Resolute Forest Can’t Escape Suit Over Retiree Health Benefits

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 Carmen Castro-Pagan

Resolute Forest Products Inc. lost an early bid to toss allegations that it violated federal law by unilaterally reducing retirees’ health-care benefits ( Reynolds v. Resolute Forest Products, Inc. , E.D. Tenn., No. 1:16-cv-00048, 3/1/17 ).

The collective bargaining agreements concerning the health benefits of retirees from three Resolute plants in Tennessee, South Carolina and Alabama are ambiguous concerning the parties’ intent to vest retiree health-care benefits, Chief Judge Thomas A. Varlan of the U.S. District Court for the Eastern District of Tennessee held March 1. The court must resort to extrinsic evidence to resolve the ambiguity, Varlan said in denying Resolute’s motion to dismiss.

The decision is the latest in a number of cases in which retirees who allegedly were promised lifetime health benefits have been challenging their companies’ efforts to terminate those benefits.

In 2016, four lawsuits were filed against Honeywell International Inc. over its plan to terminate health benefits for retirees. A court in Ohio ruled in favor of the company, while retirees have scored wins in another court in Ohio, and one in Michigan. A court in Connecticut granted an early win to a group of Honeywell retirees, holding later that other groups of retirees weren’t entitled to lifetime benefits.

Other major companies, including BorgWarner Inc., Moen Inc., Weyerhauser Co. and Johnson Controls Inc., have been successful in getting courts to uphold cuts to retiree health-care coverage. Similar challenges are pending against Kraft Heinz Food Co., CONSOL Energy Inc. and Raytheon Co. Besides litigation expenses, these challenges can end up in companies paying millions of dollars in settlements. In February, Century Aluminum Co. agreed to pay $23 million into a trust fund providing health benefits for retirees from a West Virginia plant.

In 2014, Resolute unilaterally replaced the retirees’ health-care benefits with “limited funds” provided through a health reimbursement account, the retirees alleged in their lawsuit. The new coverage was “inferior” to their previous benefits, the retirees said. Seeking to dismiss their claims, Resolute alleged that the CBAs didn’t grant unalterable benefits to the retirees.

Varlan declined to dismiss the lawsuit, holding that more evidence is needed to resolve the ambiguity and to determine the parties’ intent to vest retiree health-care benefits.

Feinstein Doyle Payne & Kravec LLC, Barrett Johnston, Martin & Garrison LLC and the Assistant General Counsel of the United Steelworkers represent the retirees. Seyfarth Shaw LLP and Spears Moore Rebman & Williams represent Resolute.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

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

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