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McKinney v. United States Postal Serv.

United States District Court, D. Columbia.

December 4, 2014


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[Copyrighted Material Omitted]

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For Pamela Mckinney, Plaintiff: David U. Fierst, STEIN, MITCHELL, MUSE & CIPOLLONE LLP, Washington, DC USA; Robert L. Bredhoff, STEIN MITCHELL MUSE & CIPOLLONE, Washington, DC USA.

For United States Postal Service, Defendant: Jane M. Lyons, LEAD ATTORNEY, U.S. ATTORNEY'S OFFICE, Washington, DC USA.

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CHRISTOPHER R. COOPER, United States District Judge.

In 1986, an arbitrator determined that the United States Postal Service had underpaid life insurance benefits to thousands of beneficiaries of deceased postal workers. But rather than promptly locating and paying eligible beneficiaries, the Postal Service dawdled. Many beneficiaries were made to wait decades to receive payment and some still have not been located and paid. Named plaintiff Pamela McKinney, whose father died in 1982 while employed by the Postal Service, is one such beneficiary. The Postal Service did not pay her the benefits she was due until 2008, some 22 years after the arbitrator's decision. McKinney has brought suit against the Service on behalf of a class of beneficiaries who suffered similar delays. She alleges that the Postal Service's delay in payment violated the arbitration award and breached the collective bargaining agreement between the Postal Service and its employee unions, which required the additional payments in the first instance. As a remedy, McKinney and the other plaintiffs seek interest on the underpaid amounts to compensate them for their loss of use of the funds. Despite the Postal Service's arguments to the contrary, the Court concludes that McKinney's suit is properly before it, that no genuine question of fact exists as to whether the Postal Service violated the arbitration award and the underlying collective bargaining agreement, and that McKinney and her fellow class members are entitled to interest on the long-delayed payments. It will therefore grant partial summary judgment in favor of McKinney as to Plaintiffs' entitlement to interest and deny summary judgment to the Postal Service.[1]

I. Background

In 1981, the United States Postal Service and its employees' unions[2] agreed to

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defer a cost of living adjustment (" COLA" ) to postal employees' salaries until 1984. Pls. Ex. 1 at 19-20 (" 1981 CBA" ). The parties memorialized this agreement in an addendum to their collective bargaining agreement (" CBA" ), which guaranteed that " no employee . . . will suffer any diminution of annuity (e.g., optional disability, or survivor benefits)" as a result of the COLA deferral. Id. at 163 (Supplemental Memorandum of Understanding). The parties also reached an oral understanding that " no one will get hurt" by the deferral. Id. Ex. 2 at 1 (" Kerr Award" ). Despite these promises, the Postal Service paid life insurance benefits to beneficiaries of employees who died between 1981 and 1984 based on the employees' then-current wages, without increasing the benefit to account for the missing COLA.[3] The unions subsequently compelled arbitration of the Postal Service's calculation of benefits. In 1986, the arbitrator, Clark Kerr, determined that benefits should have been paid based on the employees' COLA-adjusted salaries and ordered that " full remedy should be awarded to the survivors of deceased postal employees who have suffered a diminution of life insurance benefits." Id. at 2-3. Arbitrator Kerr did not decide, however, whether beneficiaries were entitled to interest on the underpaid amounts, leaving " open for discussion by the parties the issue of interest payments on any remedies since this was not adequately explored before him." Id. at 4. The Postal Service and unions entered into several additional CBAs over the course of the following two decades that deferred COLA payments from 1984 to 1987, from 1987 to 1990, and from 1990 to 1995. Id. Ex. 4-6 (1984, 1987, and 1990 CBAs). It appears from the record that the Postal Service did not use employees' COLA-adjusted salaries to calculate life insurance benefits in the first instance even after the Kerr Award directed it to do so. Instead, it continued to pay survivors the lower amount and only paid the remainder later, as described in further detail below.

In negotiations following the arbitral award, the Postal Service sent the unions a letter stating, among other things, that " during our discussion the issue of interest payments on remedies was raised and we responded by stating that interest payments were inappropriate. Lacking any comment to the contrary from you, we will assume that this issue is behind us." Def. Ex. 10 (Jan. 21, 1987 letter from William Downes, Director, Office of Contract Administration, Postal Service, to William Burrus, Executive Vice President, American Postal Workers Union, and Lawrence G. Hutchins, Vice President, National Association of Letter Carriers). The unions' response did not mention interest payments. Id. Ex. 11 (Jan. 27, 1987 letter from William Burrus to William Downes).

After concluding negotiations with the unions, the Postal Service began satisfying the Kerr Award by attempting to locate beneficiaries and to date has paid over $70,292,233 in COLA-adjusted benefits to 16,595 survivors. Id. Ex. 32 (Declaration of Carol Carlson, Postal Service Accounting and Control Specialist) ¶ 6. The Postal Service tracked down most beneficiaries by sending letters to addresses it had on file. Where it lacked addresses, the service searched the phone book or a commercially-available

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locator database. Id. ¶ 7. Despite these efforts, the Postal Service ceased searching in 2010 after determining that there were 1,142 beneficiaries who still could not be located, although it continued to pay beneficiaries who came forward on their own. Id. The Postal Service paid beneficiaries the difference in principal owed under the relevant life insurance policy at the time of the policyholder's death but did not pay accrued interest during the period between death and the payment. See id. ¶ ¶ 4-5.

Named Plaintiff Pamela McKinney's father died in 1982 while employed by the Postal Service. Declaration of Pamela McKinney ¶ ¶ 2-3. McKinney received her COLA-adjusted life insurance benefit under the Kerr Award in 2008, without interest for the 26-year delay in payment. Id. ¶ ¶ 4-6. She has brought suit on behalf of all life insurance beneficiaries who were paid or were entitled to payment under the arbitral award, seeking both the remaining principal amounts for the unpaid beneficiaries and interest for all beneficiaries. Second Am. Compl. ¶ 35. She has brought claims for breach of the CBA (Count I), unjust enrichment (Count II), conversion (Count III), enforcement of the arbitral award (Count IV), and for an accounting (Count V). Id. ¶ ¶ 44-55.

Judge Wilkins, who was previously assigned to this case, granted the Postal Service's motion to dismiss McKinney's conversion claim but allowed all of her other counts to proceed. He rejected the Postal Service's argument that the Court lacked jurisdiction, reasoning that McKinney may properly bring an action to enforce the arbitral award in federal court. Hearing Tr. 4:12-5:7 (Aug. 27, 2012). He also held that McKinney need not exhaust administrative grievance procedures under federal labor law before bringing suit because the postal unions owed McKinney--who had never been a postal service employee or union member--no duty of fair representation. Id. 5:8-6:6. Judge Wilkins further determined that McKinney's claims were not rendered moot by the payment of the COLA-adjusted principal because her entitlement to interest remained a live controversy, explaining " the only interest that could have been considered by the arbitrator was interest that would have accrued up until the time of the arbitration." Id. 7:1-15. He proceeded to certify the following class of plaintiffs:

All beneficiaries of deceased United States Postal Service employees (or, if deceased, the beneficiaries' estates or other legal representatives), who first received notice on or after March 28, 2008, that they may be entitled to an additional death benefit payment under provisions of the U.S. Postal Service Annuity Protection Program.

Order (May 31, 2013).

Plaintiffs have now filed a motion for partial summary judgment only on the issue of the Plaintiffs' entitlement to interest on the COLA-adjusted benefits, and the Postal Service has cross-moved for summary judgment on all of Plaintiffs' remaining claims. As of the filing of these motions, Plaintiffs maintain there are 1,002 beneficiaries who received notice from the Postal Service that they are entitled to the COLA-adjusted principal after the class definition cutoff date (" paid beneficiaries" ) along with 1,142 beneficiaries who are entitled to an arbitral award payment but have not received it because the Postal Service has failed to locate them (" unpaid beneficiaries" ). Pls. Statement of Undisputed Facts ¶ ¶ 34-35.

II. Standard of Review

Summary judgment is appropriate where the pleadings, the discovery and

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disclosure materials on file, and any affidavits show that there is " no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The court must draw all reasonable inferences in favor of the moving party, but the nonmovant must produce material facts showing that there is a genuine dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine if there is sufficient admissible evidence for a ...

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