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.
Kenneth Nelson owned two car dealerships -- Auto Plaza and Auto Mall. In 1989, he and Richard Curia entered into an agreement whereby Curia agreed to pay $100,000 for 1000 (of 8180) shares in Auto Plaza and 144 (of 1200) shares in Auto Mall. The agreement also gave Curia three separate options to buy additional stock in both dealerships, up to 100% of each. Curia exercised the first of the options in 1990. A few years later, in 1993, Nelson and Curia modified the agreement, apparently because the total number of shares in the two companies had increased. The 1993 agreement also provided that Curia could purchase additional shares "upon those terms and conditions subsequently agreed upon." A later agreement terminated Curia's rights to acquire any additional Auto Mall stock. In 2005, however, Curia attempted to exercise his options to acquire all of the stock in Auto Plaza. Nelson filed a declaratory judgment action contesting Curia's right. Curia counterclaimed for breach of contract. The court granted summary judgment to Curia. Nelson appeals.
Roger Twenhafel owns a business that manufactures wood cabinets. He stores some of his wood inventory outdoors. Just before a violent storm hit in late 2006, he covered the inventory with a tarp and secured it with heavy blocks and beams. In spite of this effort, the storm lifted and carried the tarp away. The inventory was damaged. Twenhafel made a claim against State Auto Property and Casualty Insurance Company. The policy covered all losses except those specifically excluded. State Auto denied the claim, relying on an exclusion for rain damage to property "in the open." Twenhafel brought suit for breach of the insurance policy. The district court found that "in the open" was not ambiguous and it meant property that was exposed to the elements with no protection. The court granted summary judgment to Twenhafel and awarded prejudgment interest at 6.98% and postjudgment interest at .96%. State Auto appeals.
Quality Dining, Inc. has several subsidiaries (the "Borrowers") that own franchise restaurants, including .jpg)
Material Sciences Corp. ("MSC") is a large liquid-coating company. It pre-paints raw material used in commercial and industrial applications. During the 1990s, MSC began working with Terronics Development Corporation ("TDC"), a small research and engineering company that had developed a process for coating materials with a powder-based paint. In 1998, the parties entered into a technology agreement. Under the agreement, TDC assigned certain patents to MSC and MSC promised to purchase equipment and consulting services from TDC. By its terms, the agreement would expire in 2002 but could be renewed. After some initial successes, the technology did not pan out as expected. TDC covered some of its cost overruns by borrowing from MSC against its future profit expectations. The relationship of the parties came to an end in 2002. TDC sought millions in damages and a reassignment of its patents. The district court granted MSC's motion for summary judgment. TDC appeals.