United Steelworkers of America, AFL-CIO-CLC v. Connors Steel Co.

Decision Date28 September 1988
Docket NumberNo. 87-7418,AFL-CIO-CLC,87-7418
Citation855 F.2d 1499
Parties129 L.R.R.M. (BNA) 2531, 110 Lab.Cas. P 10,781, 10 Employee Benefits Ca 1265 UNITED STEELWORKERS OF AMERICA,; Joseph D. Forest; Henry Roberson, A.C. Burttram, Jr., for themselves and all persons similarly situated, Plaintiffs-Appellees- Cross-Appellants, v. CONNORS STEEL COMPANY, a corporation, Defendant, H.K. Porter Company, Inc., a corporation, Defendant-Appellant-Cross-Appellee.
CourtU.S. Court of Appeals — Eleventh Circuit

Appeal from the United States District Court for the Northern District of Alabama.

ON PETITION FOR REHEARING

(Opinion June 16, 1988, 11 Cir., 847 F.2d 707).

Before VANCE and EDMONDSON, Circuit Judges, and TUTTLE, Senior Circuit Judge.

TUTTLE, Senior Circuit Judge:

The panel has decided to vacate its earlier opinion and judgment in this case, United Steelworkers of America v. Connors Steel, 847 F.2d 707 (11th Cir.1988), and to substitute the following in its stead.

This is an appeal from a judgment of the trial court enjoining H.K. Porter Company from failing to continue payment of health and life insurance benefits to employees of Connors Steel Company, Porter's wholly owned subsidiary, after the class action against Connors had been stayed by the bankruptcy of Connors.

I. STATEMENT OF THE CASE

Plaintiffs are the United Steelworkers of America, AFL-CIO-CLC (the "Steelworkers"), and certain former hourly employees (including surviving spouses) of Connors Steel Company. Plaintiffs brought this action under Sec. 301 of the Labor Management Relations Act (the "Labor Act"), 29 U.S.C. Sec. 185(a), and Sec. 502(a) of ERISA, 29 U.S.C. Sec. 1132(a). Until February 28, 1987, the individual plaintiffs received life and health insurance benefits from Connors under the "1980 Pensioners Agreement" and the "1980 General Insurance Agreement" (collectively, the "1980 Insurance Agreements").

Plaintiffs filed their complaint on March 6, 1987. Plaintiffs also filed a motion for preliminary injunction and a motion to maintain the lawsuit as a class action.

On March 22, 1987, Connors filed for relief under Chapter 7 of the Bankruptcy Code. On April 3, 1987, the district court confirmed that this action was stayed as to Connors.

On March 24, 1987, the court held a hearing on plaintiffs' motion for class certification and motion for preliminary injunction. The court rendered its decision on April 3, 1987, granting both of plaintiffs' motions.

On April 20, 1987, H.K. Porter filed a motion to strike the jury demand in plaintiffs' complaint. The court granted that motion on May 11, 1987. On April 20, 1987, H.K. Porter also filed a motion for summary judgment to strike claims for extra-contractual compensatory and punitive damages.

On May 20, 1987, the court conducted a non-jury trial on the question whether H.K. Porter was liable to provide health and life insurance benefits to plaintiffs. On June 11, 1987, the court entered an order and memorandum opinion making the preliminary injunction against H.K. Porter permanent and granting H.K. Porter's motion for summary judgment "to the extent of dismissing all non-ERISA claims with prejudice." The court also "reconfirmed" its earlier findings and conclusions and struck plaintiffs' jury demand.

This appeal followed.

II. STATEMENT OF THE FACTS
A. As to the obligation of Connors to continued payments.

The material facts in this case occurred over approximately 25 years. They encompass the history of the operation by H.K. Porter of the Connors Steel Division of H.K. Porter Company and the operation of the later incorporated Connors Steel Company, and its relation to H.K. Porter, its sole owner, to the date of the bankruptcy of Connors in 1987.

In 1950, H.K. Porter acquired a steel making facility in Birmingham, Alabama called Connors Steel Company. H.K. Porter operated the plant as the Connors Steel Division of H.K. Porter Company. In 1956, H.K. Porter acquired another steel making facility in Huntington, West Virginia, and operated it as the West Virginia Works of the Connors Steel Division of H.K. Porter Company. H.K. Porter operated Connors Steel Company in this manner until 1974.

On March 22, 1974, H.K. Porter incorporated Connors as a separate subsidiary. H.K. Porter took this step, among other things, to limit its liability.

Beginning in 1974, the Steelworkers and Connors negotiated what was known as a "basic agreement" and a "general insurance agreement" and a "pensioner's agreement" (hereinafter collectively "the insurance agreements"). Each of these agreements ran for a term of years and was renegotiated in 1980. They were all negotiated with an employee of Connors, not of H.K. Porter. The agreements negotiated in 1980, which had an effective date of January 1, 1981, are those which are before the court for construction in this case. During its term, Connors suffered severe financial loss and several concessions were allowed by the Steelworkers and some others were denied by the Steelworkers. Finally, as the time for expiration of the 1980 agreement approached, Connors started to negotiate with the Steelworkers for a new contract. However, the negotiations came to an impasse. No new contract was agreed to.

Thereupon, Connors notified the retirees that their health and life insurance benefits would cease on September 31, 1983, the date of the expiration of the "basic agreement." Nevertheless, Connors continued to fund both the health and life benefits for plaintiffs' class with funds supplied by H.K. Porter for nearly four years. This was done on the advice of Porter's general counsel and vice president Moncrief.

In 1987, Porter found an increase in the costs of such funding unacceptable, and unilaterally stopped the benefits. This action then ensued. A few days later, Porter placed Connors under the protection of the bankruptcy court under Chapter 7.

There is no dispute between the parties as to the benefits granted to retirees under the 1980 agreement. The only question is whether such benefits were to be continued after the expiration of the underlying negotiated agreement. Included in the provisions of the health insurance agreement appears the following:

Continuation of Coverage.

6. Any pensioner or individual receiving a surviving spouse's benefit who shall become covered by the program established by this agreement shall not have such coverage terminated or reduced (except as provided in this program) so long as the individual remains retired from the company or receives a surviving spouse's benefit, notwithstanding the expiration of this agreement, except as the company and the union may agree otherwise.

(Emphasis added.)

The insurance agreement provided as follows:

Life Insurance After Retirement

8. Any employee who shall have retired and who shall have become entitled to basic life insurance after retirement pursuant to the provisions of the insurance agreement and booklet applicable to such employee at the time of retirement shall not have such basic life insurance terminated or reduced (except as provided in such booklet) so long as he or she remains retired from the company, notwithstanding the expiration of such agreement or booklet of this agreement, except as the company and the union may agree otherwise.

(Emphasis added.)

Appellant does not contend that the company and the union ever "agreed otherwise" that either of these coverages could be terminated or reduced.

In support of its contention that the health insurance and life insurance provided to retirees under the terms of the 1980 "basic agreement" were no longer effective after the expiration of the collective bargaining agreement it is necessary to consider the following provision in Section 20 of the 1980 basic agreement:

Except as otherwise provided below, this Agreement shall terminate (sic) the expiration of sixty days after either party shall give written notice of termination to the other party but in any event shall not terminate earlier than September 1, 1983.

If either party gives such notice it may include notice of its desire to negotiate with respect to insurance, pensions, the savings and vacation plan, and supplemental employment benefits (existing provisions or agreements as to insurance, pensions, the savings and vacation plan, and supplemental unemployment benefits to the contrary notwithstanding ), and the parties shall meet within thirty days thereafter to negotiate with respect to such matters by the end of sixty days after the giving of such notice, either party may therafter resort to strike or lock-out as the case may be in support of its position in respect to such matters as well as any other matters in dispute (the existing agreements, or provisions with respect to insurance, pensions, savings and vacation plan, and supplemental unemployment benefits to the contrary notwithstanding ).

(Emphasis added).

B. The facts as to the obligation of H.K. Porter Company to carry out the agreements made by Connors.

The trial court under its heading "Findings of Fact" in its memorandum order supporting its preliminary injunction stated:

1. Petitioners have made a strong showing that they are likely to prevail on the merits. The evidence, while conflicting in certain important respects, particularly as to plaintiffs' alter ego theory, is clear that H.K. Porter Company continued to fund the hospital and medical benefits obligations of its wholly owned subsidiary, Connors Steel Company, long after Connors Steel Company was no longer an operating company and after Connors Steel...

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