The opinion
2016 IL 117638
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket Nos. 117638, 117713, 117728 cons.)
JERRY MATTHEWS et al., Appellees and Cross-Appellants, v. CHICAGO
TRANSIT AUTHORITY et al. (Retirement Plan for Chicago Transit Authority Employees et al.,
Appellants and Cross-Appellees).
Opinion filed May 5, 2016.
JUSTICE FREEMAN delivered the judgment of the court, with opinion.
Chief Justice Garman and Justices Thomas, Kilbride, and Burke concurred in
the judgment and opinion.
Justice Theis specially concurred, with opinion, joined by Justice Karmeier.
Justice Karmeier specially concurred, with opinion.
OPINION
¶1 At issue in this appeal is the enforceability of plaintiffs’ rights to retiree health
care benefits as set forth in the 2004 collective bargaining agreement (CBA)
between the Chicago Transit Authority (CTA) and Amalgamated Transit Union
Locals 241 and 308 (collectively, the Transit Unions), the labor unions that
represented CTA’s bus and rail employees for purposes of collective bargaining.
After the 2004 CBA expired, the retiree health care benefits were the subject of an
interest arbitration award. That award, which modified the retiree health care
benefits, was accepted by the CTA and the Transit Unions. Plaintiffs brought suit to
challenge the implementation of that award.
¶2 Plaintiffs filed a putative class action complaint asserting claims for breach of
contract, promissory estoppel, breach of fiduciary duty, and declaratory relief. In
addition, plaintiffs claimed that the terms of the arbitration award modifying the
retiree health care benefits were unenforceable because they violate article XIII,
section 5, of the Illinois Constitution of 1970 (Ill. Const. 1970, art. XIII, § 5),
commonly referred to as the pension protection clause.
¶3 The circuit court of Cook County ruled that the retired CTA employees had
standing to challenge the modifications to their retiree health care benefits, but the
current CTA employees lacked standing to assert that challenge. On the merits, the
circuit court dismissed the complaint in its entirety for failure to state a claim upon
which relief could be granted.
¶4 Plaintiffs appealed, and the appellate court affirmed in part and reversed in part.
2014 IL App (1st) 123348. The appellate court upheld the circuit court’s ruling that
the current CTA employees lacked standing but held that the CTA retirees had a
vested right to receive the retiree health care benefits that were provided in the prior
CBA and had stated a claim for breach of that contract. The appellate court also
held that the retired CTA employees were entitled to pursue their claims for
promissory estoppel against the CTA.
¶5 Defendants brought this appeal, seeking reversal of the lower courts’ rulings
with respect to the standing of the CTA retirees and the sufficiency of their claims
for breach of contract and promissory estoppel. Plaintiffs cross-appeal, arguing that
the lower courts erred in ruling that the current employees lack standing to
challenge the health care modifications. For the reasons that follow, the judgment
of the appellate court is affirmed in part, reversed in part, and the cause is remanded
for further proceedings.
¶6 BACKGROUND
¶7 The individual plaintiffs are five current and retired employees of the CTA who
began working for the CTA prior to 2001. In their complaint, they seek to bring
claims on behalf of themselves and two putative classes. Plaintiff Jerry Williams
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retired in 2006 and seeks to represent a class of retirees (Class I) who were hired
before September 5, 2001, and retired before January 1, 2007. The remaining
plaintiffs seek to represent a class of CTA employees and retirees (Class II) who
were hired before September 5, 2001, and retired after January 1, 2007, or remain
current employees of the CTA. These plaintiffs include Jerry Matthews and
Tommy Sams, who are alleged to be current employees of the CTA, and Cynthia
Boyne and Charles Brown, who retired after January 1, 2007. Each class
purportedly consists of more than 7000 people.
¶8 Defendants are the CTA, the Retirement Plan for CTA Employees, the Board of
Trustees of the Retirement Plan for CTA Employees, the Retiree Health Care Trust,
and the Board of Trustees of the Retiree Health Care Trust.
¶9 The CTA is a “political subdivision, body politic and municipal corporation”
created in 1945 by the Metropolitan Transit Authority Act (70 ILCS 3605/3 (West
2010)). The Retirement Plan for CTA Employees (Retirement Plan) is the entity
established by section 22-101 of the Illinois Pension Code (40 ILCS 5/22-101
(West 2010)) to provide specified retirement benefits to retired CTA employees,
which are set forth in a Retirement Plan Agreement. The Board of Trustees of the
Retirement Plan (Retirement Plan Board) was established on January 18, 2008, by
section 22-101(b) of the Pension Code (40 ILCS 5/22-101(b) (West 2010)) to
administer the Retirement Plan. The Retiree Health Care Trust (Health Trust) was
established on January 18, 2008, by section 22-101B(b) of the Pension Code (40
ILCS 5/22-101B(b) (West 2010)) to provide health care benefits to CTA retirees.
The Board of Trustees of the Health Trust (Health Trust Board) was established on
January 18, 2008, by section 22-101B(b)(1) of the Pension Code (40 ILCS
5/22-101B(b)(1) (West 2010)) to administer the Health Trust.
¶ 10 The CTA employs both union and nonunion employees, including members of
the Transit Unions, which collectively bargain with the CTA regarding employee
wages, working conditions, and retirement benefits. The CBAs between the CTA
and the Transit Unions consist of a series of Wages and Working Conditions
Agreements (WWCAs), each of which is subject to periodic modification through
collective bargaining. Two such WWCAs are at issue in this case. The 2004
WWCA became effective January 1, 2004, with a term extending through
December 31, 2006. The 2007 WWCA became effective January 1, 2007, with a
term extending through December 31, 2011.
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¶ 11 Section 19.2 of the 2004 WWCA includes a provision allowing for
modification of its terms, stating: “Either of the parties hereto shall have the right to
open this Agreement for modifications and[/] or additions to be effective January 1,
2007, or any anniversary date thereafter by written notice to the other party sixty
(60) days prior to such anniversary date.” Section 19.2 further provides: “All
conditions of this Agreement are to continue in full force and effect until changed,
revised or amended from time to time by agreement of the parties or by the decision
of the Board of Arbitration.” Section 20.2 of the 2007 WWCA has identical
language, except that the effective date of modifications is “January 1, 2012, or any
anniversary date thereafter.”
¶ 12 Incorporated into each WWCA is the Retirement Plan Agreement, a contract
concerning retirement benefits that was first agreed to by the CTA and the Transit
Unions in 1949. Article 18 of both the 2004 and 2007 WWCAs provides that the
Retirement Plan Agreement is incorporated in full into the WWCA “in all respects
and for all purposes, including future proposals for revision in the Plan and in the
negotiation or arbitration of proposed revisions.” Correspondingly, the Retirement
Plan Agreement provides that it “is part of the Wage[s] and Working Conditions
Agreement between the parties hereto. This Agreement can be changed only in
accordance with the provisions of the aforesaid Wage[s] and Working Conditions
Agreement.” Collectively, the WWCA and the Retirement Plan Agreement
constitute the CBA.
¶ 13 Prior to May 16, 1980, the CTA contributed up to $40 per retiree per month
toward the retiree’s health insurance premium. On May 16, 1980, an arbitration
panel chaired by Harry J. Dworkin issued an interest arbitration award 1 (the
Dworkin award), which ordered the Retirement Plan Agreement to be amended.
Regarding one such amendment, the award stated: “Effective [upon] the issuance
of the Award, the [Chicago Transit] Authority will no longer contribute up to
$40.00 per month toward the retiree’s Group Hospital Surgical premium.” Instead,
the award ordered the Retirement Plan to pay up to $60 per month toward the
retiree’s Group Hospital Surgical premium until January 1, 1981, when the
Retirement Plan would pay up to $75 per month.
1
According to the complaint, “[a] proceeding that relates to terms of the CBA applicable to
multiple employees or employees as a group, rather than to a single employee’s grievance, is called
an ‘Interest Arbitration.’ ”
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¶ 14 The retiree health care benefit was added to the Retirement Plan Agreement in
1980 as a new section 20.12. Section 20.12(a) of the Retirement Plan Agreement,
as amended through December 31, 2003, provides:
“(a) Effective December 1, 1989, a sum will be paid in an amount sufficient
to provide insurance coverage for all retirees under the Group Hospital Surgical
Major Medical Plan or the Health Maintenance Organization premium, but said
sum shall not exceed the premium cost to the [Retirement] Plan effective for
such coverage for a retiree on December 31, 2003. This benefit terminates
when the retiree attains age 65.”
¶ 15 In 2006, the Transit Unions and the CTA met to negotiate the extension of the
2004 CBA and changes to its terms. They were unable to reach agreement and, in
2007, submitted their dispute for interest arbitration. On June 26, 2007, an
arbitration panel chaired by Edwin Benn issued an opinion and award (the Benn
award), which noted that the “Pension Fund and retiree health insurance [are] in
dire financial straits and in desperate need of major additional funding.” The award
stated that the parties agreed that the jurisdiction of the panel to issue an arbitration
award was “expressly conditioned upon the passage into law of legislation which
contains substantially the terms and conditions set forth in the attached Exhibit A.”
¶ 16 Exhibit A, in a section titled “Retiree Health Care,” provided for creation of the
Health Trust and its board. This section further provided for a bond to fund $450
million in “seed” money to the Health Trust, conditioned on the parties’
compliance with certain terms, including: (1) that retired employees contribute up
to 45% of the total amount expended under the Retirement Plan for health care; (2)
that current employees pay a “payroll tax” contribution equal to 3% of
compensation; and (3) that the Health Trust “shall take sole responsibility for
payment, claims and plan administration effective January 1, 2009.” Exhibit A also
included a section titled “Pension” and a final section stating: “All of the above [is]
contingent on appropriate Legislative Funding.”
¶ 17 Public Act 95-708, titled “An Act concerning transportation,” became effective
on January 18, 2008. As relevant to the case at bar, Public Act 95-708 amended
section 22-101 of the Pension Code and added section 22-101B. The amended
section 22-101 concerned the Retirement Plan. Section 22-101(h) provided, in
pertinent part:
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“The changes made by this amendatory Act of the 95th General Assembly,
to the extent that they affect the rights or privileges of Authority employees that
are currently the subject of collective bargaining, have been agreed to between
the authorized representatives of these employees and of the Authority prior to
enactment of this amendatory Act, as evidenced by a Memorandum of
Understanding between these representatives that will be filed with the
Secretary of State Index Department and designated as ‘95-GA-C05.’ ” 40
ILCS 5/22-101(h) (West 2008).
¶ 18 The Memorandum of Understanding, which was signed by representatives of
the CTA and the Transit Unions, provided that “[t]he parties acknowledge that the
Legislation, if passed into law, is legislation containing substantially the terms and
conditions set forth in Exhibit A to Arbitrator Benn’s June 26, 2007[,] Opinion and
Award and the parties’ clarifications thereto.” The memorandum further stated:
“The parties further acknowledge their intention that the Legislation not be
construed as a diminution of the rights, privileges and benefits under the
existing CBAs between them or of Arbitrator Benn’s June 26, 2007[,] Opinion
and Award, including but not limited to the parties’ exercise of their right to
grant ad hoc increases to retirees in accordance with the parties’ past practice.”
¶ 19 The new section 22-101B, titled “Health Care Benefits,” provided:
“The [CTA] *** shall take all actions lawfully available to it to separate the
funding of health care benefits for retirees and their dependents and survivors
from the funding for its retirement system. The [CTA] shall endeavor to
achieve this separation as soon as possible, and in any event no later than July 1,
2009.” 40 ILCS 5/22-101B(a) (West 2008). 2
It also established the Health Trust “for the purpose of providing health care
benefits to eligible retirees and their dependents and survivors in accordance with
the terms and conditions set forth in this Section 22-101B” and provided that the
Health Trust “shall be solely responsible for providing health care benefits to
eligible retirees and their dependents and survivors by no later than July 1, 2009,
but no earlier than January 1, 2009.” 40 ILCS 5/22-101B(b) (West 2008).
2
This provision was originally enacted as article 15, section 15-5, of Public Act 94-839 (eff.
June 6, 2006), which amended section 22-101 of the Pension Code. As of January 18, 2008, this
provision was deleted from section 22-101 and was included in the new section 22-101B. With that
enactment, the funding-separation deadline was extended from January 1, 2009, to July 1, 2009.
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¶ 20 Section 22-101B further provided that, beginning January 1, 2009, “the
aggregate amount of retiree, dependent and survivor contributions to the cost of
their health care benefits shall not exceed more than 45% of the total cost of such
benefits.” 40 ILCS 5/22-101B(b)(5) (West 2008). Additionally, section 22-101B
included a requirement that “all employees of the [CTA] shall contribute to the
[Health Trust] in an amount not less than 3% of compensation.” 40 ILCS
5/22-101B(6) (West 2008).
¶ 21 Finally, section 22-101B stated:
“(7) No earlier than January 1, 2009[,] and no later than July 1, 2009[,] as
the [Health Trust] becomes solely responsible for providing health care benefits
to eligible retirees and their dependents and survivors in accordance with
subsection (b) of this Section 22-101B, the [CTA] shall not have any obligation
to provide health care to current or future retirees and their dependents or
survivors.” 40 ILCS 5/22-101B(b)(7) (West 2008).
¶ 22 Public Act 95-708 also added section 12c to the Metropolitan Transit Authority
Act, which permitted the CTA to issue certain bonds and notes, more than $500
million of which was to be deposited into the Health Trust for retiree health care. 70
ILCS 3605/12c(b)(2) (West 2008).
¶ 23 On or about February 27, 2009, the Health Trust Board instituted a health
insurance “plan design” that required CTA retirees hired before September 5, 2001,
to pay 45% of the total cost of their retiree health care benefits. Since July 2009,
retirees have been paying a portion of the cost of those benefits. The Health Trust
Board began levying a 3% payroll tax on current employees in July 2009.
¶ 24 Plaintiffs subsequently filed a nine-count class action complaint, challenging
the modifications to their health care benefits that were implemented following the
enactment of Public Act 95-708 (eff. Jan. 18, 2008).
¶ 25 Counts I and V of the complaint, against all defendants, alleged a violation of
article XIII, section 5, of the Illinois Constitution based on the claim that the retiree
health care benefits constitute “ ‘an enforceable contractual relation[ship], the
benefits of which shall not be diminished or impaired’ ” (quoting Ill. Const. 1970,
art. XIII, § 5). Counts II and VI, against the CTA and the Retirement Plan, asserted
claims for breach of contract based on the CBAs entered into between the CTA and
the Transit Unions.
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¶ 26 Counts III and VII, against the CTA and the Retirement Plan, alleged claims for
promissory estoppel. Those counts asserted that the CTA and the Retirement Plan
made a number of promises to plaintiffs, including that plaintiffs would receive
fully paid retiree health care benefits identical to those of current CTA employees.
They further asserted that plaintiffs relied on these promises to their detriment and
their reliance was expected and foreseeable.
¶ 27 Counts IV and VIII, against the Retirement Plan Board and the Health Trust
Board, alleged breach of fiduciary duty. 3 Count IX, against all defendants, sought a
declaratory judgment on the basis that plaintiffs have a legal interest in enforcing
past and present CBAs, as well as the right to collective bargaining in the future,
while defendants have contrary interests.
¶ 28 As relief, plaintiffs requested: (1) certification of Classes I and II; (2) a
declaration that certain parts of Public Act 95-708 are void and unenforceable
because they violate article XIII, section 5, of the Illinois Constitution and the
Regional Transportation Authority Act (RTA Act) (70 ILCS 3615/1.01 et seq.
(West 2010)); (3) a declaration that a 2007 arbitration award is “null and void” as to
plaintiffs because the terms of the arbitration award were not adopted in Public Act
95-708; (4) a preliminary and permanent injunction against enforcement of certain
parts of Public Act 95-708 and a requirement that defendants reinstate plaintiffs’
rights as they existed prior to the enactment of Public Act 95-708, including the
rights of retired CTA employees to fully paid health care benefits at the same level
as those of current CTA employees; and (5) compensatory damages, costs and
attorney fees.
¶ 29 The Retirement Plan, the Retirement Plan Board, the Health Trust, and the
Health Trust Board (collectively, the Plan and Trust defendants) filed a combined
motion to dismiss plaintiffs’ class action complaint pursuant to sections 2-615 and
2-619(a)(9) of the Code of Civil Procedure (Code) (735 ILCS 5/2-615, 2-619(a)(9)
(West 2010)). The Plan and Trust defendants claimed the complaint should be
dismissed under section 2-615 because (1) the unambiguous language of the
Retirement Plan Agreement proves that plaintiffs do not have a vested right to free
lifetime retiree health care benefits, so the entire complaint fails; (2) the CTA and
the Transit Unions had the right to change retiree health care benefits, so the breach
of contract claims fail; (3) plaintiffs could not rely on statements outside the
Retirement Plan Agreement, so the promissory estoppel claims fail; (4) complying
3
Counts IV and VIII, alleging breach of fiduciary duty, are not at issue here.
-8-
with Public Act 95-708 does not constitute a breach of fiduciary duty, so the breach
of fiduciary duty claims fail; and (5) because plaintiffs failed to allege a substantive
cause of action, the request for declaratory judgment fails. The Plan and Trust
defendants further claimed the complaint should be dismissed under section
2-619(a)(9) because the Transit Unions are the only entities with standing to
challenge modifications in retiree health care benefits resulting from collective
bargaining.
¶ 30 The CTA filed a combined motion to dismiss the complaint pursuant to sections
2-615 and 2-619(a)(9). The CTA claimed the counts directed at it should be
dismissed because (1) the CTA is not a proper party because it has not had any
responsibility to pay any portion of retired CTA employees’ health care costs since
the 1980s; (2) plaintiffs do not have a vested right to free lifetime retiree health
care; and (3) plaintiffs failed to state a cause of action. The CTA also claimed that
plaintiffs do not have standing to challenge their health care benefits.
¶ 31 The circuit court entered an order granting defendants’ section 2-619(a)(9)
motions with regard to the current CTA employees, finding that they lacked
standing to challenge the modification of their health care benefits. However, the
court denied the 2-619(a)(9) motions with regard to the CTA retirees, concluding
they have standing to challenge the changes in their health care benefits.
¶ 32 The court also granted defendants’ section 2-615 motions, with prejudice, and
dismissed the complaint in its entirety. With regard to the CTA, the circuit court
found that the Dworkin award, as well as Public Act 95-708, established that the
CTA did not have any duty to pay for retiree health care benefits.
¶ 33 Regarding the Plan and Trust defendants, the court concluded that the retiree
health care benefits were not vested. The court pointed to portions of the
Retirement Plan Agreement indicating that it provided for vesting of lifetime
pension benefits, and noted that similar language was not employed for health care
benefits. The court concluded this “strongly implies that the parties did not intend
to vest retirees with health care benefits.” The circuit court also concluded that the
“more fatal flaw” to plaintiffs’ claim was the inclusion of language in the CBA that
allowed the parties to modify the terms of that agreement, through collective
bargaining, upon its expiration. In the circuit court’s view, this provision
demonstrated that the health care benefits could be altered and were not vested.
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¶ 34 The appellate court affirmed in part and reversed in part. 2014 IL App (1st)
123348, ¶¶ 1, 155. The court affirmed the dismissal of all current CTA employees’
claims for lack of standing. Id. ¶¶ 76, 154. However, the appellate court reversed as
to the vesting of retired CTA employees’ health care benefits, concluding, contrary
to the circuit court, that retirees have a vested right to those benefits. Id. ¶¶ 108,
122.
¶ 35 In addition, the appellate court affirmed the dismissal of the retired CTA
employees’ breach of contract claim against the CTA, their promissory estoppel
claim against the Retirement Plan, and their breach of fiduciary duty claims against
the Retirement Plan Board and the Health Trust Board. Id. ¶¶ 82, 85-86, 136, 149.
The court reversed the dismissal of the retired CTA employees’ breach of contract
claim against the Retirement Plan, their promissory estoppel claim against the
CTA, and their claim for declaratory judgment against all defendants. Id.
¶¶ 130-31, 138, 152. The court also reversed the dismissal of the retired CTA
employees’ constitutional claim, based on section 5 of article XIII, and remanded
the matter for further proceedings. Id. ¶¶ 128, 154-55.
¶ 36 The Retirement Plan and the Health Trust filed a petition for leave to appeal in
case No. 117638 4; the CTA filed a petition for leave to appeal in case No. 117728;
and plaintiffs, as cross-appellants, filed a petition for leave to appeal in case No.
117713. On September 24, 2014, we allowed the petitions for leave to appeal and
consolidated the cases. See Ill. S. Ct. R. 315(a) (eff. July 1, 2013). In addition, we
allowed the Illinois Municipal League and the City of Chicago to file an amici
curiae brief in support of appellants; the Chicago Transit Authority Trade Union
Coalition to file an amicus curiae brief in support of appellants; and the Northeast
Illinois Regional Commuter Railroad Corp. to file an amicus curiae brief in support
of the CTA. Ill. S. Ct. R. 345 (eff. Sept. 20, 2010).
4
On June 4, 2014, we allowed the Retirement Plan Board and the Health Trust Board to join this
petition for leave to appeal.
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¶ 37 ANALYSIS
¶ 38 Standing
¶ 39 We initially consider whether plaintiffs’ claims were subject to dismissal under
section 2-619(a)(9) of the Code of Civil Procedure (735 ILCS 5/2-619(a)(9) (West
2010)) for lack of standing. The doctrine of standing ensures that issues are raised
only by those parties who have a sufficient stake in the outcome of the controversy.
Glisson v. City of Marion, 188 Ill. 2d 211, 221 (1999); People ex rel. Hartigan v.
E&E Hauling, Inc., 153 Ill. 2d 473, 482 (1992). Our review of a trial court’s
decision on a motion to dismiss that is based upon lack of standing is de novo, and
we consider whether dismissal was proper as a matter of law. Lyons v. Ryan, 201
Ill. 2d 529, 534 (2002); Glisson, 188 Ill. 2d at 220-21.
¶ 40 This action was brought by five individual plaintiffs on behalf of themselves
and as representatives of two putative classes. In Class I, Williams represents
former employees who were members of Amalgamated Transit Union Local 308
and retired under the 2004 CBA. In Class II, Matthews represents current
employees who are members of Amalgamated Transit Union Local 308 (train
workers); Sams represents current employees who are members of Amalgamated
Transit Union Local 241 (bus workers); Boyne represents former employees who
were members of the International Brotherhood of Electrical Workers Local 9 and
retired under the 2007 CBA; and Brown represents former employees who were
not union members and retired under the 2007 CBA.
¶ 41 The Plan and Trust defendants have argued that all of the plaintiffs lack
standing because they were represented by the Transit Unions during the collective
bargaining process that resulted in the Benn award and the enactment of Public Act
95-708, which were implemented through the modification of retiree health care
benefits under the 2007 CBA. The circuit court determined that Matthews, Sams,
Boyne, and Brown, who represent the Class II plaintiffs, lack standing to challenge
the enforceability of the 2007 CBA. However, the circuit court determined that
Williams, who represents the Class I plaintiffs, has standing to challenge its
enforceability. The appellate court agreed that the Class II plaintiffs lack standing
but did not address the standing of Williams or the Class I plaintiffs because that
issue was not raised by defendants in that appeal.
¶ 42 Before this court, Williams contends that the question of his standing has been
forfeited because defendants failed to raise it in the appellate court. We disagree. It
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is established that “ ‘[w]here the trial court is reversed by the Appellate Court and
the appellee in that court brings the case here for further review, he may raise any
questions properly presented by the record to sustain the judgment of the trial court,
even though those questions were not raised or argued in the Appellate Court.’ ”
Dineen v. City of Chicago, 125 Ill. 2d 248, 264 (1988) (quoting Mueller v. Elm
Park Hotel Co., 391 Ill. 391, 399 (1945)); see also Marshall v. Burger King Corp.,
222 Ill. 2d 422, 430-31 (2006). In this case, the circuit court dismissed the
complaint in its entirety, and the appellate court reversed the dismissal of certain
claims asserted by Williams. The Plan and Trust defendants may properly raise any
arguments to sustain the trial court’s judgment, as long as those arguments are
supported by the record. Accordingly, we will address the argument that Williams
lacks standing in turn.
¶ 43 With regard to the claims of Matthews, Sams, Boyne, Brown, and the other
members of the purported Class II, the complaint acknowledges that “[t]he Transit
Unions are collective bargaining representatives of certain active CTA employees.”
It is established that only parties to a CBA may dispute an arbitration award in
court. Stahulak v. City of Chicago, 184 Ill. 2d 176, 180 (1998). Thus, only the
employer and the designated representative of the bargaining unit may bring suit to
challenge an arbitration award in circuit court. Id.; Casanova v. City of Chicago,
342 Ill. App. 3d 80, 89 (2003); see also 5 ILCS 315/16 (West 2012) (providing that,
after exhaustion of mandatory arbitration or other grievance procedures, suits
alleging violations of CBAs “between a public employer and a labor organization
representing public employees may be brought by the parties to such agreement”).
¶ 44 Here, the 2007 CBA provides that the CTA recognizes the transit union as the
sole and exclusive collective bargaining agent for the employees in the bargaining
unit. 5 An individual member of a collective bargaining unit may bring suit against
an employer to challenge an arbitration award only if the court finds that the union,
as bargaining agent, breached its duty of fair representation. Cosentino v. Price,
136 Ill. App. 3d 490, 495 (1985). The complaint in this case contains no such
allegation. Accordingly, the Class II plaintiffs were represented by the Transit
Unions during the bargaining and arbitration process that resulted in the 2007
5
The complaint alleges that the “Transit Unions and the CTA entered into another ‘Wages and
Working Conditions Agreement,’ ” which took effect on January 1, 2007. This allegation cites to
Exhibit 3 attached to the complaint, which is a copy of the 2007 agreement between the CTA and
Local 241. That document states that the CTA “recognizes Local 241 as the sole and exclusive
bargaining agents [sic] for all of its employees.” Local 308 is not referenced in the exhibit, but none
of the parties have claimed that the members of that transit union are not bound by its terms.
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CBA. 6 Because the claims of the Class II plaintiffs attack the modification of
health care benefits resulting from an arbitration award to which their exclusive
bargaining agent was a party, those plaintiffs lack standing. See Stahulak, 184 Ill.
2d at 180-81.
¶ 45 With regard to the claims of Williams and the members of Class I, the
complaint alleges that “[r]etirees, even those formerly represented by the Transit
Unions, are not represented by the Transit Unions in collective bargaining, cannot
vote on proposed collective bargaining agreements, and cannot participate in
arbitration proceedings between the Transit Unions and the CTA to determine the
terms to be included in a new collective bargaining agreement.” The terms of the
2004 CBA establish that the CTA recognized the Transit Unions as “the sole and
exclusive collective bargaining agents for all of its employees.” Following
expiration of that agreement, however, Williams and the Class I retirees were no
longer employed by the CTA and were not represented in the subsequent collective
bargaining and interest arbitration proceedings. 7
¶ 46 That fact is consistent with Illinois law. The Illinois Public Labor Relations Act
(the Act) defines “[p]ublic employee” as “any individual employed by a public
employer.” 5 ILCS 315/3(n) (West 2012). In addition, the Act allows public
employees “to bargain collectively through representatives of their own choosing
on questions of wages, hours and other conditions of employment.” 5 ILCS
6
Though Boyne was a member of another union and Brown was not a member of any union, the
appellate court noted that the plaintiffs “did not argue that CTA employees who are not members of
the transit unions are treated differently than union members,” and any argument about nonunion
employee standing was not raised until the plaintiffs’ rehearing petition below. 2014 IL App (1st)
123348, ¶ 68 n.6. Therefore, that argument has been forfeited.
7
There is no merit to the Plan and Trust defendants’ argument that the definition of the term
“employee” in the Retirement Plan Agreement necessarily means that retirees were represented
during the collective bargaining over the 2007 CBA. The plan states that “retired employees are not
included” in its definition of “employee,” except as provided in section 20. Section 20 relates to
“Present Pensioners” and the relevant portions of that section contains two references to
“employees.” The first refers to employees hired before September 1, 2001, who “upon retirement”
receive the hospitalization supplement provided by the Plan; the second refers to employees hired
after that date who do not receive the supplement “upon retirement.” These two references do not
indicate that retirees are considered to be employees for purposes of collective bargaining. To the
contrary, those references merely address the circumstance that some employees may reach
retirement in the future, when they will become retirees and either will or will not be granted the
hospitalization supplement. Nothing in the plan contradicts the contract language stating that only
current employees are represented by the designated agent for purposes of collective bargaining.
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315/6(a) (West 2012). Accordingly, individuals who are not public employees do
not have a right to collective bargaining. See Carnock v. City of Decatur, 253 Ill.
App. 3d 892, 899 (1993) (“a union has no obligation to represent retirees, who are
outside the collective-bargaining unit”); see also Allied Chemical & Alkali Workers
of America, Local Union No. 1 v. Pittsburgh Plate Glass Co., Chemical Division,
404 U.S. 157, 172 (1971) (holding that retirees are not “employees” covered by the
collective-bargaining provisions of the National Labor Relations Act). 8 Because
retirees are not represented in collective bargaining, they have standing to pursue
claims for enforcement of benefits granted under a CBA. Pittsburgh Plate Glass,
404 U.S. at 181 n.20; Carnock, 253 Ill. App. 3d at 898 (holding that a retiree need
not exhaust contractual remedies before filing suit to enforce a benefit provision of
a CBA); see also Poole v. City of Waterbury, 831 A.2d 211, 227-30 (Conn. 2003).
¶ 47 In asserting that Williams lacks standing, the Plan and Trust defendants rely
upon “the sworn factual record” in another case involving a CTA retiree who was a
member of a transit union. In particular, the Plan and Trust defendants refer to two
affidavits submitted in the “[b]riefing” of that case. According to defendants, those
affidavits show that the Transit Unions advocated for retirees during collective
bargaining. Even if that circumstance is true, it does not alter the fact that retirees
are not part of the bargaining unit and generally are not represented by unions.
¶ 48 The Plan and Trust defendants also refer to another document submitted in the
“[b]riefing” of that case: a “Beneficiary Designation Form,” signed by all CTA
employees upon enrolling in the retirement plan. Under its terms, CTA employees
purportedly agree to the provisions of the plan and also to “any future duly
authorized Amendments made thereto hereafter.” That form is not before us, and
there is nothing in the record indicating that Williams signed it. 9
¶ 49 Though a union is under no obligation to represent the interests of retirees in
collective bargaining, it may choose to do so if the retirees agree to such
representation. See Rossetto v. Pabst Brewing Co., 128 F.3d 538, 540 (7th Cir.
8
Because there is a close parallel between the Act and the National Labor Relations Act, it is
appropriate to consider federal labor law decisions when they are consistent with the purposes of the
Act. See City of Burbank v. Illinois State Labor Relations Board, 128 Ill. 2d 335, 345 (1989).
9
In a similar vein, the amicus curiae brief filed by the Chicago Transit Authority Trade Union
Coalition states that “many” of its member unions permit retired members to vote in officer
elections and that “at least one” of the unions also permits retired members to vote on contracts. Yet,
the Coalition’s brief does not indicate whether the Transit Unions here allow retirees to ratify
contracts. We must assume that Williams and the Class I plaintiffs did not do so.
- 14 -
1997). Here, there is nothing in the complaint or its attachments to indicate that
Williams agreed to union representation in the negotiation and arbitration of the
2007 CBA. On this record, we must conclude that the Transit Unions did not
represent Williams or the other Class I retirees during the collective bargaining
process that resulted in the Benn award and the 2007 CBA. Consequently,
Williams has standing to pursue his claims against defendants on behalf of himself
and a class of employees who were hired before September 5, 2001, and retired
under the 2004 CBA.
¶ 50 Vesting of Retiree Health Care Benefits
¶ 51 We next consider Williams’s argument that the health care benefits provided to
CTA retirees in the 2004 CBA were vested rights that could not be diminished or
impaired through the collective bargaining process. The circuit court rejected this
argument, finding that the 2004 CBA’s provision of retiree health care benefits was
subject to modification when that agreement expired. Consequently, the circuit
court dismissed all of Williams’s claims on the ground that they failed to assert
claims on which relief could be granted (735 ILCS 5/2-615 (West 2012)).
¶ 52 The appellate court reversed that ruling and held that, under the language of the
2004 CBA, the retiree health care benefits were vested. 2014 IL App (1st) 123348,
¶¶ 99-122. In reaching this conclusion, the appellate court did not address the
applicability of the pension protection clause (id. ¶ 124), but applied a presumption
in favor of vesting that had been adopted by our appellate court and by reviewing
courts in other jurisdictions. Id. ¶¶ 99-104 (citing Marconi v. City of Joliet, 2013 IL
App (3d) 110865, ¶¶ 24-38; Roth v. City of Glendale, 2000 WI 100, ¶¶ 26-29, 33,
35-36, 237 Wis. 2d 173, 614 N.W.2d 467; International Union, United Automobile,
Aerospace, & Agricultural Implement Workers of America v. Yard-Man, Inc., 716
F.2d 1476, 1482 (6th Cir. 1983)). The reasoning employed by the appellate court
has since been overruled by the United States Supreme Court. See M&G Polymers
USA, LLC v. Tackett, 574 U.S. ___, ___, 135 S. Ct. 926, 935 (2015) (rejecting the
presumption in favor of vesting as inconsistent with ordinary principles of contract
law). Accordingly, we review the legal question of whether the circuit court erred
in dismissing the claims asserted by Williams, as representative of the Class I
plaintiffs, in light of the pension protection clause and without applying a
presumption in favor of vesting.
- 15 -
¶ 53 A motion to dismiss under section 2-615 challenges the legal sufficiency of a
complaint. Kanerva v. Weems, 2014 IL 115811, ¶ 33. In ruling on such a motion, a
court must accept as true all well-pleaded facts in the complaint, as well as any
reasonable inferences that may arise from them. Id. The essential question is
whether the allegations of the complaint, when construed in the light most
favorable to the plaintiff, are sufficient to establish a cause of action upon which
relief may be granted. Id. A cause of action should not be dismissed under section
2-615 unless it is clearly apparent from the pleadings that no set of facts can be
proven that would entitle the plaintiff to recover. Id. Our review of an order
granting a section 2-615 motion to dismiss is de novo. Id. Also, because resolution
of this issue requires us to determine the applicability and effect of the pension
protection clause and to interpret the relevant CBA provisions, our review is
de novo. Hawthorne v. Village of Olympia Fields, 204 Ill. 2d 243, 254-55 (2003);
Carr v. Gateway, Inc., 241 Ill. 2d 15, 20 (2011).
¶ 54 Article XIII, section 5, of the Illinois Constitution provides that “[m]embership
in any pension or retirement system of the State, any unit of local government ***
or any agency or instrumentality thereof, shall be an enforceable contractual
relationship, the benefits of which shall not be diminished or impaired.” Ill. Const.
1970, art. XIII, § 5. In Kanerva, we held, as a matter of first impression, that the
plain meaning of this clause demonstrates that it protects all of the benefits that
flow from the contractual relationship arising from membership in a public
retirement system. Kanerva, 2014 IL 115811, ¶ 38. We also held that, because
retiree health care benefits provided by statute to state employees are benefits of
membership in a public retirement system, they are constitutionally protected from
unilateral diminishment or impairment through legislative action. Id. ¶ 40. In In re
Pension Reform Litigation, 2015 IL 118585 (hereinafter referred to as Heaton), we
held that the State’s police power could not be used to justify legislation that
effected a unilateral reduction of State retirement annuity benefits. Id. ¶¶ 60-75. In
Jones v. Municipal Employees’ Annuity & Benefit Fund, 2016 IL 119618, this court
again held that public employees’ pension benefits are constitutionally protected
against diminishment through unilateral action by the General Assembly. Id. ¶¶ 29,
47. In doing so, the court recognized that, under ordinary contract principles, public
employee pension benefits may be modified where there has been a bargained-for
exchange and consideration. Id. ¶ 53. However, none of these cases specifically
addressed enforceability of retiree health care benefits provided to public
- 16 -
employees in a CBA or whether such benefits may be subject to modification
through the collective bargaining process.
¶ 55 The Plan and Trust defendants argue that the right to retiree health care benefits
provided in the 2004 CBA does not constitute a vested right, where the
unambiguous language of that agreement, which incorporates the Retirement Plan
Agreement, demonstrates that those benefits were subject to modification when the
term of that agreement expired. Defendants further contend that the pension
protection clause set forth in article XIII, section 5, does not provide any additional
protection beyond that specified in the 2004 CBA.
¶ 56 Plaintiffs respond that their 2004 contractual right to retiree health care benefits
is vested because it is constitutionally guaranteed by the pension protection clause.
According to plaintiffs, since the right to receive retirement system benefits is
vested in the individual, those benefits cannot be diminished or impaired without
the individual consent of the retirement system participant. In plaintiffs’ view,
constitutionally protected retiree benefits are vested and, therefore, are not subject
to collective waiver through the process of collective bargaining. Plaintiffs further
assert that the language of the Retirement Plan Agreement, which provides that the
retiree health care benefit “terminates when the retiree attains age 65,” indicates the
parties intended that this retirement benefit would survive the expiration of the
CBA.
¶ 57 We first consider whether the pension protection clause operates to
automatically vest the retirement benefits of public employees, regardless of the
terms of the contract that confers those rights. As this court has observed, prior to
the adoption of the 1970 constitution, Illinois adhered to the historical classification
of pension plans as either mandatory or optional. Kanerva, 2014 IL 115811, ¶ 45;
see also People ex rel. Sklodowski v. State, 182 Ill. 2d 220, 228 (1998). Under that
classification, the benefits of an optional plan were considered to be enforceable
contract rights, while the benefits of a mandatory plan were considered to be
gratuities that could be revoked at will. People ex rel. Sklodowski, 182 Ill. 2d at
228. The primary purpose of article XIII, section 5, was to eliminate any
uncertainty surrounding the payment of public pension benefits and to clarify that
state and local governments were obligated to provide pension benefits to their
employees. Id.; McNamee v. State, 173 Ill. 2d 433, 440 (1996); see also Buddell v.
Board of Trustees, State University Retirement System, 118 Ill. 2d 99, 102 (1987).
- 17 -
¶ 58 The pension protection clause effected a fundamental change in the
characterization of mandatory pension plans by ensuring that the benefits of such
plans were no longer viewed as gratuities that could be modified or eliminated at
the employer’s discretion. Buddell, 118 Ill. 2d at 102 (recognizing that section 5 of
article XIII “guarantees that all pension benefits will be determined under a
contractual theory”). With respect to the benefits of optional pension plans, which
historically had been regarded as contractual rights, section 5 of article XIII
provided protection that is essentially coextensive with that afforded all contracts
under article I, section 16, of the constitution. ILCS Ann., Ill. Const. 1970, art. XIII,
§ 5, Constitutional Commentary, at 665 (Smith-Hurd 2006); see also People ex rel.
Sklodowski v. State, 162 Ill. 2d 117, 147 (1994) (Freeman, J., concurring in part and
dissenting in part, joined by Harrison, J.) (citing Buddell, 118 Ill. 2d at 102). Thus,
the adoption of the pension protection clause put mandatory pension plans on par
with optional plans and guaranteed that public employees’ rights to retirement
benefits are enforceable. Buddell, 118 Ill. 2d at 102.
¶ 59 Moreover, this court has consistently held that the contractual relationship
protected by section 5 of article XIII is governed by the actual terms of the contract
or pension plan in effect at the time the employee becomes a member of the
retirement system. Heaton, 2015 IL 118585, ¶ 46; People ex rel. Sklodowski, 182
Ill. 2d at 229; McNamee, 173 Ill. 2d at 439; Di Falco v. Board of Trustees of the
Firemen’s Pension Fund of the Wood Dale Fire Protection District No. One, 122
Ill. 2d 22, 26 (1988); Kerner v. State Employees’ Retirement System, 72 Ill. 2d 507,
514 (1978); see also ILCS Ann., Ill. Const. 1970, art. XIII, § 5, Constitutional
Commentary, at 665 (Smith-Hurd 2006). While the pension protection clause
guarantees the vested rights provided in the contract that defines a participant’s
retirement system membership, it does not change the terms of that contract or the
essential nature of the rights it confers. Accordingly, the pension protection clause
does not transform a nonvested right to retirement benefits into one that is vested.
¶ 60 Indeed, this elemental fact is reflected in the debates at the constitutional
convention that preceded the adoption of article XIII, section 5. With regard to the
issue of vesting, Delegate Kinney, who sponsored the provision, stated that, if a
public employee begins employment under a pension statute that permits the
lowering of benefits in the future, that contingency would be constitutionally
permissible because it was a condition of the contract that the employee accepted. 4
Record of Proceedings, Sixth Illinois Constitutional Convention 2931 (statements
of Delegate Kinney).
- 18 -
¶ 61 This court approved and adopted that analysis more than 30 years ago. In
Kerner, we held that, where a public employee becomes a member of a retirement
system under a statute that includes a provision which may operate to deny him
benefits in the future, that provision does not become an unconstitutional
impairment of his retirement benefits because he agreed to it as a condition of his
membership in the system. Kerner, 72 Ill. 2d at 514; see also Kraus v. Board of
Trustees of the Police Pension Fund, 72 Ill. App. 3d 833, 849-50 (1979).
¶ 62 The same conclusion necessarily holds true where an employee’s membership
in a public retirement system is governed by a CBA. If the underlying contract
provides that certain retirement benefits may be modified in the future, then that is
the contract protected by article XIII, section 5. Nothing in the pension protection
clause requires or permits a court to rewrite the terms of such an agreement. See
Kerner, 72 Ill. 2d at 514.
¶ 63 In arguing that section 5 of article XIII precludes a modification of the retiree
health care benefits granted by the 2004 CBA, Williams refers to what he has
termed the “vesting rules” of the pension protection clause, and he cites to our
recent decision in Kanerva and to earlier cases holding that pension rights may not
be diminished or impaired by statutory amendment. See Kanerva, 2014 IL 115811,
¶¶ 48, 57; Buddell, 118 Ill. 2d at 104-05, 106; Felt v. Board of Trustees of the
Judges Retirement System, 107 Ill. 2d 158, 162-63 (1985). There are two
fundamental flaws in this argument. First, as explained above, section 5 of article
XIII does not establish any “vesting rules.” Rather, it simply protects the actual
contract that governs the retirement system membership.
¶ 64 Second, the cases cited by Williams were decided under an entirely different
framework from that presented here. Those cases addressed the validity of changes
to portions of the Pension Code, which did not include any provision allowing for
the modification of benefits and also did not specify an expiration or termination
date for the benefits conferred. Accordingly, our prior cases held only that
retirement benefits that are defined by statute may not be unilaterally modified by
legislative action. That precedent does not control here because it did not consider
the validity of a change in benefits that was achieved through the collective
bargaining process or where the underlying contract permitted the modification of
benefits. This distinction is of critical importance, given the divergent means by
which public retirement benefits are determined and conferred.
- 19 -
¶ 65 For those public servants whose employment is not governed by a contract, the
agreement that controls their membership in a retirement system consists of the
relevant provisions in the Pension Code that define the rights and obligations that
arise from that membership. See People ex rel. Sklodowski, 182 Ill. 2d at 229;
Buddell, 118 Ill. 2d at 104-05; Felt, 107 Ill. 2d at 162-63. In that circumstance, the
General Assembly determines what retirement benefits will be granted, and the
employees receive the benefits that are conferred by that legislative action. Because
the retirement benefits of these employees are not governed by a separate contract,
and because Illinois law generally presumes that statutes do not create private
contractual rights (People ex rel. Sklodowski, 182 Ill. 2d at 231-32; Fumarolo v.
Chicago Board of Education, 142 Ill. 2d 54, 105 (1990)), the pension protection
clause guarantees the contractual relationship and the benefits that flow from their
retirement system membership. This is true whether the statute allows for
modification or not.
¶ 66 For those public servants whose employment is governed by a contract, such as
a CBA, the pension protection clause guarantees the retirement benefits that are
provided in their employment contract. The terms of such an agreement are subject
to negotiation between the public employer and the designated collective
bargaining representative and are implemented by the applicable provisions
codifying the agreement in the Pension Code. If the terms of the agreement provide
for vested retirement benefits, those benefits are constitutionally protected by
section 5 of article XIII. However, as explained above, if the underlying contract
allows for the modification of certain retirement benefits, the pension protection
clause does not preclude modification or alter the essential nature of the rights
granted under the contract. Therefore, neither the language of the pension
protection clause nor our prior case law presents an obstacle to a contractual
provision that permits subsequent modification of public retirement benefits.
¶ 67 Williams further contends that the union did not have authority to agree to a
diminishment of retiree health care benefits because a union cannot agree to a CBA
provision that operates as a waiver of a constitutionally protected right. This
contention is without merit. Constitutional rights can be waived or restricted by a
union in a CBA. See Cook County College Teachers Union, Local 1600 v. Board of
Trustees of Community College District No. 508, County of Cook, 134 Ill. App. 3d
489, 492 (1985) (holding that a provision in a CBA waived public employees’
constitutional rights to privacy regarding information related to outside
employment); Bolden v. Southeastern Pennsylvania Transportation Authority, 953
- 20 -
F.2d 807, 828 (3d Cir. 1991) (holding that a union is authorized to consent to drug
testing of public employees, thereby restricting the employees’ fourth amendment
rights); In re Briggs, 635 N.Y.S.2d 687, 688 (N.Y. App. Div. 1995) (same); see also
American Postal Workers Union, Columbus Area Local v. United States Postal
Service, 871 F.2d 556, 560 (6th Cir. 1989) (recognizing that a union may consent to
searches of employee lockers, as provided in a CBA).
¶ 68 In addition, a union can waive statutory and economic rights on behalf of its
members. See Ehlers v. Jackson County Sheriff’s Merit Comm’n, 183 Ill. 2d 83,
93-94 (1998) (holding that a union can waive statutory rights under Illinois Public
Labor Relations Act and that the court must enforce the CBA as written); see also
Metropolitan Edison Co. v. National Labor Relations Board, 460 U.S. 693, 705-06
(1983) (recognizing that, because such waivers are premised on the duty of fair
representation, a union may waive a member’s statutory and economic rights, as
long as the union does not surrender rights that impair the employees’ choice of
their bargaining representative). Consequently, the mere fact that retirement
benefits fall within the scope of section 5 of article XIII does not mean that they are
categorically insulated from modification in accordance with the terms of a CBA
that has been approved by the union.
¶ 69 Williams also asserts that the retiree health care benefits at issue are beyond the
scope of the collective bargaining process because they constitute individual
statutory rights. According to Williams, the right to retiree health care benefits
cannot be restricted by the union because they are “different in kind” from other
terms and conditions in the CBA. In Williams’s view, those benefits could not be
modified or amended without the individual consent of each retirement system
participant. We reject this assertion because it is inconsistent with the overall
purpose of collective bargaining.
¶ 70 Section 2 of the Act states that “[i]t is the public policy of the State of Illinois to
grant public employees full freedom of association, self-organization, and
designation of representatives of their own choosing for the purpose of negotiating
wages, hours and other conditions of employment or other mutual aid or
protection.” 5 ILCS 315/2 (West 2014). Thus, one of the primary goals of
collective bargaining is to enable employees to consolidate their economic strength
by banding together in a union to improve conditions of their employment.
Stahulak, 184 Ill. 2d at 184.
- 21 -
¶ 71 As this court has recognized, “ ‘[a] union is allowed a great deal of flexibility in
serving its bargaining unit during contract negotiations. It makes concessions and
accepts advantages it believes are in the best interest of the employees it represents.
[Citations.] This flexibility includes the right of the union to waive some employee
rights, even the employee’s individual statutory rights.’ ” Ehlers, 183 Ill. 2d at 93
(quoting Prudential Insurance Co. of America v. National Labor Relations Board,
661 F.2d 398, 400 (5th Cir. 1981)); see also Espinoza v. Cargill Meat Solutions
Corp., 622 F.3d 432, 442 (5th Cir. 2010). Yet, a labor union’s authority to waive
individual statutory rights is balanced by the fact that the law imposes on the union
a duty of fair representation. 5 ILCS 315/7, 10(a) (West 2014).
¶ 72 The ultimate purpose of a CBA is to express the common understanding of the
terms and conditions of employment. See Kulins v. Malco, A Microdot Co., 121 Ill.
App. 3d 520, 525 (1984) (citing Owens v. Press Publishing Co., 120 A.2d 442 (N.J.
1956)). As such, it is the embodiment of a reciprocal negotiation between the
employer and the labor union, with various strengths on each side. The contracting
parties pursue negotiations as a means of achieving a successful result in their
common endeavor to adapt their collective bargaining relationship to the demands
of their circumstances. Therefore, it is essential that the collective bargaining
procedure function as a means of allowing the negotiating parties to engage in the
give-and-take process that ensures disputed issues will be resolved through
peaceful and orderly procedures that protect the rights of public employees and
employers. See 5 ILCS 315/2 (West 2014). Moreover, it has been recognized that,
when a collective bargaining agent negotiates on behalf of a collective bargaining
unit, some members may be unhappy with the result. See Vaca v. Sipes, 386 U.S.
171, 182 (1967). Yet, that circumstance does not alter the fact that the union has the
authority, and is obligated, to negotiate for the entire bargaining unit. Id. The fact
that some persons in the bargaining unit might be dissatisfied, does not mean that
the terms of the contract are invalid. Antinore v. State, 371 N.Y.S.2d 213, 217 (N.Y.
App. Div. 1975).
¶ 73 A labor union’s ability to negotiate freely to advance the interests of the
bargaining unit is essential to the collective bargaining process. To say that a labor
union cannot agree that certain benefits are subject to modification would be to say
that unions cannot perform the very functions for which they were originally
created. Forcing a public employer and a labor union to obtain the individual
consent of each unit member would unduly burden the process of negotiation and
arbitration, thereby undermining the purpose of collective bargaining and the goals
- 22 -
of the Act. Accordingly, we reject Williams’s contention that, because the right to
retiree health care benefits constitutes an individual right of the employee, a labor
union cannot agree to modify that right. 10
¶ 74 In addition, Williams’s reliance on federal cases holding that a labor union is
precluded from forfeiting employees’ individual statutory and constitutional rights
is misplaced. Williams has cited to cases involving a labor union’s attempt to waive
the right to seek relief for violation of the Age Discrimination in Employment Act
of 1967 (29 U.S.C. § 621 et seq.) (ADEA) and Title VII. See 14 Penn Plaza LLC v.
Pyett, 556 U.S. 247, 273 (2009); Equal Employment Opportunity Comm’n v.
Indiana Bell Telephone Co., 256 F.3d 516, 522 (7th Cir. 2001). However, the
substance of the holdings in these cases is premised on the determination that a
prospective waiver of employment discrimination claims, even by the individual
employee, is invalid as against public policy. See 14 Penn Plaza LLC, 556 U.S. at
259, 265 (citing Alexander v. Gardner-Denver Co., 415 U.S. 36, 51 (1974)
(holding that “ ‘[t]here can be no prospective waiver of an employee’s rights under
Title VII’ ” (emphasis omitted))); see also Barrentine v. Arkansas-Best Freight
System, Inc., 450 U.S. 728, 740-41 (1981) (holding that the right to seek relief for a
violation of the Fair Labor Standards Act cannot be waived because it would negate
the purposes of the statute).
¶ 75 This rule applies in circumstances where the statutory right to fair treatment in
employment is “separate and distinct from the rights created through the
‘majoritarian processes’ of collective bargaining.” Barrentine, 450 U.S. at 737-38
(quoting Gardner-Denver Co., 415 U.S. at 51). Here, the right to retiree health care
is not separate and distinct from the rights created by collective bargaining. To the
contrary, that right exists only because it was negotiated through the process of
collective bargaining. The right to receive health care benefits in retirement is
entirely unrelated to the right to be free from discrimination and unfair treatment in
employment. Moreover, nothing in Illinois’s public policy precludes a union from
agreeing to the subsequent modification of certain retirement benefits while
negotiating the terms of a CBA. As a consequence, the aforementioned cases have
no application here. Based on the analysis set forth above, we conclude that there is
10
Moreover, it must be remembered that union members who disagree with the negotiating
choices made by their collective bargaining representatives are not without recourse. Those
members who object to the actions taken by union negotiators on their behalf can either vote to
designate a different bargaining representative or pursue a claim for breach of the duty of fair
representation. See 5 ILCS 315/10(b)(1) (West 2014). As noted above, no such claim has been made
here.
- 23 -
no legal impediment that would prevent a labor union from agreeing that certain
retirement benefits are not vested and, therefore, may be modified during the
collective bargaining process.
¶ 76 We next consider the terms of the 2004 CBA to ascertain the intent of the CTA
and the Transit Unions with regard to the vesting of retiree health care benefits
provided to Williams and the other Class I plaintiffs who retired under that
agreement. Whether the parties to a CBA intended to vest postretirement medical
benefits is essentially a question of contract. 51A C.J.S. Labor Relations § 385
(2010). As is true with other contracts, the terms of a CBA are interpreted
according to traditional rules of contractual interpretation. Martin v. City of
O’Fallon, 283 Ill. App. 3d 830, 834 (1996); Board of Education of Du Page High
School District No. 88 v. Illinois Educational Labor Relations Board, 246 Ill. App.
3d 967, 975 (1992); Board of Governors of State Colleges & Universities v. Illinois
Educational Labor Relations Board, 170 Ill. App. 3d 463, 470 (1988); see also 20
Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 55:14,
at 57; § 55:27, at 114 (4th ed. 2001); 51A C.J.S. Labor Relations §§ 363, 385
(2010).
¶ 77 In construing a contract, the primary goal is to ascertain and give effect to the
intention of the parties at the time the contract was formed. In re Doyle, 144 Ill. 2d
451, 468 (1991); Lenzi v. Morkin, 103 Ill. 2d 290, 293 (1984); Cedar Park
Cemetery Ass’n v. Village of Calumet Park, 398 Ill. 324, 335 (1947). Where no
ambiguity exists, the intent of the parties at the time the contract was entered into
must be ascertained from the language of the contract itself. In re Doyle, 144 Ill. 2d
at 468; Lenzi, 103 Ill. 2d at 293; 20 Williston & Lord, supra, § 55:20, at 87;
§ 55:27, at 114. A contract must be construed as a whole, viewing particular terms
or provisions in the context of the entire agreement. Thompson v. Gordon, 241 Ill.
2d 428, 441 (2011); Gallagher v. Lenart, 226 Ill. 2d 208, 233 (2007); 20 Williston
& Lord, supra, § 55:20, at 87; § 55:27, at 114. Therefore, the parties’ intent will not
be ascertained by viewing a clause or provision in isolation. Thompson, 241 Ill. 2d
at 441; Gallagher, 226 Ill. 2d at 233.
¶ 78 It is generally recognized that contractual obligations imposed by a CBA cease
upon the termination of that agreement. Litton Financial Printing Division, A
Division of Litton Business Systems, Inc. v. National Labor Relations Board, 501
U.S. 190, 207 (1991) (Litton) (recognizing this principle in deciding the
applicability of an arbitration clause in a CBA); Jenkins v. South Bend Community
- 24 -
School Corp., 982 N.E.2d 343, 347 (Ind. Ct. App. 2013) (same); Poole, 831 A.2d at
220, 223 (acknowledging this principle in deciding whether retiree health care
benefits were vested under a CBA); see also 20 Williston & Lord, supra, § 55:27, at
114. Any exceptions to this rule are to be decided based on contract interpretation.
Litton, 501 U.S. at 207; Poole, 831 A.2d at 220; 20 Williston & Lord, supra,
§ 55:27, at 114.
¶ 79 Whether particular benefits survive the termination of a CBA depends on the
intent of the parties. 20 Williston & Lord, supra, § 55:27, at 114. Contractual rights
that have accrued or vested under a CBA will survive the termination of the
contract. Litton, 501 U.S. at 207; Poole, 831 A.2d at 220; 20 Williston & Lord,
supra, § 55:27, at 116; 51A C.J.S. Labor Relations § 384 (2010).
¶ 80 Before examining the specific provisions of the CBA at issue here, it is
appropriate to observe that the term “vested” embraces several different
connotations, depending on the context in which it is being considered. It can refer
to contract rights that are not subject to unilateral modification or elimination
during the term of the agreement. See Doyle v. Holy Cross Hospital, 186 Ill. 2d
104, 112 (1999); York v. Central Illinois Mutual Relief Ass’n, 340 Ill. 595, 602
(1930). Because one party to a contract cannot by its own acts release or alter its
obligation (York, 340 Ill. at 602), this concept generally applies to all contractual
rights, unless exceptions are set forth in the agreement. This aspect of vesting
focuses on the mutuality of the parties’ obligations and requires that the parties to
the agreement consent to, and provide consideration for, any change in terms while
the contract is in effect. Holy Cross Hospital, 186 Ill. 2d at 112.
¶ 81 The term “vested” also can refer to a right that expressly survives the expiration
of the contract that grants it. See Litton, 501 U.S. at 206. This concept of vesting
applies where the parties to the agreement have manifested their intent that some
rights will continue to be enforceable after the contract term has expired. Id. at 207.
This concept of vesting is applicable where the agreement includes explicit
language providing that certain rights or benefits extend beyond the termination
date of that agreement. Id. at 207-08.
¶ 82 A third connotation of “vested” refers to a right that is consummated or
unconditional, such as where all of the requisite specifications for present or future
enjoyment of the right have been achieved. See Black’s Law Dictionary 1699 (9th
ed. 2009). In the employment context, this connotation is of particular significance
- 25 -
when the right at issue has been “accrued” or “earned” by an employee through
continued service or satisfaction of some other eligibility requirement. Litton,
supra at 206; R.J. Corman Derailment Services, LLC v. International Union of
Operating Engineers, Local Union 150, 422 F.3d 522, 526 (7th Cir. 2005). Such
rights are said to be “vested” when the employee has fulfilled all of the necessary
qualifications and obligations for enjoyment of the right. See Lawrence v. Board of
Education of School District 189, 152 Ill. App. 3d 187, 197-98 (1987) (quoting
Kulins, 121 Ill. App. 3d at 525-27). This notion of vesting focuses on the prior
employment activities of the employee. Id. at 199. As such, it does not necessarily
preclude subsequent changes to the contract provision that granted the benefit, but
only prevents the denial of a contractual benefit once it has accrued. See Kulins,
121 Ill. App. 3d at 527 (recognizing that, after the contract term providing for
severance pay had been modified, employees were not entitled to accrue that
benefit in the future); see also Lawrence, 152 Ill. App. 3d at 198 (quoting Kulins,
121 Ill. App. 3d at 527). ). A right that has accrued under a contract remains
enforceable after the termination of the contract. Litton, 501 U.S. at 207. The
relevant question here is whether Williams’s right to the retiree health care benefits
provided in the 2004 CBA is enforceable even though that agreement has expired.
As explained above, we look to the language of the contract to ascertain the parties’
intent with regard to the vesting of retiree health care benefits.
¶ 83 Section 20.12(a) of the Retirement Plan Agreement provides as follows:
“(a) Effective December 1, 1989, a sum will be paid in an amount sufficient
to provide insurance coverage for all retirees under the Group Hospital Surgical
Major Medical Plan or the Health Maintenance Organization premium, but said
sum shall not exceed the premium cost to the [Retirement] Plan effective for
such coverage for a retiree on December 31, 2003. This benefit terminates
when the retiree attains age 65.”
Williams argues that the final sentence in this section is a durational provision,
which indicates that the right to receive the health care benefits extends beyond the
term of the 2004 CBA. We agree.
¶ 84 The statement that the “benefit terminates when the retiree attains age 65”
reflects that the right to the health care benefit in subsection 20.12(a) is
extinguished only when the age of the retiree exceeds the specified termination
date. The language of this provision demonstrates that the enforceability of the
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right to health care benefits after retirement is contingent only upon the age of the
retiree and is not limited by the durational term of the CBA. This conclusion is
further supported by the fact that section 20.12 states that “[u]pon the attainment of
age 65 by a retiree who participates in the complement to Medicare Plan, the Plan
shall pay a sum sufficient to provide coverage under the Complement to Medicare
Plan; provided, however, that such sum shall not exceed the cost to the Plan
effective for such coverage on December 31, 2003.” When considered together, the
language of these two provisions reflects the intent to provide health care benefits
to former employees during their retirement and to specify the type of benefit that
will be provided based on the age of each retiree.
¶ 85 The Plan and Trust defendants argue that because the final sentence of section
20.12(a) expresses an eligibility requirement, it does not reflect the parties’ intent
with regard to vesting. This argument fails to take into account the principle that a
contract right becomes vested when the employee has fulfilled all of the necessary
qualifications and obligations for enjoyment of the right. Lawrence, 152 Ill. App.
3d at 197-98 (quoting Kulins, 121 Ill. App. 3d at 525-27); see also Navlet v. Port of
Seattle, 194 P.3d 221, 237 (Wash. 2008) (en banc). Even accepting the Plan and
Trust defendants’ premise, the termination date constitutes a qualification for a
benefit to be provided during the former employee’s retirement, which the parties
certainly recognized could extend beyond the expiration of the 2004 CBA,
depending on the age of the individual retiree. Where a retiree is under age 65 and
has fulfilled the other prerequisites necessary to establish eligibility, the right to the
retiree health care benefit is fully accrued. Navlet, 194 P.3d at 235 (recognizing that
a vested right “fully accrues” once the recipient becomes eligible to receive the
benefit). Where all of the requisite specifications for the present or future
enjoyment of a right have been achieved, the right is considered to be vested.
Black’s Law Dictionary 1699 (9th ed. 2009).
¶ 86 The Plan and Trust defendants further argue that other provisions in the 2004
CBA indicate that retiree health care benefits do not survive the expiration of that
agreement. In particular, article 18 of the 2004 WWCA provides that it
incorporates the Retirement Plan Agreement “in all respects and for all purposes,
including future proposals for revision in the Plan and in the negotiation or
arbitration of proposed revisions.” Section 23.1 of the Retirement Plan Agreement
complements that provision and states that “[t]his Agreement can be changed only
in accordance with the provisions of the Wage[s] and Working Conditions
Agreement.”
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¶ 87 Article 19.2 of the 2004 WWCA states that “[e]ither of the parties hereto shall
have the right to open this Agreement for modifications and or additions to be
effective January 1, 2007, or any anniversary date thereafter by written notice to the
other party sixty (60) days prior to such anniversary date.” This section further
provides that “[a]ll conditions of this Agreement are to continue in full force and
effect until changed, revised or amended from time to time by agreement of the
parties or by the decision of the Board of Arbitration.” The Plan and Trust
defendants point out that article 19.2 of the 2004 CBA clearly contemplates that the
terms of the 2004 CBA may be modified by agreement or through arbitration after
that agreement has expired. According to the Plan and Trust defendants, this
provision indicates that retiree health care benefits do not vest. Yet, this generally
worded provision cannot be interpreted to affect rights that have become fully
accrued prior to the contract’s expiration. See Navlet, 194 P.3d at 237 (holding that
a reservation of rights clause cannot abridge a vested right, which becomes
irrevocable when the employee satisfies the eligibility conditions).
¶ 88 Thus, although retiree health care benefits could be changed by agreement upon
expiration of the 2004 CBA, Williams retired before that contract expired. In doing
so, he satisfied the benefit qualification set forth in section 20.12 and established
his eligibility to enforce the right it conferred. There is no indication in the record
that he agreed to the modification of his health care benefits, and he was not a
member of the bargaining unit during the 2007 arbitration. Consequently,
Williams’s contractual right to retiree health care benefits under the 2004 CBA was
fully accrued and was not modified by agreement or the 2007 arbitration.
¶ 89 For the foregoing reasons, we conclude that the provision of health care
benefits to Williams and the other Class I plaintiffs who retired under the 2004
CBA constituted an enforceable, vested right that survived the expiration of that
agreement. Accordingly, the circuit court erred in dismissing Williams’s claim for
breach of contract and his claim for violation of the pension protection clause in
article XIII, section 5, of the Illinois Constitution. Ill. Const. 1970, art. XIII, § 5.
¶ 90 Promissory Estoppel Against the CTA
¶ 91 Lastly, we consider whether Williams can pursue a claim for promissory
estoppel against the CTA. Promissory estoppel is a common-law doctrine adopted
to permit the enforcement of promises that are unsupported by consideration, such
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as gratuitous promises, charitable subscriptions, and certain intrafamily promises.
See Holy Cross Hospital, 186 Ill. 2d at 119-20 (Freeman, C.J., concurring in part
and dissenting in part, joined by McMorrow, J.) (citing John D. Calamari & Joseph
M. Perillo, The Law of Contracts §§ 6-1 through 6-3 (3d ed. 1987)); 4 Samuel
Williston & Richard A. Lord, A Treatise on the Law of Contracts § 8:4, at 76, 79
(4th ed. 2008). Promissory estoppel is employed to form a contract when the
promisee has detrimentally relied on the promissor’s gratuitous promise to do or
refrain from doing something in the future. See 4 Williston & Lord, supra, § 8:4, at
47; Restatement (Second) of Contracts § 90, at 242 (1981).
¶ 92 Application of promissory estoppel is proper only in the absence of an express
agreement. Prentice v. UDC Advisory Services, Inc., 271 Ill. App. 3d 505, 512-13
(1995) (citing Wagner Excello Foods, Inc. v. Fearn International, Inc., 235 Ill.
App. 3d 224, 237 (1992)); see also Holy Cross Hospital, 186 Ill. 2d at 120-21
(Freeman, C.J., concurring in part and dissenting in part, joined by McMorrow, J.).
This rule applies because promissory estoppel is intended as a means to enforce
gratuitous promises and is not designed to provide a party to a negotiated bargain a
“second bite at the apple” if it fails to prove breach of contract. (Internal quotation
marks omitted.) Prentice, 271 Ill. App. 3d at 512 (quoting Wagner Excello Foods,
Inc., 235 Ill. App. 3d at 237).
¶ 93 The doctrine operates to impute contractual stature based upon a promise that is
not supported by consideration and to provide a remedy to the party who
detrimentally relies on that promise. See Holy Cross Hospital, 186 Ill. 2d at 120
(Freeman, C.J., concurring in part and dissenting in part, joined by McMorrow, J.)
(citing 2A Arthur L. Corbin, Corbin on Contracts § 196A, at 55-56 (Supp. 1991)).
Under Illinois law, a promissory estoppel claim will succeed where the other
elements of a contract exist (offer, acceptance, and mutual assent), but
consideration is lacking. See Bank of Marion v. Robert “Chick” Fritz, Inc., 57 Ill.
2d 120, 124 (1974); see also Dumas v. Infinity Broadcasting Corp., 416 F.3d 671,
677 (7th Cir. 2005) (citing Bank of Marion, 57 Ill. 2d at 124). Thus, the doctrine is
recognized as creating a contract implied in fact, which imposes a contractual duty
based on a promissory expression by the promissor that shows an intention to be
bound. 12 Ill. L. and Prac. Contracts § 10 (2008); see also Arthur Rubloff & Co. v.
Drovers National Bank of Chicago, 80 Ill. App. 3d 867, 873 (1980) (citing Arthur
L. Corbin, Corbin on Contracts §§ 17, 18, at 38-43 (1963)). A contract implied in
fact is a “true contract,” under which the parties set the terms and establish the
bounds of their liability. 12 Ill. L. and Prac. Contracts § 10 (2008) (distinguishing
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contracts implied in fact from contracts implied in law, which are also referred to as
quasi-contracts or constructive contracts).
¶ 94 Although promissory estoppel is distinct from equitable estoppel and applies in
different circumstances, 11 similar considerations apply when these doctrines are
asserted against public bodies. See Chicago Limousine Service, Inc. v. City of
Chicago, 335 Ill. App. 3d 489, 499 (2002); see also Biddle v. BAA Indianapolis,
LLC, 860 N.E.2d 570, 581 (Ind. 2007); Hortman v. City of Miamisburg, 852 N.E.2d
716, 720-21 (Ohio 2006). Illinois courts have consistently held that the doctrine of
equitable estoppel will not be applied to governmental entities absent extraordinary
and compelling circumstances. See Patrick Engineering, Inc. v. City of Naperville,
2012 IL 113148, ¶ 35; Hickey v. Illinois Central R.R. Co., 35 Ill. 2d 427, 447-49
(1966); Lindahl v. City of Des Plaines, 210 Ill. App. 3d 281, 295-96 (1991). Yet,
even assuming that the doctrine of promissory estoppel is applicable in this case,
the claim asserted by Williams against the CTA necessarily fails.
¶ 95 To establish a claim based on promissory estoppel, the plaintiff must allege and
prove that (1) defendant made an unambiguous promise to plaintiff, (2) plaintiff
relied on such promise, (3) plaintiff’s reliance was expected and foreseeable by
defendant, and (4) plaintiff relied on the promise to its detriment. Newton Tractor
Sales, Inc., 233 Ill. 2d at 51; Quake Construction, Inc. v. American Airlines, Inc.,
141 Ill. 2d 281, 309-10 (1990).
¶ 96 Williams’s allegations of promissory estoppel against the CTA are set forth in
count III of the complaint. 12 In that count, Williams, as representative of the Class
I plaintiffs, alleged that the CTA “made numerous unambiguous promises to Class
I Members,” including (1) that the class members would receive fully-paid retiree
health care benefits, (2) those benefits would be identical to those enjoyed by
current CTA employees, (3) that the class members’ retiree health care benefits
would be changed only by a method prescribed in a CBA, and (4) that the class
11
Promissory estoppel is distinguished from equitable estoppel in that the former allows a party
to pursue a claim for damages based on breach of a gratuitous promise of future conduct, and the
latter is used as a defense to preclude a party from denying a representation of past or existing fact.
See Newton Tractor Sales, Inc. v. Kubota Tractor Corp., 233 Ill. 2d 46, 55-56 (2009); 28 Am. Jur.
2d Estoppel and Waiver § 34 (2011); 4 Williston & Lord, supra, § 8:3, at 29-33, 42-43; § 8:4, at 44,
47, 57-63.
12
Count III was brought against the CTA and the Retirement Plan. However, the appellate court
below affirmed the dismissal of the promissory estoppel claim against the Retirement Plan, and
Williams does not challenge that ruling here.
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members’ retiree health care benefits would not be changed without consideration
received by the class members in exchange. Williams further alleged that the
putative class members relied on these promises by accepting employment at the
CTA, working at the CTA, and retiring from the CTA. Williams also asserted that
the class members’ reliance on these promises was expected and foreseeable by the
CTA and was to the class members’ detriment.
¶ 97 In support of his promissory estoppel claim, Williams does not point to any
specific statement—either written or verbal—in which the CTA promised to
continue to provide health care benefits to retirees. Rather, the factual support for
Williams’s claim is premised on the assertion that “the CTA began providing
fully-paid retiree health care benefits in 1980, and continued to provide those
benefits until 2009.” Williams also alleged that “[f]rom 1980 to July 2009, the CTA
acted consistent with the well-established understanding that it had an obligation
under the collective bargaining agreements to pay for and provide retiree health
care benefits.” These allegations are insufficient, as a matter of law, to support a
claim for promissory estoppel against the CTA.
¶ 98 The CTA is a municipal corporation that acts through ordinances and
resolutions passed by its governing and administrative body, the Chicago Transit
Board. 70 ILCS 3605/3, 19, 23 (West 2002); Schivarelli v. Chicago Transit
Authority, 355 Ill. App. 3d 93, 100 (2005). A municipal corporation cannot be held
liable under a contract implied in fact where there has been a failure to comply with
a statute or ordinance prescribing the method by which an officer or agent can bind
such corporation by contract. South Suburban Safeway Lines, Inc. v. Regional
Transportation Authority, 166 Ill. App. 3d 361, 366 (1988) (citing Roemheld v. City
of Chicago, 231 Ill. 467 (1907)). Stated differently, a municipal corporation cannot
be obligated under a contract implied in fact that is ultra vires, contrary to statutes,
or contrary to public policy. Schivarelli, 355 Ill. App. 3d at 101 (citing Lindahl, 210
Ill. App. 3d at 290, quoting South Suburban Safeway Lines, Inc., 166 Ill. App. 3d at
366). Consequently, a CTA employee cannot act in such a manner as to form a
contract without the approval of the Chicago Transit Board. Schivarelli, 355 Ill.
App. 3d at 101; see also Chicago Patrolmen’s Ass’n v. City of Chicago, 56 Ill. 2d
503, 507 (1974) (rejecting the plaintiffs’ assertion of a quasi-contractual obligation
and holding that reliance on the statements of an unauthorized official was
unwarranted, where that official lacked the power to bind the municipality and
where the party seeking to enforce the promise was charged with notice of the
statutory limitation on the official’s power).
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¶ 99 Here, the CTA can only be contractually bound by official action taken by the
Chicago Transit Board. Count III of the complaint does not include any allegations
indicating that the Chicago Transit Board made unambiguous promises to continue
providing retiree health care benefits in accordance with the terms of the 2004 CBA
after it expired.
¶ 100 Moreover, the Pension Code and the Metropolitan Transit Authority Act
authorize the CTA to collectively bargain over the terms, conditions, and
provisions of any pension or retirement system. 40 ILCS 5/22-101 (West 2002); 70
ILCS 3605/28a(a), (b)(2) (West 2002). The Pension Code also provides that the
terms of such a retirement system may be amended or modified by agreement with
the labor organization that is the designated representative of the employees for
purposes of collective bargaining. 40 ILCS 5/22-101 (West 2002). There is no
dispute that the CTA did engage in collective bargaining over retiree health care
benefits, and the 2004 and 2007 CBAs resulted from that bargaining process.
¶ 101 In essence, Williams’s promissory estoppel claim seeks to enforce a contractual
obligation (implied in fact) that goes beyond the terms of the 2004 CBA. Because
the CTA engaged in collective bargaining over retiree health care benefits, it is
precluded under Illinois law from making “outside” promises of benefits that
exceed those set forth in the relevant CBAs. See Board of Education of
Sesser-Valier Community Unit School District No. 196 v. Illinois Educational
Labor Relations Board, 250 Ill. App. 3d 878, 883-84 (1993). Therefore, any
“promises” allegedly made to Williams and the Class I plaintiffs before the 2004
CBA expired would have constituted direct dealing in violation of the Illinois
Public Labor Relations Act (5 ILCS 315/6, 7, 10(a)(4) (West 2002)). As to
“promises” allegedly made after the 2004 CBA expired, the complaint does not
allege any specific, unambiguous promises by the Chicago Transit Board, and this
deficiency cannot be cured by amendment in light of the fact that the CTA accepted
the terms of the Benn award and signed the Memorandum of Understanding.
Because Williams has not, and cannot, adequately allege a claim for promissory
estoppel against the CTA, count III was properly dismissed with prejudice.
¶ 102 CONCLUSION
¶ 103 In sum, we hold that Matthews, Sams, Boyne, and Brown lack standing to
challenge the enforceability of the 2007 CBA, but Williams has standing to
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challenge its enforceability with regard to himself and the other Class I plaintiffs
who retired before its effective date. We further hold that Williams failed to allege a
claim for promissory estoppel against the CTA. Accordingly, dismissal of that
claim was proper. However, Williams sufficiently stated a cause of action for
breach of contract and for violation of the pension protection clause set forth in
article XIII, section 5, of the Illinois Constitution against the Plan and Trust
defendants. As a consequence, the circuit court erred in dismissing those claims.
¶ 104 For the foregoing reasons, we affirm that portion of the appellate court’s
judgment which upheld the dismissal of all claims by the Class II plaintiffs. We
also affirm that portion of the judgment holding that the Class I plaintiffs stated a
cause of action for breach of contract against the Plan and Trust defendants. We
further affirm that portion of the judgment which held that the Class I plaintiffs
stated a cause of action for declaratory judgment against the Plan and Trust
defendants. We also affirm that portion of the judgment which reversed the
dismissal of the Class I plaintiffs’ claim for violation of article XIII, section 5, of
the Illinois Constitution against the Plan and Trust defendants. Finally, we reverse
that portion of the appellate court’s judgment holding that the Class I plaintiffs
stated a claim for promissory estoppel against the CTA. Accordingly, we remand
the cause to the appellate court, with directions to remand to the circuit court for
further proceedings.
¶ 105 Appellate court judgment affirmed in part and reversed in part.
¶ 106 Cause remanded.
¶ 107 JUSTICE THEIS, specially concurring:
¶ 108 Today, Illinois faces unprecedented fiscal challenges, the most important of
which may be to ensure a future for chronically underfunded state and municipal
pension systems. Officials have attempted solutions to this growing problem, but
those solutions have been attacked in court. What should be matters for the political
branches have become matters for the judiciary that, with increasing frequency, end
with us. In 2014, we held that subsidized health care provided to state employees
was a benefit of membership in a state retirement system protected by article XIII,
section 5, of the Illinois Constitution of 1970. Kanerva v. Weems, 2014 IL 115811,
¶ 40. In 2015, we held that pension benefits provided to state employees are
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covered by the so-called pension protection clause when those employees first
begin employment, and those benefits cannot be later unilaterally diminished or
eliminated by legislative fiat. In re Pension Reform Litigation, 2015 IL 118585,
¶ 46 n.12 (Heaton). In March, we intimated that pension benefits may be modified
through collective bargaining. Jones v. Municipal Employees’ Annuity & Benefit
Fund, 2016 IL 119618, ¶ 55. In my view, those cases decide this case, but the
majority barely mentions them.
¶ 109 The majority’s indifferent approach to our latest pronouncements in this area
stems from its struggle to identify the issue before the court. Initially, the majority
states that the issue is “the enforceability of plaintiffs’ rights to retiree health care
benefits as set forth in the 2004 collective bargaining agreement.” Supra ¶ 1. Later,
the majority indicates that it must address “enforceability of retiree health care
benefits provided to public employees in a CBA or whether such benefits may be
subject to modification through the collective bargaining process.” Supra ¶ 54.
Both characterizations are correct, but enforceability of retirees’ rights to health
care benefits is not the issue that drives the majority’s analysis. Instead, the
majority addresses the parties’ arguments regarding vested rights. According to the
majority, the court must “first consider whether the pension protection clause
operates to automatically vest the retirement benefits of public employees,
regardless of the terms of the contract that confers those rights” (supra ¶ 57), then
“next consider the terms of the 2004 CBA to ascertain the intent of the CTA and the
Transit Unions with regard to the vesting of retiree health care benefits” (supra
¶ 76).
¶ 110 The majority’s willingness to take the parties’ lead and adopt their “vested
rights” terminology is understandable because they discuss little else in their briefs.
In fact, from the beginning, the parties have framed their arguments with respect to
vested rights, and the lower courts have addressed those arguments in those terms.
Everything below—from the filing of the complaint to the filing of the appellate
court opinion—happened before we made a definitive statement about the
relationship between health care benefits and pension benefits in Kanerva, so the
parties and the lower courts latched onto a body of law that covers both.
¶ 111 Unfortunately, that body of law involved the federal Employee Retirement
Income Security Act of 1974 (ERISA). See 29 U.S.C. § 1001 et seq. (2012). Under
ERISA, “vested” is a shorthand descriptor for benefits that an employer cannot
unilaterally terminate or modify. Generally, pension benefits are vested and outlast
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the term of a CBA; “welfare benefits,” including health care benefits, are not vested
and do not outlast the term of a CBA. See International Union, United Automobile,
Aerospace & Agricultural Implement Workers v. Skinner Engine Co., 188 F.3d
130, 137-38 (3d Cir. 1999) (“Although ERISA contains elaborate vesting
requirements for pension plans, it does not require automatic vesting of welfare
benefit plans.”). ERISA gives employers an absolute right to modify or terminate
health care benefits at any time, though employers may waive that right and
provide by contract that such benefits are vested.
¶ 112 Over time, a split developed in the federal courts of appeal on the issue of how
to construe contract language to determine whether employers have done that. In
this case, the lower courts both engaged that precedent. The trial court sided with
the Seventh Circuit, which has applied a strict presumption against vesting (see,
e.g., Rossetto v. Pabst Brewing Co., 217 F.3d 539 (7th Cir. 2000)), and the
appellate court sided with the Sixth Circuit, which has applied an inference for
vesting (see International Union, United Automobile, Aerospace, & Agricultural
Implement Workers v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983). In M&G
Polymers USA, LLC v. Tackett, 574 U.S. ___, 135 S. Ct. 926 (2015), the Supreme
Court rejected the latter approach and instructed federal courts to use ordinary
principles of contract law in determining whether welfare benefits were vested
under the terms of a particular agreement. The majority states that Tackett
overruled the reasoning employed by the appellate court here, and proceeds without
applying such an inference. Supra ¶ 52.
¶ 113 Tackett and its progeny (see, e.g., Gallo v. Moen Inc., 813 F.3d 265 (6th Cir.
2016)) would control our analysis, if this dispute arose under the Labor
Management Relations Act, 1947 (29 U.S.C. § 141 et seq. (2012)) and ERISA. It
did not. Therefore, those cases are inapposite. Contrary to the argument of the
Retirement Plan and Health Care Trust defendants, nothing about Tackett’s holding
is “critical” to resolving the issue in this case because federal law does not govern
the interpretation of CBAs with state and local governments. See 29 U.S.C.
§ 152(2) (2012); Davenport v. Washington Education Ass’n, 551 U.S. 177, 181
(2007) (“The National Labor Relations Act leaves States free to regulate their labor
relationships with their public employees.”). ERISA generally preempts state law
relating to private-sector employee benefit plans (see 29 U.S.C. § 1144(a) (2012)),
but that Act does not apply to “governmental” or public-sector employee plans (29
U.S.C. § 1003(b)(1) (2012)). Here, the plaintiffs’ employer was a municipal entity
and the interpretation of the 2004 CBA rests, not on federal law, but on Illinois law.
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¶ 114 In this area, Illinois law departs drastically from federal law. Health care
benefits are treated differently than pension benefits under federal law. Under
Illinois law, as we explained in Kanerva, health care benefits are pension benefits.
Further, ERISA offers private-sector employers an absolute right to modify or
terminate health care benefits, while the pension protection clause denies
public-sector employers such a right. See Heaton, 2015 IL 118585, ¶ 46 n.12. In
Illinois, it is the employee’s rights, not the employer’s rights, that are protected.
The majority summarizes our recent holdings in Kanerva and Heaton:
“[T]he plain meaning of [the pension protection] clause demonstrates that it
protects all of the benefits that flow from the contractual relationship arising
from membership in a public retirement system. [Citation.] *** [B]ecause
retiree health care benefits provided by statute to state employees are benefits
of membership in a public retirement system, they are constitutionally
protected from unilateral diminishment or impairment through legislative
action. [Citations.]” Supra ¶ 54.
¶ 115 Notably, the term “vested” does not appear in that passage. Nor does it appear
in Kanerva. It appears once in Heaton, 2015 IL 118585, ¶ 57, but only where the
court discussed the facts in Jorgensen v. Blagojevich, 211 Ill. 2d 286 (2004), which
addressed the judicial salary clause of the Illinois Constitution (Ill. Const. 1970, art.
VI, § 14), not the pension protection clause. “Vested” has been used in other
pension protection clause cases from this court (see, e.g., People ex rel. Sklodowski
v. State, 182 Ill. 2d 220 (1998)), but it is not in the text of the constitutional clause
itself. In my view, if “vested” has no place in our pension protection clause (see Ill.
Const. 1970, art. XIII, § 5 (“Membership in any pension or retirement system of the
State *** shall be an enforceable contractual relationship, the benefits of which
shall not be diminished or impaired.”)), its place in our pension protection clause
jurisprudence is dubious. That term, as demonstrated by the majority’s awkward
description of its various, context-dependent connotations (see supra ¶¶ 79-82),
only serves to distract us from a disciplined constitutional analysis.
¶ 116 The overriding issue in this case is not whether CTA retirees’ rights to their
health care benefits were vested, but, rather, as the majority correctly asserted in its
opening sentence, whether those rights were enforceable. That inquiry turns on the
contract because “the contractual relationship protected by section 5 of article XIII
is governed by the actual terms of the contract or pension plan in effect at the time
the employee becomes a member of the retirement system.” Supra ¶ 59; accord
- 36 -
Heaton, 2015 IL 118585, ¶ 46 (“The protections afforded to such benefits by article
XIII, section 5 attach once an individual first embarks upon employment in a
position covered by a public retirement system, not when the employee ultimately
retires.” (citing Di Falco v. Board of Trustees of the Firemen’s Pension Fund of
Wood Dale Fire Protection District No. One, 122 Ill. 2d 22, 26 (1988))); Kerner v.
State Employees Retirement System, 72 Ill. 2d 507, 514 (1978)). The majority
insists that the pension protection clause created no “vesting rules.” Supra ¶ 63.
Our case law instructs that it did create one very simple de facto vesting rule: Public
employees’ rights to benefits are constitutionally protected when they begin their
jobs.
¶ 117 I agree with the majority that the mere fact that health care benefits fall within
the scope of the pension protection clause does not mean that they are
“categorically insulated from modification in accordance with the terms of a CBA
that has been approved by the union.” Supra ¶ 68. As the majority observes, public
servants whose employment is governed by a contract are guaranteed under the
state constitution only those retirement benefits provided in those contracts: “[I]f
the underlying contract allows for the modification of certain retirement benefits,
the pension protection clause does not preclude modification or alter the essential
nature of the rights granted under the contract.” Supra ¶ 66. That echoes what we
said last year: Under the pension protection clause, benefits cannot be unilaterally
diminished or eliminated. See Heaton, 2015 IL 118585, ¶ 46 & n.12. It also echoes
what we implied more recently: Benefits can be bilaterally modified through
collective bargaining. See Jones, 2016 IL 119618, ¶ 55. That is, our constitution
certainly does not prevent an agreement to modify pension benefits. The question
becomes whether Williams, who represents CTA retirees, made such an agreement.
The majority asserts that he did not. I strongly agree.
¶ 118 The 2004 CBA was comprised of two parts: the Wages and Working
Conditions Agreement (WWCA) between the two transit union locals and the CTA
and the Retirement Plan Agreement (RPA). Section 20.12(a) of the RPA in effect at
that time provided:
“(a) Effective December 1, 1989, a sum will be paid in an amount sufficient to
provide insurance coverage for all retirees under the Group Hospital Surgical
Major Medical Plan or the Health Maintenance Organization premium, but said
sum shall not exceed the premium cost to the [Retirement] Plan effective for
- 37 -
such coverage for a retiree on December 31, 2003. This benefit terminates
when the retiree attains age 65.”
Section 23.1 of the RPA added that the RPA is part of the WWCA between the
parties and can be changed only in accordance with the WWCA.
¶ 119 Similarly, article 18 of the WWCA stated, “The Retirement Plan is a part of this
Agreement in all respects and for all purposes, including future proposals for
revision in the Plan and in the negotiation or arbitration of proposed revisions.”
Section 19.2 of the WWCA provided:
“Either of the parties hereto shall have the right to open this Agreement for
modifications and[/]or additions to be effective January 1, 2007, or any
anniversary date thereafter by written notice to the other party sixty (60) days
prior to such anniversary date. Notification submitted in accordance with the
foregoing shall contain a written statement of all modifications and[/]or
additions to the Agreement which are proposed. If no agreement is reached
within said sixty (60) days, or such further time as the parties may agree upon,
the matter shall be submitted to arbitration ***. All conditions of this
Agreement are to continue in full force and effect until changed, revised or
amended from time to time by agreement of the parties or by the decision of the
Board of Arbitration.”
Section 20.12(a) of the RPA clearly expresses an intent by the parties to ensure that
pre-2007 retirees would receive health care benefits until age 65. It does not refer to
eligibility, only a termination date (a retiree’s sixty-fifth birthday), which,
depending on the retiree’s age, could fall outside the effective dates of the CBA.
¶ 120 Section 19.2 of the WWCA contemplated and permitted modification of its
terms, but only by agreement of the parties. Saying that the 2004 CBA could be
modified in 2007 does not mean that Williams agreed to any modification. The
2004 CBA could be modified but not until it expired in 2007. Williams retired
before then. Nothing in the language of section 19.2 indicated that he agreed to the
reduction in his health care benefits that came three years after he left the CTA.
¶ 121 Fixing Illinois’s public pension systems may be a political matter, but the
methods for doing so remain legal matters. This court, however, must be cognizant
of its limited role and deliberate in its decision making. We must answer the
questions before us in line with our precedent. In my view, this case can be decided
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by simply applying Kanerva, Heaton, and Jones. The majority strays from those
cases and takes an ill-advised detour through vested rights. Though the majority
reaches a correct result as to plaintiff Williams, I cannot join in its problematic
analysis.
¶ 122 JUSTICE KARMEIER joins in this special concurrence.
¶ 123 JUSTICE KARMEIER, specially concurring:
¶ 124 I join Justice Theis’s well-reasoned special concurrence. I write separately to
raise two additional problems with the majority’s opinion. First, in the course of its
analysis of the claims asserted by Williams, who seeks to represent the Class I
plaintiffs, the majority engages in a protracted discussion of the authority of unions
to agree to terms in collective bargaining agreements that operate as a waiver of
their members’ constitutionally protected rights or their statutory and economic
rights (supra ¶¶ 67-75). This discussion constitutes an improper advisory opinion.
¶ 125 As the majority itself points out in explaining why Williams, the pre-2007
retiree, has standing to bring this action, he was no longer a public employee and
was therefore outside the collective bargaining unit and not represented in the
collective bargaining and interest arbitration proceedings that led to the reduction
in benefits challenged in this case. Supra ¶¶ 41-49. Because “the Transit Unions did
not represent Williams or the other Class I retirees during [this] collective
bargaining process” (supra ¶ 49), it necessarily follows that the Transit Unions
could not, as a matter of law, waive any rights belonging to those individuals.
Accordingly, whether and to what extent the Transit Unions could waive the rights
of their existing members is irrelevant. No such individuals are before us. The only
people who belonged to the union during the relevant period—the Class II
plaintiffs—are being dismissed based on lack of standing.
¶ 126 It is axiomatic that Illinois courts “ ‘do not decide moot questions, render
advisory opinions, or consider issues where the result will not be affected
regardless of how those issues are decided’ ” (Wright Development Group, LLC v.
Walsh, 238 Ill. 2d 620, 632 (2010) (quoting In re Alfred H.H., 233 Ill. 2d 345, 351
(2009))), nor will we review cases merely to set precedent or guide future litigation
(In re Marriage of Donald B., 2014 IL 115463, ¶ 23). The majority should
therefore have omitted the entire discussion of this point.
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¶ 127 Second, after concluding that “the provision of health care benefits to Williams
and the other Class I plaintiffs who retired under the 2004 CBA constituted an
enforceable, vested right that survived the expiration of that agreement” and that
“the circuit court erred in dismissing Williams’s claim for breach of contract and
his claim for violation of the pension protection clause in article XIII, section 5 of
the Illinois Constitution,” the majority proceeds to consider in detail and then reject
Williams’s additional claim for promissory estoppel. Supra ¶¶ 90-101. Once again,
this discussion is unnecessary to the disposition. Under indistinguishable
circumstances in Kanerva v. Weems, 2014 IL 115811, ¶ 58, we expressly held that
“[o]ur holding that plaintiffs are entitled to proceed on their pension protection
clause claims obviates the need to address the sufficiency of their remaining
claims,” which included a claim for promissory estoppel (id. ¶ 23). That is equally
true here. Why the majority has decided to take a contradictory position in this case
is inexplicable. Consistency in the law is not the only thing, but it is an important
thing, particularly where the stakes are so high for so many.
¶ 128 In addition to joining Justice Theis’s special concurrence, I therefore decline to
join those portions of the majority’s opinion addressing these two additional
matters.
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