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American Federation of State, County, and Municipal Employees, Local 2957 v. City of Benton

February 13, 2007

AMERICAN FEDERATION OF STATE, COUNTY, AND MUNICIPAL EMPLOYEES, LOCAL 2957; TERRY WHITE; BOBBY L. ASHER; JOHN A. PARKS; AND BILL WYLLIA PLAINTIFFS
v.
CITY OF BENTON, ARKANSAS; DOUG STRACENER, ALDERMAN; PHILLIP MONTALVO, ALDERMAN; KARLA J. HALEY, ALDERMAN; WILLIE FLOYD, ALDERMAN; RAY FREEMEN, ALDERMAN; LEROY ALLEN, ALDERMAN; ANN HALL, ALDERMAN; ROBIN BERRY, ALDERMAN; CLAUDINE RAMSEY, ALDERMAN; CHARLES CUNINGHAM, ALDERMAN; AND RICK HOLLAND, MAYOR OF THE CITY OF BENTON, ARKANSAS DEFENDANTS



MEMORANDUM OPINION AND ORDER

The Plaintiff, American Federation of State, County, and Municipal Employees, Local 2957 ("the Union"), has sued the City of Benton, Arkansas, and the City's Alderman, named in their official capacities as members of the City Council (collectively "the City"), claiming that the City unconstitutionally impaired the collective bargaining agreement ("the Agreement") that terminated December 2004. In an order dated January 27, 2006, this Court held that the City's March 2004 resolution unconstitutionally impaired the Agreement (doc. #39) but Court did not rule on a remedy. In January 2007, the Court held a bench trial to address the remedy. At the trial, the City made an offer of proof, arguing the Court's prior order finding impairment did not need a remedy. This Court disagrees and finds that the Union is entitled to have the benefits of the Agreement enforced.

I. FACTS

The Union is the collective bargaining representative of the City's non-uniformed employees. Plaintiff Terry White is the current president of the Union and is an employee of the City. Plaintiffs Bobby L. Asher, John A. Parks, and Bill Wyllia are retired employees of the City, who were receiving health insurance from the City during retirement. These individual plaintiffs settled their claims before trial and are no longer part of the case.

Since 1976, the Union has had a collective bargaining agreement with the City covering non-uniform employees of the City of Benton. The parties entered into the disputed Agreement on June 14, 2002. The Agreement established rates of pay, hours of work, and other conditions of employment. Specifically, the Agreement provided for fourteen paid holidays. In September 2003, the City Council passed an ordinance providing for eleven paid holidays instead of fourteen. The Union and the City settled the holiday pay issue before trial.

The Agreement also provided for various types of insurance for employees. Article XII, Section 5 of the Agreement states, "The Employer [the City] shall continue to provide health, accidental death and dismemberment, disability, life and retirement insurance. Employee and employee dependent's health insurance coverage is set forth in Appendix B." (Exhibit 11). Similar language has been used in every collective bargaining agreement since insurance was first specifically provided for in 1982, and the language has remained unchanged since 1988 (Exhibit 5). Kathy Kirk, the City's human resources manager, testified the term "retirement insurance" referred to a defined-benefit retirement account. Terry White, a City employee and the current president of the Union, testified the term "retirement insurance" is health insurance paid to employees after retirement.

For as long as any witness could remember, the City had paid health insurance for all retired employees until the retiree reached age sixty-five. In 1989, the City adopted a resolution stating that the City would continue to pay health insurance for City employees who retired before December 31, 1989, until they reached age sixty-five, but for employees retiring after December 31, 1989, the City would only pay the premiums until age sixty-five if the employee had thirty years of service or more (Exhibit 15). The testimony was unclear whether this new resolution was applied to union-represented employees. However, Exhibit 20 shows a list of retirees that were paid health insurance after retirement, including several that had not attained the thirty years of service the 1989 resolution required. The logical inference is that the 1989 resolution was not applied to union employees. The Court received evidence that in 2003, the City adopted a resolution under which the City would pay the premiums on a pro rata basis according to a retiree's years of service (Exhibit 16). Retirees with twenty-eight years of service would have insurance paid until age sixty-five. Retirees with fewer than ten years of service could remain on the insurance plan but were required to pay all of the premium. Employees with more than ten years of service but fewer than twenty-eight years would receive a premium payment of three percent per year of service. For example, someone who worked for the City for eleven years would have thirty-three percent of his or her insurance premiums paid. The Court granted the Union's motion to amend its complaint to conform to the evidence to include a claim that the October 2003 resolution also unconstitutionally impaired the Agreement (doc. #62). In March 2004, the City Council passed a resolution terminating the payment of health insurance for retired employees (Exhibit 17).

In May 2004, the Union sued the City, asking the Court to enjoin the City from enforcing the March 2004 resolution. The Union argued the City's actions impaired the Agreement in violation of the Contract Clause of the United States Constitution. The City contended that the Agreement in question was void and that the City's actions could not impair an invalid contract. The Court found the Agreement was valid, provided for payment of health insurance to retired employees, and the City unconstitutionally impaired that agreement with its March 2004 resolution. The Court held, "As far as the Ordinance and Resolution affect rights vested under the June 14, 2002 Collective Bargaining Agreement, they are NULL AND VOID."

In January 2007, the Court held a bench trial to address what remedy was appropriate. The Court allowed the City to make an offer of proof. The City argued that no remedy was required and that the Court's holding that the resolution was "null and void" was sufficient. The City also presented three new theories of the case. First, the City argued the Union should be estopped from raising its claims because it did not dispute the 1989 resolution or the October 2003 resolution. Second, the City presented evidence that the Agreement never provided for payment of retiree health insurance. Rather, the City paid the health insurance according to its own policy, separate from the Agreement, and thus could change the policy in its discretion. Finally, the City argued that if the Agreement did provide for insurance payments to retired employees, that part of the Agreement was void because it violated Ark. Code Ann. § 24-12-129. The Union argued the Court should enjoin enforcement of the resolution as to those employees hired and working under the Agreement, requiring the City to pay health insurance for those employees when they retired.

II. DISCUSSION

A. The October 2003 Policy

The Court allowed the Union to amend its complaint to conform to the evidence (doc. #62). The Union now alleges the October 2003 resolution was also an unconstitutional impairment of contract. For substantially the same reasons relied on in its January 2006 order (doc. #39), the Court agrees. The Agreement was a valid agreement. The October 2003 resolution was a legislative act that impaired a provision of the Agreement. See Minneapolis St. Ry. Co. v. City of Minneapolis, 189 F. 445, 453 (D. Minn. 1911)(holding that resolutions of a city were legislative acts). The October 2003 policy effectuated a fundamental change in the employee's expectations under the Agreement, so the impairment was substantial. Finally, the City has failed to show the modification of retired employees' insurance was reasonable and necessary to serve an important public purpose. Therefore, the October 2003 resolution unconstitutionally impaired the Agreement.

B. The City's Offer of Proof

The Law of the Case Doctrine requires this Court adhere to all of its prior rulings because both parties have relied on those rulings. See Arizona v. California, 460 U.S. 605, 618 (1983) ("when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case."). After reviewing the evidence, the Court remains firm in its prior holding. Therefore, the Court concludes that the City's arguments made in its offer of proof cannot reverse the Court's prior ruling and should have been raised in its motion to dismiss. The Court has already held the Agreement was valid and obligated the City to pay retiree's health insurance(doc. #39). Thus, granting any of the City's offer of proof arguments would be contrary to that order. However, the Court believes the City's offer of proof deserves some analysis.

i. Estoppel

The City argues the Union should be estopped from claiming unconstitutional impairment of contract because it did not object to the 1989 or the 2003 resolutions. Arkansas law requires the City prove four elements for estoppel:

(1) the party to be estopped must know the facts; (2) he must intend that his conduct must be acted on or must so act that the party asserting the estoppel has a right to believe the other party so intended; (3) the party asserting the estoppel must be ignorant of the true facts; and (4) the party asserting the estoppel must rely on the other party's conduct to his injury. Miller v. City of Lake City, 789 S.W.2d 440, 442 (Ark. 1990)

The Court concludes it need not engage in a long analysis of estoppel. Element three requires the City to prove it was ignorant of all the facts. However, the City was certainly aware of its own policies, resolutions, and other material facts. Therefore, the argument fails.

ii. Interpretation of Article XII, Section 5

Article XII, Section 5 of the Agreement states, "The Employer [the City] shall continue to provide health, accidental death and dismemberment, disability, life and retirement insurance. Employee and employee dependent's health insurance coverage is set forth in Appendix B." (Exhibit 11). Appendix B states, "The City of Benton shall provide insurance coverage for each employee while employed with the City of Benton." The Union argues "continue to provide health . . . and retirement insurance" means the City has to pay employee health insurance after retirement. The City argues Appendix B clearly states the insurance obligation applied only to current employees.

Under Arkansas law, the Court must first interpret a contract "to give to the language employed the meaning which the parties intended." First Nat'l Bank of Crossett v. Griffin, 832 S.W.2d 816, 169 (Ark. 1992). The Court must give the words used their plain and ordinary meaning. Id. All clauses of a contract must be read together, giving each article legal effect. Id. at 169-70. However, when a contract is ambiguous, the Court may look outside the contract to the parties' course of dealing to resolve the ambiguity. Ne. Ark. Internal Med. ...


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