BorgWarner Latest Company to Prevail in Retiree Health Spat

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Dec. 6 — BorgWarner Inc. won a long-running lawsuit by retirees who accused the company of modifying their health benefits in violation of various collective bargaining agreements ( Sloan v. BorgWarner, Inc. , 2016 BL 403170, E.D. Mich., No. 2:09-cv-10918, 12/5/16 ).

A federal judge in Michigan ruled on Dec. 5 that the retirees’ health benefits weren’t vested for life and thus could be modified by the company. In surviving this legal challenge to retiree benefit cuts, BorgWarner joins Moen Inc., Weyerhaeuser Co. and Johnson Controls Inc., which have prevailed in similar lawsuits.

The BorgWarner lawsuit began in 2009 but was put on hold while the U.S. Supreme Court considered how to interpret bargaining agreements that require companies to provide health benefits to their retired workers. Previously, some federal courts were quick to find these benefits were vested for life—and thus unable to be changed. In 2015, the Supreme Court instructed lower courts to read bargaining agreements as ordinary contracts and not place any “thumb on the scale” in favor of retirees.

The BorgWarner retirees urged the judge to focus less on the Supreme Court’s majority opinion in that case— M&G Polymers USA, LLC v. Tackett—and more on Justice Ruth Bader Ginsburg’s concurring opinion. Ginsburg reminded lower courts that ordinary contract principles can include consideration of extrinsic evidence—including details surrounding the collective bargaining process—in the event contractual language is ambiguous with regard to vesting.

Although Ginsburg’s concurrence has been cited by at least one judge in allowing a retiree benefit lawsuit to proceed, the judge hearing BorgWarner’s case wasn’t persuaded. He specifically rejected any reliance on Ginsburg’s concurrence, adding that the Tackett decision represented a “fundamental shift in the analytical paradigm” for cases involving collectively bargained retiree health benefits.

Given this, the judge said that the parties’ bargaining agreement contained an unambiguous durational limitation on retiree health benefits, which was fatal to the retirees’ claim that the benefits were vested for life.

Judge Paul D. Borman of the U.S. District Court for the Eastern District of Michigan wrote the opinion.

McKnight Canzano Smith Radtke & Brault P.C. represented the retirees. King & Spalding, Miller Canfield and McDermott Will & Emery LLP represented BorgWarner.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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