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ERISA • Employment Law

Fourth Circuit Rules in Favor of Employer in Retiree Health Benefits Case

23 Mar 2017

In a blow to retirees, the United States Court of Appeals for the Fourth Circuit recently affirmed a decision granting summary judgment to an employer in a case involving changes to a retiree health benefits plan.  See Barton v. Constellium Rolled Products-Ravenswood, LLC, Case No. 16-1103, 2017 U.S. App. LEXIS 5087, __ F.3d __ (4th Cir. March 22, 2017).  A copy of the Fourth Circuit’s opinion can be found here.

The Barton individual plaintiffs retired from Constellium’s aluminum plant and were represented by a labor union during their employment, which served as a co-plaintiff.  Going back to 1988, the Union entered in several collective bargaining agreements (“CBA”) with Constellium related to the individual plaintiffs’ employment and each individual class member retired while a CBA was in effect.

Each CBA contained a nearly identical Article 15 that contained a provision for group health insurance benefits and referred to a booklet entitled “Retired Employees’ Group Insurance Program.”   That booklet served as the summary plan description (“SPD”) of the retiree health benefits program for retirees. During bargaining negotiations over a new CBA in July 2012, Constellium proposed amending Article 15.  It wanted to extend a cap on its “contributions to retiree health benefits to employees who retired before January 1, 2003 and to freeze its Medicare Part B premium reimbursement amount for all hourly retirees at $99.90.”  The union, contended that the retiree health benefits were vested and would not bargain on the issue.  Thus, Constellium sent the union “a written notice that it planned to make these changes beginning January 1, 2013,” and it did just that.

In February 2013, the individual retirees and the union filed suit against Constellium (and its pension plan) and amended their complaint about a year later.  The Amended Complaint contained class and individual allegations asserting a violation of Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185.  The individual plaintiffs also brought a claim for violation of Section 502(a)(1)(B) of the Employee Retirement Income Security Act, 29 U.S.C. § 1132(a)(1)(B) (“ERISA”).  The plaintiffs’ claims were premised on the contention that their retiree health benefits were vested.  The U.S. District Court for the Southern District of West Virginia granted summary judgment in favor Constellium on all counts and the plaintiffs appealed.

The Fourth Circuit affirmed the District Court’s decision.  Relying on the Supreme Court’s relatively recent decision in M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926, 933 (2015), the Fourth Circuit held that Article 15 of the CBA must be interpreted “using ordinary contract principles.  And in doing so, we must recognize that these principles foreclose holding that the retiree health benefits have vested unless unambiguous evidence indicates that the parties intended that outcome.”  The Court noted that the “[t]he plain language of the CBA and SPD clearly indicates that the retiree health benefits did not vest.” (emphasis in original).  Article 15 of each CBA contained “explicit durational language stating that the retiree health benefits continue ‘for the term of’ the governing CBA.” That durational language was also contained in the plan’s SPD.  Although the plaintiffs pointed to additional side agreements called “Cap Letters” between the union and employer as evidencing an intent to vest the retiree health benefits, the Court rejected the argument, noting among other things that the side letters allowed the parties to change the nature and structure of the benefits.

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Mr. Garner is an ERISA employee benefits and employment attorney with over a decade of experience. The laws governing employee benefits, the employment relationship, and the workplace are complex.

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