United States District Court, W.D. Pennsylvania
ANTHONY J. ZANGHI, KENNETH J. SOWERS, DOMINIC MCCUCH, JAMES HOHMAN, and DARRELL SHETLER, on behalf of themselves and others similarly situated; UNITED STEEL, PAPER AND FORESTRY, RUBBER MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL UNION, AFL-CIO/CLC, Plaintiffs,
FREIGHTCAR AMERICA, INC.; JOHNSTOWN AMERICA CORPORATION; and JOHNSTOWN AMERICA CORPORATION USWA HEALTH & WELFARE PLAN, Defendants.
MEMORANDUM OPINION AND ORDER OF COURT
KIM R. GIBSON Judge
This matter comes before the Court on Defendant FreightCar America’s first motion for summary judgment (ECF No. 118) and Plaintiffs’ third motion for summary judgment as to liability (ECF No. 123). Plaintiffs Anthony J. Zanghi, Kenneth J. Sowers, Dominic McCuch, James Hohman, and Darrell Shetler (“Class Representatives”), on behalf of themselves and all other persons in the proposed class described in their complaint, by their attorneys, and Plaintiff United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO/CLC (“USW”), by its attorneys, brought a complaint against Defendants FreightCar America and Johnstown America Corporation USWA Health & Welfare Plan. (ECF No. 1 at 1).
The parties agree that this case is related to the underlying Deemer litigation. United Steelworkers of America, AFL-CIO-CLC, Geraldine Deemer, and Darrell Shetler v. Johnstown America Corporation, et al., No. 02-CV-806 (W.D.Pa.). (ECF No. 136 at 1). Plaintiffs’ complaint asserts that FreightCar’s reduction of retiree welfare benefits violated collectively bargained obligations owed to Class Members, and is actionable under Section 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185(a). (ECF No. 1 at 24). Plaintiffs also assert that FreightCar’s violation of the employee welfare benefit plan is actionable under § 502(a)(1)(B) and (a)(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132(a)(1)(B), which allows a participant or beneficiary to bring a civil action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” (Id. at 25).
Plaintiffs now ask the Court to enter summary judgment in their favor on the basis of additional evidence adduced during the Deemer discovery, which they assert confirms that FreightCar and the Union never “agreed otherwise” to allow FreightCar to unilaterally terminate retirees’ health and life insurance benefits. (ECF No. 124 at 3). In the alternative, Plaintiffs argue that FreightCar failed to terminate retirees’ healthcare benefits through the collective bargaining process, and that it terminated life insurance benefits in violation of the parties’ settlement agreement. (Id. at 3–4).
Defendants also move for summary judgment, asking the Court to find that the undisputed material facts clearly demonstrate a lack of any clear and express agreement by FreightCar to provide vested medical and life insurance benefits to the Retirees. (ECF No. 120-1 at 1). Further, Defendants argue that FreightCar’s termination of Retirees’ benefits was entirely consistent and expressly authorized by the governing documents because none of them provided for vested benefits. (Id. at 2).
Also pending before this Court is Plaintiffs’ motion to strike certain denials of fact included in Defendants’ response to Plaintiffs’ statement of undisputed facts. (ECF No. 142).
For the reasons given below, this Court will deny Plaintiffs’ and Defendant’s motions for summary judgment. Plaintiffs’ motion to strike is also denied.
II. JURISDICTION AND VENUE
This Court exercises subject matter jurisdiction pursuant to 28 U.S.C. § 1331, as both counts of Plaintiffs’ complaint raise federal questions. This Court also has jurisdiction over Count I pursuant to § 301 of the LMRA, 29 U.S.C. § 185, and over Count II pursuant to §§ 502(e)(1) and (f) of ERISA, 29 U.S.C. § 1132(e)(1). Venue in this judicial district is proper pursuant to § 301 of LMRA, 29 U.S.C. § 185, and § 502(e)(2) of ERISA, 29 U.S.C. § 1132(e)(2).
a. Factual background
This Court previously ruled on FreightCar’s motion to dismiss, transfer, or stay proceedings, in which a lengthy description of the factual background was given. (ECF No. 73 at 2–7). FreightCar’s response to Plaintiffs’ concise statement of undisputed material facts asserts that the Court’s summary did not contain all of the materially relevant facts. (ECF No. 136 at 1). The Court now sets out the undisputed facts as set out by the parties in their respective statements of undisputed material fact. (ECF Nos. 119 and 129).
i. The 1991 Collective Bargaining Agreement
Bethlehem Steel Corporation owned and operated a facility producing railroad freight cars in Johnstown, Pennsylvania, from 1923 to 1991. (Compl. ¶ 3). In 1991, Bethlehem Steel sold the assets of the freight car division to Johnstown America Corporation (“JAC”), FreightCar’s predecessor. (ECF No. 129 at 11, ¶ 8).
Plaintiff United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO/CLC (“Union” or “USW”), was the collective bargaining representative for hourly employees at the Johnstown Facility. (Id. at ¶ 3). The USW negotiated the collective bargaining agreements with FreightCar relating to the retiree health and life insurance benefits at issue in this case. (Id.).
The 1991 purchase agreement between FreightCar and Bethlehem, to which the USW was not a party, provided that Bethlehem would reimburse FreightCar for retiree insurance costs for those FreightCar employees who were 43 at the time of the October 28, 1991 sale and who subsequently retired with eligibility for retiree insurance benefits from FreightCar. (Id. at ¶ 9). FreightCar recognized the USW as the collective bargaining representative of the Johnstown Facility bargaining unit employees in connection with the 1991 sale. (Id. at ¶ 10).
During the summer and fall of 1991, FreightCar engaged in negotiations with the USW in an effort to reach a collective bargaining agreement that would govern the terms and conditions of employment at the Johnstown Plant following the closing of the sale. (ECF No. 119 at ¶ 9). In October 1991, the parties discussed the benefit plans that JAC would create for the represented employees if FreightCar closed on the Johnstown Plant. (Id. at ¶ 10). In mid-October, FreightCar and the USW reached an agreement which they memorialized in a main collective bargaining agreement (“the 1991 CBA”) and twenty-seven “side letters” to the CBA. (Id. at ¶ 16). This agreement was tentative and would only become effective in the event that FreightCar closed on its purchase of the Johnstown Plant. (Id.). One of the 27 side letters to the 1991 CBA was the “Mirroring Agreement, ” which was also known as “Side Letter 22.” (ECF No. 129 at 11, ¶¶ 11–12). Side Letter 22 provided that:
Johnstown America Corporation will create mirror bargaining unit employee benefit plans identical in all material respects to the Bethlehem plans they replace. Within 60 days after closing of the Johnstown America Corporation/Bethlehem sale, Johnstown America Corporation will forward to the Union for review and comment draft copies of such plans, and Johnstown America Corporation and the Union agree to use their best efforts to finalize such plans, subject to IRS approval if appropriate, within 120 days of closing.
(ECF No. 119 at ¶ 20).
ii. The 1993 Summary Plan Description
In 1993, while the 1991 CBA was still in effect, FreightCar distributed a summary plan description titled “JAC’s Employee Guide” (“1993 SPD”), which included a letter informing employees that the handbook served as the summary plan description required by the Employee Retirement Income Security Act of 1974, as amended. (ECF No. 129 at 17, ¶¶ 41–42). The 1993 SPD stated as follows with respect to health benefits:
Note: This plan is subject to the rights and obligations of collective bargaining. The company may amend or terminate the plan only through this process. This booklet is intended as a general summary of your benefits under the plan. The specific details of this plan are in the actual plan document, which controls your benefits.
(Id. at ¶ 48). In addition, the 1993 SPD provided that “[t]he plans are subject to the collective bargaining process.” (Id. at ¶ 49). Another notice provided that:
This guide attempts to provide a simple explanation of the provisions of your benefit. Complete technical information on the plans can be found in formal legal documents available in the human resources department. If there’s any omission, if this guide is unclear, or if this guide and the plans differ, the plans as stated in the legal documents must take precedence.
(Id. at ¶ 50).
The first page of the 1993 SPD included a letter dated May 1993 addressed to “Employee” stating that the handbook contained only “summaries of the benefit plans;” and that:
Each benefit plan has legal documents that may be referred to whenever a question concerning your coverage arises. In the event of a difference between the summary and the legal documents, the legal documents shall control.
(Id. at ¶ 51). The 1993 SPD was drafted by Hewitt, an outside benefits administrator. (Id. at¶ 52). Mr. Grove, the FreightCar Benefit Administrator, reviewed the 1993 SPD to ensure that the benefits in it matched the Bethlehem benefits. (Id. at ¶ 53). Regarding eligibility upon retirement, the 1993 SPD provided that:
If you retire under Johnstown America’s pension plan for represented employees and have worked continuously at Johnstown America for 15 or more years, you and your eligible dependents will be enrolled for retiree medical coverage under the medical plan, unless you choose not to be. If you’re the spouse of a former employee who’s eligible to receive a surviving spouse’s benefit under the pension plan, you’ll also be eligible for our retiree medical coverage.
(Id. at ¶ 55). With respect to retiree coverage, the 1993 SPD stated that “[t]he company pays the cost of hospital and physicians’ coverage for you and your dependents.” (Id. at ¶ 56). Regarding life insurance, the 1993 SPD stated: “If you retire at or after age 62, your basic life insurance will be reduced to $5, 000. If you retire before you turn age 62 . . . you’ll keep the same coverage as other active employees until you turn 62. Then your coverage will be reduced to $5, 000.” (Id. at ¶ 57).
The 1993 SPD further provided the following regarding termination:
Subject to collective bargaining, the company reserves the right to end, suspend, or amend the plans at any time, in whole or in part. This means the plans may be discontinued in part or in their entirety or modified to provide different benefits or different levels of benefits, the price of coverage may be changed, or any other modifications may be implemented. If any changes are made, you’ll be notified.
(Id. at ¶ 58). Another provision of the 1993 SPD provided the following regarding situations that could affect benefits:
Situations That May Affect Your Benefits
You and your family’s medical benefits could be lost or delayed if:
Subject to the collective bargaining agreement, the plan is modified to reduce or eliminate certain benefits or it ends.
(Id. at ¶ 59). FreightCar construed the JAC Employee Guide to mean that it had “expressly reserve[d] to JAC the right to terminate any benefit, including company paid retiree benefits, subject to collective bargaining.” (Id. at ¶ 60).
The USW, through Jerry Sokolow, its Technician in the USW’s Pension, Insurance & Research Department, had sought and obtained the 1993 SPD condition that the right to amend or terminate the plan should be “subject to collective bargaining” and “subject to the collective bargaining agreement.” (Id. at ¶ 61). With regard to the purported reservation of right provisions as to dental, vision and medical benefits, the USW had advised FreightCar: “delete or subject to collective bargaining agreement.” (Id.).
The JAC Guide was distributed to the represented employees in May 1993, and was given an effective date of October 28, 1991, as agreed by FreightCar and the USW. (ECF No. 119 at ¶ 51).
iii. The 1994 Collective Bargaining Agreement
In 1994 FreightCar and the Union engaged in collective bargaining, resulting in the 1994 CBA. (ECF No. 129 at ¶ 65). Mr. Joseph S. Canini, Jr., who worked in FreightCar’s Human Resources Department from November 15, 1993 through August 21, 2000, stated the following regarding the 1994 bargaining:
It was during the 1994 round of bargaining that JAC management first proposed removing of a number of side letters from the 1991 CBA, including Side Letter 22 (the Mirroring Agreement). The Union negotiators asked JAC negotiators why they wanted the side letters removed. Tex McIver stated that these side letters were no longer needed, because they dealt with issues related to the 1991 sale. McIver also assured the Union’s negotiators that the removal of the side letters would not affect anybody’s rights under CBA. Mark Duray, a JAC executive and a member of management’s negotiating committee, affirmed McIver’s statement. McIver and Duray said that removing these letters was “housecleaning” and would merely make the CBA shorter without changing its meaning. (I specifically remember Duray using the term “housecleaning.”)
(Id. at ¶¶ 68–69).
iv. The 1997 Collective Bargaining Agreement
FreightCar and the Union engaged in collective bargaining again in 1997, which resulted in the 1997 CBA. (Id. at ¶ 72). Prior to these negotiations, the active employee and retiree medical benefits described in the JAC Guide were administered by Blue Cross Blue Shield pursuant to an insurance contract and indemnity agreement with FreightCar (“the BCBS Insurance Agreement”). (ECF No. 119 at ¶ 62). During the 1997 negotiations, the USW proposed that FreightCar provide employee and retiree medical benefits through the Steelworkers Health and Welfare Fund Point-of-Service Plan (“the SHWF Plan”), to which FreightCar agreed. (Id. at ¶¶ 63, 67). The SHWF Summary Plan Description was distributed to the employees and retirees. (Id. at ¶ 71).
The 1997 CBA included a “zipper clause, ” which stated:
This Agreement and the documents expressly referred to herein are the only documents by which the parties intend to be contractually or statutorily bound. Any document not expressly referred to herein that may be brought forth by either the Company or the Union after ratification of this Agreement may be included as part of this Agreement, provided both parties agree to its inclusion.
(Id. at ¶ 58).
In a letter to FreightCar employees dated November 7, 1997, FreightCar President James D. Cirar advised that FreightCar had made its last and final offer to the Union, and that “[t]his offer provides major benefits to you and your family, including… an improved healthcare, life insurance and benefit package.” (ECF No. 129 at ¶ 83). The 1997 CBA included a “Successorship” provision, stating that:
(1) In the event of a permanent shutdown of the Plant prior to five years following the date of sale, the Company will guarantee that each former Johnstown America Corporation Employee at the Plant will receive from the owner of the Plant, from the Pension Benefit Guaranty Corporation (the “PBGC”) and/or from the Johnstown America Corporation Pension Plan . . . the same retiree health and life insurance coverage, and the same severance pay that he would have received had the Plant shutdown as of the date of sale.
(Id. at 104). In the deposition taken of Mr. Duray, FreightCar’s Vice President of Human Resources, he testified that the retiree health benefits provided by FreightCar in 1999 mirrored those provided in the Bethlehem Plan. (Id. at ¶ 106). The President of FreightCar sent a letter to employees dated June 3, 1999, which reassured employees that their benefits would continue just as they had under Bethlehem: “You will be eligible for the same retiree health and life insurance ...