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Little Chute Area School District v. Wisconsin Education Association Council

Court of Appeals of Wisconsin, District III

January 18, 2017

Little Chute Area School District, Plaintiff-Respondent,
v.
Wisconsin Education Association Council, Lois Alferi, Michael Baye, Joe Beck, Richard Bender, Mary Bond, Margaret Callies, Robert Church, Irene Fanta, Charles Fischer, Jo Gehl, Mary Jane Grissman, Joyce Ison, Julie Janquart, Karen Jones, Cindy Johnson-Tank, Judith Kickland, Jane Klozotsky, Robert Klozotsky, Charles Kocken, Patty Loppnow, Cheryl Leatherbury, Dan McInnis, Ronald Meidam, Francis (Al) Schmidt, Deb Schnell, Robert Schottmuller, Pat Schultz, Sherry Simon, Susan Solberg, Rose Stipek, Kay St. John, Richard Switzer, Kay Tripp, Dorothy Van Lith, Robert Van Gompel, Margaret Wippich and David Zamzow, Defendants-Appellants.

         APPEAL from an order of the circuit court for Outagamie County No. 2014CV144: MARK J. MCGINNIS, Judge. Affirmed.

          Before Stark, P. J., Hruz and Seidl, JJ.

          HRUZ, J.

         ¶1 The Wisconsin Education Association Council ("WEAC") and thirty-seven retirees (collectively and with WEAC, the "Retirees") from the Little Chute Area School District (the "District") appeal a summary judgment in the District's favor. In 2013, the District terminated its group long-term care ("LTC") insurance policy for the District's active employees and retirees. The District then filed the present declaratory judgment action, seeking a declaration that it was permitted, under the terms of the relevant collective bargaining agreements ("CBAs"), to terminate the group LTC policy. After analyzing the CBAs' provisions, the circuit court agreed with the District and rejected the Retirees' argument that they had a "vested right" to continuing insurance benefits under the specific group LTC policy that had been terminated. We affirm.

         BACKGROUND

         ¶2 This case concerns a series of CBAs entered into between the District and the Little Chute Education Association ("LCEA"), a WEAC local bargaining unit.[1] Each CBA was generally in force for two years, then it expired and was supplanted by a new agreement that oftentimes contained identical or similar provisions.

         ¶3 Each CBA described the compensation and benefits for current employees during the term of the agreement. Employees received a number of benefits, among them insurance coverage under the District's group LTC policy. Between 1995 and 2001, the CBAs identified the specific group LTC policy under which the employees received coverage as "WEAIT Insurance Corporation Plan #333-235.0." This reference to the specific policy number appears to have ceased beginning with the 2001-2003 CBA.[2]

         ¶4 The District's WEAIT group LTC policy remained virtually unchanged between 1994 and 2013. The policy did not require the District to keep the policy in force for any specific length of time, but rather the District could terminate the policy by giving WEAIT advance written notice. WEAIT, too, was allowed to terminate the policy under certain conditions, including premium nonpayment, the District's failure to negotiate the terms of coverage with the local bargaining unit, or if one-hundred percent of the employees eligible for coverage failed to enroll.

         ¶5 An individual's coverage under the WEAIT group LTC policy typically terminated when the person ceased employment with the District. Early retirees under the relevant CBAs, however, could elect to continue coverage, which was effective "as long as [WEAIT] receive[d] the required premiums and continue[d] to insure the active employees" of the District. The policy included a "paid-up" feature under which a covered person would owe no further premiums if he or she: (1) was retired; (2) was at least age sixty-five; and (3) had premium payments made on his or her behalf for at least 360 months. Retired employees could also elect an "accelerated paid-up" option that required a single, lump-sum payment if certain conditions were met. Once a person reached "paid-up" status, their coverage was not subject to termination.

         ¶6 Under the terms of each CBA relevant to this case, early retirees from the District were permitted to "continue participation" in the District's group LTC policy, subject to the carrier's terms and conditions.[3] Initially, the District agreed that early retirees could remain covered by the group LTC policy until age sixty-five. However, in the 2001-2003 and subsequent CBAs, the parties agreed to cap a retired employee's eligibility for coverage at "a maximum of ninety-six (96) months."[4]

         ¶7 The 2001-2003 CBA brought other changes to the group LTC insurance benefit, which changes continued in subsequent CBAs. In July of 2000, our supreme court had decided Roth v. City of Glendale, 2000 WI 100, 237 Wis.2d 173, 614 N.W.2d 467, which held that retirement health benefits are presumed to "vest" in the absence of contract language or extrinsic evidence suggesting otherwise.[5] Id., ¶25. The following year, the District and the LCEA agreed to make early retirees' continued participation in the group LTC program subject to "any collectively bargained changes in those benefits and programs, " in addition to being subject to the carrier's terms and conditions as before. In addition, the parties inserted a clause at the end of the section pertaining to group LTC coverage, stating: "The benefits, premiums, and contributions under this Article are established for the term of this collective bargaining agreement and subject to amendment, termination or extension through future collective bargaining."

         ¶8 These provisions remained in place through the 2009-2011 CBA. Then, on the eve of the effective date of 2011 Wis. Act 10, [6] the District and the LCEA negotiated an extension of the 2009-2011 CBA, known as the 2009-2012 Master Agreement. This new CBA eliminated all postretirement insurance benefits, including group LTC insurance benefits, for early retirees.[7] Effective July 1, 2011, Article 16 of the CBAs, which had previously defined early retiree benefits, was deleted entirely from the 2009-2012 Master Agreement. The District terminated the WEAIT group LTC policy in June of 2013.[8]

         ¶9 The District's termination of the WEAIT group LTC policy triggered certain conversion provisions under the policy. Early retirees had an opportunity to purchase an individual "conversion policy" that featured the same coverage as the defunct group policy, with premium payments counted toward "paid-up" status. However, early retirees no longer received the benefit of a group-rate premium. Rather, these individual policies had premiums based on the individual's actuarial factors, including the retired employee's age, gender, and geographic location. Qualifying early retirees could also elect the "accelerated paid-up" option and pay a significant lump sum.[9]

         ¶10 On October 24, 2013, the Retirees provided the District's board of education with a notice of injury and claim. The Retirees asserted the District breached the relevant CBAs by curtailing their vested benefits, including "the right to continue to be members of the group LTC policy and to pay the group rates until the policy was 'paid up' or the retirees chose not to continue payments." They also asserted they had a vested right to the District contributing to the group LTC policy premiums.

         ¶11 The District filed a preemptive suit against the Retirees, seeking declaratory relief in the form of an order stating the District was not prohibited from terminating group LTC insurance for current or former employees.[10] The Retirees counterclaimed, alleging the District had breached the relevant CBAs and its duty of good faith and fair dealing. The case was decided upon the parties' cross-motions for summary judgment.

         ¶12 At a hearing on the motions, the circuit court granted the District judgment on both its declaratory action and the Retirees' counterclaims. After reviewing standard principles of contract interpretation and Roth, the circuit court concluded the plain language of the relevant CBAs did not require the District to maintain the WEAIT group LTC policy indefinitely, "or even until the [Retirees] achieved paid-up status." The court also rejected the Retirees' argument that vesting occurred because the CBAs incorporated the WEAIT group LTC policy, reasoning that even if such incorporation occurred, the policy provision allowing the District to terminate the policy at any time with advance notice was incompatible with vesting. The Retirees appeal.

         DISCUSSION

         ¶13 We review a grant of summary judgment de novo, applying the same methodology employed by the circuit court. Burgraff v. Menard, Inc., 2016 WI 11, ¶20, 367 Wis.2d 50, 875 N.W.2d 596. The facts in this case are undisputed. Accordingly, the only issue is whether the District was entitled to summary judgment as a matter of law. See Roth, 237 Wis.2d 173, ¶¶13-14; WIS. STAT. § 802.08(2).[11]

         ¶14 As in Roth, the dispute in this case "centers on the proper interpretation of the collective bargaining agreements" and whether they "vest" in the Retirees' favor a legal right to continuing coverage under the WEAIT group LTC policy. See Roth, 237 Wis.2d 173, ¶15. "Interpretation of a collective bargaining agreement, as with other contracts, presents a question of law that we review independently of the determinations rendered by the circuit court ...." Id. When we interpret a contract, our goal is to ascertain and give effect to the contracting parties' intent. Id.

         ¶15 The three CBAs in effect between 1995 and 2001 each provided employees with certain benefits upon early retirement. Section H of Article 16 in each of those CBAs discussed the LTC insurance benefit. Each such provision stated in relevant part:

An eligible member may continue participation in the District's group health, dental, life ... and long term care insurance programs subject to the terms and conditions of the carrier until the end of the month in which he/she reaches the age of 65. The cost of the programs to be paid by the District will be adjusted ...

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