Frances Alday v. Raytheon Company

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;



5533

5534 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 5535

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;



5536 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 5537

v.  No. 08-16985

RAYTHEON COMPANY, a Delaware D.C. No.

corporation,  4:06-cv-00032-DCB

Defendant-Appellee. ORDER AND

 OPINION

Appeal from the United States District Court

for the District of Arizona

David C. Bury, District Judge, Presiding

Argued and Submitted

May 9, 2011—San Francisco, California

Filed May 21, 2012

Before: M. Margaret McKeown, William A. Fletcher, and

Marsha S. Berzon, Circuit Judges.

Opinion by Judge Berzon

5540 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.

ORDER

The opinion filed September 7, 2010, and published at 620

F.3d 1219, is withdrawn. The superseding opinion shall be

filed concurrently with this order.

Further petitions for rehearing or petitions for rehearing en

banc shall be allowed in the above-captioned matter.

ALDAY v. RAYTHEON COMPANY 5541

OPINION

BERZON, Circuit Judge:

Employees at a defense plant in Arizona collectively bar-

gained for the right to receive employer-provided healthcare

coverage after they retired. We consider whether those

employees—now retirees—are contractually entitled to

receive premium-free healthcare coverage until age 65, or

whether the contracts on which the retirees rely as providing

that entitlement allowed their prior employer to start charging

them for their insurance. Our analysis depends on the lan-

guage of the relevant documents, considered against the back-

ground of employee benefits law and labor law precepts.

I

The plaintiffs here are a class of retirees who had worked

at a defense plant in Tucson, Arizona, as well as their eligible

spouses and dependents.1 The plant was owned by Hughes

Missile Systems Group until 1997, at which point it was taken

over by the Raytheon Company. Hughes and then Raytheon

entered into a series of collective bargaining agreements

(“CBAs”) with the International Association of Machinists

and Aerospace Workers, AFL-CIO and its Local Old Pueblo

Lodge, No. 933 (“the union”). From 1972 to 1999, the CBAs

entered into consistently stipulated that the “Employer” would

provide health insurance for eligible employees who retired

under the retirement plan’s so-called “contributory option.”

To participate in the retirement plan’s contributory option,

employees had to contribute three percent of their eligible

compensation.

Before the 2003-2006 CBA became operative on Novem-

1

The spouses’ and dependents’ rights under the contracts are derivative

of the retirees’. For the sake of brevity, we refer most often only to the

claims of the retirees themselves.

5542 ALDAY v. RAYTHEON COMPANY

ber 2, 2003, Raytheon provided fully funded healthcare cover-

age for eligible retirees who had participated in the

contributory option of their respective retirement plans. The

2003 CBA, however, expressly limited Raytheon’s contribu-

tions towards future eligible retirees’ healthcare coverage. In

2004, Raytheon applied this policy to all employees who had

retired while previous CBAs were in place, by starting to

charge such retirees monthly premiums for their health insur-

ance.

Several retirees sued on behalf of themselves and a class of

other retirees, alleging claims under § 301 of the Labor Man-

agement Relations Act (“LMRA”), 29 U.S.C. § 185, and

§ 502 of the Employee Retirement Income Security Act of

1974 (“ERISA”), 29 U.S.C. § 1132. The district court certi-

fied a class of retirees, together with their eligible spouses and

dependents, (“Retirees”) who had retired under the 1990,

1993, 1996, and 1999 CBAs, and otherwise satisfied the

CBAs’ eligibility criteria for employer-provided retiree health

insurance. The court subsequently granted Retirees’ motion

for summary judgment on the LMRA and ERISA claims,

holding that the CBAs’ terms unambiguously establish eligi-

ble retirees’ contractual right to premium-free health insur-

ance until they reach age 65. Raytheon appeals the order

granting summary judgment.

In a separate order, the district court granted Raytheon’s

motion for judgment on the pleadings regarding Retirees’

claims for extracontractual and punitive damages, holding that

Retirees are not entitled to such damages. Retirees cross-

appeal that order.

II

Because the parties’ positions depend on their differing

interpretations of the relevant CBA and ERISA plan provi-

sions, we begin by surveying these provisions in detail. Gen-

erally, “[a] retired worker’s labor rights are governed by the

ALDAY v. RAYTHEON COMPANY 5543

CBA under which she retired and the terms of any ERISA

plans incorporated therein.” Coffin v. Bowater Inc., 501 F.3d

80, 97 n.15 (1st Cir. 2007). We therefore look to the contrac-

tual documents in effect when Retirees left the active work-

force.

As noted, the class includes retirees who retired under four

different CBAs—those entered into in 1990, 1993, 1996, and

1999.2 While the last three CBAs were in effect, Raytheon

issued the 1994, 1997, 1999, and 2003 ERISA welfare bene-

fits plans (“the Plans”). Both the CBAs and the Plans changed

over time in pertinent ways. We therefore consider both

classes of documents in some detail.

The CBAs

Each CBA carried a three- or four-year effective term.

According to all the CBAs’ Current and Supplemental Agree-

ments provision, Article XIX § F, each CBA constituted the

sole agreement between the parties during its effective term.

Article XIX § F further states that the CBAs’ terms and con-

ditions cannot be altered or rescinded except as executed in

writing between the parties.

The CBAs’ Group Benefits Article (Article XIII of the

1990 and 1993 CBAs; Article XII of the 1996 and 1999

CBAs) covers the group benefits provided to both active

employees and retirees. In each instance, § J(1) of the Group

Benefits Article obligates the Employer to pay the Compre-

hensive Medical Plan premiums of active employees, subject

to the provisions of § A. Section A(5), in turn, establishes a

detailed schedule for determining an active employee’s man-

datory individual contribution (if any), based primarily on the

employee’s selected medical plan and “coverage level.” Cov-

2

Hughes executed the 1990-1996 CBAs. Raytheon merged with Hughes

in 1997, and was substituted as the employer in the 1996 CBA. Raytheon

executed the 1999 CBA.

5544 ALDAY v. RAYTHEON COMPANY

erage levels include: Employee Only; Employee and Spouse;

Employee and Children; and Family.

Section D of the Group Benefits Article encompasses the

medical coverage provisions pertaining specifically to retir-

ees. It establishes a distinct dichotomy, for medical coverage

purposes, between participants in the retirement plan’s con-

tributory and non-contributory options. With respect to

contributory-option participants, § D(1) stipulates that the

Employer will continue to provide the Comprehensive Medi-

cal Plan coverages for which the retiree was covered as an

active employee, until the retired employee attains age 65.3 To

qualify for this entitlement, retirees must be between the ages

of 55 and 65, have at least five years of continuous employ-

ment, and have at least three years of continuous participation

in the company retirement plan’s contributory option immedi-

ately preceding retirement. Section D(5)(e) of the 1993, 1996,

and 1999 CBAs further specifies that qualifying retirees pay

“no weekly premium/charge” for their medical plans.4

The CBAs treat quite differently retirees who participated

in the retirement plan’s non-contributory option. Section D(5)

of the 1990 CBA states that employees who retire with partic-

ipation in the non-contributory option do not receive

employer-provided medical coverage. Section D(6) of the

1993 and 1996 CBAs, and § D(7) of the 1999 CBA, elaborate

that a non-contributory option participant may “extend enroll-

ment” in the medical coverages he or she enjoyed as an active

employee, but further specify that enrollment is contingent on

the retiree’s payment of COBRA medical plan premiums.5

3

The 1999 CBA substitutes the Raytheon Medical Plan for the Compre-

hensive Medical Plan. We do not refer to the Raytheon Medical Plan sepa-

rately, but instead include it in our references to the Comprehensive

Medical Plan.

4

As we explain below, the 1990 CBA also assured eligible retirees of

no-cost retiree health insurance.

5

The Consolidated Omnibus Budget Reconciliation Act, 29 U.S.C.

§ 1161 et seq. (“COBRA”), “requires group health care plan sponsors to

ALDAY v. RAYTHEON COMPANY 5545

The Plans

The CBAs’ Group Benefits Articles frequently reference

Raytheon’s ERISA welfare benefits plans (“the Plans”). Sec-

tions A(2) and D(2) stipulate that the “benefits” of both active

and retired employees will be administered in accordance

with the Employer’s Plan documents. Section J(4) further pro-

vides that nothing in the CBAs shall “change any provisions

of the Group Benefit Plans provided under this Article XIII

[Article XII in the 1996 and 1999 CBAs] as currently in

effect, other than those changes specifically referred to here-

in.” Finally, § J(5) expressly subordinates “[a]ll benefits of

employees, retired employees, laid off employees and insured

dependents” to the “terms of the applicable Plan documents

under which payment is claimed.” Section 2.5 of the 1999 and

2003 Plans defines “[b]enefits” as “any payments or services

made under the Plan to a Participant or other person eligible

to receive payments or services pursuant to any Benefit Pro-

gram”; the term “benefits” is not defined in the excerpts of the

earlier Plans included in the record.

The Plans in the record begin with the 1994 Plan; no Plan

in the record covers the 1990-94 period, and the parties point

to no relevant language in any Plan covering that period. The

Plans for 1994 and thereafter contain various reservation-of-

rights provisions, on which Raytheon now relies in claiming

the unilateral authority to eliminate any premium-payment

obligations otherwise established by the CBAs.

Specifically, Section III of the 1994 Plan and § VIII(Q) of

the 1997 Plan state that the Employer “reserves the right to

alter, amend, modify, revoke or terminate in whole or in part

the Plan, except as provided in any agreement with a Collec-

provide continuation coverage for employees who are terminated from

their employment under certain specified circumstances, including lay-

offs.” Local 217, Hotel & Rest. Emp. Union v. MHM, Inc., 976 F.2d 805,

806-07 (2d Cir. 1992).

5546 ALDAY v. RAYTHEON COMPANY

tive Bargaining Agent.” The 1999 and 2003 Plans contain a

reservation-of-rights provision, § 8.1, which similarly autho-

rizes Raytheon to amend the Plan, but without any explicit

reference to CBAs.

In addition, the 1999 and 2003 Plans contain two provi-

sions that might affect the Employer’s unilateral authority to

amend its healthcare coverage obligations to retirees. First,

§ 9.2 of the 1999 and 2003 Plans (“the no-vesting clause”)

affirmatively prevents the vesting of any right to, or interest

in, benefits provided under the Plans, except as specifically

provided under a Benefit Program.6 Second, § 5.2 of the 1999

and 2003 Plans (“the contributions clause”) gives the Com-

pany sole discretion to change the contributions required of

Plan participants.

Raytheon argues that these Plan provisions authorize it uni-

laterally to limit or discontinue Retirees’ contractual right to

premium-free health insurance. Retirees respond that their

contractual rights under the CBAs cannot be extinguished or

otherwise modified by provisions in Raytheon’s unilaterally

adopted Plans. For the reasons set forth below, we hold that,

under the terms of the particular agreements here relevant,

Raytheon lacked the authority to abrogate unilaterally its col-

lectively bargained premium-payment obligations.

6

Section 2.3 of the 1999 and 2003 Plans defines “Benefit Program(s)”

as “the benefit plans maintained by the Company listed on Appendix A to

the Plan, as such programs and such Appendix A may be amended from

time to time.” Appendix A, in turn, identifies the benefit packages avail-

able to Plan participants. Appendix A to the 2003 Plan, for example, states

that the Employee Medical Benefits, Employee Dental Benefits, Employee

Vision Care Benefits, Retiree Medical Benefits, Retiree Dental Benefits,

Flexible Spending Account Plan, and Employee Assistance Programs shall

be “incorporated into and made a part of the Plan,” effective “as of Janu-

ary 1, 1999.”

ALDAY v. RAYTHEON COMPANY 5547

III

“Section 301 of the LMRA, 29 U.S.C. § 185(a), creates a

federal cause of action for breach of collective bargaining

agreements.” Miller v. AT&T Network Sys., 850 F.2d 543, 545

(9th Cir. 1988). ERISA provides a cause of action to benefits

plan participants or beneficiaries for recovery of benefits due

under a plan, to enforce rights under the plan, or to clarify

their rights to future benefits under the plan’s terms. 29

U.S.C. § 1132(a)(1)(B).

Under ERISA, post-retirement medical benefits are classi-

fied as welfare benefits. 29 U.S.C. § 1002(1). Welfare bene-

fits, unlike pension benefits, “do not vest unless and until the

employer says they do.” Grosz-Salomon v. Paul Revere Life

Ins. Co., 237 F.3d 1154, 1160 (9th Cir. 2001). An employer

is therefore “generally free under ERISA, for any reason at

any time, to adopt, modify, or terminate” welfare benefits

unless “[it] contractually cedes its freedom.” Inter-Modal Rail

Emps. Ass’n v. Atchison, Topeka & Santa Fe Ry. Co., 520

U.S. 510, 515 (1997) (quoting Curtiss-Wright Corp. v.

Schoonejongen, 514 U.S. 73, 78 (1995)) (internal quotation

marks omitted).

[1] The terms of medical coverage agreed to in a CBA

constitute such a contractual commitment. See, e.g., Winnett

v. Caterpillar, Inc., 553 F.3d 1000, 1009 n.5 (6th Cir. 2009).

When such a contractual commitment is in place, an employ-

er’s breach of its contractual duty to provide benefits violates

both LMRA § 301 and ERISA. See id. Our question, then, is

whether the CBAs under which Retirees worked when

employed obligated Raytheon to continue paying their health

insurance premiums until they attain age 65; if the CBAs

impose such an obligation, Raytheon may be held liable under

both the LMRA and ERISA.

In construing a CBA, we apply federal common law princi-

ples of contract interpretation, which take into account the

5548 ALDAY v. RAYTHEON COMPANY

policies underlying our national labor laws. See Textile Work-

ers Union v. Lincoln Mills, 353 U.S. 448, 456-57 (1957); Nw.

Adm’rs, Inc. v. B.V. & B.R., Inc., 813 F.2d 223, 226 (9th Cir.

1987). To apply those principles, we begin by looking to the

CBA’s express written terms. Id. at 225. In so doing, “[w]e

interpret written terms in the context of the entire agreement’s

language, structure, and stated purpose.” Trs. of S. Cal.

IBEW-NECA Pension Trust Fund v. Flores, 519 F.3d 1045,

1047 (9th Cir. 2008).

As we are reviewing the district court’s grant of summary

judgment to the Retirees, we must decide whether the CBAs

unambiguously establish Retirees’ right to company-paid

health insurance until age 65. See Ariz. Laborers, Local 395

Health & Welfare Trust Fund v. Conquer Cartage Co., 753

F.2d 1512, 1518 (9th Cir. 1985). The district court did not

consider any extrinsic evidence; we similarly limit our analy-

sis to the relevant documents’ terms, which we find suffi-

ciently clear in themselves.

We must determine: (A) whether Retirees had a contractual

right to premium-free health insurance; if so, (B) whether that

right survived the CBAs’ expiration; and if so, (C) whether

Raytheon could terminate that right unilaterally.

A. Contractual Right to Premium-Free Healthcare

Coverage

As to the first question—whether the collective bargaining

agreements before the one entered into in 2003 required the

employer to pay the premiums for Retirees’ medical insurance

until age 65—we had thought that there was agreement

between the parties that the CBAs do so provide. In a post-

argument letter, however, Raytheon appears to be disputing

that basic premise. We therefore consider the question briefly.

[2] First, as to the 1993, 1996, and 1999 agreements, there

is absolutely no question as to the intent of the parties to the

ALDAY v. RAYTHEON COMPANY 5549

CBAs. Each of these CBAs includes, in § D(5)(e) of the sec-

tion covering “Retired Employees Medical Benefits,” the

assurance that “[t]here is no weekly premium/charge for the

Preferred Plan, the Hughes Medical Plan, or an HMO.” As the

rest of § D(5) specifies that those are the only medical plan

choices available to retirees, there is no doubt that the eligible

retirees were not required to make any payments toward their

medical benefits.7

Second, even without that explicit assurance, the CBAs,

including the 1990 CBA, established that the employer will

pay for eligible retirees’ medical coverage. Each CBA speci-

fied that:

For employees who hereafter retire, with at least

three (3) years of continuous participation in the con-

tributory option of the Retirement Plan immediately

preceding the employee’s date of retirement, and

who are at least age 55 but less than age 65 and who

have five (5) or more years of continuous employ-

ment with the Employer, the Employer agrees to

continue to provide the Comprehensive Medical Plan

coverages for which they were covered while active

employees, until the retired employee attains age 65.

Construing “provide” to mean “make available,” Raytheon

suggests that this section obligates it to make available the

same coverages Retirees enjoyed as active employees, but

does not obligate the company to pay for that coverage. We

cannot agree.

Looking at the 1990 CBA as a whole—the only one as to

which this contention could matter, as the others contain the

additional, express clarification just discussed—one notices,

7

Some active employees, depending on their choice of benefit plan, did

have to pay toward their medical coverage, while others received cash

payment from the employer for choosing a less selective plan.

5550 ALDAY v. RAYTHEON COMPANY

first, that Section D distinguishes between retirees who partic-

ipated in the Retirement Plan’s contributory option and those

who participated in the non-contributory option. Whereas

§ D(1) states that Raytheon must “provide” contributory

option participants with the same Comprehensive Medical

Plan Coverages they enjoyed as active employees, § D(5) of

the 1990 CBA states that “employees who retire with partici-

pation in the non-contributory option of the Retirement Plan

will not receive employer provided medical coverage.”

(Emphasis added). Sections D(1) and D(5) of the 1990 CBA

thus establish a basic dichotomy: Contributory option partici-

pants enjoy employer-provided health insurance; non-

contributory option participants do not. Article XIV § B(3)(b),

describing some of the differences between the Retirement

Plan’s contributory and non-contributory options, clarifies the

meaning of this distinction. It states that “[t]he non-

contributory benefit will have different qualifications for nor-

mal and early retirement, no automatic cost-of-living pay-

ment, and no eligibility for company-paid medical per Article

XIII, Section D, paragraph 5.” (Emphasis added).8 So, Arti-

cles XIII § (D)(5) and XIV § (B)(3)(b), read together, equate

“company paid medical” and “employer provided medical.”

This gloss on the CBA’s meaning of “provide” in the context

of Medical Plan coverage indicates that “provide” means “pay

for” and not simply “make available at the employee’s

expense.”9

8

Article XIV § (B)(3)(b) remained substantially the same, in this

respect, throughout the 1993, 1996, and 1999 CBAs.

9

The terms of subsequent CBAs continue to support this interpretation

of § D(1). The 1993, 1996, and 1999 CBAs state that, for non-contributory

option participants, “the Employer agrees that the employees may extend

enrollment in the Comprehensive Medical Plan or HMO coverages for

which [non-contributory option participants] were covered as active

employees, until the retired employee attains age sixty-five (65),” but fur-

ther stipulate that “[t]he covered individual(s) shall pay the full retiree

COBRA Group Premium for the medical plan of benefits in which they

are enrolled.” 1993 CBA § D(6); 1996 CBA § D(6); 1999 CBA § D(7).

The use of the phrase “the Employer agrees that the employees may

ALDAY v. RAYTHEON COMPANY 5551

Of course, one could “provide” partial rather than full pay-

ment. But, were that the case, there would have to be some

indication as to the parties’ respective contributions, such as

that spelled out for active employees under § A(5). Without

an explicit payment schedule, reading “provide” to mean “pay

in part” would render the promise effectively illusory, as Ray-

theon could fulfill its obligation by contributing a penny. See

Tackett v. M & G Polymers, USA, LLC, 561 F.3d 478, 490

(6th Cir. 2009) (per curiam) (“The CBA has no limitation on

the amount of a company contribution and if the Defendants’

argument were accepted, the company presumably could

lower the contribution to zero without violating this language.

Such a promise would be illusory.”). “As in all contracts, the

collective bargaining agreement’s terms must be construed so

as to render none nugatory and avoid illusory promises.”

Smith v. ABS Indus., Inc., 890 F.2d 841, 845 (6th Cir. 1989)

(citing Cordovan Assocs., Inc. v. Dayton Rubber Co., 290

F.2d 858, 861 (6th Cir. 1961)). Finally, § D(5)(e) of the 1993,

1996, and 1999 CBAs confirms this interpretation: With the

“provide” language of § D(1) still in place, § D(5)(e) confirms

that employees who retire under the retirement plan’s contrib-

utory option pay “no weekly premium/charge” for the rele-

vant medical plans.

[3] We therefore hold that § D(1) of the various CBAs

obligates Raytheon fully to pay eligible retirees’ health insur-

ance premiums until they attain age 65.

extend enrollment” instead of “the Employer agrees to continue to pro-

vide,” in a section otherwise directly analogous to § D(1), indicates that

the parties were careful to state clearly a limited obligation to make cover-

age available in §§ D(6) and D(7), and intended a greater obligation (i.e.,

“company-paid medical”) in § D(1). “[W]hen parties to the same contract

use such different language to address parallel issues . . . it is reasonable

to infer that they intend this language to mean different things.” Taracorp,

Inc. v. NL Indus., Inc., 73 F.3d 738, 744 (7th Cir. 1996).

5552 ALDAY v. RAYTHEON COMPANY

B. Retirees’ Medical Coverage Post-Contract

[4] Having concluded that § D(1) obligates Raytheon fully

to pay eligible retirees’ health insurance premiums, we must

address whether this obligation survived after each CBA’s

expiration. “As a general rule, where the contract at issue has

expired, the parties are ‘released . . . from their respective

contractual obligations’ and any dispute between them cannot

be said to arise under the contract.” Poore v. Simpson Paper

Co., 566 F.3d 922, 927 (9th Cir. 2009) (omission in original)

(quoting Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 206

(1991)). As with many rules, however, there are exceptions:

Certain benefits continue past expiration “where, under nor-

mal principles of contract interpretation, the disputed contrac-

tual right survives expiration of the remainder of the

agreement.” Id. (quoting Litton, 501 U.S. at 206) (internal

quotation marks omitted).

Applying normal contract interpretation principles, Retir-

ees’ right to premium-free health insurance did not expire

with the CBAs. Eligible retirees’ right to premium-free health

insurance was one of two group coverages for which the

CBAs supplied a specific duration — “until the retiree attains

age 65.”10 In similar cases, this distinction has been disposi-

tive.

[5] In Turner v. Local Union No. 302, Int’l Bhd. of Team-

sters, 604 F.2d 1219 (9th Cir. 1979), for example, the reason

“appellant’s rights to the health and welfare benefits . . . .

could be terminated at the end of any one of the collective

bargaining agreements” was that “[n]one of the documents

10

At least some of the CBAs provided cost-free life insurance to certain

“eligible employees retiring during the term of this Agreement,” for five

years after retirement, in decreasing amounts. After the fifth year, retirees

were required to pay for their insurance, in an amount “subject to change

based on claims experience.” Group Benefits § C, Retiree Group Life

Insurance Plan.

ALDAY v. RAYTHEON COMPANY 5553

establishing the . . . benefits made any representation as to the

length of the period during which these benefits would con-

tinue to be paid, other than ‘throughout the term of this agree-

ment.’ ” Id. at 1225. In contrast, where a CBA links eligibility

for a particular right “to an event that would almost certainly

occur after the expiration of the agreement”—e.g., turning 65

or becoming eligible for Medicare—such linkage “signal[s]

the parties’ intent to continue retirement health benefits not-

withstanding expiration.” Quesenberry v. Volvo Trucks N.

Am. Retiree Healthcare Benefit Plan, 651 F.3d 437, 441 (4th

Cir. 2011); see Poore, 566 F.3d at 924, 927 (holding that

jurisdiction existed under the LMRA because the retirees had

established “a colorable claim that they have a right to bene-

fits which survived the expiration of the remainder of the

agreement,” where a benefit booklet incorporated into the

CBAs stated that medical coverage “would continue until the

retiree ‘bec[ame] eligible for Medicare, attain[ed] age 65, or

until . . . death, whichever occurs first,’ ” but stating that there

was ambiguity regarding how this commitment could be mod-

ified (alterations and omission in original)).11 Because the

CBAs here require Raytheon to “continue to provide” Retir-

ees with premium-free healthcare coverage until they reach

age 65, Raytheon’s obligation to pay Retirees’ medical insur-

ance premiums continued after the CBAs themselves expired.12

11

See also, e.g., Dewhurst v. Century Aluminum Co., 649 F.3d 287, 292

(4th Cir. 2011); Maurer v. Joy Techs., Inc., 212 F.3d 907, 918 (6th Cir.

2000). Compare Diehl v. Twin Disc, Inc., 102 F.3d 301, 307 (7th Cir.

1996) (Flaum, J.) (holding that the CBA’s “clear provision for lifetime

benefits. . . . abrogated whatever right [the employer] may have had to ter-

minate coverage”) with UAW v. Rockford Powertrain, Inc., 350 F.3d 698,

705 (7th Cir. 2003) (Flaum, J.) (distinguishing Diehl, and holding that a

company could terminate ongoing retiree health benefits, on the ground

that the CBA “contain[ed] no statement regarding the period of time dur-

ing which retirees would be entitled to benefits”).

12

The CBAs’ use of specific durational language to limit the employer’s

obligations to a fixed period for each retiree—i.e., until the retiree attains

age 65, and for similarly fixed periods for spouses and dependants—

differentiates this case from those in which courts have recognized the

employer’s “natural[ ] reluctan[ce] to saddle itself with [the] indefinite

future obligations” inherent in a promise to provide benefits for life.

Bidlack v. Wheelabrator Corp., 993 F.2d 603, 609 (7th Cir. 1993) (en

banc) (emphasis added).

5554 ALDAY v. RAYTHEON COMPANY

C. Unilateral Abrogation of Fully-Paid Retiree Medical

Coverage

[6] Having resolved these fairly straightforward issues, we

come to the question at the heart of this case: Do the Plans’

provisions limit Raytheon’s contractual obligation, bilaterally

agreed upon with the union representing now-retired employ-

ees while they were still employed, to provide premium-free

healthcare coverage for eligible retirees? We conclude that

they do not. The Plans’ reservation-of-rights provisions were

not incorporated into the CBAs with regard to the obligation

to pay for eligible retirees’ medical coverage, and the CBAs

expressly prevented Raytheon from unilaterally abrogating its

contractual premium-payment obligations.

1. The CBAs’ relationship to the Plans

In arguing that the CBAs incorporated the Plans’

reservation-of-rights provisions, Raytheon relies on three sep-

arate CBA clauses — Sections J(4), J(5), and D(2). We

address each in turn.

a. Section J(5)

First, Raytheon argues that § J(5) of the CBAs’ Group Ben-

efits Article expressly subordinates the CBAs’ group benefits

provisions in their entirety (including §§ D(1) and D(5)(e))

to the Plans’ terms, including the Plans’ reservation-of-rights

provisions. Section J(5) of the various CBAs states 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 maintains that

the term “benefits” includes commitments regarding plan con-

tributions and premium payments, and concludes that § J(5)

subordinates § D(1)’s promise—that Raytheon would fully

pay eligible retirees’ health insurance—to the Plans’

reservation-of-rights provisions, thereby allowing unilateral

ALDAY v. RAYTHEON COMPANY 5555

modification of the CBAs’ promises of employer-provided

retiree health insurance.

[7] We disagree. Generally, under ERISA, “benefits” are

payments made or services provided, pursuant to the plan, to

claiming participants or beneficiaries, while premiums or con-

tributions cover the cost of those “benefits.” Compare 29

U.S.C. § 1002(22)-(23) (benefits are amounts paid out of the

plan)13 with 29 C.F.R. § 2520.102-3(p) (contributions are

amounts paid into the plan);14 see also Kadane v. Hofstra

13

29 U.S.C. § 1002(22) states:

The term “normal retirement benefit” means the greater of the

early retirement benefit under the plan, or the benefit under the

plan commencing at normal retirement age. The normal retire-

ment benefit shall be determined without regard to—

(A) medical benefits, and

(B) disability benefits not in excess of the qualified disability

benefit.

For purposes of this paragraph, a qualified disability benefit is a

disability benefit provided by a plan which does not exceed the

benefit which would be provided for the participant if he sepa-

rated from the service at normal retirement age. For purposes of

this paragraph, the early retirement benefit under a plan shall be

determined without regard to any benefit under the plan which

the Secretary of the Treasury finds to be a benefit described in

section 1054(b)(1)(G) of this title. (Emphasis added).

Section 1002(23) declares:

The term “accrued benefit” means—

(A) in the case of a defined benefit plan, the individual’s accrued

benefit determined under the plan and, except as provided in sec-

tion 1054(c)(3) of this title, expressed in the form of an annual

benefit commencing at normal retirement age, or

(B) in the case of a plan which is an individual account plan, the

balance of the individual’s account.

The accrued benefit of an employee shall not be less than the

amount determined under section 1054(c)(2)(B) of this title with

respect to the employee’s accumulated contribution.

14

29 C.F.R. § 2520.102-3(p) provides that “[t]he sources of contribu-

tions to the plan — for example, employer, employee organization,

5556 ALDAY v. RAYTHEON COMPANY

Univ., 682 F. Supp. 166, 169-70 & n.3 (E.D.N.Y. 1988) (“The

fact that these employer contributions are transformed into

Plan benefits as they are paid out pursuant to the Plan does

not make the contributions plan benefits.”); cf. Leister v.

Dovetail, Inc., 546 F.3d 875, 881 (7th Cir. 2008)

(“Contributions to a plan and benefits owed by a plan are not

necessarily equivalent [in amount] . . . .”). Thus, for example,

a defined contribution pension plan requires the employer to

contribute a certain percentage of payroll or profits to partici-

pants’ accounts, whereas a defined benefit plan promises to

pay participants a fixed benefit upon retirement. See, e.g.,

Hurlic v. S. Cal. Gas Co., 539 F.3d 1024, 1029 (9th Cir.

2008) (quoting Pension Benefit Guar. Corp. v. LTV Corp.,

496 U.S. 633, 637 n.1 (1990)).

[8] Although these examples center on pension benefits,

the general concept that contributions and benefits differ and

are separately provided for in ERISA plans is not so limited,

as the reference to “medical benefits” in § 1002(22) indicates.

A right to employer contributions may also be construed as a

benefit where the failure to make contributions economically

undermines the monetary benefits promised. See Frulla v.

CRA Holdings, Inc., 543 F.3d 1247, 1253 (11th Cir. 2008).

Here, however, as we have seen, the promise to “provide”

coverage assures that the employer will pay the contributions.

And § J(5)’s language also otherwise implies the narrower

meaning outlined above.

[9] Section J(5) states that benefits are subject to the terms

of the Plan “under which payment is claimed.” This phrasing

closely resembles the statutory language used in ERISA to

employees — and the method by which the amount of contribution is cal-

culated” shall be included in the summary plan description of both

employee welfare benefit plans and employee pension benefit plans. The

regulation further notes that “[d]efined benefit pension plans may state

without further explanation that the contribution is actuarially deter-

mined.”

ALDAY v. RAYTHEON COMPANY 5557

refer specifically to a participant’s claim for payments from

the plan. See 29 U.S.C. § 1133(1) (requiring the employer to

“provide adequate notice in writing to any participant or ben-

eficiary whose claim for benefits under the plan has been

denied”) (emphasis added).

The language of § J(5) also resembles the phrasing used by

Raytheon’s Plans. Section 2.5 of the 1999 and 2003 Plans

defines “Benefits” as “any payments or services made under

the Plan to a Participant or other person eligible to receive

payments or services pursuant to any Benefit Program.”

(Emphasis added). Similarly, § 5.3 of the 1999 and 2003

Plans, entitled “Contributions Used to Provide Benefits,”

states that “[c]ontributions shall be held by the Employer and

distributed for the benefit of Participants solely for the pay-

ment of Benefits under, and in accordance with the provisions

of, the applicable Benefit Program pursuant to which such

contributions were made.” (Emphasis added). Raytheon’s

Plans thus confirm that the company distinguished “contribu-

tions” from “benefits,” and meant to refer only to the latter by

agreeing to the terms of § J(5).15

15

Section J(5)’s explicit focus on “benefits,” as distinct from “contribu-

tions,” distinguishes this case from United Mine Workers v. Brushy Creek

Coal Co., 505 F.3d 764 (7th Cir. 2007). The retiree plaintiffs in that case,

relying on a clause in a nationwide CBA—which stated that “ ‘the benefits

and benefit levels provided by an Employer under its Employer plan are

established for the term of this Agreement only, and may be jointly

amended or modified in any manner at any time after the expiration or ter-

mination of this agreement’ ”—argued that Brushy Creek had violated the

LMRA and ERISA when it relied on a reservation-of-rights clause con-

tained in its healthcare plans to modify unilaterally the retirees’ medical

benefits. See id. at 766-67 (emphasis added). “[A]nother provision of the

nationwide collective bargaining agreement,” however, broadly “state[d]

that ‘the specific provisions of the plans will govern in the event of any

inconsistencies between the general description and the plans.’ ” Id. at

767. Observing that the joint amendment clause “appear[ed] in the part of

the nationwide agreement captioned ‘general description of the health and

retirement benefits,’ ” the Seventh Circuit held that the broad subordina-

tion provision required the court to disregard the joint amendment clause,

because it was inconsistent with the plans’ reservation-of-rights provi-

sions. Id. Here, by contrast, the subordination clause is narrower, pertain-

ing only to the benefits provisions in the Plans.

5558 ALDAY v. RAYTHEON COMPANY

Further, the structure of the CBAs confirms our under-

standing. The CBAs first cover in detail, as we have seen, the

payments to be made for medical coverage, as well as the

types of “coverages” available—for the employee or retiree

alone, or for various family configurations. Absolutely noth-

ing in the CBAs specifies what payments will be made to or

on behalf of covered individuals for which medical services

and under what circumstances.16 In other words, the “benefits”

provided are not spelled out in the CBAs, but instead “are

subject in every respect to the terms of the applicable Plan

documents under which payment is claimed.”

[10] We therefore reject Raytheon’s contention that § J(5)

evinces the parties’ intent to subordinate to the Plans the

CBAs’ provisions regarding healthcare coverage. Instead,

§ J(5) means exactly what it says—that when a covered indi-

vidual claims medical services or payment for a medical cost,

whether he or she is entitled to the “benefits” claimed is deter-

mined according to the “applicable Plan documents.”17

16

As we are all aware, such provisions can be quite complex and change

regularly. See Reese v. CNH Am. LLC, 574 F.3d 315, 324 (6th Cir. 2009)

(citing Diehl, 102 F.3d at 309). The provisions of a healthcare coverage

plan typically spell out the participants’ substantive medical benefits—

e.g., which office visits, hospital stays, laboratory tests, and drugs are cov-

ered, including any limitations to particular providers, referral require-

ments, prior authorization requirements, and so on. See, e.g., Brushy

Creek, 505 F.3d at 766 (“The collective bargaining agreement entitles

employees who retire during its term, such as the 63 individual plaintiffs,

to health benefits ‘for life.’ The memorandum of understanding creates the

health plan that lists the benefits to which employees are entitled for

life.”); Armistead v. Vernitron Corp., 944 F.2d 1287, 1290-91 (6th Cir.

1991); cf. 42 U.S.C. § 18022(b)(1) (enumerating some of the general ben-

efits categories that must be included in a health plan’s “essential health

benefits package”).

17

Raytheon also argues that Retirees’ right to company-paid healthcare

coverage premiums would be meaningless if Raytheon could gut the sub-

stantive medical benefits, pursuant to § J(5) and the Plans’ reservation-of-

rights provisions. This position is rather ironic, as Raytheon is essentially

arguing that the CBA provisions are meaningless. In any event, we do not

ALDAY v. RAYTHEON COMPANY 5559

b. Section J(4)

Raytheon also argues that § J(4) subordinates the CBAs’

Group Benefits provisions to the Plans. That section states

that “[n]othing herein shall change any provisions of the

Group Benefit Plans provided under this Article XIII [or XII]

as currently in effect, other than those changes specifically

referred to herein.” (Emphasis added). Quoting this provision

only partly, Raytheon contends that § J(4) entirely subordi-

nates the CBAs’ group benefits provisions to any future

changes in the Plans.

Raytheon is incorrect. Section J(4)’s language demonstrates

that the provision was a temporal one, not one directed at

allowing unilateral Plan provisions promulgated after the

CBA went into effect to trump the agreement the employer

negotiated with the union. The clause speaks of “changes”

from the Plans “currently in effect”—that is, the Plans in

effect at the time the CBA was entered into. As such, it sim-

ply prevented the CBAs from modifying the pre-existing

Plans by omission. Section J(4) did not, as Raytheon would

have it, permit future changes in the Plans unilaterally to

override the CBAs.18

dispute that a company may assume contractually binding contribution

obligations while reserving the right to alter unilaterally employees’ sub-

stantive medical benefits. See Mississippi Power Co. v. NLRB, 284 F.3d

605, 624-25 (5th Cir. 2002). Moreover, although we do not presume to

resolve § J(5)’s full scope, it is at least plausible to construe that provision

as authorizing Raytheon to modify the benefits plans so long as such mod-

ifications are reasonably commensurate with the benefits originally pro-

vided under the CBA and reasonable in light of changes to the provision

of healthcare generally. See Reese, 574 F.3d at 326 (citing Diehl, 102 F.3d

at 310).

18

We note that this interpretation accords with, rather than contradicts,

the zipper provision, which (as discussed further below) prohibits Ray-

theon from modifying the Plans in a manner that would violate its contrac-

tual commitments under the CBAs.

5560 ALDAY v. RAYTHEON COMPANY

c. Section D(2)

Finally, Raytheon suggests, in passing, that § D(2)—which

states that “Retired Employees Medical Benefits will be

administered by the Employer in accordance with the provi-

sions of the Comprehensive Medical Plan Document prepared

by the Employer”—incorporates the Plans, and so their

reservation-of-rights provisions, by reference.

Section D(2) cannot bear even the slim weight Raytheon

places on it. The provision nowhere purports to authorize

Raytheon to terminate or modify its contractual agreement to

pay Retirees’ healthcare coverage premiums. Rather, it obli-

gates Raytheon to administer medical benefits (which, again,

are not themselves spelled out in the CBAs) according to the

Plans. In other words, not only are the terms of the medical

benefits spelled out in the Plans, pursuant to § J(5), the

administrative manner in which they are provided—i.e.,

whether reimbursement or direct payments to services provid-

ers are available; what claims-filing forms must be used; how

a covered individual can dispute a benefits denial; and so on

—are all determined under Plan documents and not spelled

out in the CBAs. Thus, § D(2) simply reiterates and makes

more specific the division of responsibility between the CBAs

and the Plans, clarifying that the latter spell out not only

which specific medical costs will be covered, but also in what

manner. See, e.g., Karl Schmidt Unisia, Inc. v. UAW, 628 F.3d

909, 916 (7th Cir. 2010) (holding that a CBA’s passing refer-

ence to the employer’s pension plan—“ ‘[the Pension Plan]

shall continue in effect’ for the term of the CBA”—did not

incorporate the Pension Plan’s dispute resolution procedure

into the CBA); Printing Specialties & Paper Prods. Union

Local 680 v. Nabisco Brands, Inc., 833 F.2d 102, 105 (7th

Cir. 1987) (“The collective bargaining agreement did not

incorporate the provisions of the Pension Plan, but merely

stated that Nabisco would keep the Pension Plan in full force

and effect. . . . [T]he ‘mere mentioning of the Retirement Plan

in the General [collective bargaining] Agreement is insuffi-

ALDAY v. RAYTHEON COMPANY 5561

cient reason to construe the Retirement Plan as part and parcel

of the General Agreement.’ ”) (alterations in original) (quot-

ing RCA Corp. v. Local 241, Int’l Fed’n of Prof’l & Technical

Eng’rs, 700 F.2d 921, 927 (3d Cir. 1983)).

d. Conclusion

[11] Looking at §§ J(5), J(4), and D(2) together, it is evi-

dent that the bargaining parties assigned the CBAs and the

Plans different functions with respect to medical coverage.

Section D(2) requires the employer to administer Plan “bene-

fits” in accordance with Plan documents. Section J(5) ensures

that Plan “benefits” are governed by the Plan documents in

which they appear. Finally, Section J(4) guarantees that the

CBAs do not modify preexisting Plans absent the express

agreement of the bargaining parties. Taken altogether, these

three provisions ensure that the Plans, not the CBAs, govern

the payments or services provided to the concerned individu-

als. But none of these provisions allows the employer unilat-

erally to override express terms in the bilateral CBA,

governing who is to be covered and who is to pay for cover-

ages, whether by unilaterally writing conflicting language into

the Plans referenced by the CBAs or otherwise. The Plans’

reservation-of-rights provisions therefore cannot qualify the

CBAs’ promise of premium-free healthcare coverage, as that

promise is not affected by the Plans. See, e.g., Int’l Ass’n of

Machinists & Aerospace Workers v. Masonite Corp., 122

F.3d 228, 233 (5th Cir. 1997); Diehl, 102 F.3d at 307.19

19

Our conclusion in this regard accords with a common-sense under-

standing of the collective bargaining context. Active employees know that

their collective bargaining influence will wane upon retirement, because

the retirement benefits of current retirees are not mandatory subjects of

collective bargaining, Allied Chem. & Alkali Workers v. Pittsburgh Plate

Glass Co., 404 U.S. 157, 181-82 & n.20 (1971), and because retirees gen-

erally do not pay union dues, vote in union elections, or vote in representa-

tion elections, see Bidlack, 993 F.2d at 609. Active employees thus have

strong incentives to lock-in their future retiree welfare benefits through

collective bargaining, as a form of deferred compensation. See id. This

5562 ALDAY v. RAYTHEON COMPANY

2. The Plans’ Reservation-of-Rights Provisions

[12] Our conclusion thus far does not depend on the pre-

cise reach of the reservation-of-rights provisions contained in

the Plans and relied on by Raytheon. But broadening the

scope of our inquiry to include those provisions reinforces our

conclusion, for a number of reasons.

a. The Reservation-of-Rights and No-Vesting

Clauses

First, Raytheon’s Petition for Rehearing states that “the rel-

evant Plans were issued in 1994, 1997, 1999, and 2003.”

Indeed, there is no language from any pre-1994 Plan recited

or relied upon by Raytheon as limiting or qualifying the

promise of fully paid medical benefits to age 65 made in the

1990 and 1993 CBAs. The question whether Raytheon’s

reservation-of-rights provisions in its Plans authorized it uni-

laterally to limit its premium-payment obligations therefore

arises at all only with regard to employees who retired after

the 1994 Plan went into effect.

As to the reservation-of-rights provisions that are in the

record, Raytheon relies on four: a limited reservation-of-rights

in the 1994 and 1997 Plans; a differently worded reservation-

of-rights in the 1999 and 2003 Plans; a no-vesting clause in

reasoning is particularly salient here, because retirees who participated in

the retirement plan’s contributory option actually gave up three percent of

their eligible compensation in order to enjoy a specific slate of collectively

bargained privileges, including premium-free healthcare coverage. Ray-

theon’s position is essentially that contributory option participants for-

feited three percent of their eligible compensation in the hopes of one day

attaining a collectively bargained privilege that could be unilaterally abro-

gated at the employer’s discretion. Of course, a CBA could so provide,

explicitly or through a broad subordination clause such as the one in

Brushy Creek. See 505 F.3d at 767. But we should not read such an autho-

rization into a CBA when it does not appear there.

ALDAY v. RAYTHEON COMPANY 5563

the 1999 and 2003 Plans; and a clause in the 1999 and 2003

Plans granting Raytheon sole authority to determine partici-

pants’ contributions (“the contributions clause”).

In general, a reservation-of-rights provision is effective

only against contractual obligations explicitly covered by the

reservation. In Vallone v. CNA Fin. Corp., 375 F.3d 623 (7th

Cir. 2004), for example, the Seventh Circuit held that a com-

pany’s reservation-of-rights clause allowed it to abrogate a

promise of lifetime benefits, because the clause applied to all

benefits described in the company’s retirement guide, and the

promise of lifetime benefits was contained therein. See id. at

636-37. Conversely, in Patterson v. Tenet Healthcare, Inc.,

113 F.3d 832 (8th Cir. 1997), the Eighth Circuit held that a

reservation-of-rights provision contained in an employee

handbook did not apply to the handbook’s arbitration clause,

because “[t]he reservation of rights language refers to the

handbook provisions relating to employment, not to the sepa-

rate provisions of the arbitration agreement.” Id. at 835.

Here, all of the provisions relied on by Raytheon, except

for the contributions clause, apply exclusively to rights

granted under the Plans and incorporated Benefit Programs

(e.g., Raytheon’s Retiree Medical Benefits Program), rather

than to rights granted under the CBAs. The 1994 and 1997

Plans’ reservation-of-rights provision, for example, states that

the Employer “reserves the right to alter, amend, modify,

revoke or terminate in whole or in part the Plan, except as

provided in any agreement with a Collective Bargaining

Agent.” (Emphasis added). This clause is thus expressly lim-

ited in scope to the Plans, and affirmatively requires Plan

amendments to conform to the CBAs. Such a provision does

not authorize the modification of the CBA, but instead

expressly recognizes that the CBA prevails over any Plan

modifications. See McCoy v. Meridian Auto. Sys., Inc., 390

F.3d 417, 425 (6th Cir. 2004) (holding that a modification is

not “subject to” a CBA where it contradicts the CBA’s

express terms); cf. Poore, 566 F.3d at 927 (rejecting an

5564 ALDAY v. RAYTHEON COMPANY

employer’s argument that it could terminate retirees’ benefits

at any time, where the plan document at issue stated that its

terms could be modified “subject to negotiation with the

Union”) (internal quotation marks omitted).

The parallel reservation-of-rights provision in the 1999 and

2003 Plans does not refer to the CBAs, but its scope remains

limited to the Plans and incorporated Benefit Programs. It

provides that the Employer “reserves the absolute right to

amend the Plan and any or all Benefit Programs incorporated

herein from time to time, including, but not limited to, the

right to reduce or eliminate benefits provided pursuant to the

provisions of the Plan or any Benefit Program as such provi-

sions currently exist, or may hereafter exist.” 1999 Plan § 8.1;

2003 Plan § 8.1. (Emphases added). Similarly, the 1999 and

2003 Plans’ no-vesting clause states that “[n]o [Plan] Partici-

pant . . . shall have any right to, or interest in, any benefits

provided under this Plan . . . except as specifically provided

under a Benefit Program.” 1999 Plan § 9.2; 2003 Plan § 9.2.

(Emphasis added). For the same reasons surveyed with

respect to the meaning of “benefits” under the CBA, these

Plan provisions do not affect, because they do not purport to

affect, the contribution obligations imposed by the CBAs.

Instead, they focus on the employer’s right to change the ben-

efits provided—that is, the terms of the payments for medical

services or direct services provided to covered employees.

This focus is entirely consistent with the dichotomy discussed

earlier: The CBAs leave the designation of the precise medi-

cal benefits provided, and the procedures for obtaining them,

to the Plans, and the Plans permit the Employer to modify the

Plans accordingly.

At least with respect to the 1999 Plan, the timing of the

negotiations further supports this conclusion. The Raytheon

Medical Plan—the only health benefits plan available under

the 1999 CBA—was adopted effective January 1, 1999. The

1999 CBA, however, was negotiated subsequent to the 1999

Plan and did not become effective until October 25, 1999. The

ALDAY v. RAYTHEON COMPANY 5565

later-adopted CBA clearly states that “written notice of desire

to modify or amend” the CBA may be given by either party

and provides the manner in which the parties will negotiate

any proposed modification. It defies reason to accept Ray-

theon’s contention that the earlier-adopted 1999 Plan obviated

the company’s obligation under the later-adopted CBA to pro-

vide written notice and negotiate with the Union prior to

changing the Retirees’ entitlement to premium-free health-

care.

b. The Contributions Clause

Section 5.2(a) of the 1999 and 2003 Plans, however, does

purport to govern the contributions required of Plan partici-

pants. It states that “Participants’ contributions shall be sub-

ject to change by and in the sole discretion of the Company.”

Raytheon argues, albeit somewhat in passing, that this contri-

butions clause gave it total discretion to adjust Retirees’ pre-

mium payments as of 1999. We reject this assertion.

First, it is noteworthy that the language of the contributions

provision is not limited to retirees. Thus, if read without

regard to the CBAs, it would appear to allow the Employer

unilaterally to abrogate the commitments made in the CBAs

with respect to paying for the medical benefits of active

employees during the CBA’s term.

As a general matter, we are skeptical that the Union would

have agreed to give Raytheon unilateral authority to modify

the contribution requirements for retirees and active employ-

ees. Doing so would render non-binding both § D’s

contributory/non-contributory dichotomy and § A(5)’s

detailed schedule for maximum active employee contribu-

tions. In other words, Raytheon’s proposed interpretation of

the scope of the contributions clause in the 1999 and 2003

Plans would permit it to “increase or decrease its [collectively

bargained] contribution to the existing policy” as it sees fit,

“without any consultation with or recourse for the Union.”

5566 ALDAY v. RAYTHEON COMPANY

See NLRB v. Gen. Elec. Co., 418 F.2d 736, 747 (2d Cir.

1969).

At oral argument, Raytheon contended that we need not

interpret the contributions clause and other reservation-of-

rights provisions in light of their implications for active

employees, because the statutory rights of active employees

are distinct from the rights of retirees. See Rockford

Powertrain, 350 F.3d at 704 n.1 (citing Pittsburgh Plate

Glass, 404 U.S. at 188). Specifically, Raytheon noted, accu-

rately, that the National Labor Relations Act (“NLRA”) gen-

erally imposes a statutory obligation to bargain regarding

modifications to the conditions of employment for active

employees. See 29 U.S.C. §§ 158(a)(5), (d). But, contrary to

Raytheon’s submission, the NLRA does not necessarily

require bargaining where there is an applicable reservation of

management’s rights to act unilaterally. See, e.g., Conoco Inc.

v. NLRB, 91 F.3d 1523, 1527-28 (D.C. Cir. 1996) (per

curiam) (holding that an applicable management’s rights

clause authorized the unilateral modification of rights and

obligations, where such unilateral modification was expressly

provided for by the CBA). If, as Raytheon maintains, the

CBAs incorporated the Plans wholesale, the Plans’

reservation-of-rights provisions would apply equally to both

groups, as the reservation-of-rights provisions themselves do

not distinguish between the two. Such a result would provide

a “convincing reductio ad absurdum” of Raytheon’s argu-

ment, because, “as a matter of contractual interpretation, it

seems highly unlikely that the Union would have ever consid-

ered such a clause” with respect to its active employees. See

Gen. Elec. Co., 418 F.2d at 747.20

On our view of the division of responsibility between the

CBAs and the Plans, however, this anomaly does not arise. As

we have explained, the bargaining parties to the CBAs did not

20

We note that this aspect of our analysis does not apply to the 2003

Plan, which governed the medical benefits of retirees alone.

ALDAY v. RAYTHEON COMPANY 5567

need to contemplate such a possibility, because they under-

stood that the CBAs incorporated the Plans’ reservation-of-

rights provisions only insofar as the provisions pertained to

modifying the substance of, or the procedures for payment or

direct provision of, medical services. Contribution questions

were thus reserved to the CBAs, and not subject to the Plans’

reservation-of-rights provisions.

Solidifying our conclusion in this regard is the consider-

ation that the CBAs themselves expressly preclude the very

result Raytheon seeks to effect. In each CBA, the Current and

Supplemental Agreements provision, Article XIX § F, con-

tains both an integration clause and, more importantly, a mod-

ifications clause. The integration clause states that the CBA

“constitutes the sole and entire existing agreement between

the parties . . . for the period of this Agreement”; the modifi-

cations clause separately provides that “[n]o alteration, varia-

tion, waiver or modification of any of the terms, conditions,

or covenants contained herein . . . shall be valid or binding

unless such is made and executed in writing between the par-

ties hereto.” (Emphasis added).21

Such hybrid provisions are called “zipper clauses.” See,

e.g., Pace v. Honolulu Disposal Serv., Inc., 227 F.3d 1150,

1159 (9th Cir. 2000). They are traditionally “intended to fore-

close claims of any representations outside the written con-

tract aside from those made in another written document

executed by the parties,” thus “zipping up” the CBA. See id.

Read together with the contributions clause’s reservation-of-

rights, however, the zipper provision at issue here takes on

added significance. Specifically, because the zipper provision

prohibits modification except through a written instrument

executed between the parties, it affirmatively prevents the

21

Although the zipper provision’s integration clause is limited to “the

period of this Agreement,” the modifications clause does not include this

limitation.

5568 ALDAY v. RAYTHEON COMPANY

unilateral modification of retirees’ contractual rights under the

CBAs.

We find Prater v. Ohio Education Association, 505 F.3d

437 (6th Cir. 2007), instructive as to this matter, although the

precise problem here is slightly different from the one there

at issue. In Prater, the employer unilaterally terminated retir-

ees’ health benefits pursuant to a reservation-of-rights provi-

sion contained in Summary Plan Descriptions (“SPDs”) not

incorporated in the relevant CBAs. See id. at 440-41, 444-45.

Under Sixth Circuit precedents, an unincorporated SPD’s

reservation-of-rights clause will be enforced if the union does

not grieve or file suit in response to the employer’s reserva-

tion of the right to modify a CBA, so long as the reservation

was sufficiently clear that the union can fairly be expected to

protest immediately upon notification. See McCoy, 390 F.3d

at 424-25 (citing Maurer, 212 F.3d at 913, 919).22 Prater held

that the unions could not fairly be expected to protest the

SPD’s reservation-of-rights clause, because the court

observed that the CBAs’ zipper provisions—which provided

that the agreements could not be amended without signed,

mutual consent—effectively precluded any unilateral termina-

tion of rights. See 505 F.3d at 444-45. Thus, “the unions . . .

could not fairly ‘be compelled to protest the SPD language’

— at least when the summary does not explicitly renounce the

collective bargaining agreement — because both sets of

[CBAs] explicitly said that their bargained-for rights could

not be terminated in such a manner.” Id. at 445 (quoting

McCoy, 390 F.3d at 425) (citation omitted). “When a contract

contains formal procedures requiring mutual, written assent to

amend,” the court wrote, “that language preempts future uni-

lateral termination of rights.” Id. at 444.

22

McCoy, for example, held that an SPD’s reservation-of-rights provi-

sion, which stated that any termination of benefits was “ ‘subject to the

provisions of any applicable collective bargaining agreement,’ ” id. at 421,

could not “fairly . . . have prompted the union immediately to protest,” id.

at 425.

ALDAY v. RAYTHEON COMPANY 5569

Prater’s holding does not directly apply to this case, but its

rationale does. Because the particular right at issue—that the

company would pay for eligible retirees’ medical insurance—

is expressly contained in the CBAs themselves, it is protected

from unilateral amendment by the CBAs’ zipper provision.23

Raytheon’s assertion of unilateral authority to abrogate that

right, under the contributions clause, would both go beyond

the degree to which the CBAs explicitly deferred to the Plans

and run headlong into the zipper provision’s prohibition

against unilateral modification of the CBA. See Brushy Creek,

505 F.3d at 766-67 (observing that a clause requiring “joint

amendment” of the CBA was inconsistent with a plan’s

reservation-of-rights provision, but holding that the CBA’s

subordination provision required the court to resolve the

inconsistency by disregarding the joint amendment clause).

This understanding of the relationship between the CBAs

and the 1999 and 2003 Plans’ contributions clause does not

wash out the clause’s importance in other respects. The con-

tributions clause authorized Raytheon unilaterally to adjust

active employees’ weekly contribution requirements, so long

as Raytheon did not require more than the maximum amount

specified under § A(5). It also authorized Raytheon unilater-

ally to alter the contribution requirements of retirees who par-

ticipated in the retirement plan’s non-contributory option, and

so were not promised any employer contribution at all.

Finally, and most obviously, it permitted Raytheon to change

the contributions required of those unrepresented employees

covered by the Plans but not covered by the CBAs at all. The

clause did not, however, authorize Raytheon to abrogate eligi-

ble employees’ contractual right to company-paid health

insurance contributions during the term of the CBA, or to

23

Rockford Powertrain, for example, held that an ERISA plan’s

reservation-of-rights clause authorized the employer to amend welfare

benefits, despite the CBA’s prohibition on unilateral modifications,

because the CBA did not provide for any particular benefits, only the Plan

did. See 350 F.3d at 704-05.

5570 ALDAY v. RAYTHEON COMPANY

eliminate eligible retirees’ right to company-paid insurance

until age 65, in accordance with the agreement in effect at the

time they retired.

IV

As to the Retirees’ cross-appeal, the Retirees contend that

the district court erred in rejecting their claims for punitive

and extra-contractual damages under the LMRA or ERISA.

We do not agree.

[13] As Retirees concede, 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 brought under Section 301 [of

the LMRA].”); Desert Palace, Inc. v. Local Joint Exec. Bd.,

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 punitive.”). Retirees

contend, however, that there are exceptions to this general

rule: A court may award punitive damages if it would deter

persistent misconduct and may award extra-contractual dam-

ages if the defendant’s conduct was particularly likely to

result in serious emotional distress.

[14] We need not resolve whether such exceptions exist.

Retirees pleadings do not allege sufficient facts to support any

claim for punitive and extra-contractual damages. In particu-

lar, “[e]ven if we were to conclude that punitive damages are

available in appropriate circumstances,” Retirees 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, 83 F.3d 747, 755 (6th Cir. 1996). We therefore

ALDAY v. RAYTHEON COMPANY 5571

affirm the district court’s grant of judgment on the pleadings

to Raytheon as to the availability of punitive and extra-

contractual damages.

V

In sum, we hold: that Raytheon expressly agreed to provide

100% company-paid healthcare coverage for eligible Retirees;

that Raytheon’s obligation survived the expiration of the

CBAs; and that Raytheon’s agreed-upon obligation could not

be unilaterally abrogated by Raytheon, regardless of the rights

Raytheon reserved for itself in Plan documents, because the

CBAs did not incorporate the Plans’ reservation-of-rights pro-

visions with respect to employer contribution issues, as

opposed to issues relating to the provision of monetary or in-

kind benefits for particular medical services. We further hold

that the district court did not err in rejecting Retirees’ claim

for punitive and extra-contractual damages.

AFFIRMED.