On rehearing, panel reaffirms finding that retiree benefits were not vested

Finding once again that the plain language of the applicable collective bargaining agreements and summary plan descriptions indicated there was no intent to vest retiree health benefits, a Fourth Circuit panel held on rehearing that a district court properly granted summary judgment to an employer in a suit brought by retirees and their union challenging the company’s right to unilaterally alter those benefits.

CBAs and SPDs.

During their working years, the retirees were employed at an aluminum fabrication plant under a series of CBAs negotiated between the Steelworkers and their employer’s predecessors. They had all retired during the operative term of one of these CBAs and were covered by one of the summary plan descriptions (SPD) issued in accord with each operative CBA. Each CBA contained a provision for group health insurance benefits, and each CBA and SPD provided retiree health benefits for the term of the operative CBA. Also, each CBA and SPD included a durational clause limiting retiree benefits to the term of the agreement. A third set of documents, “cap letters,” provided additional terms governing the retirees’ health benefits.

Unilateral change.

In 2012, the employer announced that it would unilaterally modify retiree health benefits. Effective January 1, 2013, the employer extended the annual contribution caps to pre-2003 retirees and froze the amount it reimbursed post age-65 retirees for their Medicare Part B premiums. The retirees brought individual and class claims alleging the employer violated ERISA and the LMRA by altering their retiree health benefits in breach of the CBAs. The district court dismissed their suit on summary judgment, and a Fourth Circuit panel affirmed in a March 2017 decision. Because the plain language of the CBAs and SPDs clearly stated that the health benefits would last for the duration of the labor agreement, the appeals court found the retirees’ benefits did not vest. While the appeals court granted the retirees’ petition for rehearing, it reaffirmed its holding, once again rejecting their plea that the parties had intended for their health benefits to continue beyond the duration of the applicable CBAs.

Durational provisions.

Each CBA included an Article 15, which expressly stated that the retiree health benefits “shall remain in effect for the term of this . . . Labor Agreement.” A booklet that served as the SPD for these benefits likewise provided that the benefits would last “for the term of” the governing labor agreement. The plain language of the documents clearly indicated that the retiree health benefits had not vested, the appeals court held. Bolstering this conclusion was the contrast between the durational language found in the retiree health benefits SPDs and the more expansive language found in the pension benefits SPDs, which unambiguously provided that “once pension payments commence they are payable monthly for the life of the participant” and are “not subject to reduction.” It was clear, then, that the parties knew how to manifest their intent to vest benefits when they desired to do so, the appeals court reasoned.

Cap letters and other terms.

Undeterred, the retirees argued that the cap letters and other CBA provisions nonetheless indicated an intent to vest their health benefits. Several cap letters established limits on the employer’s benefit contributions after expiration of the CBA currently under negotiation. Notwithstanding the durational clauses in the CBA and SPD, this provision would only make sense if the parties had intended the health benefits to continue past expiration of the CBA, the retirees argued. However, the cap letters didn’t help their cause; rather, they indicated that the parties could alter the benefits-undermining their assertion that the benefits vested, the court said. For one, the letters expressly provided that the benefits were a mandatory subject of bargaining, clearly revealing that the benefits “are fluid and not set in stone.” Other cap letter provisions offered no recourse, either.
In M & G Polymers USA, LLC v. Tackett, the Supreme Court specifically mandated that “when a contract is silent as to the duration of retiree benefits, a court may not infer that the parties intended those benefits to vest for life.” Ultimately, this principle controlled. “If the CBA did not have the durational language of Article 15, the Cap Letters would certainly not eliminate an inference that the parties intended the benefits to continue past that CBA,” the appeals court wrote. “But given Article 15’s actual robust durational language, the other textual provisions which cut against this inference, and Tackett’s call for clarity in providing for vesting, the Cap Letters do not show that the parties intended the benefits to vest.”
The retirees also pointed to other SPD contract terms-regarding coverage for retirees’ dependents and pensioned surviving spouses, and the reimbursement of Medicare Part B premiums-which, they argued, supported their claim that the retiree health benefits had vested. Specifically, they cited language that linked the termination of dependent coverage to a retiree’s death, for example; this evinced an intent for the retiree health benefits to vest, they urged, but the appeals court was not persuaded. In the end, the retirees simply could not overcome the “unequivocal durational language” of the CBAs and SPDs indicating that their health benefits had not vested.

SOURCE: Barton v. Constellium Rolled Products-Ravenswood, LLC, (CA-4), No. 16-1103, May 11, 2017.
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