Grove v. Johnson Controls, Inc.

WILLIAM GROVE, SR.; VIRGINIA B. GROVE;SANDRA PALMIERI; MICHAEL G. FUHRMAN;WILLIAM WINTER; PRESTON HIMES; EDWARD MYERS;FLOYD MITZEL; MAURICE KEFAUVER, III; HAROLD G. LUCKENBAUGH;WILLIAM C. BARRETT; LARRY LEHMAN; GERALD A. YOUNG;JOHN C. DOUGLASS; INTERNATIONAL UNION UNITED AUTOMOBILE,AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, Appellants v. JOHNSON CONTROLS, INC.; JOHNSON CONTROLS, INC.UNION RETIREE WELFARE PLAN (PLAN 570); JOHNSON CONTROLS, INC.UNION WELFARE PLAN (PLAN 565); DOES 1 through 20

No. 16-2178

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Submitted: June 13, 2017

June 15, 2017

NOT PRECEDENTIAL

On Appeal from the United States District Court for the Middle District of Pennsylvania

(D.C. Civil Action No. 1-12-cv-02622)

District Judge: Honorable Sylvia H. Rambo

Submitted Under Third Circuit L.A.R. 34.1(a)

on Tuesday, June 13, 2017

Before: JORDAN and KRAUSE, Circuit Judges, and STEARNS, District Judge.^*

OPINION^**

KRAUSE, Circuit Judge.

Before this Court is an appeal from the District Court's grant of summary judgment in favor of Appellee Johnson Controls, Inc., on claims that Johnson Controls violated the Labor Management Relations Act and owes Appellants health insurance benefits under the Employee Retirement Income Security Act. For the reasons that follow, we will affirm.

I. Background

Appellants in this case are retired Johnson Controls employees with retirement dates dating back to 1977,¹ and they are joined by their former union, the International Union United Automobile, Aerospace and Agricultural Implement Workers of America ("the Union"). While working for Johnson Controls, Appellants were subject to and received the benefits of the Union's collective bargaining agreements, which the Union,on their behalf, had negotiated with Johnson Controls every few years since 1973. Each of these agreements had a "Duration and Termination" clause specifying the agreement's expiration date. See, e.g., J.A. 987-88.

Beginning in 1975, each collective bargaining agreement also addressed health insurance benefits for both active and retired Johnson Controls employees through a separate Group Insurance Program booklet, which was incorporated into the agreement by reference and was expressly made subject to "all provisions of [the] Agreement." See, e.g., J.A. 1110. The Group Insurance Program booklets issued between 1975 and 2006 imposed no lifetime cap on overall benefits payable, and the booklet issued in 2006 imposed a $500,000 lifetime cap.

Things changed in late 2009, when, as the 2006 collective bargaining agreement was expiring, Johnson Controls informed Appellants that, effective January 1, 2010, and with respect to services and prescriptions on or after that date, it would cap health insurance benefits at $50,000 for all Appellants over age sixty-five. Appellants who reached the $50,000 lifetime limit on post-2009 benefits still remained eligible, however, for government-provided health insurance benefits through Medicare, which Johnson Controls specified would not count toward the cap on post-2009 benefits.

In response, Appellants and the Union sued Johnson Controls, claiming that the new cap violated contracts between a union and an employer under the Labor Management Relations Act, 29 U.S.C. § 185, and seeking to enforce their rights under a benefit plan pursuant to the Employee Retirement Income Security Act ("ERISA"),29 U.S.C. § 1132(a)(1)(B).² Appellants moved for class certification, and the District Court certified a class of retirees divided into six subclasses, A through F, based on the years in which the subclass members retired and the collective bargaining agreements applicable to those members. After discovery, the District Court carefully analyzed the issues relevant to each subclass and issued a thorough and thoughtful decision, granting summary judgment to Johnson Controls on the ground that Appellants and the Union could not establish by a preponderance of the evidence that Johnson Controls intended for Appellants' employee health insurance benefits to vest, i.e., to be guaranteed for the rest of a beneficiary's lifetime, and thus no unlawful conduct had occurred. This appeal followed.

II. Standard of Review³

We review the District Court's grant of summary judgment de novo. See Faush v. Tuesday Morning, Inc., 808 F.3d 208, 215 (3d Cir. 2015). Summary judgment is appropriate where the moving party has established that "there is no genuine dispute as to any material fact" and, viewing the facts in the light most favorable to the non-moving party, "the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); Moore v. City of Phila., 461 F.3d 331, 340 (3d Cir. 2006).

III. Discussion

On appeal, Appellants challenge the District Court's conclusion that Appellants could not establish vesting, contending (1) that our Court's previous test for whether health insurance benefits have vested, which the District Court applied in its opinion, did not survive the Supreme Court's recent decision in M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015); (2) that language in the Group Insurance Program booklets showed Johnson Controls intended Appellants' health insurance benefits to vest; and (3) that the District Court erred in its assessment of Appellants' extrinsic evidence. We address each of Appellants' arguments below.

1. Applicable Standard

Health insurance benefits under ERISA do not automatically vest, and, nearly two decades ago, we wrote in UAW v. Skinner Engine Co. that any commitment for health insurance benefits to vest must "be stated in clear and express language." 188 F.3d 130, 139 (3d Cir. 1999). Appellants argue that, to the extent Skinner's "clear and express language" requirement differs from traditional rules of contractual interpretation, Skinner was overruled by the Supreme Court's 2015 decision in Tackett, which focused on the application of "ordinary principles of contract law" to evaluate whether benefits had vested, see 135 S. Ct. at 930, 933, 937, and where a plurality of the Court in concurrence explicitly rejected a "'clear and express' language" requirement for vesting, see id. at 938 (Ginsburg, J., concurring).

Reading Skinner carefully, it is arguably consistent with, rather than at odds with, Tackett. As the District Court observed, even while concluding that the "clear and express language" requirement remains binding in this Circuit, Skinner in fact "relied on traditional rules of contract construction" to determine the meaning of a collective bargaining agreement, and, moreover, this Court has not applied the "clear and express" language requirement "as a bright-line rule that would suspend all discussion of traditional principles of contract interpretation." Grove v. Johnson Controls, Inc., 176 F. Supp. 3d 455, 470-71 (M.D. Pa. 2016). The District Court's observations appear well founded. Indeed, in Skinner, we expressly stated that "traditional rules of contract construction apply when not inconsistent with federal labor law" and, thus, that "[w]here the contract is clear and unambiguous, a court must determine its meaning as a matter of law." Skinner, 188 F.3d at 138.

Nonetheless, we need not resolve today whether Skinner's "clear and express language" requirement is distinct from the application of "ordinary principles of contract law," Tackett, 135 S. Ct. at 930 (majority opinion), or, if it is, whether it survives Tackett. In this case, even applying "ordinary principles of contract law," id., we conclude, for the reasons discussed below, that the District Court correctly determined that the benefits in question were guaranteed only for the duration of the relevant collective bargaining agreement.

2. Contractual Language

We begin with the "rule that contractual provisions ordinarily should be enforced as written," which "is especially appropriate when enforcing an ERISA welfare benefits plan." Id. at 933 (brackets and internal quotation marks omitted). Because of the differences between the various collective bargaining agreements and Group Insurance Program booklets in this case, we analyze subclass A separately from subclasses B though F.

Subclass A. Appellants in subclass A retired between 1977 and 1984, and were subject to the 1975, 1978, and 1981 collective bargaining agreements and Group Insurance Program booklets. The applicable booklets provided that, in retirement, Appellants in subclass A would "continue to be insured," J.A. 1029-30, 1165, or would "have [their] benefits . . . continued," J.A. 1316. Appellants contend this language at least creates ambiguity as to whether the parties intended health insurance benefits for Appellants in subclass A to vest.

We disagree with this contention, for the application of ordinary rules of contract interpretation removes any ambiguity as to vesting. The booklets containing the phrases in question were incorporated into collective bargaining agreements, and those agreements, of course, included durational clauses with exact expiration dates. We must accordingly read the phrases about "contin[uing]" benefits in combination with the collective bargaining agreements "as a harmonious whole," Engelhard Corp. v. NLRB, 437 F.3d 374, 381 (3d Cir. 2006); accord 11 Richard A. Lord & Samuel Williston,Williston on Contracts § 32:5 (4th ed. 1993 & Supp. 2017), and we must adhere to "the traditional principle that contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement," Tackett, 135 S. Ct. at 937 (internal quotation marks omitted); see Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 207 (1991). These principles compel us to hold that the subclass A members' benefits did not vest and that any obligations on Johnson Controls' part terminated with the expiration of the collective bargaining agreements, for "the specific" clause regarding the agreements' termination dates "controls the general" clause regarding continuation of benefits. In re...