Armistead v. Vernitron Corp.
| Decision Date | 05 November 1991 |
| Docket Number | 89-6406,Nos. 89-6405,AIE--D,s. 89-6405 |
| Citation | 944 F.2d 1287 |
| Parties | 138 L.R.R.M. (BNA) 2559, 60 USLW 2232, 120 Lab.Cas. P 10,985, 14 Employee Benefits Cas. 1632 Virginia ARMISTEAD, et al., Plaintiffs-Appellees, Cross-Appellants, v. VERNITRON CORPORATION;ivision of Vernitron Group Insurance Plan, Defendants-Appellants, Cross-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
James G. Stranch, III, Branstetter, Kilgore, Stranch & Jennings, Nashville, Tenn., William T. Payne (argued and briefed), Schwartz, Steinsapir, Dohrmann & Sommers, Los Angeles, Cal., Franklin G. Shuler, Jr., Birmingham, Ala., for plaintiffs-appellees cross-appellants.
Douglas R. Pierce, Kenneth E. Douthat, King & Ballow, Nashville, Tenn., Harrison C. Thompson, Jr., Thomas M. Gonzalez (argued), Ronald W. Fraley (briefed), Thompson, Sizemore & Gonzalez, Tampa, Fla., for defendants-appellants cross-appellees.
Cathy Ventrell-Monsees, Washington, D.C., for the American Ass'n of Retired Persons (AARP), amicus curiae.
Before GUY and BOGGS, Circuit Judges, and BERTELSMAN *, District Judge.
Plaintiffs are a class of thirty-three persons formerly employed at the Nashville, Tennessee plant of Aladdin Industries Electronics Division ("AIED"), a subsidiary of defendant Vernitron Corporation ("Vernitron"). They are represented by the United Steel Workers, AFL-CIO-CLC ("United Steel Workers" or "the union"). When Vernitron decided to close the AIED plant in Nashville, Tennessee, plaintiffs elected to retire. In this suit, they invoke the jurisdiction of the Labor-Management Relations Act ("LMRA") and the Employee Retirement Income Security Act ("ERISA") to allege that Vernitron has wrongfully failed to provide them with retiree health and life insurance benefits, thereby violating the collective bargaining agreement ("CBA") with the union and breaching the terms of a retirement benefit plan established pursuant to the CBA. See LMRA § 301(a), 29 U.S.C. § 185(a); ERISA §§ 502(a)(1)(B), (a)(3), (e) & (f), 29 U.S.C. §§ 1132(a)(1)(B), (a)(3), (e) & (f).
The district court held for the plaintiffs, finding Vernitron in violation of the CBA and the retirement benefit plan. The court further held that Vernitron was equitably estopped from denying the plaintiffs retiree insurance benefits. The plaintiffs were awarded compensatory damages for insurance and medical expenses they had already incurred and were granted an injunction requiring Vernitron to provide lifetime health and life insurance benefits. Plaintiffs' request for attorneys fees was denied.
Vernitron now appeals the judgment in plaintiffs' favor. Plaintiffs cross-appeal the denial of attorneys fees. The American Association of Retired Persons ("AARP") is before the court as amicus to support the cross-appeal. We affirm the judgment of the district court in all respects.
Prior to October 1979, the Nashville plant where plaintiffs worked was owned by Aladdin Industries ("Aladdin"). On that date, the plant was purchased by Vernitron and subsequently renamed the Aladdin Industries Electronics Division. Shortly before the sale, in May 1979, Aladdin employees were organized by the United Steel Workers. On August 25, 1987, after Vernitron underwent a leveraged buyout, Vernitron announced that it would close the Nashville plant on November 20, 1987 and move its operations to another location where labor was less costly. Plaintiffs, who were eligible for early retirement, planned to retire on the day the plant closed. When they made this decision, they believed that they were entitled to lifetime medical and life insurance benefits in retirement. However, on the day the plant shut down, plaintiffs were informed by Vernitron officials that they would not be receiving retirement insurance benefits.
Vernitron contends that under the provisions of the collective bargaining agreement and the employee benefit plan it had purchased from Massachusetts Mutual Insurance Company ("Massachusetts Mutual"), it had the right to terminate unilaterally plaintiffs' eligibility for retiree insurance benefits. The plaintiffs deny that Vernitron has any such right. This is the sum and substance of the dispute between the parties in this case. Both sides base their positions on a series of documents containing the terms of AIED's benefits plan. Following the arguments of the parties will require a road map through the maze of CBAs, group insurance plans, and plan booklets on which the parties rely.
1. "Your Aladdin Benefits." Before the Nashville plant was organized by the United Steel Workers, plaintiffs were eligible for retirement benefits under a plan Alladin had set up voluntarily. The terms of the benefits plan were set forth in a booklet entitled "Your Aladdin Benefits." The plan provided life and health insurance benefits to active employees and pension benefits to retirees. It also provided that employees retiring between ages 50 to 65 and their eligible dependents were to receive the same medical insurance coverage as active employees and twenty-five percent of their life insurance protection. The booklet also contained the following language reserving to Aladdin the right to terminate or modify the plan:
Aladdin Industries, Inc. expects to continue the plan indefinitely, but the company must reserve the right to amend or terminate it, or to change the method of providing benefits.
In the final analysis, Vernitron relies on this passage to assert its alleged right to terminate the plaintiffs' retirement insurance benefits unilaterally.
2. Article XV of the 1979 Collective Bargaining Agreement. After unionization, Aladdin and the union negotiated a CBA. It took effect May 8, 1979, some six months before Aladdin sold its Nashville plant to Vernitron. Article XV of the CBA provided, in pertinent part, as follows:
1. The Company agrees to continue to provide an opportunity for eligible employees and dependents to participate in the present group health insurance plan as amended, all as set out in the booklet, "Your Aladdin Benefits," provided that the percentage of participants is sufficient to justify the continuance of the plan....
2. The Company agrees to provide each eligible employee Life, Accidental Death and Dismemberment, and Sick and Accident Insurance, as outlined in the above mentioned booklet....
3. The Massachusetts Mutual Plan (or the "Group Insurance Plan") and booklet. During this period of time, Leon Candella was hired as the company's personnel director. He did not negotiate the 1979 CBA, but he was responsible for implementing its terms and served as the company's representative to the union. After Vernitron bought Aladdin's Nashville plant, Candella continued in this position until he was laid off in February 1986, more than eighteen months before the shut-down. The purchase agreement between Vernitron and Aladdin required Vernitron to accept the CBA then in effect. Consistent with this obligation, Vernitron requested its insurer, Massachusetts Mutual, to replicate the insurance package in effect when Aladdin owned the plant. Retiree insurance benefits were to be included in the replicated package.
Candella flew to New York to oversee the preparation of a group insurance booklet containing the provisions of the group insurance plan. The plan booklet omitted the language from "Your Aladdin Handbook" reserving to the employer the right to amend or terminate the plan. Nonetheless, Candella testified at trial that it was the intention of Vernitron to continue the same insurance benefits that were previously offered. He also testified that any differences between the benefits or conditions described in "Your Aladdin Benefits" and the group plan booklet was the result of an oversight.
The policy, not the plan booklet, also contained the following language:
Your coverage under each type of [p]ersonal [i]nsurance and [d]ependent [i]nsurance will cease on the earliest to occur of the following dates:
....
2. The date you are no longer eligible for that type of insurance ... because you have become a member of an ineligible group of employees....
4. The date you cease active work in the employ of the Policyholder except that ...
b. if such cessation is due to retirement, any type of insurance specified in the Schedule of Insurance as applicable to you during retirement shall be continued subject to the terms of the Group Policy.
4. The 1982 Collective Bargaining Agreement and Plan Booklet. In 1982, the union and Vernitron entered into a second CBA. For the first time, they actively negotiated over benefits. Although some changes were made in benefits available to active employees, no changes in the coverage for retired employees were discussed. Article XV of the 1979 Agreement was not altered in any appreciable sense. The only changes relevant to this action were that a reference to the plan booklet, "AIE-Division of Vernitron Group Insurance Plan Booklet," was substituted for a reference to "Your Aladdin Benefits" in section 1 of Article XV and a reference to the Aladdin booklet was deleted in section 2 of that article.
Each employee who retired under the terms of the 1982 agreement received retiree health and life insurance benefits and continues to receive them, even though the agreement has expired.
5. The 1985 Collective Bargaining Agreement and Plan Booklet. The second, and last, CBA negotiated by Vernitron and the union took effect in May 1985. The parties discussed the issue of insurance, and some changes were made with respect to the health insurance benefits available to the employees. Although there were no specific negotiations regarding the benefits available to retirees, the changes that were made with regard to insurance for active employees applied to them as well. Article XV of the 1985 agreement remained the same as Article XV of the 1982...
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