CourtUnited States District Courts. 8th Circuit. United States District Courts. 8th Circuit. District of South Dakota
Citation825 F. Supp. 1440
Decision Date24 June 1993
Docket NumberNo. Civ. 91-4184.,Civ. 91-4184.
PartiesJOHN MORRELL & CO., Plaintiff, v. UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION, AFL-CIO, and Benard J. Aning, personally and as a representative of a defendant class of others similarly situated, Defendants.


Jeremiah D. Murphy, Sioux Falls, SD, Wilber H. Boies, Maria G. Arias-Chapleau, Chicago, IL, for plaintiff.

Donald R. Shultz, Rapid City, SD, Irving M. King, Chicago, IL, for defendants.


BATTEY, District Judge.

John Morrell & Co. ("Morrell") brought this action under the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq. It seeks a determination that it is entitled to unilaterally modify or terminate programs of health benefits provided to its retired hourly employees. Defendants UFCW and Benard J. Aning allege that the changes in the retirees' health benefits constitute breaches of Morrell's fiduciary duties as defined by section 404 of the Employee Retirement Income Security Act of 1974 ("ERISA"). They further claim that Morrell has dealt with assets of the ERISA plan in its own interest in violation of section 406 of ERISA, 29 U.S.C. § 1106.

This Court has jurisdiction pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, sections 8 and 301 of the National Labor Relations Act ("NLRA"), as amended, 29 U.S.C. §§ 158 and 185, sections 502(a) and 502(e) of ERISA, 29 U.S.C. § 1132(a, e), and 28 U.S.C. § 1337.

The issue before the Court is whether Morrell has a unilateral right to change or terminate the health benefits for retirees who retired before April 1, 1989. Exhibit 36b sets forth the intention of Morrell.

Morrell contends that the retiree Health, Medical, and Surgical ("H.M.S.") benefits do not continue beyond the expiration of the collective bargaining agreement ("CBA") under which each retiree retired. Morrell asserts its contractual obligation to provide the same benefits bargained for in the CBA terminated when the CBA expired. It further alleges that these benefits are not "vested" lifetime benefits, and therefore, they may be changed unilaterally. Finally, Morrell contends that even if the benefits are lifetime benefits which cannot be unilaterally changed by Morrell, the benefits can be changed by agreement between Morrell and UFCW. Therefore, Morrell requests the Court to order the parties to negotiate in good faith on the proposed health benefits changes for retirees.

A court trial was held on October 6, 1992. The Court submits the following findings of fact and conclusions of law, some of which were stipulated on October 5, 1992 (Docket # 103). Reference to facts which have been stipulated will be noted as (Stip. ___).

a. Background

1. Morrell is a Delaware corporation with its principal place of business in Cincinnati, Ohio. (Stip. C-1). It currently owns and operates meat-packing plants in Sioux Falls, South Dakota, and other locations. At various times relevant to this action, it owned and operated plants covered by a master agreement between the parties in Sioux Falls, South Dakota; Estherville, Iowa; Ottumwa, Iowa; Fort Smith, Arkansas; Arkansas City, Kansas; St. Paul, Minnesota; East St. Louis, Illinois; El Paso, Texas; Memphis, Tennessee; and Cincinnati, Ohio. All of those plants are now closed except the plant in Sioux Falls. (Stip. C-5 & C-6).

2. Morrell is an "employer" under section 2(2) of the NLRA, 29 U.S.C. § 152(2). (Stip. C-2).

3. United Food and Commercial Workers International Union, AFL-CIO ("UFCW") is a "labor organization" under section 2(5) of the NLRA, 29 U.S.C. § 152(5) with its principal offices in Washington, D.C. (Stip. C-3 & C-4). UFCW is engaged in representing employees in the district of South Dakota and has for many years been the recognized collective bargaining representative of Morrell hourly employees.

4. Defendant Benard J. Aning ("Aning") is a retired hourly employee of Morrell's Sioux Falls plant who was formerly represented by the UFCW. He has been furnished with health care benefits by Morrell, first as an active employee and currently as a retiree. (Stip. C-7).

5. Aning is a representative of the certified class.1 As of December 17, 1991, it contained over 3,300 former hourly employees. (Stip. C-9).

6. The retiree class is a closed class and the number of persons in the class is declining through death at a rate of approximately 200 per year.

7. Morrell and UFCW (or its predecessor unions) have throughout the past forty years been parties to successive CBAs commonly referred to as "master agreements." The history of these CBAs evidences some variance as relates to retirees and H.M.S. benefits.

8. UFCW (or its predecessor unions) has also been a party to similar master agreements with other major meat-packing employers such as Armour and Company, Swift & Company and Wilson Foods Corporation. UFCW and the meat-packing employers (including Morrell) engaged in what is commonly known as "pattern bargaining." In each round of negotiations, one meat-packing company and UFCW would reach an agreement which would "set the pattern" for the meat-packing industry, and the other companies would then adopt the same provisions as a means of equalizing labor costs. This pattern bargaining resulted in the same wages and benefits and working conditions for all employees and retirees in the meat-packing industry.

9. Successive CBAs became effective on September 1, 1973, 1976, 1979, 1982, and 1985. Each of these CBAs contained an Appendix F which detailed health benefits for Morrell's hourly employees and persons retiring during its term. These CBAs covered the labor contract relations at the Sioux Falls plant.

b. Relevant Provisions of the CBAs

10. 1970-73 CBA (April 4, 1970, to September 1, 1973), (Exhibit 55).

The parties to the 1970-73 CBA were Morrell and the Local P-1 Amalgamated Meat Cutters and Butcher Workmen of North America A.F.L.-C.I.O. (predecessor of UFCW).

Referring to an earlier CBA terminating August 31, 1964, paragraph 8, page 37, provided:

The H.M.S. benefits ... shall continue to be made available to present covered retirees who have been carrying such insurance ... at no additional cost over the amounts being paid as of the date of execution of this Memorandum by retirees for such insurance coverage at the respective plants. All retirees who are carrying such insurance coverage as of December 1, 1967, and all Employees retiring after December 1, 1967, shall be furnished such insurance thereafter at Company expense.

Thus by contract, in 1970 the retirees were included by specific contract provisions. This status of retirees was to change later.

11. 1973 CBA (September 1, 1973September 1, 1976), (Exhibits 1a and 1b).

Retirees continued to receive by contract H.M.S. benefits under this CBA.

Paragraph 8.12, Exhibit 1b, page 24, provided:

8.12 Retirement: All retirees currently furnished H.M.S. coverage and all Employees who retire during the term of the Master Agreement shall be furnished hospital, medical and surgical insurance at Company expense....

(Emphasis supplied.) Paragraph 8.12 further changed benefits which had been provided in the 1964 agreement by (1) providing coverage of 120 days per confinement; (2) increasing miscellaneous fees to $500; (3) providing coordination with Medicare; and (4) providing conditions of coverage for those employees ages 53 and 54 who elect a separation pension.

The 1973 CBA contained a duration clause on H.M.S. benefits as follows:


103. The Hospital-Medical-Surgical Insurance Plan described in Appendix F will remain in effect for the duration of this Agreement.

(Exhibit 1a, page 50).

12. 1976 CBA (September 1, 1976September 1, 1979), (Exhibits 2a and 2b).

Paragraph 8.12, Exhibit 2b, page 25, omitted the reference to "all retirees currently furnished H.M.S. coverage" as found in the 1973 CBA paragraph 8.12 and read in part as follows:

8.12 Retirement: All Employees who retire on or after September 1, 1976 ... shall be furnished at Company expense effective as of the time of retirement, the following: ...

Again as with the 1973 CBA, the 1976 CBA contained the identical Article XXXI, paragraph 103, as follows:


103. The Hospital-Medical-Surgical Insurance Plan described in Appendix F will remain in effect for the duration of this Agreement.

(Exhibit 2a, page 52).

Thus the 1976 CBA represented a policy shift by Morrell not to include H.M.S. benefits for past retired employees (employees who had retired at a time when previous CBAs were in effect). This CBA represents a clear intent not to include the past retirees in the H.M.S. program by contractual agreement.

The logical inference for this change in posture is that the company became aware of the case of Allied Chem. & Alkali Workers of Am., Local Union v. Pittsburgh Plate Glass Co., Chem. Div., 404 U.S. 157, 92 S.Ct. 383, 30 L.Ed.2d 341 (1971). Pittsburgh Plate Glass held that retired employees were not a part of the employee bargaining unit and that a bargaining agent was under no mandated statutory duty to represent retirees in negotiations with employer. It held that bargaining for retirees was permissive only and not a mandatory requirement of collective bargaining.

Neither in the 1976 CBA nor in its Appendix F is there found any express contract terms requiring past retirees to be contractually furnished H.M.S. benefits beyond the expiration of the CBA. The contract is clear and unambiguous.

13. 1979 CBA (September 1, 1979September 1, 1982), (Exhibits 10a and 10b).

The 1979 CBA, Appendix F (Exhibit 10b), page 17, provided for H.M.S. benefits to those employees retiring after September 1, 1979. It read in part as follows:



9.1 Normal, Early or Disability Retirees:

(a) Benefits: All Employees who retire on or after

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