Temme et al v. Bemis Company Inc

Filing 51

ORDER signed by Judge J P Stadtmueller on 8/26/09: denying 14 plaintiffs' Motion for Summary Judgment and a Permanent Injunction; granting 18 defendant's Motion for Summary Judgment; and dismissing this action on its merits. See Order. (cc: all counsel) (nm)

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN ____________________________________________ T H O M A S TEMME and SHIRLEY TEMME, individually and as a class of persons similarly situated Plaintiffs, v. B E M IS COMPANY, INC., Defendant. ____________________________________________ C a s e No. 08-CV-090 ORDER P la in tiffs Thomas Temme and Shirley Temme bring this class action lawsuit a g a in s t defendant Bemis Company, Inc. ("Bemis"), asserting claims under 301 of th e Labor Management Relations Act (LMRA) and 502 of the Employee R e tire m e n t Income Security Act (ERISA). The claims arise from Bemis's alleged fa ilu re to provide life-time retiree health benefit coverage at the levels promised in a 1985 Plant Closing Agreement ("the Agreement"). The parties now file c ro s s -m o t io n s for summary judgment. The plaintiffs ask the court to enter summary ju d g m e n t against Bemis as to liability and to enter a permanent injunction. Bemis a s k s the court to enter summary judgment in its favor and dismiss the case with p re ju d ic e . Based on the reasoning set forth below, the court will grant Bemis's m o tio n for summary judgment and deny the plaintiffs' motion. B AC K G R O U N D The plaintiff class members in this suit are former employees of the Hayssen M a n u fa c tu rin g Company ("Hayssen") plant in Sheboygan, W is c o n s in , and their s p o u s e s , surviving spouses and dependents (hereinafter, collectively referred to as "th e plaintiffs" or "the retirees"). Defendant Bemis acquired Hayssen prior to the S h e b o y g a n plant's closing in 1985. (Plaintiff's Proposed Findings of Fact 1, h e re in a fte r "PFOF," Defendant's Proposed Findings of Fact 1, hereinafter "D F O F " ). The bargaining unit employees of the Hayssen plant were represented by th e United Automobile, Aerospace and Agricultural Implement W o r k e r s of America (U A W ), and its Local 1423 ("the Union"). (PFOF 2). In June 1985, the existing la b o r agreement between Hayssen and the Union expired and the parties failed to re a c h a successor agreement. (DFOF 3). The Union then commenced a strike a g a in s t the company. (DFOF 4). Instead of negotiating a new labor agreement, H a ys s e n decided to close its facility. (DFOF 5). Hayssen and the Union conducted b a rg a in in g on the matter and entered into a Plant Closing Agreement ("Plant Closing A g re e m e n t" or "the Agreement"), which was executed on November 5, 1985. (PFOF 3, DFOF 5-7). The Plant Closing Agreement terminated the employment of u n io n employees, terminated the strike, and terminated the bargaining relationship b e t w e e n the Union and the company. (DFOF 9-11). Among other items, the A g r e e m e n t provided that certain qualifying individuals would be eligible for a retired e m p lo ye e medical benefit. (DFOF 13-14). -2- T h e retirees have received continuous health insurance coverage from Bemis fo r more than 25 years, despite Bemis's sale of Hayssen in 1997. (PFOF 10, D.'s R e s p . PFOF 10). However, effective January 1, 2005, Bemis transferred the H a ys s e n retirees' health coverage from a Blue Cross/Blue Shield health plan to a C IG N A health plan. (DFOF 21). The change in plans resulted in increased d e d u c tib le s and new prescription drug co-pays. (PFOF 23). Bemis instituted a d d itio n a l modifications to the retirees' coverage effective January 1, 2007, when it e lim in a te d prescription drug coverage. (PFOF 25). When Bemis informed the re tire e s of this change, it also notified them that they could purchase AARP drug p ro g ra m s at their own expense as an alternative. (PFOF 26). The plaintiffs assert th a t the changes Bemis instituted to their coverage breach the Plant Closing A g re e m e n t and violate ERISA and the LMRA. LEGAL STANDARD S u m m a ry judgment is appropriate where the moving party establishes that th e re is no genuine issue of material fact and that the party is entitled to judgment a s a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1 9 8 6 ). "Material facts" are those facts which "might affect the outcome of the suit," a n d a dispute about a material fact is "genuine" if a reasonable finder of fact could fin d in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 2 4 2 , 248 (1986). Summary judgment is appropriate where a party has failed to m a k e "a showing sufficient to establish the existence of an element essential to that -3- p a rty's case and on which the party will bear the burden of proof at trial." Celotex, 4 7 7 U.S. at 322-23. A party opposing summary judgment may not rest upon the m e re allegations or denials of the adverse party's pleading, but must set forth s p e c ific facts showing that there is a genuine issue for trial. Fed. R. Civ. P. 56(e). A n y doubt as to the existence of a material fact is to be resolved against the moving p a rty. Anderson, 477 U.S. at 255. In considering cross-motions for summary ju d g m e n t, the court is obliged to view all facts and draw all reasonable inferences in a light most favorable to the party against whom the motion under consideration is made. Bassiouni v. F.B.I., 436 F.3d 712, 721 (7th Cir. 2006). AN AL Y S IS T h e plaintiffs ask the court to enter summary judgment against Bemis as to lia b ility and to enter a permanent injunction requiring Bemis to provide class m e m b e rs with coverage at the levels agreed upon in 1985. The plaintiffs claim that th e Plant Closing Agreement promises the retirees $50.00 deductibles and full p r e s c r ip tio n drug coverage, though the Agreement itself does not mention these c o ve ra g e levels. Instead, the plaintiffs assert that they are entitled to the level of c o ve ra g e provided for in the 1982 Collective Bargaining Agreement (CBA) between th e company and the Union; a CBA which expired four months prior to the signing o f the Plant Closing Agreement. The Plant Closing Agreement does not explicitly promise continued retiree m e d ic a l benefits, nor does it specify precise levels of any health coverage. -4- N o n e th e le s s , the plaintiffs read a promise for lifetime, unalterable benefits into the A g r e e m e n t based on suggestive phrases and omissions in the contract's language. T h e y point to language ensuring "eligibility" for a retired employee health benefit, o m is s io n of the "Retired Employee Medical Benefit" section of the previous CBA fro m the Agreement's list of obligations that had been "fully satisfied"; and the a b s e n c e of a duration clause or termination clause in the Agreement. As further s u p p o rt for their claims of irreducible medical benefits for life, the plaintiffs note that B e m is provided health coverage to the retirees at an unchanged level for twenty ye a rs - from 1985 until Bemis instituted the first coverage changes in 2005. In contrast, Bemis argues that the court should enter summary judgment in its fa vo r because the Plant Closing Agreement made no explicit guarantees of lifetime re tire e health coverage, nor did it promise unchanged coverage or endorse a s p e c ific plan design. Bemis denies that the level of coverage it provided in the past s h o w s that it promised lifetime benefits or obligates the company to continue p ro vid in g the same level of coverage into the future. Thus, the court must first determine whether the Plant Closing Agreement p ro m is e d lifetime medical benefits for the retirees and, second, determine whether a promise of lifetime benefits requires Bemis to continue providing $50.00 d e d u c tib le s and full prescription drug coverage under that Agreement. These are iss u e s of contract interpretation. See Diehl v. Twin Disc, Inc., 102 F.3d 301, 305 (7th -5- C ir. 1996). Thus, they are particularly appropriate for resolution through summary ju d g m e n t. The court initially addresses the question of whether the Plant Closing A g r e e m e n t promises lifetime benefits to the retirees. Medical benefits, like those at iss u e in this case, are classified as "welfare" benefits under ERISA. Bland v. Fiatallis N o rth America, Inc., 401 F.3d 779, 783 (7th Cir. 2005). Unlike pension benefits, w e lfa re benefits do not automatically vest. Cherry v. Auburn Gear, Inc., 441 F.3d 4 7 6 , 481 (7th Cir. 2006). Instead, health benefits only vest if an agreement or c o n tra c t provides for lifetime entitlement. Id. Because vested benefits are not legally re q u ire d , and because they become forever unalterable, a contract must express an in ten t to vest in "clear and express language." Bland, 401 F.3d at 784. W h e n in te rp re tin g collective bargaining agreements, courts apply a presumption that retiree h e a lth benefits do not vest under the CBA unless it contains explicit contractual la n g u a g e to this effect. Cherry, 441 F.3d at 481. If the CBA does not include such e xp re s s language, courts presume that health benefits terminate when the collective b a rg a in in g agreement ends. Id. The case law requiring express language in order to vest lifetime health b e n e fits involves claims under collective bargaining agreements, not claims under p la n t closing agreements. However, these statements of law inform the court's a n a lys is. The court finds that the requirement for an explicit statement of intent to -6- p r o v id e lifetime benefits applies to the instant case, though the plaintiffs' claims arise fro m a plant closing agreement.1 T h e Seventh Circuit has distinguished between CBA cases and plant closing a g re e m e n t cases when applying the presumption against vesting. However, the c o u rt has relied upon express contract language even in cases arising from closing a g re e m e n ts , suggesting that explicit guarantees of lifetime benefits are required u n d e r both types of contract. In Zielinski v. Pabst Brewing Company, a case in vo lv in g retiree claims under a closing agreement, the Seventh Circuit found that th e agreement created a contractual obligation to provide benefits for life to the p la in tiffs . 463 F.3d 615, 617 (7th Cir. 2006). The court briefly addressed the p re s u m p tio n against vesting health benefits, but stated that the presumption "has re fere n c e mainly to suits to enforce collective bargaining agreements." Id. at 617. T h e court acknowledged that it previously applied the presumption against vesting in another case involving retiree claims under a plant closing agreement, Diehl v. T w in Disc, Inc., 102 F.3d 301 (7th Cir. 1996). Id. at 617. However, the court d is tin g u is h e d the earlier plant closing agreement case and its application of the p r e s u m p tio n by explaining that the earlier case involved a short-term agreement, The plaintiffs assert in their brief that Seventh Circuit law relating to vesting presum p tio n s is in a p p lic a b le to the instant case because it involves a plant closing agreem e n t and not a contract of set d u r a tio n . (Pls.' Br. Mot. Sum m . J. 5). However, the cases the plaintiffs cite do not stand for this precise p r o p o s itio n . The cases discuss the vesting presum p tio n in the context of CBA's or state that the presum p tio n is applicable to contracts of set duration. See Murphy v. Keystone Steel & W ir e Co., 61 F.3d 560, 565 (7th C ir . 1995); Senn v. United Dominion Indus., 951 F.2d 806, 816 (7th Cir. 1992); Bidlack v. W h e e la b r a to r , 993 F . 2 d 603, 607 (7th Cir. 1993)(en banc). However, none of the cited authority discusses plant closing a g r e e m e n t s or states that the vesting presum p t io n is inapplicable when interpreting these agreem e n t s . See id . 1 -7 - m a k in g the plant closing agreement similar to a collective bargaining agreement. Id. a t 617-18. The court reasoned that a presumption against vesting applies mainly to c o lle c tive bargaining agreements because they are short-term agreements p r e s u m e d not to create rights or duties continuing beyond the agreement's te rm in a tio n date. Id. The court stated that plant shutdown agreements, in contrast, h a ve no end date and rights originating in these agreements carry forward in d e fin ite ly as a result. Id. Despite these statements, Zielinski does not eliminate the need for "clear and e xp re s s " language to create a contractual obligation for lifetime benefits under a p la n t closing agreement. The court did state that the presumption "mainly" refers to s u its enforcing collective bargaining agreements, but did not declare that it only re fe rs to suits enforcing collective bargaining agreements. The court conspicuously d e c lin e d to state that the requirement for explicit language does not apply to vesting h e a lth benefits under a closing agreement. Instead, the court's analysis suggests that explicit language is necessary b e fo re the court can find a guarantee of lifetime benefits. In Zielinski, the Seventh C irc u it relied upon the presence of clear language in the closing agreement stating tha t the defendant company "shall continue to provide the health and welfare b e n e fits for retirees" in finding that the plant closing agreement created an explicit c o n tra c tu a l obligation for continuous benefits. 463 F.3d at 616-17. ("It is hard to re a d `shall continue' otherwise than as creating a contractual obligation that indeed -8- c o n tin u e s until six months after the last retiree dies."). Based on the plant closing a g re e m e n t's clear promise, the Seventh Circuit reasoned that the benefits were p ro vid e d for life because the closing agreement did not include a termination date. Id . at 617-18. Zielinski does not repudiate the need for clear language indicating an in te n t to vest benefits for life. To the contrary, it seems to confirm the importance of s u c h language. T h e need for express language is problematic for the plaintiffs here because th e Plant Closing Agreement executed by Hayssen and the Union makes no clear p ro m is e to continue providing health benefits. Instead, the plaintiffs rely on o m is s io n s from the Agreement and an indirect reference to a health benefit for re ti r e e s . The plaintiffs cite a section of the Plant Closing Agreement referring to "e lig ib ility" for health benefits to support their argument for irreducible, lifetime b e n e fits . The eligibility section is the only provision of the Agreement to mention h e a lth benefits for retirees. The section reads in relevant part: R e tire d Employee Medical Benefit In d iv id u a ls who attain age 60 and have at least six years of continuous s e rv ic e by 12-31-85, and who elect to commence their retirement b e n e fits by 12-31-85, will be eligible for the retired employee medical b e n e fit. Individuals who attain age 58 or 59 by 12-31-85 and who in d ic a te by 12-31-85, their intent to commence retirement benefits at a g e 60 will be eligible for the retired employee medical benefit. (P la n t Closing Agreement, Docket #16, Attachment 2, p. 5). However, this section d o e s not expressly state that Bemis promises to continue providing a retiree health b e n e fit. Indeed, a guarantee of eligibility for retiree medical benefits does not -9- c o n s titu te explicit language vesting the health benefits themselves. See Ryan v. C h ro m a llo y American Corp., 877 F.2d 598, 604 (7th Cir. 1989) (concluding that re tire e health benefits did not vest under provisions of a collective bargaining a g re e m e n t and rejecting plaintiffs' reliance upon a provision that referred to a re tire e 's eligibility for benefits). The language merely guarantees that particular q u a lifyin g individuals will be eligible for the retiree employee benefit while it is o ffe re d . It does not promise that such a benefit will always be offered. T h e court acknowledges that the "eligibility" provision lacks a definition for, or e xp la n a tio n of, the retired employee medical benefit it references. The plaintiffs a rg u e that this absence requires incorporation of a "Retired Employee Medical B e n e fit" provision from a separate document. They suggest that the Plant Closing A g re e m e n t incorporates portions of the expired CBA, including Section 9.02, entitled R e tire d Employee Medical Benefit, and Section 9.01, entitled Hospital, Surgical and M e d ic a l Insurance. Section 9.01 is the source of the plaintiffs' claims for an u n a lte ra b le level of coverage because the provision specifies that the benefits plan in c lu d e s full prescription drug coverage and $50.00 deductibles. The plaintiffs s u p p o rt their argument for incorporation by citing the following language from the P la n t Closing Agreement: T h is agreement shall supersede and void all prior written and oral a g re e m e n ts between the parties, including without limitation the labor C o n tra c t, pension and insurance agreements, except and only to the e xte n t that reference to the same may be necessary to effectuate the p ro vis io n s of this agreement. -10- (P la n t Closing Agreement, Docket #16, Attachment 2, p. 6). The plaintiffs argue that th e Agreement must incorporate retired employee medical benefit provisions of the e xp ire d CBA in order for the "eligibility" language in the Plant Closing Agreement to b e effectuated. Thus, the promise of continued health benefits for retirees must be in c o rp o ra te d along with the CBA's promise of $50.00 deductibles and full p re s c rip tio n drug coverage. However, the fact remains that the phrase "will be eligible for the retired e m p lo ye e medical benefit" does not explicitly promise to continue benefits. The la n g u a g e promises eligibility for a benefit that may or may not continue to be offered. T h e fact that Bemis provided a particular level of benefits for twenty years does not v e s t lifetime benefits. See Barnett v. Ameren Corp., 436 F.3d 830, 835 (7th Cir. 2 0 0 6 ). The plant closing agreement itself must clearly make this promise. T h e inadequacy of the "eligibility" language to create a contractual obligation is clear when the language is compared to plant closing agreement language that d id vest retiree health benefits. As previously mentioned, the Seventh Circuit c o n s id e re d the issue of vesting health benefits under plant closing agreements in D ie h l and Zielinski. Like the instant case, Diehl and Zielinski each involved a class a c tio n lawsuit brought by retirees and arose from changes to their health benefits m a d e by the respective defendants. Diehl, 102 F.3d at 302-03; Zielinski, 463 F.3d a t 616-17. In Diehl, the Seventh Circuit found that the plaintiffs had a vested right to medical benefits for their lifetimes under the agreement based on an "explicit and -11- s e e m in g ly unambiguous provision" in the shutdown agreement stating that the re tire d employees "shall, notwithstanding any provision of the Insurance A g r e e m e n t..., be entitled for the lifetime of the pensioner... to the life insurance and h o s p ita liz a tio n , medical and surgical expense benefit coverages as provided under th e Extension of Coverages and Integration of Benefits provisions of Sections 5 and 6 of the Insurance Agreement." 102 F.3d at 306. There is no question that the plant c lo s in g agreement in Diehl promised lifetime benefits based on this express la n g u a g e . Similarly, in Zielinski the court found that the plant closing agreement la n g u a g e vested the plaintiffs' medical benefits, entitling them to benefits for life. 4 6 3 F.3d at 617-18. The court based its conclusion on language in the closing a g re e m e n t stating that the defendant company "shall continue to provide the health a n d welfare benefits for retirees [and their spouses and dependents] described in" th e prescription drug provision of the collective bargaining agreements. 463 F.3d at 6 1 6 , 618. Though not as explicit as the "for the lifetime of the pensioner" language in Diehl, the shutdown agreement in Zielinski clearly stated that the company g u a ra n te e d continuing health benefits. In contrast, the Plant Closing Agreement at iss u e here contains no such explicit statement guaranteeing continued benefits. Further, even if the Plant Closing Agreement incorporates the portions of the e xp ire d CBA defining a retired employee health benefit, the Agreement still does not in c lu d e a promise for lifetime benefits. Collective bargaining agreements are, by -12- th e ir nature, intended to be limited term agreements. See Zielinski, 463 F.3d at 618 (n o tin g that CBA's are "short-term agreement"). The presumption that CBA's do not in te n d to vest lifetime health benefits is based on this idea. In the absence of la n g u a g e to the contrary, CBA's create only limited-term obligations because they a re limited term agreements. Therefore, the Plant Closing Agreement cannot in c o rp o ra te language meant to apply for a limited duration and then convert this s a m e language into a promise of lifetime benefits. The Agreement does not provide a n explicit guarantee of benefits for life, thus, the court cannot find that such a p r o m is e exists. B e c a u s e the Plant Closing Agreement does not promise to provide the re tire e s with lifetime benefits, altering their specific levels of coverage cannot c o n s titu te a breach of the Agreement. Nonetheless, the court will briefly address the s e c o n d issue in the suit, whether increasing deductibles and eliminating full p re s c rip tio n drug coverage breaches the Plant Closing Agreement. A n explicit promise to provide benefits for life would not insulate the plaintiffs fro m all modifications to their coverage. The Seventh Circuit has not found an irre d u c ib le level of health benefits even when explicit vesting language creates a c o n tra c tu a l obligation for lifetime benefits. In Zielinski, the court found that the p la in tiffs were entitled to the prescription drug coverage vested by and incorporated in to the shutdown agreement. 463 F.3d at 618-19. However, the court also found th a t the plant closing agreement language was not intended to create an "inflexible -13- o b lig a tio n ." Id. at 618. The court concluded that the shutdown agreement entitled th e plaintiffs to lifetime prescription drug benefits, but at a level adjusted for changes to which the parties "would have agreed" if they had considered the duration of the c o m m itm e n t. Id. at 621. The court then remanded the case to the district court for a determination of benefits "reasonably commensurate" with those provided in the 1 9 7 1 health plan. Id. Similarly, in Diehl, the Seventh Circuit found that the plaintiff re tire e s were entitled to medical benefits under a plant shutdown agreement, but re m a n d e d the issue to the district court to determine whether the modified retiree h e a lth benefits were "reasonably commensurate" with previously promised coverage. 1 0 2 F.3d at 311. Thus, the court did not preclude the respective defendants from c h a n g in g the specific coverage promised to the plaintiff retirees. As a result, even if the Plant Closing Agreement at issue in the instant case provided for lifetime h e a lth benefits, this does not necessarily preclude Bemis from making the m o d ific a tio n s to coverage that it instituted in 2005 and 2007. M o re o ve r, as previously noted, CBA's are intended and understood to be s h o rt-te rm agreements. The parties did not negotiate the 1982 CBA and its specific le ve ls of coverage with the intent that those levels would be irreducible into the in d e fin ite future. To the contrary, at the time the Agreement was negotiated, the $ 5 0 .0 0 deductibles and full drug coverage appearing within Section 9.01 of the CBA w e re applicable only for the limited term of the contract. Thus, requiring Bemis to p ro vid e lifetime, irreducible coverage does not reflect the intent of the parties at the -14- tim e they negotiated the CBA's coverage levels. An intent to provide unalterable b e n e fits is not reflected in the Plant Closing Agreement either, because the A g re e m e n t does not mention lifetime coverage, much less specify exact deductible a m o u n ts . Indeed, the court is skeptical that Bemis (or rather, Hayssen) would n e g o tia te for precise coverage levels and deductible amounts binding the company fo r the lifetime of the longest-lived retiree a period that has already spanned 24 ye a rs . Finally, the court notes that requiring Bemis to provide unalterable benefits a t the generous level of $50.00 yearly deductibles per family and full prescription d ru g coverage seems imprudent given the economic realities of skyrocketing health c a re costs. CONCLUSION T h e court concludes that the Plant Closing Agreement does not guarantee the p la in tiffs lifetime benefits because the Agreement does not explicitly promise to p ro vid e health benefits for life.2 Further, even if the Agreement did make such a p r o m is e , the contract does not necessarily require Bemis to provide the precise le ve l of benefits appearing in the expired CBA. The court is sympathetic to the d iffic u ltie s faced by the plaintiffs in paying an increased portion of their healthcare 2 The court notes that this conclusion is inconsistent with a finding the court m a d e for the purposes o f class certification. In its class certification order, the court assum e d that the Plant Closing Agreem e n t in c o r p o r a t e d the Retired Em p l o ye e Health Benefit from the 1982 CBA and guaranteed the benefit. See T e m m e v. Bemis Company, Inc., No. 08-CV-090, 2009 W L 1505120, at *2-3 (E.D. W is . May 28, 2009). Based o n this determ in a tio n , the court concluded that any prom is e of benefits for those retiring after the execution o f the Plant Closing Agreem e n t applied equally to those individuals retiring prior to the signing of the A g r e e m e n t , im p a c t in g the court's analysis of num e r o s it y, com m o n a lit y, and typicality. Id. at *3-4. However, a f te r considering the parties' briefs and conducting its sum m a r y judgm e n t analysis, the court concludes that th e Plant Closing Agreem e n t does not prom is e lifetim e health benefits to the retirees because the Agreem e n t d o e s not explicitly m a k e this prom is e . -15- c o s ts while on a fixed income. However, the court cannot read a promise for life tim e , unalterable health benefits into a Plant Closing Agreement whose language m a k e s no clear and express promise of such. Accordingly, IT IS ORDERED that the plaintiffs' motion for summary judgment and a p e rm a n e n t injunction (Docket #14) be and the same is hereby DENIED; IT IS FURTHER ORDERED that the defendant's motion for summary ju d g m e n t (Docket #18) be and the same is hereby GRANTED; IT IS FURTHER ORDERED that this action be and the same is hereby D IS M IS S E D on its merits. T h e Clerk is directed to enter judgment accordingly. D a te d at Milwaukee, W is c o n s in , this 26th day of August, 2009. BY THE COURT: J .P . Stadtmueller U .S . District Judge -16-

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