Brass v. SPX Corp.

DAVID BRASS, RICHARD HAMILTON, CHARLES KOZITZKY,RON BEEGLE, DAVID BABCOCK, and CARL VAN LOON, Plaintiffs, v. SPX CORPORATION, Defendant.

3:14-cv-656-RJC-DSC

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NORTH CAROLINA CHARLOTTE DIVISION

February 3, 2021

ORDER

THIS MATTER comes before the Court on Defendant's Motion for Summary Judgment, (Doc. No. 183); its Memorandum and Affidavit in Support, (Docs. Nos. 184-186), Plaintiffs' Response in Opposition, (Docs. Nos. 192-193); Defendant's Reply, (Doc. No. 197); Plaintiffs' Motion for Partial Summary Judgment, (Doc. No. 187); their Memorandum in Support, (Doc. No. 188); Defendant's Response in Opposition, (Doc. No. 190); Plaintiffs' Reply, (Doc. No. 202); Defendant's Motion in Limine to Exclude Plaintiffs' Expert Report, (Doc. No. 199); Defendant's Memorandum in Support, (Doc. No. 200); Defendant's Motion to Strike Plaintiffs' Expert Report, (Doc. No. 201); Plaintiffs' Response in Opposition, (Doc. No. 205); Defendant's Reply (Doc. No. 210); Plaintiffs' Motion to Strike Defendant's Expert Report, (Doc. No. 206); Defendant's Response in Opposition, (Doc. No. 211); and Plaintiffs' Reply (Doc. No. 213). These motions are ripe and ready for adjudication.¹

I. BACKGROUND

A. Procedural Background

David Brass, Ron Beegle, David Babcock, Carl Van Loon, Richard Hamilton, and Charles Kozitzky ("Plaintiffs" or "retirees"), along with several other retirees who have since been dismissed from this case, filed their Complaint against SPX Corporation ("Defendant" or "SPX") on November 25, 2014. (Doc. No. 1). Plaintiffs brought two claims in their Complaint: (1) violation of the settlement agreements under section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185; and (2) violation of employee welfare benefit plans under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B).² Plaintiffs filed their Motion for Preliminary Injunction on December 15, 2015 (Doc. No. 9).

By the time Plaintiffs' Motion for Preliminary Injunction became ripe, the event that Plaintiff sought to prevent had already occurred, and this Court denied the motion as moot. (Doc. No. 31). Plaintiffs appealed to the Fourth Circuit on October 27, 2015, (Doc. No. 34), whereupon the Fourth Circuit denied Plaintiffs' appeal on September 28, 2017, affirming this Court's Order under different reasoning and remanding for further proceedings. (Doc. No. 80). This Court denied Plaintiffs' Motion to Certify Class, filed during the intervening time period, on October 17, 2017. (Doc. No. 81).

Following failed settlement discussions both parties now seek summary judgment. Defendant filed its Motion for Summary Judgment on October 9, 2020. (Doc. No. 183; see also Docs. Nos. 184-186, 192, 193, 197). Plaintiffs filed their Motion for Partial Summary Judgment on the same day. (Doc. No. 187; see also Docs. Nos. 188, 190, 202, 203). This Court heard oral arguments from both parties regarding their respective motions on November 18, 2020.

The parties have also filed recent motions to strike expert witness opinions. On October 30, 2020, Defendant filed a Motion in Limine and a Motion to Strike, both to exclude the reports, opinions, and testimony of Plaintiffs' expert Michael A. Dunn. (Docs. No. 199, 201; see also Docs. Nos. 200, 205, 210). On November 13, 2020, Plaintiffs filed a Motion to Strike as well, to exclude portions of Defendant's expert report and the corresponding testimony of Defendant's expert Adam Reese. (Doc. No. 206; see also Doc. No. 211).

B. Factual Background

1. Early-2000s Settlement Agreements between the Parties

In 2001, the UAW along with several retired SPX union members filed two class action lawsuits against SPX alleging it had violated the union members' rights to lifetime health benefits.³ (Doc. No. 1, ¶2: Complaint). The parties eventually negotiated a resolution to those suits, which led to the execution and court approval of two settlement agreements in 2004 (the "Settlement Agreements").⁴ (Id.). Thelanguage at issue in each Settlement Agreement is identical. (Id.). In the Settlement Agreements, SPX agreed to provide certain health care benefits to retirees and surviving spouses for the remainder of their lives. (Id. ¶ 26). Some specific benefits differed depending on the residence of the retirees, (Doc. No. 10 at 5-6), and exhibits to the Settlement Agreements set out the principal features of the described plans, including, among other things, co-pays, out-of-pocket expenses, deductibles, payment limits, and coverage. See (Doc. Nos. 1-1 at 47-77; 1-2 at 50-62).

2. Benefits Structure Required by the Settlement Agreements

The Settlement Agreements do not mandate that SPX provide a particular plan or type of plan, nor do they require that SPX provide benefits that are identical to those described in the accompanying exhibits. The Agreements instead memorialized the benefit levels upon which the parties had agreed. The Settlement Agreements provided that SPX could change plans, carriers, networks, and providers so long as SPX provided benefits that were "substantially equivalent" to those agreed upon in the Agreements. (Complaint, ¶27). The relevant language in both Agreements, to which both parties cite, reads:

Notwithstanding any other provision hereof, any obligation on the part of SPX to provide coverage under a specified plan or its substantial equivalent shall be deemed to require only that SPX provide coverage which is substantially equivalent in benefits and it shall not be deemed to obligate SPX to provide such coverage through an HMO, to maintain or replicate coverage in a particular network, to provide benefits through a structure under which the patient designates a primary care physician or otherwise to regulate or affect the manner in which SPX makes such substantially equivalent benefits available.

Except to the extent that SPX is obligated by this Agreement to provide coverage under a specified plan or its substantial equivalent, SPX retains its right to, at any time, and from time to time: (a) amend or modify the provisions of any plan; (b) change the plan administrator, carrier, trustee or any other person or entity rendering services to or with respect to any plan; (c) merge the plan with any other plan or split up or spin off any portion of any plan; (d) unilaterally make any change to any plan required by applicable law or maintain the tax status of any plan or the benefit provided under any plan; or (e) any combination of these items.

(Doc. No. 1-1, ¶¶5.6, 5.7; Doc. No. 1-2, ¶¶5.6, 5.7).

The exhibits to the Settlement Agreements set out features of the described benefit levels, including co-pays, out-of-pocket expenses, deductibles, payment limits, coverage, and so forth. (Doc. No. 16, Affidavit of Leisa White, at ¶ 13; Settlement Agreements at 9-14). Specifically, the Settlement Agreements require:

• Medical coverage under specific medical plans or their "substantial equivalent." (Doc. No. 1-1, ¶ 5.1(a), (b); Doc. No. 1-2, ¶ 5.1(a), (b)).

• A Prescription Drug Plan with no annual maximums on coverage and with set co-pays for each subscription covering all Federal legend drugs, or the "substantial equivalent" of such a prescription plan. (Id.).

• SPX prescription drug plan that covers all Federal legend drugs prescribed by a physician, except for those specifically excluded, and covering both formulary and non-formulary drugs. (Doc. No. 1-1, ¶ 5.1(a), (b), Ex. G; (b); Doc. No. 1-2, ¶ 5.1(a), (b), Ex. I).

• Partial monthly reimbursement of Medicare Part B premiums. (Doc. No. 1-1, ¶ 5.5; Doc. No. 1-2, ¶ 5.3).

• Michigan law covers the terms and conditions of the Settlement Agreement. (Id. ¶ 9.12).

• The benefits required by the Agreements will be covered for life, or for as long as the Settlement Class Members remain members. (Id. ¶ 5.1).

• Settlement Class Members under the Muskegon Agreement had to make a one-time, permanent election whether to remain in the Beneflix program or whether to become Traditional Plan Participants. (Doc. No. 1-2, ¶ 5.1(a)(1)).

• SPX must provide a customer service contact number for each plan of insurance, to help retirees with unresolved questions about plan benefits and status of claims, as well as the ability for a Settlement Class Member Representative to contact a SPX employee to address any unresolved questions. (Docs. Nos. 1-1, 1-2, ¶ 5.10).

3. In 2014 SPX Announced a New Benefits Structure

After the signing of the Settlement Agreements in 2004, SPX made several changes affecting the provision of benefits to the settlement groups without complaint from the UAW. (Doc. No. 10 at 11-12).

Then in early 2014, SPX decided to change the structure through which it provided medical benefits to the settlement members. (Doc. No. 15 at 11-14). It hired Willis Towers Watson ("WTW"), a consulting firm that provides actuarial and benefit design consulting services, to assist with designing the new program. (Doc. No. 16, ¶ 25). SPX informed WTW of its obligation to provide the retirees with benefits substantially equivalent to their then-existing benefit. (Doc. No. 16, ¶ 35; Tomic Dep., 91:10-20, 102:11-103:6). WTW compared the costs of Medicare Part F plans, which SPX considers the most comprehensive Medigap plans available, and that SPX argues provides richer benefits than group plans in the Settlement Agreements. (Doc. No 184 at 10). WTW used calculations based on SPX's retiree consensus data and its own medical and prescription drug claim continuance tables and determined that a robust plan would cost an average of $3,400 a year, to which SPX added catastrophic drug coverage and increased the base annual amount to $5,000. (Doc. No. 17, ¶¶ 14-17).

On March 18, 2014, SPX sent letters to the UAW and its counsel notifying them that SPX was proposing to change the structure through which it provided medical benefits to the settlement members beginning January 1, 2015. (Doc. No. 16, ¶41). On July 1, 2014, SPX sent a notice to each...