Court Opinion

ID: 8245975
Source: CourtListenerOpinion
Date Created: 2022-10-16 09:33:29.839008+00
Date Added: 2024-06-11T16:42:43.603955
License: Public Domain

ANDERSON, PAUL H., Justice
(dissenting).
I respectfully dissent. I disagree with the majority’s conclusion that the language in the approximately 60 collective bargaining agreements (CBAs) between the City of Duluth and its employees is unambiguous. There is more than one reasonable interpretation of the CBAs at issue. Therefore, I would conclude the CBAs are ambiguous and would reverse the district court’s decision to grant the City’s summary judgment motion and remand to the district court for a determination of the CBAs’ meaning.
Before I get into the reasons why I disagree with the majority’s analysis, it is important to describe what this case is about. This case is about the interpretation of contracts, more particularly, the interpretation of approximately 60 CBAs entered into between the City and its employees following arms-length negotiations. This case is not about a change of statutes or ordinances, nor is it about one party— i.e., the City — being in default on its obligations. This is simply a case about contract interpretation.
It is also important to understand the procedural posture of this case. It comes to us following the district court’s grant of the City’s summary judgment motion. The City, in its motion, asserted that there are no facts in dispute and there is no *801ambiguity with respect to any of the approximately 60 CBAs. The district court agreed with these assertions. I disagree. The bottom line for me in this case is that after reviewing the approximately 60 CBAs between the City and its employees, I conclude that there are factual matters in dispute which need a further hearing at the district court in order to resolve the ambiguities in the CBAs.
We review a district court’s decision regarding summary judgment de novo. Premier Bank v. Becker Dev., LLC, 785 N.W.2d 753, 758 (Minn.2010). Our goal in contract interpretation is “to ascertain and enforce the intent of the parties.” Valspar Refinish, Inc. v. Gaylord’s, Inc., 764 N.W.2d 359, 364 (Minn.2009). Importantly, to ascertain the intent of the parties we look to the contract as a whole. See Halla Nursery, Inc. v. City of Chanhassen, 781 N.W.2d 880, 884 (Minn.2010) (“[T]he terms of a contract are not read in isolation.”). The intent of the parties is not ascertained “by a process of dissection in which words or phrases are isolated from their context, but rather from a process of synthesis in which the words and phrases are given a meaning in accordance with the obvious purpose of the contract * * * as a whole.” Motorsports Racing Plus, Inc. v. Arctic Cat Sales, Inc., 666 N.W.2d 320, 324 (Minn.2003) (quoting Republic Nat’l Life Ins. Co. v. Lorraine Realty Corp., 279 N.W.2d 349, 354 (Minn.1979)) (alteration in original). A contract is ambiguous when the language is susceptible to more than one reasonable interpretation. Dykes v. Sukup Mfg. Co., 781 N.W.2d 578, 582 (Minn.2010). Therefore, we must look at the CBAs as a whole to determine if there is more than one reasonable interpretation, and we must not isolate the active-employees clause from the remaining portions of the CBAs.
Both parties assert that the CBAs unambiguously support their respective positions. Savela argues that the CBAs unambiguously require the City to provide health insurance benefits to retirees for life, and that the City is obligated to provide those benefits at the same level the retiree received those benefits at the time of his retirement. The City agrees that the CBAs unambiguously require the City to provide health insurance benefits to retirees for life, but argues that it is obligated only to provide those benefits at the same level at which the City provides benefits to its present-day employees. At this preliminary stage in the proceedings, it is not possible to determine which argument should ultimately prevail because the CBAs are subject to more than one reasonable interpretation. More information is required before this case can be properly resolved.
I begin my analysis by noting that the majority omits describing certain critical historical circumstances surrounding the agreement by the City to provide retirees with the health insurance benefits in dispute. A more complete picture of the circumstances under which the employees and the City agreed to the retiree benefits in dispute will help clarify the context of the current dispute. Savela submitted a number of affidavits detailing the history of the City’s retiree health insurance benefits; but none of the allegations contained in the affidavits has been established— either shown to be true or discredited — at this stage of the proceedings.1
*802According to an affidavit from three individuals involved on the employees’ side of the negotiations in 1983, before the current retiree health insurance provision was in effect the City paid health insurance premiums for retirees based on accumulated sick leave. A federal regulation took effect around the time of the 1983 negotiations that required the City to show projected costs or payables for then-existing contract obligations. As a result of changes in certain regulations, the City offered its employees the new retiree health insurance benefit that is in dispute. The City did so because it wanted “to avoid the political consequences of that newly required negative for budgeting purposes.” But the City discovered that the new health insurance benefit would cost the City more than the old one. Therefore, the City offered the employees’ negotiating committee the alternative of either a 1 percent wage increase with the old health insurance system intact, or a 2 percent wage decrease with the new retiree health insurance benefits. The new retiree health insurance system was adopted by the City and its employees.
After the new health insurance benefits language was adopted, the City arguably interpreted and applied the CBAs to require the City to provide health insurance benefits to retirees for life at the same level as when the retiree retired. According to the City’s former Employee Benefits Administrator, between 1985 and 2005, the City went from providing two health insurance plans — one a fee-for-service plan and the other a HMO plan — to providing up to 129 different variations of its health insurance plans. The variations between the plans included differing co-pays, deductibles, and life qualifying events. Save-la contends that the accumulation of so many different variations of its plans shows that the City, until only recently, had interpreted the CBAs as requiring the City to provide retirees with health insurance benefits frozen at levels they received on the date of their retirement. The City counters that the accumulation of the different variations in its plans is consistent with its position that the City only is required to provide plans that are available to present-day employees.
The majority dismisses Savela’s interpretation of the CBAs — that the CBAs guarantee retirees health insurance benefits at the same level as the day they retired — as unreasonable and states that the majority’s interpretation is the only reasonable interpretation. The majority concludes that a reasonable interpretation of the CBAs is that retirees would only receive health insurance benefits identical to those of current City employees. I concede that the majority’s interpretation of the CBAs is reasonable, but the majority falls far short of the mark in its efforts to support its conclusion that Savela’s alternate interpretation of the CBAs is not reasonable and therefore that the CBAs are unambiguous.
There are at least four components of the CBAs that render them ambiguous with regard to the health insurance benefits guaranteed to retirees. Even though each component individually should be enough to render the CBAs ambiguous, when all four components are considered together there is strong, if not overwhelming, evidence of ambiguity. First, the active-employees clause, which is present in some form in all of the CBAs, is nonspecific about the time to which it refers. The active-employees clause states:
Any employee who retires from employment with the City on or after January 1, 1983, after having been employed by the City for such total time so as to be qualified by such employment to receive retirement benefits from the Public Em*803ployees Retirement Association, the Duluth Firemen’s Relief Association, or the Duluth Police Pension Association, and who is currently receiving a retirement or disability pension from any such fund, shall receive hospital-medical insurance coverage to the same extent as active employees, subject to the following conditions and exceptions....
As the majority notes, “active” tends to mean “current” or “participating.” But it is not enough to say that “active” means “current,” because “current” still must refer to a specific time frame to have any meaning. For example, if a newspaper article refers to “the current Minnesota Governor,” it is unknown which governor the article references without knowing more details, such as the publication date of the article. The same is true of the active-employees clause. Without context, “active” or “current” employees as used in the CBAs could mean “current” on a specific date in the past.
It is essential for any court deciding this case to answer the following question: what is the exact time period to which the active-employees clause refers? Is it active as of the date the CBA took effect, active as of an employee’s retirement date, active as of the present time, or active as of some other time? When we look to a CBA as a whole, we find that the majority’s answer to this question is not the only reasonable answer. In his dissent at the court of appeals, Judge Stauber noted that the CBAs only cover employees who are “active” during the effective period of the CBA, a 1- to 3-year span. See Savela v. City of Duluth, No. A09-2093, 2010 WL 3632313, at *6 (Minn.App. Sept. 21, 2010) (Stauber, J., dissenting). Therefore, when a CBA uses the term “active employees,” it could be referring to only those employees who are active during the effective dates of the applicable CBA, rather than future employees who are not covered by the CBA in effect. The majority only notes that there is no language limiting the term “active” to “then-active.” But the majority’s analysis works just as well to support ambiguity because, as Judge Stau-ber states, there is also no language limiting the term “active” to “now-active.” See id. at *5. Thus, even using the majority’s analytical framework, the active-employees clause can be reasonably interpreted to mean both “then-active” and “now-active,” and therefore the clause is ambiguous.
Second, “active employees” could be interpreted as being merely a descriptive term rather than a term designed to tie the retirees’ health insurance rights to an actual group of employees. As the City acknowledges in its brief, “[t]he contract promise at issue is stated at a level of detail no greater than the plan level.” A reasonable interpretation of the active-employees clause — when considered alongside the lack of details provided in the retiree health insurance section and the greater details provided in the employee health insurance section2 — is that the active-employees clause was meant to incorporate the details of the insurance plan from another section of the CBAs.3 Therefore, *804the “active employees” language can reasonably be interpreted to simply incorporate the details of the section describing the plans. Viewing the active-employees clause as a method of incorporating a more specific provision of the CBA reinforces the reasonable alternative interpretation that the active-employees clause refers to employees subject to the applicable CBAs rather than present-day City employees.
Third, under the majority’s interpretation, the CBAs do not state which provision will control in the event of a conflict. The CBAs, in addition to stating that retirees shall receive the health insurance plan provided active employees, also state that retirees shall receive a specific health insurance plan or must select one plan from a list of options. The CBAs do not indicate which requirement should control in the event that the listed plans are no longer provided to present-day employees. For example, some of the CBAs state that retirees without claimed dependents would receive “[t]he approved fee-for-service coverage provided active employees.” But the majority does not note why one clause of the provision — “provided active employees” — trumps the other clause of the provision — the “fee-for-service coverage”— when the two are in conflict with each other. In other words, if the City stops providing the fee-for-service coverage to its present-day employees, even under the majority’s interpretation it is unclear what the City is obligated to do under the CBA. Is the City required to (1) stop providing the retirees with the fee-for-service coverage and continue to provide retirees with the plan given to present-day employees, or is it required to (2) stop providing the retirees with a plan provided present-day employees and continue to provide retirees with the fee-for-service coverage? Despite the lack of language dictating the answer to this critical question, the majority would conclude that the only reasonable interpretation is that the City can stop providing the fee-for-service coverage to retirees when it no longer provides that coverage to its present-day employees. But I fail to see how this conclusion is dictated by the language of the CBAs.
Fourth, the CBAs state that “[s]uch coverage shall be for the life of the retiree.” The majority concludes that the term “such coverage” refers to the insurance plan that the City provides to present-day employees. But “such coverage” could just as readily refer to the specific plan listed in the CBA, or the plan chosen by the retiree at the time of retirement. Again, the language of the CBA does not explicitly answer this question, yet the majority concludes that its conclusion is the only reasonable interpretation.
An additional factor important to any analysis of the meaning of the CBAs is that one can arrive at reasonable alternative interpretations of the CBAs without reading words into the CBAs or relying on extrinsic evidence. Ambiguity is apparent simply by reading the CBAs as a whole. But the extrinsic evidence provided by Savela is notable for its consistency with a conclusion of ambiguity based on the CBAs’ language. Savela’s reasonable alternative interpretation is consistent with the way the City has arguably interpreted the CBAs for approximately 25 years. Moreover, the CBAs were interpreted in a manner that gave rise to, as the City describes in its response to Savela’s petition for review, a “morass of conflicting extrinsic evidence.” It seems unlikely that approximately 60 CBAs with only one reasonable interpretation — as the majority *805holds — would lead to a “morass of conflicting extrinsic evidence.”
Additionally, the majority’s conclusion would allow the City to completely eliminate the retirees’ health insurance benefits by removing health insurance for its present-day City employees. The City conceded as much during oral argument when it stated that “if coverage is not available for active employees then it is not available for retirees either.” Indeed, the majority affirms the district court, which concluded that “[t]he City may modify the Plaintiffs’ benefits whenever and however benefits for active employees are modified.” (Emphasis added.) Moreover, the present-day employees’ bargaining unit no longer represents the retirees, even though that bargaining unit will, under the majority’s analysis, be essentially negotiating what the retirees’ health insurance benefits will be. If the present-day employees are offered a better deal that excludes health insurance benefits, they may accept such a deal without regard to the affected retirees. Therefore, there appears to be nothing that would prevent the City from removing all health insurance benefits for its present-day employees and, by extension, removing the retirees’ health insurance benefits.
The City claimed at oral argument that the only way the City would not provide health insurance coverage to its employees would be “a federal takeover or a financial disaster.” But this possibility may not be as remote as the City makes it out to be. Hopefully, we are now in the process of emerging from a serious economic recession, a recession that has caused several states to rethink their pension and health care liabilities. In fiscal year 2009, “the gap between the promises states made for employees’ retirement benefits and the money they set aside to pay for them grew to at least $1.26 trillion,” which was a 26 percent increase in one year. The Pew Ctr. on the States, The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs 1 (2011). For retiree health care and other benefits, states had saved less than 5 percent of their total liability. Id. at 5. The study done by the Pew Center on the States appears to list Minnesota as one of 19 states that set aside no funds for retiree health care liabilities. Id. at 6. Because of the failure to set aside funds to pay for the benefits that were contractually given, states have begun taking legislative steps to either reduce benefits or increase employee contributions. Id. at 7.
At the state level, there have been a few attempts to revise the pension benefits of state workers even after they have vested. Colorado recently attempted to modify the pension benefits granted to current employees as well as those who had already retired. Whitney Cloud, Comment, State Pension Deficits, the Recession, and a Modern View of the Contracts Clause, 120 Yale L.J. 2199, 2202 (2011). Before Colorado, attempts to modify retiree benefit agreements were also made in Alabama and Arizona. Id. at 2202 n. 19. Moreover, the phenomenon of attempting to reduce vested pension rights is not new to the most recent economic climate; it has been going on for quite some time. See Note, Public Employee Pensions in Times of Fiscal Distress, 90 Harv. L.Rev. 992, 993 (1977). Given that states have already attempted to alter pension benefits after retirees have earned them, it does not appear a remote possibility that the City would at some point attempt to eliminate health insurance benefits for its present-day employees. Under the conclusion reached by the majority, the City would eliminate all such benefits for the retirees.
For all of the foregoing reasons, I would conclude that the language in the approxi*806mately 60 CBAs guaranteeing retiree health insurance benefits is ambiguous; therefore, I would reverse the district court and remand to the district court for further proceedings to determine the meaning of the CBAs.

. The City objected to the submission of some of the affidavits on hearsay and lack-of-foundation grounds. The district court considered the affidavits with respect to the promissory estoppel claim, but did not use the affidavits in deciding the contract issue. I do not use the affidavits to decide whether the CBAs are ambiguous, but merely to illustrate the history of the dispute before our court.

. The employee health insurance section can be found in the 2004-2006 Duluth Police Local CBA. Few of the other CBA excerpts, if any, contain this section.

. The majority faults the dissent for not "pointfing] to any specific language” from the CBAs in support of its analysis. But the majority misinterprets the point being made by the dissent. If there was specific language supporting the dissent's argument, language in the CBAs would unambiguously support Savela's interpretation and the CBAs would not be ambiguous. But the dissent was not able to find specific language that supports either the City's or Savela’s interpretation of the CBAs. It is precisely because there is no specific language supporting the positions of the parties that the dissent must look to other *804provisions of the CBAs in search of clarity. In this search, the dissent found no clarity but did find other reasonable interpretations for the term “active employees.”