Gardner Denver, Inc. v. District No. 9 Local Lodge 822, International Association of Machinists and Aerospace Workers

Filing 35

OPINION: The Defendant's Motion for Summary Judgment 15 is DENIED. The Plaintiff's Cross-Motion for Summary Judgment 23 is ALLOWED. The Court concludes that the dispute between the Parties is not subject to arbitration. The Court notes that there was a discovery dispute between the parties while the summary judgment motions were pending. Discovery was stayed pending resolution of the summary judgment motions. Accordingly, this case is referred to United States Magistrate Judge Tom Schanzle-Haskins to address any discovery issues in light of the Court's ruling. (See Written Opinion.) Entered by Judge Richard Mills on 9/2/2014. (GL, ilcd)

E-FILED

Tuesday, 02 September, 2014 11:55:58 AM
Clerk, U.S. District Court, ILCD

IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
GARDNER DENVER, INC.,
Plaintiff,
v.
DISTRICT NO. 9 LOCAL LODGE
822, INTERNATIONAL
ASSOCIATION OF MACHINISTS
AND AEROSPACE WORKERS,
Defendant.

)
)
)
)
)
)
)
)
)
)
)
)

NO. 13-3040

OPINION
RICHARD MILLS, U.S. District Judge:
Pending is the Defendant’s Motion for Summary Judgment. Pending
also is the Plaintiff’s Cross-Motion for Summary Judgment.
I. INTRODUCTION
Plaintiff Gardner Denver, Inc. (“the Plaintiff” or “the Company”) filed
a Complaint for Declaratory Judgment against Defendant District No. 9
Local Lodge 822, International Association of Machinists and Aerospace
Workers (“the Defendant” or “the Union”). The dispute concerns changes
to retiree medical benefits for current retirees of the Company and whether

they are within the scope of the parties’ collective bargaining agreement
(CBA) or are arbitrable under the contractual grievance procedure.
The Union filed a Counterclaim to Compel Arbitration. It seeks
summary judgment on Count I of its Counterclaim to compel the Plaintiff
to arbitrate a dispute over retiree medical benefits pursuant to the parties’
CBA.
II. FACTUAL BACKGROUND
The Company is an employer engaged in an industry affecting
commerce within the meaning of 29 U.S.C. §§ 142 and 152. The Union
is a labor organization representing employees in an industry affecting
commerce within the meaning of 29 U.S.C. §§ 142 and 152. The Parties
have had a collective bargaining relationship for over 60 years. The Union
and the Company are parties to a CBA, effective May 6, 2012, to which
both parties are bound.
Prior to 1991, the Company provided a retiree benefits package
governed by the Gardner Denver Retiree Medical Plan. The medical plan
included, among other things, an agreement to pay the majority of the

2

insurance premiums.
Article 12 Section 12.5 of the CBA reads as follows:
RETIREE MEDICAL PHASE OUT
AND SUPPLEMENTAL
IARP CONTRIBUTION PLAN
Effective October 1, 1991, for employees who turn 49 or less in
1991 and are employed prior to May 1, 1991, eliminate medical
insurance coverage at retirement and add the following
contributions to their Individual Retirement Plan on a weekly
basis for any week in which the employee has contribution
hours under the Plan:
Age Turned
In 19911

Weekly
Contribution

25 or younger
26
27
28
29
30
31
32
33
34
35
36
37
38
1

$2.31
$2.54
$3.00
$3.46
$3.92
$4.38
$4.85
$5.31
$5.77
$6.23
$6.69
$7.15
$7.85
$8.54

The year the change becomes effective.

3

39
40
41
42
43
44
45
46
47
48
49

$9.23
$10.15
$11.08
$12.00
$12.46
$13.85
$15.00
$16.15
$17.31
$18.46
$20.77

No change for those retired prior to October 1, 1991, and no
supplementary pension contributions or retiree medical for
employees hired after May 1, 1991.
Accordingly, this bargained-for change in medical plans only affected
current and future employees, and did not alter the Medical Plan, which
remained in place for the then-current retirees.
According to the Comprehensive Retiree Medical Plan dated April
2008, “[t]he amount of Medical Plan contribution being paid by retirees is
as set forth in the letter [retirees] received at retirement, or as set forth in
the letter you received in January 2007.” It further provides that “[t]his
contribution amount may be changed in the future. The company reserves
the right to adjust Retiree Medical Plan contributions if the future cost of

4

claims changes. You will be notified of any adjustment to the amount of
your Medical Plan Contributions.”
Disputes over Article 12 Section 12.5 are arbitrable under Article 5
of the grievance procedure. Section 5.1 of the CBA provides: “A grievance
is a dispute or difference of opinion between the Company and the Union,
or between the Company and an employee(s) concerning the breach,
violation, meaning or application of any of the terms or conditions of this
Agreement.” When disputes are not otherwise resolved, CBA Section 5.1
provides: “the grievance may be submitted to arbitration as hereinafter
provided if a written request to arbitrate is submitted to the Company no
later than ten working days after the Company’s decision is given.” This
CBA Section further provides: “The Arbitrator may consider and decide
only the particular issue or issues presented in writing by the Company and
the Union and the decision must be based solely upon an interpretation of
the provisions of the Agreement. The Arbitrator shall not amend, take
away, add to, or change any of the provisions of this Agreement.”
Article 1 of the CBA provides: “The Company recognizes the Union

5

as the sole collective bargaining agency for all the above named employees.”
The above named individuals include: “all production and maintenance
employees of the Company in Quincy, Illinois, except office workers, sales
force, area managers, supervisors, timekeepers, watchmen, guards, and
employees of the engineering department.”
In a letter dated October 24, 2012, the Plaintiff sent notices to
participants in the retiree medical plan that as of January 1, 2013, retirees
will be required to pay 50 percent of the costs of retiree health benefits and
as of January 1, 2014 retirees will be required to pay 100 percent of the
health insurance premium. Until the Company unilaterally changed retiree
medical benefits, those who retired prior to October 1, 1991 were only
required to pay $30.00 per month until they became Medicare eligible.
The change affected those who retired before 1991.
The CBA provides, in pertinent part, that the Union is the “sole
collective bargaining agency” for “all production and maintenance
employees of the Company in Quincy, Illinois, except office workers, sales
force, area managers, supervisors, time-keepers, watchmen, guards, and

6

employees of the engineering department.” The parties dispute whether the
Union is recognized in the CBA as the bargaining agent for retirees of the
Company.
On December 5, 2012, the Defendant filed a grievance protesting the
Plaintiff’s unilateral decision to change retiree medical coverage, asserted
that this change violates Section 12.5 of the CBA, and demanded the
Company make whole any losses due to the Company’s failure to follow the
CBA. In a letter dated December 21, 2012, the Company denied the
Union’s grievance.

Subsequently, the Union demanded arbitration

pursuant to the grievance procedure in the CBA. In response, the Company
refused to arbitrate and, on February 20, 2013, verbally informed the
Union that the Company intended to litigate the issue in Court.
The grievance procedure set forth in the CBA applies to disputes or
differences concerning the “breach, violation, meaning or application of any
of the terms or conditions of this Agreement.” The parties dispute whether
such “terms or conditions” of the CBA apply only to bargaining employees.
The CBA does not explicitly and unmistakably reserve a determination as

7

to whether a dispute is a proper subject of the grievance procedure for
exclusive resolution.
The authority of the arbitrator is limited as follows: “The Arbitrator
may consider and decide only the particular issue or issues presented in
writing by the Company and the Union and the decision must be based
solely upon an interpretation of the provisions of the Agreement. The
Arbitrator shall not amend, take away, add to, or change any of the
provisions of this Agreement.”
The CBA and the Company’s bargaining obligations relate to current
employees. To the extent the Company is claiming the CBA does not relate
to retirees, the Union disputes any such suggestion. The parties further
dispute whether the Company has ever negotiated an agreement with the
Union related to retiree medical insurance coverage of premiums applicable
to individuals who, at the time of the agreement, were retirees of the
Company.
The Plaintiff filed its Complaint in this case. The Defendant states
that Jesse Stone, who is retired from the Company, and his spouse Betty

8

Stone have signed declarations giving consent to the Union to arbitrate this
retiree medical plan dispute on their behalf.
The Plaintiff disputes the Defendant’s assertion that no provision of
the CBA or any other agreement with the Union, or the Medical Plan,
grants the Union the authority to negotiate or bring a grievance on behalf
of current retirees with respect to insurance benefits or premiums.
III. DISCUSSION
A. Summary judgment standard
Summary judgment is appropriate if the motion is properly supported
and “there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” See Fed. R. Civ. P. 56(a). The
Court construes all inferences in favor of the non-movant. See Siliven v.
Indiana Dept. of Child Services, 635 F.3d 921, 925 (7th Cir. 2011). When
cross-motions are being considered, the Court construes “all inferences in
favor of the party against whom the motion under consideration is made.”
Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998).
To create a genuine factual dispute, however, any such inference must be

9

based on something more than “speculation or conjecture.” See Harper v.
C.R. England, Inc., 687 F.3d 297, 306 (7th Cir. 2012) (citation omitted).
B. Arbitrability of dispute
If an agreement includes an arbitration clause, there is a presumption
in favor of arbitrability. See Exelon Generations Co. v. Local 15 Int’l
Brotherhood of Electrical Workers, 540 F.3d 640, 646 (7th Cir. 2008).
“[A]rbitration is favored and should be ordered ‘unless it may be said with
positive assurance that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute.’” Niro v. Fearn Int’l, Inc.,
827 F.2d 173, 175 (7th Cir. 1987) (quoting United Steelworkers of Am. v.
Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960)). This is
particularly true if the arbitration provision is broad. See Exelon, 540 F.3d
at 646. In such instances, “only an ‘express provision excluding a particular
grievance from arbitration . . . [or] the most forceful evidence of a purpose
to exclude the claim from arbitration’ can keep the claim from arbitration.”
Id. (quoting Warrior & Gulf, 363 U.S. at 584-85).
Based on the presumption in favor of arbitrability, the Union

10

contends this case must be referred to arbitration. The Defendant alleges
that the broad CBA language should be interpreted as evincing the parties’
intent to arbitrate disputes over retiree medical benefits. The Union further
asserts it has the right to arbitrate disputes on behalf of retirees. It does not
appear there is any language specifically excluding the retiree benefit
provisions of the CBA from the grievance procedure. Because the CBA
applies not only to employees but also members of “the Union,” it can be
interpreted to include retirees. See Exelon, 540 F.3d at 645-46.
The Union claims that an arbitrator possibly could interpret the CBA
by finding that the Employer violated its terms by unilaterally reducing
retiree medical benefits. Because the arbitration clause is susceptible to that
interpretation, the Defendant contends that the Court should order
arbitration.
Upon reviewing the record, however, the Court concludes that the
dispute over retiree benefits for then-existing retirees does not involve an
interpretation of Article 12 Section 12.5 of the CBA. Rather, it involves an
interpretation of the Medical Plan which is not a part of the CBA. The

11

2012 CBA requires arbitration over the grievances related to “breach,
violation, meaning or application of any of the terms or conditions of this
Agreement.” The “Retiree Medical Phase Out And Supplemental IARP
Contribution Plan” applied to employees who were employed prior to May
1, 1991 and who turned 49 or less in 1991. Its effect was to eliminate
medical insurance coverage at retirement and add weekly contributions to
the employees’ Individual Account Retirement Plan for any week in which
the employee has contribution hours under the plan. The amount of the
weekly contribution depended on the age of the individual in 1991.
Given this context, the phrase “No change for those retired prior to
October 1, 1991" simply highlights the fact that this phase out applied to
employees who turned 49 or less in 1991, and not to union members who
had retired before that date. Because the phase out applied to employees
within a certain age range and not to retired employees, it resulted in no
change to the latter group of individuals. Accordingly, the phrase cannot
reasonably be interpreted to pertain to a reduction in benefits for retired
employees. Because this provision does not apply to retiree benefits, the

12

Court concludes no interpretation of this portion of the CBA is necessary.
The dispute between the parties regarding retiree benefits for those who
retired prior to 1991 is not implicated in the CBA.
Although the CBA addresses Retirement Plans for current employees,
including the amount the Plaintiff agreed to contribute, the parties did not
bargain for and the CBA does not substantively address the benefits of
those who retired prior to 1991. Because the Company has not agreed to
bargain for retiree benefits, the Union has no authority to bargain on behalf
of retirees for such benefits. See Rossetto v. Pabst Brewing Co., Inc., 128
F.3d 538, 540 (7th Cir. 1997).

Accordingly, the Court is unable to

conclude that the arbitration provision contained in Section 5.1 applies to
this dispute.
Contrary to the Defendant’s argument, Exelon does not compel a
different result. A key difference between this case and Exelon is that in the
latter case, the CBA created the retirees’ rights to medical benefits. See
Exelon, 540 F.3d at 645. In Rossetto, moreover, the CBA provided for
retiree benefits. See Rossetto, 128 F.3d at 538. Because the grievance

13

procedure applied to disputes between Exelon and the “Union or its
members” and there was a dispute over the retiree medical benefit
provisions of documents which became part of the CBA, the Seventh
Circuit applied the presumption of arbitrability and determined the
company had consented to arbitrate disputes over retiree benefits. See
Exelon, 540 F.3d at 646-47. In Rossetto, the presumption of arbitrability
did not carry the day because the arbitration provision in the CBA applied
to grievances between the “Company and its employees.” See Rossetto,
128 F.3d at 539-40.
Here, although the CBA applies to members of the Union, the issue
of benefits for those who retired prior to 1991 is not addressed therein.
Only retiree benefits for then-current employees are bargained for in the
CBA. In Cleveland Elec. Illuminating Co. v. Utility Workers Union of
America, 440 F.3d 809 (6th Cir. 2006), the Sixth Circuit held that the
“presumption of arbitrability applies to disputes over retirees’ benefits if the
parties have contracted for such benefits in their collective bargaining
agreement and if there is nothing in the agreement that specifically excludes

14

the dispute from arbitration.” See id. at 816. There are no provisions in
the CBA suggesting that the parties bargained over the benefits of pre-1991
retirees.

Accordingly, the Court concludes that the presumption of

arbitrability does not apply in this case.
The benefits of pre-1991 retirees are governed by the Medical Plan.
The Medical Plan includes a reservation of rights provision which provides
that “[t]his contribution amount may be changed in the future. The
company reserves the right to adjust Retiree Medical Plan contributions
if the future cost of claims changes.” (Emphasis in original).
Because the dispute concerns the interpretation of the reservation of
rights provision in the Medical Plan, and not a provision of the CBA, the
Court concludes that it is not within the scope of the arbitration provision
of the CBA.
Based on the foregoing, the Court declines to compel arbitration on
Count 1 of the Defendant’s Counterclaim.
Ergo, the Defendant’s Motion for Summary Judgment [d/e 15] is
DENIED.

15

The Plaintiff’s Cross-Motion for Summary Judgment [d/e 23] is
ALLOWED.
The Court concludes that the dispute between the Parties is not
subject to arbitration.
The Court notes that there was a discovery dispute between the
parties while the summary judgment motions were pending. Discovery was
stayed pending resolution of the summary judgment motions. Accordingly,
this case is referred to United States Magistrate Judge Tom SchanzleHaskins to address any discovery issues in light of the Court’s ruling.
ENTER: September 2, 2014
FOR THE COURT:
s/Richard Mills
Richard Mills
United States District Judge

16