Savela v. City of Duluth

806 N.W.2d 793, 2011 Minn. LEXIS 732, 193 L.R.R.M. (BNA) 2369, 2011 WL 5864807

• Court: Supreme Court of Minnesota
• Decided: November 23, 2011
• Docket: No. A09-2093
• Status: Published

Opinions

OPINION

STRAS, Justice.

At issue in this case is the interpretation of approximately 60 collective bargaining agreements (CBAs) between the City of Duluth and its employees. Subject to certain conditions and exceptions, the CBAs guarantee retired City employees health insurance benefits “to the same extent as active employees.” The dispute centers on the meaning of that phrase — specifically whether the phrase guarantees health insurance benefits to retirees to the same extent as employees who were active at the time of a retiree’s departure, or to the same extent as current City employees. Because we conclude that retirees are entitled to health insurance benefits to the same extent as current City employees, we affirm.

I.

Between 1983 and 2006, the City of Duluth and its employees operated under approximately 60 CBAs covering five bargaining units: Duluth Police Local; Confidential Employees; City of Duluth Supervisory Association; Local 66 of American Federation of State, County and Municipal Employees (AFSCME) for Basic Unit Employees; and Local 101 International Association of Fire Fighters. Among other things, the CBAs provide for certain health benefits for employees who retired from employment with the City. Each of the CBAs include the following, or materially identical, language regarding retirement benefits, which we will refer to as the “active-employees clause”:

Any employee who retires from employment with the City on or after January 1, 1983, after having been employed by the City for such total time so as to be qualified by such employment to receive retirement benefits from the Public Employees Retirement Association, the Duluth Firemen’s Relief Association, or the Duluth Police Pension Association, and who is currently receiving a retirement or disability pension from any such fund, shall receive hospital-medical insurance coverage to the same extent as active employees, subject to the following conditions and exceptions: ....

(Emphasis added.) Immediately following the active-employees clause, each of the CBAs contain separately numbered or lettered paragraphs listing the various conditions or exceptions to the active-employees clause. Although the specific conditions and exceptions vary among the CBAs, many include the following, or substantially similar, provisions:

(a) The City will provide any eligible retired employee without claimed dependents the approved fee-for-service coverage or plan 2 coverage, whichever is designated by the employee at the time of retirement, provided active employees, without cost to the retiree.

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(d) Such coverage shall be for the life of the retiree....

On May 12, 2008, three retired City employees, including appellant Paula Save-la, filed a lawsuit in St. Louis County District Court alleging that the City had wrongfully changed or threatened to change their health insurance benefits. In affidavits, the plaintiffs claimed that the City had consistently interpreted the CBAs as freezing health insurance benefits for retirees to the benefits received at the time of retirement. Moreover, according to the affidavits, the City told Savela and others that their health insurance benefits would remain unchanged for the rest of their lives. The court issued a temporary restraining order prohibiting the City from changing the health insurance benefits for retirees until further order by the court.

The parties later stipulated to converting the lawsuit into a class action with Savela as the class representative. The court defined the class in its order as “all Duluth retirees who are former bargaining unit members and who retired from January 1, 1983 through December 31, 2006, and their spouses/dependents who are presently entitled to the retiree health care benefits [under the relevant CBAs].” The stipulation also stated in relevant part:

There is a live controversy between the City and the Class as to the meaning of the CBA language (“to the same extent as active employees”) on the following issue:

As a matter of contract, are the Class members’ health benefits fixed and governed by the plan in place on the date of their retirement or may the City modify the benefits whenever and however benefits for current employees are modified?

The stipulation therefore narrowed the issue in the case to one of contract interpretation, with the class stipulating that it would not pursue other individualized claims, such as promissory estoppel.

Savela and the City filed competing motions for summary judgment, each arguing that there were no material facts in dispute. The district court granted summary judgment to the City, and denied Savela’s motion. The court concluded that the active-employees clause unambiguously granted retirees the same health benefits as current City employees, not the same benefits as employees active on the date of a retiree’s departure. The court therefore held that the City was able to “modify the Plaintiffs’ benefits whenever and however benefits for active employees are modified.” The court also granted summary judgment to the City under a promissory estoppel theory, even though the parties stipulated that the class would not seek relief under that theory.

The court of appeals reversed in part and affirmed in part. Savela v. City of Duluth, No. A09-2093, 2010 WL 3632313, at *1 (Minn.App. Sept. 21, 2010). The court reversed the district court’s dismissal of the class’s putative promissory estop-pel claim on the ground that “the issue of promissory estoppel was not before the district court.” Id. at *4. The court affirmed the district court’s interpretation of the active-employees clause, concluding that the term “active employees” referred to current City employees, not employees who were active at the time of a retiree’s departure. Id. at *3. Resort to extrinsic evidence of intent and past practice was unnecessary, the court held, because the term “active employees” in the CBAs was clear and unambiguous. Id. We granted Savela’s petition for review, and now affirm.

II.

We review de novo the district court’s grant of summary judgment to the City. See Riverview Muir Doran, LLC v. JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn.2010). In reviewing the district court’s grant of summary judgment, our task is to determine whether genuine issues of material fact exist, and whether the district court correctly applied the law. Id. Because CBAs are contracts, see Hous. & Redev. Auth. of Chisholm v. Norman, 696 N.W.2d 329, 337 (Minn.2005), proper interpretation of them is a question of law that is subject to de novo review, see Halla Nursery, Inc. v. City of Chanhassen, 781 N.W.2d 880, 884 (Minn.2010).

The issue in this case is narrow, and the material facts are not in dispute. Although there are approximately 60 different CBAs covering five different bargaining groups, each of the CBAs contains an active-employees clause. The parties, in stipulating to the class action, identified the active-employees clause as the “live controversy” for judicial resolution. In addressing the limited breach of contract claim asserted by the class, we take no position on whether the City promised certain retirees that their health benefits would remain unchanged for the rest of their lives, nor do we address the wisdom of the City’s plan to move all employees and retirees into a single health insurance plan.

A.

When interpreting a contract, we look to its language to determine the parties’ intent. Dykes v. Sukup Mfg. Co., 781 N.W.2d 578, 582 (Minn.2010). In other words, “[w]here there is a written instrument, the intent of the parties is determined from the plain language of the instrument itself.” Travertine Corp. v. Lexingtoiu-Silverwood, 683 N.W.2d 267, 271 (Minn.2004). Accordingly, we assign unambiguous contract language its plain meaning. Metro. Airports Comm’n v. Noble, 763 N.W.2d 639, 645 (Minn.2009).

As argued and framed by the parties, the resolution of this ease turns on the active-employees clause, which states in relevant part: “Any employee who retires from employment with the City ... shall receive hospital-medical insurance coverage to the same extent as active employees, subject to the following conditions and exceptions.” To narrow the question further, this case effectively turns on the meaning of the phrase “active employees.” Savela argues that “active employees” refers to employees who were active at the time of a retiree’s departure. In contrast, the City claims that “active employees” refers to current City employees. We agree with the City.

During the entire 24-year period in which the various CBAs have governed the relationship of the parties, the term “active” has been synonymous with the term “current.” The American Heritage Dictionary of the English Language 17 (4th ed. 2009) (“Currently in use or effect”); see also Black’s Law Dictionary 32 (6th ed. 1990) (“That is in action; that demands action; actually subsisting; the opposite of passive.”); Black’s Law Dictionary 31 (5th ed.1979) (same). In other words, “active” employees are those employees that are currently “engaged” or “participating” in employment with the City. The American Heritage Dictionary of the English Language 18 (3rd ed. 1992) (“Engaged in activity; participating: an active member of a club.”)-, Webster’s Third New International Dictionary 22 (2002) (“[Ejngaged in an action or activity: PARTICIPATING <an [active] club member>”); Webster’s Third New International Dictionary 22 (1976) (same). The City’s position, therefore, is consistent with the common and accepted meaning of the word “active.”¹

Savela’s proposed interpretation, by contrast, would require us to add words to the active-employees clause. Specifically, Savela’s proposed interpretation requires us to change the phrase “active employees” to “active employees at the time of retirement” or “then-active employees.” However, “[w]e have consistently stated that when a contractual provision is clear and unambiguous, courts should not rewrite, modify, or limit its effect by a strained construction.” Valspar Refinish, Inc. v. Gaylord’s, Inc., 764 N.W.2d 359, 364-65 (Minn.2009) (citing Telex Corp. v. Data Prods. Corp., 271 Minn. 288, 294-95, 135 N.W.2d 681, 686-87 (1965)).

Accordingly, we conclude the only reasonable interpretation is that the CBAs guarantee to retirees the same health insurance benefits as current City employees.²

B.

Savela nonetheless argues that our interpretation of the active-employees clause is inconsistent with other provisions of the CBAs.³ In particular, Savela claims that our interpretation of the CBAs is inconsistent with the various “conditions and exceptions” that follow the active-employees clause. Specifically, Savela notes that one of the conditions placed upon the active-employees clause in some of the CBAs requires retirees to select a single insurance plan at the time of retirement. The 2004-2006 Local 66 AFSCME Basic Unit Employees CBA, for example, states that certain retirees are entitled to one of two health insurance plans, “whichever is designated by the employee at the time of retirement, provided active employees.” Another condition found in all of the CBAs provides that “[s]uch coverage shall be for the life of the retiree.” Taken together, Savela argues that these two conditions support her interpretation that the active-employees clause refers to employees who were active at the time of a retiree’s departure. We disagree.

The clause requiring a retiree to select a single health insurance plan at the time of retirement does not guarantee the retiree the selected plan throughout retirement. That initial election of a health insurance plan is effective for as long as the City offers the selected plan to current City employees. Indeed, the provision relied upon by Savela repeats the requirement of the active-employees clause that the plan a retiree initially selects also be “provided active employees.” Reading both clauses together supports our interpretation that the City is required only to provide retirees the same health benefits that are available to current City employees. Any other interpretation would require us to add words to both the active-employees clause and the clause requiring an initial selection of a health plan by a retiree.

Moreover, the fact that “[s]uch coverage shall be for the life of the retiree” adds little to our interpretive task here. The City does not dispute that it must provide health insurance coverage to a retiree for life; rather the parties dispute the content of that coverage. In accordance with our interpretation of the active-employees clause, the health insurance coverage that the CBAs guarantee “for the life of the retiree” is the coverage provided to current City employees, not the coverage initially selected by a retiree.⁴

In addition to Savela’s arguments, Justice Paul H. Anderson advances two novel reasons why, in his view, the CBAs are ambiguous with respect to the scope of health insurance benefits for retirees. First, Justice Anderson argues that the active-employees clause may implicitly cross-reference a “more specific” section in the CBAs governing health insurance benefits for employees covered by the CBAs. As an initial matter, Justice Anderson’s dissent acknowledges that the employee health insurance section on which it relies appears in very few of the CBAs. More fundamentally, however, Justice Anderson fails to point to any specific language supporting his alternative interpretation of the CBAs, and we can find none. See Columbia Heights Motors, Inc. v. Allstate Ins. Co., 275 N.W.2d 32, 36 (Minn.1979) (“[We] must fastidiously guard against the invitation to create ambiguities where none exist.” (citation omitted) (internal quotation marks omitted)). Indeed, the employee health insurance section discussed by Justice Anderson never uses the phrase “active employees” when referring to the health insurance benefits available to employees covered by that particular CBA. Therefore, nothing in the CBAs suggests that the active-employees clause can reasonably be interpreted to incorporate the details of the section describing the plans.

Second, Justice Anderson claims that the CBAs are ambiguous because there could be a conflict between the active-employees clause and the requirement in some CBAs that retirees receive “the approved fee-for-service coverage provided active employees.” The flaw in Justice Anderson’s argument is straightforward. By its terms, the aforementioned clause from the CBAs requires the City to provide fee-for-service coverage to retirees only as provided to active employees. If the City eliminates fee-for-service coverage, then the City no longer has a contractual obligation to provide such coverage for retirees. Accordingly, there is no conflict, potential or otherwise, between the active-employees clause and the requirement that retirees receive “the approved fee-for-service coverage provided active employees.”

C.

We also disagree with Savela that our decision today is foreclosed by Housing & Redevelopment Authority of Chisholm v. Norman, 696 N.W.2d 329, 337 (Minn.2005). In Norman, we concluded “a promise by a public employer, embodied in a CBA, to pay health insurance premiums for an employee who retires during the term of the CBA is enforceable on contract grounds.” Norman, 696 N.W.2d at 337. Norman stands for the proposition that the right to retiree benefits provided in an operative CBA vests when an individual retires. Neither party disputes that members of the class have a vested right to health insurance benefits under Norman. Rather, the parties dispute the substance of that right.

The substance of the vested right is defined by the terms of the CBA. See id. (looking to the CBA to determine what the public employer was obligated to pay). In Norman, the CBA in question guaranteed health insurance benefits to retirees under “the existing hospital medical, surgical, drug and dental programs covering employees of the CHRA.” Id. (emphasis added) (internal quotation marks omitted). Here, the CBAs do not guarantee health benefits to retirees under “the existing” insurance plans; rather, the CBAs in this case guarantee retirees health benefits “to the same extent as active employees.” Therefore, our decision today is consistent with Norman’s requirement that the substance of a retiree’s vested right to health insurance benefits is determined under the plain language of the CBA in operation at the time the retiree departs.

III.

For the foregoing reasons, we conclude the CBAs unambiguously guarantee health insurance benefits to retirees to the same extent as current City employees. Accordingly, we affirm the decision of the court of appeals.

Affirmed.

1 . Justice Paul H. Anderson's dissent argues that the phrase “active employees” is ambiguous because, even if "active" means “current” or "participating,” the active-employees clause could be referring to employees who were “current" employees of the City when a retiree departed during the effective period of the CBAs. We disagree for two reasons. First, there is nothing in the CBAs (and certainly nothing in the active-employees clause) to support the dissent’s suggestion that the phrase "active employees” refers to employees who were active on any specific date in the past. Second, the dissent’s alternative interpretations of the term "active,” though plausible, are not reasonable. To use the example in Justice Anderson’s dissent, if a statute were to refer to the “current Minnesota Governor,” we would not interpret that phrase to refer to some governor who served in the past even if the statute was enacted in 1983, the year when the parties ratified some of the CBAs in this case. Similar to the temporal scope of a statute, this contract was indisputably intended to govern the contractual obligations of the City to its retirees for as long as the retirees shall live, not for some discrete time period in the past. For these reasons, the alternative interpretations of the "active employees” clause advanced by Justice Anderson are unreasonable and do not create an ambiguity sufficient to survive summary judgment. See Columbia Heights Motors, Inc. v. Allstate Ins. Co., 275 N.W.2d 32, 36 (Minn. 1979) ("[We] must fastidiously guard against the invitation to create ambiguities where none exist.” (citation omitted) (internal quotation marks omitted)).

2 . We take no position on whether the City could cancel health insurance benefits for retirees by eliminating such benefits for current City employees because this case does not present that question.

3 . Both dissents rely on the interpretive rule that we must construe the active-employees clause with reference to the CBAs as a whole. See Chergosky v. Crosstown Bell, Inc., 463 N.W.2d 522, 525 (Minn.1990). We agree. In accordance with that rule, we have examined the entire record in this case — including those portions of the approximately 60 CBAs that are available in the record — which leads us to the conclusion that there is only one reasonable interpretation of the CBAs: retirees are entitled to the same health insurance benefits provided to current City employees. See Offerdahl v. Univ. of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn.1988) ("On an appeal from summary judgment, the role of the reviewing court is to review the record for the purpose of answering two questions: (1) whether there are any genuine issues of material fact to be determined, and (2) whether the trial court erred in its application of the law.”). The dissents’ discussion of numerous other provisions of the CBAs, some of which are unrelated to health benefits, does not alter our conclusion that the outcome of this case effectively turns on the interpretation of the active-employees clause, which has been the view of the parties throughout this litigation.

4 . Justice Meyer argues that the phrase "[s]uch coverage shall be for the life of the retiree” likely refers to the specific coverage options listed in the conditions and exceptions that follow the active-employees clause. Specifically, Justice Meyer interprets "such coverage” as a likely reference to the health insurance coverage option designated by retirees at the time of their departure rather than to the "hospital-medical insurance coverage” guaranteed by the active-employees clause. We disagree.

When used as a demonstrative adjective, as it is here, the word "such” refers back to an antecedent category of persons or things. See, e.g., Commonwealth v. McClintic, 589 Pa. 465, 909 A.2d 1241, 1250 (2006) ("Use of the word 'such,' a demonstrative adjective, refers to an antecedent, or a category of things previously mentioned.”); Bryan A. Garner, Garner’s Modem American Usage 758 (2003) (describing the use of "such” as a demonstrative adjective). Structurally, the only reasonable interpretation of the phrase "such coverage” is that it refers only to the coverage described in the active-employees clause, which is the antecedent that immediately precedes the colon. In other words, each of the various conditions and exceptions modify only the active-employees clause, not the other conditions and exceptions appearing in the paragraphs below the active-employees clause. Other than asserting ambiguity, the dissents do not provide a grammatical, textual, or structural reason to interpret the conditions and exceptions in any other manner. Accordingly, it is unreasonable to read "such coverage” as a reference to the specific health insurance coverage option selected by retirees at the time of their departure.