An Ohio federal judge on Friday found that Honeywell International Inc. need not pay for a proposed class of retired factory workers’ health benefits, using the Supreme Court’s M&G Polymers v. Tackett decision to find an expired collective bargaining agreement could not be interpreted as a lifetime guarantee.
The retirees worked at Honeywell’s Fostoria, Ohio, plant, which closed in 2011. They were unionized and brought a lawsuit in August alleging their collective bargaining agreement, negotiated by United Automobile Aerospace and Agricultural Implement Workers of America, guaranteed lifetime vesting health care benefits for them and their dependents. They alleged Honeywell’s decision to terminate its health benefits to retirees is both a breach of contract and a violation of the Employee Retirement Income Security Act.
But U.S. District Judge James G. Carr found in favor of the company’s motion to dismiss the suit. In an order filed Friday, Judge Carr said the collective bargaining agreement was only effective for a three-year timeline. He cited language that said the benefits would be paid “for the duration of this agreement,” which was defined elsewhere in the document as having an expiration date of Oct. 31, 2011. The judge said in the absence of an express agreement to provide retiree health care benefits for life, he couldn’t interpret the contract that way.
“Thus, if the parties here intended health care benefits to vest on retirement, they would have taken care to include express vesting language, as they did for pension benefits, to ensure that health care benefits would vest on retirement,” he wrote in the order. “That the parties did not do so … evidences they did not intend or agree to the vesting of lifetime retiree health care benefits.”
Judge Carr’s decision relied heavily on the U.S. Supreme Court’s ruling last year in the M&G Polymers v. Tackett case, which changed how collective bargaining agreements are read in the U.S. Before that, Judge Carr wrote, the high court’s 1983 UAW v. Yard-Man Inc. decision had allowed courts to find that if a collective bargaining agreement is ambiguous, it can be interpreted as providing lifetimes benefits.
Tackett changed that, finding Yard-Man was erroneously interpreting such agreements as being outside the ordinary principles of contract law, Judge Carr wrote, adding that courts may still use Yard-Man inferences, but only when contract language is ambiguous.
“Here, the dispositive question is whether, applying ordinary contract principles, I can find the contractual language on which Honeywell relies — namely the three-year duration provision — is ambiguous or not ambiguous,” he wrote. “The pertinent language in this case is clear and expresses an unambiguous intent and agreement that the benefits were assured only for three years, not for life.”
Judge Carr also cited Gallo v. Moen Inc, a similar decision from the Sixth Circuit in February, which used Tackett to find another collective bargaining agreement did not allow for lifetime benefits. Judge Carr noted that in Gallo, the company had included a “reservation of rights” clause in its contract, which didn’t exist in this case. But he added that the reservation clause did not decide the Gallo case but was “merely one of several considerations the court used in its application of ordinary contract principles.”
Though the most recent contract was one written in 2009 and expired in 2011, Honeywell kept paying retiree benefits as though it were still in effect until December 2015, when it announced it would stop paying contributions as of Jan. 1, 2017. Rob Ferris, a spokesman for Honeywell, said in a statement that the company intentionally gave its former employees over a year to find new insurance.
“As more options for Americans to purchase affordable and comprehensive health insurance have become available, we decided to terminate medical and prescription drug coverage for certain retirees and their covered dependents at the Fostoria, Ohio site as of December 31, 2016," he said. "Those notified have had a full year to carefully review their coverage options and chose a plan that best suits their cost and coverage needs."
Attorneys and representatives for the class did not immediately respond to requests for comment Monday.
Honeywell is represented by K. Winn Allen, Craig Primis and Jennifer Bandy of Kirkland & Ellis and by Donald E. Burton and Charles J. Faruki of Faruki Ireland & Cox.
The class is represented by John G. Adam and Stuart M. Israel of Legghio & Israel and by William A. Wertheimer Jr.
The case is Watkins v. Honeywell International Inc., case number 3:16-cv-01925, in the Northern District of Ohio.
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