“Once more unto the breach, dear friends, once more;”

— William Shakespeare, Henry V, Act III, (1598)

In August, we distributed a WorkCite analyzing the decision of the U.S. Court of Appeals for the Fourth Circuit in Quesenberry v. Volvo Trucks North America, which held that the employer could not unilaterally modify its union retirees’ medical benefits because the employer had agreed to follow a specific bargaining process before making changes in those benefits.

On August 22, 2011, the same court decided another case involving a collectively bargained retiree health plan, Dewhurst v. Century Aluminum Company. In Dewhurst, the court refused to enjoin the employer’s plan to unilaterally modify the retirees’ medical benefits, holding that the retirees failed to show a likelihood of success on the merits because the health benefits did not appear to be vested under either the plan document or the collective bargaining agreement (CBA) and the retirees failed to show that the employer had a duty to continue retiree medical benefits at the end of the CBA.

MW Comment: Dewhurst did not decide the merits of the dispute, only that the retirees’ claim was not likely to succeed and therefore an injunction against the employer would not be proper.

Dewhurst emphasizes that retiree medical benefits do not presumptively vest. As the court previously discussed in Quesenberry, a court looks to the language in the CBA to determine whether retiree medical benefits extend beyond the term of the CBA.

Quesenberry dictates that a court must review the language of the CBA as a whole for “any clear manifestation of the parties’ intent.” Clear wording that the benefits do not vest entitles the employer to summary judgment.

If there is ambiguity in the CBA, the court will consider extrinsic evidence of the parties’ intent, which ordinarily requires a trial. For retiree medical claims brought under Section 301 of the Labor Management Relations Act as a breach of the CBA, this could be a jury trial because the Fourth Circuit (as discussed in our earlier WorkCite) has not ruled whether jury trials are appropriate in these cases.

Because the Quesenberry Court concluded that the CBA required the employer to follow an agreed-upon bargaining process before unilaterally modifying the retirees’ benefit, it had no need to explain whether it had presumed that the retirees had a vested interest in their coverage under the plan. However, in Dewhurst, the vesting issue was squarely presented to the court.

Court Refuses to Follow Yard-Man

In Dewhurst, the retirees argued that the Fourth Circuit should follow UAW v. Yard-Man, Inc., one of the earliest appellate decisions to consider collectively bargained retiree medical benefits. The decision was perceived as creating a rule that retiree medical benefits are “status” benefits that continue as long as an individual’s “retiree” status continues: in other words, there should be an inference of vesting. This made it difficult for employers to obtain summary judgment and forced trials featuring extrinsic evidence of retirees’ allegations that they were told they would always have these benefits.

By inferring an intention to vest retiree health plan coverage, Yard-Man made the express words of many CBAs ambiguous and essentially shifted to the employer the burden of disproving that the parties intended to vest retiree medical benefits.

The Fourth Circuit refused to adopt this Yard-Man inference, observing that the Sixth Circuit itself rejected the Yard-Man inference of vested benefits:

This [c]ourt has never inferred an intent to vest benefits in the absence of either explicit contractual language or extrinsic evidence indicating such an intent…. All that Yard-Man and subsequent cases instruct is that the [c]ourt should apply ordinary principles of contract interpretation. Yolton v. El Paso Tennessee Pipeline Co. (6th Cir. 2006).

The “Durational Language” Rule of Royal Coal

In District 29 UMWA v. Royal Coal Co. (4th Cir. 1985), the Fourth Circuit determined that retiree medical benefits did not extend beyond the CBA term because the CBA stated that benefits “shall be guaranteed during the term of this Agreement.” Based on this language, the court determined the benefits did “not extend beyond the expiration of” the CBA, and stated that employer obligations and employee rights, under a CBA “do not survive the expiration of the agreement absent a clear intention of the parties.”

In Quesenberry, the court acknowledged the Royal Coal rule, but found that other language in the CBA indicated that the parties intended retiree medical benefits to extend past the CBA term. Dewhurst reiterates the view of the Fourth Circuit that there is no vesting of retiree medical benefits absent a clear and express statement providing for vested benefits.

Conclusion

Having affirmed denial of the retirees’ motion for preliminary injunction, the Fourth Circuit sent the case back to the district court for a proceeding on the merits. Given the decision of the Fourth Circuit in Dewhurst, expect the employer to ultimately prevail on summary judgment.