Lead Opinion
The court delivered a PER CURIAM opinion. MARTIN, J. (p. 415), delivered a separate concurring opinion.
OPINION
At stake in this interlocutory appeal are the claims of one subclass of plaintiffs in an ongoing class-action lawsuit against Caterpillar for allegedly breaching its promise to provide “lifetime cost-free retiree health care.” R.61, ¶ 2. The district court preliminarily enjoined Caterpillar to provide the subclass — 275 plaintiffs who retired from a Caterpillar subsidiary between 1992 and 1998 — with this benefit. Because the statute of limitations bars the claims of this subclass, we reverse.
I.
In 1987, Caterpillar formed a subsidiary, Caterpillar Logistics Services (CLS), to market its warehousing and product distribution services to third parties. Caterpillar’s warehousing and distribution services
The 1988 CBA expired in 1991, and in 1991, during negotiations over a new CBA, the UAW instituted several strikes. One aspect of the UAW-Caterpillar dispute turned on Caterpillar’s proposal to cap retiree medical benefits in return for increased pension benefits. Consistent with their agreement, CLS employees did not participate in the strikes, and they continued to receive benefits under the 1988 CBA. On March 16, 1998, a new CBA between UAW and Caterpillar (the 1998 CBA) was ratified. Between January 1, 1992 and the ratification of the 1998 CBA on March 16, 1998, a few hundred CLS employees retired, known here as the CLS retirees or subclass.
In March 1998, Caterpillar gave the CLS subclass notice of benefits changes brought about by the new CBA, including increases in the basic pension benefit rate, an additional early retirement allowance, and lump-sum payments to retirees, as well as an increase in prescription drug co-pays and a limit on adding new dependents. The 1998 CBA also established a managed care network, under which Caterpillar would reimburse 100% of expenses for medical services by a preferred provider in the managed care network but only 70% of such expenses for services by a non-network provider. While the 1988 CBA purported to provide free lifetime healthcare benefits for retirees, the 1998 CBA “limited” “[cjompany contributions” for medical benefits “as of the year 2000 for those employees retired after January 1,1992.” A-1600.
On April 20, 1998, Caterpillar told the UAW that CLS employees who retired during the 1992-98 labor dispute would “prospectively be eligible for the same pension and benefit provisions as other employees who retired under the terms and conditions [in the 1998 CBA].” R.246-10. By May 1, 1998, the CLS subclass thus received the 1998 CBA’s increased basic pension rates, plus additional early retirement allowance and lump-sum pension payments, and was subject to the 1998 CBA’s cap on retiree healthcare costs. And by June 1, 1998, the subclass was subject to the 1998 CBA’s managed care network.
In November 1999, Caterpillar mailed the members of the CLS subclass a Summary Plan Description (SPD) that outlined the benefits changes in the 1998 CBA. The SPD noted the increases in basic pension rates, additional early retirement allowance, and lump-sum pension payments, as well as the increase in prescription drug co-pays, the limit on adding new dependents, and the imposition of a managed care network. As to the cap on retiree healthcare benefits, the SPD said:
Company contributions for health care benefits for employees who retired on or after January 1, 1992 are capped at the average annual cost per individual in*407 1997 projected to 1999. Thereafter, the Company will continue to pay up to that amount each year for retiree health care benefits. If costs rise above that amount, beginning January 1, 2000, retirees will be required [to] contribute towards the cost of health care benefits in the form of a monthly premium.
Note: The VEBA (Voluntary Employee Benefit Association) Trust Fund assets will be used to cover retiree premiums after the year 2000 until trust assets are depleted. Once that fund is depleted, monthly premium contributions from retirees will be required. A-1658-59.
In 2004, when the VEBA fund was nearly depleted, Caterpillar began deducting a monthly healthcare premium from the pensions of CLS subclass members. In June 2006, Caterpillar began charging the CLS subclass deductibles, out-of-pocket charges and coinsurance charges up to certain máximums.
On March 28, 2006, the CLS subclass and other Caterpillar retirees filed this lawsuit against Caterpillar under § 301 of the Labor-Management Relations Act, 29 U.S.C. § 185, and § 502 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132. As amended, the complaint alleges that Caterpillar breached the 1988 CBA’s commitment to provide free, unalterable, lifetime healthcare benefits for retirees when it (1) charged retirees and their surviving spouses a premium for healthcare benefits, (2) “increased charges for drug prescription co-pays, deductibles, and other out-of-pocket expenses,” and (3) made “reductions in retiree healthcare.” R.61, ¶ 29-30, ¶ 59. Caterpillar moved to dismiss the lawsuit, contending that the six-year statute of limitations barred it because the plaintiffs’ claims accrued in 1998 when Caterpillar applied the new CBA to them. The district court denied the motion because
the wording of Caterpillar’s communications regarding retiree benefits ... was so indefinite and contingent on future events, it could hardly have been clear to the plaintiffs that, years before the defendant actually began to make the challenged deductions, the plaintiffs had suffered an injury and that the statute of limitations on their claims had begun to run.
Winnett v. Caterpillar, Inc.,
The CLS subclass moved for a preliminary injunction to prevent Caterpillar from charging CLS retirees and their surviving spouses premiums, deductibles, and other medical care payments. Caterpillar opposed the motion, reiterating its argument that the claims were time-barred and contending that Caterpillar never made a promise of lifetime, unalterable, free healthcare benefits to the CLS employees. In 2008, the court granted the preliminary injunction.
The court also held that new evidence introduced in connection with the preliminary injunction motion “did not change, and, in fact bolsterfed]” its earlier decision that the CLS subclass’s claims were not
From 1992 until late 2004, retirees had every reason to believe that future negotiations between the UAW and Caterpillar would prevent Caterpillar from implementing the caps [on retiree healthcare costs]. From the very beginning, Caterpillar described the caps as a possibility dependent and contingent on future events. This indefinite and uncertain language continued until October 10, 2004, when Caterpillar began deducting retiree health care premium charges from the CLS retirees’ pensions.
Id. Caterpillar’s imposition of the managed-care network and other changes from the 1998 CBA, the court reasoned, together with the CLS subclass’s acceptance of these changes, did not trigger the accrual of the claims because the changes were “minor” and did not put the CLS subclass on notice that Caterpillar was repudiating a vested right to lifetime cost-free health care. Id. at 1041. “Essentially,” the court explained, “ ‘no cost’ retiree health care to which the plaintiffs were entitled under the 1988 agreement was still available if the retiree stayed in Network” until 2006, when Caterpillar began charging the CLS subclass deductibles, out-of-pocket charges, and co-insurance charges up to certain máximums. Id. Caterpillar appeals, challenging the district court’s decision to grant injunctive relief and its decision that the claims were timely filed.
II.
Courts weigh four factors in deciding whether to issue a preliminary injunction: “(1) whether the plaintiff has established a substantial likelihood or probability of success on the merits; (2) whether there is a threat of irreparable harm to the plaintiff; (3) whether issuance of the injunction would cause substantial harm to others; and (4) whether the public interest would be served by granting injunctive relief.” Entm’t Prods., Inc. v. Shelby County, Tenn.,
Congress did not provide a statute of limitations for claims under § 502 of ERISA and § 301 of LMRA, requiring courts to borrow the time limit from the forum state’s most analogous cause of action. See Sterling China Co. v. Glass, Molders, Pottery, Plastics, & Allied Workers, Local No. 24,
Although state law sets the length of the statute of limitations, “federal law” establishes when the “statute of limitations begins-to run.” Mich. United Food & Comm. Workers Union & Drug Employees v. Muir Co.,
The CLS retirees filed this lawsuit on March 28, 2006. That means that, if they discovered or reasonably should have discovered Caterpillar no longer was willing to provide free, unalterable, lifetime healthcare benefits under the 1988 CBA at least six years earlier, namely before March 28, 2000, the claim must be dismissed as time-barred. See Noble,
A.
The retirees filed the claim too late because it accrued at least by 1998, when the UAW and Caterpillar reached a new labor agreement that altered the healthcare benefits available to retirees and for the first time announced new costs for obtaining them, and Caterpillar applied the new agreement to the CLS retirees. First, the contractual theory of the subclass is that Caterpillar was obligated to provide the healthcare benefits associated with the 1988 CBA to retirees for life. If there is one thing that became clear in 1998, it was that the 1988 CBA no longer governed their healthcare benefits. Starting on May 1, 1998, with the implementation of the new CBA, Caterpillar placed the subclass on equal footing with non-CLS retirees who also retired between 1992 and 1998, by applying the healthcare benefits associated with the 1998 CBA to all of them, namely to all Caterpillar retirees who retired after the end of the 1988 CBA in late 1991.
Second, not only did Caterpillar no longer apply the 1988 CBA to the retirees in 1998, but that year it also no longer honored the alleged promise of free, lifetime, unalterable healthcare benefits associated with the 1988 CBA. In connection with the 1998 CBA, Caterpillar immediately altered the benefits package and increased the costs of it by (1) increasing prescription drug co-pays, (2) placing a limit on new dependents that could be added to a plan, (3) establishing a managed care network, which reimbursed 100% of expenses for medical services by a preferred provider in the managed care network and 70% of such expenses for services by a non-network provider, and (4) adding new limits to vision and dental care.
In 1998, Caterpillar announced two other significant changes: (1) it capped the amount it would contribute to each retiree’s healthcare plan, and (2) it added a broader reservation-of-rights clause, giving the company an unfettered right “to terminate the plan,” A-1679. Cf. A-405 (making the right to terminate benefits under the 1988 plan “[sjubject to applicable collective bargaining agreements”). As to the capping of premium contributions, a notice dated March 1998 and distributed to the subclass explained that the “Company contributions are limited as of the year 2000 for those employees retired after January 1, 1992.” A-1600. The SPD distributed in November 1999 added that “Company contributions for health care benefits for employees who retired on or after January 1, 1992 are capped at the average annual cost per individual in 1997 projected to 1999,” A-1658, and informed the subclass that, “[i]f costs rise above that amount, beginning January 1, 2000, retirees will be required [to] contribute towards the cost of health care benefits in the form of a monthly premium.” A-1658.
Nor did the notices leave any doubt about the effects of these changes on the costs of the retirees’ healthcare plan. As of March 1998, the subclass knew that the VEBA, not Caterpillar, would “cover the difference in monthly premiums after the year 2000” and would only do so “until trust assets are depleted.” A-1600. The 1999 SPD explained that, while the VEBA could delay retiree-paid premiums, it could not prevent them. “Once [the VEBA] is depleted,” the 1999 SPD confirmed, “monthly premium contributions from retirees will be required.” A-1659 (emphasis added). Caterpillar’s repudiation of the 1988 plan’s “no-cost” guarantee was clear and unequivocal.
Third, the accrual of a cause of action turns on when subclass members knew of Caterpillar’s change in benefits, not when they felt its effects. See Morrison,
Fourth, while notice is the touchstone of accrual, this case is easier than most in one respect: It involves claims that affected the plaintiffs soon after they were announced — -if not in 1998, then certainly before March 28, 2000. In addition to challenging Caterpillar’s authority to cap its contribution to retirees’ healthcare premiums, the complaint challenged other changes that affected the subclass immediately: “increased charges for drug prescription co-pays, deductibles, and other out-of-pocket expenses.” R.61, ¶¶ 29-30, 59. That the retirees’ own complaint challenges Caterpillar’s authority to make these kinds of alterations, whether first made in 1998 or repeated in different forms in 2004, proves that they were material. And that the subclass offers no explanation how these changes would not have affected them soon after they were announced confirms that the claim accrued in 1998.
Nor are we aware of any authority for the concept that a cause of action under, say, § 301 of the LMRA could have different accrual dates for each affected healthcare benefit. If true, that would require the courts to identify a different accrual date for each benefit — one for increased co-pays for prescription drugs, one for managed care, one for caps on company contributions to the healthcare premiums and so on — even when the company announces all of the changes to the benefits at the same time in connection with the negotiation of the same 1998 CBA and even when the claimants challenge all of them in the same complaint.
The testimony of subclass members, moreover, confirms that they knew of the changes to their benefits prior to 2000, whether because the changes already had affected their healthcare choices or knew they soon would. A1 Church, a former CLS employee, testified that he knew, pre-2000, to seek treatment for his heart attack from a network hospital because “there would be more [to] pay if [he] had treatment outside [the network].” R.298, 257. William Dailey, another CLS retiree, testified that as of 1998 he “always tried to be in the network” to avoid increased medical costs. R.298, 275. And though subclass member Gary Winnett testified that the first time he felt personally affected by the changes in his plan was 2004, he also explained that he understood in 1998 that “VEBA would only continue to pay [his] premiums so long as there was money in there to do so.” R.299, 515. Because by 1998 all signs confirmed the reality that Caterpillar would no longer administer benefits to the subclass under the 1988 contract, the subclass’s complaint — filed almost eight years later — came too late.
Fifth, an analogy to union grievances completes the picture. Had the union represented the subclass in 1998 and 1999, it would have had to grieve these changes then in order to preserve a right to challenge them later. If a company announces new authority to terminate or modify healthcare benefits, the union, we have held, must grieve the change at that point or be precluded from later claiming that benefits had vested. Maurer v. Joy Technologies,
B.
The CLS retirees offer several arguments to the contrary. They claim that the 1998 and 1999 notices were too “indefinite and uncertain” for the retirees to know of the alleged breach until 2004, when the VEBA ran out and when Caterpillar began deducting monthly premiums from their pensions. Winnett Br. 40. Some of the notices, they point out, say only that they “may” be required to pay premiums “if” costs rise above the contribution caps. Winnett Br. 42, 45. But the 1999 SPD left no doubt about the legal stakes of the changes, notifying the retirees that monthly premiums “will be required” upon the VEBA’s depletion. A-1659. Words like “may” and “if’ did not purport to describe the legal effect of the 1998 changes if the VEBA ran out, but other possibilities — that the union or company could choose to make further contributions to the VEBA, that a future CBA would undo this aspect of the 1998 CBA, that modifications to Medicare would fill the gap, or even, most hopeful of all, that healthcare costs would remain stagnant or decline, thereby allowing the company to continue to pay all of the retirees’ premiums. Any announcement about capping a company’s contribution to healthcare premiums, however, could implicate these possibilities. What mattered was that, as of 1998 and 1999, the 1998 CBA, the company notices and the statutorily required SPDs left no doubt about the effect of the change on the company’s legal obligations — that, once the VEBA was depleted, the retirees would be required to pay the difference in the cost of healthcare premiums between the company’s now-capped contribution and the full cost.
Other changes left even less doubt. In 1998, the retirees immediately experienced managed care, increases in drug costs, changed eligibility criteria and new restrictions on adding dependents, all of which confirmed that Caterpillar was no longer providing 1988 level benefits, the ones to which they claimed a vested right for life. To discount these changes as “sundry minor benefit changes” that do not “trigger the limitations period,” Winnett Br. 48, is a difficult argument to maintain given that their own complaint challenges the validity of precisely these kinds of changes. See R.61, ¶¶ 29-30. By any objective measure, the changes the subclass faced in 1998 cannot fairly be characterized as minor. The managed-care network on its own marked a significant change from the health care the retirees enjoyed under the 1988 contract: Retirees for the first time faced the burden of paying “at least 30% of [their] covered expenses” if they chose out-of-network care. A-1589. This “reduction in the effective choices of coverage available for all retirees” was a very real limitation on their benefit program, Reese v. CNH Am. LLC,
Our recent decision in Reese is not to the contrary. First and foremost, it confirms that the introduction of managed care is not a “minor benefit change.” That, indeed, is a key proposition that Reese rejects. Reese,
The subclass protests that, had they filed their case before 2000, it would have been dismissed as unripe. But a ripeness problem arises only if the claim involves “contingent future events that may not occur as anticipated, or indeed may not occur at all.” Thomas v. Union Carbide Agricultural Prods. Co.,
The subclass separately complains that Caterpillar staked out inconsistent litigation positions in this case. “On the one hand,” the subclass claims, “Caterpillar argues that [the subclass’s] claims are not timely.... On the other hand, Caterpillar asserts that surviving spouses’ claims are not ripe because Caterpillar has not yet begun to charge them premiums.” Win-nett Br. 41. This mischaracterizes the company’s argument. In 2006, Caterpillar
The subclass separately argues that we should treat Caterpillar’s 1998 and 1999 notices as an “anticipatory breach” and that the retirees did not have an obligation to sue until the contract was actually breached, which occurred when the company began collecting premiums. Were that the case, however, this common-law contracts doctrine would eliminate the discovery rule for accrual, which requires claimants to sue upon receiving notice of the breach. Even if anticipatory-breach principles could apply in a discovery-rule case, they would not help the subclass: Caterpillar did not just announce its intent to apply a different CBA — the 1998 CBA, not the 1988 CBA — prior to 2000; it implemented immediate, fundamental changes to the retirees’ medical benefits before then.
Enforcing a statute of limitations is never easy. The inquiry puts the validity of the claimants’ underlying cause of action to the side. And it thus requires us to dismiss all claims, whether valid ones or not, if they were untimely filed. All of this can be particularly difficult in the context of a claim for healthcare benefits by retirees, a group that often is without ready access to new sources of income to cover new costs.
Statutes of limitations, however, promote fairness concerns of their own. No one should be forced to defend stale claims, and courts often are ill-equipped to resolve disputes long after the key events took place. In this case, the limitations period — six years — was longer than most. And there was no mystery about the stakes of the debate between Caterpillar and the UAW from the end of the 1988 CBA in 1991 to the consummation of the 1998 CBA. Throughout the negotiation, a central point of disagreement was Caterpillar’s proposal to cap the company’s contribution to healthcare premiums. Under the 1998 CBA, the company limited employees’ and retirees’ healthcare benefits but did so in return for increases in their pension rates, an additional early retirement allowance and lump-sum and supplemental pension payments. After the announcement of the 1998 CBA, the company confirmed that the CLS retirees would be eligible for, and thus reap the benefit of, the increased pension benefits, and the company’s notices confirmed that the retirees would face new limitations on their healthcare benefits.
Placed in this light, the retirees’ decision not to file this lawsuit in 1998 is perhaps understandable. The company was not compelled to increase the pension benefits of pre-existing retirees, and a lawsuit about the changes to their healthcare benefits might have dissuaded the company from extending the pension benefits to the retirees. The near-term changes to their healthcare benefits also may have seemed tolerable in light of the immediate pension increase, and, given the existence of the VEBA, it was not known exactly when they would have to contribute to their healthcare insurance premiums. The key point, however, is that the company’s no
III.
For these reasons, we reverse the preliminary injunction and remand the case to the district court for further proceedings.
Concurrence Opinion
CONCURRENCE
Circuit Judge, concurring.
As the lead opinion notes, it is never easy to enforce a statute of limitations. It is an especially bitter pill to swallow in this case because the Caterpillar Logistics Services retirees clearly have the better part on the breach of contract claim. The 1988 Collective Bargaining Agreement unequivocally obligates Caterpillar to provide no-cost, unalterable healthcare to the retirees for life, and that benefit vested under the 1988 Agreement when these plaintiffs retired. Caterpillar’s various assertions to the contrary are simply untenable. Thus, these retirees would have prevailed on their claim had it been timely filed.
But, the lead opinion’s point about taking the bitter with the sweet is a fair one. Had the retirees sued earlier, Caterpillar might well have said, “Fine, you want the 1988 Agreement, you got it. Here’s your no-cost healthcare, but we’ll take back those increased pension payments and retirement allowances we gave you under the 1998 Agreement.” I assume that, if given the choice, the retirees would have chosen to keep their no-cost healthcare and to forgo the increased pension benefits, but I may be wrong. Either way, I just hope that the decision to bring suit in 2006 rather than in 1999 or 2000 was an informed, strategic gamble to have the short and then sue later for the long sweetening, or even merely the result of oversight or inattention to the big picture. It would be heartbreaking to find out that hardworking folks lost an important benefit due to misguided legal advice.