CBAs clear; no lifetime health care benefits for Honeywell retirees

Reversing a district court’s conclusion that Honeywell retirees were entitled to lifetime health care benefits, the Sixth Circuit U.S. Court of Appeals noted that general principles of contract interpretation applied and, because the language of the collective bargaining agreements was clear, there was no need to look to extrinsic evidence as the lower court had. While it might seem unusual, the CBAs specifically provided for lifetime health care benefits to surviving spouses and dependents, but did not provide such lifetime benefits to retirees themselves.

The plaintiffs are retirees who worked at Honeywell’s plant in Greenville, Ohio, which the company sold in 2011. While employed at that plant, the plaintiffs were members of a bargaining unit represented by the Fram Employees’ Independent Union (FEIU) until 2000, and after 2000 by the UAW. The bargaining unit and Honeywell negotiated a series of CBAs and, though the plant was sold in 2011, the final CBA did not expire until May 22, 2014.

Termination of benefits. Honeywell continued to provide health care benefits for retirees and their spouses after the CBA expired, but on December 28, 2015, it sent them a letter informing them that it “intend[ed] to terminate the retiree medical and prescription drug coverage currently provided to you and your covered dependents as of December 31, 2016.” The plaintiffs filed suit on behalf of themselves and other similarly situated retirees, retirees’ surviving spouses, and eligible dependents under LMRA Section 301 and ERISA Section 502, claiming Honeywell was obligated under the CBAs to provide retirees with lifetime health care benefits.

Honeywell argued that the 2011 CBA’s general durational clause, which stated the agreement remained in effect until May 22, 2014, governed its duty to provide retiree health care benefits, so the plaintiffs’ health care benefits did not extend beyond that date. However, it did promise to continue coverage to certain surviving spouses and dependents since the 2011 CBA expressly promised that “[u]pon the death of a retiree, the Company will continue coverage for the spouse and dependent children for their lifetime,” provided that certain conditions were met.

District court finds CBAs ambiguous. Denying Honeywell’s motion to dismiss, the court acknowledged the CBAs did not expressly provide for vested retiree health care benefits, but held that wasn’t dispositive. It pointed to language from this circuit emphasizing that the Supreme Court’s decision in M & G Polymers USA, LLC v. Tackett does not mean that “the absence of such specific language, by itself, evidences an intent not to vest benefits . . . .” The district court also distinguished the Sixth Circuit’s decision in Gallo v. Moen Inc. noting, among other things, that the language in Honeywell’s CBA promised lifetime health care benefits to retirees’ surviving spouses and dependents. In the district court’s view, express vesting of lifetime health care benefits for surviving spouses and dependents strongly implied the parties also intended to vest lifetime benefits for the retirees themselves.

Finding the CBAs ambiguous, the court held an evidentiary hearing and considered extrinsic evidence, including testimony from various participants in the CBA negotiations. The court concluded that the plaintiffs proved by a preponderance of the evidence that Honeywell agreed to provide lifetime health care benefits to retirees at the Greenville plant and it permanently enjoined Honeywell from terminating benefits for all putative class members who retired from the Greenville plant before June 1, 2012, and for their eligible spouses and dependents.

Precedent. Reversing, the Sixth Circuit explained that under the Supreme Court’s decision in Tackett, it must “interpret collective-bargaining agreements, including those establishing ERISA plans, according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy.” Only if the language is susceptible to more than one meaning does the court consider extrinsic evidence. Reviewing circuit precedent, the court noted the Supreme Court’s criticism of Sixth Circuit cases refusing to apply general durational clauses to provisions governing retiree benefits, as well as the High Court’s admonishment to look to the record evidence of industry customs or usages, not to the court’s own assumptions about the intent of employees, unions, and employers negotiating retiree benefits. From this the court distilled a clear rule: “a CBA’s general durational clause applies to health care benefits unless it contains clear, affirmative language indicating the contrary.”

CBAs clear: no lifetime health care benefits for retirees. Here, reviewing the two sets of CBAs at issue (those negotiated with FEIU before 2000, and those negotiated with UAW after 2000), the appeals court found neither ambiguous. The pre-2000 CBAs merely provide that retirees were eligible to enroll in a plan and the company would pay the premium costs for that plan. They contained no promise to provide benefits for the lifetime of the retiree and no indication they are exempt from the general durational clause governing the agreement, the latest of which provided it would remain in effect until May 22, 2000. Further, the pre-2000 CBAs did expressly provide for other kinds of vested benefits, and the court had to “assume that the explicit guarantee of lifetime benefits in some provisions and not others means something.” The court concluded: “Absent any suggestion to the contrary, both provisions are time-limited by the CBA’s general durational clause. The pre-2000 CBAs therefore unambiguously do not provide for vested retiree health care benefits.”

The appeals court also held that the post-2000 CBAs were unambiguous and did not provide for vested retiree health care benefits. The 2011 CBA states: “Employees ages 50-55 with 30 years of service, who leave the company prior to becoming pension eligible, will be eligible for retiree health care benefits when they commence their pension benefits (age 55 or later).” It also had a provision capping Honeywell’s health care contributions, not to take effect until 2012. Finally, Honeywell promised to “continue coverage for the spouse and dependent children for their lifetime” after the retiree’s death. There is no similar promise to provide lifetime health care for the retirees themselves, the court averred.

Absence of language doesn’t show ambiguity. While the district court was right that the absence of vesting language does not signify an intent to terminate benefits when the agreement expires, the absence of such language also does not automatically signify ambiguity, explained the appeals court. And in the Sixth Circuit’s view, “[i]f the parties included language expressly granting lifetime health care benefits to surviving spouses and dependents in the CBA, this tends to show that they knew how to provide for vested benefits and chose not to for retirees.”

Unusual but true. Also, while providing lifetime benefits for surviving spouses but not for retirees might have been “highly unusual,” as the district court put it, CBA terms are “often the product of compromise,” and Honeywell may have decided it was cheaper to provide lifetime benefits only to a limited class rather than to all retirees, spouses, and dependents. The important point, though, was that the CBA clearly promised lifetime benefits to surviving spouses and dependents, but not to retirees. Because the CBAs were unambiguous, the parties’ arguments about extrinsic evidence were no longer to be considered.

SOURCE: Fletcher v. Honeywell International, Inc., (CA-6), No. 17-3277, June 8, 2018
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