United Rubber, Cork, Linoleum v. Pirelli Armstrong

• Decision Date: 09 December 1994
• Docket Number: No. 3:94-0573.,3:94-0573.
• Citation: 873 F. Supp. 1093
• Parties: UNITED RUBBER, CORK, LINOLEUM & PLASTIC WORKERS OF AMERICA, AFL-CIO, CLC, et al. v. PIRELLI ARMSTRONG TIRE CORPORATION, et al.
• Court: U.S. District Court — Middle District of Tennessee

873 F. Supp. 1093

UNITED RUBBER, CORK, LINOLEUM & PLASTIC WORKERS OF AMERICA, AFL-CIO, CLC, et al. v. PIRELLI ARMSTRONG TIRE CORPORATION, et al.

No. 3:94-0573.

United States District Court, M.D. Tennessee, Nashville Division.

December 9, 1994.

COPYRIGHT MATERIAL OMITTED

George Edward Barrett, Phillip A. Purcell, Barrett, Johnston & Parsley, Nashville, TN, Charles R. Armstrong, Carolyn T. Wonders, Gen. Counsel, URW, Akron, OH, for plaintiffs.

Charles Hampton White, Cornelius & Collins, Nashville, TN, Bettina B. Plevan, Edward A. Brill, Proskaver, Rose, Goetz & Mendelsohn, New York City, for Pirelli Armstrong Tire Corp.

Bettina B. Plevan, Edward A. Brill, Proskaver, Rose, Goetz, Mendelsohn, New York City, for Plan Admin., Pension & Bene. Plans Committee.

MEMORANDUM

JOHN T. NIXON, Chief Judge.

In this action, Plaintiffs challenge the legality of Defendants' decision to terminate retiree health benefits. Beginning November 4, 1994, the Court conducted a non-jury trial on Plaintiffs' claims. Upon the evidence presented, the Court makes the following Findings of Fact and Conclusions of Law in accordance with Fed.R.Civ.P. 52(a).

I. FINDINGS OF FACT

A. Background

1. This Court has jurisdiction pursuant to 28 U.S.C. § 1331.

2. Pirelli Armstrong Tire Corporation ("PATC") is a Delaware corporation headquartered in New Haven, Connecticut, engaged in the production of automobile tires, light truck tires, inner tubes and bladders at three manufacturing plants located in the United States. PATC employs approximately 1,600 workers. (Tr. 397-98.)

3. Pirelli Tire Holding ("PTH"), which is a company based in Amsterdam, Holland, owns PATC. PTH acquired Armstrong Tire & Rubber Co., PATC's predecessor, in 1988. (Tr. 399.)

4. PATC now operates manufacturing plants in Nashville, Tennessee; Hanford, California; and Little Rock, Arkansas. (Tr. 398.) In the past, PATC, or its predecessors, operated plants in Des Moines, Iowa; Natchez, Mississippi; and West Haven, Connecticut. (Tr. 287-88; 407-408; Pls. Ex. 26(3), p. 3.)

5. The United Rubber, Cork, Linoleum and Plastic Workers of America ("URW") is an unincorporated labor organization headquartered in Akron, Ohio. URW and its affiliated local unions have, at all relevant times, been the collective bargaining representative of the hourly employees at PATC's manufacturing facilities. The URW has also served as the representative of PATC's hourly retirees in bargaining with PATC concerning the health care benefits provided by PATC to members of the class. (Stipulations No. II ¶ II.)

6. URW Local 164, URW Local 670, and URW Local 703 are unincorporated labor organizations whose principal place of business are located in Des Moines, Iowa; Nashville, Tennessee; and Hanford, California, respectively.

7. The URW and PATC¹ have entered into collective bargaining agreements ("CBA") and Employee Benefit Agreements ("EBA") in the years 1957, 1959, 1964, 1967, 1970, 1973, 1976, 1979, 1982, 1985, 1988 and 1991. (Stipulations No. II ¶ II.)

8. Pursuant to the EBAs referenced above in ¶ 7, PATC sponsored one or more Plans to provide medical benefits to its employees and retirees. (Stipulations No. II ¶ III.) The Plan or Plans are Welfare Benefit Plans within the meaning of the Employee Retirement Income Security Act, ("ERISA"), 29 U.S.C. § 1001, et seq. (Stipulations No. II ¶ IV.)

9. In 1991, the URW and PATC entered into a CBA and EBA. (Stipulations No. II ¶ VII.)

10. On or about July 8, 1994, PATC, via letter, notified its hourly-rated retirees that it was unilaterally modifying or eliminating their benefits. (Stipulations No. II ¶ VIII.) On July 15, 1994, the CBA between PATC and the URW terminated. (Tr. 31.)

11. The decision to modify the participants' medical plan coverage was made without the consent of the URW or the retiree/participants represented by the individual Plaintiffs. (Stipulations No. II ¶ IX.)

B. Facts Relevant to Claims

12. The Court finds that throughout the years, PATC represented to its employees and retirees that retiree health benefits would be provided for life. The Court further finds that paragraphs 13-31 are examples of such representations.

13. In 1955, PATC negotiated an EBA which covered only its employees at the New Haven, Connecticut facility. The EBA provided health care benefits to its retired hourly employees. (Defs. Ex. HH, § 14.02.)

14. In 1957, PATC negotiated an EBA which covered only its employees at the Natchez, Mississippi facility. This EBA was closely patterned after the 1955 New Haven, Connecticut EBA. (Tr. 43.) The EBA provided health care benefits to its retired hourly employees. (Pls. Ex. 1(a), § 14.02.) During the negotiation of this EBA, PATC represented to the union that the terms of the EBA provided lifetime health benefits to retirees. (Tr. 47.)

15. In 1959, PATC negotiated its first master EBA which covered employees at its facilities in New Haven, Connecticut; Natchez, Mississippi; Des Moines, Iowa; and Norwalk, Connecticut. (Pls. Ex. 1(b); Tr. 48-49.) During the negotiation of this EBA, PATC represented to the union that the terms of the EBA provided lifetime health benefits to retirees. (Tr. 53.)

16. During this same time, PATC developed an "exit interview" procedure. (Tr. 54-56.) Under this procedure at the Natchez facility, a prospective retiree met with PATC representatives and the URW. (Id.) PATC representatives explained the employee's pension options and advised the prospective retiree of his or her right to lifetime health coverage. (Id.) This procedure continued up until the sale of the Natchez facility in 1987. (Id.)

17. During the negotiation of the 1959 EBA, the parties discussed the termination clause of the EBA. (Tr. 53-54.) The clause was drafted to protect the union's right to strike over issues not covered by the EBA. (Id.)

18. In 1964, PATC negotiated an EBA with its employees which provided health care benefits to its retired hourly employees and their surviving spouses. (Pls. Ex. 1(c), §§ 14.02 & 14.03.) During the negotiation of this EBA, PATC and the URW agreed to contract language limiting a retiree's surviving spouse's entitlement to medical coverage to his or her lifetime or until he or she remarried. (Tr. 59.) Harold Hoppert and Robert Millar, former Vice-Presidents for Human Resources at PATC, testified that PATC never intended to give greater benefits to spouses of retirees than to retirees. (Pls. Ex. 26(1) at 44 and 26(2) at 16.)

19. In 1967, PATC and URW negotiated an EBA which provided health care benefits to its retired hourly employees and their surviving spouses. (Pls. Ex. 1(d), §§ 14.02 & 14.03.) These provisions were unchanged from the 1964 EBA. (Id.)

20. Until 1967, PATC and URW had negotiated master CBAs which expired in different years than the EBAs. At this time, PATC proposed establishing common expiration dates for CBAs and EBAs. As a result, the URW insisted on an "umbrella clause." The outcome was the insertion of § 18.04 to the 1967 EBA. This section provided medical coverage to employees engaged in a lawful strike for 90 days following the expiration of the agreement. This provision was never applied to retirees during any strike. Retirees never lost any benefits while active employees were on strike. (Tr. 65-70.)

21. The language of § 18.04 of the 1967 EBA is virtually identical in all respects to § 24.04 of the 1991 EBA.

22. In 1981, PATC closed its facility in New Haven, Connecticut. (Stipulations No. II ¶ V.) Prior to closing it, PATC prepared a script to be read to all retiring employees. (Pls. Ex. 26(3) at 35-36.)

23. Joseph Colantoino, Industrial Relations Manager at the New Haven facility, told the facility's employees that if they were fifty-five years old or had twenty-five years of service, they and their spouses were entitled to the benefits for the rest of their life. (Id. at 32-33.)

24. In addition, all New Haven retiring employees were given a benefits form during their retirement interviews which indicated that they would be provided medical coverage for life at no cost to them. (Id. at 25-29.)

25. To this date, PATC has continued to pay the medical benefits of its New Haven, Connecticut retirees even though the facility is no longer owned or operated by PATC and the retirees are no longer referenced in the EBAs. (Stipulations No. II ¶ X.)

26. In 1987, PATC sold its facility in Natchez, Mississippi. (Stipulations No. II ¶ VI.) Prior to the sale, PATC negotiated a close-out agreement with the union. (Tr. 287-288.)

27. During the interviews with retiring employees, PATC provided each with a benefits form which indicated they would receive medical benefits at no cost to them. (Pls. Ex. 2(a).) In this benefits form and in the closure agreement, PATC extended 24 months of vision care to retiring employees in addition to the medical coverage to which they were entitled. (Pls. Ex. 2(a) and 24(a).) No such time limit was set for the other medical benefits. (Id.)

28. To this date, PATC has continued to pay the medical benefits of its Natchez, Mississippi retirees even though the facility is no longer owned or operated by PATC and the retirees are no longer referenced in the EBAs. (Stipulations No. II ¶ X.)

29. In 1987, PATC threatened to close its Des Moines facility. (Tr. 211.) The closure was averted when the union agreed to a concessionary agreement to make the plant competitive. (Tr. 214.) A part of the concessionary agreement included an lower quality medical program for the remaining employees, but it was not applicable to existing retirees. (Tr. 214-15.) Existing employees who were eligible for retirement were given an option to retire under the then existing medical plan. (Tr. 216.) Approximately 100 employees took advantage of this option of early retirement. (Tr. 221.) Based upon an agreement with the union, PATC met with every pension-eligible employee in the plant. PATC representatives explained all pension options to employees and...