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Fourth Circuit Holds Century Aluminum Retirees Not Entitled to Preliminary Injunction Continuing Healthcare Benefits Because Not Clearly Likely To Succeed on the Merits

Tuesday, September 6, 2011

Dewhurst v. Century Aluminum Company, No. 10-CV-1759, 2011 BL 215902 (4th Cir. Aug. 22, 2011) In a certified class action, the U.S. Court of Appeals for the Fourth Circuit held that retirees of a Century Aluminum Company plant (Plant) and their union (collectively, plaintiffs) were not entitled to a preliminary injunction because they did not clearly show that they were likely to succeed on the merits of their case seeking continuation of their healthcare benefits. Relying on District 29, United Mine Workers of America v. Royal Coal Co., 768 F.2d 588 (4th Cir. 1985) (Royal Coal), the Court held that plaintiffs were not entitled to vested retiree healthcare benefits because the applicable collective bargaining agreements (CBAs) and summary plan descriptions (SPDs) provided that retiree healthcare benefits were effective only for the duration of the applicable CBA. The Court rejected plaintiffs' interpretation of the Sixth Circuit's holding in International Union, United Automobile, Aerospace & Agricultural Implement Workers of America v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983) (Yard-Man), as well as plaintiffs' argument that the Court had adopted such holding in Keffer v. H.K. Porter Co., 872 F.2d 60 (4th Cir. 1989).

Century Announced Plans to Modify or Terminate Retiree Healthcare Benefits

In 2007, Century's West Virginia subsidiary, which operated the Plant, began experiencing financial problems. In February 2009, Century limited operations at the Plant. In October 2009, Century announced that it would modify or terminate healthcare benefits for retirees 65 and older who retired before June 1, 2006, the effective date of the current CBA (2006 CBA) between Century and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO/CLC. The Fourth Circuit noted that the 2006 SPD indicated that it applied "to Ravenswood Reduction Plant retirees and surviving spouses who retired or commenced receiving a surviving spouse pension from Century Aluminum of West Virginia, Inc. The Century Aluminum of West Virginia, Inc. Hourly Employees' Pension Plan on or after June 1, 2006." The 2006 SPD also stated that such benefit plan had been established pursuant to the CBA effective June 1, 2006, and that it was incorporated in the CBA. The Fourth Circuit observed that all the relevant CBAs prior to the 2006 CBA and the SPDs incorporated in them provided that retiree healthcare benefits would be effective only for the duration of the CBA in effect at the time. The Court also noted that the 1995 and 1999 SPDs, but not the 2006 SPD, included continuation language that arguably required Century to pay healthcare benefits for the duration of the corresponding CBA to those who retired before the particular SPD's effective date.

District Court Denied Preliminary Injunction

In November 2009, plaintiffs sued defendants alleging that their benefits were vested and that defendants violated the applicable CBAs and thus § 301 of the Labor Management Relations Act, 29 U.S.C. § 185, and §§ 502(a)(1)(B) and 502(a)(3) of the Employee Retirement Income Security Act, 29 U.S.C. §§ 1132(a)(1)(B) and 1132(a)(3). The district court granted the parties' joint motion for certification of a class of more than 400 retirees and their spouses and dependents. Dewhurst v. Century Aluminum Company, Nos. 09-CV-1546/1193, 2010 BL 143738 (S.D. W. Va. June 24, 2010). The district court denied plaintiffs' motion for a preliminary injunction seeking continuation of their healthcare benefits because it concluded that plaintiffs failed to show a likelihood of success on the merits of their case. Dewhurst v. Century Aluminum Company, 731 F. Supp. 2d 506 (S.D. W. Va. 2010). Plaintiffs appealed.

Preliminary Injunction Standard

The Fourth Circuit emphasized that a party seeking the "extraordinary remedy" of a preliminary injunction must "clear[ly] show[]" that he or she is likely to succeed on the merits, among other requirements. Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008).

Keffer and Yard-Man

Plaintiffs argued that they were likely to succeed on the merits of their claims because, in Keffer, 872 F.2d at 62, the Fourth Circuit had adopted the Sixth Circuit's Yard-Man inference that retiree benefits "continue so long as the prerequisite status is maintained." The Court disagreed with plaintiffs' interpretation of Keffer and Yard-Man. As did the district court, the Court concluded that the Keffer Court's reference to Yard-Man was not necessary to its holding and was thus dictum. The Keffer Court determined that the retiree healthcare benefits in question survived the expiration of the applicable CBA because the CBA explicitly provided for such continuation. The Keffer Court also noted that extrinsic evidence supported such holding. The Court reasoned that, after relying on controlling documents and extrinsic evidence for its holding, the Keffer Court "observe[d]" that its conclusion was "also consistent" with the context of providing retiree healthcare benefits: as a permissive, not mandatory, collective bargaining subject, "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 contingencies of future negotiations." Id. at 64 (quoting Yard-Man, 716 F.2d at 1482). The Court also concluded that the Sixth Circuit itself did not interpret Yard-Man as plaintiffs advocated. As the Court quoted, in Yolton v. El Paso Tennessee Pipeline Co., 435 F.3d 571, 580 (6th Cir. 2006), the Sixth Circuit stated that "there is no legal presumption that benefits vest. . . . All that Yard-Man and subsequent cases instruct is that the Court should apply ordinary principles of contract interpretation."

CBAs and SPDs Provide for Retiree Healthcare Benefits Only for the Duration of the Applicable CBA

The Court then applied such ordinary contract interpretation principles and concluded that the CBA in Keffer was meaningfully different from the CBAs in the instant case. In Keffer, retiree health benefits were linked to the future date, after the CBA's termination, when the retiree would be eligible for Medicare. As the district court observed, there was no analogous language in the instant CBAs. Indeed, the language in every CBA from 1988 to present clearly stated "that such benefits shall remain in effect for the term of this [year] Labor Agreement." The Court noted that this durational language was similar to that used in Royal Coal, in which the applicable CBA provided that benefits "shall be guaranteed during the term of this Agreement." Royal Coal, 768 F.2d at 590. The Royal Coal Court also stated that the rights of employees and obligations of employers under a CBA do not survive the CBA's expiration unless the parties clearly so intended. Id. at 592. The Court thus held that, given the CBA's durational language, Keffer and Royal Coal were clear, governing precedent that did not support a finding that plaintiffs showed that they were likely to succeed on the merits. The Court also agreed with the district court that plaintiffs' other arguments were unavailing. For example, plaintiffs asserted that the CBA's absence of a provision reserving Century's right to amend or terminate benefits implied that the parties did not agree to delegate such right to Century. The Court concurred with the district court that it was just as possible that Century considered a reservation of rights clause unnecessary since the topic of benefits would arise during each bargaining cycle. Even if such omission created an ambiguity, however, the Court reasoned, it would not suffice to make a clear showing that plaintiffs were likely to succeed on the merits.

Notes on Another Recent Case

In a recent case (decided by the same three-judge panel), the Fourth Circuit held that Volvo Group North America, LLC, was not permitted to make unilateral changes to retirees' health benefits after a collective bargaining agreement expired unless it complied with the collective bargaining agreement's procedure for doing so. Quesenberry v. Volvo Trucks North America Retiree Healthcare Benefit Plan, No. 10-CV-1491, 2011 BL 180320 (4th Cir. July 11, 2011), discussed in Bloomberg Law Reports, Labor & Employment, Vol. 5, No. 31 (July 25, 2011). Because of different contractual language, the Fourth Circuit rejected defendants' attempt to rely on Royal Coal. Instead, the Court opined that Keffer was analogous because the collective bargaining agreement there linked retiree benefits to an event that would almost necessarily occur after its expiration and it provided for the parties to negotiate regarding the continuation of benefits post-expiration. Quesenberry and Dewhurst thus illustrate how different collective bargaining language can be dispositive and result in different outcomes in retiree welfare benefit cases.
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