Rutledge v. Dayton Malleable, Inc.

• Decision Date: 28 August 1984
• Docket Number: No. 83AP-355,83AP-355
• Citation: 20 OBR 290,485 N.E.2d 757,20 Ohio App.3d 229
• Parties: , 20 O.B.R. 290 RUTLEDGE et al., Appellees, v. DAYTON MALLEABLE, INC., Appellant. *
• Court: Ohio Court of Appeals

Page 229

20 Ohio App.3d 229

485 N.E.2d 757, 20 O.B.R. 290

RUTLEDGE et al., Appellees, v. DAYTON MALLEABLE, INC., Appellant. ^*

No. 83AP-355.

Court of Appeals of Ohio, Tenth District, Franklin County.

Aug. 28, 1984.

Syllabus by the Court

1. A suit brought by a retiree, which is based upon insurance provisions of the collective bargaining agreement between his former employer and his union, arises under Section 301 of the Labor-Management Relations Act, and state courts must apply substantive federal law; however, the verdict of the trial court shall not be reversed if, although state law was applied, the result was the same as though federal law had been applied.

2. Retirees' rights to employer-provided insurance coverage are vested, in the absence of limiting language in the collective bargaining agreement, and the union may not bargain away these rights, as retirees are no longer represented by the union.

3. In the absence of an express requirement that they do so, retirees, seeking to retain vested insurance benefits, are not obligated to employ contractual grievance or arbitration remedies prior to bringing suit against their employers.

Bernard Bernard and Gary J. Pandora, Columbus, for appellees.

Smith & Schnacke, Robert J. Brown, Dayton, and Daniel G. Rosenthal, Cincinnati, for appellant.

MOYER, Judge.

This case is before us on the appeal of defendant-appellant, Dayton Malleable, Inc., from a judgment of the Franklin County Court of Common Pleas sustaining, in part, the motion of plaintiffs-appellees, Robert and Lela Rutledge, for summary judgment and overruling defendant's motion for summary judgment.

Robert Rutledge (plaintiff) retired from his employment with defendant, Dayton Malleable, Inc., in 1975. ¹ Following his retirement, plaintiff was covered by a $5,000 life insurance policy and a company-paid medical insurance policy. Defendant decided to permanently close its plant by May 31, 1980, and defendant and United Steelworkers Local 2654 entered into a plant closing agreement pursuant to which defendant claims that plaintiff's right to life and health insurance coverage was terminated.

Plaintiff brought this action against defendant when his medical insurance and life insurance benefits were terminated, alleging breach of contract and requesting damages for, inter alia, the cost of procuring other insurance.

The trial court awarded plaintiff damages for the cost of procuring replacement insurance and ordered defendant to either provide plaintiff with a $5,000 life insurance policy or pay plaintiff the present value of such policy.

Defendant asserts the following two assignments of error in support of its appeal from the trial court's judgment:

"1. The trial court erred in partially sustaining appellees' motion for summary judgment.

"2. The trial court erred in overruling appellant's motion for summary judgment."

The first issue presented by the parties is whether this case is governed by state or federal law. Plaintiff maintains that the case was brought under state law and defendant argues that federal law must be applied. The resolution of this controversy depends upon whether this action is a suit for the violation of a contract between an employer and a labor organization. If it is, the case arises under Section 301 of the Labor-Management Relations Act, Section 185, Title 29, U.S.Code (Section 301). Section 301 governs not only suits between employers and labor organizations, but all suits based on contracts between employers and labor organizations. Smith v. Evening News Assn. (1962), 371 U.S. 195, 200, 83 S.Ct. 267, 270, 9 L.Ed.2d 246. Thus, this case arises under Section 301 if plaintiff's cause of action is based on an agreement, such as a collective bargaining agreement, entered into between defendant and the union.

If the suit arises under Section 301, the state courts and the federal district courts have concurrent jurisdiction, but federal law, rather than state law, must be applied by the state courts. Textile Workers Union v. Lincoln Mills (1957), 353 U.S. 448, 456, 77 S.Ct. 912, 917, 1 L.Ed.2d 972; Internatl. Union, UAW v. Yard-Man, Inc. (C.A. 6, 1983), 716 F.2d 1476, 1479; Metal Polishers Local No. 11 v. Kurz-Kasch, Inc. (S.D.Ohio 1982), 538 F.Supp. 368, 370; Holbrook v. Dana Corp. (1980), 70 Ohio App.2d 255, 261, 436 N.E.2d 1371 ; Neal v. Reliance Electric & Engineering Co. (1967), 12 Ohio App.2d 183, 187, 231 N.E.2d 882 .

"The dimensions of § 301 require the conclusion that substantive principles of federal labor law must be paramount in the area covered by the statute. Comprehensiveness is inherent in the process by which the law is to be formulated under the mandate of Lincoln Mills, requiring issues raised in suits of a kind covered by § 301 to be decided according to the precepts of federal labor policy.

"More important, the subject matter of § 301(a) 'is peculiarly one that calls for uniform law.' Pennsylvania R. Co. v. Public Service Comm., 250 U.S. 566, 569 [40 S.Ct. 36, 37, 64 L.Ed. 1142 (1919) ]." Local 174, Teamsters v. Lucas Flour Co. (1962), 369 U.S. 95, 103, 82 S.Ct. 571, 576, 7 L.Ed.2d 593.

This is true even though plaintiff did not mention Section 301 in his complaint. Hess v. Great A. & P. Tea Co. (N.D.Ill.1981), 520 F.Supp. 373, 376.

"The force of Federal preemption in this area of labor law cannot be avoided by failing to mention Section 301 in the complaint." Avco Corp. v. Aero Lodge No. 735 (C.A. 6, 1967), 376 F.2d 337, 340, affirmed (1968), 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126.

The trial court apparently applied state law to this case in reliance on Luli v. Sun Products Corp. (1979), 60 Ohio St.2d 144, 398 N.E.2d 553 , and decided the case based on a general breach of contract theory. Luli is clearly not applicable to this case. Luli dealt with pension rights, rather than life insurance and health insurance rights, and Luli involved statutory vesting requirements for pension plans under the Employee Retirement Income Security Act, Section 1001 et seq., Title 29, U.S.Code (ERISA). The principles pertaining to pension plans are not always applicable to insurance plans since pension plans, unlike insurance plans, are covered by ERISA. See Metal Polishers Local No. 11 v. Kurz-Kasch, Inc., supra, at 374. The Ohio Supreme Court applied state law in Luli because ERISA expressly provides that it does not apply "to any cause of action which arose, or any act or omission which occurred, before January 1, 1975." Section 1144(b)(1), Title 29, U.S.Code. The Sun Products Corporation plant closed in 1974 and the last collective bargaining agreement affecting the employees in Luli expired in 1973. Thus, the holding of Luli is that state law may be applied to suits based on the termination of a pension plan agreement when there is no governing federal law in effect. In this case, pension rights are not at issue and Section 301 has been in effect since 1947.

Plaintiff's complaint states that he was a party to and a beneficiary of the collective bargaining agreement entered into between defendant and the union and that:

"Pursuant to the Contract of Agreement, plaintiff was to receive certain medical care insurance benefits * * *.

" * * *

" * * * [P]ursuant to the attached contract the defendant was to provide plaintiffs with a Five Thousand Dollar ($5,000.00) life insurance policy * * *." (Emphasis added.)

Plaintiff's suit is clearly based on the collective bargaining agreement entered into between his employer and his union. As such, plaintiff's suit arises under Section 301 and state courts, in the exercise of their concurrent jurisdiction, must recognize the federal preemption of this area of the law and apply substantive federal law.

The next issue presented is whether the trial court reached the correct conclusion under federal law. Although the trial court apparently did not apply federal law, its conclusion in plaintiff's favor will not be reversed if the same result would be reached under federal law. The issue of whether the trial court reached the correct conclusion depends for its resolution on whether plaintiff's rights in the insurance policy were vested rights.

Determining whether plaintiff's rights were vested rights:

"[R]equires interpretation of key contractual language in the collective bargaining agreement * * *

" * * *

"[Since] whether retiree insurance benefits continue beyong the expiration of the collective bargaining agreement depends upon the intent of the parties." International Union, UAW v. Yard-Man, Inc., supra, at 1479. See, also, Upholsterers' Internatl. Union v. American Pad & Textile Co. (C.A. 6, 1967), 372 F.2d 427, 428.

Although numerous cases discuss the vested rights question and reach different conclusions based on the language found in the various collective bargaining agreements, see, e.g., Internatl. Union, UAW v. Yard-Man, Inc., supra, we have chosen, in the interest of brevity, to compare and contrast the language contained in the collective bargaining agreement at issue in this case with the language found and the conclusions reached in only two other cases.

Upholsterers' Internatl. Union v. American Pad & Textile Co. involved a plant closing and the retirees' loss of their life insurance coverage. The pertinent portion of the collective bargaining agreement reads as follows:

"[T]he Company will continue to cover such eligible retired employees with $2,000 life insurance." Id. at 427.

The Sixth Circuit Court of Appeals held that the term "continue" was ambiguous since it could mean continue for the term of the collective bargaining agreement (as the company argued), or it could mean continue as long as the employee is retired (as the union, representing the retirees, argued). However, since the paragraph of the collective bargaining agreement dealing with active employees' insurance benefits clearly stated that their benefits would "continue in * * * effect for the duration of the...