Yolton v. El Paso Tennessee Pipeline Co.

• Decision Date: 31 December 2003
• Docket Number: No. 02-75164.,02-75164.
• Citation: 318 F.Supp.2d 455
• Parties: Gladys YOLTON, Wilbur Montgomery, Elsie Teas, Robert Betker, Edward Maynard, and Gary Halstead, on behalf of themselves and a similarly situated class, Plaintiffs, v. EL PASO TENNESSEE PIPELINE CO., and Case Corporation, a/k/a Case Power Equipment Corporation, Defendants
• Court: U.S. District Court — Eastern District of Michigan

318 F.Supp.2d 455

Gladys YOLTON, Wilbur Montgomery, Elsie Teas, Robert Betker, Edward Maynard, and Gary Halstead, on behalf of themselves and a similarly situated class, Plaintiffs, v. EL PASO TENNESSEE PIPELINE CO., and Case Corporation, a/k/a Case Power Equipment Corporation, Defendants

No. 02-75164.

United States District Court, E.D. Michigan. Southern Division.

December 31, 2003.

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Norman C. Ankers, Honigman, Miller, (Detroit), Detroit, MI, Brian D. Sieve, Kirkland & Ellis (Chicago), Chicago, IL, for Case, L.L. C., Defendant.

William B. Forrest, Thomas G. Kienbaum, Kienbaum, Opperwall, (Birmingham), Birmingham, MI, Stephanie Goldstein, Fried, Frank, New York, NY, for El Paso Tennessee Pipeline Company, Defendant.

Roger J. McClow, Klimist, McKnight, Southfield, MI, for Edward Maynard, Elsie Teas, Gary Halstead, Gladys Yolton, Robert Betker, Wilbur Montgomery, Plaintiffs.

OPINION

DUGGAN, District Judge.

Plaintiffs, six hourly retirees or surviving spouses of hourly retirees of the J.I. Case Company or the Case Corporation, filed this class action lawsuit seeking fully funded, lifetime retiree health care benefits. Plaintiffs brought their lawsuit on behalf of retirees and surviving spouses of retirees who retired from J.I. Case or the Case Corporation prior to July 1, 1994, the date when Case Corporation was spun-off from its parent corporation, Tenneco, Inc., and reorganized as an independent publicly owned company. The Court has not yet addressed Plaintiffs' motion for class certification. Presently before the Court is Plaintiffs' motion for preliminary injunction, filed March 21, 2003. A hearing on Plaintiffs' motion was conducted on October 30, 2003.

In their Complaint, Plaintiffs allege two counts against Defendants. In Count I, Plaintiffs allege that Defendants breached labor agreements in violation of Section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, by requiring Plaintiffs to contribute substantial premiums to maintain their retiree or surviving spouse health care benefits. In Count II, Plaintiffs allege that Defendants breached their fiduciary duties under the various labor agreements which constitute employee welfare plans within the meaning of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq.

Defendants are El Paso Tennessee Pipeline Company and Case, LLC.¹ J.I. Case was established in 1842 and became a wholly owned subsidiary of Tenneco in 1970. In 1990, J.I. Case changed its name to Case Corporation ("Case").² Tenneco continued to operate Case as a wholly owned subsidiary until 1994.

In June 1994, Tenneco underwent a reorganization and decided to sell its agriculture and construction business assets, which consisted of some of Case's assets and some of Tenneco's assets. Pursuant to a Reorganization Agreement, Tenneco sold these assets to a "newly-formed" corporation Case Equipment Corporation ("Case Equipment"). On July 1, 1994, Case Equipment conducted an initial public offering ("IPO") of its shares and changed its name to Case Corporation. Then in September 2002, Case Corporation converted to a limited liability company, Case, LLC ("Case LLC").

In 1996, Tenneco merged with a subsidiary of El Paso Natural Gas Company and was renamed El Paso Tennessee Pipeline Company ("El Paso").

I. Factual and Procedural Background — The Relevant Labor Agreements and Other Documents

The International Union, United Automobile, Aerospace and Agricultural Workers of America ("UAW") represented Case employees in collective bargaining. Case and the UAW negotiated a series of collective bargaining agreements ("CBAs"), referred to as Central Agreements.³ Case and the UAW also negotiated a series of Group Insurance Plans which addressed group insurance benefits for various categories of employees and former employees.⁴ Group insurance benefits include, inter alia, life insurance benefits, major medical expenses coverage, and prescription drug coverage. The Central Agreements between the UAW and Case from 1971 forward contain the following language with respect to the Group Insurance Plans ("GIPs"): "The group insurance plan agreed to between the parties will run concurrently with this Agreement and is hereby made a part of this Agreement." See El Paso App., Vol. I, Ex. 2 A-H.

The 1971 Group Insurance Plan provides that employees retiring under Case's "Pension Plan for Hourly Paid Employees" or "their surviving spouses eligible to receive a spouse's pension under the provisions of that Plan are eligible for" Group Life Insurance, Major Medical Expense Insurance, and the Prescription Drug Plan. See Pls.' Exhibits, Vol. II, Ex. E at 26-27. Subsequent GIPs contain identical language. The 1971 Group Insurance Plan required the following "Contribution for Coverage" under the Major Medical Expense Insurance and Prescription Drug Plan:

(i) For eligible Retired Employees and Surviving Spouses who have enrolled and are age 65 or older, the Company shall pay the full premium cost of the above coverages.

(ii) Effective January 1, 1975, for eligible Retired Employees and Surviving Spouses who have enrolled and are under age 65, the Company shall pay the full premium cost of the above coverages.

See id. In subsequent GIPs, Case agreed to "pay the full premium cost" of health care coverage for eligible retirees and their surviving spouses, regardless of age. See id. Over the years, the provisions in the various GIPs addressing retiree health care benefits differed only in that Case agreed to provide additional health care benefits for retirees and their surviving spouses.

During the 1980's and 1990's, some Case employees retired when Case decided to close the facilities at which they worked. Prior to these plant closings, the UAW and Case entered into Plant Shutdown Agreements ("Shutdown Agreements"). In 1987, before Case closed its Rock Island, Bettendorf, and Terre Haute facilities, the UAW and Case entered into such an agreement. In 1993, the UAW and Case entered into a Shutdown Agreement after Case announced its intention to terminate activities at its Memphis Depot and Wausau plant and to cease most covered operations at its Hinsdale engineering center.

The Shutdown Agreements offered eligible employees three options when their positions were terminated: (A) layoff/master recall, (B) special plant shutdown retirement, or (C) severance pay. Employees selecting Option B received, among other entitlements, special early retirement pension benefits and the post-retirement medical coverage that apply generally to retired Case/UAW employees. The Shutdown Agreements specifically provide that Case representatives will fully explain the various options to eligible employees before they are required to make a selection.

The Shutdown Agreements required the UAW, for itself and on behalf of its members, to release and discharge Case from all claims "other than claims and obligations provided for in [the] Shutdown Agreement." See, e.g., El Paso App., Vol II, Ex. 12 at CASELLC 02177. For example, the release clause in the 1987 Shutdown Agreement provides that the UAW, for itself and the employees who it represents, releases Case from all claims, "except any claim which may be based upon an alleged violation of this Shutdown Agreement ... and any claims pertaining to vested residual rights to pension benefits, life insurance or hospitalization/medical insurance." See Pls.' Exhibits, Vol. III, Ex. U at 24 (emphasis added).

Faced with increasing financial problems, Case sought to reduce its workforce in the early 1990's. To effectuate that goal, Case and the UAW entered into an "Agreement on Case Voluntary Employment Reduction Program" ("Early Retirement Incentive Program") in 1991. Some Case employees (including some putative class members) retired in 1991 and 1992 pursuant to this Early Retirement Incentive Program. Case offered employees four options under this program: (1) Special Early Retirement Benefit, (2) Voluntary Termination of Employment Benefit ("VTEP"), (3) Special Layoff with Partial VTEP Benefit, and (4) Special Layoff with Grow-In to Special Early Retirement Benefit. Plaintiffs who chose Special Early Retirement or chose to grow-in to such retirement were entitled to special pension benefits and "the post-retirement medical coverage and Medicare Part B premium payments that apply generally to retired Case/UAW employees."⁵ See Case Exhibits, Vol. III, Ex. 21 at CASELLC 00244. The Early Retirement Incentive Program provides that employees may be required, as a condition for receiving a benefit, to sign a release or other binding agreement satisfactory to Case. See id. at CASELLC 00249.

The 1990 Central Agreement is the last CBA under which Plaintiffs and members of the putative class retired. That agreement was effective from June 2, 1990 through October 2, 1993. However on November 5, 1993, Case and the UAW entered into an Extension Agreement which extended the 1990 Central Agreement through February 2, 1995.

With respect to insurance benefits, Section 2 of the Extension Agreement provides that "[e]xcept for pension improvements, all wage schedules, pension benefit and insurance levels would remain in effect at the current schedule rates or levels for the term of the Extension Agreement." See Pls.' Exhibits Vol II, Ex. G. In Section 9 of the Extension Agreement, however, Case and the UAW agreed to adopt, effective October 3, 1993, an appended Letter of Agreement (the "FAS-106 Letter") which appears to cap Case's liability for certain health care benefits.⁶ The FAS-106 Letter, written by Case's Senior Vice-President to the UAW's Secretary-Treasurer, states:

This will confirm our understanding that the average per capita annual cost to the Company of providing medical and related benefits under the Case Group Benefit Plan to retired employees and surviving spouses...