International Union v. Honeywell International, Inc., 040320 FED6, 18-1471

Docket Nº:18-1471, 18-1975, 18-1976
Opinion Judge:NALBANDIAN, Circuit Judge
Party Name:International Union, United Automobile, Aerospace And Agricultural Implement Workers Of America (UAW); Thomas Bode, Bruce Eaton, William Burns, Peter Antonellis, and Larry Preston, for themselves and others similarly situated, Plaintiffs-Appellees/Cross-Appellants, v. Honeywell International, Inc., Defendant-Appellant/Cross-Appellee.
Attorney:K. Winn Allen, KIRKLAND & ELLIS LLP, Washington, D.C., for Appellant/Cross-Appellee. John G. Adam, LEGGHIO & ISRAEL, P.C., Royal Oak, Michigan, for Appellees/Cross-Appellants. K. Winn Allen, Craig S. Primis, P.C., Matthew P. Downer, KIRKLAND & ELLIS LLP, Washington, D.C., for Appellant/Cross-Appe...
Judge Panel:Before: GILMAN, STRANCH, and NALBANDIAN, Circuit Judges. NALBANDIAN, J., delivered the opinion of the court in which GILMAN, J., joined, and STRANCH, J., joined in part. STRANCH, J. (pp. 19-24), delivered a separate opinion concurring in part and dissenting in part. JANE B. STRANCH, Circuit Judge...
Case Date:April 03, 2020
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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International Union, United Automobile, Aerospace And Agricultural Implement Workers Of America (UAW); Thomas Bode, Bruce Eaton, William Burns, Peter Antonellis, and Larry Preston, for themselves and others similarly situated, Plaintiffs-Appellees/Cross-Appellants,

v.

Honeywell International, Inc., Defendant-Appellant/Cross-Appellee.

Nos. 18-1471, 18-1975, 18-1976

United States Court of Appeals, Sixth Circuit

April 3, 2020

Argued: June 19, 2019

Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:11-cv-14036-Denise Page Hood, Chief District Judge.

ARGUED:

K. Winn Allen, KIRKLAND & ELLIS LLP, Washington, D.C., for Appellant/Cross-Appellee.

John G. Adam, LEGGHIO & ISRAEL, P.C., Royal Oak, Michigan, for Appellees/Cross-Appellants.

ON BRIEF:

K. Winn Allen, Craig S. Primis, P.C., Matthew P. Downer, KIRKLAND & ELLIS LLP, Washington, D.C., for Appellant/Cross-Appellee.

John G. Adam, Stuart M. Israel, LEGGHIO & ISRAEL, P.C., Royal Oak, Michigan, William Wertheimer, LAW OFFICE OF WILLIAM WERTHEIMER, Brooklyn, New York, for Appellees/Cross-Appellants.

Before: GILMAN, STRANCH, and NALBANDIAN, Circuit Judges.

NALBANDIAN, J., delivered the opinion of the court in which GILMAN, J., joined, and STRANCH, J., joined in part. STRANCH, J. (pp. 19-24), delivered a separate opinion concurring in part and dissenting in part.

OPINION

NALBANDIAN, Circuit Judge

For decades, Honeywell International (Honeywell) and its employees entered into collective bargaining agreements (CBAs) in which Honeywell promised to cover the full cost of its retirees' health insurance premiums. That changed for certain retirees in 2003, when the parties negotiated a CBA obligating Honeywell to pay "not . . . less than" a specified amount beginning in 2008. This dispute largely turns on the meaning of that revision to Honeywell's commitment. The retirees argue that: (1) the pre-2003 CBAs vested lifetime, full-premium benefits for all pre-2003 retirees, and (2) the 2003, 2007, and 2011 CBAs vested-at a minimum-lifetime, floor-level benefits for the remaining retirees. Honeywell maintains that none of the CBAs vested lifetime benefits of any kind, and the CBAs' "not . . . less than" language simply ended the company's obligation to make full-premium contributions.

In two summary judgment orders, the district court decided that: (1) none of the CBAs vested lifetime benefits; (2) the "not . . . less than" language did not end Honeywell's obligation to make full-premium contributions until each CBA's expiration date; and (3) Plaintiffs' claims that Honeywell had taken certain "windfall" advantages at the expense of retirees were moot. We agree with the district court's first conclusion, disagree with its second conclusion, and reject Plaintiffs' windfall claims on the merits. We therefore affirm in part and reverse in part.

I.

Beginning in 1965, Honeywell and the United Auto Workers (UAW) labor union negotiated a series of CBAs in which Honeywell agreed to pay "the full [healthcare benefit] premium or subscription charge applicable to the coverages of [its] pensioner[s]" and their surviving spouses. (R. 101-2, 1965 CBA at PageID 6469.) Over the next four decades, each successive CBA likewise guaranteed full-premium contributions on behalf of pensioners and their surviving spouses. Each CBA also contained a general durational clause stating that the agreement would expire on a specified date and time, after which the parties would negotiate a new CBA.

When the 1999 CBA expired in 2003, Honeywell's negotiators met with the UAW to discuss the company's payment obligation in the next agreement. In a March 2003 presentation titled "The Cost of Benefits," Honeywell emphasized the effect of rising retiree medical costs on its bottom line and concluded that "[c]ost controls" were "required . . . to remain competitive." (R. 60-4, UAW Master Labor Negotiations at PageID 3122.) Those controls were necessary in part because Financial Accounting Standard (FAS) 106 "required publicly traded companies to 'recognize [immediately] a liability for the present value of all of their future payments for retiree health care expenditures [], rather than including these costs on the company's balance sheet on a pay-as-you-go basis.'" (Def.-Appellant Br. at 11-12 (quoting Wood v. Detroit Diesel Corp., 607 F.3d 427, 428-29 (6th Cir. 2010)).) The company thus proposed setting a "limit" on Honeywell's contribution for all retirees going forward. (R. 58-8, UAW - Honeywell Master Negotiations at PageID 2925.) With this limit in place, Honeywell could reduce its recognized FAS liabilities to the minimum required payment.

The UAW negotiators objected to this limit, in part because they believed the pre-2003 CBAs had vested lifetime, full-premium benefits for pre-2003 retirees. This meant that Honeywell had no right to reduce its contribution (at least with respect to those retirees). But Honeywell insisted that none of the CBAs had vested lifetime benefits. Richard Atwood, the UAW's lead negotiator, recalled that "the parties could not agree whether [the full-premium benefits were vested] or were not," and believed that "the only other place to settle that [disagreement] would be in court." (R. 181-2, Atwood Dep. at PageID 9044.) Eric Warren, one of Honeywell's negotiators, testified that he told Atwood that the pre-2003 CBAs did not vest full-premium benefits because the "UAW master contracts expired at the end of each contract and we renegotiated benefits . . . in each bargaining session." (R. 98-7, Warren Tr. at PageID 6063.)

Rather than reach a common understanding, however, the parties settled on language that left open whether the pre-2003 CBAs had vested full-premium benefits. This new language provided: The Company's contribution for health care coverage after 2007 for present and future retirees, their dependents, and surviving spouses covered under the UAW Honeywell Master Agreement shall not be less than (A) the actual amount of the Company's retiree health care contribution in 2007 or (B) the Company actuary's 2003 estimate of the Company's retiree health care contribution in 2007, whichever is greater. As stated above, this limit will be a mandatory subject of bargaining for 2007 UAW Honeywell Master Negotiations and for all future UAW Honeywell Master Negotiations. Notwithstanding such negotiations, the Company's contributions shall not be less than the greater of: (A) the actual amount of the Company's retiree health care contribution in 2007 or (B) the Company actuary's 2003 estimate of the Company's retiree health care contribution in 2007.

The above limit on Company retiree healthcare contributions will not apply to any year prior to calendar year 2008.

(R. 168-2, 2003 Agreement Regarding Insurance at PageID 7907.) According to Atwood, the purpose of this language was to preserve some measure of vested benefits even if the UAW later failed to convince Honeywell (or, if necessary, a court) that the pre-2003 CBAs had vested full-premium benefits. But if the UAW did eventually secure those benefits, then the "shall not be less than" language would not be "applicable to [pre-2003] retirees at all" because those retirees would have vested full-premium benefits under the prior CBAs. (R. 181-2, Atwood Dep. at PageID 9050-55.)

The parties included the same language when they renegotiated the CBA in 2007, though they pushed back the implementation date to "calendar year 2012." (R. 53-10, 2007 Mem. of Settlement at PageID 2380.) When the parties met to renegotiate in 2011, the UAW restated its position that the pre-2003 retirees were "entitled to 100% company paid health insurance" because the pre-2003 CBAs had already vested full-premium benefits; but for those who retired in 2003 or after, the union conceded that "[t]he company contribution amount [would] be limited to the amounts described in the 2003 and 2007 agreements." (R. 59-9, 2011 Master Union Proposals at PageID 3048.) The parties again agreed to disagree on whether the pre-2003 CBAs had vested full-premium benefits. And they later signed a "Memorandum of Terms of Settlement" that incorporated, in relevant part, the language of the 2007 agreement. (Def.-Appellant Br. at 18; see also R. 26, Answer to Compl. at PageID 911.)

What's more, the 2003, 2007, and 2011 CBAs all contained general durational clauses like the pre-2003 CBAs before them. The CBAs also attached an Insurance Agreement, which governed the essential terms of the retirees' healthcare benefits. And the Insurance Agreement contained its own specific durational clause, which said that it would end on the same day and at the same time as the general durational clause of each CBA.

In anticipation of the contribution limit's effective date of January 2012, both parties filed suit. Honeywell first sued in the District of New Jersey, seeking a declaratory judgment that the contribution limit applied to all retirees, including those who retired before the 2003 CBA. The UAW filed suit in the Eastern District of Michigan, arguing that the floor-level requirement (1) did not apply to pre-2003 retirees and (2) established only a minimum payment obligation for post-2003 retirees, without modifying Honeywell's prior commitment to make full-premium contributions to all retirees.

The New Jersey lawsuit was dismissed, and the parties' claims were consolidated in the Eastern District of Michigan. Both parties later filed motions for summary judgment, after which the litigation stalled for several years. Although Honeywell at first abstained from enforcing the contribution limit while litigation was pending, the company began imposing the limit on post-2003 retirees in 2014 and on pre-2003...

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