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Local 494 v. Int'l Union

United States District Court, E.D. Michigan

November 6, 2015

OFFICE AND PROFESSIONAL EMPLOYEES INTERNATIONAL UNION, LOCAL 494, et al., Plaintiffs,
v.
INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, Defendant

Page 448

          For Office and Professional Employees International Union, Local Union 494, Plaintiff: David M. Fusco, Schwarzwald McNair & Fusco LLP, Cleveland, OH.

         For Staff Council of International Representatives, Plaintiff: Andrew W. Stumpff, Stevenson Keppelman Associates, Ann Arbor, MI.

         For Norman L Bissell, Jr., David Curson, Elizabeth Manian, Plaintiffs: Claire W. Bushorn, David M. Cook, Jennie G. Arnold, Cook & Logothetis, LLC, Cincinnati, OH.

         For United Automobile Aerospace and Agricultural Implement Workers of America, International Union (UAW), Defendant: Jeremiah A. Collins, Bredhoff and Kaiser, Washington, DC; John R. Runyan, Jr., Sachs Waldman, Detroit, MI.

         Randy J. Ruple, UAW International Retiree, Objector, Pro se, Harvest, AL.

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         FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER

         Denise Page Hood, United States District Judge.

         This matter is before the Court on the parties' motion for final approval of a class action settlement resolving plaintiffs' complaint filed on December 22, 2014. Based on the facts and conclusions stated herein, the Court GRANTS the motion, and orders as follows:[1]

         I. FINDINGS OF FACT

         A. The Parties and the UAW Retiree Health Benefits Programs

         1. Defendant United Automobile, Aerospace and Agricultural Implement Workers of America (" UAW" ) is a labor union that represents employees in collective bargaining with their employers. (Supplemental Declaration of Joseph Stackpoole (Doc. # 33) ¶ 3.)

         2. As of the end of 2014, the UAW had approximately 403,466 active members. This membership total constitutes a sharp decline from the UAW peak membership total of 1,530,870 in 1969. ( Id. )

         3. The UAW employs approximately 717 active staff employees, approximately 580 of whom are represented by a union, including

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Plaintiff Office and Professional Employees International Union, Local 494 (" OPEIU" ); Plaintiff Staff Council of International Representatives (" Staff Council" ); International Union, Security, Police and Fire Professionals of America Amalgamated Local 119 (" SPFPA" ); Staff Lawyers Union (" SLU" ); and Newspaper Guild/ Communications Workers of America Local 34022 (" Guild" ) (collectively the " Unions" ). ( Id. ¶ 4.)

         4. For employees who were hired before specified dates in 2008 and who satisfy the age and service eligibility criteria specified in its Staff Manual and applicable collective bargaining agreements, the UAW provides retiree health care benefits as set out therein. ( Id. ¶ ¶ 5-7 and Exs. A, B thereto.) The UAW provides retiree health care benefits to approximately 2,000 retirees and surviving spouses, and more than 400 active or inactive UAW employees (as well as their spouses or dependents) could become eligible for retiree health care benefits under the UAW program in the future. ( Id. ¶ 10.)

         5. In addition to paying the current costs of its retiree health care benefits program, in 2007 the UAW established and began contributing to an internal trust - the UAW Retiree Health and Welfare Benefits Trust (" UAW Retiree Trust" ) - to fund in part the future costs of the retiree health care program. ( Id. ¶ 11.)

         6. The Retiree Medical Benefits described in the Staff Manual, and the eligibility criteria stated in the Manual, were adopted through collective bargaining between the UAW and Staff Council. Except as indicated in paragraph 7 of these findings (and except for certain variations due to the differing effective dates under the various agreements), the same arrangements have been adopted for members of the other Unions that represent UAW employees, and the UAW has applied those same terms to its officers, directors and other UAW employees not represented by one of the Unions. ( Id. ¶ 8.)

         7. Prior to 2008, all of the UAW's active employees and retirees were provided substantially the same retiree health care benefits, subject to the specific eligibility requirements applicable to each group of employees and retirees and some minor variations in benefits. The 2010 collective bargaining settlement between the UAW and Staff Council provided for certain changes in retiree health care benefits - including some benefit reductions and new cost sharing - generally applicable for employees retiring after January 1, 2010 (the " 2010 Benefit Modifications" ). ( Id. ¶ 9; Ex. A to Initial Declaration of Joseph Stackpoole (Doc. # 10-6) at A-22-23 and J-1-2.) Except for certain variations as to effective dates, these changes also were adopted for all other UAW employees, either in collective bargaining or by application to UAW staff employees not covered by collective bargaining agreements. ( Id. )

         8. In the 2012 collective bargaining settlement, the UAW and Staff Council adopted, effective August 1, 2013, certain improvements in retiree health care benefits for Staff Council employees who had retired after January 1, 2010 or would retire in the future and who had at least 15 years of service credit (or 20 years for certain benefits) (the " 2012 Benefit Modifications" ). (Supp. Stackpoole Decl. ¶ 9; Ex. B to Initial Stackpoole Decl. at 3-4.) The 2012 Benefit Modifications also were made applicable to members of the UAW staff represented by the Guild and the SLU, and to unrepresented staff employees. (Supp. Stackpoole Decl. 9) The 2012 Benefit Modifications were not adopted for employees represented by OPEIU and SPFPA. ( Id. )

         B. The Dispute Concerning the 2013 Benefit Modifications

         9. In 2013, the UAW made modifications to the prescription drug, dental and major medical benefits provided to retirees and surviving spouses (the " 2013 Benefit Modifications" ), and also made those changes applicable in retirement to UAW active employees who could be eligible for retirement benefits in the future. ( Id. ¶ 12; Ex. C to Initial Stackpoole Decl.) These changes were designed to reduce the UAW's costs without a substantial impact on benefits, and also to make certain improvements in retiree benefits. ( Id. ) The principal changes consisted of (i) inclusion of certain prescription drug utilization tools, (ii) new incentives for the use of generic drugs over brand name drugs,

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and (iii) reductions in the percentage of costs borne by the UAW for dental providers outside an established PPO network. (Ex. C.)

         10. Both the OPEIU and the Staff Council objected to the 2013 Benefit Modifications and subsequently filed group and policy grievances alleging that the changes - which, as to current retirees and their surviving spouses, had been made without agreement by those unions - violated their collective bargaining agreements with the UAW. (Supp. Stackpoole Decl. ¶ ¶ 12-13, and Exs. D and E to Initial Stackpoole Decl.) The UAW responded that the benefit modifications were permissible and that the dispute was not subject to arbitration. (Exs. D, E.)

         11. Shortly after the announcement of the 2013 Benefit Modifications, the UAW, Staff Council, and OPEIU entered into substantive discussions regarding a possible settlement that would involve a restructuring of the UAW's retiree health care plans and programs through the creation of a voluntary employees' beneficiary association trust (" VEBA" ) funded by the UAW and administered by a committee with independent authority. (Supp. Stackpoole Decl. ¶ 14.) The concept of a retiree health care VEBA was familiar to the parties, because the UAW had over past decades negotiated numerous retiree health care VEBAs with employers of its members, including the largest such VEBA, the UAW Retiree Medical Benefits Trust, which provides retiree health care benefits for retirees of General Motors, Ford Motor Company and Chrysler. ( Id. )

         12. In its notice of the 2013 Benefit Modifications, the UAW Executive Board had stated that " the combination of health care inflation, a growing number of retirees, and declining membership [had] resulted in health insurance becoming one of the UAW's largest expenses." (Ex. C to Initial Stackpoole Decl.) The discussions regarding the dispute therefore focused on the funding necessary to preserve the retiree health care benefits and the risk to retirees if those benefits remained largely unfunded. (Supp. Stackpoole Decl. ¶ 14.)

         13. During those discussions, the UAW provided voluminous financial, actuarial, and benefit program data and documentation to Staff Council and OPEIU and to a team of financial consultants, actuaries, and legal counsel those unions had retained. ( Id.; Settlement Agreement (Doc. # 19-1) at 8-9.)

         14. The discussions between the UAW, Staff Council and OPEIU resulted in a June, 2014 tentative agreement (the " MOU" ) to restructure the UAW's retiree health care plans and programs through the creation of an independent VEBA trust funded by the UAW. (Supp. Stackpoole Decl. ¶ 15.) The tentative agreement was ratified by Staff Council, OPEIU, and the other unions representing UAW employees, but was subject to negotiation of a final settlement agreement and to court approval with respect to current retirees and active employees who were not represented by unions. ( Id. )

         C. Commencement of the Litigation

         15. Counsel for the OPEIU, David Fusco, contacted Class Counsel in this matter, David Cook, in August 2014, when it had become apparent that litigation would be necessary. (Supplemental Declaration of David M. Cook (Doc. # 32) ¶ 12.) After discussing the matter with Mr. Fusco, Mr. Cook and his firm determined that they were willing to become involved in the case.

         16. Mr. Cook and his firm were retained by three retired UAW employees who agreed to serve as class representatives: Paula Young, a retired clerical employee of the UAW who was represented by the OPEIU while an active employee; Norman L. Bissell, Jr., a retired international representative who was represented by Staff Council while an active employee; and David Curson, a retired employee of the UAW who was not represented by a union while an active employee. (Complaint ¶ ¶ 8-10.) By order filed April 22, 2015 (Doc. # 17), plaintiff Young withdrew as a plaintiff and Elizabeth Manian, a retired clerical employee of the UAW who was represented by the OPEIU while an active employee (Doc. # 16) was substituted as a plaintiff and proposed class representative.

         17. Class Counsel conducted an independent factual investigation and legal analysis of the claims at issue in this case. Class

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Counsel were provided access to the information that had been given to the Unions and to the Staff Manual and other relevant documents describing UAW's retiree health care program and agreements with respect to the program over the years. Class counsel also were provided with analyses and opinions of the Unions' experts, actuarial reports regarding the cost and value of the retiree health benefits members of the class are receiving, and other relevant documents. (Supp. Cook Decl. ¶ 13; Settlement Agreement ¶ 3.)

         18. Upon being retained by the Class Representatives, Class Counsel began negotiating on behalf of the Class for settlement terms that were satisfactory and acceptable to the putative Class Representatives. (Supp. Cook Declaration ¶ 14.) After continued negotiations, the UAW, the Unions and the Class Representatives entered into the proposed Settlement Agreement, resolving among the parties, subject to Court approval, the retiree health care benefits claims, including claims of the Class Representatives and the proposed Class Members.

         19. Plaintiffs filed their complaint in this action on December 22, 2014, asserting claims under Section 301 of the Labor Management Relations Act of 1947, as amended (the " LMRA" ), 29 U.S.C. § 185, and Sections 501(a)(1) and (3)(B) of the Employee Retirement Income Security Act of 1974, as amended (" ERISA" ), 29 U.S.C. § § 1132(a)(1) and (3)(B).

         20. On January 30, 2015, the individual plaintiffs moved for class certification (Doc. # 8) and the parties jointly moved for an order preliminarily approving the proposed settlement, approving proposed notice to the class, and setting the date for a class settlement fairness hearing. (Doc. # 10.)

         D. The Settlement Agreement

         21. The Settlement Agreement provides for the establishment and funding of an independent VEBA trust fund to provide health care benefits to eligible current and future UAW retirees, surviving spouses and dependents. Upon the establishment of the VEBA, the UAW will have no further obligation to provide health care benefits to its current or future retirees.

         22. The Settlement Agreement provides that, as funding for the retiree health care benefits to be provided by the VEBA, the UAW will contribute to the VEBA approximately $346 million, with that figure to be adjusted to account for any amounts paid by the UAW or by its sponsored employee benefit plans to cover the costs attributable to retiree medical benefits provided to Class Members during the period commencing January 1, 2013 and ending on the date that the VEBA is implemented, plus interest using an annual rate of 6.5 percent. (Settlement Agreement ¶ 6.)

         23. In addition to the $346 million, as thus adjusted, the Settlement Agreement provides that the UAW will contribute to the VEBA an additional $8.5 million to offset the cost of administering those benefits, and that the UAW also will bear reasonable costs of the start-up of the VEBA. ( Id. ¶ ¶ 9-10.)

         24. Toward those contribution amounts, within 10 business days after Court approval of the settlement and the exhaustion of any appeal period, the UAW will contribute $85 million plus the assets of the existing UAW Retiree Trust, approximately $158 million. ( Id. ¶ 6(C); Supp. Stackpoole Decl. ¶ 11.) The total initial funding, therefore, will be approximately $243 million ($85 million plus $158 million). The remaining contributions, with interest, will be made ratably over the next 15 years in quarterly installments. (Settlement Agreement ¶ 6(D).)

         25. The VEBA will be administered by an eight-person Committee consisting of four Independent Members, one of whom will serve as the Chair, two Staff Council-appointed Members, one OPEIU-appointed Member, and one UAW-appointed Member. (Trust Agreement (Doc. 19-1) § 9.01.) Except in certain specified instances, the Chair's vote will be treated as two votes on matters determined by the Committee. ( Id. ยง 9.10.) The Committee will have control over benefit decisions and will evaluate plan and benefit options for current and future VEBA beneficiaries, taking ...


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