Kelly v. Honeywell Int'l, Inc.

• Decision Date: 07 August 2019
• Docket Number: Docket Nos. 17-675(L),17-2075(CON),August Term, 2018
• Citation: 933 F.3d 173
• Parties: David KELLY, Richard Norko, Annette Dobbs, and Peter Dellolio, for themselves and others similarly situated, Plaintiffs-Appellees, v. HONEYWELL INTERNATIONAL, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

933 F.3d 173

David KELLY, Richard Norko, Annette Dobbs, and Peter Dellolio, for themselves and others similarly situated, Plaintiffs-Appellees,

v.HONEYWELL INTERNATIONAL, INC., Defendant-Appellant.¹

Docket Nos. 17-675(L)

17-2075(CON)

August Term, 2018

United States Court of Appeals, Second Circuit.

Argued: December 5, 2018

Decided: August 7, 2019

BRIAN T. ORTELERE, Morgan Lewis & Bockius LLP (Donald L. Havermann, Sean M. McMahan, Abbey M. Glenn, on the brief), Philadelphia, PA, for Defendant-Appellant.

WILLIAM WERTHEIMER, Bingham Farms, MI, for Plaintiffs-Appellees.

Thomas Meiklejohn, Livingston, Adler, Pulda, Meiklejohn & Kelly, PC (on the brief), Hartford, CT, for Plaintiffs-Appellees.

Before: CABRANES, POOLER, and DRONEY, Circuit Judges.

POOLER, Circuit Judge:

Defendant-Appellant Honeywell International, Inc. ("Honeywell") appeals from the February 28, 2017, judgment and order of the District Court for the District of Connecticut (Vanessa L. Bryant, J. ) granting summary judgment to union retirees who retired before June 6, 1997, and their surviving spouses and permanently enjoining Honeywell from terminating their medical benefits. Honeywell also appeals from the June 27, 2017, order of the same court preliminarily enjoining Honeywell from terminating medical benefits to union retirees who retired after June 6, 1997, and their surviving spouses.

The parties contest two issues in these consolidated appeals: (1) whether an effects bargaining agreement ("EBA") requires Honeywell to provide lifetime medical coverage to union retirees and their surviving spouses and (2) if so, whether union retirees who retired after that EBA expired (i.e., after June 6, 1997) and their surviving spouses are also entitled to lifetime medical coverage. As to the first issue, we AFFIRM the judgment and order of the district court and hold that, where a collective bargaining agreement contains unambiguous language vesting welfare benefits, the agreement’s general durational clause does not prevent those benefits from vesting. As to the second issue, we AFFIRM the order of the district court preliminarily enjoining Honeywell from terminating medical coverage for union retirees who retired after the EBA expired and their surviving spouses because there is a sufficiently serious question as to whether an ambiguous term in the agreement entitles such retirees and their surviving spouses to lifetime medical coverage.

BACKGROUND

This case concerns the medical benefits of workers who retired after October 28, 1994, from an army plant in Stratford, Connecticut, and the medical benefits of their surviving spouses.² The retirees in these consolidated appeals were members of the United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW" or "Union"), Local 1010 and Local 376. These local chapters entered into several agreements regarding employee and retiree benefits with Textron Corporation ("Textron"), the owner and operator of the Stratford plant between 1984 and 1994.

In the waning months of 1993, Textron began negotiating a sale of the Stratford plant to AlliedSignal, Inc. ("AlliedSignal"). AlliedSignal conditioned its purchase of the Stratford plant on Textron reaching a satisfactory collective bargaining agreement with the local UAW to replace the parties’ expiring agreements. Accordingly, Textron and the local UAW negotiated a new collective bargaining agreement while Textron was in talks to sell the plant to AlliedSignal.

I. The Collective Bargaining Agreements

Textron and the UAW ultimately negotiated—and AlliedSignal approved—three agreements:³ a Collective Bargaining Agreement ("CBA"), a supplemental Group Insurance Agreement ("Supplemental Agreement"), and an EBA, which specifically concerns "the financial and economic impact and effects of a potential sale of assets" to AlliedSignal, App’x at 344, 374. The substance of the three agreements and their durational clauses are of particular relevance to this appeal.

A. The EBA

The parties negotiated an EBA in part due to the UAW’s concern that AlliedSignal would close the Stratford plant upon purchase and transfer operations to a different plant. The EBA therefore covers such topics as pensions, severance packages, transition bonuses, and other considerations for employees who might be laid off as a consequence of AlliedSignal’s acquisition of the plant. Of particular importance here, the EBA outlines medical benefits for union retirees as follows:

All past and future retired employees and surviving spouses shall continue to receive ... full medical coverage as provided in the ... Group Insurance Agreement, as now in effect or as hereafter modified by the parties for the life of the retiree or surviving spouse.

App’x at 345, 375. The parties agreed that the EBA was "effective as of May 30, 1994, and [would] remain in effect until midnight on June 6, 1997, but not thereafter unless renewed or extended in writing by the parties." App’x at 359, 391.

B. The CBA

The parties explicitly incorporated the EBA as a supplemental agreement to the CBA. The CBA concerns, inter alia, medical insurance benefits for union members. The CBA, like the EBA, also contains a durational clause:

Except as otherwise provided herein, this Agreement shall become effective as of May 30, 1994 and shall remain in effect up to and including June 6, 1997 and shall automatically renew itself from year to year thereafter unless written notice to terminate or amend the Agreement is given by either party to the other at least sixty (60) days prior to its expiration or any annual renewal thereof.

App’x at 309, 318 (alterations omitted).

C. The Supplemental Agreement

The CBA incorporates the Supplemental Agreement in order to provide a description of "[t]he details and levels of the Group Insurance benefits" specified in the CBA. App’x at 306, 316. The Supplemental Agreement describes the medical benefits and plan options available to eligible employees and retirees and conditions the benefits provided for therein on the continued existence of the CBA. App’x at 329, 339 ("If the Collective Bargaining Agreement is canceled in whole or in part benefits hereunder will immediately cease."). The Agreement also contains a durational clause that is nearly identical to the CBA’s durational clause.

II. Asset Sale

In July 1994, AlliedSignal agreed to assume the 1994 collective bargaining agreements and Textron’s obligations thereunder as of the date it acquired the Stratford plant (ultimately in October 1994). AlliedSignal subsequently terminated the agreements at the earliest permissible opportunity, June 6, 1997. Nonetheless, the company continued to provide union retirees with medical benefits without interruption.

On September 30, 1998, AlliedSignal closed production at the Stratford plant and moved operations to a nonunionized plant in Phoenix, Arizona, and a plant in South Carolina. Shortly thereafter, in 1999, AlliedSignal acquired Honeywell, and the company assumed the Honeywell name.

Now doing business as Honeywell, the company continued to provide medical coverage to union retirees until years later, when, in December 2015, Honeywell undertook a review of its collective bargaining agreements in light of the Supreme Court’s decision in M&G Polymers USA, LLC v. Tackett , 574 U.S. 427, 135 S. Ct. 926, 190 L.Ed.2d 809 (2015). Following the review, Honeywell announced that it intended to terminate retiree medical coverage on December 31, 2016. Nevertheless, as of this writing, and pursuant to injunctive orders from the district court, Honeywell has continued to provide medical coverage to the retirees.⁴

III. Procedural History

The retirees brought suit over Honeywell’s decision to terminate their medical coverage, claiming they were entitled to medical coverage for their lifetimes. Taking a complex path to the disposition of these claims, the district court ultimately (1) awarded summary judgment and a permanent injunction to retirees who retired before the EBA expired ("Pre-Expiration Plaintiffs") and (2) preliminarily enjoined Honeywell from terminating medical benefits for retirees who retired after the EBA expired ("Post-Expiration Plaintiffs").

DISCUSSION

Honeywell now appeals from the district court’s grant of summary judgment to the Pre-Expiration Plaintiffs, which required Honeywell to provide medical coverage to the Pre-Expiration Plaintiffs for their lifetimes, and the district court’s order preliminarily enjoining Honeywell from terminating medical coverage to the Post-Expiration Plaintiffs.

I. Standard of Review

The appealed-from injunctive orders turn on the interpretation of a contract, which presents "a legal question ... reviewed de novo." Capital Ventures Int’l v. Republic of Argentina , 552 F.3d 289, 293 (2d Cir. 2009). We review the district court’s "ultimate decision" to issue an injunction for abuse of discretion. Goldman, Sachs & Co. v. Golden Empire Schs. Fin. Auth. , 764 F.3d 210, 214 (2d Cir. 2014).

II. The Pre-Expiration Plaintiffs Are Entitled to Lifetime Medical Coverage

Honeywell primarily offers two reasons that the EBA’s promise that "[a]ll past and future retired employees and surviving spouses shall continue to receive ... full medical coverage ... for the life of the retiree or surviving spouse," App’x at 345, 375, does not vest retiree medical coverage. ⁵

First, Honeywell argues that the general durational clauses in the EBA and CBA and a cancellation provision in the Supplemental Agreement prevent retiree medical benefits from vesting. Second, Honeywell contends that a cancellation provision in the Supplemental Agreement operated as the functional equivalent of a reservation of rights clause, enabling Honeywell to unilaterally terminate medical benefits when it terminated the CBA. The retirees counter that Honeywell’s contractual promise to provide medical coverage "for the life of the retiree or surviving spouse," App’x at 345, 375, is affirmative lifetime language that can only be interpreted...