Hinckley v. Kelsey-Hayes Co.

• Decision Date: 03 November 1994
• Docket Number: Civ. A. No. 93-74537.
• Citation: 866 F. Supp. 1034
• Parties: Anna HINCKLEY, Richard Benn, Billy Flannery, Ernest Ballard, United Paperworkers International Union, Local No. 7670, and United Paperworkers International Union, Plaintiffs, v. KELSEY-HAYES COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

866 F. Supp. 1034

Anna HINCKLEY, Richard Benn, Billy Flannery, Ernest Ballard, United Paperworkers International Union, Local No. 7670, and United Paperworkers International Union, Plaintiffs, v. KELSEY-HAYES COMPANY, Defendant.

Civ. A. No. 93-74537.

United States District Court, E.D. Michigan, Southern Division.

November 3, 1994.

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Ernest Ballard, Previant Goldberg, Milwaukee, WI, for plaintiffs.

Richard E. Rassel, Butzel Long, Detroit, MI, Jay G. Swardenski, Matkov Salzman, Chicago, IL, for defendant.

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS' MOTION FOR A PRELIMINARY INJUNCTION

GADOLA, District Judge.

This matter is before the court on plaintiffs' motion for a preliminary injunction pursuant to Rule 65(a) of the Federal Rules of Civil Procedure. Plaintiffs represent a proposed class of individuals seeking relief under the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, and the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132, from defendant Kelsey-Hayes Company for breach of a collective bargaining agreement and a welfare benefit plan.¹ For the reasons discussed below, the court will grant plaintiffs' motion.

I. Facts

In this proposed class action, plaintiffs are labor organizations and individuals who represent retired unionized employees, their surviving spouses, and current, retirement-eligible unionized employees of Kelsey-Hayes' Jackson, Michigan facility.² Plaintiffs Anna Hinckley and Richard Benn are retired employees, while plaintiffs Billy Flannery and Ernest Ballard are current employees who are eligible for retirement.³ Plaintiffs United Paperworkers International Union and its Local 7670 negotiated successive collective bargaining agreements on behalf of the retiree plaintiffs. Kelsey-Hayes is a supplier and manufacturer of automotive parts that conducts business in several states.

Plaintiffs claim that defendant breached its promise to provide lifetime retiree health benefits at no cost. Defendant has provided health care benefits for its unionized retirees pursuant to successive collective bargaining agreements with the United Paperworkers and its predecessor unions since 1968. The current bargaining agreement is in effect from 1991 through 1995. Each of the collective bargaining agreements incorporate similar insurance agreements that provide health care coverage for retirees and surviving spouses at specific negotiated levels.

In April 1993, defendant notified plaintiffs that starting January 1, 1994, it would modify retiree and surviving spouse health care benefits so as to require the payment of premiums and deductibles. Defendant would thereafter require payment of a monthly premium, an out-of-pocket deductible of $300 per person and $600 per family, and a twenty percent co-pay until an annual out-of-pocket maximum of $2,000 for an individual and $4,000 per family is reached. On October 26, 1993, plaintiffs filed the instant complaint seeking damages and injunctive relief that prevents defendant from continuing the modifications to their health benefits.

Plaintiffs contend that the current collective bargaining agreement, as well as the agreements in force over the past decades, guarantee the payment of specified health benefits for the lifetime of covered retirees and their surviving spouses. Plaintiffs claim that Kelsey-Hayes has always promised the benefits to retirees during negotiations. In addition, plaintiffs contend that summary plan descriptions distributed to employees pursuant to ERISA promise lifetime health benefits to retirees.

Kelsey-Hayes contends that the collective bargaining agreements contain durational provisions that terminate all health care benefits for retirees upon expiration of the particular agreement. Furthermore, Kelsey-Hayes claims that the agreements contain provisions that exempt it from any obligation to pay medical benefits to Medicare-eligible retirees.

II. Standard of Review for Preliminary Injunctions

Plaintiffs are seeking a preliminary injunction that requires defendant to reinstate the benefits that it provided prior to implementing the modifications. The decision of whether or not to issue a preliminary injunction lies within the discretion of the district court. CSX Transp., Inc. v. Tennessee State Bd. of Equalization, 964 F.2d 548, 552 (6th Cir.1992). When determining whether to issue a preliminary injunction, a district court should address four factors:

1. the plaintiff's likelihood of success on the merits of the action;

2. the irreparable harm to plaintiff that could result if the court does not issue the injunction;

3. whether the interests of the public will be served; and

4. the possibility that the injunction would cause substantial harm to others.

Forry, Inc. v. Neundorfer, Inc., 837 F.2d 259, 262 (6th Cir.1987); In re DeLorean Motor Co., 755 F.2d 1223 (6th Cir.1985); Mason Cty. Medical Ass'n v. Knebel, 563 F.2d 256 (6th Cir.1977).

III. Analysis

A. Likelihood of Success on the Merits

The principal issue is whether the individual plaintiffs have a vested right to receive lifetime health care benefits from defendant without cost, and whether defendant has a contractual right to modify and reduce the health care benefits provided for in collectively bargained agreements. Plaintiffs allege that defendant has reduced their health insurance benefits in violation of the LMRA and ERISA. If the health insurance benefits vest for the lifetime of the retirees, then defendant could not unilaterally modify or reduce those benefits.

In UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir.1983), cert. denied, 465 U.S. 1007, 104 S.Ct. 1002, 79 L.Ed.2d 234 (1984), the Sixth Circuit addressed the question of whether retiree health insurance benefits terminate at the expiration of the current collective bargaining agreement or whether they continue for the lifetime of the retiree. The court stated that resolution of this question depends on the intent of the parties to the collective bargaining agreement. Id. at 1479. First, a court must look to the express provisions of the agreement construing each section "consistently with the entire document and the relative positions and purposes of the parties." Id. at 1479-80. Where the express language of a retiree benefit plan is ambiguous as to the duration of retiree health insurance, courts should look to other provisions of the agreement. Id. at 1482. In determining the duration of retiree health benefits, the court noted that

examination of the context in which these benefits arose demonstrates the likelihood that continuing insurance benefits for retirees were intended. Benefits for retirees are only permissive not mandatory subjects of collective bargaining. As such, it is unlikely that such benefits, which are typically understood as a form of delayed compensation or reward for past services, would be left to the contingencies of future negotiations.

Id. (citations omitted). The Sixth Circuit recognized that employees are aware when they accept retiree benefits in exchange for lower wages, that they cannot rely on their union to maintain those benefits once they have retired and left their bargaining unit. Thus, "finding an intent to create interminable rights to retiree insurance benefits in the absence of explicit language, is not, in any discernible way, inconsistent with federal labor law." Id.

The most important holding of the Yard-Man decision is a recognition of an inference of interminable benefits absent express language to the contrary. In this context, the Sixth Circuit stated that

retiree benefits are in a sense "status" benefits which, as such, carry with them an inference that they continue so long as the prerequisite status is maintained. Thus, when the parties contract for benefits which accrue upon achievement of retiree status, there is an inference that the parties likely intended those benefits to continue as long as the beneficiary remains a retiree. This is not to say that retiree insurance benefits are necessarily interminable by their nature. Nor does any federal labor policy identified to this Court presumptively favor the finding of interminable rights to retiree insurance benefits when the collective bargaining agreement is silent. Rather, as part of the context from which the collective bargaining agreement arose, the nature of such benefits simply provides another inference of intent. Standing alone, this factor would be insufficient to find an intent to create interminable benefits.

Id. at 1482 (citation omitted). The status inference does not shift the burden of proof to the defendant. See Anderson v. Alpha Portland Indus., 836 F.2d 1512, 1517 (8th Cir.1988), cert. denied, 489 U.S. 1051, 109 S.Ct. 1310, 103 L.Ed.2d 579 (1989). The decision in Yard-Man has been consistently followed in more recent cases in the Sixth Circuit. See, e.g., Smith v. ABS Indus., Inc., 890 F.2d 841 (6th Cir.1989) (retiree benefits were vested); Policy v. Powell Pressed Steel Co., 770 F.2d 609 (6th Cir.1985) (duty to provide retiree health benefits did not end with expiration of collective bargaining agreement), cert. denied, 475 U.S. 1017, 106 S.Ct. 1202, 89 L.Ed.2d 315 (1986); Weimer v. Kurz-Kasch, Inc., 773 F.2d 669 (6th Cir. 1985); UAW v. Cadillac Malleable Iron Co., 728 F.2d 807 (6th Cir.1984). Thus, any determination of the duration of retiree health benefits must be made in the context of Yard-Man and its progeny.

In support of their claim for lifetime retiree health benefits, plaintiffs rely upon the express provisions of the collective bargaining agreements, portions of summary plan descriptions issued by defendant to its employees that explained the retiree benefits that it was providing to them, the conduct of defendant over the past two decades, and defendant's promises made during labor negotiations.

Plaintiffs claim that the express language of provisions of the collective...