Court Opinion

ID: 8245977
Source: CourtListenerOpinion
Date Created: 2022-10-16 09:33:29.843241+00
Date Added: 2024-06-11T16:42:43.608254
License: Public Domain

MEYER, Justice
(dissenting).
I respectfully dissent. The majority frames the issue incorrectly as a narrow one: the meaning of an active-employees clause in 60 collective bargaining agreements (CBAs) between the City of Duluth and its employees. I would correctly frame the issue as the district court stated it in its May 12, 2009, Order for Class Certification: “As a matter of contract, are the Class members’ health benefits fixed and governed by the plan in place on the date of their retirement or may the City modify the benefits whenever and however benefits for current employees are modified?” In answering the correct issue, I would not limit the analysis to the meaning of only one term in the contract, “active employees,” isolating the term from the rest of the terms of the contracts. Rather, I would apply established rules of contract interpretation, and consider the terms of the contract as a whole to determine whether the City may modify a retiree’s health benefits whenever and however benefits for current employees are modified. I would conclude that the contracts are ambiguous. Therefore, I would reverse the court of appeals and remand to the district court for trial.
I.
Paula Savela is the class representative in a class action brought in 2008 on behalf of all former Duluth city employees (and their spouses and dependents) who retired between January 1, 1983, and December 31, 2006, and are entitled to retiree health benefits under a series of negotiated collective bargaining agreements.1 At issue in the litigation is the right of the City of Duluth, under the terms of the various collective bargaining agreements, to modify health benefits for members of the class, that is, for retired employees. These 60 CBAs2 all include similar language. For example, the agreement in effect between the City and AFSCME between 2004 and 2006 includes the following provision:3
23.1 Any employee who retires from employment with the City on or after *807January 1, 1983 ... shall receive hospital-medical insurance coverage to the same extent as active employees, subject to the following conditions and exceptions:
(a) The City will provide any eligible retired employee without claimed dependents the approved fee-for-service coverage or plan 2 coverage, whichever is designated by the employee at the time of retirement, provided active employees, without cost to the retiree.
(b) Effective December 31, 1987, for any such eligible retired employee with or without claimed dependents, the City will provide, without cost to the retiree, the approved fee-for-service coverage or plan 2 coverage, whichever is designated by the employee at the time of retirement, provided active employees. Effective with the approval of this contract by the City Council, for any such eligible retired employee with or without claimed dependents, the City will provide without cost to the retiree, the approved fee-for-service, (Plan 1), H.M.P. (Plan 2), Comprehensive Plan (Plan 3) or Plan 4 coverage provided to active employees. However, the approved fee-for-service coverage shall be subject to an annual deductible amount of $650. If no covered-plan participant receives benefits during a calendar year, any portion of the deductible amount which is accrued for services rendered in the last three calendar months of that calendar year shall be applied toward the deductible amounts for the following calendar year.
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(d) Such coverage shall be for the life of the retiree, but if the retiree dies before his or her spouse, such coverage shall be continued for such spouse until he or she dies or remarries, but any such coverage for such surviving spouse shall not include coverage for any dependent of such surviving spouse.
(e) Employees hired after February 1, 2001 and who retire and qualify for retiree health coverage shall receive benefits under the comprehensive plan (Plan 3) only. Any employee who qualifies for retiree hospital-medical insurance may voluntarily elect to retire under Plan 3, the comprehensive plan.
(Emphasis added.) Provisions (a) and (b) list specific plans from which the retired employee may choose. Provision (d) then states that “[s]uch coverage shall be for the life of the retiree.”
The class argues that the term “active employees” in paragraph (a) refers to those employees who were employed at the time a particular class member retired, and the phrase “to the same extent as active employees” means that class members’ health benefits are fixed and governed by the plan in place on the date of the class member’s retirement. The City argues that the term “active employees” refers to those currently employed by the City, meaning the phrase “to the same extent as active employees” means that class members’ benefits may be modified to the extent that health benefits for current employees are modified.
II.
A promise by a public employer, embodied in a collective bargaining agreement, to pay health insurance premiums for an employee who retires during the term of the collective bargaining agreement is enforceable on contract grounds. Hous. & Redev. Auth. of Chisholm v. Norman, 696 N.W.2d 329, 337 (Minn.2005). A contract is ambiguous if its terms are reasonably susceptible to more than one interpretation. Blattner v. Forster, 322 N.W.2d 319, 321 (Minn.1982).
*808The construction and effect of an unambiguous contract presents a question of law for the court. Trondson v. Janikula, 458 N.W.2d 679, 681 (Minn.1990). The determination of whether a contract is ambiguous is also a question of law, but the interpretation of an ambiguous contract is a question of fact for the jury. Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346 (Minn.2003). CBAs are contracts, see Norman, 696 N.W.2d at 337, and their proper interpretation is subject to de novo review, see Halla Nursery, Inc. v. City of Chanhassen, 781 N.W.2d 880, 884 (Minn.2010).
In determining whether the 60 CBAs at issue were ambiguous, the district court and the court of appeals considered only the term “active employees” (or perhaps the phrase “to the same extent as active employees”), which appears in all contracts. However, the question of whether a contract is ambiguous “depends, not upon words or phrases read in isolation, but rather upon the meaning assigned to the words or phrases in accordance with the apparent purpose of the contract as a whole.” Art Goebel, Inc. v. N. Suburban Agencies, Inc., 567 N.W.2d 511, 515 (Minn.1997); see also id. (“The cardinal purpose of construing a contract is to give effect to the intention of the parties as expressed in the language they used in drafting the whole contract.”); Halla Nursery, 781 N.W.2d at 884; Emp’rs Mut. Liab. Ins. Co. of Wis. v. Eagles Lodge of Hallock, Minn., 282 Minn. 477, 479, 165 N.W.2d 554, 556 (1969).
Thus, the goal of contract interpretation here is not to figure out what the phrase “to the same extent as active employees” means in isolation. Rather, the goal is to discern what health benefit obligation the City of Duluth owes retired employees by interpreting the words or phrases of the CBAs in the context of the documents as a whole.
A.
All 60 contracts at issue begin their discussion of hospital-medical insurance for retired employees by describing eligibility requirements. The paragraph is then followed by several subparts that describe the “conditions and exceptions” that apply to the employee’s eligibility requirements. Typically, these may include requirements to purchase Medicare Part B, different plans and deductibles available for retired employees with or without dependents, and credits for sick leave not used before retirement. The specific “conditions and exceptions,” however, vary from CBA to CBA.
Where the phrase “to the same extent as active employees” is specifically qualified as “subject to the following conditions and exceptions,” it is reasonable to conclude that the obligations owed to retirees are different than those owed to current employees. In other words, the fact that each CBA was negotiated with varying terms and conditions could mean that retirees under different contract years were intended to collect different benefits under different plans.
Further, a contract that is “subject to the following conditions and exceptions” should be interpreted according to those conditions and exceptions. Some contracts contain terms and conditions that are inconsistent with the City being able to modify retirees’ benefits whenever and however benefits for current employees are modified. For example, 11 of the 12 CBAs between the City and Confidential Employees4 contain the following paragraph:
*80914.2 Any person purchasing medical insurance coverage pursuant to a former, or this, agreement may continue to do so. When any such person ceases to so purchase medical coverage, the employee shall no longer have any right to participate in any insurance plan or group created by this, or successor, labor agreement. This paragraph shall become inoperative when no former employee is buying insurance coverage as here provided.
(Emphasis added.) Each of the CBAs also specifies particular plans under which retired employees would be covered. It is reasonable to interpret paragraph 14.2 as fixing retired employees’ rights to purchase medical insurance pursuant to the contract in effect at the time of retirement, thus limiting the changes available to the City in their obligations to those retired employees.
The City argues that all the clauses contained in the “conditions and exceptions” portion of the CBA are subordinate to the “active employees” clause, and are therefore not controlling. Under this interpretation, the CBAs require any plan for retirees first be offered to “active employees”; only after that requirement is met will the subsequently listed conditions and exceptions apply. However, the full “active employees” clause states health insurance benefits will be given “to the same extent as active employees, subject to the following conditions and exceptions.” Any provision that follows the “active employees” clause is a “condition and exception”; it is not necessarily subordinate to the “active employees” clause. Interpreting the CBA in the way the City advances would read the word “exception” out of the CBA. Cf. Current Tech. Concepts, Inc. v. Irie Enters., Inc., 580 N.W.2d 589, 543 (Minn.1995) (“A contract must be interpreted in a way that gives all of its provisions meaning.”).
B.
In addition to the “terms and conditions” language discussed above, all 60 contracts between the City and its employees include the provision: “Such coverage shall be for the life of the retiree.” This phrase occurs in each contract after previous paragraphs set out the types of coverage a retiring employee would receive. In some contracts, such as those between the City and Confidential Employees, the phrase is listed as a “condition and exception”; in others, such as those between the City and Fire Fighters Local 101, the phrase appears in a separate numbered paragraph.
To what coverage does “such coverage” refer? The phrase “[s]uch coverage shall be for the life of the retiree” likely refers to the specific coverage designated by the retiree under the previous terms and conditions paragraphs. The City’s obligation is mandatory; the designated coverage shall be for the life of the retiree. Therefore, it would be reasonable to conclude that the City’s obligation is fixed at the time of the employee’s retirement when the employee chooses benefits. This interpretation would mean that the employee is limited to whichever plan he or she designated at the time of retirement, but is covered under that plan on whatever terms apply to then-active employees. The ability of the City to move all retirees to a different plan — on whatever terms — is therefore suspect.
*810Another possible interpretation of this language would be that retirees are only allowed to receive the insurance benefits that current employees receive. Provision (a) could be interpreted as merely providing retirees a choice between two plans that were, at that time, provided to active employees. Therefore, if all current employees were shifted to one plan, retirees would also be shifted to that plan, because it is the only one available to “active employees.” In other words, the insurance benefits available to retirees must, as a prerequisite, be provided to current employees. If the plan is no longer offered to current employees, this provision is no longer enforceable, and “such coverage” only refers to the City’s general obligation to provide coverage.
Given that there are two reasonable interpretations, I would conclude that the contracts are ambiguous. This ambiguity is reinforced by an additional paragraph that appears in many of the CBAs. According to the 2000-2002 and 2003 contracts between AFSCME and the City, and the 2000-2001-2002 contract between Duluth Police Local and the City, employees hired after a certain date are eligible for “benefits under the comprehensive plan (Plan 3) only.” This begs the question of what obligation the City retains if Plan 3 is eliminated for current employees. If “active employees” are current employees, then the City might argue it is only required to provide coverage under these CBAs if Plan 3 remains available to current employees; if Plan 3 is eliminated, the City might argue it can substitute any coverage provided current employees or cease coverage altogether for employees who retire after agreement approval, since the plan these retirees are limited to is no longer offered. If “active employees” are employees covered under the CBA at the time of retirement, the City might be required to continue Plan 3 coverage for these retirees even if current employees no longer retain Plan 3 coverage as an option.
Since the phrase “[s]ueh coverage shall be for the life of the retiree,” when read in conjunction with the remainder of the contracts relating to hospital-medical coverage for retirees, is susceptible to more than one reasonable interpretation, the contracts are ambiguous and should be remanded to the fact-finder for interpretation.
In sum, the contracts entered into between the City and AFSCME, Confidential Employees, Duluth Police Local, Fire Fighters Local 101, and Supervisory Association attempt to fix the City’s obligation in providing hospital-medical insurance to retired employees. The nature and extent of the City’s obligations are susceptible to more than one reasonable interpretation, and are thus ambiguous. This ambiguity occurs in two ways. First, the qualification of the “active employees” language with “conditions and exceptions” is ambiguous because conditions and exceptions make the City’s obligations to retired employees different from the obligations owed to current employees. Second, the phrase “[s]uch coverage shall be for the life of the retiree” may indicate either that the City is obligated to provide only that coverage given to current employees, or that it must continue to give particular coverage to retirees. When contract language is ambiguous, summary judgment is inappropriate and contract interpretation becomes a question of fact for the jury. Hickman v. SAFECO Ins. Co. of America, 695 N.W.2d 365, 369 (Minn.2005). I would reverse the court of appeals and remand to the district court for trial.5

. The CBAs involved are between the City of Duluth and the Duluth Police Union, Local 807 (Duluth Police Local); Confidential Employees; City of Duluth Supervisory Association (Supervisory Association); Local 66 of AFSCME Council 5 (formerly Council 96) for Basic Unit Employees (AFSCME); and Local 101 International Association of Fire Fighters (Fire Fighters Local 101).

. The record contains parts of 60 CBAs for the five unions: 13 between the City and Duluth Police Local; 12 between the City and Confidential Employees; 11 between the City and Supervisory Association; 12 between the City and AFSCME; and 12 between the City and Fire Fighters Local 101. These 60 contracts collectively cover the entire class period except for 2003 for Duluth Police Local. If there is a 61st CBA covering that year, it is not in the record.

.All 60 CBAs include the phrase "[sjuch coverage shall be for the life of the retiree.” In addition, all 60 CBAs follow the format of describing the coverage available to retired employees and then stating that "[sjuch coverage shall be for the life of the retiree." Thus, the analysis of the AFSCME contract for 2004-2006 as ambiguous would apply to all 60 contracts at issue.

. The only contract between the City and Confidential Employees that does not contain *809paragraph 14.2 is the 1983 agreement, which contains a different paragraph providing for employees retiring before January 1, 1983, who received retirement benefits under a different scheme. Additionally, the 1984-1985 agreement has the identical paragraph numbered 14.6.

. The district court signed an order on May 12, 2009, agreeing with the parties’ stipula*811tion that class treatment of the contract issue was appropriate. If the contracts were deemed ambiguous, the district court may have had to reconsider class status. See Minn. R. Civ. P. 23.03 (class status may be altered or amended before final judgment). However, the issue of class certification is not before the court, and thus need not be decided.