Ignacy Green v. United Parcel Service of Ameri ( 2010 )


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  •                               In the
    United States Court of Appeals
    For the Seventh Circuit
    Nos. 09-2445 & 09-2553
    IGNACY G REEN, P ATRICK C OOPER,
    and all those similarly situated,
    Plaintiffs-Appellees,
    Cross-Appellants,
    v.
    T HE UPS H EALTH AND W ELFARE P ACKAGE
    FOR R ETIRED E MPLOYEES, U NITED P ARCEL S ERVICE
    OF A MERICA , INC . and P LAN A DMINISTRATOR,
    Defendants-Appellants,
    Cross-Appellees.
    Appeals from the United States District Court
    for the Northern District of Illinois, Eastern Division.
    No. 09 C 00616—Matthew F. Kennelly, Judge.
    A RGUED D ECEMBER 7, 2009—D ECIDED F EBRUARY 10, 2010
    Before C UDAHY, W OOD , and E VANS, Circuit Judges.
    E VANS, Circuit Judge. In this class-action lawsuit, the
    plaintiffs, participants in the UPS Health and Welfare
    2                                       Nos. 09-2445 & 09-2553
    Package for Retired Employees (Plan) due to their
    former employment with UPS as members of the Interna-
    tional Brotherhood of Teamsters (IBT) Local 705, claim
    that the defendants, United Parcel Service of America,
    Inc., the Plan, and its administrator (we will refer to
    them collectively as UPS), raised the amount of health
    insurance contributions required of the Local 705 retirees
    in violation of the Plan and, consequently, the Employee
    Retirement Income Security Act (ERISA), 
    29 U.S.C. § 1104
    (a)(1)(D). Specifically, the Local 705 retirees argue
    that the Plan’s requirements that (1) if a threshold cost
    was met, all retirees would “share equally in the cost . . .
    by making an additional contribution” and (2) the addi-
    tional contributions would not be implemented until
    after the expiration of the “current collective bargaining
    agreement” prohibit UPS from collecting additional
    contributions from them until 2013. UPS, on the other
    hand, asserts that the Plan can reasonably be inter-
    preted to allow collections before that time.
    After a bench trial, the district court found that the
    Local 705 retirees had the better of the argument
    regarding the first clause at issue but not the second. The
    court therefore enjoined UPS from collecting additional
    contributions from the Local 705 retirees in excess of the
    minimum contribution required for all IBT retirees
    under the Plan—but only until further order of the
    court, not until 2013. We review the district court’s con-
    clusions of law de novo and its findings of fact for clear
    error. Cerros v. Steel Techs., Inc., 
    288 F.3d 1040
    , 1044 (7th Cir.
    2002) (citing Fed. R. Civ. P. 52(a)(6)). The district court’s
    findings of fact, however, are not in dispute. We begin
    there.
    Nos. 09-2445 & 09-2553                                         3
    UPS employs IBT members and negotiates collective
    bargaining agreements (CBAs) with IBT’s international
    union and separately with a few IBT locals, like Local 705.1
    Under the 2002 CBA between UPS and Local 705 (expiring
    July 31, 2008), UPS agreed to provide health insurance
    to retirees during the term of the agreement “as outlined
    in the new UPS Health & Welfare Package Summary
    Plan Description.” Unlike the CBA, the Summary Plan
    Description (SPD) covered all IBT retirees (with a few
    exceptions), not just the Local 705 retirees.
    Under the heading entitled “Contribution,” the SPD
    provided that “[a]ll retired employees are responsible
    for a $50 per month contribution for their medical cover-
    age,” which covered “the retired employee, spouse and
    any eligible dependent children.” Under the next
    heading, entitled “Average Annual Cost,” the SPD stated
    as follows:
    The average annual cost per participant is defined as
    the total claims paid by the Plan in a calendar year,
    divided by the total number of Plan participants
    during that year. Each retired employee, each spouse,
    and each eligible dependent would be considered
    a Plan participant.
    If the average annual cost per participant exceeds
    $6,250, each retired employee will share equally in the
    1
    At oral argument, counsel for the retirees explained that Local
    705 negotiates separately because it is a large union with
    a comparable amount of bargaining power.
    4                                    Nos. 09-2445 & 09-2553
    cost above the $6,250 maximum by making an additional
    contribution.
    The $6,250 maximum cost per participant is subject
    to future negotiations. If required, the additional
    contributions would not be implemented until after the
    expiration of the current collective bargaining agreement.
    (Emphasis added.)
    Beginning in 2006, the average annual cost per partici-
    pant exceeded $6,250. In October 2007, UPS sent a Sum-
    mary of Material Modifications (SMM) to all IBT retirees,
    stating this fact and also advising that “each retired
    employee will share equally in the cost above the $6,250
    maximum by making an additional contribution. There-
    fore, effective January 1, 2008, the per retiree contribu-
    tion of $50 per month will increase to $114.33 per
    month.” At the time of this notice, UPS was negotiating
    a new CBA with IBT’s international union. After the
    parties reached a tentative agreement but before ratifica-
    tion, the international union asserted complaints over
    the increase in retiree contributions. UPS eventually
    agreed (although not in writing) not to collect additional
    contributions from the international union retirees
    until after the expiration of their newly bargained CBA.
    Members of Local 705 also complained about the
    October 2007 SMM. Their complaint, however, was that
    the notice was premature because their negotiations for
    a new CBA would not even begin until the summer of
    2008 (and their current CBA would not expire until
    July). As a result, in December 2007, UPS sent a revised
    Nos. 09-2445 & 09-2553                                    5
    SMM to the Local 705 retirees only. That notice stated
    as follows:
    The average cost per participant for the UPS Health
    and Welfare Package for Retired Employees has ex-
    ceeded $6,250.
    As explained in the SPD (Summary Plan Description),
    when the cost per participant exceeds $6,250, each
    retired employee will share equally in the cost above
    the $6,250 maximum by making an additional contri-
    bution.
    That additional cost will be effective after the expira-
    tion of the current collective bargaining agreement.
    (Emphasis added.) UPS received no complaints about
    this SMM.
    During the CBA negotiations, a Local 705 representa-
    tive asked UPS’s finance liaison whether the previous
    SPD for the Plan was current with respect to the new
    CBA. UPS’s liaison responded that it was. Local 705
    did not propose raising the $6,250 cap or deferring the
    collection of additional contributions from retirees, nor
    did UPS raise the issue. The new CBA became effective
    August 1, 2008, for a five-year period. Like the 2002
    CBA, the 2008 CBA did not directly address the issue
    of retiree contributions but rather simply incorporated
    the SPD, which continued to state that additional con-
    tributions would not be collected until the expiration of
    the “current” CBA.
    In January 2009, UPS sent another notice to the
    Local 705 retirees, stating that the average annual cost per
    6                                    Nos. 09-2445 & 09-2553
    participant had risen above the $6,250 cap. The notice
    also advised that, after February 1, 2009, instead of a flat-
    rate $50 per month, each Local 705 retiree would be
    required to contribute $157.58, $315.17, or $472.75 per
    month, depending on whether their family members
    were also covered. Consistent with the oral agreement
    between UPS and IBT’s international union, other IBT
    retirees did not receive this notice and continued to pay
    only $50 per month.
    Shortly thereafter, the Local 705 retirees filed this class-
    action lawsuit and brought a motion for temporary
    and preliminary injunctive relief, which the parties con-
    verted to a bench trial on the merits pursuant to Federal
    Rule of Civil Procedure 65(a)(2). The district court found
    in favor of the Local 705 retirees on their claim that
    UPS violated the SPD by collecting additional contribu-
    tions from them without also collecting from the other
    IBT retirees. The court found against the Local 705
    retirees, however, on their claim that UPS violated the
    SPD by collecting additional contributions during the
    term of the 2008 CBA. The final order enjoined
    UPS from collecting additional contributions from the
    Local 705 retirees until further order of the court but did
    not enjoin UPS from collecting additional contributions
    through July 2013, as requested by the Local 705 retirees.
    Both parties appealed.
    The parties agree that, because the dispute involves
    plan interpretation, and the Plan grants UPS discretion
    to interpret its terms, the district court properly applied
    the deferential arbitrary and capricious standard. See
    Nos. 09-2445 & 09-2553                                    7
    Hess v. Hartford Life & Accident Ins. Co., 
    274 F.3d 456
    , 461
    (7th Cir. 2001). A plan administrator’s interpretation
    is not arbitrary and capricious if it falls within the range
    of reasonable interpretations. See Carr v. Gates Health Care
    Plan, 
    195 F.3d 292
    , 294 (7th Cir. 1999); Exbom v. Central
    States, Se. & Sw. Areas Health & Welfare Fund, 
    900 F.2d 1138
    , 1142-43 (7th Cir. 1990). Interpretations that “contro-
    vert the plain meaning of a plan,” however, may be
    overturned. Swaback v. Am. Info. Techs. Corp., 
    103 F.3d 535
    , 540 (7th Cir. 1996).
    The first issue is whether the district court correctly
    concluded that UPS violated the SPD by collecting addi-
    tional contributions from the Local 705 retirees without
    collecting from other IBT retirees covered by the Plan.
    The SPD states that “[i]f the average annual cost per
    participant exceeds $6,250, each retired employee will
    share equally in the cost above the $6,250 maximum
    by making an additional contribution.” UPS contends
    that this provision allows it to collect additional con-
    tributions from the Local 705 retirees even though it is not
    collecting additional contributions from other IBT
    retirees because the phrase “share equally” concerns
    how the Plan calculates average costs, not how it collects
    additional contributions. The district court found that
    this interpretation contradicts the plain language and
    was therefore arbitrary and capricious. We agree.
    The SPD states that each retired employee will “share
    equally . . . by making an additional contribution.” As the
    district court pointed out, UPS’s interpretation effectively
    negates the last clause of the provision. The provision
    8                                    Nos. 09-2445 & 09-2553
    plainly refers to how all retirees will contribute—that is,
    equally by making an additional payment—not how the
    Plan will calculate average costs. The latter subject is
    dealt with in the SPD’s preceding paragraph, which
    states that “[t]he average annual cost per participant is
    defined as the total claims paid by the Plan in a calendar
    year, divided by the total number of Plan participants
    during that year.” UPS concedes that only some retirees
    are making additional contributions because UPS has
    agreed not to collect additional contributions from the
    IBT international retirees until 2013. All retirees are not
    therefore “shar[ing] equally” because the method by
    which they must share equally—that is, “by making an
    additional contribution”—has been nullified.
    UPS urges us to apply the doctrine of extrinsic
    ambiguity and consider the extrinsic evidence presented
    at trial on this issue. That doctrine provides that, “[i]n
    limited circumstances, . . . parties are allowed to
    present [objective] extrinsic evidence to demonstrate
    that although the contract looks clear, anyone who under-
    stood the context of its creation would understand that
    it doesn’t mean what it seems to mean.” Mathews v. Sears
    Pension Plan, 
    144 F.3d 461
    , 466 (7th Cir. 1998). But, contrary
    to UPS’s assertion, “[t]he fact that parties to a contract
    disagree about its meaning does not show that it is am-
    biguous, for if it did, then putting contracts into writing
    would provide parties with little or no protection.”
    Fed. Deposit Ins. Corp. v. W.R. Grace & Co., 
    877 F.2d 614
    , 621
    (7th Cir. 1989). And there is no latent ambiguity here
    because the evidence does not show that a literal inter-
    pretation “would lead to an unreasonable or absurd
    Nos. 09-2445 & 09-2553                                     9
    result.” Chi. Bd. Options Exch., Inc. v. Conn. Gen. Life Ins.
    Co., 
    713 F.2d 254
    , 258 (7th Cir. 1983).
    UPS’s main contention is that interpreting the language
    according to its plain meaning would allow Local 705
    to “wield an inordinate amount of bargaining power in
    that it could effectively block the Plan from collecting
    the additional contribution from every UPS Teamster
    retiree in the U.S.,” contrary to the “separateness” of
    Local 705 from other IBT members. But just because a
    provision is favorable to one party does not make it
    “unreasonable” or “absurd.” Furthermore, the language
    at issue is contained in the SPD, which covers almost
    all IBT retirees, not the CBA, which was negotiated sepa-
    rately by Local 705. And, as UPS repeatedly points out,
    it could amend the language (in accordance with ERISA)
    if it wanted a different result. Until then, however, the
    Local 705 retirees have a right to rely on the language,
    which unambiguously states that UPS must, if it
    collects additional contributions, collect them from all
    IBT retirees. UPS’s interpretation to the contrary was
    therefore arbitrary and capricious.
    The second issue is whether UPS violated the SPD by
    collecting additional contributions from the Local 705
    retirees during the term of the 2008 CBA. At all relevant
    times, the SPD has stated that additional contributions
    would not be implemented until after the expiration of
    the “current” CBA. UPS asserts that the term “current”
    refers only to the 2002 CBA, into which the SPD was
    first incorporated. The Local 705 retirees argue that the
    term refers to the 2008 CBA, the CBA now in effect, into
    10                                  Nos. 09-2445 & 09-2553
    which the SPD was also incorporated. They read the
    clause as prohibiting UPS from collecting additional
    contributions until the 2008 CBA expires (that is, in July
    2013). The district court found that UPS’s determination
    was within the range of reasonable interpretations
    and therefore not arbitrary and capricious. We agree.
    When the Plan first issued the SPD in 2002, the term
    “current,” referred to the CBA in effect at that time—the
    2002 CBA. When the Plan continued to issue the same
    SPD even after the 2002 CBA expired, however, the term
    “current,” on its face, referred to the CBA existing at that
    time—the 2008 CBA. See Merriam Webster’s Collegiate
    Dictionary at 306 (11th ed. 2003) (defining “current” as
    “occurring in or existing at the present time”). UPS
    again asks us to apply the doctrine of extrinsic
    ambiguity and find that the term “current” “doesn’t mean
    what it seems to mean.” The argument is much better
    suited to this provision than it was to the previous one
    because here there is specific, objective evidence of the
    meaning of the term “current.” The parties’ course of
    dealing shows that the SPD was first incorporated into
    the 2002 CBA and therefore indicates that the SPD
    referred to the 2002 CBA and no other. In addition, the
    December 2007 SMM, informing the Local 705 retirees
    that the cap had been exceeded and that UPS would
    collect additional contributions when the “current” CBA
    expired, also shows that the SPD referred to the 2002
    CBA. We need not decide whether this evidence creates
    an ambiguity, however, because we agree with the
    district court that the December 2007 SMM amended the
    SPD.
    Nos. 09-2445 & 09-2553                                    11
    ERISA requires that fiduciaries provide beneficiaries
    with a summary of any material modification of a plan
    “written in a manner calculated to be understood by
    the average plan participant . . . .” 
    29 U.S.C. § 1022
    (a).
    Material modifications include changes to “requirements
    respecting eligibility for participation and benefits[.]” 
    Id.
    at § 1022(b). The December 2007 SMM clearly stated that
    the cost “has exceeded” the cap and that additional
    contributions “will be effective after the expiration of the
    current [CBA].” This was a clear departure from the
    SPD—which only referred to the possibility of additional
    contributions—and notified the Local 705 retirees that
    UPS would no longer be picking up the tab. As we
    pointed out at oral argument, UPS could have com-
    pletely eliminated the problem if it had specified in the
    December 2007 SMM that the contributions would be
    collected after the expiration of the “2002” CBA. Never-
    theless, we find that the December 2007 SMM met the
    minimal requirements necessary to modify the SPD.
    The Local 705 retirees argue that the December 2007
    SMM failed to specify the amounts that would be col-
    lected from the retirees and was, on that basis alone,
    ineffective. But the retirees fail to cite any provision,
    regulation, or case mandating this requirement. Rather,
    the regulations they cite pertain to requirements for the
    SPD (the validity of which is not at issue here), not the
    plan modification. See 
    29 U.S.C. § 1022
    (b); 
    29 C.F.R. § 2520.102-3
    (j)(3). The Local 705 retirees raised no objec-
    tions to the December 2007 SMM, issued only based on
    their complaints about the October 2007 SMM, which did
    specify amounts. We find that the December 2007 SMM
    12                                  Nos. 09-2445 & 09-2553
    modified the SPD and made it reasonably clear that
    contributions would increase after the expiration of the
    “current” SPD—at that time, the 2002 CBA. UPS’s deter-
    mination that the term “current” in the SPD referred
    only to the 2002 CBA therefore was not arbitrary and
    capricious. Accordingly, there is no basis to grant the
    Local 705 retirees’ request to increase the duration of the
    injunction against UPS.
    For these reasons, the judgment of the district court
    is A FFIRMED.
    2-10-10