Plan Administrator's Interpretation That Contravenes Plain Language Of Plan Is Arbitrary And Capricious
GREEN v. THE UPS HEALTH AND WELFARE PACKAGE (February 10, 2010)
UPS negotiates collective bargaining agreements (CBAs) covering its employees who are members of the International Brotherhood of Teamsters (“IBT”). It actually negotiates with the international union and also directly and separately negotiates with some large locals, including Local 705. Under the 2002-2008 CBA with Local 705, UPS agreed to provide health care to Local 705 retirees. The benefit was outlined in the Summary Plan Description (SPD), which applied to all IBT retirees. The SPD set a monthly contribution for each retiree and provided that, if the cost of coverage exceeded a certain threshold, each retiree would share in the excess cost “by making an additional contribution.” It also stated that additional contributions would not be implemented until after the “current” CBA expired. The cost threshold was exceeded in 2006. In October 2007, UPS issued a Summary of Material Modification (SMM) advising all IBT retirees of that fact and imposing an additional contribution for each retiree effective January 1, 2008. Before implementing the additional contribution, however, UPS agreed with both the international and local unions to delay implementation until their respective CBAs expired. UPS sent a revised SMM to Local 705 retirees in December 2007 advising that increased contributions “well be effective” after the expiration of the “current” CBA. After the Local 705 CBA expired in mid-2008, UPS notified Local 705 retirees that it would implement an additional contribution effective February 2009. Local 705 retirees brought a class action, alleging that the collection of additional contributions violated the Plan and ERISA because a) the retirees were not sharing equally since the international retirees were not yet contributing, and b) the SPD stated that contributions would not be implemented until the expiration of the “current” plan and the Local 705 current plan now expired in 2013. The district court agreed with Local 705 on the first argument but agreed with the Plan on the second – and enjoined further collection of contributions until further order of the court. The retirees and the Plan appeal.
In their opinion, Judges Cudahy, Wood, and Evans affirmed. The Court agreed with the district court that the collection of contributions from Local 705 retirees only controverted the plain language of the Plan and was, therefore, arbitrary and capricious. The Court rejected UPS’ contrary interpretation of the “share equally” language and rejected its plea to consider extrinsic evidence under the doctrine of extrinsic ambiguity. Although the Court was more receptive to the use of the extrinsic ambiguity doctrine with respect to the meaning of “current” in the SPD, it concluded that it need not. Instead, it held that the December 2007 revised SMM modified the SPD and made it clear that the “current” CBA referred to was the 2002 CBA.
