   UPS urges us to apply the doctrine of extrinsic
ambiguity and consider the extrinsic evidence presented
at trial on this issue. That doctrine provides that, “[i]n
limited circumstances, . . . parties are allowed to
present [objective] extrinsic evidence to demonstrate
that although the contract looks clear, anyone who under-
stood the context of its creation would understand that
it doesn’t mean what it seems to mean.” Mathews v. Sears
Pension Plan, 144 F.3d 461, 466 (7th Cir. 1998). But, contrary
to UPS’s assertion, “[t]he fact that parties to a contract
disagree about its meaning does not show that it is am-
biguous, for if it did, then putting contracts into writing
would provide parties with little or no protection.”
Fed. Deposit Ins. Corp. v. W.R. Grace & Co., 877 F.2d 614, 621
(7th Cir. 1989). And there is no latent ambiguity here
because the evidence does not show that a literal inter-
pretation “would lead to an unreasonable or absurd
Nos. 09-2445 & 09-2553                                     9

result.” Chi. Bd. Options Exch., Inc. v. Conn. Gen. Life Ins.
Co., 713 F.2d 254, 258 (7th Cir. 1983).
   UPS’s main contention is that interpreting the language
according to its plain meaning would allow Local 705
to “wield an inordinate amount of bargaining power in
that it could effectively block the Plan from collecting
the additional contribution from every UPS Teamster
retiree in the U.S.,” contrary to the “separateness” of
Local 705 from other IBT members. But just because a
provision is favorable to one party does not make it
“unreasonable” or “absurd.” Furthermore, the language
at issue is contained in the SPD, which covers almost
all IBT retirees, not the CBA, which was negotiated sepa-
rately by Local 705. And, as UPS repeatedly points out,
it could amend the language (in accordance with ERISA)
if it wanted a different result. Until then, however, the
Local 705 retirees have a right to rely on the language,
which unambiguously states that UPS must, if it
collects additional contributions, collect them from all
IBT retirees. UPS’s interpretation to the contrary was
therefore arbitrary and capricious.
   The second issue is whether UPS violated the SPD by
collecting additional contributions from the Local 705
retirees during the term of the 2008 CBA. At all relevant
times, the SPD has stated that additional contributions
would not be implemented until after the expiration of
the “current” CBA. UPS asserts that the term “current”
refers only to the 2002 CBA, into which the SPD was
first incorporated. The Local 705 retirees argue that the
term refers to the 2008 CBA, the CBA now in effect, into
10                                  Nos. 09-2445 & 09-2553

which the SPD was also incorporated. They read the
clause as prohibiting UPS from collecting additional
contributions until the 2008 CBA expires (that is, in July
2013). The district court found that UPS’s determination
was within the range of reasonable interpretations
and therefore not arbitrary and capricious. We agree.
  When the Plan first issued the SPD in 2002, the term
“current,” referred to the CBA in effect at that time—the
2002 CBA. When the Plan continued to issue the same
SPD even after the 2002 CBA expired, however, the term
“current,” on its face, referred to the CBA existing at that
time—the 2008 CBA. See Merriam Webster’s Collegiate
Dictionary at 306 (11th ed. 2003) (defining “current” as
“occurring in or existing at the present time”). UPS
again asks us to apply the doctrine of extrinsic
ambiguity and find that the term “current” “doesn’t mean
what it seems to mean.” The argument is much better
suited to this provision than it was to the previous one
because here there is specific, objective evidence of the
meaning of the term “current.” The parties’ course of
dealing shows that the SPD was first incorporated into
the 2002 CBA and therefore indicates that the SPD
referred to the 2002 CBA and no other. In addition, the
December 2007 SMM, informing the Local 705 retirees
that the cap had been exceeded and that UPS would
collect additional contributions when the “current” CBA
expired, also shows that the SPD referred to the 2002
CBA. We need not decide whether this evidence creates
an ambiguity, however, because we agree with the
district court that the December 2007 SMM amended the
SPD.
Nos. 09-2445 & 09-2553                                    11

  ERISA requires that fiduciaries provide beneficiaries
with a summary of any material modification of a plan
“written in a manner calculated to be understood by
the average plan participant . . . .” 29 U.S.C. § 1022(a).
Material modifications include changes to “requirements
respecting eligibility for participation and benefits[.]” Id.
at § 1022(b). The December 2007 SMM clearly stated that
the cost “has exceeded” the cap and that additional
contributions “will be effective after the expiration of the
current [CBA].” This was a clear departure from the
SPD—which only referred to the possibility of additional
contributions—and notified the Local 705 retirees that
UPS would no longer be picking up the tab. As we
pointed out at oral argument, UPS could have com-
pletely eliminated the problem if it had specified in the
December 2007 SMM that the contributions would be
collected after the expiration of the “2002” CBA. Never-
theless, we find that the December 2007 SMM met the
minimal requirements necessary to modify the SPD.
  The Local 705 retirees argue that the December 2007
SMM failed to specify the amounts that would be col-
lected from the retirees and was, on that basis alone,
ineffective. But the retirees fail to cite any provision,
regulation, or case mandating this requirement. Rather,
the regulations they cite pertain to requirements for the
SPD (the validity of which is not at issue here), not the
plan modification. See 29 U.S.C. § 1022(b); 29 C.F.R.
§ 2520.102-3(j)(3). The Local 705 retirees raised no objec-
tions to the December 2007 SMM, issued only based on
their complaints about the October 2007 SMM, which did
specify amounts. We find that the December 2007 SMM
12                                  Nos. 09-2445 & 09-2553

modified the SPD and made it reasonably clear that
contributions would increase after the expiration of the
“current” SPD—at that time, the 2002 CBA. UPS’s deter-
mination that the term “current” in the SPD referred
only to the 2002 CBA therefore was not arbitrary and
capricious. Accordingly, there is no basis to grant the
Local 705 retirees’ request to increase the duration of the
injunction against UPS.
   For these reasons, the judgment of the district court
is A FFIRMED.

                          2-10-10