Sixth Circuit Affirms District Court, Rejects Retirees' Claim to Lifetime 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...

A class of retired union employees of Acument Global Technologies Inc. are not entitled to lifetime health care benefits because of a collective bargaining agreement that contained a reservation-of-rights clause allowing their employer to modify or terminate benefits, the U.S. Court of Appeals for the Sixth Circuit ruled Sept. 17 in a 2-1 decision (Witmer v. Acument Global Technologies Inc., 6th Cir., No. 11-1793, 9/17/12).

Writing for the majority, Judge Jeffrey S. Sutton found that the CBA's reservation-of-rights clause was “incompatible” with a promise to provide lifetime benefits and that the CBA's mention of “continuous health insurance” did not change the fact that the employer was free to modify or terminate health benefits at any time.

In so holding, the Sixth Circuit affirmed a decision of the U.S. District Court for the Eastern District of Michigan.

Dispute Over Lifetime Health Coverage.

The plaintiffs were former employees of Acument who retired under a series of CBAs that included provisions for retiree health care and life insurance coverage. The CBAs all contained a reservation-of-rights clause giving Acument the right to amend, modify, suspend, or terminate the plan after the CBAs expired. In addition, some of the retirees at issue were covered by plant closing agreements that acknowledged their right to certain benefits.

In January 2008, Acument reduced health benefits for retirees and their spouses. Four months later, Acument announced it would terminate retiree health and life insurance benefits, and the retirees brought a lawsuit seeking reinstatement of their benefits at pre-2008 levels.

In January 2009, the U.S. District Court for the Eastern District of Michigan certified the case as a class action (21 PBD, 2/4/09; 36 BPR 312, 2/10/09). In November 2010, the district court struck the retirees' request for a jury trial (222 PBD, 11/19/10; 37 BPR 2551, 11/23/10), and in May 2011, it granted summary judgment to Acument, finding that the retirees were not entitled to receive lifetime health care and life insurance benefits (104 PBD, 5/31/11; 38 BPR 1062, 6/7/11). The retirees appealed to the Sixth Circuit.

No Lifetime Health Benefits.

In upholding the district court's ruling that the retirees could not claim lifetime benefits, the Sixth Circuit found that the CBA in question contained a reservation-of-rights clause providing that Acument “reserves the right to amend, modify, suspend, or terminate the Plan.” This language was “incompatible with a promise to create vested, unchangeable benefits,” the court found.

Further, the CBA language granting “continuous health insurance” did not create vested lifetime benefits, the court found, because this language appeared in the same section as the reservation-of-rights clause. The purpose of the phrase “continuous health insurance” was to show that benefits did not automatically terminate upon expiration of the CBA, not to vest the retirees with lifetime coverage that could never be modified, the court found.

The court also rejected the retirees' contention that the relevant CBA section's references to the “pension plan” signaled that health care benefits were not subject to the reservation-of-rights clause. Instead, the court found that the “pension plan” references necessarily referred to both retirement income benefits and retiree health care benefits, and that the reservation-of-rights clause applied equally to both.

John R. Canzano of McKnight McClow Canzano Smith & Radke, counsel for the retirees, told BNA Sept. 17 that he disagreed with the Sixth Circuit's application of the summary judgment standard.

“In the summary judgment context, all doubts should be resolved against the moving party,” Canzano said. “Here, the appeals court engaged in what can only be described as fact finding--which is the district court's job--which contravenes the summary judgment standard and is an act of inappropriate judicial activism.” Canzano said that, because “there were two reasonable interpretations of the contract language,” the court should have considered the “extensive extrinsic evidence” to resolve the ambiguity.

Judge Richard A. Griffin joined in the court's opinion.

Judge David D. Dowd Jr., sitting by designation from the U.S. District Court for the Northern District of Ohio, authored a separate dissent, concluding that the language of the CBA was “poorly drafted” and “not a model of clarity” and that the case should be remanded to the district court for consideration of extrinsic evidence of the parties' intent with respect to vesting of health care benefits.

The retirees were represented by John R. Canzano of McKnight McClow Canzano Smith & Radke, Southfield, Mich. Acument was represented by Donald A. Van Suilichem and Kelly A. Van Suilichem of Van Suilichem & Associates, Bloomfield Hills, Mich.

By Jacklyn Wille  

The full text of the opinion is at

Request Pension & Benefits Daily™