FIFTH DIVISION FEBRUARY 7, 2014

No. 1-12-3348

) JERRY MATTHEWS; JERRY WILLIAMS; TOMMY ) SAMS; CYNTHIA BOYNE; and CHARLES BROWN, ) Individually and on Behalf of All Others Similarly ) Situated, ) ) Plaintiffs-Appellants, ) Appeal from the ) Circuit Court of v. ) Cook County. ) CHICAGO TRANSIT AUTHORITY; RETIREMENT ) No. 11 CH 15446 PLAN FOR CHICAGO TRANSIT AUTHORITY ) EMPLOYEES; THE BOARD OF TRUSTEES OF THE ) Honorable RETIREMENT PLAN FOR CHICAGO TRANSIT ) Franklin U. Valderrama, AUTHORITY EMPLOYEES; RETIREE HEALTH CARE ) Judge Presiding. TRUST; and THE BOARD OF TRUSTEES OF THE ) RETIREE HEALTH CARE TRUST, ) ) Defendants-Appellees. ) )

PRESIDING JUSTICE GORDON delivered the judgment of the court, with opinion. Justices McBride and Palmer concurred in the judgment and opinion.

OPINION

¶1 The instant appeal arises from the dismissal of plaintiffs’ class action suit pursuant to

sections 2-615 and 2-619 of the Code of Civil Procedure (the Code) (735 ILCS 5/2-615, 2-619

(West 2010)). Plaintiffs’ complaint alleges that defendants substantially diminished and

impaired the vested retirement health care benefits of plaintiffs, current and retired employees of

defendant Chicago Transit Authority (the CTA). The trial court dismissed the case, finding: (1)

that the plaintiffs who were current CTA employees lacked standing; (2) that none of the No. 1-12-3348

plaintiffs could state a claim against the CTA because it had no responsibility for retiree health

care benefits; and (3) that none of the plaintiffs could state a claim against any of the defendants

because plaintiffs did not have a vested right to retiree health care benefits. Plaintiffs appeal, and

we affirm in part and reverse in part.

¶2 BACKGROUND1

¶3 I. Parties

¶4 A. Plaintiffs

¶5 The individual plaintiffs are current and former employees of the CTA, all of whom

began working for the CTA prior to 2001 and all of whom participated in the Retirement Plan for

Chicago Transit Authority Employees. Named plaintiffs Jerry Williams, Cynthia Boyne, and

Charles Brown are retired, while plaintiffs Jerry Matthews and Tommy Sams were currently

employed by the CTA as of April 20, 2011, the filing date of the class action complaint. Both

Matthews and Sams are union members: Matthews is a member of Amalgamated Transit Union

Local 308 (Local 308) and Sams is a member of Amalgamated Transit Union Local 241 (Local

241).

¶6 The class action complaint also sets forth two classes of plaintiffs. Class I consists of

1 The facts are taken from the complaint and the exhibits attached thereto, and those documents attached to the motions to dismiss that are public documents of which we may take judicial notice. See Callis, Papa, Jackstadt & Halloran, P.C. v. Norfolk & Western Ry. Co.,

(2001) (taking judicial notice of the case file of a previous appeal since it “is a public document, capable of being readily verifiable”); Young-Gibson v. Board of Education,

, ¶ 52 (taking judicial notice of board’s approval of the 2009 fiscal year budget “because it is a public document containing facts capable of instant and unquestionable demonstration”).

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CTA employees hired prior to September 5, 2001, who retired before January 1, 2007. Class II

consists of CTA employees hired prior to September 5, 2001, who either retired after January 1,

2007, or remain active employees. Each class consists of more than 7,000 people.

¶7 B. Defendants

¶8 1. The CTA

¶9 Defendant 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)).

¶ 10 2. Retirement Plan Defendants

¶ 11 Defendant Retirement Plan for Chicago Transit Authority Employees is the entity

responsible under section 22-101 of the Pension Code (40 ILCS 5/22-101 (West 2010)) for

providing specified retirement benefits to retired CTA employees, which are set forth in an

agreement entitled “Retirement Plan for Chicago Transit Authority Employees.” The

terminology is confusing because both the written agreement and the entity have the same name;

however, the parties use various labels to attempt to minimize confusion. We will adopt the

terminology used by plaintiffs and will refer to the entity as the “Retirement Plan” and the

written agreement as the “retirement plan agreement.”

¶ 12 Defendant Board of Trustees of the Retirement Plan for Chicago Transit Authority

Employees (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

Retirement Plan Board is the successor to the Retirement Allowance Committee that

administered the Retirement Plan prior to January 18, 2008. While the Retirement Plan is the

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entity that is responsible for providing the benefits, as a practical matter, the Retirement Plan

Board is the group of individuals that administers those benefits.

¶ 13 3. Health Trust Defendants

¶ 14 Defendant 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.

¶ 15 Defendant Board of Trustees of the Retiree Health Care 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. As with the Retirement Plan, while the

Health Trust is the entity that is responsible for providing the benefits, as a practical matter, the

Health Trust Board is the group of individuals that administers those benefits.

¶ 16 II. Complaint

¶ 17 On April 20, 2011, the named plaintiffs filed a nine-count class action complaint against

defendants. The focus of the complaint was the fact that, after years of fully paid health care

benefits for retired CTA employees, plaintiffs are now being asked to pay for a portion of their

health care benefits and are no longer entitled to the same level of health care coverage as active

CTA employees. The complaint alleges that these changes occurred as a result of amendments to

the Pension Code made by Public Act 95-0708 (effective January 18, 2008) (the 2008 Act). The

complaint alleges that, in charging class members for their retiree health care benefits, defendants

diminished those benefits, which plaintiffs claimed (1) was a breach of defendants’ contracts

with class members, (2) constituted a violation of the Illinois Constitution, and (3) was a breach

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of defendants’ fiduciary duties to class members.

¶ 18 Counts I and V of the complaint, against all defendants, allege 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, the benefits of which shall not be diminished or

impaired’ ” (quoting Ill. Const. 1970, art. XIII, § 5).

¶ 19 Counts II and VI of the complaint, against the CTA and the Retirement Plan, are for

breach of contract, based on the collective bargaining agreements (CBAs) entered into between

the CTA and the unions representing plaintiffs that included the retirees’ health care benefits.

The complaint alleges that each CBA is a contract and that, by completing their service

requirements and fulfilling their employment obligations, the class members performed their

obligations under each CBA. The complaint further alleges that the CTA and the Retirement

Plan breached the CBAs by (1) requiring class members to pay for a portion of their health care

coverage, (2) reducing the level of benefits available, and (3) changing the benefits of already-

retired CTA employees in a manner unauthorized by the CBAs.

¶ 20 Counts III and VII of the complaint, against the CTA and the Retirement Plan, allege

promissory estoppel. The complaint alleges that the CTA and the Retirement Plan made a

number of promises to class members, including: (1) that class members would receive fully-paid

retiree health care benefits, (2) that those benefits would be identical to those of active CTA

employees, (3) that those benefits would be changed only in a manner prescribed in a CBA, and

(4) that those benefits would not be changed without consideration. The complaint alleges that

the class members relied on these promises to their detriment by accepting employment at the

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CTA, working at the CTA, and retiring from the CTA, and further alleges that their reliance was

expected and foreseeable.

¶ 21 Counts IV and VIII of the complaint, against the Retirement Plan Board and the Health

Trust Board, allege breach of fiduciary duty. The complaint alleges that both defendants owed

the class members fiduciary duties, which were breached, causing injury to the class members.

¶ 22 Class IX of the complaint, against all defendants, seeks a declaratory judgment

concerning (1) plaintiffs’ right to collective bargaining for wage and benefits levels, including

potential payroll-based contributions from the CTA for retiree health care benefits and the right

to have equal representation on the Retirement Plan Board and the Health Trust Board; and (2)

the Health Trust Board’s right to tax active CTA employees and dictate the levels of coverage

available for the retiree health care benefit without considering CBAs.

¶ 23 In their prayer for relief, plaintiffs request: (1) a certification of Classes I and II; (2) a

declaration that certain parts of the 2008 Act are void and unenforceable because they violate

article XIII, section 5 of the Illinois Constitution and the Regional Transportation Authority Act

(the 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 the 2008 Act; (4) a preliminary and permanent injunction against enforcement of

certain parts of the 2008 Act and a requirement that defendants reinstate the rights of the class

members as they existed prior to the enactment of the 2008 Act, including the right of retired

CTA employees to fully paid health care benefits at the same level as those enjoyed by active

CTA employees; and (5) an award of compensatory damages to the class members for breach of

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contract and breach of fiduciary duty, as well as court costs and attorney fees.

¶ 24 III. Collective Bargaining Between the CTA and Transit Unions

¶ 25 The CTA employs both union and nonunion employees, including employees belonging

to Local 241 and Local 308 (collectively, the transit unions). The transit unions collectively

bargain with the CTA regarding employee wages, working conditions, and retirement benefits, as

required by the RTA Act. The unions represent the active CTA employees in their respective

unions; retired employees are not represented by the transit unions in collective bargaining and

cannot vote on proposed CBAs, and cannot participate in arbitration proceedings between the

transit unions and the CTA to determine the terms to be included in a new CBA.

¶ 26 The CBAs between the CTA and the transit unions consist of a series of “Wages and

Working Conditions Agreements,” each of which is subject to periodic renewal and modification

through collective bargaining. Two such CBAs are at issue in the case at bar. One, the 2004

CBA, became effective January 1, 2004, and had a term through December 31, 2006. The other,

the 2007 CBA, became effective January 1, 2007, and had a term through December 31, 2011;

the 2007 CBA was the governing agreement at the time of the filing of this class action

complaint.

¶ 27 Several provisions of the 2004 and 2007 CBAs are relevant to the instant case. We set

forth summaries of the longer provisions here, and quote them as necessary later. Both CBAs

provide that the transit unions are “the sole and exclusive bargaining agents for all of [the

CTA’s] employees” and article 17 of both CBAs sets forth the procedure for arbitration of

disputes.

7 No. 1-12-3348

¶ 28 Section 19.2 of the 2004 CBA provides for modifying the CBA, stating 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.” Section 20.2 of the 2007 CBA has identical

language, except that the effective date of modifications was “January 1, 2012, or any

anniversary date thereafter.”

¶ 29 Additionally, incorporated into each CBA is the retirement plan agreement, a contract

concerning retirement benefits that was first agreed to by the CTA and the transit unions in 1949.

Both the 2004 and 2007 CBAs provide that the retirement plan agreement is incorporated in full

into the CBA “in all respects and for all purposes, including future proposals for revision in the

Plan and in the negotiation or arbitration of proposed revisions.” The retirement plan agreement

also provides that it “is part of the Wage and Working Conditions Agreement between the parties

hereto. This Agreement can be changed only in accordance with the provisions of the aforesaid

Wage and Working Conditions Agreement.”

¶ 30 Finally, while not part of the CBAs, section 22-101(a) of the Pension Code concerns

changes to the retirement plan agreement, providing that “[t]he terms, conditions and provisions”

of the retirement plan agreement “may be established, amended or modified by agreement” of the

CTA and the transit unions. 40 ILCS 5/22-101(a) (West 2010).

¶ 31 IV. Health Care Benefits Between 1980 and January 18, 2008

¶ 32 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.

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Dworkin issued an interest arbitration award2 (the Dworkin award) that ordered the retirement

plan agreement to be amended and stated that, “[e]ffective [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, at

which time the Retirement Plan would pay up to $75.

¶ 33 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[3], 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.”

The complaint alleges that, “[a]lthough Section 20.12 facially purports to cap the amount to be

2 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.’ ” 3 According to the complaint, the “Group Hospital Surgical Major Medical Plan or the Health Maintenance Organization” are the health insurance plans available to active CTA employees.

9 No. 1-12-3348

paid out of the Retirement Plan Account for retiree health coverage at the December 31, 2003,

level, no cap was ever agreed to by Local 308, and so no cap was ever effective or implemented.

Accordingly, from 1980 to July 2009, Transit Union members, employees represented by other

unions, and non-union employees hired before September 5, 2001[4], were provided retiree health

care benefits identical to those provided to active employees, and were not charged for this

retiree health care benefit.”

¶

Arbitration Award

¶ 35 In 2006, prior to the December 31, 2006, expiration date of the 2004 CBA, the transit

unions and the CTA discussed extension of the CBA and changes to its terms. They were unable

to reach an agreement and, in 2007, submitted their dispute to an interest arbitration. On June

27, 2007, an arbitration panel, chaired by Edward Benn, issued an opinion and award (the Benn

award), prefaced by the statement that the parties requested an expedited hearing and decision

“occasioned by certain proposed legislative action being contemplated by the Illinois

government, which is designed to remedy a long standing financial problem with the parties’

pension and retiree health and welfare funding. From the evidence and arguments of the parties,

it is clear that the parties’ Pension Fund and retiree health insurance is in dire financial straits and

in desperate need of major additional funding.” The Benn award further indicated that “the

parties have agreed that the jurisdiction of this panel to issue an arbitration award in this matter is

4 In 2001, the CTA and the Local 308 agreed to restrict retiree health care benefits for employees hired after September 5, 2001; the same restriction was imposed on Local 241 following an interest arbitration in 2003. Employees hired after September 5, 2001, are not members of either class of plaintiffs.

10 No. 1-12-3348

expressly conditioned upon the passage into law of legislation which contains substantially the

terms and conditions set forth in the attached Exhibit A. In the event such legislation is not

passed into law, this Award shall be void and of no effect whatsoever.”

¶ 36 Exhibit A to the award provided for the establishment of a “Retiree Health Care Trust” in

a section entitled “Retiree Health Care.” This section included governance by seven

trustees—three union trustees, three CTA trustees, and “the Auditor General or his

designee”—and limited the retiree health plan “to a plan no better than the current Option II – the

90%/70% to Insurance Plan.” Exhibit A further provided that $450 million would be deposited

in “seed” money to the Retiree Health Care Trust in the form of a pension obligation bond,

provided that the transit unions and the CTA complied 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 “the Healthcare Trust shall take sole responsibility for payment, claims

and plan administration effective January 1, 2009"; (3) that current employees contribute to their

health care costs through a “payroll tax” equal to 3% of compensation; and (4) that the trustees

monitor the Retiree Health Care Trust funding levels and the actuarial present value of projected

benefits expected to be paid, and have the discretion to increase or decrease contribution levels

and benefit levels, based on the presence of a surplus or deficit.

¶ 37 In a section entitled “Pension,” Exhibit A provided for legislation establishing

governance by 11 members—five CTA members, five union members, and “the Auditor General

or his designee.” The last section of Exhibit A indicated that “[a]ll of the above [is] contingent

on appropriate Legislative Funding.”

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¶ 38 The complaint alleges that the retired CTA employees who would be charged for their

health care benefits pursuant to the Benn award were not parties to the interest arbitration and

were not represented at the interest arbitration.

¶ 39 VI. Public Act 95-708

¶ 40 Public Act 95-708, entitled “An Act concerning transportation” (the 2008 Act), became

effective on January 18, 2008. As relevant to the instant case, the Act amended section 22-101

of the Pension Code and added section 22-101B. The amended section 22-101 concerned the

Retirement Plan and provided for the Retirement Plan Board to be composed of 11

members—five selected by the CTA Transit Board, five selected by the transit unions and a

coalition of the CTA’s other unions, and one “selected by the Regional Transportation Authority

Board of Directors.” 40 ILCS 5/22-101(b) (West 2008). The trustee from the Regional

Transportation Authority (RTA) Board of Directors was further required to “be a professional

fiduciary who has experience in the area of collectively bargained pension plans.” 40 ILCS 5/22-

101(b) (West 2008). Beginning in 2009, if the Retirement Plan Board determined that an

increased contribution was required to fund the Retirement Plan, then participating employees

had to pay one third of the increased contribution. 40 ILCS 5/22-101(e)(3) (West 2008).

¶ 41 Section 22-101(h) stated that “[t]he 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 [Chicago Transit] Authority prior to enactment of

this amendatory Act, as evidenced by a Memorandum of Understanding between these

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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). The “Memorandum of Understanding”

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” and further stated that “[t]he

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.”

¶ 42 Finally, section 22-101(j) stated that “[n]othing in this amendatory Act of the 95th

General Assembly shall impair the rights or privileges of Authority employees under any other

law.” 40 ILCS 5/22-101(j) (West 2008).

¶ 43 The new section 22-101B, entitled “Health Care Benefits,” provided that 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 Authority

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). 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,

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2009.” 40 ILCS 5/22-101B(b) (West 2008).

¶ 44 The new Health Trust Board was to consist of seven members—three selected by the

CTA Transit Board, three selected by the transit unions and a coalition of the CTA’s other

unions, and one “selected by the Regional Transportation Authority Board of Directors.” 40

ILCS 5/22-101B(b)(1) (West 2008). The trustee selected by the RTA Board of Directors “shall

be a professional fiduciary who has experience in the area of collectively bargained retiree health

plans.” 40 ILCS 5/22-101B(b)(1) (West 2008).

¶ 45 The new Health Trust Board was to “establish and administer a health care benefit

program for eligible retirees and their dependents and survivors,” which was “not [to] contain

any plan which provides for more than 90% coverage for in-network services or 70% coverage

for out-of-network services after any deductible has been paid.” 40 ILCS 5/22-101B(b)(2) (West

2008). The Health Trust Board was to “establish and maintain an appropriate funding reserve

level” and was to make an annual assessment of the funding levels of the Health Trust, which it

reported to the Auditor General. 40 ILCS 5/2-101B(b)(3)(ii) (West 2008). In its report to the

Auditor General, the Health Trust Board was to include an assessment of whether the actuarial

present value of projected benefits expected to be paid to current and future retirees and their

dependents and survivors exceeded or was less than the actuarial present value of projected

contributions and trust income; if there was a projected shortfall, the Health Trust Board was to

“provide a plan of increases in employee, retiree, dependent, or survivor contribution levels,

decreases in benefit levels, or both,” which would be implemented if approved by the Auditor

General. 40 ILCS 5/2-101B(b)(3)(iii) (West 2008).

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¶ 46 Beginning January 1, 2009, “the aggregate amount of retiree, dependent and survivor

contributions to the cost of their health care benefits” could 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 Authority shall contribute to the Retiree

Health Care Trust in an amount not less than 3% of compensation.” 40 ILCS 5/22-101B(b)(6)

(West 2008).

¶ 47 Finally, section 22-101B stated: “No earlier than January 1, 2009 and no later than July 1,

2009 as the Retiree Health Care 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 [Chicago Transit] Authority shall not have any obligation to provide

health care to current or future retirees and their dependents or survivors. Employees, retirees,

dependents, and survivors who are required to make contributions to the Retiree Health Care

Trust shall make contributions at the level set by the Board of Trustees pursuant to the

requirements of this Section 22-101B.” 40 ILCS 5/22-101B(b)(7) (West 2008).

¶ 48 The 2008 Act also added section 12c to the Metropolitan Transit Authority Act, which

permitted the CTA to issue certain bonds and notes, over $500 million of which was to be

deposited into the Health Trust for retiree health care. 70 ILCS 3605/12c(b)(2) (West 2008).

¶ 49 VII. Health Care Benefits in 2009

¶ 50 Following the enactment of the 2008 Act, on February 27, 2009, the Health Trust Board

instituted a health insurance “plan design” that required CTA employees hired prior to September

5, 2001, to pay 45% of the total cost of their retiree health care benefits, and apportioned that cost

15 No. 1-12-3348

among the retired CTA employees. The plan design also provided that retired employees would

pay more for medical services than active CTA employees, including larger deductibles and

copayments than those paid by active CTA employees.

¶ 51 In May 2009, retired CTA employees were sent a letter informing them that, in the future,

they would be required to pay part of their monthly health care benefits payment obligations.

According to the complaint, “[p]rior to this, CTA employees and retirees had been repeatedly

assured that any changes to the Retirement Plan Agreement would affect only new and/or current

CTA employees, not employees or retirees hired prior to September 5, 2001.” According to the

complaint, beginning on July 1, 2009, and continuing each month thereafter, “the CTA, the

Retirement Plan, and the Health Trust joined together to compel retire[d] Class Members to pay

for health care benefits *** by setting up a mechanism to deduct the improper charges

automatically from CTA retirees’ monthly pension checks. Class Members were told they had

no choice but to authorize such automatic deductions or their retiree health care benefits would

end.” Also beginning in July 2009, the Health Trust Board began levying a 3% payroll tax on

active CTA employees and the complaint alleges that “the Health Trust Board has given

indications to CTA employees that it intends to raise this payroll tax in the near future.”

¶ 52 VIII. Motions to Dismiss

¶ 53 Following the filing of plaintiffs’ class action complaint, on August 8, 2011, the

Retirement Plan, the Retirement Plan Board, the Health Trust, and the Health Trust Board

(collectively, the non-CTA defendants) filed a combined motion to dismiss the complaint

pursuant to both sections 2-615 and 2-619 of the Code. The non-CTA defendants claimed that

16 No. 1-12-3348

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) article XIII, section 5, of the Illinois

Constitution does not apply to retirement health care benefits but only to pension benefits, so the

counts related to the Constitution fail; (3) the CTA and the transit unions had the right to change

retiree health care benefits, so the breach of contract claims fail; (4) plaintiffs could not rely on

statements outside the retirement plan agreement, so the promissory estoppel claims fail; (5)

following the 2008 Act does not constitute a breach of fiduciary duty, so the breach of fiduciary

duty claims fail; and (6) since plaintiffs failed to allege a substantive cause of action, the request

for a declaratory judgment fails. The non-CTA defendants further claimed that the complaint

should be dismissed under section 2-619 because the transit unions were the only entities that

had standing to challenge changes made to retiree health care benefits as a result of the collective

bargaining process.

¶ 54 Also on August 8, 2011, the CTA filed a combined motion to dismiss the complaint

pursuant to both sections 2-615 and 2-619 of the Code. The CTA claimed that the counts

directed at it should be dismissed under section 2-615 (1) because the CTA was not a proper

party since it has not had any responsibility to pay any portion of retired CTA employees’ health

care costs since the 1980s; (2) because plaintiffs did not have a vested right to free health care;

and (3) because plaintiffs failed to state a cause of action. The CTA also claimed that plaintiffs

do not have standing to challenge their health care benefits.

17 No. 1-12-3348

¶ 55 IX. Trial Court Ruling

¶ 56 On September 21, 2012, the trial court entered an order granting in part and denying in

part defendants’ section 2-619 motions and granting defendants’ section 2-615 motions in their

entirety with prejudice. Concerning the section 2-619 motions, the trial court concluded that the

class members who were current CTA employees did not have standing to challenge their health

care benefits, since the transit unions were the “sole and exclusive” bargaining agents for current

CTA employees under both the 2004 and 2007 CBAs. Additionally, the trial court concluded

that, since only a union and an employer may invoke arbitration, only they have the standing to

challenge an arbitration award. Consequently, the trial court found that the current CTA

employees did not have standing to overturn the Benn award since they did not allege that the

transit unions breached their duty of fair representation in the arbitration proceeding. Therefore,

the court granted the section 2-619 motions to dismiss with regard to the current CTA

employees.

¶ 57 However, the trial court denied the section 2-619 motions to dismiss with respect to the

retired CTA employees, finding that the retired employees were not “employees” represented by

the transit unions. Additionally, since they were employees at the time the 2004 and 2007 CBAs

were negotiated, the trial court found the retired employees in privity with the unions as to those

contracts and, therefore, were able to challenge changes to their health care benefits.

¶ 58 Concerning the section 2-615 motions, the trial court granted the motion to dismiss as to

the CTA, finding that the Dworkin award, as well as the 2008 Act, established that the CTA did

not have any duty to pay for retiree health care benefits.

18 No. 1-12-3348

¶ 59 Additionally, the trial court considered the issue of whether the retiree health care benefits

were vested. In its analysis, the trial court considered federal law discussing the vesting of health

care benefits. The court noted that the CBAs did not use the term “vest,” and found that they did

not “clearly and expressly” vest retired CTA employees with fully paid health care benefits after

December 31, 2003. The court further observed that, “at most, retirees could expect to have fully

paid health insurance but only until December 31, 2003. After that date, Plaintiffs were not

entitled to have health insurance premiums paid by the CTA.”

¶ 60 The trial court also considered section 17.1 of the retirement plan agreement, which

provides:

“[A]n employee retiring under the Plan, desiring that any group

health insurance benefit made available for the employee and

eligible dependents, by the Authority, in the then existing labor

agreement between the parties for active employees, or an

employee who immediately prior to retirement was eligible for said

benefits made available by any health maintenance organization

under contract with the Authority to provide benefits and who

desires to continue such benefits upon retirement may authorize the

[Retirement Allowance] Committee[5] in writing to deduct monthly

from his benefits due under the Plan an amount to pay his monthly

5 As noted, the Retirement Allowance Committee was the predecessor to the Retirement Plan Board that is a defendant in the instant case.

19 No. 1-12-3348

premiums or rate.”

The court noted that section 17.1 of the retirement plan agreement permitted deductions from

retirees’ pension checks to pay for premiums and that, “if the CTA and Transit Unions intended

to vest retirees with fully paid health insurance to age 65, they certainly would not have included

Section 17.1.” The court further pointed to portions of the retirement plan agreement in which it

provided for vesting of lifetime pension benefits and concluded that the absence of similar

language when discussing health care benefits “strongly implies that the parties did not intend to

vest retirees with health care benefits.” The court also noted that the retirement plan agreement’s

dissolution provision discussed the payment of “retirement and disability allowances,” but not

the payment of retiree health care benefits.

¶ 61 Additionally, the trial court concluded that the “more fatal flaw” to plaintiffs’ argument

was the inclusion of language in the CBAs and the retirement plan agreement that the CTA and

the transit unions reserved the right to modify the benefits in collective bargaining. Relying on

federal case law, the trial court concluded that health care benefits did not vest in the presence of

a reservation of rights clause. Accordingly, the trial court granted the section 2-615 motions to

dismiss and declined to address the parties’ remaining arguments. This appeal follows.

¶ 62 ANALYSIS

¶ 63 On appeal, plaintiffs claim that the trial court erred in granting the motions to dismiss

because (1) they have standing to challenge their retiree health care benefits, (2) they have a

vested right to retiree health care benefits, and (3) the CTA bears responsibility for plaintiffs’

retiree health care benefits. Additionally, plaintiffs claim that each count of their complaint

20 No. 1-12-3348

stated a cause of action for which relief could be granted.

¶ 64 I. Standard of Review

¶ 65 Plaintiffs’ claims were dismissed pursuant to sections 2-615 and 2-619 of the Code. A

section 2-615 motion to dismiss “tests the legal sufficiency of a complaint,” while a section 2-

619 motion to dismiss “admits the sufficiency of the complaint, but asserts affirmative matter

that defeats the claim.” Bjork v. O’Meara,

. “In ruling on motions to

dismiss pursuant to either section 2-615 or 2-619 of the Code, the trial court must interpret all

pleadings in the light most favorable to the nonmoving party” (Doe v. Chicago Board of

Education,

(2004)), and a cause of action should not be dismissed under

either section unless it is clearly apparent that no set of facts can be proved that would entitle the

plaintiff to relief (Pooh-Bah Enterprises, Inc. v. County of Cook,

(2009)

(section 2-615 motion); Feltmeier v. Feltmeier,

(2003) (section 2-619

motion)). Our review of a motion to dismiss under either section is de novo (Carr v. Koch,

), and we may affirm the dismissal of a complaint on any ground that is apparent

from the record (Golf v. Henderson,

(2007)). De novo consideration

means we perform the same analysis that a trial judge would perform. Khan v. BDO Seidman,

LLP,

(2011).

¶ 66 II. Standing

¶ 67 We first address the preliminary question of whether current CTA employees have

standing to bring the instant suit. The trial court found that current employees lacked standing

for two reasons. First, the court found that the current employees lacked standing because, under

21 No. 1-12-3348

the CBAs, the transit unions are the “sole and exclusive” bargaining agents for the employees.

Additionally, as to the claims involving the propriety of the Benn award and the portions of the

2008 Act that were derived from the Benn award, the court found that the current employees

lacked standing since only parties to the CBA can challenge the arbitration award in court unless

the union breached its duty of fair representation, which was not alleged.

¶ 68 On appeal, plaintiffs argue that both of the trial court’s conclusions were incorrect and

urge us to find that the current CTA employees have standing.6 First, plaintiffs argue that their

claims are based on rights independent of the CBAs, including violations of the Illinois

Constitution, promissory estoppel, breach of fiduciary duty, and request a declaratory judgment

of their constitutional and statutory rights, and claim that they have the right to prosecute these

claims as individuals. Additionally, plaintiffs argue that they have standing to bring their

contractual claims because “[t]he grievance procedure in the CBAs here does not cover claims

for retirement benefits, which would instead have been referred to the Retirement Allowance

Committee for resolution before it was dissolved in 2008,” and “[c]learly it would have been

futile to file a grievance with the Transit Unions to challenge a statute.”

¶ 69 Defendants, in response, argue that the trial court correctly determined that the proper

party to raise these claims was the transit unions, and that “[i]f the Current Employees are

unhappy with the Unions’ conduct, then their course of relief is to file an unfair labor practice

charge against the Unions.” Defendants point to the fact that the CBAs, the Benn award, and the

6 Plaintiffs do not argue that CTA employees who are not members of the transit unions are treated any differently than union members.

22 No. 1-12-3348

portion of the 2008 Act based on the Benn award were all implemented as a result of the

collective bargaining process and argue that plaintiffs “cannot individually seek to unwind” the

collectively bargained-for changes. We agree with defendants.

¶ 70 Generally, under both the 2004 and 2007 CBAs, grievances between the CTA and its

employees are processed through a three-step procedure. Step 1 requires the grievance to be

reported to the CTA “by the Union” and further requires the CTA to provide a written response

“to the Union.” If the grievance is not resolved “and the Union desires to appeal,” the grievance

is placed on the agenda for a discussion between the union and representatives of the CTA’s

employee relations department. If the grievance is still not resolved, “and the Union or the

Authority wishes to appeal the grievance, the Union or the Authority may refer the grievance to

arbitration.” Thus, under the CBAs, it is the union representing the employee that participates in

the grievance process, not the employee himself.

¶ 71 Additionally, only parties to an arbitration award may challenge the award in the circuit

court, and individual employees represented by a union cannot bring a suit to overturn the

outcome of a grievance procedure or arbitration unless the employee proves that the union’s

conduct in processing the grievance “was arbitrary, discriminatory, or in bad faith.” Stahulak v.

City of Chicago,

(1998).

¶ 72 As noted, plaintiffs argue that the current CTA employees have standing to raise their

claims because they are asserting individual rights independent of the CBAs. It is true that the

claims alleged by plaintiffs are not problems caused by the CTA violating a CBA, as in the

typical situation involving grievances. For instance, this is not a case of an employee challenging

23 No. 1-12-3348

his termination or her work environment. Instead, plaintiffs allege that the CBA negotiated by

the CTA and the transit unions contains terms that violate the Illinois Constitution, the RTA Act,

and earlier promises made to plaintiffs. In short, the claims alleged by plaintiffs are claims about

the terms of the CBA itself, not about compliance with those terms by the CTA.

¶ 73 We cannot agree with plaintiffs that the nature of their claims confers standing upon the

current CTA employees. Despite their contentions, plaintiffs’ claims are not seeking “to

vindicate individual rights independent of collective bargaining agreements.” Each of the

“individual rights” alleged by plaintiffs arises from the CBAs. The retiree health care benefits

that plaintiffs are seeking to retain are provided by the CBAs and the retirement plan agreement

incorporated within them, and the question we are asked to answer is whether the benefits

provided by the CBAs may be changed. Indeed, a central issue in the instant case involves

interpretation of section 20.12 of the retirement plan agreement and whether it provides for

vested retiree health care benefits.

¶ 74 Plaintiffs cite several cases to demonstrate that individual employees can bring claims

independent of collective bargaining agreements. For instance, in Cosentino v. Price,

(1985), the appellate court noted that “[a] cause of action for retaliatory

discharge is recognized in Illinois independent of any remedy the employee may have based on a

collective bargaining agreement.” Similarly, in Casanova v. City of Chicago,

(2003), the appellate court considered the plaintiff’s procedural due process claim

despite concluding that the plaintiff lacked standing to challenge an arbitration award. Finally, in

City of Rock Island v. Human Rights Comm’n,

(1998), the appellate

24 No. 1-12-3348

court found that an employee “has a right to assert a claim of racial discrimination under the

Human Rights Act [(775 ILCS 5/1-101 et seq. (West 1996))] that is independent of his

contractual right under the collective bargaining agreement.”

¶ 75 We have no quarrel with plaintiffs’ argument that individual employees can bring claims

independent of collective bargaining agreements. However, in the case at bar, the claims that the

current CTA employees raise are not independent of the CBAs between the CTA and the transit

unions. In the cases cited by plaintiffs, even in the absence of a collective bargaining agreement,

the plaintiffs in those cases would have the right to bring causes of action for retaliatory

discharge, procedural due process, and racial discrimination. By contrast, here, in the absence of

the CBAs and the retirement plan agreement incorporated therein, plaintiffs would have no

retiree health care benefits to protect. The benefits originated in the CBAs, they are administered

as provided for in the retirement plan agreement, and they were changed by the CBAs. We can

find no legal basis to determine that any of the claims alleged concerned the retiree health care

benefits independent of the CBAs.

¶ 76 In the case at bar, the trial court correctly determined that the current CTA employees do

not have standing to raise their claims. The current CTA employees could have filed an unfair

labor practice charge against the transit unions, arguing that the transit unions breached their duty

of fair representation (1) in agreeing to a CBA that included terms that could be unconstitutional,

violated the RTA Act, and breached promises made to CTA employees; and (2) in not appealing

the Benn award, which set forth the terms that were incorporated into the 2007 CBA, and which

was the basis for the 2008 Act. Although we are sympathetic to the current CTA employees’

25 No. 1-12-3348

plight, we see no way that they have standing to raise their claims.7

¶ 77 As a final matter, plaintiffs argue that the grievance procedure provided by the CBAs

does not apply to the retirement plan agreement, based on a provision in the retirement plan

agreement granting the Retirement Allowance Committee (now the Retirement Plan Board) the

power “to decide any questions arising in the administration, interpretation and application of

this Plan.” However, the retirement plan agreement is expressly part of the CBAs, and the CBAs

set forth a detailed grievance process, and we cannot say that the above statement is intended to

replace the CBAs’ grievance procedure for issues concerning the retirement plan agreement.

¶ 78 III. Claims Involving the CTA

¶ 79 Next, we consider whether the trial court properly granted the CTA’s motion to dismiss

since the CTA had no responsibility for the payment of retiree health care benefits. The trial

court found that the Dworkin award, as well as the 2008 Act, established that the CTA did not

have any duty to pay for retiree health care benefits. On appeal, plaintiffs8 argue that the

complaint alleges facts “that establish the CTA’s obligation to provide plaintiffs’ retiree health

benefits, including access to the group plans for active employees.”

¶ 80 As an initial matter, the CTA asks us to strike certain sections of plaintiffs’ brief and

7 Indeed, our conclusion is bolstered by the fact that, in researching the issues present in the instant case, we have been unable to discover any cases concerning retirement health benefits in which current employees are plaintiffs; instead, plaintiffs are universally either retired employees or unions. 8 As we have determined that the current CTA employees do not have standing and were properly dismissed, any reference to “plaintiffs” for the remainder of the opinion refers only to the class I plaintiffs remaining.

26 No. 1-12-3348

dismiss plaintiffs’ appeal because the sections of plaintiffs’ brief concerning the CTA do not

contain citations to authority. Illinois Supreme Court Rule 341(h)(7) (eff. July 1, 2008) requires

the appellant to support its arguments with citations to authority and a failure to do so may result

in forfeiture of the issue on appeal. See People v. Ward,

(2005) (“point

raised in a brief but not supported by citation to relevant authority *** is therefore forfeited”); In

re Marriage of Bates,

(2004) (“A reviewing court is entitled to have issues

clearly defined with relevant authority cited.”). However, waiver is an admonition to the parties,

not a limitation upon the powers of courts of review. Flynn v. Ryan,

, 438 n.1

(2002). Here, since plaintiffs’ main argument concerning the CTA depends on the meaning of

the language of the Dworkin award and the retirement plan agreement, we are able to analyze

their argument effectively despite the lack of citations to authorities and choose to do so. Thus,

we proceed to consider the issue on its merits.

¶ 81 Plaintiffs argue that the CTA has a “long-standing and continuing obligation[] under the

CBA for retiree health benefits.” They point to the fact that the CTA is the employer signatory to

the CBAs, and argue that “[i]t would be contrary to the basic laws of contracts and collective

bargaining for the CTA to negotiate an employee benefit and have no responsibility at all for its

role in changing the retirement system to negate the benefits that it promised.” They also argue

that, while the retirement plan agreement provides for payment of retiree health care benefits out

of the Retirement Plan’s assets, “it does not mandate that the cost of retiree health benefits would

be paid exclusively from the Retirement Plan, with no obligation of the CTA.” Instead, they

claim that the CTA was obligated to pay any costs not covered by the Retirement Plan, and the

27 No. 1-12-3348

CTA acted in accordance with this obligation until its breach in 2009. We do not find plaintiffs’

argument persuasive.

¶ 82 While we acknowledge that we must take plaintiffs’ allegations as true for the purpose of

a motion to dismiss, an examination of the Dworkin award and the language of the CBAs leads

us to the same conclusion reached by the trial court: that the CTA does not have a contractual or

statutory obligation to provide retiree health care benefits. First, the May 16, 1980, Dworkin

award ordered the retirement plan agreement to be amended and stated that, “[e]ffective [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, at which time the Retirement Plan would pay up to $75. Thus, as

of 1980, the responsibility of paying the retiree health care benefits shifted from the CTA to the

Retirement Plan.9

¶ 83 Plaintiffs argue that the award was relevant only to the CBA governed by it, and that it

does not speak to the issue of whether the CTA is now obligated to pay for retiree health care

benefits. Plaintiffs also argue that the Dworkin award only concerned payment of premiums and

did not concern the CTA’s obligation to provide retired CTA employees with access to the same

insurance plans provided to active CTA employees. However, plaintiffs’ argument overlooks the

language of the CBAs, and the retirement plan agreement incorporated therein.

9 Plaintiffs clarified during oral argument that class I does not include any retired CTA employees who retired prior to 1980.

28 No. 1-12-3348

¶ 84 As plaintiffs admit, the retirement plan agreement provides for payment of retiree health

care benefits from Retirement Plan assets. Nevertheless, plaintiffs claim that the retirement plan

agreement does not state that those benefits are exclusively paid for by the Retirement Plan, and

that the CTA has an obligation to pay the difference between the retired employees’ premiums

and the amount paid by the Retirement Plan. However, section 7.5 of the retirement plan

agreement specifically provides:

“All payments and benefits provided for in this Plan *** shall be

made from the Fund and there shall be no obligation on the part of

the Authority or the employees to provide for payments of benefits

from any other source; and there shall be no liability on the

Authority or employees to make any contributions other than those

specified in Paragraph 7.1 and Paragraph 21.1(1) and Paragraph

22.2 hereof.”

Thus, under the specific terms of the retirement plan agreement, the CTA has no obligation to

make any contributions other than those set forth in the retirement plan agreement.

¶ 85 Plaintiffs make the claim that section 7.5 does not apply to retiree health care benefits,

arguing that the “Plan” referred to in the section “is a defined term referring to only the

‘retirement and disability allowance plan.’ *** It does not include the separate ‘Group Hospital

Surgical Major Medical Plan or the Health Maintenance Organization premium’ in Section

20.12.” However, plaintiffs’ argument mischaracterizes the definition of “Plan” in section 1.1 of

the retirement plan agreement, which states in full:

29 No. 1-12-3348

“The retirement and disability allowance plan which is the subject

of this agreement shall be known as ‘RETIREMENT PLAN FOR

CHICAGO TRANSIT AUTHORITY EMPLOYEES’ and is

sometimes referred to in this agreement as ‘this Plan’ or ‘the

Plan.’ ” (Emphasis in original.)

Clearly, the “Plan” is the retirement plan agreement in its entirety, not simply the portions

concerning pensions and disability benefits.10 Were it otherwise, section 20.12 of the retirement

plan agreement, which concerns retiree health care benefits, would not contain any references to

the “Plan” paying for health care benefits. Accordingly, the terms of the retirement plan

agreement contradict plaintiffs’ claims that the CTA had an obligation to pay retiree health care

benefits.

¶ 86 All is not lost for plaintiffs, however. Although the CTA does not have a contractual or

statutory obligation to pay for retiree health care benefits, plaintiffs have alleged that the CTA

nevertheless continued to pay for retiree health care until 2009 and, at this early stage of the

proceedings, “we accept as true all well-pleaded facts and all reasonably drawn inferences from

those facts in favor of the plaintiff.” Doe,

. As will be explained later in our

opinion, plaintiffs’ allegations are sufficient to state a cause of action for promissory estoppel and

declaratory judgment as we cannot find that it is clearly apparent that no set of facts can be

proved that would entitle the plaintiff to relief. Feltmeier,

. Thus, while the

10 Sometimes, based on context, the “Plan” is the Retirement Plan as an entity, not the retirement plan agreement as a written contract. Nevertheless, the point remains that the “Plan” is not limited to solely pensions and disability benefits.

30 No. 1-12-3348

trial court correctly granted the CTA’s motion to dismiss with respect to the majority of the

claims against it, those two counts remain and should not have been dismissed.

¶ 87 IV. Vesting of Retiree Health Care Benefits

¶ 88 We next turn to the issue of whether the retired CTA employees had a vested right to

retiree health care benefits. After dismissing the CTA and finding the current CTA employees

lacked standing, the trial court found the issue of vesting dispositive of the rest of plaintiffs’

claims. In essence, the trial court concluded that since plaintiffs had no vested right to retiree

health care benefits, plaintiffs could not state a cause of action under any of their theories of

recovery. The trial court found that the retirement benefits were not vested rights because (1) the

language of the retirement plan agreement did not include an intention to vest in “clear and

express language,” and (2) the retirement plan agreement and the CBAs included language

reserving the right to modify the benefits in collective bargaining. On appeal, plaintiffs do not

dispute the trial court’s conclusion that vesting is a threshold issue, but argue that their rights

were vested and, therefore, the trial court erred in granting defendants’ motion to dismiss.

¶ 89 Plaintiffs argue that their retiree health care benefits were vested under two theories: (1)

the language of the retirement plan agreement itself and (2) the language of article XIII, section 5

of the Illinois Constitution. We first consider plaintiffs’ contractual argument and will only

consider plaintiffs’ constitutional argument if necessary. See Marconi v. City of Joliet,

(“we must avoid the adjudication of constitutional questions when a case

can be decided on other grounds”).

31 No. 1-12-3348

¶ 90 A. Language of Retirement Plan Agreement

¶ 91 1. Presumption

¶ 92 Plaintiffs argue that, under the terms of the retirement plan agreement, their right to

retiree health care benefits was vested. In considering the language of the retirement plan

agreement, we must first determine whether there is a presumption either in favor of or against

vesting of retirement health care benefits. There are two Illinois cases cited by the parties

speaking to this issue: Haake v. Board of Education for Glenbard Township High School District

87,

(2010), a Second District case applying federal law, which, in the

Seventh Circuit, includes a presumption against vesting; and Marconi v. City of Joliet,

, a Third District case applying state law and imposing a presumption in favor

of vesting.11

¶ 93 In Haake, the Second District considered whether the defendant school board could

reduce the health insurance benefits provided to retired teachers pursuant to CBAs between the

school board and the teachers’ union, after those CBAs had expired. Haake,

. In its analysis, the Haake court indicated that there was little Illinois case law on point

because “federal common law developed under section 301 of the [Labor-Management Relations

Act, 1947 (

(2000))] is supposed to be applied in any case requiring the

interpretation of a collective bargaining agreement.” Haake,

. Thus, the

11 Marconi had not yet been decided at the time of the trial court’s decision in the case at bar. Accordingly, neither the trial court nor the parties relied on the case below. However, the impact of the case has been discussed in the non-CTA defendants’ response brief and plaintiffs’ reply brief on appeal.

32 No. 1-12-3348

court applied federal law to its analysis. Haake,

.

¶ 94 The Haake court noted that the question was whether the retiree health care benefits had

vested, “so that they survive the expiration of the agreement granting them” and further noted

that “[n]o federal statute requires employers to grant health insurance benefits to retirees, and

such benefits are vested only if the contract under which they were provided so states.” Haake,

(citing Bland v. Fiatallis North America, Inc.,

(7th Cir.

2005)). “ ‘[B]ecause employers are not legally required to vest benefits, the intention to vest

must be found in “clear and express language.” ’ ” Haake,

(quoting

Bland,

, quoting Inter-Modal Rail Employees Ass’n v. Atchison, Topeka & Santa

Fe Ry. Co.,

(1997)). Under the terms of the contracts before it, the court

concluded that the intention to extend the duration of the retiree health care benefits beyond the

expiration of the contacts was clearly expressed. Haake,

.

¶ 95 The Haake court rejected the school board’s argument that, under Seventh Circuit case

law, there is a presumption that retiree health care benefits terminate when the CBA providing

for them expires, finding that the presumption applied “only if a collective bargaining agreement

is utterly silent on the question of whether the health insurance benefits provided therein were

intended to survive the expiration of the collective bargaining agreement.” Haake,

-33 (citing Bland,

, and Rossetto v. Pabst Brewing Co.,

(7th Cir. 2000)). Since the contracts before it were not silent, “the presumption [was] not

applicable.” Haake,

.

¶ 96 Three years later, in Marconi, the Third District disagreed with the Haake court’s

33 No. 1-12-3348

conclusion that federal law applied to the interpretation of collective bargaining agreements

involving state governments. Marconi,

. In that case, the

plaintiffs, retired firefighters and police officers, sued the City of Joliet, their former employer, in

response to the city’s decision to reduce some of the retirement health benefits that were

promised to them. Marconi,

. The plaintiffs argued that the

changes to their benefits violated article XIII, section 5, of the Illinois Constitution because it

diminished the health care benefits to which they were contractually entitled at the time of their

retirement. Marconi,

.

¶ 97 The Marconi court first focused on “whether each plaintiff has a vested right to receive

the specific health care benefits promised in the collective bargaining agreement under which he

retired, thereby barring the City from unilaterally reducing such benefits after his retirement.”

Marconi,

. If not, then the plaintiffs’ entitlement to the benefits

provided in the CBAs expired when the agreements terminated, and no principle of contract law

would bar the city from reducing those benefits after the plaintiffs retired. Marconi,

. Only in the event that the benefits were not vested according to the contract

would the court consider whether the city’s reduction of the benefits violated the Illinois

Constitution. Marconi,

.

¶ 98 Prior to addressing the merits of the case, the Marconi court considered whether federal

or state law applied to the plaintiffs’ claims, and whether a presumption concerning vesting

applied. The Marconi court noted that the Haake court concluded that federal law applied to

claims for breach of a collective bargaining agreement, but disagreed with that conclusion.

34 No. 1-12-3348

Marconi,

. The Marconi court noted that, “[a]lthough state-law

claims for breach of a collective bargaining agreement by a private employer are generally

preempted by federal labor law, the federal act does not apply where the employer is ‘any State or

political subdivision thereof.’ ” Marconi,

(quoting

(2) (2000)). Accordingly, the court concluded that, since the City of Joliet was a political

subdivision of the State of Illinois, “any claim involving the interpretation of the plaintiffs’

collective bargaining agreements arises under Illinois law, not federal law.” Marconi,

.

¶ 99 The Marconi court then examined whether a presumption should be applied either in

favor of or against vesting. The court noted that several courts, including the Seventh Circuit,

applied a presumption against the vesting of retirement benefits under a collective bargaining

agreement, finding that such benefits vested only if the presumption was rebutted through

contractual language or by extrinsic evidence showing that the parties intended the benefits to

survive the expiration of the agreement. Marconi,

(citing Bidlack

v. Wheelabrator Corp.,

(7th Cir. 1993)). However, the court also noted that

other courts, namely, the Supreme Court of Wisconsin, applied a presumption in favor of vesting

retirement health care benefits. Marconi,

. The court then

engaged in a thorough examination of the Supreme Court of Wisconsin’s decision in Roth v. City

of Glendale,

,

,

, in which the Wisconsin court

“applied a presumption that health benefits promised in a collective bargaining agreement vest

unless: (1) the language of the agreement suggests otherwise; or (2) the agreement is ambiguous

35 No. 1-12-3348

and extrinsic evidence demonstrates that the parties did not intend the benefits to vest,” reasoning

that “this presumption ‘comports with a more far-reaching understanding of the context in which

retiree benefits arise and serves to fulfill the legitimate expectations of employees who have

bargained for those benefits.’ ” Marconi,

(quoting Roth,

,

,

).

¶ 100 The Roth court noted that “employers offer employment benefits to attract and maintain

personnel, and that ‘[t]he employer’s promise of such benefits is an inducement to provide

services for that particular employer to the exclusion of other employment opportunities.’ ”

Marconi,

(quoting Roth,

,

,

). Thus, treating such benefits as mere gratuities that could be changed by the

employer after the employee’s retirement would frustrate the legitimate expectations of retirees.

Marconi,

.

¶ 101 The Roth court also set forth several equitable considerations weighing in favor of a

vesting presumption, including “the unfairness of allowing an employer to offer retirement

benefits as an inducement to employment and, after an employee has accepted employment under

such circumstances and satisfied all the contractual conditions entitling him to such benefits,

[allowing the employer to then] disregard or modify its contractual obligations.” Marconi,

. Furthermore, “ ‘many retirees live solely on their retirement benefits,’

and *** ‘[r]etirees with fixed incomes are generally ill-prepared to meet additional financial

obligations that were unanticipated and that may be incrementally modified without notice.’ ”

Marconi,

(quoting Roth,

,

,

36 No. 1-12-3348

). Finally, the Roth court noted that unions were not obligated to represent the

interests of retired employees during collective bargaining and that bargaining for continued

benefits “ ‘may create conflicts of interest between the retirees and the current union employees,’

” and a presumption in favor of vesting thus “ ‘serves to protect the voiceless in the subsequent

negotiating process.’ ” Marconi,

(quoting Roth,

,

,

).

¶ 102 The Marconi court found Roth’s reasoning persuasive, finding:

“Unless the contractual language or extrinsic evidence clearly

shows otherwise, retirement health care benefits promised under a

collective bargaining agreement are not mere gratuities that may be

unilaterally reduced or eliminated by the employer after an

employee has earned them. The promise of health insurance

benefits at retirement may induce an employee to accept a job and

to work for the requisite number of years in order to become

eligible for such benefits. [Citation.] This provides a substantial

benefit to the employer. Accordingly, once an employee becomes

eligible for health insurance benefits and retires under the

agreement, the right to receive the benefits vests, and the employer

must provide the benefits as promised in the agreement.

[Citations.]” Marconi,

.

The Marconi court further found that fundamental fairness requires a presumption in favor of

37 No. 1-12-3348

vesting:

“When the promise of retirement health benefits induces an

employee to work for an employer until he becomes eligible for

such benefits, this inducement may prevent him from finding

alternative ways to prepare for retirement, either by finding other

employment with higher wages or benefits or by negotiating with

the employer for higher wages in lieu of retirement benefits so that

he can start his own personal retirement account. [Citation.] Such

an employee may be put in an untenable position when his

employer unilaterally withdraws or diminishes his benefits after the

employee has retired. [Citation.] He may be forced to incur a

‘substantial financial burden for which [he] had not planned at a

time when it is least affordable.’ ” Marconi,

(quoting Poole v. City of Waterbury,

(Conn. 2003)).

Finally, the Marconi court found that a presumption in favor of vesting “protects retirees from

the vagaries of a collective bargaining process that no longer represents their interests,” since

unions only represented the interests of active employees when negotiating a new collective

bargaining agreement, not the interests of employees who had already retired, and,

“[a]ccordingly, unions have every incentive to bargain for conditions that would benefit active

employees at the expense of retirees.” Marconi,

.

38 No. 1-12-3348

¶ 103 The Marconi court rejected the city’s argument that the court should not use the vesting

presumption applied in Roth because “Roth announced a policy preference of the Wisconsin

Supreme Court that is ‘in open opposition to Seventh Circuit jurisprudence.’ ” Marconi,

. The Marconi court again noted that federal law did not apply to state-

law claims for breach of a collective bargaining agreement by a municipal employer. Marconi,

. Furthermore, the court pointed out that most of the federal cases

that apply an inference against vesting of retiree health care benefits addressed claims in which

the Employment Retirement Income Security Act of 1974 (ERISA) (

et seq.

(2000)) was at issue, and that ERISA requires the vesting of pension rights, but not health or

other welfare benefits for retirees, leading some federal courts to conclude that a presumption

against the vesting of retirement health care benefits is appropriate; since ERISA did not apply to

government-sponsored and government-funded benefit plans, any inference against vesting

implied by ERISA had no application. Marconi,

. Finally, the

Marconi court noted that, even within the federal courts, not all courts followed the Seventh

Circuit’s presumption against the vesting of retirement health care benefits. Marconi,

. See, e.g., International Union, United Automobile, Aerospace, &

Agricultural Implement Workers of America (UAW) v. Yard-Man, Inc.,

(6th

Cir. 1983) (finding that when the parties contract for benefits that accrue upon achievement of

retiree status, “there is an inference that the parties likely intended those benefits to continue as

long as the beneficiary remains a retiree”). Accordingly, the Marconi court stated:

“[W]e rule that the plaintiffs’ collective bargaining agreements

39 No. 1-12-3348

should be interpreted in light of a presumption in favor of the

vesting of retirement health care benefits, as in Roth. We will

therefore presume that such benefits vest unless: (1) the language

of the collective bargaining agreements unambiguously suggests

otherwise; or (2) if the contract language is ambiguous, extrinsic

evidence suggests that the parties did not intend the benefits to

vest.” Marconi,

.

¶ 104 In the case at bar, we find Marconi’s reasoning persuasive. Accordingly, in our

examination of the terms of the CBAs and retirement plan agreement, we will apply a

presumption in favor of vesting.

¶ 105 2. Contractual Terms

¶ 106 We now turn to the consideration of whether the terms of the CBAs and the retirement

plan agreement provided for vested retiree health care benefits. The principal objective in

construing a contract is to determine and give effect to the intention of the parties at the time they

entered into the contract. Fleet Business Credit, LLC v. Enterasys Networks, Inc.,

(2004). “ ‘[A]n agreement, when reduced to writing, must be presumed to speak the

intention of the parties who signed it. It speaks for itself, and the intention with which it was

executed must be determined from the language used. It is not to be changed by extrinsic

evidence.’ ” Air Safety, Inc. v. Teachers Realty Corp.,

(1999) (quoting

Western Illinois Oil Co. v. Thompson,

(1962)). A court interpreting a contract

begins by examining the language of the contract alone, and “[i]f the language of the contract is

40 No. 1-12-3348

facially unambiguous, then the contract is interpreted by the trial court as a matter of law without

the use of parol evidence.” Air Safety,

(citing Farm Credit Bank of St. Louis v.

Whitlock,

(1991)). If an ambiguity is present, then the court may admit parol

evidence to aid in resolving the ambiguity. Air Safety,

-63 (citing Whitlock,

). “In interpreting a contract, it is presumed that all provisions were intended for a

purpose, and conflicting provisions will be reconciled if possible so as to give effect to all of the

contract’s provisions.” Shorr Paper Products, Inc. v. Aurora Elevator, Inc.,

(1990). Additionally, in interpreting the retirement plan agreement, “unless the language of

the collective bargaining agreements or extrinsic evidence shows that the parties did not intend

the health benefits at issue to vest, we will presume that the parties intended these benefits to

survive the expiration of the collective bargaining agreements.” Marconi,

.

¶ 107 a. Section 20.12 of the Retirement Plan Agreement

¶ 108 In the case at bar, we cannot find that the language of the retirement plan agreement

unambiguously provides that retiree health care benefits were not intended to be vested rights.

Under section 20.12 of the retirement plan agreement:

“(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

41 No. 1-12-3348

such coverage for a retiree on December 31, 2003. This benefit

terminates when the retiree attains age 65.”

This section expressly provides that “[t]his benefit terminates when the retiree attains age 65,”

indicating that the benefit is intended to continue past the expiration of the CBA in force when

the CTA employee retires.12 Haake,

(finding that a provision stating that

“benefits would be paid until the retiree reached the age of 65" “clearly expressed the intent that

the duration of the retiree health insurance benefits was to extend beyond the expiration of the

contracts”). Accordingly, the rights provided under section 20.12 are vested rights that may not

be changed after the CTA employee retires.

¶ 109 We note that, while section 20.12 appears to cap the level of payments to the premium

costs as of December 31, 2003, plaintiffs allege in their complaint that, in actuality, “from 1980

to July 2009, Transit Union members, employees represented by other unions, and non-union

employees hired before September 5, 2001, were provided retiree health care benefits identical to

those provided to active employees, and were not charged for this retiree health care benefit.”

For the purposes of a section 2-615 motion to dismiss, all well-pleaded facts in the complaint,

and all reasonable inferences that may be drawn from those facts, are taken as true. Young v.

Bryco Arms,

(2004). Additionally, even if the precise contours of the benefit

are in dispute, the retirement plan agreement is clear that, at the very least, benefits up to the

level of the December 31, 2003, amount were intended to be vested rights. Whether benefits

12 As noted, the retirement plan agreement is a separate document from the CBAs, but is expressly incorporated into the CBAs.

42 No. 1-12-3348

beyond that level were vested is a question of fact dependent on the course of conduct between

the parties and is inappropriate for resolution on a motion to dismiss.

¶ 110 b. Other Provisions

¶ 111 Defendants point to several other portions of the retirement plan agreement and CBAs

that they claim demonstrate that the CTA and the transit unions did not intend to provide

plaintiffs with a vested right to retiree health care benefits. Under section 17.1 of the retirement

plan agreement:

“[A]n employee retiring under the Plan, desiring that any group

health insurance benefit made available for the employee and

eligible dependents, by the Authority, in the then existing labor

agreement between the parties for active employees, or an

employee who immediately prior to retirement was eligible for said

benefits made available by any health maintenance organization

under contract with the Authority to provide benefits and who

desires to continue such benefits upon retirement may authorize the

[Retirement Allowance] Committee in writing to deduct monthly

from his benefits due under the Plan an amount to pay his monthly

premiums or rate.”

Defendants argue that, “[i]f the CTA and Unions intended to vest Retirees with ‘fully paid’

health insurance to age 65, then they would not have included Section 17.1 allowing the

[Retirement] Plan to deduct money from Retirees’ pension checks to pay for health insurance

43 No. 1-12-3348

premiums.” However, under the terms of the retirement plan agreement, CTA employees hired

as of September 5, 2001, did not receive retiree health care benefits, nor did dependents of CTA

employees. Thus, the provision for deducting money from retired CTA employees’ pension

checks is not inconsistent with an intention to vest benefits provided under section 20.12.

¶ 112 Defendants also point to sections 8 and 11 of the retirement plan agreement, which

expressly provide for vesting of lifetime pension benefits, and section 21, which concerns

distribution of funds in the event of abandonment of the Retirement Plan. Section 8.1 provides

that a retiring employee “shall receive an annual retirement allowance paid in equal monthly

installments for life” according to the formula set forth in the retirement plan agreement, while

section 11 expressly concerns payment of a “deferred vested old-age retirement allowance.”

Defendants claim that the fact that the retirement plan agreement specifically uses the terms

“vested” and “for life” when referring to pension benefits means that the absence of such

language when referring to retiree health care benefits demonstrates an intention not to vest, as

does the fact that section 21 discusses only payment of pension benefits and not health care

benefits upon abandonment of the Retirement Plan. We do not find this argument persuasive.

¶ 113 As noted, although the health care benefits are not provided “for life,” section 20.12

expressly indicates that the benefits “terminate[] when the retiree attains age 65,” indicating that

the benefit is contemplated to extend past the expiration of the CBA. The fact that pension

benefits extend for a longer period of time than health care benefits does not mean that the right

to health care benefits is not a vested one. The same reasoning applies to payments made upon

abandonment of the Retirement Plan. Additionally, the scenario at issue in section 11 is the

44 No. 1-12-3348

situation in which an employee “becomes separated from the service of the Authority (other than

by death) after he has completed ten (10) or more years of continuous service and prior to his

eligibility for a retirement allowance”; it is entirely reasonable for the retirement plan agreement

to make clear that such an employee is entitled to a deferred vested retirement allowance. Such

language is not inconsistent with an intention that other benefits in the retirement plan agreement

are also vested rights.

¶ 114 c. Presence of Reservation of Rights Clause

¶ 115 Finally, we are not persuaded by defendants’ argument that the CBAs contain a

reservation of rights clause, preventing the benefits from vesting as a matter of law. Defendants’

argument relies on several provisions of the retirement plan agreement and 2004 and 2007 CBAs.

First, section 19.2 of the 2004 CBA provides for modifying the CBA, stating 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.” Section 20.2 of the 2007 CBA has identical

language, except that the effective date of modifications was “January 1, 2012, or any

anniversary date thereafter.” Both the 2004 and 2007 CBAs also provide that the retirement plan

agreement is incorporated in full into the CBA “in all respects and for all purposes, including

future proposals for revision in the Plan and in the negotiation or arbitration of proposed

revisions.” Finally, the retirement plan agreement provides that it “is part of the Wage and

Working Conditions Agreement between the parties hereto. This Agreement can be changed

only in accordance with the provisions of the aforesaid Wage and Working Conditions

45 No. 1-12-3348

Agreement.” Defendants argue that the language in these provisions reserve the right of the CTA

and the transit unions to modify retirement benefits.

¶ 116 Defendants rely on federal case law, as did the trial court. While, as noted, state and not

federal law applies to the instant case, the federal cases are nonetheless helpful in interpretation

of reservation of rights clauses. Both the trial court and defendants cite the Seventh Circuit case

of International Union of United Automobile, Aerospace & Agricultural Implements Workers of

America v. Rockford Powertrain, Inc.,

(7th Cir. 2003), in support of a finding that a

reservation of rights clause prevented benefits from vesting in the instant case. In Rockford

Powertrain, the court determined that the plaintiff retired employees did not have a vested right

to retirement health benefits based on two clauses in the collective bargaining agreements

between the employees’ union and their employer. Rockford Powertrain,

. The

plaintiffs pointed to a “lifetime benefits clause,” which provided that “ ‘health coverage is

continued until . . . death . . . [i]f you die after retirement, health coverage may be continued for

your spouse,’ ” arguing that this section unambiguously vested them with lifetime health care

benefits. Rockford Powertrain,

. The court noted that “[t]he plaintiffs’

interpretation, however, ignores two equally important clauses contained in the plan description.”

Rockford Powertrain,

. First, the lifetime benefits clause was followed by a “plan

termination clause” that provided that, “ ‘in the event this group plan is terminated, [health

insurance] coverage for you and your dependents will end immediately.’ ” Rockford Powertrain,

. Additionally, a “reservation of rights clause” provided the defendant

employer’s “reservation of its right to modify benefits, found in the ‘Future of the Plans’ section

46 No. 1-12-3348

of the plan description: ‘[a]lthough the company expects and intends to continue the plan

indefinitely, it reserves the right to modify, amend, suspend or terminate them at any time.’ ”

Rockford Powertrain,

.

¶ 117 The court sought to resolve the tension between the lifetime benefits clause and the plan

termination and reservation of rights clauses, and determined that, reading the plan documents in

their entirety, “the clauses explain that although the plan in its current iteration entitles retirees to

health coverage for the duration of their lives and the lives of their eligible surviving spouses, the

terms of the plan -- including the plan’s continued existence -- are subject to change at the will of

[Rockford Powertrain].” Rockford Powertrain,

. Thus, the court concluded that

“[t]he health insurance section of the plan description unambiguously does not provide the

plaintiffs with vested lifetime health insurance benefits” and further noted that “[t]here is no

ambiguity in a plan description that states that retirees are currently entitled to life insurance

benefits, but also that these benefits are subject to change.” Rockford Powertrain,

.

¶ 118 We find no analogous reservation of rights clauses in the case at bar. In Rockford

Powertrain, the two clauses provided that “ ‘coverage for you and your dependents will end

immediately’ ” upon termination of the plan and that the company specifically “ ‘reserves the

right to modify, amend, suspend or terminate them at any time.’ ” Rockford Powertrain,

. By contrast, none of the provisions defendants point to include any indication that they

have the right to suspend or terminate the retirement health care benefits, only that the provisions

of the retirement plan agreement “can be changed only in accordance with the provisions of the

47 No. 1-12-3348

aforesaid Wage and Working Conditions Agreement.”

¶ 119 We must also note that defendants’ brief misrepresents the holding of Rockford

Powertrain in stating that the case “held that the following provision in a collective bargaining

agreement, which was incorporated into the retirement plan, unambiguously provided for

reservation of rights: ‘this Agreement may be amended or modified in writing by mutual

agreement’ ” (emphasis omitted) (quoting Rockford Powertrain,

). The

reservation of rights clause relied upon by the Rockford Powertrain court is as quoted above in

our discussion of the case. The language quoted by defendants is referred to as the “bargaining

provision” by the Seventh Circuit and is discussed in the context of the plaintiffs’ argument that

their benefits could not be unilaterally modified during the term of the collective bargaining

agreement. Rockford Powertrain,

. The Seventh Circuit did not discuss this

provision in its analysis of reservations of rights. Thus, the similarity of that language to

language present in the CBAs in the instant case does not support defendants’ argument

concerning a reservation of rights clause.

¶ 120 Similarly, Pabst Brewing Co. v. Corrao,

(7th Cir. 1998), does not support

defendants’ position since it did not consider the presence of a reservation of rights clause.

Instead, it focused on the existence of the phrase “ ‘for the term of this Agreement’ ” in finding

that retirement health care benefits were not vested rights. Pabst,

; see also

Pabst,

(Ripple, J., dissenting) (noting that “[t]he majority places a great deal of

emphasis on the clause ‘[f]or the term of this Agreement’ ”); Rossetto v. Pabst Brewing Co.,

(7th Cir. 2000) (noting that “ ‘during the term of this agreement’ ” was “the

48 No. 1-12-3348

formula that we held in [Corrao] eliminated any patent ambiguity”). Rossetto likewise did not

consider the presence of a reservation of rights clause and, in fact, found that the contract was

ambiguous, in part because of the lack of the phrase present in Corrao. Rossetto,

.

¶ 121 Finally, United Mine Workers v. Brushy Creek Coal Co.,

(7th Cir. 2007), is

not persuasive because the language there, like in Rockford Powertrain, expressly contemplates

termination of the benefits. There, while the plaintiffs were entitled to health benefits “ ‘for

life,’ ” the health plan “expressly entitle[d] Brushy to terminate it or alter its terms, ‘subject to the

Collective Bargaining Agreement.’ ” United Mine Workers,

. Additionally, a

clause in the collective bargaining agreement provided that “ ‘the benefits and benefit levels

provided by an Employer under its Employer plan are established for the term of this Agreement

only,’ ” which the Seventh Circuit noted “reinforces the right of termination or alteration that the

health plan confers on Brushy; it makes the benefits terminate when the agreement expires.”13

United Mine Workers,

. As noted, nothing in the agreements in the case at bar

states that the CTA or transit unions may terminate the retiree health care benefits, nor was there

any language expressly limiting the benefits to the term of the CBA.

¶ 122 In short, in the case at bar, defendants have provided no cases demonstrating that

language similar to that present in the CBAs has been considered to be a reservation of rights

13 The clause had a second part, providing that the benefits “ ‘may be jointly amended or modified in any manner at any time after the expiration or termination of this agreement,’ ” but the Seventh Circuit “disregarded” this portion of the clause to eliminate the inconsistency between the “ ‘jointly amended’ ” clause and the termination provision in the health plan. United Mine Workers,

.

49 No. 1-12-3348

clause that prevents vesting of contractual rights. The most analogous cases nevertheless include

much stronger language, including a right of termination. Moreover, even in Rockford

Powertrain, where the contract included a provision that “ ‘this Agreement may be amended or

modified ... in writing by mutual agreement’ ” (Rockford Powertrain,

), the court

did not consider that language in its reservation of rights analysis, indicating that the court did

not consider that provision as defeating vesting. Accordingly, we cannot agree with defendants

that the CBAs contain a reservation of rights clause, defeating the presumption that the right to

retiree health care benefits was a vested one, and instead find that plaintiffs have a vested right to

retiree health care benefits.

¶ 123 B. Constitutional Argument

¶ 124 Plaintiffs also argue that their retiree health care benefits were vested under the language

of article XIII, section 5, of the Illinois Constitution. Since we have determined that their rights

were vested pursuant to the language of the CBAs and the retirement plan agreement

incorporated therein, we have no need to consider whether the Illinois Constitution also provides

them with a vested right. See Marconi,

(“we must avoid the

adjudication of constitutional questions when a case can be decided on other grounds”).

¶ 125 V. Other Bases For Affirming

¶ 126 Since we have determined that the trial court erred in granting defendants’ motion to

dismiss on the basis that plaintiffs had no vested right to retiree health care benefits, we must

now consider the allegations of plaintiffs’ complaint to determine if there is any other basis for

affirming the trial court’s decision. Golf,

(we may affirm the dismissal of

50 No. 1-12-3348

a complaint on any ground that is apparent from the record). In their motion to dismiss,

defendants also raised the following arguments as bases for dismissal: (1) article XIII, section 5,

of the Illinois Constitution does not apply to health care benefits but only to pension benefits; and

(2) plaintiffs failed to state a cause of action for breach of contract, promissory estoppel, breach

of fiduciary duty, or declaratory judgment. We consider each argument in turn.

¶ 127 A. Constitutional Claim

¶ 128 The issue of whether the Illinois Constitution protects retired CTA employees’ retiree

health care benefits or is limited to pension benefits was not decided by the trial court, as its

decision was based on its conclusion that plaintiffs had no vested right to retiree health care

benefits. A similar constitutional issue is currently pending before our supreme court, and its

decision in that case will be instructive in providing an answer. See Kanerva v. Weems, No.

115811 (advisement docket, January Term 2014). Given that we are reversing the dismissal of

several counts of plaintiffs’ complaint and, therefore, the case will be before the trial court again

regardless of our conclusion on the constitutional issue, we reverse the dismissal of the

constitutional claim so that the trial court can consider it in light of the supreme court’s

forthcoming decision.

¶ 129 B. Breach of Contract

¶ 130 Next we consider whether plaintiffs have stated a claim for breach of contract. To prevail

on a breach of contract claim, a plaintiff must plead and prove: (1) that a contract existed, (2) that

the plaintiff performed his obligations under the contract, (3) that the defendant breached the

contract, and (4) that the plaintiff sustained damages as a result of the defendant’s breach.

51 No. 1-12-3348

Anderson v. Kohler,

(2009). In the case at bar, plaintiffs allege that

each CBA is a binding and enforceable contract; that by completing their service requirements

and fulfilling their employment obligations, the retired CTA employees performed their

obligations under each CBA; that all conditions precedent to defendants’ contractual obligations

have been satisfied; and that defendants breached each CBA, causing damage to plaintiffs by (1)

requiring retired CTA employees to pay for retiree health care benefits, (2) reducing the benefits,

(3) changing the benefits in a manner unauthorized by the CBA, and (4) effecting these changes

without consideration in exchange.

¶ 131 Since we have concluded that plaintiffs have a vested right to at least some portion of

their retiree health care benefits, and since plaintiffs have pleaded each element of the cause of

action for breach of contract, they have sufficiently stated a claim for breach of contract.

¶ 132 C. Promissory Estoppel

¶ 133 We next consider whether plaintiffs have stated a claim for promissory estoppel. In the

case at bar, plaintiffs allege that defendants made a number of promises to plaintiffs, notably, that

they would receive fully-paid health care benefits, that those benefits would be identical to those

enjoyed by active CTA employees, that their benefits would only be changed by a method

prescribed in a CBA, and that their benefits would not be changed without consideration received

in exchange. They further allege that they relied on these promises to their detriment by

accepting employment at the CTA, working at the CTA, and retiring from the CTA, and that

their reliance was expected and foreseeable. In considering plaintiffs’ claims, we consider the

non-CTA defendants and the CTA separately.

52 No. 1-12-3348

¶ 134 Generally, in order to establish a claim for promissory estoppel, a plaintiff must plead 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 defendants, and (4) plaintiff

relied on the promise to its detriment.” Newton Tractor Sales, Inc. v. Kubota Tractor Corp.,

(2009) (citing Quake Construction, Inc. v. American Airlines, Inc.,

(1990)).

¶ 135 “ ‘[P]romissory estoppel is a doctrine under which the plaintiff may recover without the

presence of a contract.’ ” Newton,

(quoting Illinois Valley Asphalt, Inc. v. J.F.

Edwards Construction Co.,

(1980)). Thus, a party will generally be

barred from seeking redress under the doctrine of promissory estoppel “where the performance

which is said to satisfy the requirement of detrimental reliance is the same performance which

supplies the consideration for [a] contract.” Prentice v. UDC Advisory Services, Inc.,

(1995). This is so because promissory estoppel is intended to enforce promises

that are not supported by consideration; “[i]t is not intended ‘to give a party to a negotiated

commercial bargain a second bite at the apple in the event it fails to prove breach of contract.’ ”

(Internal quotation marks omitted.) Prentice,

(quoting Wagner Excello

Foods, Inc. v. Fearn International, Inc.,

(1992)). While a party may

plead claims for both breach of contract and promissory estoppel in the alternative, “once it is

established, either by an admission of a party or by a judicial finding, that there is in fact an

enforceable contract between the parties and therefore consideration exists, then a party may no

longer recover under the theory of promissory estoppel.” Prentice,

.

53 No. 1-12-3348

¶ 136 In the case at bar, plaintiffs’ promissory estoppel claim against the Retirement Plan was

properly dismissed. There is no dispute that the CBAs were in existence, and the CBAs

governed the retiree health care benefits at issue in the case at bar through the retirement plan

agreement incorporated therein. Since there is no dispute as to the existence of a contract, but

only as to the meaning of the terms set forth therein, plaintiffs’ promissory estoppel claim must

fail. See Prentice,

n.2 (“It is, of course, irrelevant whether plaintiffs will

ultimately prove a breach of the contract since it is the existence of consideration and not the

existence of a breach which precludes reliance on the theory of promissory estoppel.”).

¶ 137 With regard to the CTA, however, our analysis is slightly different since the CTA is a

municipal corporation. 70 ILCS 3605/3 (West 2010). Although not raised by either party, “the

doctrine of promissory estoppel is inapplicable to the [government] absent ‘extraordinary

circumstances.’ ” Hamwi v. Zollar,

(1998) (quoting Hickey v.

Illinois Central R.R. Co.,

(1966)). “ ‘For a municipality to be estopped, there

must have occurred an affirmative act on the part of the municipality which induced substantial

reliance thereon by the litigant ***.’ ” LaBolle v. Metropolitan Sanitary District,

(1992) (quoting Diakonian Society v. City of Chicago Zoning Board of Appeals,

(1978)). Additionally, “ ‘such act must be the act of the municipality itself

(such as legislation by a city council) rather than merely the unauthorized act of a ministerial

officer or a ministerial representation.’ ” LaBolle,

(quoting Diakonian

Society,

). “ ‘If under all of the circumstances, the affirmative acts of the

public body have created a situation where it would be inequitable and unjust to permit it to deny

54 No. 1-12-3348

what it has done or permitted to be done, the doctrine of estoppel may be applied against it.’ ”

Morgan Place of Chicago v. City of Chicago,

(quoting Stahelin

v. Board of Education, School District No. 4,

(1967)).14

¶ 138 In the case at bar, as noted, the CTA’s motion to dismiss was granted on the basis that the

CTA did not have an obligation to provide health care benefits under the CBAs and the

retirement plan agreement, and we have found above that the CTA does not have a statutory or

contractual obligation to provide retiree health care benefits. However, plaintiffs have alleged

that the CTA continued to pay for health care benefits of retired CTA employees until 2009, and

we must take such statements as true for purposes of a motion to dismiss. If there was no

contract obligating the CTA to pay for retiree health care benefits, then the issue becomes

whether it was obligated through its conduct to continue the payments. This is an area in which

promissory estoppel may apply. Plaintiffs have alleged that the CTA made unambiguous

promises to plaintiffs, that plaintiffs relied on those promises to their detriment, and that their

reliance was expected and foreseeable by the CTA. At this early stage of the proceedings, we

cannot find that it is clearly apparent that no set of facts can be proved that would entitle the

plaintiff to relief. Feltmeier,

. Accordingly, plaintiffs have sufficiently

stated a cause of action for promissory estoppel against the CTA.

14 We do not apply this standard to the Retirement Plan, as it is not clear that it would be considered a governmental body. See Barry v. Retirement Board of Firemen’s Annuity & Benefit Fund,

(2005) (concluding that the defendant board was not a “governmental entity” for purposes of statutory interest, since neither it nor the fund it administered performed a governmental function).

55 No. 1-12-3348

¶ 139 D. Breach of Fiduciary Duty

¶ 140 Next, we consider whether plaintiffs have stated a claim for breach of fiduciary duty. To

state a cause of action for breach of a fiduciary duty, a plaintiff must allege and ultimately prove:

(1) a fiduciary duty on the part of the defendant; (2) a breach of that duty; (3) damages; and (4) a

proximate cause between the breach and the damages. Martin v. Heinold Commodities, Inc.,

(1994); Alpha School Bus Co. v. Wagner,

(2009). In the

case at bar, plaintiffs allege that the Retirement Plan Board and the Health Trust Board owed

plaintiffs fiduciary duties to act solely in their best interest as participants in and beneficiaries of

the Retirement Plan and the Health Trust, pursuant to section 1-109 of the Pension Code (40

ILCS 5/1-109 (West 2008)), and that they breached those duties through choosing to charge

retired CTA employees the maximum retiree contribution and withholding the contribution from

their pension checks.

¶ 141 Under the Pension Code:

“A person is a ‘fiduciary’ with respect to a pension fund or

retirement system established under this Code to the extent that the

person:

(1) exercises any discretionary authority or discretionary

control respecting management of the pension fund or retirement

system, or exercises any authority or control respecting

management or disposition of its assets; [or]

***

56 No. 1-12-3348

(3) has any discretionary authority or discretionary

responsibility in the administration of the pension fund or

retirement system.” 40 ILCS 5/1-1.02 (West 2008).

Further:

“A fiduciary with respect to a retirement system or pension fund

established under this Code shall discharge his or her duties with

respect to the retirement system or pension fund solely in the

interest of the participants and beneficiaries and:

(a) For the exclusive purpose of:

(1) Providing benefits to participants and their

beneficiaries; and

(2) Defraying reasonable expenses of administering

the retirement system or pension fund;

(b) With the care, skill, prudence and diligence under the

circumstances then prevailing that a prudent man acting in a like

capacity and familiar with such matters would use in the conduct

of an enterprise of a like character with like aims;

(c) By diversifying the investments of the retirement

system or pension fund so as to minimize the risk of large losses,

unless under the circumstances it is clearly prudent not to do so;

and

57 No. 1-12-3348

(d) In accordance with the provisions of the Article of the

Pension Code governing the retirement system or pension fund.”

40 ILCS 5/1-109 (West 2008).

Thus, we must first determine whether plaintiffs have alleged facts indicating that the Retirement

Plan Board and the Health Trust Board were fiduciaries and, if so, that they breached their duties

as fiduciaries to act solely in the interest of the participants and beneficiaries.

¶ 142 First, we consider whether the Retirement Plan Board and the Health Trust Board were

acting in a fiduciary capacity when (1) the Health Trust Board chose to charge retired CTA

employees the maximum retiree contribution for their health care benefits; and (2) the Retirement

Plan Board stopped paying for retiree health care and began withholding retiree contributions

from retired CTA employees’ pension checks. As noted, under the Pension Code, in order for

either defendant to be considered a fiduciary, it must have been exercising discretionary authority

in the administration or management of the Retirement Plan or Health Trust, respectively. 40

ILCS 5/1-1.02 (West 2008).

¶ 143 In considering whether a fiduciary under the Pension Code has breached its fiduciary

duty, our courts have looked for instruction to federal law interpreting analogous provisions of

ERISA. Board of Trustees of the Village of Barrington Police Pension Fund v. Department of

Insurance,

(1991). The United States Supreme Court has indicated

that, under ERISA, “[p]lan sponsors who alter the terms of a plan do not fall into the category of

fiduciaries. *** ‘[E]mployers or other plan sponsors are generally free under ERISA, for any

reason at any time, to adopt, modify, or terminate welfare plans.’ [Citation.] When employers

58 No. 1-12-3348

undertake those actions, they do not act as fiduciaries, [citation], but are analogous to the settlors

of a trust [citation].” Lockheed Corp. v. Spink,

(1996) (quoting Curtiss-

Wright Corp. v. Schoonejongen,

(1995)). “In general, an employer’s decision to

amend a pension plan[15] concerns the composition or design of the plan itself and does not

implicate the employer’s fiduciary duties which consist of such actions as the administration of

the plan’s assets.” Hughes Aircraft Co. v. Jacobson,

(1999). Thus, “[t]he

jurisprudence of this area is marked by the drawing of a sharp distinction between 1) the sponsors

of a plan acting as an administrator (which is discretionary and therefore fiduciary) and 2) the

sponsors of a plan amending, altering, terminating, or otherwise redesigning the plan itself

(functions considered to be not discretionary and therefore not fiduciary).” Walling v. Brady,

(3d Cir. 1997). “ ‘Discretion’ for the purpose of determining the applicability of

fiduciary obligations means solely that the plan administrator is making a choice reserved to it by

the plan document in administering the plan, not tinkering with the plan document itself.”

Walling,

.

¶ 144 In the case at bar, plaintiffs argue that the Health Trust Board owed fiduciary duties to

plaintiffs when exercising the discretion afforded to it under section 22-101B of the Pension

Code, which provides that the Health Trust Board “shall have the discretion to provide different

contribution levels for retirees, dependents and survivors based on their years of service, level of

coverage or Medicare eligibility, provided that the total contribution from all retirees,

15 The Supreme Court has stated that the fiduciary-settlor distinction applies to both pension and welfare plans in the same way. Spink,

.

59 No. 1-12-3348

dependents, and survivors shall be not more than 45% of the total cost of such benefits.” 40

ILCS 5/22-101B(b)(5) (West 2008). Defendants, on the other hand, argue that in setting

contribution levels, the Health Trust Board was not acting as a fiduciary but was merely acting as

a settlor. We agree with plaintiffs.

¶ 145 Plaintiffs rely on Tourangeau v. Uniroyal, Inc.,

(D.Conn. 1999), a district

court case from the District of Connecticut. There, the district court held that the act of raising

premium rates for lifetime medical, drug, and life insurance benefits was a fiduciary act.

Tourangeau, 189 F.R.D at 46. The court acknowledged that “[i]t is well settled that an employer

or sponsor organization does not act as a fiduciary when it amends, modifies, terminates or

changes benefits in an existing ERISA plan. *** Only when fulfilling certain defined functions,

including the exercise of discretionary authority or control over plan management or

administration does a person become a fiduciary.” Tourangeau,

. However, the

court found:

“The real issue here is whether the act of increasing contribution

rates was an amendment, modification or change in benefits to the

ERISA plan. Logic and recent case law supports the conclusion

that the act was not an amendment, but rather was a discretionary

act carried out in accordance with an existing plan provision which

provided for rate changes ‘in accordance with plan experience and

medical cost escalation.’ Because the act of changing contribution

rates was a valid exercise of an existing provision in the [ERISA]

60 No. 1-12-3348

plan that authorized such changes, it did not constitute a plan

amendment or modification.” Tourangeau,

.

¶ 146 Similarly, other courts have determined that, when making a decision permitted by the

plan and not altering the terms of the plan itself, the plan administrator is acting as a fiduciary

and not as a settlor. See, e.g., Abbott v. Pipefitters Local Union No. 522 Hospital, Medical, &

Life Benefit Plan,

(6th Cir. 1996) (finding that changing a multi-employer

welfare benefit plan to require different contribution levels from different unions was a fiduciary

function, since “the decision at issue was not one which affected plan design or which altered any

existing plan terms. Rather, the decision was an administrative one, squarely within the powers

of the trustees to make, but one which did not ‘modify’ or ‘amend’ the plan.”). We find the cases

cited by defendants to be inapposite, since they contained changes that were clearly amendments

and not the exercise of discretion explicitly granted to the trustees. Milwaukee Area Joint

Apprenticeship Training Committee for the Electrical Industry v. Howell,

(7th Cir. 1995) (finding that the adoption of a scholarship loan plan was an amendment to an

apprenticeship trust fund and not administration of it where, in adopting the plan, “the trustees

dictated that participants in the training program would no longer be able to accept employment

with non-contributing employers without incurring a repayment obligation” because “[t]his

constituted a substantive change to the terms of the Trust Fund’s apprenticeship program”);

Hartline v. Sheet Metal Workers’ National Pension Fund,

(D.C. Cir. 2002) (per

curiam) (finding that setting of nonuniform contribution rates in a multi-employer pension fund

was not a fiduciary function).

61 No. 1-12-3348

¶ 147 In the case at bar, the Health Trust Board was explicitly given the discretion to provide

different contribution levels for retirees, dependents, and survivors, as long as the total

contribution did not exceed 45% of the total cost of the benefits. 40 ILCS 5/22-101B(b)(5)

(West 2008). By making the choice to charge the maximum 45%, the Health Trust Board was

not amending or modifying the plan itself, but was exercising discretion that was specifically

given to it. Accordingly, we find that the Health Trust Board was acting as a fiduciary in setting

the contribution levels for plaintiffs, as was the Retirement Plan Board when it withheld the

funds from the retired CTA employees’ pension checks.

¶ 148 We next consider whether plaintiffs have alleged that the Health Trust Board and the

Retirement Plan Board breached their fiduciary duties. As noted, under the Pension Code:

“A fiduciary with respect to a retirement system or pension fund

established under this Code shall discharge his or her duties with

respect to the retirement system or pension fund solely in the

interest of the participants and beneficiaries and:

(a) For the exclusive purpose of:

(1) Providing benefits to participants and their

beneficiaries; and

(2) Defraying reasonable expenses of administering

the retirement system or pension fund;

(b) With the care, skill, prudence and diligence under the

circumstances then prevailing that a prudent man acting in a like

62 No. 1-12-3348

capacity and familiar with such matters would use in the conduct

of an enterprise of a like character with like aims;

(c) By diversifying the investments of the retirement

system or pension fund so as to minimize the risk of large losses,

unless under the circumstances it is clearly prudent not to do so;

and

(d) In accordance with the provisions of the Article of the

Pension Code governing the retirement system or pension fund.”

40 ILCS 5/1-109 (West 2008).

¶ 149 Plaintiffs claim that the defendant Boards were not acting “solely in the interest of the

participants and beneficiaries” (40 ILCS 5/1-109 (West 2008)) when they increased the retiree

contribution and withheld the funds from the retired CTA employees’ pension checks. “A plan

administrator’s duty to act in the best interest of all the beneficiaries cannot mean that it must

cater to the optimal needs of each individual beneficiary. All of the beneficiaries’ interests will

not always be aligned. The fiduciary must act as though it were a reasonably prudent business

person with the interests of all the beneficiaries at heart.” Ameritech Benefit Plan Committee v.

Communication Workers of America,

(7th Cir. 2000). In the case at bar, while

plaintiffs claim that the defendant Boards were not acting in plaintiffs’ best interests, plaintiffs

were not the only beneficiaries under the retirement plan agreement. Given the precarious state

of the funding of the Retirement Plan, we cannot find that plaintiffs have stated a claim that the

defendant Boards were not acting in the best interests of the beneficiaries and participants of the

63 No. 1-12-3348

Retirement Plan as a whole, and therefore affirm the dismissal of their breach of fiduciary duty

claims. We note that, in their reply brief, plaintiffs argue that “whether [the defendant Boards’]

actions were in the interest of any participant at all is a fact question that cannot be decided on a

motion to dismiss.” However, plaintiffs do not allege anywhere in their complaint that any of the

defendant Boards’ actions adversely impacted any beneficiaries other than themselves and it is

difficult to see how reducing the amount of money the Retirement Plan is forced to spend on

plaintiffs could adversely affect the other beneficiaries. Accordingly, as noted, we affirm the

dismissal of plaintiffs’ breach of fiduciary duty counts.

¶ 150 E. Declaratory Judgment

¶ 151 Finally, we consider whether plaintiffs stated a cause of action for declaratory judgment.

“The essential requirements of a declaratory judgment action are: (1) a plaintiff with a legal

tangible interest; (2) a defendant having an opposing interest; and (3) an actual controversy

between the parties concerning such interests.” Beahringer v. Page,

(2003)

(citing Griffin v. County of Cook,

(1938) (Stone, J., specially concurring, joined

by Farthing, J.)). “A declaratory judgment ‘may be obtained by means of a pleading seeking that

relief alone, or as incident to or part of a complaint, counterclaim or other pleading seeking other

relief as well.’ ” Beahringer,

(quoting 735 ILCS 5/2-701(b) (West 2000)). A

declaratory judgment is strictly remedial and does not create substantive rights or duties, but

“merely affords a new, additional, and cumulative procedural method for the judicial

determination of the parties’ rights.” Beahringer,

(citing Berk v. County of

Will,

(1966)).

64 No. 1-12-3348

¶ 152 In the case at bar, defendants argue that plaintiffs fail to state a claim for declaratory

judgment because “Plaintiffs’ request for declaratory relief hinges on Plaintiffs’ preceding eight

counts and does not allege any independent legal interest sufficient to state a claim for

declaratory relief.” We do not find defendants’ argument persuasive. Defendants fail to

recognize that a declaratory judgment action is “a new, additional, and cumulative procedural

method for the judicial determination of the parties’ rights.” Beahringer,

(citing Berk,

). Thus, “ ‘[b]ecause the declaratory judgment procedure does not

replace but merely adds to existing remedies a form of judgment to declare the rights of the

parties, the existence of other remedies does not preclude judgment for declaratory relief, even

though such other remedies may be equally effective.’ ” Beahringer,

(quoting

Ill. Ann. Stat., ch. 110, ¶ 2-701, Historical & Practice Notes, at 6-7 (Smith-Hurd 1983)).

Moreover, we do not find defendants’ reliance on Seip v. Rogers Raw Materials Fund, L.P.,

(2011), to be persuasive. There, the declaratory judgment claim was dismissed

because it was duplicative of other claims in the complaint that were properly dismissed. Seip,

. Thus, there was no controversy, since the court had already determined

that those claims were meritless. Here, by contrast, we have determined that several of plaintiffs’

claims should have survived defendants’ motions to dismiss. Since the claims are still viable, we

cannot agree with defendants that the declaratory judgment claim should have been dismissed.

¶ 153 CONCLUSION

¶ 154 For the reasons set forth above, we find: (1) the trial court properly found that current

CTA employees did not have standing to bring their claims and properly dismissed their claims;

65 No. 1-12-3348

(2) retired CTA employees have a vested right to at least some portion of their retiree health

benefits; (3) retired CTA employees stated a cause of action for breach of contract against the

Retirement Plan but did not state a cause of action against the CTA; (4) retired CTA employees

stated a cause of action for promissory estoppel against the CTA but did not state a cause of

action against the Retirement Plan; (5) retired CTA employees did not state a cause of action

against the Retirement Plan Board and the Health Trust Board for breach of fiduciary duty; and

(6) retired CTA employees stated a cause of action against all defendants for declaratory

judgment. We also reverse the dismissal of the retired CTA employees’ constitutional claim and

order the trial court to consider the claim in light of the forthcoming decision of the Illinois

Supreme Court.

¶ 155 Affirmed in part and reversed in part; cause remanded with instructions.

66