Intern. Union, United Auto., Aero. v. Skinner
| Decision Date | 30 July 1998 |
| Docket Number | No. Civ.A. 93-289 ERIE.,Civ.A. 93-289 ERIE. |
| Citation | 15 F.Supp.2d 773 |
| Parties | INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE & AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, U.A.W., U.A.W. LOCAL NO. 1697 and Theodore Ruef for Himself and all Others Similarly Situated, Plaintiffs, v. SKINNER ENGINE COMPANY, Defendant. |
| Court | U.S. District Court — Western District of Pennsylvania |
William Taggart, Erie, PA, for plaintiffs.
James T. Marnen, Knox, McLaughlin, Gornall & Sennett, Erie, PA, for defendant.
This class action arises out of the termination of postretirement medical and life insurance benefit plans, sponsored by an employer for retired hourly union employees and their spouses. Presently before the Court are cross motions for summary judgment. For the reasons stated herein, we will deny plaintiffs' motion and grant defendant's motion.
In December of 1990, the Financial Accounting Standards Board ("FASB"), a professional association that self-regulates the accounting practice, issued "Employers' Accounting for Postretirement Benefits Other Than Pensions, Statement of Financial Accounting Standards No. 106" (1990) ("FAS 106"). FAS 106 requires that employers report postretirement benefits on an accrual basis. Prior to its adoption, employers would report or account for postretirement benefits on a pay-as-you-go basis. The FASB was concerned that as the "prevalence and magnitude of employers' promises to provide those [postretirement] benefits ... increased, there ... was increased concern about the failure of financial reporting to identify the financial effects of those promises." FAS 106. Employers with 500 or more employees were required to use FAS 106 in their financial reporting by 1993, while employers with fewer than 500 employees began use of FAS 106 in their financial reports by 1995. FAS 106 at 108.
The net effect of FAS 106 has been a significant reduction in current income for most corporations. As many had predicted, the impact of FAS 106 has been staggering: General Motors' FAS 106 expense was $20.8 billion in 1992. Doron P. Levin, "G.M. Lost $23.5 Billion Last Year," N.Y. Times, Feb. 12, 1993, at D1. Not surprisingly, FAS 106 has forced many employers to reexamine their retiree health care benefits and life insurance benefits in order to cut costs. In some instances, employers have terminated benefits altogether, giving rise to litigation.
Plaintiffs in this class action are International Union, United Automobile, Aerospace & Agricultural Implement Workers of America, U.A.W. ("International Union"), U.A.W. Local No. 1697 ("Local 1697"), and class representative Theodore Ruef, all of Erie, Pennsylvania. International Union and Local 1697 are the exclusive collective bargaining agents for the hourly production and maintenance workers employed by defendant Skinner Engine Company, Inc. ("Skinner"), and in various matters represent former bargaining unit employees who are now retired. Plaintiff Theodore Ruef is a former hourly employee of Skinner and brings this action on behalf of himself and all other retired hourly workers of Skinner who retired before September 3, 1993, and spouses of those retirees. Skinner, located in Erie, Pennsylvania, manufactures and rebuilds Banbury intensive mixing machines for the rubber, plastics, and chemical industries and manufactures steam turbines and engines.
Effective September 3, 1993 Skinner stopped paying the medical and life insurance premiums for its retired, former hourly employees, and also cut off payment of half of the health insurance premiums for retirees' spouses. It had paid such insurance premiums for decades. Plaintiffs believed that the benefits at issue were lifetime benefits. Plaintiffs assert that Skinner's termination of benefits constitutes a breach of certain collective bargaining agreements ("CBAs"), and that Skinner breached its fiduciary duty under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.
Plaintiffs have filed a motion for summary judgment, arguing that the history between the parties, as well as the language of the various CBAs and plan documents, support their claim that fully paid health and life benefits were earned and vested as of the date of their retirement. Skinner has also filed a motion for summary judgment, arguing that the language of the CBAs indicates that vesting was never intended
The following facts are undisputed. Skinner's hourly workers became affiliated with a union beginning in 1970. The parties entered into collective bargaining agreements covering time periods from 1974 to 1977, from 1977 to 1980, from 1980 to 1981, from 1981, to 1984, from 1986 to 1989, from 1989 to 1993, and from 1993 to 1996. In 1987 there were "economic reopener" negotiations. From 1984 through 1986, the union employees worked without a contract.
Before the 1993 CBA went into effect, Skinner paid all of its retirees' health care benefits, one half of the health care premiums for retiree's spouses until the spouses became 65 years old, and retirees' premiums on life insurance. Health insurance was also provided for dependent children, with the entire cost borne by Skinner, even though the CBAs did not address this issue.
The 1989 CBA was set to expire on June 30, 1993. With mandatory compliance with FAS 106 looming in the horizon, on May 10, 1993, prior to the completion of negotiations relative to the 1993 CBA, a letter was sent to nonunion retirees informing them of certain changes in benefits effective July 1, 1993. These changes involved (1) eliminating life insurance for retirees, (2) requiring a copayment of premiums with respect to health insurance on retirees, and (3) eliminating health insurance for retirees' spouses under the age of 65. A right of conversion was provided with respect to retirees' life insurance and spousal health insurance, allowing that coverage to continue with payment of the premiums by the retiree or spouse.
This same letter was mistakenly sent to union retirees and alerted them to the problem. After the union retirees and officers of the union filed a grievance, the company acknowledged its error and stated that it would abide by the terms of the then-effective CBA (the 1989-93 CBA), and that the benefits provided for under that CBA would not be changed during its life. During the 1993 negotiations, the union took the position that the proposed changes applied only to future retirees. However, after the parties negotiated and agreed upon the 1993 CBA, Skinner implemented its changes with respect to union members who retired after the effective date of the 1993 CBA and their spouses, and also with respect to union members who retired before the effective date of the 1993 CBA, and their spouses.
During the course of 1993 contract negotiations, Skinner had tried to have the International Union and Local 1697 (collectively, "the union") agree to the changes for the hourly workers who were already retired. The union took the position that since retiree benefits are not a mandatory subject of bargaining, it would not bargain away such benefits. Curiously, the union also took the position that it did not represent its retired members during contract negotiations.
After three monthly extensions of the 1989 CBA, the union and Skinner entered into the 1993 CBA, effective October 1, 1993. They also executed a Letter of Understanding on September 3, 1993 to the effect that the 1993 CBA did not resolve their differences with respect to whether Skinner could lawfully make these changes. As of September 1993, the life insurance and health insurance for retirees' spouses were eliminated, and a co-payment plan was instituted for retirees' health insurance. This lawsuit was filed one month later on October 4, 1993.
From May 1993 to September 1993, during contract negotiations, Skinner continued to provide retirees with health and life insurance at no cost to them and it paid one-half of the cost of health insurance for their spouses to age 65. Likewise, during an earlier contract negotiation, from September 22, 1984 to July 1, 1986, these benefits were paid by Skinner as usual, even though the union was operating without a contract.
According to plaintiffs, Skinner did not regularly communicate with retirees concerning their benefits. This factual assertion arises because some plaintiffs have testified that they don't remember receiving summary plan descriptions ("SPDs"). Skinner appears to have adequately supplied health insurance SPDs to active employees and new hires, but may or may not have provided them to retirees. Copies of the CBAs were provided to union employees, but not to retirees. When the insurance plans were changed over the years, Skinner appropriately provided the new version of an SPD to employees.
The facts of this case differ from those of the case law to be discussed infra, in two respects. First, while Skinner retirees and current employees appear to have been under the impression that their retiree benefits would last for their lifetime, such an understanding is not found within the four corners of the CBAs or SPDs. Second, Skinner did not explicitly include the typical broad reservation of rights language in the CBAs, although as explained below, the vast majority of SPDs clearly state under what conditions benefits could be terminated.
Skinner denies that any member of its management ever stated or promised that its health care and life insurance benefits would last a retiree's lifetime. Joseph Orlando, the International Union representative, testified at his deposition that Raymond Rutkowski, then the president of Local 1697, specifically asked that the Insurance and Pension section of the 1986 CBA be amended to reflect the historic intent of the parties, i.e. that the insurance benefits were for the lives of the retirees. Mr. Rutkowski,...
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