Winnett et al v. Caterpillar, Inc.

Filing 535

MEMORANDUM. An appropriate order will enter. Signed by District Judge Aleta A. Trauger on 6/24/11. (tmw)

IN THE UNITED STATES DISTRICT COURT FOR THE
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
GARY T. WINNETT, et al.,

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Plaintiffs,
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v.
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Case No. 3:06-0235
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Judge Trauger
CATERPILLAR INC.,
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Defendant/Third-Party Plaintiff,
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v.
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INTERNATIONAL UNION, UAW, et al.
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Third-Party Defendants.
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______________________________________________________________________________
JUDITH K. KERNS, et al.,

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Plaintiffs,
v.
CATERPILLAR INC.,
Defendant/Third-Party Plaintiff,
v.
INTERNATIONAL UNION, UAW, et al.
Third-Party Defendants.

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Case No. 3:06-1113
Judge Trauger

MEMORANDUM
These are two related, but not consolidated, cases. As with the previous rulings in these
cases, it is in the interest of judicial economy to address the pending motions in these two cases
in one opinion. In each case, pending before the court is a Motion for Certification of Final
Judgment filed by the defendant Caterpillar, Inc. (Winnett Docket No. 519; Kerns Docket No.
314). Also, in Winnett, Caterpillar has filed a Motion for Restitution (Docket No. 517). These
motions have been fully briefed. For the reasons discussed herein, Caterpillar’s Motion for
Restitution will be denied. As restitution is the lone outstanding matter in Winnett, denial of the
restitution motion essentially closes the case and renders the Motion for Certification in Winnett
moot. The court will consider the Motion for Certification in Kerns, and that motion will be
denied.
RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
The court has recounted the factual and procedural history of these cases numerous
times; therefore, some familiarity with the facts will be assumed. (See Winnett Docket No. 463.)
Again, in these class actions the plaintiffs claimed that Caterpillar – as their (or their spouse’s)
former employer – breached its promise (embodied in collective bargaining agreements and
related documents) to provide “lifetime cost-free retiree health care.” (Docket No. 470 at 2.)
Through a series of decisions from this court and the Sixth Circuit, the number of plaintiffs and
claims have been whittled down, and substantial conclusions regarding Caterpillar’s liability
have been reached. Indeed, all of the plaintiffs’ claims in Winnett have been dismissed and
damages discovery is ongoing in Kerns. (See Winnett Docket No. 495.)

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ANALYSIS
I.

Motion for Restitution
A.

Background

On July 12, 2007, the court certified Winnett as a class action under Fed. R. Civ. P
23(b)(1) and 23(b)(2) and certified three subclasses. (Docket No. 140.) On September 16, 2008,
this court granted the Caterpillar Logistics Services, or “CLS,” subclass a preliminary injunction,
which enjoined Caterpillar from deducting premium charges for the subclass members’ retiree
healthcare coverage and from charging the subclass members certain “ancillary” charges, such as
deductibles and certain co-pays. (See Winnett Docket No. 307.) The court did not require the
plaintiffs to post an injunction bond citing, among others things, the plaintiffs’ limited financial
means. (Docket No. 306 at 58-59.) Caterpillar timely appealed the preliminary injunction.
(Docket No. 310.)
In a March 26, 2010 ruling, this court granted summary judgment to the CLS subclass but
concluded that the subclass’s potential damages consisted only of premium charges. (Docket
No. 463 at 47-48.) That is, under the relevant law, Caterpillar could resume charging the
subclass “ancillary” charges, but it could not charge premiums and had violated the law in doing
so in the past. (Id.) In a footnote, the court did not “take a position” on whether Caterpillar
could attempt to “recoup funds expended in relation to the . . . ancillary charges that the court
enjoined Caterpillar from assessing through the preliminary injunction,” leaving this issue for
potential settlement discussions between the parties or “for consideration during any damages
briefing.” (Id. at 30.) This statement was made in a context in which the court assumed that the

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CLS subclass would be receiving significant damages for unpaid premiums. On June 22, 2010,
the Sixth Circuit ruled on Caterpillar’s preliminary injunction appeal, finding that the claims of
the CLS subclass were time-barred. (Docket No. 470.) In light of this ruling, this court
dismissed the claims of the CLS subclass on remand. (Docket No. 495.)
Through its Motion for Restitution, Caterpillar seeks to recoup the premiums and
ancillary costs it paid, pursuant to the injunction, on behalf of the CLS subclass from September
16, 2008 to March 26, 2010, as well as the premiums it paid from March 26, 2010 “until the
Sixth Circuit reversed the preliminary injunction” in July 2010. (Docket No. 518 at 3.)
Supported by affidavits and seemingly appropriate documentation, Caterpillar places the value of
the premium payments made pursuant to court order at $1,116,508.44 and estimates the ancillary
charges to be between $100,000 to $200,000, with further investigation required to arrive at the
precise number. (Id.) Based on the spreadsheet provided, it appears most class members would
owe Caterpillar between $2,000 and $7,000 for premiums. (Docket No. 518 Ex. A.)
B.

Analysis and Resolution

Caterpillar recognizes that the Supreme Court has stated that “a party injured by the
issuance of an injunction later determined to be erroneous has no action for damages in the
absence of a bond.” (Docket No. 532 at 2, quoting W.R. Grace & Co. v. Local Union 759, 461
U.S. 757, 770 (1983)). While no bond was issued here, Caterpillar maintains that this court may
employ its “inherent equitable power to correct that which has been wrongfully done by virtue of
its process” and award restitution. (Docket No. 518 at 4.)
Caterpillar relies heavily on language from a 92-year-old Supreme Court opinion that

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concerned the right of shippers to obtain restitution from railway companies who had improperly
obtained an injunction. See Arkadelphia Milling Co. v. St. Louis S.W. Ry. Co., 249 U.S. 134, 145
(1919). There, the Court cited the “long established” principle of common law equity that “a
party against whom an erroneous judgment or decree has been carried into effect is entitled, in
the event of a reversal, to be restored by his adversary to that which he has lost thereby.” Id.
Caterpillar goes on to cite several cases to show that the court has the authority to award
restitution to a party such as Caterpillar, even in the absence of a bond. (Docket No. 518 at 6.)
That is, these cases, in Caterpillar’s view, are examples of a court recognizing that restitution
could be paid in equity by the party who received benefits from its opponent as the result of an
injunction improvidently granted, even if no bond had been issued. (Id. at 5-6 citing, e.g.,
Caldwell v. Puget Sound Elec. Apprenticeship & Training Trust, 824 F.2d 765, 766-67 (9th Cir.
1987); Newfield House Inc. v. Mass. Dep’t of Pub. Welfare, 651 F.2d 32, 39 n. 12 (1st Cir.
1981); Maryland Dep’t. of Human Resources v. USDA, 976 F.2d 1462, 1482-83 (4th Cir. 1992)).
In arguing that restitution not only can – but should – be awarded in this case, Caterpillar
relies on the theory of unjust enrichment. (Id. at 7 citing Maryland Dept., 976 F.2d at 1482,
which stated that “the equitable nature of restitution ordinarily permits a court to award
restitution upon the reversal of a judgment to the extent of one party’s unjust enrichment.”)
Tailored to the facts of this case, the elements of an unjust enrichment claim under Tennessee
law are: (1) a benefit conferred upon the plaintiffs by Caterpillar; (2) appreciation by the
plaintiffs of such benefit; and (3) acceptance of such benefit under such circumstances that it
would be inequitable for the plaintiffs to retain the benefit without payment of the value thereof.

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U.S. v. Goforth, 465 F.3d 730, 733 (6th Cir. 2006)).
Even assuming that the first two elements are satisfied and Caterpillar’s request is
procedurally appropriate, it is not equitable for individual plaintiffs to return – in cash – the
money that Caterpillar paid to the relevant entities for the class member’s health care coverage.1
First, there is the obvious economic imbalance. The plaintiffs are retirees and elderly widows
with limited financial means; Caterpillar is one the largest construction companies in the world.
This incredible economic imbalance alone makes Caterpillar’s request for “equitable” restitution
dubious.
Further, Caterpillar ignores that – without the statute of limitations defense – its
responsibility to pay health care costs for the CLS subclass was well established. This court,
after repeatedly rejecting the statute of limitations defense, granted the CLS subclass’s summary
judgment motion, finding that Caterpillar had the obligation to pay premiums to the subclass as a
matter of law. (Docket No. 463 at 47-48.) While the Sixth Circuit disagreed with this court on
the statute of limitations defense, that court sympathized with the subclass, calling its ruling
“particularly difficult.” (Docket No. 470 at 14.) Judge Martin, in his concurrence, went further,
stating that the CLS subclass “clearly ha[s] the better part on the breach of contract claim,” and
decried that, because of when the suit was filed, “hardworking folks lost an important benefit.”

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Indeed, Caterpillar’s core equity argument is weak, brief and flailing. (Docket No. 518
at 9-10.) It pulls assorted language from the comments to the Restatement (First) of Restitution
and cites a single non-controlling (Title VII) case as precedent supporting “the imposition of
restitution upon individuals unjustly enriched by a corporate defendant.” (Id. citing Caldwell,
824 F.2d at 766). Caterpillar goes on to note that it is not seeking interest or “administrative
costs,” and it notes that the plaintiffs were always on notice of the statute of limitations defense.
(Id.)
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(Id. at 16.) Given that, aside from when this action was filed, Caterpillar’s liability for the
premiums in this case is fairly clear, principles of equity and fairness would suggest that
Caterpillar’s position at this point should be far different from what it is.
Additionally, it is worth noting that the CLS subclass was not a Rule 23(b)(3) subclass,
and the plaintiffs, therefore, could not “opt out” of this litigation. Caterpillar is essentially
suggesting that financially limited plaintiffs who had no choice regarding participating in this
litigation and whose rights under the CBA were clearly violated now, years after the relevant
payments were made, pay Caterpillar – an enormous corporation – thousands of dollars in cash
as restitution. Granting Caterpillar’s motion would not be consistent with any reasonable
concept of equity or fundamental fairness. The motion will be denied, and Winnett will be
closed.
II.

Motion for Certification in Kerns
A.

Background

As discussed in previous opinions, in 2007, in Winnett and Kerns, Caterpillar filed
identical third-party Complaints against the International UAW and assorted local unions. (See
Kerns Docket No. 82, Winnett Docket No. 150.) The third-party Complaint alleged that, in light
of the UAW’s conduct during the negotiation of the labor agreements at issue, the UAW was
responsible to Caterpillar, under a theory of indemnification and contribution, for any liability
that Caterpillar had in these cases. (See Kerns Docket No. 82 at 2.) The Complaint also alleged,
among other things, that the UAW had breached various agreements between the parties by
supporting the Winnett and Kerns litigation. (Id.)

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The third-party claims and defendants were slowly whittled down, and, in January 2010,
the remaining third-party action against the UAW was severed for trial purposes, with the court
concluding that the third-party action would be tried after the dispute between the plaintiffs and
Caterpillar was resolved. (See Kerns Docket Nos. 129, 239.) Later, in its March 26, 2010
Memorandum, the court granted the UAW’s motion for summary judgment and dismissed the
third-party Complaint in its entirety in both Winnett and Kerns. (Kerns Docket No. 263.) The
parties later settled UAW’s counterclaims against Caterpillar. (Kerns Docket No. 309.)
Therefore, Caterpillar fairly states, “this court has now resolved all outstanding issues
between Caterpillar and the UAW arising out of the third-party complaint. However, the Kerns
plaintiffs and Caterpillar are currently engaged in damages discovery, and the Court has not yet
entered final judgment in this case.” (Kerns Docket No. 315 at 3.) In light of this, Caterpillar
seeks certification of a final judgment, under Fed. R. Civ. P. 54(b), “on the Court’s dismissal of
its third-party complaint.” (Id.)
B.

Legal Standard

Rule 54(b) states that, “[w]hen an action presents more than one claim for relief . . . or
when multiple parties are involved, the court may direct entry of a final judgment as to one or
more, but fewer than all, claims or parties only if the court expressly determines that there is no
just reason for delay. Otherwise, any order or other decision, however designated, that
adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does
not end the action as to any of the claims or parties and may be revised at any time before the
entry of a judgment adjudicating all the claims and all the parties’ rights and liabilities.” Fed. R.

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Civ. P. 54(b).
The Sixth Circuit has concluded that the entry of a final judgment under Rule 54(b) is
appropriate only in the “infrequent harsh case,” where doing so is necessary “as an instrument
for the improved administration of justice.” Corrosioneering, Inc. v. Thyssen Environmental
Sys., Inc., 807 F.2d 1279, 1282 (6th Cir. 1986)(internal quotation omitted). Despite the “harsh”
language, a Rule 54(b) appeal may be appropriate depending on the circumstances, and the Sixth
Circuit has articulated a non-exhaustive list of factors for the district court to consider in
evaluating a Rule 54(b) motion:
(1) the relationship between the adjudicated and unadjudicated claims; (2) the
possibility that the need for review might or might not be mooted by future
developments in the district court; (3) the possibility that the reviewing court
might be obliged to consider the same issue a second time; (4) the presence or
absence of a claim or counterclaim which could result in set-off against the
judgment sought to be made final; (5) miscellaneous factors such as delay,
economic and solvency considerations, shortening the time of trial, frivolity of
competing claims, expense and the like.
Lowery v. Fed. Express Corp., 426 F.3d 817, 821-22 (6th Cir. 2005)
C.

The Parties’ Arguments and Resolution

The parties’ briefing here is as one might expect. Caterpillar argues that there is a
“limited relationship” between the third party claims, which “focus on interactions between
Caterpillar and the UAW in connection with [] settlement[s] . . . as well as the UAW’s conduct
in supporting the Kerns litigation,” and the plaintiffs’ claims, which “involve whether the
Plaintiffs are entitled to retiree benefits.” (Docket No. 315 at 6-7.) In light of this, Caterpillar
suggests, the third-party claims can be appealed and freely reviewed without affecting the
damages discovery in Kerns, which will continue for an uncertain duration. (Id. at 8-9.)
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In response, the plaintiffs and the UAW contend that all the claims are “intertwined []
and not easily separated,” that is, both sets of claims raise issues of the bargaining history
between Caterpillar and UAW “relating to the issue of retiree health.” (Docket No. 320 at 7;
Docket No. 322 at 7.) Moreover, the plaintiffs argue, if the Sixth Circuit were to consider the
claims Caterpillar made against the UAW in Kerns, it would inevitably be pulled into the Kerns
litigation and be forced to make findings and conclusions about the case, all while the Kerns
plaintiffs – who would not be parties to the appeal between Caterpillar and the UAW – were not
represented before the Sixth Circuit. (Docket No. 320 at 7-11.) This is fundamentally unfair, the
plaintiffs argue, and strongly counsels against a Rule 54(b) appeal. (Id.)
The plaintiffs and the UAW also point out that the third-party Complaint seeks
indemnification and contribution and states that the claims were explicitly brought “in the event
the Plaintiffs and class members in this lawsuit prevail,” and that, in severing the actions for trial
purposes, the court anticipated that the plaintiffs’ claims would go to trial and then the thirdparty claims would be heard. (Docket No. 320 at 9-14; Docket No. 322 at 4.) Given the
“derivative” and “secondary” nature of the claims, the plaintiffs argue, it “makes no sense to
leapfrog the claims between Caterpillar and the UAW ahead of the main case.” (Docket No. 320
at 9.) Further, the UAW contends, if the Sixth Circuit found that Caterpillar had no liability to
the Kerns plaintiffs (reversing this court), it would render the indemnification and contribution
claims moot. (Docket No. 322 at 3-4.) Therefore, the argument goes, it only makes sense to
afford the Sixth Circuit the opportunity to consider Caterpillar’s liability to the Kerns plaintiffs

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first, before moving on to the derivative claims.2 (Id.)
All of this briefing, of course, predates the court’s ruling on the restitution motion in
Winnett, which closes that case. The fundamental challenge for the court here is to attempt to
predict, in this complicated and unwieldy litigation, what course is most consistent with the
“improved administration of justice,” in light of the fact that Winnett is now final and ready for
appeal. One path would be to grant Caterpillar’s motion, which would put all third-party claims,
in both Winnett and Kerns, before the Sixth Circuit at roughly the same time. The other option is
to allow Winnett, in full, to be appealed while Kerns, in full, remains at this level, awaiting the
conclusion of damages discovery.
On balance, the court favors the latter approach, largely because it allows the Kerns
plaintiffs to be fairly and easily represented at every stage of the Kerns litigation; that is, it
avoids a scenario in which the Sixth Circuit considers issues in the Kerns case, without the Kerns
plaintiffs being involved. Further, it appears from the parties’ briefing from the Kerns damages
discovery (let alone subsequent anticipated briefing) will take a significant amount of time and
has been proceeding slowly. Therefore, it seems that there is a reasonable possibility that the
Sixth Circuit could issue a ruling on the third-party claims in Winnett while the Kerns case is still
pending, or at least at a time when the parties in Kerns could use that ruling to assist them in
deciding how to proceed with their case and the third-party claims therein on appeal.

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In its reply, Caterpillar points out that, in addition to indemnification and contribution, it
also seeks “attorneys’ fees and costs incurred by Caterpillar in defending this action” and that its
breach of contract claims also concern the UAW’s financial support of the Kerns litigation and
thus “raise issues and involve facts distinct from Plaintiffs’ claims.” (Docket No. 325 at 4-6.)
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In light of all of this, Caterpillar’s motion for a Rule 54(b) judgment will be denied.
CONCLUSION
For the reasons discussed herein, Caterpillar’s Motion for Restitution in Winnett will be
denied, as will Caterpillar’s Motion for Certification in Kerns.
An appropriate order will enter.
_______________________________
ALETA A. TRAUGER
United States District Judge

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