Pension & Benefits News CBA did not vest retiree health benefits for under-age 65 retirees
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Monday, March 18, 2019

CBA did not vest retiree health benefits for under-age 65 retirees

By Pension and Benefits Editorial Staff

After the Sixth Circuit determined on the appeal of a preliminary injunction that retirees were unlikely to succeed on a dispute as to whether their health care benefits survived the expiration of a collective bargaining agreement, a federal district court in Michigan found this ruling was the law of the case that the CBA unambiguously contained no promise of vested retiree health care benefits. Thus, there were no proper bases upon which the district court could look "beyond the four corners of the CBA" to examine the retirees’ evidence of "context." Moreover, the retirees could not use an estoppel claim to sidestep the fact that their benefits unambiguously did not vest.

Under age 65 retiree health care benefits. Three former employees of a Honeywell auto parts plant brought a suit alleging that the employer unlawfully terminated retiree medical benefits for "under age 65" retirees upon expiration of a 2011 collective bargaining agreement. About 27 "under age 65" workers took early retirement under the CBA and began receiving Honeywell-sponsored health care, consistent with the terms of the agreement. Article 19.7.4 of the CBA provided that retirees under the age of 65 would continue to be covered under the employer health care plan by the payment of specified premium amounts.

Termination of retiree benefits. On November 9, 2015, the employer notified the union and retirees that it planned to terminate retiree medical benefits upon the expiration of the 2011 CBA on March 30, 2016. In December 2015, the employer decided to delay the termination of the benefits until the end of 2016. Five months later, the retirees filed this purported class action lawsuit seeking "to enforce their rights to collectively-bargained retiree health care until age 65." Specifically, the retirees claimed the elimination of benefits was a breach of the CBA under the LMRA, and a violation of ERISA. They sought to recover under a theory of estoppel and to arbitrate their claims.

Preliminary injunction. In November 2016, the retirees moved for a preliminary injunction to enjoin the employer from terminating their benefits. The motion was granted after the court determined that the retirees established a likelihood of success on the ultimate contract dispute. That decision was appealed to the Sixth Circuit.

Recent caselaw. On September 1, 2017, the Sixth Circuit issued its decision in Serafino v. City of Hamtramck, which considered a retiree health care provision similar to the provision at issue here. Serafino found that the CBA’s promise to continuing paying retiree health care benefits until a certain age served only to "guarantee benefits until the agreement expired."

Further, on February 20, 2018, the U.S. Supreme Court summarily reversed the Sixth Circuit decisions in Int’l Union, United Auto., Aerospace & Agri. Implement Workers of Am. (UAW) v. Kelsey-Hayes Co. and Reese v. CNH Indus. N.V., holding that the Sixth Circuit had improperly relied on inferences to refuse to give effect to the general durational clause, and to read the CBA’s silence on a retiree health care end date as evidence of intent to vest benefits. Guided by this caselaw, the Sixth Circuit concluded that the retirees now were unlikely to succeed on the contract dispute, and reversed the grant of a preliminary injunction.

Retiree medical benefits not vested. Subsequently, the employer filed a motion to dismiss the retirees’ complaint. In support of dismissal, it argued that the retirees have not stated a claim for breach of the 2011 CBA because the agreement did not promise vested retiree medical benefits. The employer emphasized that the Sixth Circuit interpreted the CBA using ordinary principles of contract law and found no "intent to vest retiree health care benefits beyond the CBA’s expiration," and that the appeals court refused to consider any extrinsic evidence because the agreement was not ambiguous on this issue.

The district court found this argument had merit. To state plausible claims for relief, the retirees’ LMRA and ERISA claims required a promise of vested retiree health care benefits. In this instance, the Sixth Circuit has already concluded that the CBA unambiguously contained no promise of vested benefits. This is the law of the case. Consequently, there was no proper bases upon which the district court could look "beyond the four corners of the CBA" to examine the employee’s evidence of "context," the "common law" of the "plant," or the documents and declarations showing "what Honeywell said and did."

Estoppel theory. Moreover, the court concluded that the retirees could not use an estoppel claim to sidestep the fact that their benefits unambiguously did not vest. The law of the case is that "the 2011 CBA unambiguously did not vest retiree health care benefits," and the district court was bound by the Sixth Circuit’s holding. As a result, the retirees could not plausibly allege that they reasonably relied on statements suggesting the contrary. Consequently, judgment was entered in the employer’s favor on its motion to dismiss.

SOURCE: Cooper v. Honeywell International, Inc. (W.D. Mich), No. 1:16-cv-471, February 21, 2019.

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