Opinion
DOCKET NO. A-0964-14T1
06-10-2016
RETIRED POLICE OFFICERS' ASSOCIATION OF SEA ISLE CITY on behalf of its individual members, and/or their Estates and/or dependents entitled to the benefits derived from a Collective Bargaining Agreement with Defendant; DEPARTMENT OF PUBLIC WORKS RETIREES' ASSOCIATION OF SEA ISLE CITY; JAMES SCHIRMUHLY; WILLIAM OLSZEWSKI; ROBERT BOWMAN; JOSEPH D'INTINO; and JOHN NEWMAN, Plaintiffs-Appellants, v. CITY OF SEA ISLE CITY, Defendant-Respondent.
Lauren Sandy argued the cause for appellants (Loccke, Correia & Bukosky, attorneys; Ms. Sandy, on the briefs). Paul J. Baldini argued the cause for respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Ostrer, Haas and Manahan. On appeal from Superior Court of New Jersey, Chancery Division, Cape May County, Docket No. C48-10. Lauren Sandy argued the cause for appellants (Loccke, Correia & Bukosky, attorneys; Ms. Sandy, on the briefs). Paul J. Baldini argued the cause for respondent. PER CURIAM
Plaintiffs Retired Police Officers' Association of Sea Isle City, and Public Works Retirees' Association of Sea Isle City appeal from a Chancery Division order granting defendant City of Sea Isle City's motion for summary judgment. The trial judge rejected plaintiffs' contention that defendant impermissibly reduced health care benefits for certain retired municipal workers covered by the collective bargaining agreements (CBAs) at issue in this case. For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings.
Several individual retirees were also named as plaintiffs.
I.
The retired workers' rights to health care benefits were governed by a number of CBAs between defendant and the workers' bargaining unit representatives. Each worker was entitled to health benefits in accordance with the applicable CBA in place at the time of the worker's retirement.
Police officers were covered by a CBA between defendant and the Fraternal Order of Police Lodge #7 (the FOP) for the period between January 1, 1998 through December 31, 2001. In relevant part, this CBA stated:
ARTICLE VI - RETIREMENT
. . . .
SECTION 2. If an employee retires due to a job[-]related permanent sickness, illness or injury, [defendant] shall continue in full force and effect the insurance coverage enjoyed by the members of the bargaining unit, Dental Program, Prescription Plan and Eyeglass Plan for that employee and his/her dependents until the death of that employee. In order to qualify for this benefit after a job-related permanent sickness, illness or injury, the employee must have no right (with or without employee contribution) to Blue Cross and Blue Shield coverage (or its equivalent) from subsequent employment.
SECTION 3. If, after twenty-five (25) years of service, an employee is forced to retire due to a non-job-related permanent sickness, illness or injury, [defendant] shall continue in full force and effect the medical coverage listed in Section 2 for that employee and his/her dependents until the death of that employee, subject to the same qualifications as set forth in Section 2.
SECTION 4. When an employee retires according to the rules and regulations of the Police and Firemen's Retirement System, more specifically, under the terms of the Service Retirement Benefit with twenty-five (25) years of service credit or the Special Retirement Benefit, [defendant] shall continue to compensate the employee for the medical benefits listed in Section 2 of the article. If the employee retires with twenty-five (25) years of service in Sea Isle City, [defendant] shall continue to compensate the employee, his or her spouse, and dependent children to age 19, or age 23 if attending an accredited college, for the medical benefits listed in Section 2 of this article.
[(emphasis added).]
A second CBA between defendant and the FOP covered police officers for the period between January 1, 2006 and December 31, 2010. Police officers holding the rank of lieutenant or captain ("superior officers") were covered by a CBA between defendant and the Policemen's Benevolent Association, Superior Officers, Local #59 (the PBA) for the period between January 1, 1995 and December 31, 1997. A second CBA between defendant and the PBA covered superior officers for the period between January 1, 1998 and December 31, 2001. The language concerning retirement benefits in all three of these CBAs was identical to that set forth in the 1998-2001 CBA between defendant and the FOP.
Other public workers employed by defendant were covered by the terms of a CBA between defendant and the Communication Workers of America (the CWA). The language in this CBA governing retirement benefits differed from that in the four CBAs covering police officers. For the period between January 1, 2006 and December 31, 2010, the CBA stated in relevant part:
ARTICLE XIX - INSURANCE, HEALTH AND WELFARE
A. Employees agree to the following benefits: Blue Cross/Blue Shield, Rider J, Major Medical and Dental with the institution of all costs containment features as prescribed by Blue Cross/Blue Shield including but not limited to second surgical opinion, ambulatory surgery, preadmission testing and the spin-off feature now in place. In addition, the employees agree to the Blue Cross/Blue
Shield $2.00/$4.00 dual co-payment prescription program. [Defendant] also will supply each employee with the eyeglass plan now in effect for the other employees.
The employees agree to an increase in the deductible for each medical plan, with [defendant] setting up a reserve fund to cover the added deductible over the original deductible, if it can be shown that [defendant] will save on insurance cost provided there is no additional up-front cost to the employee. The deductible will be Two Hundred Dollars ($200), of which the reserve will pay 100% of the second $100. Furthermore, [defendant] agrees to an increase of Rider "J" coverage to Four Hundred Dollars ($400) at no cost to employee.
The amount of Dental Care coverage shall be Two Thousand Dollars ($2,000), and expanded psychiatric coverage benefit shall equal twenty percent (20%) to total bill.
[Defendant] shall continue to pay premiums as described above for the employee, spouse, and dependents when he or she retires . . . after twenty-five (25) years of service with the foregoing to be terminated at the time of death. . . . The employee also agrees to change to any supplemental plans available and tie benefits into Medicare and Medicaid as a cost savings to [defendant] but not a change in benefits to the employee. It is agreed that the benefits are Blue Cross/Blue Shield Pace, Rider J, major medical, dental and prescription and that [defendant] will continue to provide this or an equal plan.
B. If an employee retires due to a job[-]related, permanent illness, sickness or injury, [defendant] shall continue in full force and [e]ffect all benefits under this article.
Finally, on April 29, 2008, defendant issued a memorandum (the early retirement memorandum) informing its employees of a "Compensation for Separation Program" intended to encourage workers to retire by certain established deadlines. The early retirement memorandum established compensation calculated by length of service, and further provided that "for those employees with [twenty-four] years or more of service as of the date of separation, health benefits [would] continue to be provided in accordance with existing bargaining unit contracts." (emphasis added).
In April 2008, defendant notified the employee bargaining unit representatives by letter that it intended "to revise the current health care benefit programs in order that all insured participants are covered under one program - the Horizon Blue Card PPO [plan]." The letter cited the need to "reduce[] health care premiums" as "a necessary part of [defendant's] efforts to manage costs."
In June 2010, defendant advised the bargaining units that retired employees would receive the same health benefits that current employees received under the current CBAs. Plaintiffs asserted that this change "resulted in decreased benefits overall and a lessening of the level of benefits."
In September 2010, plaintiffs filed a complaint against defendant, alleging that whatever specific health benefits the workers were receiving under the terms of the agreement in effect at the time of their retirement "vested" when the workers retired and could not thereafter be reduced. Plaintiffs and defendants then filed cross-motions for summary judgment.
Following oral argument, the trial judge rendered an oral decision granting defendant's motion for summary judgment. In so ruling, the judge relied upon our decision in Petersen v. Township of Raritan, 418 N.J. Super. 125 (App. Div. 2011). In Petersen, we considered whether a municipality's decision to change the specific kind of insurance policy provided to a retired worker violated the terms of the controlling CBA. Id. at 129-130. We held that the resolution of this issue was governed by the specific contractual obligations between the parties under the terms of the CBA. Id. at 133. Thus, if the CBA required the employer to continue a specific level of benefits for workers after they retired, the employer could not later reduce those benefits. Id. at 133-35. However, if the contract did not so specify, the employer could modify the benefits. Ibid.
In Petersen, the relevant contract language stated that "[a]ny employee who retires after twenty-five (25) or more years of service . . . shall continue to receive all health and medical benefits provided by the employer for the remainder of his life. Such coverage shall be provided at the expense of the employer." Id. at 129-30 (emphasis added). We held that this language "obligated [the employer] to provide [the] plaintiff with health benefits for life as 'provided by the employer[,]'" but did not require any particular plan or level of coverage. Id. at 134. Therefore, we concluded that, under the terms of the agreement, the retiree's level of coverage could be modified. Id. at 136.
In this case, the trial judge noted that the two FOP CBAs and the two PBA CBAs used language similar to the provision involved in Petersen. The four CBAs stated that defendant "shall continue in full force and effect the insurance coverage enjoyed by the members of the bargaining unit[.]" The judge found that this language was not ambiguous and did not require defendant to provide any specific level of coverage to retirees. Instead, the judge concluded that the four CBAs permitted defendant "to maintain benefits for retirees consistent with the benefits that are maintained on an ongoing basis for active employees."
The judge next found that the language of the early retirement memorandum was unambiguous and also similar to the language in the CBA involved in Petersen. The memorandum stated that defendant would continue to provide health benefits to employees who retired "in accordance with existing bargaining unit contracts." The judge ruled that this language meant that retirees were entitled to receive only that level of benefits provided to employees under the current, existing CBA for his or her bargaining unit, not the one that existed at the time the employee retired.
Finally, the judge found that language of the CWA CBA for public workers was "more ambiguous" than the CBAs covering police officers. Unlike the FOP and PBA CBAs, the CWA CBA described the type of benefits public workers would receive after retirement, and required defendant to pay the premiums for these benefits. Nevertheless, the judge stated that "based on all the circumstances, the ambiguity should be resolved in favor of" defendant. Therefore, the judge rejected plaintiffs' contention that defendant was barred from reducing the retirees' health benefits, and granted defendant's motion for summary judgment. This appeal followed.
II.
On appeal, plaintiffs argue that the judge erred in granting defendant's motion for summary judgment. Plaintiffs assert that "[r]etiree health benefits vest upon retirement and cannot subsequently be reduced." They also allege that defendant should be equitably estopped from reducing these benefits.
Our review of a ruling on summary judgment is de novo, applying the same legal standard as the trial court. Townsend v. Pierre, 221 N.J. 36, 59 (2015). "Summary judgment must be granted 'if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law.'" Town of Kearny v. Brandt, 214 N.J. 76, 91 (2013) (quoting R. 4:46-2(c)).
Thus, we consider, as the trial judge did, whether "the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Ibid. (quoting Brill v. Guardian Life Ins. Co., 142 N.J. 520, 540 (1995)). If there is no genuine issue of material fact, we must then "decide whether the trial court correctly interpreted the law." Massachi v. AHL Servs., Inc., 396 N.J. Super. 486, 494 (App. Div. 2007), certif. denied, 195 N.J. 419 (2008). We accord no deference to the trial judge's conclusions on issues of law and review issues of law de novo. Nicholas v. Mynster, 213 N.J. 463, 478 (2013).
At the outset, we note our agreement with the trial judge's determination that, under Petersen, supra, this is a case requiring contract interpretation. The interpretation of a contract is subject to de novo review by an appellate court. Kieffer v. Best Buy, Inc., 205 N.J. 213, 222-23 (2011). "The polestar of contract construction is to discover the intention of the parties as revealed by the language used by them." Karl's Sales and Serv., Inc. v. Gimbel Bros., Inc., 249 N.J. Super. 487, 492 (App. Div.), certif. denied, 127 N.J. 548 (1991).
Courts usually enforce contracts as written. Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960). However, when a contract is ambiguous in a material respect, summary judgment is unavailable and the parties must be given the opportunity to illuminate the contract's meaning through the submission of extrinsic evidence. Conway v. 287 Corp. Ctr. Assocs., 187 N.J. 259, 268-270 (2006). A contract is ambiguous if its terms are "susceptible to at least two reasonable alternative interpretations." Nester v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997) (quoting Kaufman v. Provident Life & Cas. Ins. Co., 828 F. Supp. 275, 283 (D.N.J. 1992), aff'd, 993 F.2d 877 (3d Cir. 1993)).
In attempting to resolve ambiguities in a document, courts may consider extrinsic evidence. While such evidence should never be permitted to modify or curtail the terms of an agreement, a court may "consider all of the relevant evidence that will assist in determining the intent and meaning of the contract." Conway, supra, 187 N.J. at 269.
Whether a contract is ambiguous is a legal question for the court. Nester, supra, 301 N.J. Super. at 210. If there is ambiguity, then the resolution of the ambiguity is a fact question. Michaels v. Brookchester, Inc., 26 N.J. 379, 388 (1958). However, a plenary hearing is not required to resolve the meaning of an ambiguous contract term if, after considering all competent relevant materials, a genuine issue of material fact does not remain. In re Teamsters Indus. Emps. Welfare Fund, 989 F.2d 132, 137 (3d Cir. 1993).
After carefully reviewing the contracts involved in this case, we agree with the trial judge that the four CBAs pertaining to police officers were unambiguous and did not require defendant to provide retirees with any particular level of health benefits in the future. The FOP CBAs and the PBA CBAs merely stated that defendant "shall continue in full force and effect the insurance coverage enjoyed by the members of the bargaining unit[.]" As the judge correctly noted, this language was substantially similar to that contained in the CBA at issue in Petersen, supra. And, as in that case, the employer was free to modify the health benefits for retirees to make them consistent with those enjoyed by active employees, i.e., the "members of the bargaining unit." Therefore, we affirm the judge's decision granting summary judgment to defendant on the two FOP CBAs and the two PBA CBS.
With regard to the two remaining contracts, we reach a different result. Unlike the CBAs for the police officers, the CWA CBA specified that defendant would continue to pay premiums for a specific Blue Cross/Blue Shield plan "as described" in the CBA when the employee retired. While the public workers covered by this agreement agreed to "change to any supplemental plans available and tie benefits into Medicare and Medicaid as a cost savings to" defendant, the CBA stated that the parties "agreed that the benefits are Blue Cross/Blue Shield PACE, Rider J, major medical, dental[,] and prescription and that [defendant] will continue to provide this or an equal plan."
On the one hand, these contractual provisions could be read to mean that defendant agreed to provide a Blue Cross/Blue Shield health plan or its equivalent, but did not agree to provide a specific level of benefits under such a plan. On the other hand, the agreement could be read as requiring defendant to continue to provide a plan that was "equal" in all respects, including the level of benefits, to the plan in effect at the time of the employee's retirement. This is a material ambiguity that cannot be resolved on the basis of the current evidentiary record. Therefore, summary judgment should not have been granted on the CWA PBA.
Similarly, there is an ambiguity concerning the language of the early retirement memorandum. The memorandum stated that "for those employees with [twenty-four] years or more of service as of the date of separation, health benefits [would] continue to be provided in accordance with existing bargaining unit contracts." (emphasis added). The use of the term "existing bargaining unit contracts" could reasonably be construed to refer either to those bargaining unit contracts existing at the time of the employee's retirement, or to the contracts in existence at the present time for current employees. Again, this is a material ambiguity which could not be resolved on a motion for summary judgment.
In sum, we affirm the trial judge's grant of summary judgment to defendant on the two FOP CBAs and the two PBA CBAs. We reverse the grant of summary judgment to defendant on the CWA PBA and the early retirement memorandum.
In so ruling, we reject plaintiffs' contention that once an employee retires, he or she is "vested" in whatever health benefits they are then receiving and these benefits can never be changed. As we specifically held in Petersen, supra, this argument is without merit because the level of benefits enjoyed by a retiree is dependent upon the contracts in effect at the time of retirement. 418 N.J. Super. at 135-36. Plaintiffs' equitable estoppel argument also lacks merit. As in Petersen, plaintiffs failed to present any evidence that defendant represented that benefits for retirees would never be altered. Id. at 137. Thus, assuming that the applicable contract did not require defendant to provide a specific level of benefits, it would not be equitably estopped from reducing them. Ibid. --------
Affirmed in part; reversed in part; and remanded for further proceedings. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION