Maytag Corp. v. Int'l Union, United Auto., Aerospace & Agric. Implement Workers of Am.

• Citation: 53 Employee Benefits Cas. 2510,687 F.3d 1076
• Decision Date: 03 October 2012
• Docket Number: No. 11–2931.,11–2931.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Parties: MAYTAG CORPORATION, a subsidiary of Whirlpool Corporation; Whirlpool Corporation, Plaintiffs–Appellees, v. INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE & AGRICULTURAL IMPLEMENT WORKERS OF AMERICA; United Automobile Workers Local 997, Defendants–Appellants.

687 F.3d 1076

53 Employee Benefits Cas. 2510

MAYTAG CORPORATION, a subsidiary of Whirlpool Corporation; Whirlpool Corporation, Plaintiffs–Appellees,

v.INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE & AGRICULTURAL IMPLEMENT WORKERS OF AMERICA; United Automobile Workers Local 997, Defendants–Appellants.

No. 11–2931.

United States Court of Appeals,

Eighth Circuit.

Submitted: April 18, 2012.

Filed: Aug. 7, 2012.

Rehearing and Rehearing En Banc Denied Oct. 3, 2012.

Nora L. Macey, argued, Indianapolis, IN, Robert A. Seltzer, Chicago, IL, Barry A. Macey, Indianapolis, IN, on the brief, for Appellants.

Douglas A. Darch, argued, Chicago, IL, Miriam Geraghty, Chicago, IL, Gene R. LaSuer, Deborah Tharnish, Des Moines, IA, on the brief, for Appellees.

Before LOKEN, COLLOTON, and SHEPHERD, Circuit Judges.

LOKEN, Circuit Judge.

The United Automobile, Aerospace, and Agricultural Implement Workers International Union and Local 997 (collectively, the UAW or the Union) appeal the district court ¹ judgment after a five-day bench trial declaring that Whirlpool Corporation may unilaterally modify the health care benefits it provides to retired hourly workers previously employed at the Newton, Iowa manufacturing facilities of Whirlpool's now-dissolved subsidiary, Maytag Corporation. The issues on appeal are whether an Article III case or controversy existed when Whirlpool filed its declaratory judgment action, and whether the retirees have a vested right to health benefits under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (“ERISA”). We affirm.

I. The Article III Issue.

A. Background. For over fifty years, Maytag and the UAW negotiated collective bargaining agreements governing the terms and conditions of employment for hourly workers at the Newton plants. Each CBA included a Supplemental Insurance Agreement (SIA) setting forth the agreed health benefits for active members of the UAW bargaining unit, and for retirees represented by the Union. Each SIA was an “employee welfare benefit plan” under ERISA. See29 U.S.C. § 1002(1). Whirlpool acquired Maytag in 2006 and assumed its obligations under the CBA negotiated in 2004, which was due to expire unless extended on July 31, 2008. In late 2007, Whirlpool closed most of the Newton facilities, laying off all but thirty of the more than nine hundred active employees. In May 2008, the Union gave Whirlpool notice terminating the 2004 CBA upon its expiration.

By the summer of 2008, Whirlpool had placed health benefits provided to Maytag's salaried retirees “under the Whirlpool model.” On July 1, the parties met to begin negotiating a new CBA for the hourly workers. Whirlpool proposed that seven employee benefit programs, including “Retiree Medical,” be “synchronize[d] with existing Whirlpool salaried benefit plans.” Union negotiator Ron McInroy replied that retiree health care benefits were “carved out” during the 2004 negotiations and the Union would not bargain the issue in 2008. At a second session on July 15, Whirlpool negotiator Kevin Bradley handed McInroy a letter stating that the Union had advised it would not bargain over retirees' health insurance, and that Whirlpool “will respect your stated intention not to bargain over current retirees' health insurance .... without prejudice to our right to make changes in the current retirees' health insurance unilaterally as those benefits are, and have been, subject to change at any time.” McInroy reiterated that the Union would not bargain over retiree health care benefits.

On July 24, Whirlpool filed this action in the Southern District of Iowa against the Union and three individuals, as representatives of a purported class of the more than 3,000 Newton retirees. The Complaint sought a declaration that Whirlpool had “the right to change the retiree medical benefit schedule effective January 1, 2009.” On July 31, Local 997's members ratified a new CBA for the active hourly workers; on August 1, Whirlpool gave Newton retirees notice, timely under ERISA, that their health benefits would change effective January 1, 2009. On August 8, five retirees filed a “mirror image” class action lawsuit in the Western District of Michigan alleging that Whirlpool's announced changes violated the 2004 CBA.

The district court denied the Union's motion to dismiss this action for lack of an Article III case or controversy and determined that venue was more appropriate in the Southern District of Iowa, the State in which the Newton facilities and 94% of the Newton retirees are located. The Michigan court deferred to the district court's determination and transferred the Michigan action to the Southern District of Iowa, where it was voluntarily dismissed by the retirees. The district court then granted, over the Union's objection, Whirlpool'smotion to certify a defendants' class, with the Union as representative of the retiree class. The class action proceeded to trial and judgment on the merits, with the Union repeatedly urging reconsideration of the Article III ruling it now raises on appeal.

B. The Merits. The Declaratory Judgment Act provides that any federal court, “[i]n a case of actual controversy within its jurisdiction ... may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). The phrase “case of actual controversy” in § 2201 “refers to the type of ‘Cases' and ‘Controversies' that are justiciable under Article III.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 126, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007). There must be a concrete dispute between parties having adverse legal interests, and the declaratory judgment plaintiff must seek “specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 241, 57 S.Ct. 461, 81 L.Ed. 617 (1937). In the declaratory judgment context, the difference between an abstract question and an Article III case or controversy

is necessarily one of degree, and it would be difficult ... to fashion a precise test for determining in every case whether there is such a controversy. Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.

Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941), quoted in part in MedImmune, 549 U.S. at 127, 127 S.Ct. 764.

The Union argues there was no Article III case or controversy when Whirlpool filed this “stealth lawsuit” because Whirlpool had not disclosed its plan to modify retiree benefits, the Union had not taken a position opposing unilateral modification, the Union then had no cause of action regarding such a hypothetical change, and therefore Whirlpool failed to show the requisite injury in fact. The district court rejected this contention in four separate orders, and rightly so. The Union's argument avoids the relevant inquiry in declaratory judgment contract actions, and it is contrary to MedImmune, 549 U.S. at 132 n. 11, 127 S.Ct. 764, which expressly overruled the Federal Circuit's “reasonable apprehension of suit” test in patent infringement cases, where the adverse interests of party-competitors are typically different and less concrete than the adverse interests of parties to an existing contract. ²

In the context of disputes between parties to a contract, the declaratory judgment remedy “is intended to provide a means of settling an actual controversy before it ripens into a violation of the civil or criminal law, or a breach of a contractual duty.” Rowan Cos. v. Griffin, 876 F.2d 26, 28 (5th Cir.1989). If there is “a real, substantial, and existing controversy .... a party to a contract is not compelled to wait until he has committed an act which the other party asserts will constitute a breach.” Keener Oil & Gas Co. v. Consol. Gas Utils. Corp., 190 F.2d 985, 989 (10th Cir.1951). In these situations, relevant Article III considerations include whether the contractual dispute is real, in the sense that it is not factually hypothetical; whether it can be immediately resolved by a judicial declaration of the parties' contractual rights and duties; and whether “the declaration of rights is a bona fide necessity for the natural defendant/declaratory judgment plaintiff to carry on with its business.” Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 712 (7th Cir.2002); cf.MedImmune, 549 U.S. at 132, 127 S.Ct. 764 (“actual or threatened serious injury to business or employment by a private party” is coercive).

In this case, Whirlpool had contractual obligations to the retirees and to the Union under the expiring CBA, statutory responsibilities to the retirees under ERISA, and statutory responsibilities to the Union under the federal labor laws. As the district court found, Whirlpool knew from decades of negotiations that the Union considered retiree health benefits provided in the 2004 CBA to be vested. But Whirlpool believed they were not vested and therefore subject to unilateral change when the CBA expired. When Whirlpool proposed on July 1 to modify retiree health benefits in a new CBA, the Union advised it would not bargain this issue. Because retiree benefits are a permissive rather than a mandatory subject of collective bargaining,³ the Union's position foreclosed Whirlpool from negotiating around the vesting issue, as the parties had done in the past. Thus, the only way Whirlpool could test its position on this contractual issue, as it was entitled to do, was to unilaterally modify the benefits being paid to over 3,000 Newton retirees.

We agree with the district court an actual Article III case or controversy existed at the time...