American Federation of Grain Millers, AFL-CIO v. International Multifoods Corp.

• Citation: 116 F.3d 976
• Decision Date: 23 June 1997
• Docket Number: 16,No. 1096,55,118,Nos. 1,AFL-CIO,122,D,AFL-CIO and I,4,36,85,88,37,s. 1,1096
• Parties: 155 L.R.R.M. (BNA) 2577 AMERICAN FEDERATION OF GRAIN MILLERS,ts Local Union, and 226, Theodore David, Robert Holub, Dean D. Vail, Bernell B. Osterman, Russell D. Adams, Lewis E. Bertollini, Edward B. Kohout, Kenneth J. Mulhisen, James J. Wiskerchen, Joseph B. Devich, Harold Fortwengler, Peter J. Hanson, John F. Hedden, Lawrence Groves, Edward Adamczyk, Plaintiffs-Appellants, v. INTERNATIONAL MULTIFOODS CORPORATION, The Term Life, Accidental Death and Dismemberment, Accident and Sickness Insurance and Health Care Coverages for Hourly Employees Covered by the Master Agreement Between International Multifoods Corporation and The American Federation of Grain Millers("The Plan"), Defendants-Appellees. ocket 96-7948.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 976

116 F.3d 976

155 L.R.R.M. (BNA) 2577

AMERICAN FEDERATION OF GRAIN MILLERS, AFL-CIO and Its Local Union Nos. 1, 4, 16, 36, 37, 55, 85,88, 118, 122, and 226 Theodore David, Robert Holub, Dean D. Vail, Bernell B Osterman, Russell D. Adams, Lewis E. Bertollini, Edward B Kohout, Kenneth J. Mulhisen, James J. Wiskerchen, Joseph B Devich, Harold Fortwengler, Peter J. Hanson, John F. Hedden, Lawrence Groves, Edward Adamczyk, Plaintiffs-Appellants, v. INTERNATIONAL MULTIFOODS CORPORATION, The Term Life, Accidental Death and Dismemberment, Accident and Sickness Insurance and Health Care Coverages for Hourly Employees Covered by the Master Agreement Between International Multifoods Corporation and The American Federation of Grain Millers AFL-CIO ("The Plan"), Defendants-Appellees.

No. 1096, Docket 96-7948.

United States Court of Appeals, Second Circuit.

Argued Feb. 26, 1997.

Decided June 23, 1997.

Richard Helfand, Kansas City, MO (Panethiere & Helfand, Kansas City, MO, William E. Grande, Kenmore, NY, of counsel), for Plaintiffs-Appellants.

Daniel C. Gerhan, Minneapolis, MN (Paul W. Heiring, Faegre & Benson, Minneapolis, MN, H. Kenneth Schroeder, Jr., Hodgson, Russ, Andrews, Woods & Goodyear, Buffalo, NY, of counsel), for Defendants-Appellees.

Before: VAN GRAAFEILAND, MESKILL and CABRANES, Circuit Judges.

MESKILL, Circuit Judge:

For many years, the International Multifoods Corp. (Multifoods) paid the entire premium required to provide medical insurance to its retirees. However, in 1992 Multifoods announced that in the future, if premiums increased at a rate faster than an inflationary measure selected by Multifoods, the retirees would have to pay the difference to maintain medical insurance.

The American Federation of Grain Millers (AFGM), several of AFGM's local unions and fifteen named retirees ¹ sued Multifoods under the Labor-Management Relations Act (LMRA) § 301, 29 U.S.C. § 185, alleging that collective bargaining agreements (CBAs) between Multifoods and the unions prevented Multifoods from making the change. Although the CBAs all had expired, plaintiffs alleged that Multifoods promised vested retirement benefits in the CBAs. Plaintiffs also sued under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. *978s 1132, alleging that Multifoods promised vested retirement benefits in Multifoods' ERISA plan documents.

In the alternative, plaintiffs argued that Multifoods amended its ERISA plan in an improper manner, arguing (1) that it was improper for Multifoods to fail to disclose in its ERISA summary plan description that it reserved the right to amend the plan, (2) that Multifoods failed to follow required procedures for amending the plan, and (3) that after Multifoods amended the plan, Multifoods did not provide the retirees with proper notice that the plan had been amended.

The United States District Court for the Western District of New York, Elfvin, J., concluded that plaintiffs did not make the necessary showing of a promise of vested health care benefits to the retirees in either the CBAs or the ERISA plan documents, or that Multifoods improperly amended its ERISA plan. The district court therefore granted summary judgment to Multifoods. We affirm.

BACKGROUND

Multifoods and AFGM entered a "Master" collective bargaining agreement which covered most of AFGM's locals, and Multifoods also entered into individual CBAs with a few of AFGM's local unions that were not covered by the "Master" agreement. AFGM and its various locals will be referred to collectively, hereafter, as "unions." Each CBA expressly required Multifoods to provide its retirees with medical insurance at no cost to the retirees, and Multifoods provided such coverage while the CBAs were in effect.

By providing medical insurance to its retirees, Multifoods was operating an "employee welfare benefit plan" under ERISA. See 29 U.S.C. § 1002(1). As was required by ERISA, Multifoods maintained a detailed plan description, see id. § 1022(a)(2), and provided the retirees with a summary of the plan, called a "summary plan description" (SPD), see id. § 1022(a)(1).

When all of the CBAs expired, Multifoods did not amend its ERISA plan and continued to pay the entire premium required to provide medical insurance to its retirees. However, in 1992 Multifoods amended its ERISA plan, fixing the premium that it would pay for the coverage at the amount it was currently paying, plus an annual increase of either four percent or the percentage increase in the U.S. Medical Consumer Price Index, whichever was lower. Therefore, if premiums increased at a rate faster than the lower of the two percentages, the amended plan required the retirees to pay the difference in order to maintain medical insurance.

Plaintiffs sued under LMRA § 301, 29 U.S.C. § 185, alleging that the CBAs between Multifoods and the unions prevented Multifoods from making the change. ² Although the CBAs had all expired, plaintiffs alleged that, nevertheless, Multifoods promised in the CBAs that it would provide the retirees with medical insurance at no cost to them for their lifetimes. Plaintiffs also sued under ERISA § 502, 29 U.S.C. § 1132, alleging that Multifoods' ERISA plan documents contained promises to provide the retirees with medical insurance at no cost to them for their lifetimes.

In the alternative, plaintiffs argued that Multifoods amended its ERISA plan improperly by (1) failing to disclose in the SPD that it reserved the right to amend the plan, (2) failing to follow required procedures for amending the plan, and (3) failing to provide them with proper notice that the plan had been amended.

Multifoods moved for summary judgment, arguing that none of the documents relied on by plaintiffs contained a promise to provide the retirees with vested benefits and that it amended the plan in a proper manner. The district court agreed, and granted Multifoods summary judgment. For the reasons discussed below, we affirm.

DISCUSSION

We review de novo a district court's grant of summary judgment. Hanson v. McCaw Cellular Communications, 77 F.3d 663, 667 (2d Cir.1996). "Summary judgment is proper only if, viewing all evidence in the light most favorable to the nonmoving party, there is no genuine issue of material fact," id. (quotation omitted), and the moving party is entitled to judgment as a matter of law.

I. Vesting Under the CBAs and ERISA Plan Documents

Plaintiffs argue that the CBAs and the ERISA plan documents contain promises from Multifoods to provide medical insurance to its retirees at no cost to them for their lifetimes. We disagree.

A. Vesting of Retiree Medical Benefits

ERISA contemplates two distinct types of employee benefit plans--pension plans and welfare plans. See 29 U.S.C. § 1002(1) & (2)(A). Because Multifoods' plan provides medical benefits, it is a welfare plan. See id. § 1002(1).

Unlike pension plan benefits, the benefits provided by a welfare plan generally are not vested and an employer can amend or terminate a welfare plan at any time. Inter-Modal Rail Employees Ass'n v. Atchison, Topeka & Santa Fe Ry. Co., --- U.S. ----, ----, 117 S.Ct. 1513, 1516, 137 L.Ed.2d 763 (1997); Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78, 115 S.Ct. 1223, 1228, 131 L.Ed.2d 94 (1995); Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 77 (2d Cir.), cert. denied, --- U.S. ----, 117 S.Ct. 511, 136 L.Ed.2d 401 (1996); Bidlack v. Wheelabrator Corp., 993 F.2d 603, 604-05 (7th Cir.1993) (in banc). We have explained the reason for this rule as follows:

With regard to an employer's right to change medical plans, Congress evidenced its recognition of the need for flexibility in rejecting the automatic vesting of welfare plans. Automatic vesting was rejected because the costs of such plans are subject to fluctuating and unpredictable variables. Actuarial decisions concerning fixed annuities are based on fairly stable data, and vesting is appropriate. In contrast, medical insurance must take account of inflation, changes in medical practice and technology, and increases in the costs of treatment independent of inflation. These unstable variables prevent accurate predictions of future needs and costs.

Moore v. Metropolitan Life Ins. Co., 856 F.2d 488, 492 (2d Cir.1988).

The rule is the same for plans that provide welfare benefits to retirees--retiree welfare benefits are generally not vested, and an employer can amend or terminate a plan providing such benefits at any time. See Curtiss-Wright, 514 U.S. at 75, 78, 115 S.Ct. at 1226-27, 1228 (discussing a retirement welfare plan, and stating: "ERISA does not create any substantive entitlement to employer-provided health benefits or any other kind of welfare benefits. Employers ... are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans. Nor does ERISA establish any minimum ... vesting ... requirements for welfare plans.... Accordingly, that [defendant] amended its plan to deprive [plaintiffs] of health benefits is not a cognizable complaint under ERISA." (citations omitted)); Schonholz, 87 F.3d at 77 (discussing a severance plan which provided ERISA welfare benefits, and stating: "Under ERISA it is the general rule that an employee welfare benefit plan is not vested and that an employer has the right to terminate or unilaterally to amend the plan at any time."); Moore, 856 F.2d at 491 (discussing a retirement welfare plan, and stating: "Automatic vesting does not occur in the case of welfare plans."). But see UAW v. Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir.1983) ("[R]etiree benefits are in a sense 'status' benefits which, as such, carry with them an inference that they continue so long as the prerequisite status [i.e., as a retiree] is maintained.").

The rule under section 301 is similar--after a CBA expires, an employer generally is free to modify or terminate any retiree medical benefits that the employer provided pursuant to that CBA. See ...