Appendix — United Food & Commercial Workers International Union v. John Morrell & Co.
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94180 3 MAY 2 - 1995
No.
OEEICE OF THE CLERK
In THE
Supreme Court of the United States
OCTOBER TERM, 1994
UNITED FoopD AND COMMERCIAL WORKERS INTERNA-
TIONAL UNIon, AFL-CIO, and BERNARD J. ANING,
individually and on behalf of a class of others similarly
situated, Petitioners,
V.
JOHN MoRRELL & COMPANY,
Respondent.
Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Eighth Circuit
APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI
IRVING KING
RICHARD WATT
KELLY HUPFELD
122 South Michigan Avenue
Chicago, Ill. 60603
GEORGE R. MURPHY
RICHARD ROESEL
1775 K Street, N.W.
Washington, D.C. 20036
DAVID M. SILBERMAN
LAURENCE GOLD
(Counsel of Record)
815 16th Street, N.W.
Washington, D.C. 20006
(202) 637-5390
WILSON . Erpes PRINTING Co., Inc - 749-0096 - WASHINGTON, D.C. 20001
® Se. 60
~~
20 Dey) cases aa ARETE ERS
TABLE OF CONTENTS
Page
A. Opinion of the United States Court of Appeals for
the Eighth Circuit ............................. are tae la
B. Opinion of the United States District Court for
the District of South Dakota a 27a
C. Judgment of the United States Court of Appeals
for the Eighth Circuit EE PEATE Re 2a
D. Judgment of the District Court 53a
E. Order Denying Petition for Rehearing 55a
la
APPENDIX A
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 93-2863
JOHN MorRRELL & Co.,
Plaintifj-A ppellee,
V.
UNITED Foop AND COMMERCIAL WORKERS INTERNA-
TIONAL UNION, AFL-CIO; BERNARD J. ANING, as rep-
resentative of a defendant class,
Defendants-A ppellants.
Appeal from the United States District Court
for the District of South Dakota
Submitted: February 16, 1994
Filed: October 12, 1994
Before FAGG, Circuit Judge, HEANEY, Senior Circuit
Judge, and LOKEN, Circuit Judge.
2a
LOKEN, Circuit Judge.
John Morrell & Co. (“Morrell”) and the United Food
and Commercial Workers (the “Union”) were parties to
“Master” collective bargaining agreements from the 1940’s
until April 1, 1989. In 1991, after negotiating a new
collective bargaining agreement, Morrell and the Union
disagreed over whether the expired Master Agreements
obligate Morrell to pay continuing health benefits to
hourly employees who retired before April 1, 1989.
Morrell commenced this action against the Union and a
class of retired hourly employees (the “Class”) seeking
a declaration that it may unilaterally modify or terminate
those health care benefits. The Union contends that these
are vested lifetime benefits, a legal issue governed by the
Employee Retirement Income Security Act, 29 U.S.C.
§§ 1001 et seg. (“ERISA”).
After the district court*® denied the Union’s motion
to compel arbitration, the parties completed discovery
and proceeded to trial.* Following a four-day bench trial,
the district court found that the retiree health benefits
afforded in the various Master Agreements were limited
to the three-year term of each Agreement. Accordingly,
1 Like the parties, we will use the phrase “hourly employees”
to mean Morrell employees who are represented by the Union.
Thus, an hourly employee who retired before April 1, 1989, was
covered by a Master Agreement when he or she retired.
2 The HONORABLE RICHARD H. BATTEY, United States Dis-
trict Judge for the District of South Dakota.
3 Qn appeal, the Union argues that we should compel arbitration.
However, the Union waived this issue when it did not appeal the
denial of its motion to compel arbitration, causing the parties to
incur the expense of discovery and a trial on the merits. See
Ritzel Communications, Inc. v. Mid-American Cellular Tel. Co., 989
F.2d 966 (8th Cir. 1993). A party may not “allow the substantive
lawsuit to run its course (which could take years), and then, if
dissatisfied with the result, seek to enforce the right to arbitration
on appeal from the final judgement.” Cotton v. Slone, 4 F.3d 176,
180 (2d Cir. 1993).
3a
the court concluded that those benefits are not contrac-
tually vested under the Master Agreements nor legally
vested under ERISA and granted Morrell the requested
declaratory relief. John Morrell & Co. v. United Food
& Commercial Workers Int'l Union, 825 F. Supp. 1440
(D.S.D. 1993). The Union and the Class appeal. We
affirm.
I. Governing Legal Principles.
ERISA requires that pension plans meet minimum
vesting standards. See 29 U.S.C. § 1053. But vesting
is not mandatory for “employee welfare benefit plans” —
plans that offer the health care benefits here at issue.
See 29 U.S.C. §§ 1002(1), 1051(1). An employer may
unilaterally modify or terminate health benefits “absent
the employer’s contractual agreement to the contrary,”
Howe v. Varity Corp., 896 F.2d 1107, 1109 (8th Cir.
1990), even if some benefits have been paid, see Meester
v. IASD Health Servs. Corp., 963 F.2d 194, 197 (8th
Cir. 1992). Thus, although ERISA is the governing law,
this case turns on whether vested health benefits were
contractually conferred in the Master Agreements between
Morrell and the Union. The Union has the burden of
proof on this issue. See Anderson v. Alpha Portland
Indus., Inc., 836 F.2d 1512, 1516-17 (8th Cir. 1988),
cert. denied, 489 U.S. 1051 (1989).
The Master Agreements each contained multiple ap-
pendices setting forth various employee benefit plans.
For example, Appendix G contained the Supplemental
Agreement on Pensions. Consistent with ERISA, Ap-
pendix G included vesting provisions and expressly re-
ferred to “Vested Pensions.” On the other hand, Appen-
dix F, which contained the health care benefits here at
issue, had no express vesting provisions. The Union ar-
gues that an intent to confer vested benefits may none-
theless be derived from ambiguous language in Appendix
F construed in light of the parties’ lengthy collective bar-
gaining history. The Union shoulders a difficult, though
4a
not impossible, burden of persuasion with this argument,
since courts are reluctant to read more benefits into an
ERISA plan than its plain language confers. See Wise
v. El Paso Natural Gas Co., 986 F.2d 929, 937 (Sth
Cir.), cert. denied, 114 S. Ct. 196 (1993); Howe, 896
F.2d at 1110; DeGeare v. Alpha Portland Indus., Inc.,
837 F.2d 812, 816 (8th Cir. 1988), vacated and re-
manded on other grounds, 489 U.S. 1049 (1989).
II. The Collective Bargaining History.
The express terms of an ERISA plan determine the
benefits it confers. But the plans at issue were appendices
to collective bargaining agreements, and it is usually un-
wise to construe collective bargaining agreements without
regard to their bargaining history. Therefore, before ex-
amining the relevant Master Agreement provisions, we
will review the negotiating history of those Agreements
as it relates to retiree health benefits.
Prior to 1976, Morrell and the Union bargained the
issue of health care benefits for retired employees and
expressly included such benefits in the Master Agree-
ments. For example, Appendix F to the 1973 Master
Agreement provided:
8.12 Retirement: All retirees currently furnished...
coverage and all Employees who retire during the
term of the Master Agreement shall be furnished
hospital, medical and surgical insurance at Company
expense through a plan as provided by the Company.
(Emphasis added.) The 1973 Master Agreement also
contained a term clause expressly limiting the duration
of the Appendix F benefits:
103. The Hospital-Medical-Surgical Insurance Plan
Gescribed in Appendix F will remain in effect for the
duration of this Agreement.
Each subsequent Master Agreement contained a similar
term clause, as well as a general clause limiting the dura-
Sa
tion of all the Master Agreement’s provisions to its three-
year term.
The parties changed § 8.12 of Appendix F in the 1976
Master Agreement by deleting the reference to “All re-
tirees,” so that Morrell’s only express undertaking was to
provide continuing health benefits for employees who
would retire during the term of that Master Agreement.
The district court attributed this change to the Supreme
Court’s decision in Allied Chemical & Alkali Workers
v. Pittsburgh Plate Glass Co., 404 U.S. 157 (1971),
that bargaining for retired employees is a permissive
rather than a mandatory subject of collective bargaining.
Relying on PPG, Morrell took the position in 1976 that
previously retired hourly employees were no longer mem-
bers of the bargaining unit, and the Union acquiesced.
Although the 1976 Master Agreement did not refer
to past retirees, the parties negotiated the subject of re-
tiree health benefits. In January 1977, Morrell announced
that retired hourly employees would be provided improved
health benefits, including a new cost reduction plan for
prescription drugs and some Medicare reimbursement.
These changes were made retroactive to the effective date
of the 1976 Master Agreement, and Morrell subsequently
represented to this court that they were made “as a re-
sult of union negotiations.” *
In 1979, Morrell and the Union negotiated another
Master Agreement. Again, health benefits for retirees
were discussed but not included.® Instead, Morrell and
the Union signed a July 12, 1979, “side letter” reciting
4 This quote is taken from page five of Morrell’s March 21, 1986,
brief in Anderson v. John Morrell & Co., No. 86-5017-SD, later
reported at 830 F.2d 872 (8th Cir. 1987).
5 For example, the 1979 Master Agreement provided that union
employees who retired after September 1, 1979, would be covered
under Morrell’s Vision Plan. This benefit was not extended to
previously retired hourly employees until January 1, 1984.
6a
that Morrell has no duty to bargain retiree benefits but
“has advised the Union that, as a matter of Company
policy, the Company intends to announce that effective
September 1, 1979, the Company will extend the follow-
ing benefit programs to retirees currently covered by a
Company H.M.S. Plan.” When the 1979 Master Agree-
ment became effective, Morrell wrote existing retirees
that it was “pleased to announce an improvement” in
their health care benefits. Lee Bishop, who negotiated
the 1979 Master Agreement with the Union, testified that
Morrell made a significant change to retiree health bene-
fits in 1979:
Prior to this time . . . Morrell had engaged in
what I would refer to as stairstep programs for past
retirees. In other words, if you retired [in] 1969,
you got one set of benefits; and if you retired in
1973, you got a differen[t] set of benefits... . so
that we had multiple plans in existence for past re-
tirees. The company’s determination was . . . that
we would discontinue the stairstep approach and
put all the past retirees under the same program.
Although Bishop described these as unilateral changes,
Morrell’s brief to this court in Anderson v. John Morrell
& Co., stated, “In 1979, as a result of union negotia-
tions, the Company once again retoractively improved
the benefits available to union retirees.”
When the 1979 Master Agreement expired in 1982,
the Union went on strike. Morrell terminated health
care benefits for the strikers but continued to pay bene-
fits to hourly retirees. After the parties negotiated a new
collective bargaining agreement, Morrell reopened nego-
tiations when a major competitor obtained wage and ben-
efit concessions from the Union. In late 1983, the Union
accepted lower wages and benefits from Morrell as well,
reflected in a new Master Agreement made retroactive
to September 1, 1982. Once again, Appendix F provided
retirement benefits only for employees who retired during
Ta
the life of the Agreement.” However, on January 12,
1984, Morrell sent past hourly retirees a letter stating
in part:
During these negotiations with the Union, the
parties agreed that no reductions would be made in
retiree pensions.’ However, the Company and the
Union did agree that your retiree medical benefit
program will be modified to provide the same gen-
eral level of benefits negotiated for active employees
for those benefits applicable to retirees. . . . Bene-
fits have been improved in some areas, particularly
as it relates to catastrophic type illnesses. On the
other hand, the deductibles and co-insurance have
been modified so that you will share in some of the
costs covering initial treatments and minor ailments.
* * %
John Morrell & Co. is pleased to be able to con-
tinue to provide retirees with a medical benefits plan.
Morrell also sent retirees a Summary of Hourly Retiree
Medical Benefit Program that stated, “This Benefit Pro-
gram is subject to modification and termination in ac-
cordance with applicable law.”
When the 1982 Master Agreement expired on Septem-
ber 1, 1985, the Union again went on strike, and Morrell
again stopped paying health benefits to striking employ-
ees while continuing them for hourly retirees. In the
subsequent 1985 Master Agreement, Appendix F made
no mention of past retirees, and, like its predecessors,
was limited to the duration of the three-year Master
Agreement.
*A 1983 Memorandum of Agreement stated that “present re-
tirees . . . shall be covered” by Appendix F. The district court
found that this referred to employees who retired after the 1979
Agreement expired but before the 1982 Agreement was negotiated.
7 A disingenuous statement since pension benefits are vested by
law under ERISA.
8a
In 1987, the Union again went on strike. When the
parties negotiated to an impasse in early 1989, Morrell
unilaterally implemented new wage and benefit terms. A
new collective bargaining agreement went into effect in
January of 1991. Morrell sent a memorandum to hourly
retirees on March 31, 1991, that included the statement,
“The Company reserves its legal right, at its sole discre-
tion, to alter, modify, or terminate any plan or benefit at
any time.” The Union responded that any such action
“would violate the Union’s applicable collective bargain-
ing agreement as well as the rights of the retirees.”
Morrell then commenced this action.
On appeal, each party strives to put a favorable gloss
on this long collective bargaining history. Morrell ar-
gues that, since 1976, it has carved past retiree health
benefits out of the collective bargaining process and
treated them as a matter of “employer grace.” But as the
above-quoted passages from Morrell’s brief to this court
in Anderson v. John Morrell & Co. make clear, the health
benefits Morrell provided to hourly retirees prior to
April 1, 1989, were in fact the product of collective bar-
gaining. They were not included in the Master Agree-
ments, and perhaps they were not collectively bargained
in a narrow sense of that term. But as each Master
Agreement was negotiated, the Union made requests for
improved retiree health benefits, Morrell devised and pre-
sented a detailed array of health benefits it would provide
to past retirees “as a matter of company policy,” and
the Union acquiesced in Morrell’s proposal, either by
signing a document like the July 12, 1979, side letter,
or by its silence. As Morrell negotiator Lee Bishop ad-
mitted at trial, Morrell was aware that it would be harder
to negotiate a new Master Agreement for the active em-
ployees if the Union was upset with the Company’s treat-
ment of past hourly reiirees.
On the other hand, the Union’s view of the collective
bargaining landscape is even more distorted. The Union
9a
recognizes that the Master Agreements after 1973 made
no mention of past retirees and therefore cannot de con-
Strued as providing vested benefits to already retired
hourly employees. The Union instead argues that each
retiree has a vested right to the level of retirement health
benefits afforded in the Master Agreement in effect when
he or she retired. But that view of the Master Agree-
ments does not square with the parties’ bargaining history.
In every negotiation after 1973, the Union requested
improved health benefits for past retirees. Starting in
1979, Morrell eliminated its prior “stairstep” approach—
which on its face was consistent with the Union’s vesting
argument—and adopted, with at least implicit Union
approval, a single health benefits package applicable to
all past retirees. Thereafter, prior to the signing of each
new Master Agreement, Morrell and the Union nego-
tiated, and Morrell subsequently implemented, a modi-
fied health benefits package for past retirees. As Morrell’s
January 12, 1984, letter to retirees illustrates, the modi-
fications included both increases and decreases in the
level of benefits, yet neither the Union nor any member
of the Class ever objected that such changes violated
vested rights.®
Faced with this inconsistency at oral argument, the
Union suggested that each subsequent modification is
part of the retirees’ vested benefits. But those modifica-
tions were the product of either side deals or unilateral
Morrell action, depending upon one’s views of the collec-
tive bargaining. They are not to be found in the Master
Agreements, which are the basis of the Union’s vesting
claims. In short, there is no basis for concluding that
8 Even if a union collectively bargains benefits for past retirees,
“vested retirement rights may not be altered without the pen-
sioner’s consent.” PPG, 404 U.S. at 181 n.20. Morrell’s modified
retiree health benefit plans were never submitted to past retirees
for approval, which suggests that neither Morrell nor the Union
thought they were modifying vested benefits.
10a
later modifications to a retiree’s initia! level of health
benefits are vested. Rather, the fact that modifications
were routinely negotiated is fundamentally inconsistent
with the notion that any retirement health benefits were
ever vested. See Anderson v. Alpha Portland, 836 F.2d
at 1519.
For the foregoing reasons, we conclude that the history
of collective bargaining between Morrell and the Union
does not support the Union’s claims that hourly retirees’
health benefits are vested. With that background, we
turn to the provisions of the Master Agreements as con-
strued by the district court.
III. The Master Agreement Provisions.
The Master Agreements contain many provisions that
reflect an intent to confer only non-vested retiree health
benefits.
1. The absence of any explicit vesting language in
Appendix F is strong evidence of the parties’ intent to
limit retiree benefits to the term of the Master Agree-
ment. By contrast, the pension benefits in Appendix G
were expressly referred to as vested.
2. As noted above, each Master Agreement contained
a term clause expressly limiting the duration of the re-
tirement health benefits contained in Appendix F to the
duration of the Master Agreement. We held in Ander-
son v. Alpha Portland Industries that similar language
was inconsistent with an intent to vest health benefits for
life: “[i]t would render the durational clauses nugatory
to hold that benefits continue for life even though the
agreement which provides the benefits expires on a certain
date.” 836 F.2d at 1519; see also Bidlack v. Wheela-
brator Corp., 993 F.2d 603, 609 (7th Cir.) (en banc)
(“employers adamant against assuming perpetual obliga-
tions can eliminate all doubt by insisting on a clause that
makes any entitlement to health benefits granted by the
lla
agreement expire on the date the agreement expires”),
cert. denied, 114 S. Ct. 291 (1993).
3. The provision in the 1973 Master Agreement that
continued health benefits for past retirees is evidence that
prior benefits were not vesied. See Anderson v. Alpha
Portland, 836 F.2d at 1518-19; DeGeare, 837 F.2d at
816. Likewise, as noted above, Morrell’s “unilateral”
adoption of a modified health benefits package for past
retirees with the signing of each new Master Agreement
is evidence that prior benefits were not vested.
4. Appendix F in several of the Master Agreements
contained a coordination-of-benefits provision. We have
held that such provisions are also inconsistent with vest-
ing. See Anderson v. Alpha Portland, 836 F.2d at 1519.
In the face of this substantial textual evidence that
retiree health benefits are not vested, the Union points
to relatively little in the Master Agreements to the con-
trary. First, the Union refers us to § 9.1(b) of Appendix
_F to the 1979 Master Agreement, a provision that also
appeared in the 1982 and 1985 Agreements:
(b) After Retirees Death:
* * * ot
(2) When a Retired Employee dies who has
selected a joint and survivor form of pen-
sion, the above coverage shall continue for
the surviving spouse and dependent chil-
dren until the earlier of the surviving
spouse’s death or remarriage... .
The Union argues that this language expressly vests an
eligible spouse with Appendix F retirement health bene-
fits until the spouse’s death or remarriage. We have pre-
viously noted that such language does support the argu-
ment that eligible survivor benefits are vested. See Local
Union No. 150-A, United Food & Commercial Workers
Int'l Union v. Dubuque Packing Co., 756 F.2d 66, 69-
70 (8th Cir. 1985). But in the context of this case, it is
equally plausible to construe this provision as providing
12a
that a surviving spouse who is eligible to receive a joint
and survivor pension—which is vested—will also receive
whatever non-vested retiree health benefits Morrell pro-
vides from time to time. Under this provision, the eli-
gible surivor receives only the “above coverage,” which
is limited to the three-year term of Appendix F and the
Master Agreement. Thus, $9.1(b) is ambiguous and
cannot overcome the other provisions, such as the term
clauses, that are inconsistent with vesting.
Next, the Union relies upon two additions to Appendix
F in the 1982 and 1985 Master Agreements. First, the
preamble to Appendix F in those Agreements stated:
“This Agreement . . . other than as provided under Sec-
tion B [the retirement benefits section], shall be subject
to termination, modification or extension upon the termi-
nation of [the] Master Agreement.” That language, the
Union argues without supporting trial testimony, vested
all the retirement health benefits contained in Section
B. But there is no general reference to vesting in Section
B. Rather, there is one specific provision—Article III—
that conferred fixed five-year health benefits on “Separa-
tion Retirees,” workers between the ages of 50 and 54
who elected a separation pension after a plant closing.
Absent extrinsic evidence to the contrary, we believe
that the preamble’s exception—“other than as provided
under Section B’—was simply a cross reference to the
limited vested retirement health benefits conferred in Ar-
ticle III of Section B.
Second, the Union finds an intent to vest retirement
health benefits in § 4.1 of Section B in the 1982 and
1985 Agreements:
4.1 The above retirement benefit plan was based
upon certain economic conditions in existence at the
time such plan was negotiated by the Company and
the Union. Therefore, the Company and the Union
reserve the right to subsequently alter, modify, in-
crease or reduce the benefits and coverages provided
herein, at any time, including subsequent to the
A OO Sea
l3a
Employee’s retirement date, if changes occur in the
costs of this retirement benefit, or if economic con-
ditions of the meat industry or the Company change,
but any modification to the plan shall be only upon
mutual agreement by the Company and the Union.
The Union construes § 4.1 as meaning that the Union
must agree to any modification of retiree health benefits,
even after the Master Agreement has expired. Even ac-
cepting the Union’s interpretation of this provision, it is
further evidence that both Morrell and the Union recog-
nized that retirement health benefits were subject to pe-
riodic modification, a recognition inconsistent with the
Union’s contention that each Master Agreement conferred
vested benefits. Moreover, Morrell’s uncontroverted trial
testimony gave § 4.1 a very different meaning—it was an
exception to a Company concession not to reopen these
Master Agreements prior to their expiration. In other
words, § 4.1 was an express recognition by the Union
that retirement health benefits could be the subject of
additional negotiations before the Master Agreements ex-
pired.
From the above, we conclude that both the plain mean-
ing of the Master Agreements, and the collective bar-
gaining context in which they arose, support the district
court’s determination that the Class’s retirement health
benefits are not contractually vested.
IV. Morrell’s Fiduciary Duty.
Finally, the Union argues that even if the Class does
not have vested retirement benefits, Morrell would vio-
late its fiduciary duties under ERISA by unilaterally
modifying or terminating those benefits. This argument
is without merit. ERISA does not bar an employer that
is also a fiduciary from exercising its business judgment
to modify non-vested welfare benefits. See United Paper-
workers Int’l Union v. Jefferson Smurfit Corp., 961 F.2d
1384, 1386-87 (8th Cir. 1992).
The judgment of the district court is affirmed.
l4a
HEANEY, Senior Circuit Judge, dissenting.
I agree that vesting is not mandatory under ERISA
for employee welfare benefit plans. I also agree that the
Union waived its right to compel arbitration. My agree-
ment ends there, however. The Union does, of course,
have the burden of proving that the employee welfare
benefits were contractually vested, but this burden is no
greater and no less than in any other contract case. See
Howe v. Varity Corp., 896 F.2d 1107, 1109 (8th Cir.
1990); Anderson v. Alpha Portland Indus., Inc., 836
F.2d 1512, 1517 (8th Cir. 1988), cert. denied, 489
U.S. 1051 (1989); Local Union No. 150-A, United
Food & Commercial Workers Int'l Union v. Dubuque
Packing Co., 756 F.2d 66, 70 (8th Cir. 1985). In my
view, the Union has more than sustained its burden.
Thus, I respectfully dissent.
The Collective Bargaining History
The single most powerful, undisputed fact in this rec-
ord is that every hourly employee who retired between
1957 and January 1, 1989, received health benefits from
Morrell from the time of retirement until death. The
retirees received these benefits without interruption even
though the collective bargaining agreement terminated
on several occasions during this period and even though
the Union went on strike on some occasions. The health
benefits did change from time to time, usually to the
benefit of the retirees, during the forty-two-year period,
but always by agreement between Morrell and the Union.
No retiree complained about the changes that were made.
A second undisputed fact is that, upon retirement,
each hourly employee was given the option of selecting
a joint survivor form of benefits. Upon the death of a
retiree who elected joint survivorship benefits, Morrell
informed the surviving spouse that health benefits would
continue until the spouse died or remarried. Jt. App.
823, 919 (§ 9.1(b)(2) of Appendix B of 1979 Master
15a
Agreement), 946. Larry McFarland, a retired employee
of Morrell, testified that “I was told by [LaVonne Hoff-
man, Butch Anderson, Gary Junso, and Tim Sinsky]
that I would have the benefits for the rest of my life as
well as at the time of my death. If I left the percentage
in there for my wife, she would receive the benefits for
the rest of her life.” /d. at 590. In his affidavit dated
April 21, 1992, Les Sundermann, another retired em-
ployee of Morrell, stated:
I selected a joint and survivor pension option be-
cause I knew that this form of pension would guar-
antee medical insurance for my wife after my death.
. . . [T]he form given to me to take home and fill
out... also said at the bottom that my wife would
have the health insurance after my death if I selected
the joint and survivor option.
Id. at 1733. Another retired employee of Morrell, Bob
Smelser, stated in his affidavit dated April 20, 1992, as
follows:
I chose an optional form of pension (joint and
survivor pension) specifically so that my wife would
be covered by the benefits after my death. The out-
line of the pension options which I received in the
mail from the Company contained a statement, in
large capital letters at the bottom, as follows:
HEALTH INSURANCE BENEFITS FOR
YOUR SURVIVING SPOUSE WOULD BE
PROVIDED BY THE COMPANY ONLY IF
YOU CHOOSE A JOINT AND SURVIVOR
PENSION.
Id. at 1741. In addition, Paragraph F of a form entitled
“Retirement Information” states that “[{flor continued
health care benefits for an employee’s spouse and de-
pendents beyond the life of the retiree, employee must
select a Joint & Survivor Form of Pension.” /d. at 1743:
see also Trial Testimony of Rodger Tibke, id. at 601;
l6a
Affidavit of Francis Krier (Apr. 20, 1992), id. at 1749;
Affidavit of George Zuraff (Apr. 21, 1992), id. at 1752.
Again, it is undisputed that Morrell continued these
spousal benefits without interruption during those times
that the union employees were on strike and on collec-
tive bargaining agreement was in effect.
A third undisputed fact is that not once during the
period from 1957 through December 19, 1985, did Mor-
rell inform the Union, the active employees, or employees
about to retire that it had the right to terminate retiree
health benefits. In his affidavit of April 21, 1992, Jim
Jarman, a retired employee of Morrell, states:
Neither Lavonne Hoffman or any other person
ever advised me that my pension was guaranteed
and fixed but that my health insurance benefits were
not. I have never at any time heard any representa-
tive of John Morrell & Co. make that statement or
any statement that the health insurance benefits for
employees who have retired are not guaranteed,
fixed, and vested in accordance with the agreements
between Morrell and the UFCS Union.
Id. at 1729. Another retired employee of Morrell, Jerry
Nelson, stated in his affidavit of April 20, 1992, that
“[njo one told me that my health benefits were not guar-
anteed, fixed or vested and no one ever told me that it
was the Company’s position that those benefits could be
modiefid or terminated by the Company. In fact, I have
never at any time heard any representative of the Com-
pany make such a claim.” /d. at 1736; see also Affidavit
of Don Reiter (Apr. 23, 1992), id. at 1738; Affidavit
of Ronald Christianson (Apr. 21, 1992), id. at 1758;
Affidavit of Marcene Williscroft (Apr. 21, 1992), id.
at 1763. Indeed, it was not until July 12, 1979, that
Morrell intimated that health benefits for employees and
retirees was a matter of “employer grace” rather than a
matter of contract. On that date Morrell wrote to the
Union:
17a
The Company has taken the position that it has
no legal obligation to bargain with the Union with
respect to the benefits of past retirees.
Without any waiver of the legal position of either
party, however, . . . the Company will extend the
following benefit programs to retirees currently cov-
ered by a Company H.M.S. Plan and who have re-
tired prior to September 1, 1979, under the [retire-
ment provisions] of the 1957, 1959, 1961, 1964,
1967, 1970, 1973, and 1976 Supplemental Agree-
ments on Pensions.
Id. at 932 (emphasis added). By the terms of this letter,
which the Union signed and accepted, the Union fully
preserved its legal position that no changes could be
made in the health benefits of currently retired employees
without its consent.
A fourth undisputed fact is that all during the years in
question, health benefits for active and retired employees
alike were the subject of negotiations between Morrell
and the Union. Although it is true that after the Supreme
Court’s decision in Allied Chemical & Alkali Workers v.
Pittsburgh Plate Glass Co., 404 U.S. 157 (1971), Mor-
rell was not legally required to bargain with the Union
over retiree health benefits, it is equally true that it did
bargain over this issue and it must keep the bargain it
made. Even Morrell’s chief negotiator, M. Lee Bishop,
conceded that “it was in the company’s best interests to
provide past hourly retirees with certain benefit improve-
ments. And it related largely to the contract negotia-
tions that were going on at that time.” Jt. App. 1712.
Simply stated, retiree health benefits were an element,
along with wages, hours, pensions, and other fringe bene-
fits, to be considered in reaching an agreement.
A fifth fact is that many employees testified that they
were told at the time of their retirement that their health
benefits would be continued until they died and beyond
18a
that for their spouses if they elected joint survivorship
benefits. The following colloquy between the attorney
for the Union and Virgil Grace, a retired Morrell em-
ployee, during the trial of this matter illustrates what
Morrell supervisors told employees about their retiree
health benefits:
Q. (By Mr. King) Go ahead. What else was
said?
A. And I decided to take it all and [Bob Wor-
camp] explained to me that, “Do you know what
you are doing?” And I says, “I hope that I do; I
think that I do.” And I asked for what I was going
to get in fringe benefits. He handed me a piece of
paper and says, “Read that on the back.” And it
said that if I took it all, my wife wouldn’t get any-
thing and she would lose all of her insurance plus
the PCS if I passed away. And if I took partial—
part of it she would get those for the rest of her
life if I passed away.
Q. She would get what for the rest of her life?
A. The insurance, health benefits, and the PCS.
And I said that—after I read it, and it said that I
would get my insurance and PCS for the rest of my
life, I said that I questioned that and wanted to be
sure that I knew what I was getting because in our
condition—she has had rheumatoid arthritis for 17
years, and I have arthritis, and we are both in tough
shape, and I wanted to be sure and clarify that, that
if this—if there was any way that I could lose that
health insurance. He said, “The only way you can
lose that health insurance is if the company went
belly up and went broke.” I said I'd just wanted to
clarify that because I believe a person is only as
good as their word.
Id. at 595-96. Don Sinning, another retired employee
of Morrell, stated in his affidavit of April 21, 1992, that
19a
“Lavonne Hoffman told us that if I did select a Joint and
Survivor form of pension, my wife and I would both be
covered by the health benefits during my lifetime and
thereafter my wife would be continued to be covered
until the end of her life.” Jd. at 1754; see also Affidavit
of Ronald Christianson (Apr. 21, 1992), id. at 1758.
Not a single witness for Morrell testified that retirees
were told at the time of retirement that Morrell could
terminate their health benefits at the expiration of a col-
lective bargaining agreement.
Lavonne Hoffman, the Assistant Manager of Benefits
for Morrell in Sioux Falls, South Dakota, submitted an
affidavit in which she stated that “it was our standard
practice to advise [retirees] that their pensions were guar-
anteed and fixed, but their [health] benefits were not.”
Id. at 1723. Hoffman did not state that she explicitly
advised employees that Morrell reserved the right to
terminate the retiree health benefits after retirement.
Morrell did not call a single retiree to support Hoffman’s
statement that retiree health benefits were not guaranteed,
nor did Hoffman herself identify any retiree whom she
told that health benefits were not guaranteed.
In sum, the record supports the view that both the
Union and Morrell intended that health benefits would
vest when an employee retired. The retirees knew that
health benefits could be modified by Morrell and the
Union, but they also knew that it was an article of faith
with the Union that the health benefits of retirees would
be protected.
Faced with hard times in the intensely competitive
meat industry, Morrell’s position began to change in 1984.
On December 19, 1985, Morrell stated in a letter to a
retiree that “benefits are subject to change.” /d. at 1180.
Enclosed with the letter was a summary of retiree health
benefits that stated, “This Benefit Program is subject to
modification and termination in accordance with appli-
cable law.” Jd. at 1182. Note that Morrell does not
20a
explicitly claim that it has the unilateral right to change
retiree health benefits. In fact, Morrell was obligated by
contract not to do so.
On November 16, 1989, Morrell wrote all retirees a
self-serving letter in which it stated that “as always the
Company reserves the right to change health care benefits
from time to time.” Jd. at 1251. This letter was followed
by others in a similar vein in which Morrell’s position
hardened, culminating in its decision on December 7,
1991, to continue coverage for all retirees but largely at
the retires’ expense.
In the face of this history of collective bargaining and
representations to individual retirees, I am unable to find
any support in the record for the majority’s view that
the history of collective bargaining indicates that retiree
health benefits could be terminated by Morrell unilaterally.
Obviously Morrell retained the right to deny health bene-
fits to future retirees, but it did not have the right to
terminate the health benefits of already retired hourly
employees.
The Master Agreement Provisions
I cannot agree with the majority that the Master Agree-
ments contain many provisions that reflect an intent to
confer only nonvested retiree health benefits. To the
contrary, the agreements failed to include a single pro-
vision that informed the Union, the active employees,
or the retirees that the four-decade practice of providing
health benefits could be discontinued at the end of any
collective bargaining agreement.
In my opinion, there are two reasons Morrell never
told the interested parties that it retained the right to
terminate retiree health benefits at the end of a collective
bargaining agreement. First, Morrell knew that it had no
right to do so, and only asserted this purported right
when conditions in the industry became difficult. Second,
2la
Morrell knew that its assertion of such a right after more
than forty years of give-and-take bargaining involving this
issue would certainly trigger a work stoppage. Morrell
had a perfect opportunity to assert the right to unilaterally
terminate health benefits for retirees in 1971 when Pitts-
burgh Plate Glass was decided by the Supreme Court.
It failed to do so and instead continued to bargain with
the Union with respect to retiree health benefits and to
honor retirees’ health benefit claims without interruption.
The majority next claims that this court held in Ander-
son v. Alpha Portland that language similar to that used
here limited retiree health benefits to the duration of the
Master Agreement and that such language is inconsist-
ent with an intent to vest retiree health benefits. There
are at least two responses to this claim. First, the lan-
guage here is identical to that in Dubuque Packing, in
which our court held that contract language plus a course
of dealing indicated an intent that the right to health
benefits vest upon retirement. We stated:
While the agreements are not unambiguous, we
believe plaintiffs have carried their burden of proof.
As noted previously, there are many indications in
the agreements and course of dealing that the parties
intended the right to benefits would vest upon retire-
ment. The right to receive health and welfare bene-
fits arises from the retiree’s status as a past employee.
It is not dependent on a continued or current rela-
tionship with the Company. The status of a retiree
cannot be affected by future negotiations or agree-
ments between the Company and the Union; neither
can act on behalf of retirees. There is simply no
evidence that the Company and the Union did not
intend to vest the right to benefits in the retirees.
There is, on the other hand, evidence that the par-
ties implicitly intended to provide lifetime benefits to
retirees.
22a
Dubuque Packing, 756 F.2d at 70. This panel has no
right to overrule Dubuque Packing; only this court en
banc can take that action.’
Second, the facts in Anderson v. Alpha Portland are
clearly distinguishable from our case.
1. In Anderson v. Alpha Portland both the union and
the company testified that retiree health benefits were not
guaranteed beyond the life of the current collective bar-
gaining agreement. The International Union president,
Thomas Miechur, and Alpha Portland personnel manager,
Robert J. Bonstein, “testified that under the language they
prepared and agreed upon, retiree welfare benefits were
not guaranteed beyond the expiration of the CBA.” An-
derson v. Alpha Portland, 836 F.2d at 1515. Here the
Union has always taken the position that retiree health
benefits are guaranteed for life, and Morrell acceded to
that position for many years.
1 Dubuque Packing Co. made the same argument to this court as
is being made by Morrell.
Plaintiffs’ analysis of selected portions of contractual lan-
guage simplistically and, at times, fancifully, suggests that the
parties clearly intended to provide retiree health benefits be-
yond the terms of the relevant collective bargaining agree-
ments. The retiree benefit provisions of the subject agreements
quite simply contain coverage and eligibility provisions which
are applicable during the contract term. Due to the absence
of language specifying that such benefits shall survive the con-
tract term, they are subject to the general durational provi-
sions uf the agreement. Plaintiffs fail to suggest why parties
who are manifestly capable of clearly indicating their inten-
tion with respect to the termination of rights and obligations
were unable to specify that rights shall not terminate with the
agreement in the context of retiree welfare benefits. Instead,
Plaintiffs would have this Court believe that the contract pro-
visions specifically describing the coverage of these welfare
benefits also prescribes their duration.
Dubuque Packing Co. Reply Br. 4-5.
—
23a
2. Alpha Portland unilaterally created a group insur-
ance plan for active employees in 1946 and extended the
plan to retirees in 1984. Here Morrell and the Union
negotiated the health plan for both active and retired
employees.
3. Beginning in 1955 the terms of the Alpha Portland
plan became subject to bargaining between the company
and the union. The booklet describing the initial ne-
gotiated plan stated that Alpha Portland reserved the
right to discontinue the plan. No such language appeared
in Morrell’s booklet until 1985.
4. In 1965 the union submitted a proposal to Alpha
Portland that retiree benefits be paid to a retiree’s spouse
after the retiree’s death, but Alpha Portland rejected it.
Here, spouses of Morrell retirees who elected the joint
option received health benefits until they died or re-
married.
5. In Alpha Portland benefits for both strikers and re-
tirees continued during the strike. This court stated, “The
fact that Alpha treated retirees and striking employees
equally negates any inference of intent to vest retiree
benefits.” 836 F.2d at 1518 n.3. In contrast, when
strikes occurred at Morrell, the health benefits of striking
employees were discontinued but health benefits for re-
tirees continued.
The majority makes two additional arguments. First,
it states that the durational clause limits all benefits to
the life of the collective bargaining agreement. This argu-
ment was considered and rejected in Jnternational Union,
United Auto., Aerospace & Agric. Implement Workers
of Am. v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir.
1983), cert. denied, 465 U.S. 1007 (1984). In Yard-
Man the collective bargaining agreement provided that
active employees’ benefits terminated one month after an
employee’s layoff. Thus, the benefits of all active em-
ployees terminated on plant closure. The company ar-
24a
gued that retirees’ benefits could thus be terminated at
plant closure or with the expiration of the collective bar-
gaining agreement. The court looked to the conduct of
the company in determining what the parties intended.
It noted that Yard-Man had continued retirees’ insurance
benefits for a time after plant closure beyond the point
where such benefits could have been terminated for active
employees. It stated that this conduct indicates that the
company “did not consider retiree benefits to be tied to
the durational limitations of that active group.” /d. at
1481. The court went on to say:
Benefits for retirees are only permissive not man-
datory subjects of collective bargaining. As such,
it is unlikely that such benefits, which are typically
understood as a form of delayed compensation or
reward for past services, would be left to the con-
tingencies of future negotiations. The employees are
presumably aware that the union owes no obligation
to bargain for continued benefits for retirees. If they
forego wages now in expectation of retiree benefits,
they would want assurance that once they retire
they will continue to receive such benefits regard-
less of the bargain reached in subsequent agree-
ments. Contrary to Yard-Man’s assertions, the find-
ing of an intent to create interminable rights to
retiree insurance benefits in the absence of explicit
language, is not, in any discernable way, inconsistent
with federal labor law.
Id. at 1482 (citations omitted). Here, retiree health
benefits were continued during strikes while active em-
ployees’ health benefits were not.
Second, the majority asserts that “the fact that modi-
fications were routinely negotiated is fundamentally in-
consistent with the notion that any retirement health
benefits were ever vested.”* While I agree that later
2 In III.3., the majority states that Morrell’s unilateral “adoption
of a modified health benefits package for past retirees with the
25a
modifications may be evidence of an intent not to vest,
I believe that the evidence of intent in this case is over-
whelmingly to the contrary. Most of the changes in bene-
fits were favorable to the retirees or were made to co-
ordinate benefits with newly enacted Medicare. The mere
fact that there were subsequent negotiated modifications
to retiree health benefits does not prove that such bene-
fits did not vest at the level in effect when the employee
retired. Rather, all it indicates is that retirees did not
necessarily have any incentive to object to modifications
of their benefits if the changes increased their benefits or
if the changes were otherwise viewed as beneficial because
they contributed to Morrell’s long-term prosperity.
During the forty-plus years of negotiations between
Morrell and the Union not a single retiree objected to
the changes that had been negotiated by Morrell and the
Union. If an individual retiree believed that his vested
right to health benefits had been diminished, that retiree
had a right to commence an action under section 301 of
the Labor Management Relations Act to assert his right
to receive the benefits that existed at the time of his
retirement. Benard J. Aning, a retired employee of
Morrell, personally and as a representative of the defend-
signing of each master agreement” is evidence that prior benefits
were not vested. In fact, Morrell did not unilaterally adopt a
modified health benefit package for past retirees with the signing
of each new master agreement. In every case until the very end,
the benefits package for retirees was negotiated by Morrell and the
Union.
3 The Court in Pittsburgh Plate Glass stated:
This does not mean that when a union bargains for retirees
—which nothing in this opinion precludes if the employer
agrees—the retirees are without protection. Under established
contract principles, vested retirement rights may not be al-
tered without the pensioner’s consent. The retiree, moreover,
would have a federal remedy under § 301 of the Labor Man-
agement Relations Act for breach of contract if his benefits
were unilaterally changed.
404 U.S. at 181 n.20 (citations omitted).
26a
ant class, is a party to this action. Prior to this action,
no retiree had commenced an action to challenge any
of the negotiated changes to the retiree health plan.
Conclusion
For four decades Morrell and the Union negotiated
retirees’ health benefits. In 1991, for economic and com-
petitive reasons, Morrell decided to charge retirees for
health benefits. Were it not for its bargain with the Un-
ion to continue to provide health benefits to retirees, it
would have a right under ERISA to make that change.
Morrell certainly had the right to make this decision
with respect to future retirees, but not with respect to
employees who had already retired. Morrell made the
bargain, and no court may refuse to enforce this bargain,
which was entered into freely and which cost active em-
ployees higher wages and better working conditions,
which they agreed to because they were concerned about
hospital and medical bills for themselves and _ their
spouses after they retired.
I dissent not because I feel sympathy for the retirees,
although I do, and not because I question that the meat
packing industry is an intensely competitive one, but
simply because a bargain is a bargain, and we should not
absolve either party from their bargain. I would reverse
the judgment of the district court.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH
CIRCUIT.
27a
APPENDIX B
[Filed Jun. 24, 1993]
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
CIV. 91-4184
JOHN MorRELL & Co.,
Plaintiff,
VS.
UNITED Foop AND COMMERCIAL WORKERS INTERNA-
TIONAL UNION, AFL-CIO, and BENARD J. ANING,
personally and as a representative of a defendant class
of others similarly situated,
Defendants.
MEMORANDUM OPINION
John Morrell & Co. (“Morrell”) brought this action
under the Declaratory Judgment Act, 28 U.S.C. § 2201
et seq. It seeks a determination that it is entitled to
unilaterally modify or terminate programs of health bene-
fits provided to its retired hourly employees. Defendants
UFCW and Benard J. Aning allege that the changes in
the retirees’ health benefits constitute breaches of Mor-
rell’s fiduciary duties as defined by section 404 of the
Employee Retirement Income Security Act of 1974
(“ERISA”). They further claim that Morrell has dealt
with assets of the ERISA plan in its own interest in viola-
tion of section 406 of ERISA, 29 U.S.C. § 1006.
This Court has jurisdiction pursuant to the Declaratory
Judgment Act, 28 U.S.C. § 2201, section 301 of the Na-
28a
tional Labor Relations Act (“NLRA”), as amended, 29
U.S.C. §§ 158 and 185, sections 502(a) and 502(e) of
ERISA, 29 U.S.C. § 1132, and 28 U.S.C. § 1337.
The issue before the Court is whether Morreli has a
unilateral right to change or terminate the health benefits
for retirees who retired before April 1, 1989. Exhibit 36b
sets forth the intention of Morrell.
Morrell contends that the retiree Health, Medical, and
Surgical (“H.M.S.”) benefits do not continue beyond the
expiration of the collective bargaining agreement (“CBA”)
under which each retiree retired. Morrell asserts its con-
tractual obligation to provide the same benefits bargained
for in the CBA terminated when the CBA expired. It
further alleges that these benefits are not “vested” lifetime
benefits, and therfore, they may be changed unilaterally.
Finally, Morrell contends that even if the benefits are
lifetime benefits which cannot be unilaterally changed by
Morrell, the benefits can be changed by agreement be-
tween Morrell and UFCW. Therefore, Morrell requests
the Court to order the parties to negotiate in good faith
on the proposed health benefits changes for retirees.
A court trial was held on October 6, 1992. The Court
submits the following findings of fact and conclusions of
law, some of which were stipulated on October 5, 1992
(Docket #103). Reference to facts which have been
stipulated will be noted as (Stip. —).
FINDINGS OF FACT
a. Background
1. Morrell is a Delaware corporation with its prin-
cipal place of business in Cincinnati, Ohio. (Stip. C-1). |
It currently owns and operates meat-packing plants in
Sioux Falls, South Dakota, and other locations. At var-
ious times relevant to this action, it owned and operated
plants covered by a master agreement between the parties
ee
29a
in Sioux Falls, South Dakota; Estherville, lowa; Ottumwa,
Iowa; Fort Smith, Arkansas; Arkansas City, Kansas; St.
Paul, Minnesota; East St. Louis, Illinois; El Paso, Texas;
Memphis, Tennessee; and Cincinnati, Ohio. All of those
plants are now closed except the plant in Sioux Falls.
(Stip. C-5 & C-6).
2. Morrell is an “employer” under section 2(2) of
the NLRA, 29 U.S.C. § 152(2). (Stip. C-2).
3. United Food and Commercial Workers Interna-
tional Union, AFL-CIO (“UFCW”) is a “labor organiza-
tion” under section 2(5) of the NLRA, 29 U.S.C.
§ 152(5) with its principal offices in Washington, D.C.
(Stip. C-3 & C-4). UFCW is engaged in representing
employees in the district of South Dakota and has for
many years been the recognized collective bargaining
representative of Morrell hourly employees.
4. Defendant Benard J. Aning (“Aning”) is a re-
tried hourly employee of Morrell’s Sioux Falls plant who
was formerly represented by the UFCW. He has been
furnished with health care benefits by Morrell, first as
an active employee and currently as a retiree. (Stip. C-7).
5. Aning is a representative of the certified class.'. As
of December 17, 1991, it contained over 3,300 former
hourly employees. (Stip. C-9).
1 Prior to trial the parties stipulated to a defined class for cer-
tification which provided that the class consists of the following
persons who are now, and in the past have been, provided health
care benefits by Morrell:
(i) “Retirees”-—persons who were formerly employed by Mor-
rell as hourly employees at various plants and represented
by the UFCW, but who retired on or before April 1, 1989.
(ii) “Spouses”-——wives or husbands of living Retirees.
(iii) “Surviving Spouses”—widows and widowers of Retirees who
selected a joint and survivor form of pension and widows
30a
6. The retiree class is a closed class and the number
of persons in the class is declining through death at a
rate of approximately 200 per year.
7. Morrell and UFCW (or its predecessor unions)
have throughout the past forty years been parties to
successive CBAs commonly referred to as “master agree-
ments.” The history of these CBAs evidences some vari-
ance as relates to retirees and H.M.S. benefits.
8. UFCW (or its predecessor unions) has also been
a party to similar master agreements with other major
meat-packing employers such as Armour and Company,
Swift & Company and Wilson Foods Corporation. UFCW
and the meat-packing employers (including Morrell) en-
gaged in what is commonly known as “pattern bargain-
ing.” In each round of negotiations, one meat-packing
company and UFCW would reach an agreement which
would “set the pattern” for the meat-packing industry,
and the other companies would then adopt the same pro-
visions as a means of equalizing labor costs. This pat-
tern bargaining resulted in the same wages and benefits
and working conditions for all employees and retirees in
the meat-packing industry.
9. Successive CBAs became effective on September
1, 1973, 1976, 1979, 1982, and 1985. Each of these
CBAs contained an Appendix F which detailed health
benefits for Morrell’s hourly employees and persons re-
and widowers of hourly employees who died with twenty
years of credited service.
(iv) “Other Dependents”—children of Retirees within specified
ages or children (of the same ages) of deceased Retirees
who selected a joint and survivor form of pension.
(Stipulation for class certification, Docket #104). The Court ap-
proved this stipulation and certified the class in cpen court (Tr. 4).
3la
tiring during its term. These CBAs covered the labor
contract relations at the Sioux Falls plant.
b. Relevant Provisions of the CBAs
10. 1970-73 CBA (April 4, 1970, to September 1,
1973), (Exhibit 55).
The parties to the 1970-73 CBA were Morrell and the
Local P-1 Amalgamated Meat Cutters and Butcher Work-
men of North America A.F.L.-C.1.O. (predecessor of
UFCW).
Referring to an earlier CBA terminating August 31,
1964, paragraph 8, page 37, provided:
The H.M.S. benefits . . . shall continue to be made
available to present covered retirees who have been
carrying such insurance . . . at no additional cost
over the amounts being paid as of the date of execu-
tion of this Memorandum by retirees for such insur-
ance coverage at the respective plants. All retirees
who are carrying such insurance coverage as of De-
cember 1, 1967, and all Employees retiring after
December 1, 1967, shall be furnished such insur-
ance thereafter at Company expense.
Thus by contract, in 1970 the retirees were included by
specific contract provisions. This status of retirees was
to change later.
11. 1973 CBA (September 1, 1973-September 1,
1976), (Exhibits la and 1b).
Retirees continued to receive by contract H.M.S. bene-
fits under this CBA.
Paragraph 8.12, Exhibit 1b, page 24, provided:
8.12 Retirement: All retirees currently furnished
H.M.S. coverage and all Employees who retire dur-
32a
ing the term of the Master Agreement shall be furn-
ished hospital, medical and surgical insurance at
Company expense ....
(Emphasis supplied.) Paragraph 8.12 further changed
benefits which had been provided in the 1964 agreement
by (1) providing coverage of 120 days per confinement;
(2) increasing miscellaneous fees to $500; (3) provid-
ing coordination with Medicare; and (4) providing con-
ditions of coverage for those employees ages 53 and 54
who elect a separation pension.
The 1973 CBA contained a duration clause on H.M:S.
benefits as follows:
XXXI
HOSPITAL-MEDICAL-SURGICAL
INSURANCE
103. The Hospital-Medical-Surgical Insurance
Plan described in Appendix F will remain in effect
for the duration of this Agreement.
(Exhibit la, page 50).
12. 1976 CBA (September 1, 1976-September 1,
1979), (Exhibits 2a and 2b).
Paragraph 8.12, Exhibit 2b, page 25, omitted the ref-
erence to “all retirees currently furnished H.M.S. cov-
erage” as found in the 1973 CBA paragraph 8.12 and
read in part as follows:
8.12 Retirement: All Employees who retire on or
after September 1, 1976 . . . shall be furnished at
Company expense effective as of the time of retire-
ment, the following: .. .
Again as with the 1973 CBA, the 1976 CBA con-
tained the identical Article XXXI, paragraph 103, as
follows:
33a
XXXI
HOSPITAL-MEDICAL-SURGICAL
INSURANCE
103. The Hospital-Medical-Surgical Insurance
Plan described in Appendix F will remain in effect
for the duration of this Agreement.
(Exhibit 2a, page 52).
Thus the 1976 CBA represented a policy shift by Mor-
rell not to include H.M.S. benefits for past retired em-
ployees (employees who had retired at a time when pre-
vious CBAs were in effect). The CBA represents a clear
intent not to include the past retirees in the H.M.S. pro-
gram by contractual agreement.
The logical inference for this change in posture is that
the company became aware of the case of Allied Chem.
& Alkali Workers of Am., Local Union vy. Pittsburgh
Plate Glass Co., Chem. Div., 404 U.S. 157, 92 S. Ct.
383, 30 L. Ed. 2d 341 (1971). Pittsburgh Plate Glass
held that retired employees were not a part of the em-
ployee bargaining unit and that a bargaining agent was
under no mandated statutory duty to represent retirees
in negotiations with employer. It held that bargaining
for retirees was permissive only and not a mandatory
requirement of collective bargaining.
Neither in the 1976 CBA nor in its Appendix F is
there found any express contract terms requiring past
retirees to be contractually furnished H.M.S. benefits be-
yond the expiration of the CBA. The contract is clear
and unambiguous.
13. 1979 CBA (September 1, 1979-September 1,
1982), (Exhibits 10a and 10b).
The 1979 CBA, Appendix F (Exhibit 10b), page 17,
provided for H.M.S. benefits to those employees retiring
after September 1, 1979. It read in part as follows:
34a
ARTICLE IX
RETIREMENT BENEFITS
9.1 Normal, Early or Disability Retirees:
(a) Benefits: All Employees who retire on or after
September 1, 1979, under Normal Retirement,
Early Retirement or Disability Retirement (in-
cluding Joint & Survivor Option for each) as
provided in the Supplemental Agreement on
Pensions (hereinafter referred to as “Retired
Employees”) shall be furnished at Company
expense effective as of the time of retirement,
the following:
(b) After Retirees Death:
(1) When a Retired Employee dies who has
not selected a Joint and Survivors option,
the surviving spouse and dependent chil-
dren will continue to be covered only for
the remainder of the month in which death
occurred.
(2) When a Retired Employee dies who has
selected a joint and survivor form of pen-
sion, the above coverage shall continue for
the surviving spouse and dependent chil-
dren until the earlier of the surviving
spouse’s death or remarriage, or, in the
case of a dependent child, until the earlier
of the termination of the child’s status as
a dependent, or termination of coverage
for the surviving spouse.
Again the contract Article XXXI paragraph 104 Hos-
pital-Medical-Surgical constituted a limitation on the dur-
ation of coverage. The clause is similar to paragraph
103 of the 1973 and 1976 CBAs. It read as follows:
35a
XXXI
HOSPITAL-MEDICAL-SURGICAL
INSURANCE
104. The Hospital-Medical-Surgical Insurance
Plan described in Appendix F will remain in effect
for the duration of this Agreement as modified by
the Memorandum of Agreement dated July 12,
1979. Details of the Health and Welfare Plan will
be published in a separate booklet.
(Exhibit 10a, page 55). The Memorandum Agreement
dated July 12, 1979, referred to in paragraph 104, pro-
vided in part as follows:
HOSPITAL-MEDICAL-SURGICAL
MAJOR MEDICAL PLAN
The Company shall provide coverage under this
Plan to all persons (and their eligible dependents)
employed by the Company in a bargaining unit *
covered by the Master Agreement... .
(Exhibit 6, Appendix B, page B-1; emphasis supplied).
Nothing in the Agreement referred to past retirees.
Retirees by contract referred to those employees who re-
tired after September 1, 1979, the date of the commence-
ment of the 1979 CBA.
14. In connection with the bargaining conducted prior
to the effective date of the 1979 CBA, much discussion
was had during the trial to a side letter dated July 12,
1979 (Exhibit 7). The letter was written by M. Lee
Bishop on behalf of Morrell and accepted by Jesse Pro-
* Exhibit 10a, Appendix A, page 59, defines the bargaining unit
for Sioux Falls as “[a]ll the employees, excluding supervisors,
foremen, assistant :oremen, all general office employees, all sales-
men, and the over-the-road drivers.” The Court notes that retired
former employees are not included.
36a
sten on behalf of UFCW. The letter read in part as
follows:
During the course of the 1979 contract negotia-
tions, the Union presented to the Company certain
requests for improvement in the health care benefit
program for employees who retire prior to Septem-
ber 1, 1979 (“Past Retirees”). The Company has
taken the position that it has no legal obligation to
bargain with the Union with respect to the benefits
of Past Retirees.
Without any waiver of the legal position of either
party, however, the Company has advised the Union
that, as a matter of Company policy, the Company
intends to announce that effective September 1,
1979, the Company will extend the following bene-
fit programs to retirees currently covered by a Com-
pany H.M.S. and who have retired prior to Septem-
ber 1, 1979. ...
The clear message of this letter is that Morrell was
not bargaining for H.M.S. benefits (or for that matter
any benefits) for those persons who had retired prior to
September 1, 1979 (“past retirees”). Again, without
express reference to Pittsburgh Plate Glass, it is clear
that the Company was maintaining its position that it
was not recognizing UFCW as the bargaining agent for
past retirees. Witness William Burns, negotiator for
UFCW, admitted that Pittsburgh Plate Glass was an
issue discussed. (Tr. 392). William Burns was the as-
sistant to UFCW’s chief negotiator and chairman of the
health and welfare committee at the bargaining table.
As a result, any H.M.S. benefits for those persons were
to be provided as a result of the administrative policy of
Morrell to recognize past employees for the contributions
which they made to the Company’s success over the years.
The testimony of William Burns is as follows: (Tr. 415).
Q_ Did the company tell you it intended to an-
nounce effective September 1, 1979, the company
« ee ee ee ea Ne ee oe See eee ke) ee a Se
eg ee oa ee
37a
would extend the following benefit program to re-
tirees?
A Yes. Yes, they did.
Q_ Did the company tell you they were going to
do that as a matter of company policy?
A We drafted the letter; they agreed to it and
the letter says what it says.
Q Mr. Burns, I am not asking what the letter
says. I am asking you did the company tell you
that they intended to do this, to make these changes
as a matter of company policy? That’s exactly what
they told you, isn’t it?
A They said they were going to make the
changes, correct.
Q They told you they made the changes as a
matter of company policy, didn’t they?
A_ Yes, they did.
Q_ And you read that letter at the time?
A_ Yes, I did.
Q You understood that it was accurate when it
said they were going to make these changes as a
matter of company policy? That was an accurate
reflection of their position?
Yes, it was.
You initiated the letter?
Correct.
Indicating your acceptance it was accurate?
Yes.
rPO>rO>
Q All right. This company was taking the posi-
tion that it had no legal obligation to bargain with
the Union with respect to the benefits of past re-
tirees, wasn’t it?
A_ Yes, it did.
Q_ That’s what they say in the letter?
A That’s correct.
Q Mr. Burns, the letter says the company has
taken the position that it has no legal obligation to
38a
bargain with the Union with respect to the benefits
of past retirees. Do you see that sentence?
A Yes.
Q You told me that was an accurate statement
of their position in 1979?
A Yes.
Q It is, isn’t it?
A Yes, it is.
15. The respective CBAs were never submitted to a
vote of the past retirees. None of them were invited to
the bargaining sessions. There was no bargaining unit
consisting of retirees.
16. After the 1979 agreement expired on September
1, 1982, active employees represented by the UFCW at
all plants covered by the master agreement engaged in
legal economic strikes. Morrell ceased providing health
care benefits for striking employees at its own expense,
and instead provided coverage only if paid for by the
striking employees. (Stip. D-5).
17. During the strike referred to in the preceding
paragraph, Morrell continued to provide health care ben-
efits to members of the retiree class. (Stip. D-6).
18. September 11, 1982 Agreement.
On September 1, 1982, a new collective bargaining
agreement became effective between Morrell and UFCW
pursuant to a Memorandum of Agreement signed by the
parties on September 11, 1982. It contained an Ap-
pendix F setting forth health care benefits for active
hourly employees and dependents, including hourly em-
ployees who retired during the term of the 1982 agree-
ment. (Stip. D-7).
The 1979 CBA by its terms expired September 1,
1982. Normally negotiations for a new CBA would
have been conducted during 1982; however, a new CBA
was not concluded. (Tr. 51). Instead, a Memorandum
of Agreement dated September 11, 1982, Exhibit 11,
39a
was signed. The lack of a formal 1982 CBA is not
significant. The effect of the 1982 agreement was to
extend the Master Agreement then in effect (1979 CBA)
for another three years, September 1, 1982, to August
31, 1985, with certain exceptions. In the 1982 agree-
ment there is no reference to retiree benefits.
19. After the amended 1982 agreement expired on
September 1, 1985, active employees represented by the
UFCW at all plants covered by the master agreement
engaged in legal economic strikes. Morrell ceased pro-
viding health care benefits for striking employees at its
own expense, and instead provided coverage only if paid
for by the striking employees. ( Stip. D-9). It continued
to provide H.M.S. benefits for retirees.
20. As explained earlier (Finding #8), CBAs for ma-
jor packing plants in the United States were arrived at
through a process of pattern bargaining. The purpose
was to permit them to remain competitive with each
other. Wilson Foods Corporation was one of these major
competitors. Wilson Foods suffered financial setbacks
and filed for bankruptcy under Chapter 11 ( reorganiza-
tion) in 1983. This created a desire on the part of
Morrell to renegotiate the 1982 agreement because Wil-
son Foods had drastically reduced wages and benefits un-
der its bankruptcy. If Morrell were to remain competi-
tive it would have to do likewise. To reduce wages and
benefits would require a new CBA. (Tr. 52-53). Ac-
cordingly, Morrell and UFCW renegotiated the terms of
the 1982 agreement. The task of the 1983 reopener
negotiations was to bring about a reduction in Morrell’s
wages and benefits to restore its ability to compete with
Wilson Foods. Substantial wage cuts were made. Medi-
cal benefits were changed to provide for copayments and
deductibles as well as adjustments in eligibility.
The negotiations resulted in the 1983 Memorandum of
Agreement dated September 24, 1983 ( Exhibit 12).
40a
21. 1983 Agreement (October 3, 1983, to August
31, 1985 (Exhibit 12).
The amendments to the health care plan (page 8) set
forth the changes. In general, the health care plan pro-
vided for reduced benefits, cost sharing, and deductibles.
Paragraph (f) provided as follows:
(f). Appendix F of the Master Agreement shall
be amended to provide that present retirees, and
employees retiring during the term of this Agree-
ment, and their dependents, shall be covered under
all coverages of the foregoing plan, .. .
Exhibit 12, p. 9.
The Court finds that the 1983 agreement was an agree-
ment to renegotiate the 1982 CBA and the reference to
present retirees in paragraph (f) referred to those persons
who had retired under the CBA. To extend the meaning
to all retirees whenever retired would read into the agree-
ment terms going beyond those of the 1982 CBA.
22. 1982 CBA (September 1, 1982—September 1,
1985) (Exhibits 13a and 13b).
The 1982 CBA did not become effective until January
1, 1984. In the interim period after the 1979 CBA ex-
pired (September 1, 1982) and January 1, 1984, the
agreement of September 11, 1982, (Exhibit 11) and
October 3, 1983 (Exhibit 12) constituted the Labor-
Managment Agreement in the absence of the formal
Master 1982 CBA. Finally, however, the 1982 CBA was
completed effective January 7, 1984. (Exhibit 13a).
In the 1982 CBA H.M.S. benefits weer defined as
follows:
eo NY eit 6 BER.
eal Ata Oe te Nae
4la
SECTION A. HEALTH-CARE BENEFITS
FOR ACTIVE EMPLOYEES
Article 1—Definitions
1.1 An “Eligible Employee” shall be any regular
full-time employee other than as indicated below, .. .
The following shall be ineligible for coverage:
a.
b. Individuals who have quit or have been dis-
charged or terminated from emloyment.
Exhibit 13b.
Nothing in the agreement refers to past retirees. On
the contrary, page 29 of Exhibit 13b contains a section
on retirement benefits for “all employees who retire dur-
ing the term of this Master Agreement.” Paragraph 1.1
(a).
As with prior CBAs, the 1982 CBA contained a limit-
ing clause as to H.M.S. coverage.
XXXII
HOSPITAL-MEDICAL-SURGICAL
INSURANCE
104. The Hospital-Medical-Surgical Insurance Plan
described in Appendix F, attached to the 1979-1982
Master Agreement, will remain in effect for the dura-
tion of this Agreement, as modified by the Memo-
randum of Agreement dated September 11, 1982,
the Memorandum of Agreement (“Esterville Agree-
ment”) dated June 30, 1983, the Memorandum of
Agreement (“Sioux Falls Agreement”) dated effec-
tive October 3, 1983 and the Memorandum of
Agreement (“East St. Louis Agreement”) dated De-
cember 11, 1983. Details of the Health and Welfare
Plan will be published in a separate booklet.
42a
The termination clause is substantially the same as clauses
in previous CBAs.
23. 1985 CBA. (November 20, 1985, to November
19, 1988), (Exhibits 21a and 21b).
The 1982 CBA and its Appendix F had an expiration
date of September |, 1985. Negotiations between Morrell
and UFCW resulted in a Memorandum of Agreement
dated November 18, 1985 (Exhibit 19). This agreement
formed the basis for the 1985 CBA covering retroactively
the period of November 20, 1985, to November 19,
1988.
The purpose of the November 18, 1985, agreement
was to continue the 1982 CBA pending approval of the
formal 1985 Master Agreement. The customary proce-
dure was followed, that is to say, the practice of the
parties was to cover by a memorandum of agreement the
period between the expiration of one CBA and the com-
mencement of a succeeding CBA. This would insure the
continuation of a company-union contract.
An examination of the Memorandum of Agreement
reveals no reference to H.M.S. coverage for retirees who
may have retired prior to or during the 1982 CBA. The
only reference to Appendix F concerned vision care bene-
fits which provided for Company contribution for contact
lenses and a two-visit limitation for oral dental examina-
tion. (Exhibit 19, page 6).
The finalized 1985 CBA and its Appendix F continued
to define the persons covered as was done in the previous
1982 CBA. The identical language in Appendix F was
brought forward from the 1982 CBA as follows:
SECTION A. HEALTH CARE BENEFITS
FOR ACTIVE EMPLOYEES
Article I—Definitions
1.1 An “Eligible Employee” shall be any regular
full-time employee other than an indicated below
...+ The following shall be ineligible for coverage:
43a
a.
b. Individuals who have quit or have been dis-
charged or terminated from employment.
(Exhibit 21b, page ).
The 1985 CBA contained no language which provided
for the vesting of H.M.S. benefits to past retired em-
ployees.
Finally, the 1985 term clause as related to H.M.S.
benefits is also identical to previous term clauses. The
now familiar language of section 104 in the 1979 CBA,
Exhibit 10a, page 55, was carried forward in the 1985
CBA as follows:
XXXI
HOSPITAL-MEDICAL-SURGICAL
INSURANCE
104. The Hospital-Mental-Surgical Insurance Plan
described in Appendix F, attached to this Agreement,
will remain in effect for the duration of this Agree-
ment.
(Exhibit 21a, page 44).
DISCUSSION—-CONCLUSION OF LAW
In 1974 the Employee Retirement Income Security Act,
29 U.S.C. § 1001 et seg. was enacted to “protect inter-
state commerce in the interests of participants in em-
ployee benefit plans” by establishing disclosure and report-
ing requirements, standards of conduct for plan fiduci-
aries, and access to federal courts. 29 U.S.C. § 1001(b).’
% The benefit package and pension plan at issue in this case con-
stitutes a “plan” within the meaning of ERISA. Company wit-
ness John Powers testified that the 1985-88 Appendix is the
official ERISA plan document. (Transcript of Court Trial (Tr.)
Vol. II, pp. 329-30).
44a
Pension plans and employee benefit plans are two dif-
ferent categories under ERISA and are treated differently.
Welfare plans are subject to the reporting and disclosure
requirements and the fiduciary standards of ERISA; how-
ever, ERISA does not regulate the substance of the plans.
Anderson v. John Morrell & Co., 830 F.2d 872, 876
(8th Cir. 1987), citing Metropolitan Life Ins. Co. v.
Massachusetts, 471 U.S. 724, 732, 105 S. Ct. 2380,
2385, 85 L. Ed. 2d 728 (1985).
[ERISA] was not designed to prohibit modification
of these ancillary [non-accrued] benefits. See H.R.
Conf. R. No. 1280, 93d Cong., 2d Sess. 273, re-
printed in 1974 U.S. Code Cong. & Ad. News 4639,
5038, 5054; H.R.Rep. No. 807, 93d Cong., 2d Sess.
60-61, reprinted in 1974 U.S.Code Cong. & Ad.
News 4639, 4670-4726. Rather, Congress believed
that the “vesting of these ancillary benefits would
seriously complicate the administration and increase
the cost of plans whose primary function is to pro-
vide retirement income.” H.R.Rep. No. 807, 93d
Cong., 2d Sess. 60, reprinted in 1974 U.S.Code
Cong. & Ad. News 4890, 4935. An employer may
change such benefits without violating ERISA.
Anderson, 830 F.2d at 876, quoting Sutton v. Weirton
Steel Div. of Nat'l Steel Corp., 724 F.2d 406, 410 (4th
Cir. 1983), cert. denied, 467 U.S. 1205, 104 S. Ct. 2387,
81 L. Ed. 2d 345 (1984).
Pension plans provide retirement income to employees
for periods extending beyond the termination of the em-
ployment. Therefore, they are presumably vested bene-
fits. See 29 U.S.C. § 1002(2)(A). Pension plans are
subject to ERISA’s stringent vesting requirements, 29
U.S.C. § 1053 (“Each pension plan shall provide that
employee’s right to his normal retirement benefit is non-
forfeitable upon the attainment of normal retirement
age.”). Welfare plans, on the other hand, are specifically
exempt from these vesting requirements. 29 U.S.C.
§ 1051.
eeree
OR hte aE ott Nesasidal
get alread
St / RNR ort te
PTR a a Sin temps ligt Soe ace ak ad Le
1 PN enn ine mcr De
" Colas at init
45a
“In enacting ERISA, Congress apparently determined
that subjecting employee welfare benefit plans to the same
vesting, funding, and trust requirements as pensions plans
would be so costly as to discourage employers from pro-
viding welfare benefits at all.” Schwartz v. Interfaith
Medical Center, 715 F. Supp. 1190, 1196 (E.D.N.Y.
1989) citing, H. Rep. No. 533, 93d Cong., 2d Sess.,
reprinted in 1973 U.S. Code Cong. & Admin. News 4639,
4639-40.
Therefore, welfare benefits do not automatically vest
as a matter of law and the benefits may be altered or
terminated by the employer, absent some contractual
agreement to the contrary. Howe v. Varity Corp., 896
F.2d 1107, 1109 (8th Cir. 1990) (citing Anderson v.
Alpha Portland Indus., Inc., 836 F.2d 1512, 1516-17
(8th Cir. 1988), cert. denied sub nom. Anderson v.
Slattery Group, Inc., 489 U.S. 1051, 109 S. Ct. 1310,
103 L. Ed. 2d 579 (1989) ). a
This distinction between pension and insurance benefits
is understandable in light of the nature of the benefits at
issue. Pension benefits are fixed, easily calculable bene-
fits. Employers can accordingly accurately estimate the
costs of funding an employee pension plan. On the other
hand, the costs of funding an employee welfare plan
including health care benefits is unpredictable given the
uncertainty of cost of medical care. Wiht these principles
in mind, the Court turns to their application in the con-
text of this labor-management case.
Generally, any rights conferred under a labor con-
tract do not survive beyond the expiration of the CBA.
See, e.g., Merk v. Jewel Cos., Inc., 848 F.2d 761 (7th
Cir.), cert. denied, 488 U.S. 956, 109 S. Ct. 393,
102 L Ed. 2d 382 (1988). Therefore, if the health
benefits are unambiguously limited to the term of the
relevant agreement, the benefits are not vested. Anderson
v. Alpha Portland Indus., Inc., 647 F. Supp. 1109, 1126
(E.D. Mo. 1986), affd, 836 F.2d 1512 (8th Cir. 1988)
(citations omitted).
46a
To be sure, the parties may provide that certain rights
extend beyond the term of a CBA. I/nternational Union,
United Auto., Aero., & Agric. Implement Workers of
Am. v. Yard-Man, 716 F.2d 1476, 1479 (6th Cir. 1983),
cert. denied 465 U.S. 1007, 104 S. Ct. 1002, 79 L. Ed.
2d 234 (1984) citing John Wiley & Sons, Inc. v. Liv-
ingston, 376 U.S. 543, 555, 84 S. Ct. 909, 917, 11 L. Ed.
2d 898 (1964). Whether the benefits survive the expira-
tions of the CBA depends on the intent of the parties.
Yard-Man, 716 F.2d 1476 at 1479. In such a case, the
retirees bear the burden of proving that the benefits are
vested and not tied to the agreement which created them.
United Paperworkers Int'l Union v. Jefferson Smurfit
Corp., 771 F. Supp. 992, 998 (E.D. Mo. 1991), aff'd
961 F.2d 1384 (8th Cir. 1992), citing, Dubuque Pack-
ing, 756 F.2d at 69-70; see also, Anderson v. Alpha
Portland Indus., Inc., 836 F.2d at 1516-17; DeGeare v.
Alpha Portland Indus., Inc., 837 F.2d 812, 815 (8th Cir.
1988), vacated and remanded sub nom., DeGeare v.
Slattery Group, Inc., 489 U.S. 1049, 109 S. Ct. 1305,
103 L. Ed. 2d 575 (1989).4 In DeGeare the Court
stated:
Regardless of whether the plan documents were the
subject of negotiation, the plaintiffs must establish
their case by a preponderance of the evidence if they
are to prevail. Further, it is especially important
that [retirees] bear the burden of proof in cases such
as this where the benefits in question are unilaterally
provided by the employer. Accepting plaintiffs’ ar-
gument would lead to the anomalous result that
Alpha would have to prove a negative—that it did
4 The Supreme Court remanded DeGeare based on its decision in
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S. Ct. 948,
103 L. Ed. 2d 80 (1989). The Eighth Circuit noted in Howe v.
Varity Corp., 896 F.2d 1107, 1109 n.4 (8th Cir. 1990) that the
remand did not affect the central part of the DeGeare decision and
the basic contract interpretation principles articulated therein
still apply.
ne ah Alege AS: Laan reciente,
ne ne
6 ete 1 3 gigas Radiata CABAL Ra Bons what
47a
not promise lifetime benefits—every time plaintiffs
choose to file a lawsuit.
DeGeare, 837 F.2d at 815.
The burden does not shift simply because retirees are
defendants in this declaratory judgment action. See, e.g.,
Travelers Ins. Co. v. Greenough, 88 N.H. 391, 190 A.
129 (1937). Morrell should not bear the burden of proof
on an issue which has traditionally been held to be the
retirees’ burden simply because it expeditiously availed
itself of the Declaratory Judgment Act. Therefore, the
ultimate burden of proof remains on the defendants. See
Board of Regents of Univ. of Nebraska v. Dawes, 522
F.2d 380, 383 n.9 (8th Cir. 1975), cert. denied, 424
U.S. 914, 96 S. Ct. 1112, 47 L. Ed. 2d 318 (1976)
(burden of proof in action under Equal Pay Act rested
on defendant class even though University initiated the
declaratory judgment action).
If the parties intended that the retiree health benefits
vest upon retirement, then Morrell has no right to
unilaterally alter or terminate those benefits without the
retirees’ consent. See, e.g., Allied Chem. & Alkali Work-
ers v. Pittsburgh Plate Glass Co., 404 U.S. 157, 181
n.20, 92 S. Ct. 383, 398 n.20, 20 L. Ed. 2d 341 (1971).
On the other hand, Morrell may modify or terminate
these benefits absent a specific expression of contrary in-
tent by the employer. Meester v. IASD Health Servs.
Corp., 963 F.2d 194, 197 (Sth Cir. 1992), citing, Howe
v. Varity Corp., 896 F.2d 1107 (8th Cir. 1990); see
also, Anderson v. John Morrell & Co., 830 F.2d 872.
877 (8th Cir. 1987) (if employer undertakes to con-
tractually provide indefinite welfare benefits, there must
be a specific expression of the employer’s intent to be
bound).
Accordingly, the »ssue facing the Court is whether the
CBAs contain a “specific expression” of Morrell’s intent
to provide vested lifetime benefits to its eligible retirees.
Under Eighth Circuit law, this issue is “simply one of
48a
contract interpretation.” Alpha Portland, 836 F.2d at
1516 (quoting Dubuque Packing, 756 F.2d at 70.)
In determining whether the parties intended to provide
vested health care benefits for retires, the Court must first
examine the language of the plan documents. Alpha
Portland, 836 F.2d at 1517. If the contract is deemed
ambiguous, then the Court may weigh extrinsic evidence
to resolve the ambiguity. 7d. An ambiguity exists if the
contract language reasonably gives rise to two different
interpretations.
Each provision of the CBA should be read consistently
with the others and the terms must be construed to render
none of them nugatory and to avoid illusory promises.
DeGeare, 837 F.2d at 816, citing Yard-Man, 716 F.2d
at 1479-80.
Guided by these principles, the Court finds that the
retirees have not satisfied their burden of proving these
benefits are vested lifetime benefits. The CBAs do not
contain a specific expression of Morrell’s intent to pro-
vide benefits beyond the term of the CBA. To the con-
trary, the CBAs expressly and unambiguously provide
that the H.M.S. plan would remain in effect for the dura-
tion of the respective CBA.*® In short, the language of
the CBAs reflect the intent of the parties to limit retiree
coverage to the term of the currently effective CBA.° It
is not necessary to examine extrinsic evidence to deter-
mine the intent of these unambiguous contracts.
5 See, e.g., Exhibit la, the 1973 CBA at page 52, { 103.
6 The Court has not failed to note the argument of UFCW that
to limit coverage to retirees for the length of the CBA would mean
that if an employee retires one day before the expiration of the
CBA there would be only one day of H.M.S. benefits provided. This
argument is somewhat attractive, but it does not consider the
overriding principle that the labor-management agreements were
agreed to terminate on a date certain. While the consequences may
be unfair, indeed somewhat harsh, they do not provide a reason
for the Court to make a contract for the parties based upon its
own concept of fairness.
49a
Morrell points out that each CBA contains a general
duration clause and argues that this points to additional
evidence the H.M.S. benefits cease at the end of the CBA
term. An example of these duration clauses is found in
the 1976 CBA, Exhibit 2a, page 54, as follows:
XXXVI
TERM
111. Except as otherwise provided, all of the pro-
visions of this Agreement shall take effect as of [the
effective date] and shall remain in effect until {the
termination date], .. .
Similar language is found in the 1979 CBA, Exhibit
10a, page 57; 1982 CBA, Exhibit 13a. page 62 (also
reflecting the reference to the various Memorandum of
Agreements leading to the finalized 1982 CBA); 1985
CBA, Exhibit 21a, page 46.
The Court discounts Morrell’s arguments and instead
relics on the more specific term clause contained in each
CBA relating specifically to H.M.S. benefits. While the
Court discounts the importance of the general duration
Clause vis-a-vis the specific H.M.S. duration clause, this
does not mean that the presence of the general duration
clause is completely irrelevant to the Court’s determina-
tion. It is inconsistent with the concept of vesting ot
hold that the retiree benefits continue for life in the face
of a specific termination clause which limits the benefits
to the term of the contract. In the somewhat unique con-
text of labor-management relations, the nature of collec-
tive bargaining is such that CBAs of necessity terminate
on a date certain to be followed and in most cases pre-
ceded by a new round of negotiations. Had UFCW
sought permission to bargain for retirees, undoubtedly it
possessed the knowledge of how to do so.
Despite a general desire that retired Morrell employees
should have adequate H.M.S. coverage, the Court cannot
50a
transfer such desire into contract provisions in what other-
wise are clear and unambiguous contracts which contain
no such provisions.
The Court further finds that the coordination of bene-
fits clauses found in the 1979, 1982, and 1985 CBAs are
inconsistent with UFCW’s vesting claim. The effect of a
coordination of benefits clause is to require the company
to pay benefits only to the extent of the difference between
the full amount of the benefits allowable and the pay-
ments made toward such benefits under such other plan.
1979 CBA, Exhibit 10b, pages 46-47. See also 1982
CBA, Exhibit 13b, Article III, page 4, and 1985 CBA,
Exhibit 21b, Article III, page 4. Anderson v. Alpha
Portland Indus., Inc., 836 F.2d 1512, 1519 (8th Cir.
i988).
The extrinsic evidence consisting of contract negotia-
tions and Morrell’s communications to retirees are at best
inconclusive and itself ambiguous. The contract them-
selves are the best evidence as to whether Morrell is
required to provide fixed, lifetime H.M.S. benefits to
retired employees. Much of the extrinsic evidence is con-
tradictory and speculative. It forms no independent basis
for the Court to depart from well-established rules of
construction.’
As the Court has found, there are no vested rights to
fixed, lifetime H.M.S. benefits for Morrell retired employ-
ees. The fact that Morrell as a matter of policy has
determined that it would not forsake those past employees
in their health care coverage who had provided loyal and
lengthy service to the Company hardly rises to the level
7 The Court has considered the issue of whether Amcar Div.,
ACF Indus., Inc. v. NLRB, 641 F.2d 561 (8th Cir. 1981) provides
it with a separate, independent ground on which to interpret these
CBAs. The Court finds that Amcar is inapplicable te this ERISA
case. It is not authority for this Court to interpret an otherwise
unambiguous contract by the use of the suggested extrinsic evi-
dence.
Sla
required for estoppel. There is no showing that the
retirees have in any way changed their position based
upon any promise by the Company. Whether the doctrine
of estoppel applied in an ERISA case may be an open
question; however if it exists at all, it does not exist in
this case.
The Court this date enters a judgment consistent with
this opinion.
Dated this 24th day of June, 1993.
By THE CouRT:
s/ Richard H. Battey
RICHARD H. BATTEY
United States District Judge
ATTEST:
WILLIAM F. CLAYTON
Clerk
By: /s’ Alice R. Raisly
Deputy Clerk
(SEAL)
52a
APPENDIX C
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 93-2863SDRC
JOHN MoRRELL & Co.,
- Appellee,
UNITED FooD AND COMMERCIAL WORKERS INTERNA-
TIONAL UNION, AFL-CIO; BERNARD J. ANING, as rep-
resentative of a defendant class,
Appellants.
Appeal from the United States District Court
for the District of South Dakota
JUDGMENT
This appeal from the United States District Court was
submitted on the record of the district court, briefs of the
parties and was argued by counsel.
After consideration, it is hereby ordered and adjudged
that the judgment of the district court in this cause is
affirmed in accordance with the opinion of this Court.
October 12, 1994
A true copy.
ATTEST: /s/ Michael E. Gaus
Clerk
U.S. Court of Appeals
Eighth Circuit
[Mandate Issued Jan. 26, 1995]
53a
APPENDIX D
[Filed Jun. 24, 1993]
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
CIV. 91-4184
JOHN MorrRELL & Co..,
Plaintiff,
VS.
UNITED FoopD AND COMMERCIAL WoRKERS INTERNA-
TIONAL UNION, AFL-CIO, and BeNnarp J. ANING, per-
sonally and as a representative of a defendant class of
others similarly situated,
Defendants.
JUDGMENT
Pursuant to the memorandum opinion filed this date, it
is
ORDERED, ADJUDGED, AND DECREED ' that
plaintiff shall have judgment against defendants.
IT IS FURTHER ORDERED, ADJUGED, AND
DECREED that former Morrell employees retiring prior
to April 1, 1989, do not have vested lifetime health,
medical, and surgical benefits.
IT IS FURTHER ORDERED, ADJUDGED, AND
DECREED that Morrell may unilaterally change or
eliminate existing benefits.
IT IS FURTHER ORDERED, ADJUDGED, AND
DECREED that costs in the amount of $ shall
hereinafter be taxed and inserted by the Clerk.
ee ee
54a
“ated this 24th day of June, 1993.
By THE CourRT:
/s/ Richard H. Battey
RICHARD H. BATTEY
United States District Judge
ATTEST:
WILLIAM F. CLAYTON
Clerk
By: /s/ Alice R. Raisly
Deputy Clerk
(SEAL)
55a
APPENDIX E
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 93-2863SDRC
JOHN MorRELL & Co.,
Appellee,
VS.
UNITED Foop AND COMMERCIAL WORKERS
INTERNATIONAL UNION,
Appellants.
Order Denying Petition for Rehearing and
Suggestion for Rehearing En Banc
The suggestion for rehearing en banc is denied. Judge
McMillian and Judge Wollman would grant the sugges-
tion for rehearing en banc. The petition for rehearing by
the panel is also denied.
January 17, 1995
Order Entered at the Direction of the Court:
/s/ Michael E. Gaus
Clerk
U.S. Court of Appeals
Eighth Circuit
OPPOSITION
BRIEF
PN eee MS BES Ne
o>
~~ i ——"
A 2. CY | FILED
No.
IN THE
Supreme Court of the United, States.
October Term, 1994
OFFICE OF THE pitts
UNITED FOOD AND COMMERCIAL WORKERS
INTERNATIONAL
UNION, AFL-CIO, AND BERNARD J. ANING,
individually and on behalf of a class of
others similarly situated,
Petitioners,
vs
JOHN MORRELL & Co.,
Respondent.
On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Eighth Circuit
Britt IN OPPOSITION
Wilber H. Boies, P.C. Jeremiah D. Murphy
(Counsel of Record) Boyce, MurRPHy, MCDOWELL
Nancy G. Ross & GREENFIELD
Mercedes A. Laing 101 North Phillips Avenue
Judith A. Kelley P.O. Box 5015
McDermott, WILL & EMERY Sioux Falls, $.D. 57117-5015
227 West Monroe Street (605) 336-2424
Chicago, Illinois 60606-5096
(312) 372-2000
Rule 29.1 Statement
Pursuant to Rule 29.1 of the Rules of this Court,
respondent John Morrell & Co. states that its parent
corporation is Chiquita Brands International, Inc. John
Morrell & Co. has no non-wholly owned subsidiaries.
Table of Contents
Se Ge CR cian icacccavvarcesatadapeve i
Bee Ge Fs 6.0 ocd ccdn cesta seep asivess iv
Statutory Provisions Involved................... 1
Counterstatement of the Case................... 3
SUNY GF AONE oi ccc cs ccc ccccsensvsene 8
Reasons For Denying the Writ .................. 9
I. Petitioners’ Focus On § 301 Of The LMRA
Ignores Congress’ Enactment Of ERISA
For The Regulation Of Employee Benefits .. 9
1. Years After Congress Enacted § 301 To
Preempt State Law Governing Labor
Matters, Congress Enacted ERISA To
Provide A Comprehensive Body Of
Federal Law Governing Employee
ev ick edsds chad avabava cee Koo wins 9
2. Section 301 Provides For Federal
Regulation Of Labor Law. Section 301
Does Not Provide Rules Which Override
ERISA In The Regulation Of Employee
i iavcnkeedarenacrinsukeenacsean 11
II. The Federal Common Law Consistently
Applied By The Courts Achieves The
Uniformity Congress Intended In Welfare
RR OT Te Te 15
1. ERISA Case Law Recognizes That
Pensions Are Statutorily Vested,
Welfare Benefits Are Not............... 15
‘i
2. The Contract Analysis Consistently
Applied By All Circuits Respects ERISA’S
Intention That Welfare Benefits Not
Automatically Vest But Be Left To Private
ee cies Sebel oa ire k dale sca 18
3. The Sixth And Fourth Circuits Follow
The Same Traditional Contract Analysis
As All Other Circuits In Resolving Retiree
Health Benefits Disputes Involving
Collective Bargaining Agreements ....... 21
EEE EE ne 26
ili
Table of Authorities
Cases
Page(s)
AT&T Technologies, Inc. v.
Communications Workers, 475 U.S.
OO SD o fa eiadeewniinsachsao sds 13
Adams v. Avondale Indus., 905 F.2d 943
(6th Cir.), cert. denied, 498 U.S. 984
Sere ee ree 16
Adcox v. Teledyne, 21 F.3d 1381
_ fe | eee 23
Aldridge v. Mosler, Inc., 47 F.3d 1167
(6th Cir.), reported in full, 1995 U.S.
App. LEXIS 2895 (6th Cir. Feb. 14,
| SS ee ee eee eee 23
Allen v. Adage, Inc., 967 F.2d 695
SREY MIE nae S odbb 0 5k0een seen 17,18
Allied Chem. Workers, Local 1 v.
Pittsburgh Plate Glass Co., 404
SP SE CUTE dase dashehisdkaweso' 3,14
Allis-Chalmers Corp. v. Lueck, 471
28 eg. | eee ey eee 9,11,12
Anderson v. Alpha Portland Indus., 836
F.2d 1512 (8th Cir. 1988), cert. denied
sub nom., Anderson v. Slattery Group,
Inc., 489 U.S. 1051 (1989) .......... 12,14,19,20,22
Armistead v. Vernitron Corp., 944 F.2d
Dat VEGA, ROPES 6s ca vevsdincacs 19
Bidlack v. Wheelabrator Corp., 993
F.2d 603 (7th Cir. 1993), cert. denied,
AG DS. OR Be CERI e) kab hciveccccss 14,19,24
Bower v. Bunker Hill Co., 725 F.2d 1221
CP ae GEE 6 ad bv cecd oo evaneb eux 20
In re Chateaugay Corp., 945 F.2d 1205
(2d Cir. 1991), cert. denied sub nom.,
United Mine Workers 1974 Benefit
Plan & Trust v. LTV Steel Co., 502
Wa DOPW CEOOEE 6c kcasivedececcess
Crawford Fitting Co. v. J.T. Gibbons, Inc.,
SBE VD. G57 (1GB7) ow ccc cca s acces
Curtiss-Wright Corp. v. Schoonejongen,
BED os Mem SACS CI9GS) on cnc reacces
District 29, United Mine Workers v.
Royal Coal Co., 768 F.2d 588
DOe Se I c's os ce cae e decades
International Union, United Automobile
Workers v. Yard-Man, Inc., 716 F.2d 1476
(6th Cir. 1983), cert. denied, 465
fi 2) ee a
Jensen v. SIPCO, Inc., 38 F.3d 945
(8th Cir. 1994), cert. denied, 131 L.
Ss OP EEPOOD ou con denccdscdecss:
John Morrell & Co. v. Local Union 304A,
United Food & Commercial Workers,
949 F.2d 266 (8th Cir. 1991) ........
John Morrell & Co. v. Local Union 304A,
United Food & Commercial Workers,
913 F.2d 544 (8th Cir. 1990), cert.
denied, 500 U.S. 905 (1991) .........
John Morrell & Co. v. Local Union 304A,
United Food & Commercial Workers,
804 F.2d 457 (8th Cir. 1986), cert.
denied, 481 U.S. 1014 (1987) ........
John Morrell & Co. v. United Food &
Commercial Workers, 992 F.2d 205
(8th Cir. 1993), cert. denied, 114 S.
Fs.) Sn eae
Page(s)
18
15
17
19
14,19,21,22
23
John Wiley & Sons, Inc. v. Livingston,
Pe Gs DP OD ove pt nsresevecas 12
Keffer v. H.K. Porter Co., 872 F.2d 60
ee ee 24
Local 174, Teamsters v. Lucas Flour Co., '
RO ee ee 9,12
Local 784, United Automobile Workers v.
Cadillac Malleable Iron Co., 728 F.2d
ge ee re 22
Local Union No. 150-A v. Dubuque
Packing Co., 756 F.2d 66 (8th Cir.
ARE ae Sea Pe 14
Massachusetts Life Ins. Co. v. Russell,
SE ee PPD hiv sé occ sesenes 17
Metropolitan Life Ins. Co. v. Massachusetts,
re Wee SE hho xcs sv es cece 16
Molnar v. Wibbelt, 789 F.2d 244
ot eee 18
Morales v. Trans World Airlines, 112 S.
Ce EL dad ch bebe eke boven 15
Nachman Corp. v. Pension Ben. Guaranty
Corp., 446 U.S. 359 (1980) .......... 17
Owens v. Storehouse, Inc., 984 F.2d 394,
Soa BO Se BE ecb oc aeoeeeces 16
Pilot Life Ins. Co. v. Dedeaux, 481 US. 41
RE bids eee eeaee Chien s 64 <s 9
Radzanower v. Touche Ross & Co., 426
ke Eee ee 15
Ryan v. Chromalloy American Corp., 877
P.2d 598 (7th Car. 1969) ...........- 19
The San Pedro, 15 U.S. (2 Wheat.)
pg EN Pare 15
Schneider Moving & Storage Co. v.
Robbins, 466 U.S. 364 (1984) ........ 13
vi
ee
Senn v. United Dominion Indus., 951
F.2d 806 (7th Cir. 1992), cert. denied,
pie eae. os. : |
Shaw v. Delta Air Lines, 463 U.S. 895
WU ce iuG se eee de ee oe
Stewart v. KHD Deutz of America Corp.,
980 F.2d 698 (11th Cir. 1993) .......
Struble v. New Jersey Brewery Employees’
Welfare Trust Fund, 732 F.2d 325
MY 66 665 6s bo ew dak cdsen
Textile Workers Union v. Lincoln Mills,
See Wicd. GE CISG7) . oo ov ecccsaveces
Transportation Employees Union v.
Union Pacific R.R., 385 U.S. 157
SS Aide asian has ce cainaee ss
United Paperworkers Int'l Union v.
Champion Int'l Corp., 908 F.2d 1252
ooops Ree eee
United Paperworkers Int’l Union v.
Jefferson Smurfit Corp., 961 F.2d 1384
SN US WUE ah oe) coho d ndes sox:
United Steelworkers v. Warrior & Gulf
Navigation Co., 363 U.S. 574 (1960) ..
United Steelworkers v. Enterprise
Wheel & Car Corp., 363 U.S. 593
EIS SD an es eee ee
Weimer v. Kurz-Kasch, Inc., 773 F.2d 669
I Ne
In re White Farm Equip. Co., 788 F.2d
1166 (6th Cir. 1966) ...............
Statutes & Rules
Employee Retirement Income Security
Act of 1974, 29 U.S.C. § 1001, et seq.
Labor Management Relations Act of
SPAT, OP WtiMe DUB ccc vacvascccses
Se i gaa s a erwas
Miscellaneous
Benjamin Aaron, The Legal Status of
Employee Benefit Rights Under Private
Pension Plans, Pension Research
Council of Univ. of Pennsylvania
5.5 FRSA ip or eae ae
120 Cong. Rec. 29, 197 (1974).........
H.R. Rep. No. 93-807, 93d Cong., 2d
Sess., reprinted in 1974 U.S.C.C.A.N
Dy snake Uke oh Reh keen ceases
S. Rep. No. 93-383, 93d Cong., 2d Sess.,
reprinted in 1974 U.S.C.C.A.N. 4639. .
2B Norman J. Singer, Sutherland Stat.
Constr. § 51.02 (5th ed. 1992) .......
21 Charles A. Wright & Kenneth
W. Graham, Jr., Federal Practice &
Procedure § S124 (1977) ........02000:
Vill
Page(s)
2,3,9,16,20
passim
22
15,16
No.
IN THE
Supreme Court of the United States
October Term, 1994
UNITED FOOD AND COMMERCIAL WORKERS
INTERNATIONAL
UNION, AFL-CIO, AND BERNARD J. ANING,
individually and on behalf of a class of
others similarly situated,
Petitioners,
¥.
JOHN MorrELL & Co.,
Respondent.
On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Eighth Circuit
Britt IN OPPOSITION
Statutory Provisions Involved
Petitioners suggest that the only statutory provision
involved in this case is Sec. 301(a) of the Labor-Man-
agement Relations Act, 29 U.S.C. 185(a). The petition
ignores the two federal statutory provisions most di-
rectly involved in any employee benefits litigation.
2
Section 502 of the Employee Retirement Income Se-
curity Act of 1974, 29 U.S.C. § 1132, provides in relevant
part:
(a) A civil action may be brought—
(e)
(3)
(2)
by a participant, beneficiary, or fiduciary
(A) to enjoin any act or practice which
violates any provision of this title or the
terms of the plan, or (B) to obtain other
appropriate equitable relief (i) to redress
such violations or (ii) to enforce any pro-
visions of this title or the terms of the plan.
Except for actions under subsec-
tion (a)(1)(B) of this section, the district
courts of the United States shall have ex-
clusive jurisdiction of civil actions under
this title brought by the Secretary or by a
participant, beneficiary, fiduciary, or any
person referred to in section 101(f)(1).
State courts of competent jurisdiction and
district courts of the United States shall
have concurrent jurisdiction of actions
under paragraphs (1)(B) and (7) of
subsection (a).
Where an action under this title is brought
in a district court of the United States, it
may be brought in the district where the
plan is administered, where the breach
took place, or where a defendant resides or
may be found, and process may be served
3
in any other district where a defendant
resides or may be found.
Section 402(a)(1) of the Employee Retirement In-
come Security Act of 1974, 29 U.S.C. § 1102(a)(1),
provides in relevant part:
Every employee benefit plan shall be established
and maintained pursuant to a written instrument.
Counterstatement of the Case
This is a highly factual case, carefully evaluated and
correctly decided by both the trial court which heard the
evidence and the Court of Appeals which affirmed the
district court’s thoughtful decision. Those judgments
belie petitioners’ Statement of the Case, which employs
a selective and distorted statement of facts to suggest
that the District Court and Court of Appeals applied an
“interpretative rule” to override the evidence. The
“statement of facts” ignores or misstates the decisive
facts that led both courts below to conclude that John
Morrell & Co. did not agree to provide “vested” lifetime
health benefits to retirees. Those facts are set forth in
both opinions below (Petitioners’ Appendix (hereinaf-
ter “App.”) at la, 17a) and may be fairly summarized as
follows:
Before this Court’s decision in Allied Chem. Workers,
Local 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157 (1971)
(holding that retiree benefits are not a mandatory sub-
ject of collective bargaining), the Morrell collective bar-
gaining agreements (“CBAs”) with the United Food and
Commercial Workers (“the union”) described medical
benefits that past retirees would receive under each new
CBA. Pittsburgh Plate Glass opened the door for employ-
ers such as Morrell to decline to negotiate with unions
4
about past retiree benefits, and Morrell did exactly that.
Morrell’s former chief labor negotiator testified to this
change, and a union executive conceded it. (JA 10 at 234;
455-56).'
Beginning in 1976 and continuing through every rele-
vant labor agreement (1976-1979-1982-1985), the Mor-
rell-union CBAs and health care appendices only
covered health benefits for employees working and re-
tiring during the term of the contract and only for the
duration of that contract. Each CBA contained a general
term clause which limited the duration of all of its
provisions, including the health care provisions, to the
term of the contract.2 Each CBA also had a specific
clause which limited the duration of the medical benefits
to the term of the CBA:
[T]he Hospital-Medical-Surgical Insurance Plan
described in Appendix F will remain in effect for the
duration of this agreement.”
There was no provision in any CBA or its Appendix F
(all of the contested CBA’s included an Appendix F on
medical benefits) which said that past retirees were
entitled to any health benefits, let alone fixed, perma-
nent benefits, or that employees who retired during any
contract were entitled to any particular benefits after
that CBA expired. In striking contrast to the treatment of
“JA” cites are to the Joint Appendix filed with the Eighth Circuit
Court of Appeals.
* The 1976, 1979, 1982 and 1985 CBA general term clauses can be
found at JA 12 at 743; JA 20 at 975; JA 23 at 1116; and JA 29 at 46,
respectively.
> The 1976, 1979, 1982 and 1985 CBA specific durational clauses can
be found at JA 12 at 742; JA 20 at 974; JA 23 at 1114; and JA 29 at
44, respectively.
5
welfare benefits, the pension benefits appendix of each
CBA contained “vesting” language. (Compare JA 20 at
1032 with JA 20 at 1012-13).
Company executives testified at trial that since 1976
Morrell has provided health benefits for retirees as a
management decision and a matter of company policy.
(JA 10 at 202). As part of the 1979 negotiations, Morrell
delivered a July 12, 1979 side letter to the union which
clearly stated that Morrell would not bargain about past
retiree benefits, and that Morrell was providing health
benefits to past retirees as a matter of company policy.
(JA 17). That letter was acknowledged and counter-
signed by the Union’s International Vice President.
(JA 17 at 933). Two of the union’s key witnesses at trial
admitted that the union understood Morrell’s position,
that Morrell’s letter was an accurate statement of that
position, and that the union accepted Morrell’s position.
(JA 10 at 455-56; 476-80).
While several retirees testified to their belief that they
were entitled to fixed lifetime benefits, their belief was
contradicted by undisputed evidence that retiree health
benefits had in fact been reduced by the company
during the period in dispute. In December 1983, after
contract reopener negotiations ended in employee wage
and benefit reductions, Morrell decided to reduce past
retiree benefits, so that past retirees would not have
better benefits than employees and for convenience in
benefits administration. (JA 10 at 286-87). Morrell used
a letter and a benefits summary to inform retirees of
changes in their health benefits paralleling the changes
made for active employees, including a deductible and a
co-payment requirement. (JA 24, 25). It is uncontested
that the benefits of past retirees were reduced by these
new payment requirements in 1983.
6
From January, 1984 to the time this lawsuit was filed
in December, 1991, Morrell provided employees who
retired prior to April 1, 1989 and their eligible depen-
dents with health benefits. Those benefits were as de-
scribed in the benefits summary and in the CBA
Appendix F. Morrell reserved its right to change those
benefits in the benefits summary, which contained a
provision stating that the retirees’ benefits are “subject
to modification and termination in accordance with ap-
plicable law.” (JA 25 at 1156).
Morrell filed this action requesting a declaratory judg-
ment that Morrell had the unilateral right to change or
terminate retiree health benefits. Morrell named as a
defendant The United Food and Commercial Workers
International Union as the union which represents Mor-
rell hourly employees and had disputed Morrell’s right
to make unilateral benefits changes. Morrell also named
Benard J. Aning, a retiree and former union officer, as a
representative of a Rule 23 defendant class of retirees in
order to obtain a complete resolution of this issue in a
single lawsuit. Instead of “forum shopping” as sug-
gested by the petitioners, Morrell filed its declaratory
judgment lawsuit in Sioux Falls, South Dakota, where
Morrell has its headquarters and largest plant and where
the largest group of retirees reside.
*In fact, John Morrell and the union have a history of litigation in
the Eighth Circuit. See John Morrell & Co. v. Local Union 304A,
United Food & Commercial Workers, 804 F.2d 457 (8th Cir. 1986),
cert. denied, 481 U.S. 1014 (1987); John Morrell & Co. v. Local Union
304A, United Food & Commercial Workers, 913 F.2d 544 (8th Cir.
1990), cert. denied, 500 U.S. 905 (1991) (upheld jury damage
verdict of $24,600,000 in favor of Morrell for union’s breach of
no-strike provision); John Morrell & Co. v. United Food & Commer-
cial Workers, 992 F.2d 205 (8th Cir. 1993), cert. denied, 114 S. Ct.
554 (1993); John Morrell & Co. v. Local Union 304A, United Food &
Commercial Workers, 949 F.2d 266 (8th Cir. 1991).
7
Morrell moved for summary judgment, but that mo-
tion was denied and the case proceeded to trial. The trial
involved four days of testimony by 20 witnesses, and
some 100 exhibits including five consecutive collective
bargaining agreements. After the bench trial, the District
Court entered judgment for Morrell on all issues con-
tested by the parties. (App. at 53a). The District Court
found and the Court of Appeals majority agreed that the
petitioners failed to meet their burden of proof and that
Morrell had not committed itself to provide the retirees
with fixed health benefits. In so holding, both the Dis-
trict Court and the Court of Appeals considered and
reflected in their opinions the documentary evidence
and testimony offered by witnesses for both sides about
the history of collective bargaining negotiations between
the parties, about the administration of employee and
retiree health benefits, and about the history and mean-
ing of the significant provisions of the collective bargain-
ing agreements and their health benefits appendices.
The Court of Appeals in particular made it a point to
examine the evidence on bargaining history first, find
that the bargaining history did not support the claim to
vested benefits, then examine the CBAs and health
benefit appendices to find that the health benefits were
not contractually vested. (App. at 4a).
8
Summary of Argument
Presumably recognizing the failure of several prior
certiorari petitions asking this Court to construct rigid
rules governing employee welfare benefits under ERISA
(and protect retirees from benefits changes where bene-
fit plans do not do so), petitioners have taken the novel
approach of ignoring ERISA and premising their argu-
ment on general federal labor law. Petitioners’ labor law
argument is a huge red herring.
Section 301 of the Labor Management Relations Act is
a federal preemption statute, not a source of benefit law
rules. Federal courts hearing cases about the benefits of
retired union members have had no difficulty in decid-
ing parallel claims under the Employee Retirement In-
come Security Act and § 301 by applying consistent
principles of contract construction.
Petitioners’ strenuous arguments about a supposed
three-way conflict among the circuits as to how to
interpret these contracts reads well until compared with
what the courts of appeals are actually doing. All of the
circuits use a federal common law of contracts analysis
for deciding benefits cases; none use presumptions, none
shift the burden of proof. Petitioners ask this Court to
replace that contract analysis with a special rule—surely
one treating retiree health benefits as vested—when
doing so would ignore the Congressional policy embod-
ied in ERISA and disrupt the consistent application of
that policy by the lower courts.
9
Reasons For Denying the Writ
I. Petitioners’ Focus on § 301 of the LMRA Ignores
Congress’ Enactment of ERISA for the Regulation
of Employee Benefits.
1. Years After Congress Enacted § 301 To Pre-
empt State Law Governing Labor Matters,
Congress Enacted ERISA to Provide a Compre-
hensive Body of Federal Law Governing Em-
ployee Benefits.
Congress enacted § 301 of the Labor Management
Relations Act in 1947 as a Congressional mandate that
courts develop a body of federal common law to address
disputes arising out of labor contracts. Allis-Chalmers
Corp. v. Lueck, 471 U.S. 202 (1985). The intended pur-
pose of § 301 was to assure that matters of labor policy
be uniformly decided by federal versus state courts.
Local 174, Teamsters v. Lucas Flour Co., 369 U.S. 95, 103
(1962). Almost thirty years after Congress enacted § 301,
Congress recognized the need for another mandate spe-
cifically providing for the federal regulation of employee
benefits. Congress enacted ERISA in 1974 to “protect...
participants in employee benefit plans and their benefi-
ciaries . . . by establishing standards of conduct, respon-
sibility, and obligation for fiduciaries of employee
benefit plans, and by providing for appropriate reme-
dies, sanctions, and ready access to the Federal courts.”
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44 (1987),
quoting ERISA § 2 as set forth in 29 U.S.C. § 1001(b).
Like its counterpart § 301 providing for the federal
regulation of labor agreements, ERISA’s “crowning
achievement” was its “reservation to Federal authority
[of] the sole power to regulate the field of employee
benefit plans.” Id. at 46, quoting Representative Dent,
10
120 Cong. Rec. 29, 197 (1974). To promote Congress’
intention that employee benefits be subject to a uniform
body of federal law, Congress crafted into the statute
deliberately expansive preemption provisions, “thus
eliminating the threat of conflicting or inconsistent state
and local regulation of employee benefit plans.” Id. at
45-46.
During the more than twenty years since the enact-
ment of ERISA, the federal courts have executed Con-
gress’ dictate that they develop a body of federal
common law to govern employee benefits. It is that
body of federal common law—premised upon tradi-
tional contract and trust law principles—that the courts
now consistently apply in addressing employee benefit
disputes.
11
2. Section 301 Provides For Federal Regulation
of Labor Law. Section 301 Does Not Provide
Rules Which Override ERISA in the Regulation
of Employee Benefits.
There is a critical flaw in petitioners’ request that this
Court establish “the proper, uniform LMRA § 301 inter-
pretative rule that governs suits on a collectively bar-
gained provision for retiree health insurance” (Pet. at
(i)). Petitioners falsely contend that § 301 serves as a
“congressional mandate’ ...to formulate interpretative
rules” for addressing labor contract provisions (Pet.
at 13), misconstruing and misquoting this Court's opin-
ion in Allis-Chalmers for support. In fact, in Allis-Chal-
mers this Court said nothing about any need to
formulate interpretative rules under § 301. That case
presented the direct policy concern embodied in § 301,
that state law claims be preempted by federal labor
contract law. This Court held that the respondent's
state-law claim alleging bad-faith handling of an insur-
ance claim under a disability plan in a collective bar-
gaining agreement was preempted by § 301. Nothing
less, nothing more.
In actuality, § 301 stands simply as a directive that
suits over labor contract violations be governed by fed-
eral law. It says nothing about the substance of what
parties may agree to in a labor contract. Allis-Chalmers,
471 U.S. 202, 211 (1985). Nor does it tell the courts to
develop litmus tests for interpreting labor agreements.
Section 301 was enacted in 1947 “as a congressional
mandate to the federal courts to fashion a body of
federal common law to be used to address disputes
arising out of labor contracts.” Id. at 209. Section 301
stemmed from Congress’ recognition that “[t]he possi-
bility that individual contract terms might have different
12
meanings under state and federal law would inevitably
exert a disruptive influence upon both the negotiation
and administration of collective agreements.” Jd. at 210,
quoting Lucas Flour Co., 369 U.S. at 103. Through § 301,
Congress assured that state rules purporting to define
the meaning or scope of a contract term would be
preempted by federal labor law. Id.
Executing the Congressional directive embodied in
§ 301, courts have developed a body of law which
addresses contract disputes utilizing traditional rules of
contract interpretation, unless their application is incon-
sistent with federal labor policies. John Wiley & Sons, Inc.
v. Livingston, 376 U.S. 543, 548 (1964); Textile Workers
Union v. Lincoln Mills, 353 U.S. 448, 457 (1957). In
certain instances, courts have found it appropriate in
§ 301 actions requiring the interpretation of labor agree-
ments to look to the parties’ particular bargaining his-
tory as well as the practice, usage and custom pertaining
to such agreements. Transportation Employees Union v.
Union Pacific R.R., 385 U.S. 157, 159-61 (1966). Where
the disputes involve welfare benefits, courts of appeal
typically acknowledge the existence of an asserted § 301
claim, while looking to ERISA and its federal body of
law to ultimately resolve these disputes. See, e.g., Stew-
art v. KHD Deutz of America Corp., 980 F.2d 698,
702 (11th Cir. 1993); United Paperworkers Int'l Union v.
Champion Int'l Corp., 908 F.2d 1252, 1256 (5th Cir. 1990);
Anderson v. Alpha Portland Industries, Inc., 836 F.2d 1512,
1516 (8th Cir. 1988), cert. denied sub nom., Anderson v.
Slattery Group, Inc., 489 U.S. 1051 (1989); Struble v. New
13
Jersey Brewery Employees Welfare Trust Fund, 732 F.2d 325
(3d Cir. 1984).°
Petitioners in this case had the full benefit of an
analysis of their claims under both federal labor policy
and ERISA. Specifically, in the opinion below, the
Eighth Circuit recognized that:
the plans at issue were appendices to collective
bargaining agreements, and it is usually unwise to
construe collective bargaining agreements without
regard to their bargaining history. Therefore, before
examining the relevant Master Agreement provi-
sions, we will review the negotiating history of
these Agreements as it relates to retiree health
benefits. (App. at 4a).
’ Petitioners’ implication that § 301 is the source of a uniform set of
interpretative rules is further undermined by the fact that most
disputes over the interpretation of collective bargaining agree-
ments are resolved by arbitrators rather than the courts. This
Court has instructed that courts must refer labor contract disputes
to arbitrators unless forceful evidence exists of a purpose to
exclude the grievance from arbitration. United Steelworkers v.
Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960). This
deference is granted because of the “greater institutional compe-
tence of arbitrators in interpreting collective-bargaining agree-
ments.” AT&T Technologies, Inc. v. Communications Workers of
America, 475 U.S. 643, 650 (1986). See also Schneider Moving &
Storage Co. v. Robbins, 466 U.S. 364, 371-72 (1984). When an
arbitrator's decision is challenged in court, a reviewing court does
not interpret the contract but asks only whether the arbitrator's
award “draws its essence from the collective bargaining agree-
ment.” United Steelworkers v. Enterprise Wheel & Car Corp.,
363 U.S. 593, 597 (1960). The result is a myriad of individual
arbitral awards, not a single body of federal law governing labor
contract interpretation.
14
Petitioners’ contention that the Eighth Circuit ignored
federal labor policy in deciding their case conflicts with
the record establishing the court’s exhaustive legal and
factual analysis.°
Petitioners ask this Court to ignore ERISA and turn
back the hands of time to the days when § 301 would
have provided the only basis for federal jurisdiction over
changes to collectively-bargained benefits. See Pittsburgh
Plate Glass, 404 U.S. at 181, n.20 (recognizing pre-ERISA
that a retiree “would have a federal remedy under
§ 301. . . . if his benefits were unilaterally changed”).
Even if § 301 provided an arsenal of interpretative rules
before ERISA, which it did not, petitioners’ disregard of
ERISA in asking this Court to fasnion interpretative
rules under § 301 conflicts with this Court’s consistent
approach in dealing with multiple statutes relating to
the same subject matter. A fundamental principle of
statutory construction is that “a specific statute will not
* Petitioners also claim that “considerations of labor policy that
weighed so heavily in International Union, United Automobile
Workers v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), cert.
denied, 465 U.S. 1007 (1984) play no role in the Eighth Circuit's
analysis [because] the court below cited three cases, each of
which involved interpretation of unilateral employer-created ER-
ISA plans, not collective bargaining agreements.” (Pet. at 15-16
n.13). Petitioners’ assertion is simply wrong. In fact, the Eighth
Circuit Court of Appeals relied upon many cases involving collec-
tively-bargained benefits to reach its decision, including Allied
Chem. Workers, Local 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157
(1971); Bidlack v. Wheelabrator Corp., 993 F.2d 603, 609 (7th Cir.),
cert. denied, 114 S. Ct. 291 (1993); United Paperworkers Int'l
Union v. Jefferson Smurfit Corp., 961 F.2d 1384, 1386-87 (8th Cir.
1992); Anderson v. Alpha Portland Indus., 836 F.2d 1512 (8th Cir.
1988), cert. denied sub nom., Anderson v. Slattery Group, Inc., 489
U.S. 1051 (1989); Local Union No. 150-A v. Dubuque Packing Co.,
756 F.2d 66, 69-70 (8th Cir. 1985).
es ee
15
be controlled or nullified by a general one, regardless of
the priority of enactment.” Radzanower v. Touche Ross &
Co., 426 U.S. 148, 153 (1976). See also Morales v. Trans
World Airlines, 112 S. Ct. 2031, 2037 (1992); Crawford
Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445 (1987).
If two applicable statutes irreconcilably conflict, the
more recent statute prevails. 2B Norman J. Singer, Suth-
erland Stat. Constr. § 51.02 (5th ed. 1992); The San Pedro,
15 U.S. 2 Wheat. 132, 141 (1817). Undoubtedly, § 301
would have provided the only available federal remedy
in benefits disputes about union member retirees before
ERISA. But since 1974, when Congress recognized the
need to enact a more detailed and comprehensive
scheme for regulating employee benefits, the general
labor law policy dictates of § 301 have shared the
playing field with ERISA. Where appropriate, federal
labor law principles of contract interpretation contribute
to the federal body of law under ERISA to resolve
benefit disputes. This is a scheme that works in har-
mony, honoring the policy concerns embodied in both
federal statutes.
il. The Federai Common Law Consistently Applied
By the Courts Achieves the Uniformity Congress
Intended in Welfare Benefits Regulation.
1. ERISA Case Law Recognizes That Pensions Are
Statutorily Vested, Welfare Benefits Are Not.
In enacting ERISA, Congress made a deliberate deci-
sion to require the statutory vesting of pensions but not
welfare benefits. H.R. Rep. No. 93-807, 93d Cong., 2d
Sess., reprinted in 1974 U.S.C.C.A.N. 4639, 4670, 4726; S.
Rep. No. 93-383, 93d Cong., 2d Sess., reprinted in 1974
U.S.C.C.A.N. 4639, 4890, 4935. Unlike pensions, “Con-
gress intended employers to be free to create, modify, or
16
terminate the terms and conditions of employee welfare
benefit plans as inflation, changes in medical practice
and technology, and the costs of treatment dictate.”
Owens v. Storehouse, Inc., 984 F.2d 394, 398 (11th Cir.
1993). Congress has recognized that “vesting of these
ancillary benefits would seriously complicate the admin-
istration and increase the cost of plans... .” H.R. Rep.
No. 93-807, 93d Cong., 2d Sess., reprinted in 1974
U.S.C.C.A.N. 4639, 4670, 4726; S. Rep. No. 93-383, 93d
Cong., 2d Sess., reprinted in 1974 U.S.C.C.A.N. 4639,
4890, 4935, cited in Metropolitan Life Ins. Co. v. Massa-
chusetts, 471 U.S. 724, 732 (1985). Earlier this year, this
Court summarized the law governing claims to health
benefits as follows:
In interpreting § 402(b)(3), we are mindful that
ERISA does not create any substantive entitlement
to employer-provided health benefits or any other
kind of welfare benefits. Employers or other plan
sponsors are generally free under ERISA, for any
reason at any time, to adopt, modify, or terminate
welfare plans. See Adams v. Avondale Industries, Inc.,
905 F.2d 943, 947 (CA6 1990) (“[A] company does
not act in a fiduciary capacity when deciding to
amend or terminate a welfare benefits plan”). Nor
does ERISA establish any minimum participation,
vesting, or funding requirements for welfare plans
as it does for pension plans. See Shaw v. Delta Air
Lines, Inc., 463 U.S. 895, 90-91, 77 L.Ed. 2d 490, 103
S. Ct. 2890 (1983).
Le rg ee ee eae ee
17
Curtiss-Wright Corp. v. Schoonejongen, 115 S. Ct. 1223,
1228 (1995).’
Petitioners’ request that this Court adopt rigid “inter-
pretative rules” governing the vesting of welfare benefits
flies directly in the face of this Court’s expressed unwill-
ingness to create what Congress rejected. This Court has
specifically noted that judicial intervention to infer a
vested right in a welfare plan is particularly inappropri-
ate when viewed in the context of a “comprehensive
and reticulated” statute such as ERISA. Nachman Corp. v.
Pension Ben. Guaranty Corp., 446 U.S. 359, 361 (1980); see
also Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S.
134, 146-47 (1985). Similarly, courts of appeals have
adhered to the recognition that judicial construction of
welfare plans “must be tailored to avoid undermining
Congress’ ‘considered decision that welfare benefit plans
not be subject to a vesting requirement.’ ” Allen v. Adage,
Inc., 967 F.2d 695, 698 (1st Cir. 1992).
“es -~
Recognizing that the case law developed under ERISA
refuses to graft onto ERISA that which Congress deliber-
ately rejected—vesting of welfare benefits—petitioners
attempt an “end run” around the statute and the cases.
They look to § 301 to do their blocking and open the
way for more advantageous “interpretative rules” to
govern suits over collectively-bargained retiree health
” Petitioners attempt to sidestep this clearly settled law by a host of
arguments, including a footnote argument at Pet. 16 that the
Eighth Circuit decision below has improperly afforded employees
less benefits protection “than they enjoyed before ERISA was
enacted,” citing a 1961 book entitled The Legal Status of Employee
Benefit Rights Under Private Pension Plans. As might be expected
from its title, that book is about pensions, not health benefits.
Petitioners are describing the law as it never was—while ignoring
Congress’ policy decisions in enacting ERISA.
PRO EL OAL OD im 0
18
benefits. Petitioners ignore the fact that ERISA and § 301
are on the same team.
2. The Contract Analysis Consistently Applied By
All Circuits Respects ERISA’s Intention That
Welfare Benefits Not Automatically Vest But
Be Left to Private Agreement.
Petitioners seriously misstate the decisions of the
Courts of Appeals in their clever attempt to avoid
ERISA’s reach. First, petitioners claim that the Fourth
and Sixth Circuits:
have developed an interpretative rule that treats a
collectively bargained promise to provide health
insurance to retirees as creating an accrued or
vested right in those who retire during the term of
the collective agreement. (Pet. at (i)).
In truth, as addressed below, no circuit has adopted such
an automatic, inflexible rule. Second, petitioners’ more
general contention that circuits have adopted different
“interpretative rules” in suits about retiree health bene-
fits is completely contrived.
There is, in fact, a simple set of rules in place to decide
welfare benefits cases. Without exception, all of the
circuits uniformly rely on traditional contract principles
to resolve these disputes, whether or not a collective
bargaining agreement is involved. See, e.g., Allen v.
Adage, Inc., 967 F.2d 695, 698 (1st Cir. 1992) (judicial
construction of welfare plans “must be tailored to avoid
undermining Congress’s ‘considered decision that wel-
fare benefit plans not be subject to a vesting require-
ment.’ ”); In re Chateaugay Corp., 945 F.2d 1205, 1208
(2d Cir. 1991), cert. denied sub nom., United Mine Workers
1974 Benefit Plan & Trust v. LTV Steel Co., 502 U.S. 1093
(1992); Molnar v. Wibbelt, 789 F.2d 244, 250 (3d Cir.
19
1986); Struble v. New Jersey Brewery Employees Welfare
Trust Fund, 732 F.2d 325, 330 (3d Cir. 1984); District 29,
United Mine Workers v. Royal Coal Co., 768 F.2d 588, 590
(4th Cir. 1985) (“whether the parties intended ...
employer's obligation to continue beyond the expiration
of the collective bargaining agreement is primarily a
question of contract interpretation”); United
Paperworkers Int'l Union v. Champion Int'l Corp., 908 F.2d
1252, 1256 (5th Cir. 1990) (traditional rules of contract
interpretation apply, since “ [t]he parties do not identify,
and we have not found, any federal labor policy favor-
ing or disfavoring fixed health insurance premiums for
retirees.”); Armistead v. Vernitron Corp., 944 F.2d 1287,
1293 (6th Cir. 1991) (“enforcement and interpretation of
collective bargaining agreements is governed by tradi-
tional rules of contract interpretation as long as their
application is not inconsistent with federal labor pol-
icy”); Weimer v. Kurz-Kasch, Inc., 773 F.2d 669, 671
(6th Cir. 1985) (“We agree with the district court’s
conclusion that the only issue presented is one of con-
tract interpretation . . .”); International Union, United Au-
tomobile Workers v. Yard-Man, Inc., 716 F.2d 1476, 1479
(6th Cir. 1983), cert. denied, 465 U.S. 1007 (1984)
(“... the court should first look to the explicit language
of the collective bargaining agreement for clear manifes-
tations of intent.”); Bidlack v. Wheelabrator Corp., 993
F.2d 603 (7th Cir.), cert. denied, 114 S. Ct. 291 (1993);
Senn v. United Dominion Indus., 951 F.2d 806, 816
(7th Cir. 1992), cert. denied, 113 S. Ct. 2992 (1993); Ryan
v. Chromalloy American Corp., 877 F.2d 598, 603 (7th Cir.
1989) (“efficacy of appellants’ claim under ERISA turns
solely upon the terms of the written instruments gov-
erning the plan”); Anderson v. Alpha Portland Indus., 836
F.2d 1512, 1516 (8th Cir. 1988), cert. denied sub nom.,
20
Anderson v. Slattery Group, Inc., 489 U.S. 1051 (1989)
(issue is “simply one of contract interpretation”); Bower
v. Bunker Hill Co., 725 F.2d 1221, 1223 (9th Cir. 1984)
(“The sole question, then, is whether the collective
bargaining agreements unambiguously limited the term
of the medical benefits.”); Stewart v. KHD Deutz of
America Corp., 980 F.2d 698, 702 (11th Cir. 1993) (court
applies “traditional rules of contractual interpretation”,
recognizing that federal labor policy neither favors nor
disfavors the vesting of retirees’ health benefits).
Reliance on traditional contract principles to resolve
these disputes comports with ERISA’s deliberate deci-
sion to exempt welfare benefits from statutory vesting
requirements. As explained by the Eighth Circuit in
Anderson v. Alpha Portland:
The exemption from ERISA’s vesting requirements
does not prohibit an employer from extending ben-
efits beyond the expiration of the collective bargain-
ing agreement. Rather, the exemption allows the
parties to determine the duration of the welfare
benefits. Thus, the issue is “simply one of contract
interpretation.” Anderson, 836 F.2d at 1516.
At the same time, use of a traditional contract analysis to
resolve these disputes honors the one requirement
which ERISA does prescribe in welfare plan de-
sign—that benefits be maintained pursuant to a written
plan document. ERISA § 402(a)(1), 29 U.S.C.
§ 1102(a)(1). A traditional contract analysis—which
looks to the language of the parties’ agree-
ment—provides a consistent analysis for all circuits to
apply, thus promoting ERISA’s goal of uniformity in
employee benefit regulation. At the same time it respects
ERISA’s deliberate decision to leave the vesting of wel-
fare benefits as a matter of private decision or contract.
Ae
21
3. The Sixth and Fourth Circuits Follow The Same
Traditional Contract Analysis As All Other
Circuits In Resolving Retiree Health Benefits
Disputes Involving Collective Bargaining
Agreements.
Petitioners would have this Court believe that:
the Sixth and Fourth Circuits have developed an
interpretative rule that treats a collectively bar-
gained promise to provide health insurance to retir-
ees as creating an accrued or vested right in those
who retire during the term of the collective agree-
ment. (Pet. at (i)).
According to petitioners, a rule exists in the Sixth Circuit
that “normally retiree health benefits are vested,” de-
rived from the Sixth Circuit’s decision in International
Union, United Automobile Workers v. Yard-Man, Inc., 716
F.2d at 1479 (Pet. at 13). Petitioners could not be more
wrong. In Yard-Man, the Sixth Circuit applied the same
traditional contract analysis as other circuits in address-
ing benefit disputes under collective bargaining agree-
ments. The Sixth Circuit expressly recognized that
“. .. the court should first look to the explicit language of
the collective bargaining agreement for clear manifesta-
tions of intent.” Id. The Court of Appeals then applied
principles of federal labor contract interpretation, exam-
ining not only the language of the agreement but the
context in which the benefits arose. Jd. at 1482. As part
of that examination, the Sixth Circuit observed that
“retiree benefits are in a sense ‘status’ benefits which, as
such, carry with them an inference that they continue so
long as the prerequisite status is maintained.” Id. At the
Same time, the Court of Appeals carefully stated that
“[nJor does any federal labor policy identified to this
22
Court presumptively favor the finding of interminable
rights to retiree insurance benefits when the collective
bargaining agreement is silent.” Id.
Some confusion and misunderstanding resulted
among lower courts within the Sixth Circuit from the
Sixth Circuit’s suggestion of an “inference” in Yard-Man.
The Sixth Circuit has taken great care in case law
following Yard-Man to clarify that it has not adopted a
presumption in favor of vesting. See, e.g., Local 784,
United Automobile Workers v. Cadillac Malleable Iron Co.,
728 F.2d 807, 808 (6th Cir. 1984) (explaining that “there
is no legal presumption based on the status of retired
employees”); In re White Farm Equip. Co., 788 F.2d 1186,
1191 (6th Cir. 1986) (explaining that the Yard-Man “line
of collective bargaining cases” merely “defer to the
contractual terms set by the parties, with no such rule of
‘federal common law’ overlaying the parties’ expressed
intent’”’).®
*As the courts of appeals have recognized, an inference is
relatively inconsequential—it is not a presumption. | /hile under
Fed. R. Evid. 301 a presumption “imposes on the party against
whom it is directed the burden of going forward with evidence to
rebut or meet the presumption, but does not shift to such party
the burden of proof’, the Federal Rules of Evidence do not even
recognize an inference. See 21 Charles A. Wright & Kenneth W.
Graham, Jr., Federal Practice & Procedure § 5124 (1977) (infer-
ences lack an element of legal compulsion, thus Rule 301 does
not apply to “mere inferences’’).
The Eighth Circuit recognized the importance of this distinction
when it rejected the Yard-Man inference in Anderson v. Alpha
Portland Indus., 836 F.2d at 1517. The Anderson court stated that
“the burden of proof still remains on the plaintiffs” even under
the Yard-Man inference, noting the Sixth Circuit’s own recogni-
tion in International Union v. Cadillac, 728 F.2d at 808, that
“Ti]nferences do not shift the burden of proof.” Anderson, 836
F.2d at 1517.
23
Petitioners’ claim that “in the Sixth Circuit, the Yard-
man inference almost always carries the day” (Pet. at
17) is best rebutted by the Sixth Circuit’s holdings for the
employer in the two most recent retiree health benefit
cases before it. In each case, the Sixth Circuit used a
traditional contract analysis to resolve the dispute. See
Adcox v. Teledyne, 21 F.3d 1381, 1389 (6th Cir. 1994)
(“We are mindful of ‘Congress’ considered decision that
welfare benefit plans not be subject to a vesting require-
ment” and finding that ‘under certain circumstances’
employee welfare plan benefits may vest contractu-
ally.”); Aldridge v. Mosler, Inc., 47 F.3d 1167 (6th Cir.),
reported in full, 1995 U.S. App. LEXIS 2985 (6th Cir.
Feb. 14, 1995) (upholding employer's right to reduce
retiree medical benefits under the unambiguous lan-
guage of the collective bargaining agreement). Only
petitioners, not the Sixth Circuit, have elevated the Yard-
Man inference to a rule of law.
Petitioners’ assertion that different interpretative rules
determine the outcome in these cases (Pet. at 9-11 and
17-18) is further undermined by the fact that in the
Eighth Circuit’s most recent case addressing retiree
health benefits, Jensen v. SIPCO, Inc., 38 F.3d 945 (8th
Cir. 1994), cert. denied, 131 L. Ed. 310 (1995), the Court
of Appeals, applying a contract analysis, found in favor
of retirees. Significantly, the opinions in Jensen and in
this case were both written by Circuit Judge Loken, and
were decided within one day of each other. That the
Court of Appeals reached opposite results in the two
cases is due to the differences in the testimony and
written benefit plans at issue in each case, not due to any
“outcome-determinative” interpretative rule.
Petitioners make another sweeping assertion that
“[t]he courts of appeals have begun to choose up sides
24
in this Sixth Circuit - Eighth Circuit disagreement.” (Pet.
at 16). To support that position, they argue that the
Fourth Circuit has adopted the Yard-Man “rule”, as
evidenced by its holding in Keffer v. H.K. Porter Co., 872
F.2d 60 (4th Cir. 1989). In actuality, in Keffer the Fourth
Circuit followed the approach of all other circuits,
“look[ing] to the parties’ intent as expressed in their
agreement.” Id. at 62. Like the Sixth Circuit, the Fourth
Circuit did not shift any burden of proof, nor did it
adopt any presumption. To the extent petitioners’ con-
tention is premised on the Fourth Circuit’s review of
bargaining history evidence in the interpretation of labor
agreements, petitioners themselves benefited from the
same analysis by the Eighth Circuit. Specifically, in the
opinion below, the Eighth Circuit recognized that:
the plans at issue were appendices to collective
bargaining agreements, and it is usually unwise to
construe collective bargaining agreements without
regard to their bargaining history. Therefore, before
examining the relevant Master Agreement provi-
sions, we will review the negotiating history of
these Agreements as it relates to retiree health
benefits. (App. at 4a).
Petitioners’ claim that the Seventh Circuit “has formu-
lated yet a third rule” (Pet. at 9) in Bidlack v. Whee-
labrator Corp., 993 F.2d 603 (7th Cir.), cert. denied, 114
S. Ct. 291 (1993) falls equally short. In Wheelabrator, the
Seventh Circuit applied traditional contract principles
and expounded at length on the appropriateness of
doing so. While concurring and dissenting judges dis-
cussed how presumptions could be used in these types
of cases and suggested different ways to approach these
cases, the Seventh Circuit did not adopt any presump-
tion or even any inference favoring employers or
25
retirees. Traditional contract principles dictated the
court’s decision and left the Seventh Circuit in accord
with every other circuit.
Petitioners ask this Court to bridge a gulf between the
circuits which does not exist, presumably hoping that a
grant of certiorari would be an opportunity to convince
this Court to issue a rule or directive (in conflict with
ERISA) to protect retiree benefits from changes. But try
as they might, petitioners cannot show defection by any
of the circuits from the consistent application of tradi-
tional contract principles in resolving these disputes.
26
Conclusion
Petitioners have fashioned a unique argument in an
effort to overcome the record in this case and this
Court’s standards for reviewing petitions for certiorari.
But their argument, no matter how cleverly crafted,
ultimately fails. Petitioners are seeking relief in the
wrong forum. Congress has woven the fabric of ERISA;
it is only Congress who can unravel its threads. The
courts have done their part to promote the policies
embodied in ERISA—they have developed a body of
federal common law to govern employee benefit dis-
putes. In so doing, the courts have honored Congress’
directive that welfare benefits vest only as a matter of
private design and have looked to contract principles to
resolve contract disputes. This is an approach that works
in all courts, that provides fairness to all parties. By
asking this Court to announce a “rule” under § 301 to
control the decisions in welfare benefits cases, petition-
ers are really asking this Court to undo a central part of
ERISA’s comprehensive regulatory scheme.
27
For the reasons set forth above, we respectfully sub-
mit that the petition should be denied.
Respectfully submitted,
Wilber H. Boies, P.C.
(Counsel of Record)
Nancy G. Ross
Mercedes A. Laing
Judith A. Kelley
McDERMoTT, WILL & EMERY
227 West Monroe
Chicago, Illinois 60606-5096
(312) 372-2000
Jeremiah D. Murphy
Boyce, MURPHY,
McDoweELL_ & GREENFIELD
101 N. Phillips Avenue
P.O. Box 5015
Sioux Falls, South Dakota 57117-5015
(605) 336-2424
Attorneys for Respondent
John Morrell & Co.
May 8, 1995
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.