The opinion
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
FRANCES ALDAY; JANICE ALESHIRE;
MARK AGRAVES; FRANK ARMENTA;
MILORAD ARNOKOVICH; LEONARD
BECWAR; JOAN BERNAL; IRMA
BRAVO; JANE BRAVO; THURMAN
BROOKS; HOWARD BROWNSTEIN;
MARLENE BURGER; JAMES BYRNES,
SR.; DAVID CARLESS; JOE
CARRASCO; LIPA CARRASCO;
ROSEMARY CESARE; ERNIE CORRAL;
RACHEL DELACRUZ; JOAN
DONNELLY; PATRICK ECCLES; LUCY
ESPARZA; REBECCA FEDERICO; JERRY
FITCH; DICKIE FLORES; ALICE
GALLARDO; PATRICIA GARCIA;
SANDRA GARY; RICHARD GEHRKE,
SR.; DONALD GENUNG; RONALD
GEUDER; KATHLEEN GLASER;
GEORGE GONZALES; JEANETTE GRAY;
JOSE GUTIERREZ; JEANNE HARRIS;
ROBERT HARRIS; GLORIA
HERNANDEZ; ELOISE HERRAN;
GERALD HOTCHKISS; SHARON
HUDSON; JOHN JACKSON; JOE
KEIFLIN; LARRY KIDNEY; CLARE
L’ARMEE; DAVID LILLIE;
13497
13498 ALDAY v. RAYTHEON COMPANY
LESLIE LLAMAS; ERIC MARTINEZ;
JIMMIE MARTINEZ; MARIA
MARTINEZ; MARY MCKENNA;
PATRICIA MCPHERON; JOSEPHINE
MEADOWS; ROY MESA; BILL
MEYER; THOMAS MILLER; MICHAEL
MINCHEFF; CARMEN MIRANDA;
LARRY MITCHELL; HENRY
MODRZEJEWSKI; LOIS MOORE; HEIDE
MORAN; GRACE MORENO; ABDO
MORGAN; CARLOS OCHOA; FELICITA
ORTEGA; JUAN ORTIZ; RICHARD
PAYNE; LARRY POLLOCK; CLIFTON
PRICE; JACK QUATTLEBAUM; IGNACIO
REA; JACK ROBINSON; BRUCE
ROGERS; JENNIE SAENZ; ROBERT
SAGER; ESPERANZA SALTZBERRY;
RUSSELL SCIRA; JEANNIE SIDES;
DAVID SIMS; JEROLD SMALL; JAMES
SMITH, JR.; JULIA SOLTERO;
MICHAEL SOMMER; GINA SOTO;
DONALD SPROSS; RONALD
STALLINGS; DONALD STRAUSS; JAMES
SULLIVAN; MARY TERPENING; JOHN
TERRY; DONALD ULLIMAN; MARTHA
VILLA; STEVE VUICH; LAWRENCE
WICKERSHAM; MARY WILLIAMS;
GEORGE ZUKOWSKI,
Plaintiffs-Appellees,
ALDAY v. RAYTHEON COMPANY 13499
v. No. 08-16984
RAYTHEON COMPANY, a Delaware
corporation,
D.C. No.
4:06-cv-00032-DCB
Defendant-Appellant.
MARK AGRAVES; RONALD GEUDER;
CLARE L’ARMEE; DAVID LILLIE,
Plaintiffs-Appellants,
and
FRANCES ALDAY; JANICE ALESHIRE;
FRANK ARMENTA; MILORAD
ARNOKOVICH; LEONARD BECWAR;
JOAN BERNAL; IRMA BRAVO; JANE
BRAVO; THURMAN BROOKS;
HOWARD BROWNSTEIN; MARLENE
BURGER; JAMES BYRNES, SR.; DAVID
CARLESS; JOE CARRASCO; LIPA
CARRASCO; ROSEMARY CESARE;
ERNIE CORRAL; RACHEL DELACRUZ;
JOAN DONNELLY; PATRICK ECCLES;
LUCY ESPARZA; REBECCA FEDERICO;
JERRY FITCH; DICKIE FLORES; ALICE
GALLARDO; PATRICIA GARCIA;
SANDRA GARY; RICHARD GEHRKE,
SR.; DONALD GENUNG; KATHLEEN
GLASER; GEORGE GONZALES;
JEANETTE GRAY; JOSE GUTIERREZ;
13500 ALDAY v. RAYTHEON COMPANY
JEANNE HARRIS; ROBERT HARRIS;
GLORIA HERNANDEZ; ELOISE
HERRAN; GERALD HOTCHKISS;
SHARON HUDSON; JOHN JACKSON;
JOE KEIFLIN; LARRY KIDNEY; LESLIE
LLAMAS; ERIC MARTINEZ; JIMMIE
MARTINEZ; MARIA MARTINEZ; MARY
MCKENNA; PATRICIA MCPHERON;
JOSEPHINE MEADOWS; ROY MESA;
BILL MEYER; THOMAS MILLER;
MICHAEL MINCHEFF; CARMEN
MIRANDA; LARRY MITCHELL; HENRY
MODRZEJEWSKI; LOIS MOORE; HEIDE
MORAN; GRACE MORENO; ABDO
MORGAN; CARLOS OCHOA; FELICITA
ORTEGA; JUAN ORTIZ; RICHARD
PAYNE; LARRY POLLOCK; CLIFTON
PRICE; JACK QUATTLEBAUM; IGNACIO
REA; JACK ROBINSON; BRUCE
ROGERS; JENNIE SAENZ; ROBERT
SAGER; ESPERANZA SALTZBERRY;
RUSSELL SCIRA; JEANNIE SIDES;
DAVID SIMS; JEROLD SMALL; JAMES
SMITH, JR.; JULIA SOLTERO;
MICHAEL SOMMER; GINA SOTO;
DONALD SPROSS; RONALD
STALLINGS; DONALD STRAUSS; JAMES
SULLIVAN; MARY TERPENING; JOHN
TERRY; DONALD ULLIMAN; MARTHA
VILLA; STEVE VUICH; LAWRENCE
WICKERSHAM; MARY WILLIAMS;
GEORGE ZUKOWSKI,
Plaintiffs,
ALDAY v. RAYTHEON COMPANY 13501
v. No. 08-16985
RAYTHEON COMPANY, a Delaware
corporation, D.C. No.
4:06-cv-00032-DCB
Defendant-Appellee.
OPINION
Appeal from the United States District Court
for the District of Arizona
David C. Bury, District Judge, Presiding
Argued and Submitted
February 9, 2010—San Francisco, California
Filed September 7, 2010
Before: David R. Thompson, M. Margaret McKeown and
Marsha S. Berzon, Circuit Judges.
Opinion by Judge Thompson
13504 ALDAY v. RAYTHEON COMPANY
COUNSEL
Robert Gregory, Mesa, Arizona, for the plain-
tiffs/appellees/appellants.
Christopher Landau, Washington, DC, for the defen-
dant/appellant/appellee.
OPINION
THOMPSON, Senior Circuit Judge:
The plaintiffs are a class of retirees from Raytheon and its
predecessor, Hughes Missile Systems, along with their
spouses and eligible dependents. Since 1972, Hughes, and
later Raytheon, paid insurance premiums for healthcare cover-
age for early retirees until age 65 pursuant to a series of col-
lective bargaining agreements (“CBAs”) with the plaintiffs’
union. In 2004, Raytheon limited its contributions to premi-
ums for this insurance and started charging the plaintiffs
monthly payments for their healthcare coverage. The plain-
tiffs sued alleging that Raytheon breached the CBAs and vio-
lated the Labor Management Relations Act (“LMRA”), 29
U.S.C. § 185, and the Employee Retirement Income Security
Act of 1974 (“ERISA”), 29 U.S.C. § 1132. The district court
concluded that the CBAs obligated Raytheon to continue to
pay the premiums and granted summary judgment in favor of
the plaintiffs. Raytheon appeals the order granting summary
judgment.
In a separate order, the district court granted Raytheon’s
motion for judgment on the pleadings, concluding that the
plaintiffs were not entitled to punitive and extra-contractual
damages. The plaintiffs appeal that judgment.
We have jurisdiction under 28 U.S.C. § 1291, and we
affirm the district court’s summary judgment in favor of the
ALDAY v. RAYTHEON COMPANY 13505
plaintiffs and its judgment on the pleadings in favor of Ray-
theon.
I
Background
The CBAs that apply to the plaintiffs are those adopted in
1990, 1993, 1996 and 1999. Each CBA provided premium-
free medical insurance coverage to qualified retirees until they
attained the age of 65 years, as well as their spouses and eligi-
ble dependents. To qualify, retirees had to be at least age 55
but less than age 65, with five years of continuous employ-
ment, and three years of continuous participation in the com-
pany retirement plan.
Hughes Missile Systems executed the 1990-1996 CBAs. In
1997, Hughes Missile Systems merged into Raytheon and
Raytheon was substituted as the employer in the 1996 CBA.
In 1999, Raytheon executed a new CBA that continued to
provide retirees with premium-free medical insurance cover-
age.
The relevant provisions of the 1990-1999 CBAs remained
largely unchanged. Each CBA carried a three-year term. For
qualifying retirees, Hughes and Raytheon agreed “to continue
to provide the Comprehensive Medical Plan coverages for
which they were covered while active employees, until the
retired employee attain[ed] age 65 . . . .” This promise assured
retirees of premium-free medical insurance coverage, because
a separate provision of the CBAs obligated Hughes and Ray-
theon to pay the premiums for the Comprehensive Medical
Plan for active employees. Starting in 1993, a provision was
added to the CBAs confirming that for retirees “there is no
weekly premium/charge” for the Preferred Plan, the Hughes
Medical Plan, or an HMO. Raytheon continued to pay the full
premiums for retirees until 2004.
13506 ALDAY v. RAYTHEON COMPANY
In 2003, Raytheon negotiated a new CBA that eliminated
its obligation to pay the full medical insurance premiums for
retirees. The 2003 CBA obligated Raytheon to pay only a por-
tion of the premiums for retiree medical insurance coverage.
Raytheon applied this new agreement retroactively and, in
2004, began charging the plaintiffs monthly payments to keep
their medical insurance coverage in force.
II
Continuing Obligation
As an initial matter, we must decide whether Raytheon’s
obligation to pay the premiums for retiree medical insurance
coverage survived the three-year term of each of the CBAs.
We conclude that it did.
[1] In general, “contractual obligations will cease, in the
ordinary course, upon termination of the bargaining agree-
ment.” Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 207
(1991); see also Poore v. Simpson Paper Co., 566 F.3d 922,
927 (9th Cir. 2009). There are exceptions, however, which
“are determined by contract interpretation.” Litton, 501 U.S.
at 207. As the Supreme Court has explained:
Rights which accrued or vested under the agreement
will, as a general rule, survive termination of the
agreement. And of course, if a collective-bargaining
agreement provides in explicit terms that certain
benefits continue after the agreement’s expiration,
disputes as to such continuing benefits may be found
to arise under the agreement . . . .
Id. at 207-08.
[2] The CBAs explicitly provided that the retirees’ rights
to fully paid premiums for medical insurance would continue
after the CBAs’ expiration. Id.; Poore, 566 F.3d at 927 (“An
ALDAY v. RAYTHEON COMPANY 13507
exception to this general rule exists, however, where the par-
ties’ dispute concerns a ‘right that accrued or vested under the
agreement, or where, under normal principles of contract
interpretation, the disputed contractual right survives expira-
tion of the remainder of the agreement.’ ” (quoting Litton, 501
U.S. at 206) (emphasis added)).
[3] Hughes and Raytheon expressly agreed to continue to
provide premium-free medical insurance coverage for retirees
until age 65 notwithstanding the CBAs’ three-year terms. See
Litton, 501 U.S. at 206 (recognizing that “obligations already
fixed under the contract but as yet unsatisfied” do not expire
with the agreement). Unlike other group coverages in the
CBAs, premium payments for retiree medical insurance cov-
erage were not limited to the “term of the agreement.”1 Com-
pare United Mine Workers v. Brushy Creek Coal Co., 505
F.3d 764, 766-67 (7th Cir. 2007) (concluding that retiree ben-
efits, although described as “for life” in one provision of a
CBA, were limited to the term of the CBA under a separate
provision so stating expressly); Crown Cork & Seal Co., Inc.
v. Int’l Ass’n of Machinists & Aerospace Workers, AFL-CIO,
501 F.3d 912, 917-18 (8th Cir. 2007) (holding that retiree
benefits did not vest under a CBA in part because the CBA
expressly precluded only “modification for the life of” the
agreement).
Retiree medical insurance coverage with premiums paid by
Raytheon was not limited to the CBAs’ expiration dates by
virtue of the general integration clause, which applied the
CBAs’ term limits to group coverages that did not specify dura-
tion.2 As the district court determined, retiree medical insur-
1
For example, Raytheon agreed to provide retirees over the age of 65
with at least two medicare supplemental insurance plans, but only “during
the term of this Agreement.”
2
The integration clause stated that the CBA was “the sole and entire
existing agreement between the parties . . . and expressed all obligations
of, and restrictions imposed on, the Company and the Union for the period
of the Agreement.”
13508 ALDAY v. RAYTHEON COMPANY
ance coverage, with premiums paid by Raytheon, was the
only group coverage under the CBAs that supplied a specific
duration—“until the retiree attains age 65”—and therefore
survived the expiration of the CBAs. Compare Turner v.
Local Union No. 302, Int’l Bhd. of Teamsters, Chauffeurs,
Warehousemen & Helpers of Am., 604 F.2d 1219, 1225 (9th
Cir. 1979) (concluding that the CBAs made no “representa-
tion as to the length of the period during which [retiree] bene-
fits would continue to be paid, other than ‘throughout the term
of this agreement’ ” and therefore “could be terminated at the
end of any one [CBA]”); Int’l Union of United Auto., Aero-
space & Agric. Implement Workers of Am. v. Rockford
Powertrain, Inc., 350 F.3d 698, 705 (7th Cir. 2003) (holding
that a company could terminate ongoing retiree health bene-
fits because the “CBA contains no statement regarding the
period of time during which retirees would be entitled to ben-
efits”).
[4] The language of the CBAs makes clear that Raytheon’s
agreement to pay retiree medical insurance premiums contin-
ued beyond the term of the CBAs even where its agreement
to pay non-retired employee premiums did not. The CBAs
provided retirees with medical insurance coverage “for which
they were covered while active employees,” which was,
undisputedly, premium-free.3 In addition, letters from Ray-
theon to retirees between 1998 and 2002 support the under-
standing that retirees and their qualified dependents were
“eligible for Company-Paid retiree medical coverage until the
age of 65.” Thus, Raytheon agreed to continue providing
retirees with the same premium-free medical insurance cover-
age they had as active employees, until they turned 65.
[5] While Raytheon argues that this promise was merely an
3
Raytheon apparently recognized the significance of this language, as
the 2003 CBA revised the language to provide retirees with the “Raytheon
Medical Plans available to active employees,” not with the same coverage
the retirees had had as active employees.
ALDAY v. RAYTHEON COMPANY 13509
agreement to pay some portion of retirees’ medical coverage
until age 65, the language of the CBAs supports the plaintiffs’
contention that it obligated Raytheon to continue the
premium-free coverage that retirees enjoyed as employees.
The CBAs provide different retirement benefits to employees
who enrolled in the “contributory option” of the Retirement
Plan from those who enrolled in the “non-contributory
option,” and the difference sheds light on the correct interpre-
tation of “Company-Paid.” The CBAs exclude from the non-
contributory benefit what they alternately called “employer
provided medical coverage” and “company-paid medical.”
Instead, employees opting for the non-contributory benefit
were required to “pay the full retiree COBRA Group Pre-
mium for the medical plan of benefits in which they are
enrolled,” if they wished to maintain coverage after retire-
ment. The difference is clear. Retirees who elected the non-
contributory benefit pay for their insurance, while retirees
who elected the contributory benefit receive the same
“company-paid medical” they received as employees until
they turn 65.
III
Right to Terminate
[6] The 1990-1999 CBAs each contained a general provi-
sion stating that “[a]ll benefits of employees [and] retired
employees . . . are subject in every respect to the terms of the
applicable Plan documents under which payment is claimed.”
Raytheon contends that this provision subordinates the CBAs
to Raytheon’s subsequent ERISA Plans, which purportedly
give Raytheon the right to unilaterally revoke its agreement to
pay the medical insurance premiums. We disagree.
[7] First, while the CBAs contain a general subordination
provision, the Plans are likewise restricted by the CBAs. In
the 1994 and 1997 Plans, the employer “reserves the right to
alter, amend, modify, revoke or terminate in whole or in part
13510 ALDAY v. RAYTHEON COMPANY
the Plan, except as provided in an agreement with a Collective
Bargaining Agent.” Thus, because the CBAs specifically pro-
vide for company-paid insurance to retirees from age 55 to
age 65, the Plans may not be altered to deprive retirees of
their company-paid health insurance. The Plans further state
in disclaimers regarding the potential future of the Plans that
amendment or termination “will not diminish any rights estab-
lished prior to such amendment or termination.”
[8] Raytheon tightened the language in its favor in the
1999 and 2003 Plans, expressly reserving “the absolute and
unconditional right to terminate the Plan and any and all Ben-
efit Programs, in whole or in part, with respect to some or all
of the Employees.” However, “employee” is defined in the
1999 and 2003 Plans as a “person performing compensated
services for the Employer who meets the definition of
‘employee’ for income tax withholding purposes under [Trea-
sury Regulation] 31.3401(c)-1.” Treasury Regulation
31.3401(c)-1 includes a list of factors to use in distinguishing
between employees and independent contractors, not between
current and retired employees. See Vizcaino v. Microsoft
Corp., 120 F.3d 1006, 1009 (9th Cir. 1997). Retirees do not
reasonably fall within the definition of “employee” used in
the Plans. Thus, Raytheon’s leeway to amend the Plans does
not allow it to alter the terms of the CBAs under which it
agreed to provide company-paid health insurance to retirees.
Second, Raytheon’s 1999 and 2003 Plans provide that,
while amendments can take retroactive effect, “no amendment
can reduce benefits accrued as of the date the amendment is
approved.” Thus, even on the terms of the 1999 and 2003
Plans, Raytheon may not amend the Plans to deprive plaintiffs
of premium-free medical insurance coverage.
[9] Third, the so-called subordination provision applies to
“benefits.” It does not apply to contributions or medical insur-
ance coverage. Cf. Poore, 566 F.3d at 924 (holding that
retiree medical insurance coverage was subject to Plan termi-
ALDAY v. RAYTHEON COMPANY 13511
nation rights where the CBA provided that “the coverages
agreed to in [the] labor agreement” were “[s]ubject to all the
provisions of the Benefit Plan Booklet”).4 That “premiums” or
“coverages” are not “benefits” of a Plan is clear from the
CBAs’ language. Under the CBAs, the company “agrees to
continue to provide the . . . coverages for which [retirees]
were covered while active employees, until the retired
employee attains age 65 . . . .” The company also “agrees to
pay the premiums for . . . coverages for eligible employees.”
“Coverage” does not include, however, the specific “bene-
fits” provided under a plan. Although “coverage” is not spe-
cifically defined in the CBA, one CBA provision describes
levels of “benefit coverage” as those for an “employee,” “em-
ployee and spouse,” or “employee and child(ren).” These
examples suggest that “coverage” refers to how and for whom
benefits in general become available, not the specific benefits
themselves.5
[10] Thus, while Raytheon could establish the specific
benefits of medical insurance coverage in the Plans, and could
terminate those benefits to the extent the Plans permit it to do
so, it cannot terminate its agreement to pay the medical insur-
ance premiums it had obligated itself to pay. Whatever termi-
4
Indeed, the other two CBAs at issue in Poore clearly specified what the
CBAs here do not: “all participants covered by the health care plans will
be subject to the same level of contributions as active employees and to
the same health care plan provision changes which take effect from time
to time.” 566 F.3d at 924. Here, only the “benefits” are subject to the Plan
terms.
5
This interpretation is supported by the Plans as well. As Raytheon con-
cedes, the 1994 and 1997 Plans do not even discuss contributions or pre-
miums. And the 1999 and 2003 Plans clearly state that the Plan, which has
as its purpose the provision of “certain employee welfare benefits,” “shall
be funded by Employer and Participant contributions.” (Emphasis added.)
The 1999 and 2003 Plans also define ‘benefits’ as “any payments or ser-
vices made under the Plan,” (emphasis added), not the payments made by
employees to the Plan, if any, to obtain coverage. Thus, the Plans’ plain
language distinguishes between “benefits” and premium “contributions.”
13512 ALDAY v. RAYTHEON COMPANY
nation rights Raytheon reserved for itself in the Plans with
respect to benefits do not apply to Raytheon’s existing obliga-
tion to provide premium-free medical insurance coverage. Cf.
Brushy Creek Coal, 505 F.3d at 767 (holding that the Plan
terms controlled where the CBA provided that “the specific
provisions of the plans will govern in the event of any incon-
sistencies” between the CBA and the Plans).
Other provisions in the CBAs that incorporate the Plans do
not give Raytheon the right to alter its agreement to pay
retiree medical insurance premiums. For example, the CBAs
provide that “[t]he Retired Employees Medical Benefits will
be administered by the Employer in accordance with the pro-
visions of the Comprehensive Medical Plan Document pre-
pared by the Employer.” This provision enables Raytheon to
administer medical benefits according to the Plans, not termi-
nate or modify its agreement to pay the insurance premiums.
[11] Raytheon nevertheless contends that all provisions of
the CBAs are “subject . . . to” the Plans. And because the
Plans allegedly give Raytheon an unfettered right to modify
or terminate benefits, Raytheon contends it can revoke any
plan-related obligation it agreed to in a CBA—even, appar-
ently, an obligation to active employees during the CBA’s
term. Raytheon’s interpretation, however, renders the CBAs
illusory. Nothing in the CBAs at issue here enables Raytheon
to modify or terminate its obligation to pay medical insurance
premiums at any time it pleases simply by saying it can do so
in Plan documents governing “benefits.” We therefore hold
that Raytheon breached the CBAs and violated the Plans, and
so affirm the district court’s grant of summary judgment on
this basis.
IV
Punitive and Extra-Contractual Damages
The plaintiffs contend the district court erred in granting
Raytheon judgment on the pleadings. By that judgment, the
ALDAY v. RAYTHEON COMPANY 13513
court rejected the plaintiffs’ claims for punitive and extra-
contractual damages under the LMRA and their claim for
breach of contract.
[12] At the outset, the plaintiffs concede that punitive and
extra-contractual damages are generally not allowed under the
LMRA for breach of a CBA. See Moore v. Local Union 569
of Int’l. Bhd. of Elec. Workers, 989 F.2d 1534, 1542 (9th Cir.
1993) (“The general rule . . . is that punitive damages are not
allowed in actions for breach of contract under [the
LMRA].”); Desert Palace, Inc. v. Local Joint Executive Bd.
of Las Vegas, 679 F.2d 789, 794 (9th Cir. 1982) (“Generally,
the remedy for breach of a collective bargaining agreement is
limited to an award of compensatory damages. Ordinarily, an
award that exceeds the monetary loss which an injured party
suffered as a result of a contract breach is considered puni-
tive.”). The plaintiffs, however, contend that there are excep-
tions to this general rule; a court may award punitive damages
if it would deter persistent misconduct and may award extra-
contractual damages if the defendant’s conduct was particu-
larly likely to result in serious emotional distress.
[13] We need not resolve whether such exceptions exist,
because the plaintiffs failed to allege sufficient facts support-
ing their claim for punitive and extra-contractual damages.
“Even if we were to conclude that punitive damages are avail-
able in appropriate circumstances,” the plaintiffs have alleged
no facts showing that “the defendants’ conduct in this case is
. . . sufficiently ‘outrageous’ or ‘egregious’ to warrant an
award of punitive damages against them.” Wilson v. Int’l Bhd.
of Teamsters, Chauffeurs, Warehousemen & Helpers of Am.,
AFL-CIO, 83 F.3d 747, 755 (6th Cir. 1996).
V
Conclusion
[14] Raytheon expressly agreed to continue to pay premi-
ums for medical insurance for the plaintiffs until retirees and
13514 ALDAY v. RAYTHEON COMPANY
their spouses became 65 years of age. Raytheon’s agreement
survives the expiration of the CBAs and cannot be unilaterally
terminated by Raytheon regardless of the rights Raytheon
reserved for itself in other Plan documents. The district court
did not err in rejecting the plaintiffs’ claim for punitive and
extra-contractual damages.
We affirm the district court’s summary judgment in favor
of the plaintiffs. We also affirm the district court’s judgment
on the pleadings in favor of Raytheon.
AFFIRMED.