International Ass'n of Machinists and Aerospace Workers, Woodworkers Div., AFL-CIO v. Masonite Corp.

• Decision Date: 04 September 1997
• Docket Number: No. 96-60571,AFL-CIO,96-60571
• Citation: 122 F.3d 228
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: 156 L.R.R.M. (BNA) 2327 INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, WOODWORKERS DIVISION,; Woodworkers Local Lodge W443, International Association of Machinists and Aerospace Workers,; W.R. Riser, on behalf of himself and all others similarly situated; Lester McCullum, on behalf of himself and all others similarly situated; Lewis H. Tiner, on behalf of himself and all others similarly situated; Emmett M. Napier, on behalf of himself and all others similarly situated; J.C. Waldrup, on behalf of himself and all others similarly situated; Earnest Weems, Jr., on behalf of himself and all others similarly situated; Robert J. Myers, on behalf of himself and all others similarly situated; King G. McMillan, on behalf of himself and all others similarly situated; Albert James Parker, Sr., on behalf of himself and all others similarly situated; James W. Jones, on behalf of himself and all others similarly situated; Robert J. Polson, on behalf of himself and all others similarly situated; Milford L. Graham, on behalf of himself and all others similarly situated; J.W. Lewis, on behalf of himself and all others similarly situated; E.U. Sims, on behalf of himself and all others similarly situated, Plaintiffs-Appellants, v. MASONITE CORPORATION, a division of International Paper Company, Defendant-Appellee.

Page 228

122 F.3d 228

156 L.R.R.M. (BNA) 2327

INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE

WORKERS, WOODWORKERS DIVISION, AFL-CIO; Woodworkers Local

Lodge W443, International Association of Machinists and

Aerospace Workers, AFL-CIO; W.R. Riser, on behalf of

himself and all others similarly situated; Lester McCullum,

on behalf of himself and all others similarly situated;

Lewis H. Tiner, on behalf of himself and all others

similarly situated; Emmett M. Napier, on behalf of himself

and all others similarly situated; J.C. Waldrup, on behalf

of himself and all others similarly situated; Earnest

Weems, Jr., on behalf of himself and all others similarly

situated; Robert J. Myers, on behalf of himself and all

others similarly situated; King G. McMillan, on behalf of

himself and all others similarly situated; Albert James

Parker, Sr., on behalf of himself and all others similarly

situated; James W. Jones, on behalf of himself and all

others similarly situated; Robert J. Polson, on behalf of

himself and all others similarly situated; Milford L.

Graham, on behalf of himself and all others similarly

situated; J.W. Lewis, on behalf of himself and all others

similarly situated; E.U. Sims, on behalf of himself and all

others similarly situated, Plaintiffs-Appellants, v. MASONITE CORPORATION, a division of International Paper

Company, Defendant-Appellee.

No. 96-60571.

United States Court of Appeals, Fifth Circuit.

Sept. 4, 1997.

Alison R. Steiner, Adelman & Steiner, Hattiesburg, MS, James E. Youngdahl, New Orleans, LA, for Plaintiffs-Appellants.

Jerrald L. Shivers, M. Curtiss McKee, Danile, Coker, Horton and Bell, Jackson, MS, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

Before GARWOOD, BENAVIDES and STEWART, Circuit Judges.

BENAVIDES, Circuit Judge:

In this appeal, certain retired employees of Masonite Corporation ("Masonite") challenge the district court's determination that the collective bargaining agreements ("CBAs") in effect at the time they retired did not confer vested lifetime health insurance benefits. The district court concluded that the retired employees' entitlement to health insurance benefits expired when the CBAs under which they retired did.

Because we conclude that the CBAs at issue are ambiguous, we reverse and remand for further proceedings.

I.

Before 1993, appellants, Masonite employees who retired after 1972, had received uninterrupted health insurance coverage at the company's expense at or above the level provided by the CBAs in effect at the time they retired. On May 1, 1993, however, Masonite announced unilateral changes to the health insurance benefits of its retired employees, decreasing the percentage of medical costs reimbursed from 80% to 65%, increasing the yearly deductible from $100 to $300, making some services reimbursable on a scheduled rather than an actual cost basis, and requiring pre-certification for all hospitalization. The changes apply to those employees who retired before January 16, 1993. The benefits of already-retired employees were not on the table during contract negotiations between the union and Masonite in 1992, which resulted in a new CBA effective January 16, 1993.

Masonite also announced that it might in the future require retired employees to pay premiums to maintain their health insurance coverage. In fact, the re-enrollment form Masonite sent to retired employees with the announced changes contained an authorization clause, which, if signed, would authorize the company to deduct medical insurance premiums from retiree pension payments, "if applicable." Only a handful of retired employees complied. Masonite has not terminated the benefits of any retired employees for failure to sign the authorization form, and it continues to pay the retired employees' health insurance premiums.

In response to these actions, retired Masonite employees filed this suit in federal district court under Section 301(a) of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185(a), and under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1132, 1140. The district court certified a plaintiff class consisting of all hourly employees of Masonite who retired between December 1, 1973, and January 15, 1993, and who, under the CBAs in effect at the time of their retirement, were eligible for the continuation of their health insurance benefits. The class sought declaratory and injunctive relief, monetary damages, and attorneys' fees.

In the district court, the parties clashed over three aspects of the retired employees' health insurance benefits: duration, cost, and level of benefits. The retired employees argued that their benefits were vested for each retired employee's lifetime, the cost to be borne by the company, and the level of benefits to be at least that provided in 1987. The company argued that the retired employees' benefits were guaranteed only for the duration of the CBA in effect when they retired, with no guarantee that the company would pay for those benefits, and with no minimum level of benefits ensured. The parties filed cross-motions for summary judgment based on stipulated facts and exhibits, and other summary judgment evidence. In its order granting defendant's motion for summary judgment, the district court addressed only whether the retirees' benefits were vested and concluded that any entitlement to retirement benefits expired when the relevant CBA did. Under the district court's broad holding, not only can Masonite reduce the retired employees' benefits, which it has done, it could also require retirees to contribute premiums, which it has threatened to do Plaintiffs timely filed a notice of appeal.

and could eliminate their health insurance benefits altogether.

DISCUSSION

We review the district court's grant of summary judgment de novo. Gunaca v. State of Texas, 65 F.3d 467, 469 (5th Cir.1995). Likewise, the district court's interpretation of a contract is subject to de novo review. L & A Contracting Co. v. Southern Concrete Servs., Inc., 17 F.3d 106, 109 (5th Cir.1994) (citation omitted).

ERISA divides employee benefit plans into two categories: welfare benefit plans and pension plans. Compare 29 U.S.C. § 1002(1) with id. § 1002(2)(A). Unlike pension benefits, which are subject to stringent vesting requirements under ERISA, welfare benefits, such as health care insurance, are vested only if so provided by contract. 29 U.S.C. § 1051(1) (providing that ERISA's vesting provisions do not apply to employee welfare benefit plans); see Wise v. El Paso Natural Gas Co., 986 F.2d 929, 934-35 (5th Cir.1993); Anderson v. Alpha Portland Indus., Inc., 836 F.2d 1512, 1516 (8th Cir.1988); see also Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78, 115 S.Ct. 1223, 1228, 131 L.Ed.2d 94 (1995) ("Nor does ERISA establish any minimum participation, vesting, or funding requirements for welfare plans as it does for pension plans.") (citation omitted). Thus, whether a CBA vests health insurance benefits in retired employees is a question of contractual interpretation. United Paperworkers Int'l Union v. Champion Int'l Corp., 908 F.2d 1252, 1261 (5th Cir.1990); Anderson, 836 F.2d at 1516. In making this determination, the core issue is whether the parties intended to vest retiree health insurance benefits or whether they intended to tie those benefits to the CBA in effect at the time the claimants retired. See Keffer v. H.K. Porter Co., 872 F.2d 60, 62 (4th Cir.1989); Anderson, 836 F.2d at 1516 (citing UFCW Local Union No. 150-A v. Dubuque Packing Co., 756 F.2d 66, 69 (8th Cir.1985)). Retired employees bear the burden of proving that their health insurance benefits are vested. Anderson, 836 F.2d at 1517; Dubuque, 756 F.2d at 70.

The interpretation of collective bargaining agreements is governed by federal law. Paperworkers, 908 F.2d at 1256. Nonetheless, the court may draw upon state rules of contractual interpretation to the extent that those rules are "consistent with federal labor policies." Id. (quoting International Union, UAW v. Yard-Man, Inc., 716 F.2d 1476, 1479 (6th Cir.1983)) (other citations omitted). Even when no identifiable federal labor policy favors or disfavors a particular interpretation, the rules of contractual interpretation are still applied with "flexibility ... in the context of labor contracts." Id.

In Yard-Man, the Sixth Circuit suggested an inference that retiree benefits are vested benefits. 716 F.2d at 1482. In concluding that the parties intended to vest retiree benefits, the court explained:

[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 is maintained. Thus, when the parties contract for benefits which accrue on the achievement of retiree status, there is an inference that the parties likely intended those benefits to continue so long as the beneficiary remains a retiree.

Id. In Paperworkers, however, this circuit questioned the inference. Paperworkers, 908 F.2d at 1261 n. 12. Nevertheless, we recognized that there is also no presumption that retiree health insurance benefits conferred by a CBA are coterminous with that CBA. See id. at 1261. ¹ As the Supreme Court explained in Litton Financial Printing v. NLRB:

[C]ontractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement. Exceptions are determined by contract interpretation. Rights which accrued or vested under the agreement will, as a general rule, survive termination of the agreement.

501 U.S. 190, 207, 111 S.Ct. 2215, 2226, 115 L.Ed.2d 177 (1991).

The retired employees argue that this court's decision in NLRB v. Pinkston-Hollar Construction Services, Inc., requires that this court find that their benefits were vested. 954 F.2d 306, 310 (5th Cir.1992). In particular, they rely on the court's conclusion that "pension, health and...