Int'l Union, United Auto., Aerospace & Agric. Implement Workers of Am. (UAW) v. Kelsey-Hayes Co.

130 F.Supp.3d 1111

International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), et al., Plaintiffs,

v.Kelsey–Hayes Company, et al., Defendants.

Case No. 11–CV–14434

United States District Court, E.D. Michigan, Southern Division.

Signed September 17, 2015

Stuart M. Israel, John G. Adam, Legghio & Israel, P.C., Royal Oak, MI, William A. Wertheimer, Jr., William A. Wertheimer Assoc., Bingham Farms, MI, for Plaintiffs.

Gregory V. Mersol, Todd A. Dawson, Baker & Hostetler LLP, Cleveland, OH, for Defendants.

ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT [DOC. 85], AND GRANTING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND PERMANENT INJUNCTION [DOC. 86]

GEORGE CARAM STEEH, UNITED STATES DISTRICT JUDGE

This is a class action case brought by plaintiff retirees alleging breach of collective bargaining agreement ("CBA") under Section 301 of the Labor–Management Relations Act ("LMRA"), 29 U.S.C. § 185, and for breach of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq ., and breach of fiduciary duty in violation of ERISA. Plaintiff International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America ("UAW" or "Union") sues for breach of the CBA under LMRA Section 301. The plaintiff class was previously certified by the court. [Doc. 92].

In 1998 defendant Kelsey–Hayes entered into a CBA with the UAW which represented the employees of its Detroit manufacturing plant. The 1998 CBA provided comprehensive healthcare coverage to its retirees and their surviving spouses. In 2001, Kelsey–Hayes closed its Detroit manufacturing plant and negotiated the Plant Closing Agreement with the Union. The Plant Closing Agreement addressed benefits provided to retirees, the effect of the Plant Closing Agreement on previous CBAs, and a method for resolving disputes arising out of the agreement. The named plaintiffs before the court today each retired prior to the Detroit plant's closure on April 17, 2001.

Kelsey–Hayes continued to provide healthcare benefits under the terms of the 1998 CBA for ten years after the plant closed. In September 2011, Kelsey–Hayes announced plans to terminate retiree participation in the retiree healthcare plan and required retirees to purchase individual plans for Medicare supplemental insurance paid for out of company funded Health Reimbursement Accounts ("HRA").

In October 2011, the retirees filed this suit alleging breach of the CBAs under Section 301 of the LMRA and violation of an ERISA benefit plan against Kelsey–Hayes and TRW Automotive Holdings Corp. ("TRW"), and breach of fiduciary duty under ERISA against TRW. The complaint also alleges that Northrop Grumman is liable for damages as the successor to TRW, Inc. if TRW or Kelsey–Hayes terminate the plan or otherwise reduce retiree benefits.

Kelsey–Hayes and TRW moved for an order to compel arbitration relying on the Plant Closing Agreement's general arbitration clause. Defendant Northrop Grumman filed a separate motion to compel arbitration. The district court (J. Cook) initially granted the motions to compel arbitration in their entirety. Upon reconsideration, the district court reversed itself in part, finding that a subset of plaintiffs—those who had retired prior to the plant closing in 2001—could not be bound by the terms of the Plant Closing Agreement because their rights had already vested under the 1998 CBA. The 1998 CBA provides that any healthcare-related disputes are exempt from otherwise applicable provisions requiring disputes to be resolved through arbitration.

Kelsey–Hayes appealed, and the Sixth Circuit (Rogers, Griffin, Donald) affirmed, holding that the employees who retired prior to the 2001 Plant Closing Agreement did not consent to the terms of the Plant Closing Agreement and could not be compelled to arbitrate under provisions contained in that agreement. UAW v. Kelsey–Hayes, 557 Fed.Appx. 532 (6th Cir.2014).

Defendants moved to stay this litigation pending the Supreme Court's ruling in M & G Polymers USA, LLC v. Tackett . In that case, the Supreme Court took up the issue of how to interpret silence concerning the duration of retiree health-care benefits when construing collective bargaining agreements. This court agreed to stay this litigation, and the Supreme Court issued its opinion on January 26, 2015. Tackett, ––– U.S. ––––, 135 S.Ct. 926, 190 L.Ed.2d 809 (2015). The parties re-filed their motions for summary judgment, and re-briefed their arguments to incorporate the Supreme Court's decision.

FACTS

The plaintiffs are medicare-eligible retirees who worked at a Detroit automotive plant owned by Kelsey–Hayes from 1992 until 2000. The plaintiffs were production and maintenance employees, and were represented for collective bargaining purposes by the UAW. The last of a series of CBAs was negotiated in 1998, which incorporated two separate documents covering insurance benefits, referred to as Supplement H and Supplement H–1.

There are many entities involved in the history of the Detroit facility. Kelsey–Hayes owned and operated the facility from 1992 until 2000. The UAW represented the production and maintenance workers at the Detroit facility prior to its closure in 2001. Lucas Varity was the parent corporation of Kelsey–Hayes from 1996 to 1999. Lucas Varity sold its assets to TRW, Inc., a competitor, who was the parent corporation of Kelsey–Hayes from 1999 until 2002. Kelsey–Hayes remained the owner of the plant until American Commercial Industries (ACI) purchased the Detroit facility from TRW, Inc. in 2000 and owned it until 2001. ACI assumed the UAW CBA existing at the time of the acquisition. Kelsey–Hayes retained the right to re-assume operation of the facility if ACI became insolvent, which it did. Kelsey–Hayes took financial responsibility for the Detroit operation in October 2000, while ACI retained ownership of the facility and the CBA with the UAW. The plant closed in 2001.

In connection with the closing of the Detroit facility, the UAW negotiated a Plant Closing Agreement with ACI. TRW Inc. was a party to the agreement as Kelsey–Hayes' parent. The UAW waived all claims against these entities on behalf of its members. The only qualification to the waiver was that the closing agreement did not extinguish pension or retiree health care obligations owed by ACI or TRW, Inc., to the extent that either entity had any such obligations "under applicable law and benefit plans (including those provisions contained in collective bargaining agreements)." (Release, para.5).

In 2002, Northrop Grumman acquired TRW, Inc. Northrop Grumman sold a portion of the former TRW, Inc.'s automotive assets to a private equity firm. These assets were then conveyed to a new business known as TRW Automotive Holdings Corp. (TRW) . TRW went public in 2004 and is the present parent entity of Kelsey–Hayes. The name TRW is an asset purchased from Northrop Grumman; there is no historical relationship with or continuity from the prior TRW Inc. entity. The defendants in this case are Kelsey–Hayes, TRW and Northrop Grumman.

Since the Detroit plant closed and the 1998 CBA expired, retirees have experienced a number of changes in their health insurance coverage. In 2007, Kelsey–Hayes changed insurance carriers from Blue Cross Blue Shield of Michigan to Meritain, and in 2009 from Meritain to Humana. No individual or entity objected to these changes.

Changes in Medicare benefits and regulations over the years led to private companies offering "Medigap" plans, which cover costs not covered by Parts A, B and D (prescription drugs). Tax-free Health Reimbursement Accounts (HRA) also became available to pay the cost of so-called gap coverage. On September 14, 2011 Kelsey Hayes sent letters to retirees and surviving spouses explaining that beginning January 1, 2012, it was establishing HRAs for all retirees over the age of 65 and their eligible dependents, in lieu of the group insurance plan under which they previously were covered. Kelsey–Hayes contributed $15,000 to each participant's HRA in 2012 and $4,800 to each participant in 2013 and 2014. A retiree and spouse would have a combined three-year total of $49,200 in HRA funds. Kelsey–Hayes has made no assurances of funding the HRAs beyond 2014. In the Summary Plan Description (SPD) explaining the HRAs, Kelsey–Hayes declared it "may, at any time" "decrease or eliminate the amount that is allocated to your HRA account each year" and "reserves the right to amend, modify, suspend, replace or terminate any of its plans, policies or programs (including the HRA), in whole or in part, at any time and for any reason."

Kelsey–Hayes has been able to provide insurance coverage through the HRAs at a substantially lower cost than a group insurance plan. With the funds provided by Kelsey–Hayes, the retirees can purchase the most comprehensive medicare supplemental insurance available as well as cover virtually anything left over from Medicare Parts A and B. Plaintiffs argue that the 1998 CBA provided them with a vested, lifetime right to unalterable retiree health insurance. According to plaintiffs, the HRAs shift company costs, administrative responsibilities and expenses, and financial risks to retirees and violate the 1998 CBA, the Plant Closing Agreement and ERISA.

The UAW and Kelsey–Hayes went to arbitration on the claims of the post-closing retirees. Arbitrator Paul Glendon granted the UAW's motion for summary judgment and injunctive relief on January 18, 2013. The Award directs that Kelsey–Hayes "forthwith shall rescind" the 2012 changes and "reinstate" and "restore" the "coverages" in force before 2012. The Award concludes that the 1998 CBA promised retirees "the vested right " to the "medical plan coverages" "for their lifetimes, " and that Kelsey–Hayes breached the 1998 CBA by imposing the HRAs.

ANALYSIS

I. Background

"Section 301 of the LMRA provides a federal right of action for ‘violations of contracts between an employer and a...