United States District Court, M.D. Tennessee, Nashville Division
JUDITH K. KERNS, et al., Plaintiffs,
CATERPILLAR INC., Defendant/Third-Party Plaintiff,
INTERNATIONAL UNION, UAW, et al., Third-Party Defendants.
ALETA TRAUGER, District Judge.
This is a class-action lawsuit brought on behalf of surviving spouses of former employees of Caterpillar, Inc. ("Caterpillar") who retired on or after March 16, 1998, and before January 10, 2005. This matter is before the court on cross motions for summary judgment on the claims brought by eight individual class members against Caterpillar, Inc. ("Caterpillar"). Docket Nos. 385 (Caterpillar's motion), 409 (Plaintiffs' motion). For the reasons stated herein, judgment will be entered for the eight plaintiffs at issue: Beverly Carson, Wilma Farrenholz, Hattie Grace, Sharon Houser, Laura Mansfield, Florence Miller, Charlotte Seibert, and Nancy Virden. The court also will order Caterpillar to re-enroll these plaintiffs in its insurance plan without premiums.
RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
Because the court has recounted the factual and procedural history of this case numerous times, familiarity with the facts will be assumed. During the time period relevant to this lawsuit, the International Union, UAW ("UAW"), was the exclusive bargaining representative for employees at various Caterpillar facilities, primarily in Illinois. Under federal law, Caterpillar was obligated to negotiate with the UAW before making changes to the terms and conditions of employment. The labor agreement negotiated between Caterpillar and the UAW in 1988 (the "1988 Central Labor Agreement") included provisions for health insurance benefits, including retiree health care, as set forth in an Insurance Plan Agreement between the parties, along with a Group Insurance Plan (the "1988 GIP"). The 1988 GIP provided that, following the death of a retired employee, coverage for the surviving spouse "will be continued... for the remainder of his surviving spouse's life without cost." Docket No. 243, at 7.
Upon the expiration of the 1988 Central Labor Agreement, Caterpillar and the UAW were unable to reach a new agreement. One area of dispute was the proposed changes to medical benefits for existing and future retirees. Unable to reach a new agreement, on March 31, 1992, Caterpillar advised the UAW and Caterpillar's employees that it would unilaterally implement portions of its final contract offer, which would result in increased medical costs for the retirees.
On November 20, 1992, as the parties continued to be unable to reach a new agreement, Caterpillar advised the UAW that, effective December 1, 1992, it would implement additional provisions from its final offer, including caps on the amount that Caterpillar would pay for future retiree health coverage (the "1992 unilateral implementation"). However, the December 1992 unilateral implementation did not change the following language from the 1988 GIP: "Coverage [for a surviving spouse] will be continued following the death of a retired Employee for the remainder of his surviving spouse's life without cost." Docket No. 243, at 10.
In March 1998, the parties finally ratified a successor agreement to the 1988 Central Labor Agreement. The 1998 GIP again retained the provision in the 1988 GIP providing that surviving spouses' medical coverage would be continued following the death of a retired employee for the remainder of the surviving spouse's life without cost.
After much negotiation, the 2004 labor contract removed the "without cost for life" language pertaining to surviving spouse medical benefits that, in form and/or substance, had been in the 1988, 1992, and 1998 Agreements. The 2004 GIP contains new language that clearly specifies that both retirees and their surviving spouses must contribute toward their medical costs.
In October 2005, Caterpillar mailed letters to surviving spouses indicating that, effective January 1, 2006, they would be required to pay a health care premium to maintain their coverage. Shortly thereafter, surviving spouses began sending Caterpillar complaints that they were entitled to lifetime coverage without cost, based, among other things, on letters Caterpillar had sent them following the death of their Caterpillar-retiree spouse, assuring them they would be entitled to coverage for life "without cost."
In April 2006, shortly after this lawsuit was filed, Caterpillar announced it would "waive" premiums for individuals whose spouses retired, or were eligible to retire, between January 1, 1992 and January 10, 2005 and then died prior to January 10, 2005, the effective date of the 2004 labor agreement. But Caterpillar continues to charge monthly premiums for surviving spouses whose Caterpillar-retiree spouse died after January 10, 2005-after the 2004 labor agreement that removed the "without cost" language as to surviving spouses took effect.
On March 26, 2010, the court entered judgment as a matter of law for the Kerns plaintiffs, finding Caterpillar liable for violations of Section 301 of the Labor-Management Relations Act ("LMRA"), 29 U.S.C. § 185, and Section 502(a)(1)(B) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), for improperly charging premiums to the class of individuals whose spouses retired from Caterpillar prior to the ratification of the 2004 Labor Agreement but died after its ratification. Docket Nos. 262, 263. The court found that "a surviving spouse is not precluded from relief simply because her retiree-spouse happened to die after the ratification of the 2004 agreement." Docket No. 262, at 38-39. The court further held that lifetime no-cost medical benefits had vested for the Kerns class and that Caterpillar had no viable defenses. Id. at 39. However, upon consideration of the guidelines set forth by the Sixth Circuit in Reese v. CNH America LLC, 574 F.3d 315 (6th Cir. 2009), the court concluded that, although Caterpillar's imposition of premiums was unlawful, its imposition of new deductibles, co-insurance, and increased out-of-pocket costs were permissible. Docket No. 262, at 39-41.
On August 20, 2014, the court ruled on the portion of Caterpillar's Motion for Summary Judgment on Damages that it interpreted as a motion to strike plaintiffs' claims for damages for replacement insurance and out-of-pocket medical expenses.. Docket Nos. 407, 408 (Court Order and Memorandum). In that motion, Caterpillar conceded that, under the court's prior rulings, surviving spouses who paid premiums to stay enrolled in Caterpillar's insurance plan are entitled to damages for the amount they paid in unlawfully imposed premiums, but it argued that surviving spouses who terminated Caterpillar's insurance plan because of Caterpillar's breach are not legally entitled, under either ERISA or the LMRA, to recover damages for the cost of obtaining substitute coverage and reimbursement for out-of-pocket healthcare costs that would have been covered if Caterpillar had honored the 1988 GIP. The court disagreed and held that the surviving spouses who terminated their insurance because of the unlawful imposition of premiums were entitled to those damages under the LMRA. The court declined to reach the issue of whether the plaintiffs would be entitled to those damages under ERISA.
As to the portion of Caterpillar's motion that sought summary judgment on the claims brought by twelve surviving spouses who cancelled Caterpillar's insurance and sought damages for the cost of replacement insurance and out-of-pocket expenses, the court entered judgment for Caterpillar on the claims of four plaintiffs who had not produced sufficient evidence to withstand summary judgment. As to the remaining eight plaintiffs, the court indicated that it would hold Caterpillar's motion for summary judgment in abeyance and invited plaintiffs to file a cross motion for summary judgment for those individuals. The court solicited this motion in light of its holding that these eight plaintiffs are, in fact, entitled to damages for replacement insurance and out-of-pocket expenses caused by Caterpillar's breach, and the apparent lack of genuine dispute that Caterpillar's breach was the proximate cause of these surviving spouses' incurring these damages.
To narrow and direct the issues for future briefing, the court reiterated its prior holding that Caterpillar had waived any argument that the surviving spouses failed to mitigate their damages, as it had not raised the issue as an affirmative defense in its Answer to the plaintiffs' Complaint. Docket No. 407, at 15 (citing Docket No. 262, at 39). The court further held that, even if Caterpillar had not waived a mitigation defense, it was without merit. The court also noted that Caterpillar seemed to believe that plaintiffs were obligated to present "objective" proof that, before cancelling their Caterpillar insurance, each plaintiff took steps to determine whether Caterpillar had alternative plan options available at lower cost or met with a financial advisor ...