CUNA Mutual Retirees Class Action - James Olson and Dixon Gahnz

Sly- Lawton and Cates folks are out here today. Jim Olson and Dixon Gahnz with us. They have been involved with a case that I think kind of corresponds with the issue with the state workers. This all has to do with workers’ rights. Tell us a little about this case with CUNA Mutual.

Jim- Okay. This of course is a private employer, a little different than a public employer. But a few years ago right near the end of the year, CUNA Mutual told their retirees, the people who had retired, that they weren’t going to be funding their health insurance. Up until then, they had an agreement with CUNA Mutual that basically the retirees would get 40 to 60% of their health insurance paid for. Plus they could convert their sick leave into health insurance for them. So many of them didn’t have to pay anything at all for health insurance.

Sly- Was this up until the point that they would qualify for Medicare?

Jim- Well, even before. Many of them retired before.

Sly- That’s what I mean. Up until the point that they would qualify for Medicare.

Jim- Oh no. Even after that.

Sly- Even after that. This was something that was part of their compensation package, negotiated?

Jim- Well, yes. It was an ERISA plan. That’s employee retirement income security act. It was a plan. Actually it came out of the collective bargaining by the union employees there. And then the nonunion employees, the management employees thought that this looked like a pretty good deal and then management agreed. So that’s how they got it.

Sly- Alright. Dixon, they tried to get out of this. And this of course has been tried before and you took them to court.

Dixon- We did. It was a claim that we brought in two parts. The first part was look, these folks had a contract, a deal in place where they had agreed that if they didn’t use their sick leave that it could be converted and that they could use it later. We call that deferred compensation. The second part was that as part of their compensation package, they weren’t allowed to own stock. That’s how CUNA is set up. So if you had worked for CUNA for long enough you would have accrued an additional benefit which is that they would pay an additional part of your health insurance. And once they cut that off, we brought suit in the western district of Wisconsin.

Sly- And Barbara Crabb ruled against you?

Dixon- Yes she did.

Sly- That’s unfortunate. On what grounds did she rule against you?

Jim- Well she ruled against us. The contract had a reservation of rights which said that they were entitled to mend the agreement to pay for sick leave. However it also said that amendment had to accrue to the exclusive benefit of the retirees, the planned participants. And those two terms were obviously in conflict and she basically ruled that the reservation of rights trumped the exclusive benefit provision. And so even though it was clear to most retirees that they would have these rights.

Sly- Yeah because I’ve got the human resources memorandum right here.

Jim- Yes.

Sly- Where they checked off the box “accept.”

Jim- And it also says they can use their accrued sick leave until it is exhausted. Which means, well it’s pretty clear.

Dixon- Another point is that on each pay check they would see how much they were accruing. There’s a little box in the corner that says you’ve been here for ten years now you have $40,000 in accrued sick leave.

Sly- So you appealed Judge Crabb’s decision?

Jim- Yes and we are awaiting the result. We appealed it to the seven circuit and it was a very lively argument.

Sly- Who is the judge in the seven circuit?

Jim- There are three of them. There is Judge Easterbrook who has been on the court for a long time. He was a Reagan appointee.

Sly- Uh oh.

Jim- He is a very brilliant judge, very conservative. The second judge was Judge David Hamilton, an Obama appointee. Also a very brilliant judge. The third judge is Judge Manion, also very bright. He is also a Reagan appointee but he has been on the court for a long time and it’s hard to predict how he will go.

Sly- Judge Crabb was a Carter appointee. You never know how these things are going to shake down. Put the human face on this. Jim and Dixon are both with us from Lawton and Cates. By the way what is your phone number at Lawton and Cates? In case people are interested in hiring you.

Dixon- 282-6200. They can also reach us on the web at www.lawtoncates.com

Sly- Alright. In human terms how is this affecting people’s lives at CUNA? Because I assume that they are still enforcing this.

Jim- Oh yes. Well the retirees had to go out on their own, after they retired on fixed incomes and get health insurance. And many of them, they could’ve when they retired or they could’ve gone maybe on their wife’s health insurance plan. Or they worked, they stayed at CUNA for the last five, ten years because they knew that they were accruing these benefits.

Sly- What did CUNA tell these people when the reneged on something that they promised to do?

Jim- That they had the right to do it. That it was in their contract, that they were sorry. Obviously they had losses. They had some bad investments that year and that’s what they had to do to keep the company alive.

Sly- The culture of this company has changed a great deal in the last ten years. They’ve brought in people to attempt to bust unions and they’ve gotten rid of a lot of people and they’ve significantly cut back on benefits. It’s what used to be the premiere place to work in town.

Jim- Absolutely and Bob Curry, the president was a wonderful human being. People out there would say that he would walk down the hallways and say hello how’s your wife, he’d know the kids and he was the one that really put this plan in.

Sly- But we have a different culture now. So are there many companies that even offer these plans anymore?

Jim- Well I think that yeah, there are a lot of companies that offer these plans. The state still does.

Sly- Well for now.

Jim- For now. And I’m sure that there are many others that do. We think that we have a very strong case to have this overturned.

Sly- Where you shocked when Judge Crabb read the decision or when you saw the decision that Judge Crabb had put out?

Jim- To some extent, yes because we felt that our argument that it should be commended because of the exclusive benefit was a very strong argument, but in the legal culture over the past several years is in these ERISA cases the employee normally loses.

Sly- There was a huge case with PABST and their pensions with their employees. The fact is that they reneged on paying pensions. But there was bankruptcy involved there, right? PABST ceased to exist in its current form even though another company had purchased them. Just because CUNA has losses, they never made the claim that they didn’t have money to cover these costs did they?

Jim- No and they didn’t just suspend them for a year. Now they’re doing much better. But they’re still not paying the retirees’ health insurance.

Sly- Dixon, do we have a total of how much money they’re saving themselves by not honoring this?

Dixon- What CUNA indicated in one of its most recent statements was that it was 100 million dollars that they could take off of the liability and accrued benefits.

Sly- 100 million dollars?

Dixon- Yes.

Sly- So, how many people does this affect, do we have a total on that?

Jim- I’m thinking maybe a thousand or so.

Sly- So 100 million dollars for a thousand people, that’s a pretty significant chunk of change per person isn’t it?

Jim- That is extended out over 30 years.

Sly­- Right. Over a period of time. But still that’s a lot of money.

Jim- Oh yeah. I would say that it costs the employees about 13 to 15 thousand dollars a year.

Sly- And these are people that maybe wouldn’t have retired when they did had they known that this was going to happen?

Jim- That’s correct. Or they would have had some other way of taking care of their health insurance.

Dixon- Or they would’ve gone to a different company in the past ten years when they were the most marketable.

Sly- How quickly, were there warnings that they were going to do this, how quickly did they drop this bomb on their employees?

Jim- Well they dropped it about two weeks before the end of the year, but they did agree that they would extend it, that they would pay them for two more years. They worked out some payment for their health insurance for the next two years. But they only gave them two weeks notice. They said that they could stay on their plan but they would have to pay it themselves.

Sly- How long have most of these people worked for CUNA?

Jim- Many of them for over thirty years.

Sly- So they’ve had a contract with the company for over thirty years?

Jim- Oh yeah.

Sly- And they retired and now this?

Jim- Yes. And these were many of the senior management people who had helped build the company into the company that it was.

Sly- When do you expect this decision?

Jim- It could come today. We’re looking at it every day.

Sly- And if you don’t get the decision that you want in the seven circuit court of appeals, do you go higher?

Jim- There is a possibility that we will. It depends on what it says. Appealing to the Supreme Court is always kind of a long shot but we’ll have to see what it says.

Dixon- One in a thousand.

Sly- Have you ever practiced before the Supreme Court, Jim?

Jim- I haven’t actually argued before the Supreme Court. We just had a case before the Supreme Court but we didn’t want them to take it and they did. So I wrote to them, somebody in the Supreme Court has looked at words that I’ve written.

Sly- Well here is some tips. What you need to do is watch Shirley Phelps, Fred Phelps’ daughter before the Supreme Court. She got an eight to one decision in her favor last week.

Dixon- I saw part of that. I hope to never practice like that.

Sly- Maybe you could take some tips from Shirley Phelps on how to practice in front of the Supreme Court. It’s one of the most remarkable things, although I probably tend to agree with the court’s decision but not for the reason that Shirley Phelps argued. Well I hope you prevail in this case because you have to think that this decision will certainly set a precedent on whether other companies try to pull this, right?

Jim- Obviously it will.

Sly- Dixon, Jim, thank you for joining us from Lawton and Cates. Phone number one more time?

Dixon- 282-6200 and www.lawtoncates.com