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Bailey v. AK Steel Corp.

September 22, 2006

MICHAEL A. BAILEY, ET AL., PLAINTIFFS,
v.
AK STEEL CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Judge Michael R. Barrett

ORDER

This matter is before the Court on Plaintiffs' Motion for a Preliminary Injunction (Doc.11) which was filed on August 4, 2006. Defendant, AK Steel Corporation, filed a Memorandum in Opposition (Doc. 17) on August 25, 2006. Plaintiffs' Reply Memorandum of Points and Authorities (Doc. 21) was filed on September 6, 2006. Defendant filed a Sur-Reply Memorandum (Doc. 23) on September 8, 2006. A hearing was held before this Court on September 13, 2006. Both parties were present at the hearing and presented oral argument to the Court. This matter is now ripe for review. For the reasons set forth below, the Court finds that Plaintiffs' Motion for a Preliminary Injunction is well taken and is hereby GRANTED.

PROCEDURAL BACKGROUND

On July 18, 2006 Plaintiffs filed a Class Action Complaint for Breach of Labor Contracts and for Breach of ERISA Welfare Plans (Doc. 1) against AK Steel Corporation.*fn1

The Court has jurisdiction over this matter pursuant to Section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, Section 502 of the Employment Retirement Income Security Act of 1974, as amended (ERISA), 29 U.S.C. §1132, and 28 U.S.C. § 1331, as the claims arise under the laws of the United States. Plaintiffs represent a proposed class of approximately 4500 individuals (Doc. 1, ¶9, Doc. 14, ¶9). The Complaint consists of two classes. Class I consists of retirees and their spouses, surviving spouses and/or dependents who retired from AK Steel Corporation, or its predecessors, under certain collective bargaining agreements covering hourly production, maintenance and service employees. Class II consists of retirees and their spouses, surviving spouses and/or dependents who retired from AK Steel Corporation, or its predecessors, under certain collective bargaining agreements covering salaried non-exempt employees. (Doc. 1, ¶2). The Motion for Preliminary Injunction is limited to only the collective bargaining agreements covering hourly production, maintenance and service employees.

UNDERLYING FACTS

The Plaintiffs (and the proposed class) are individuals who retired between 1950 and the present under various collective bargaining agreements negotiated between Armco Employees Independent Federation, Inc. ("AEIF" or "the Union")*fn2 and Defendant AK Steel Corporation ("AK Steel" or "the Company") or its predecessors (Doc. 1, ¶¶1 and 2, Doc. 14, ¶1). Each collective bargaining agreement ("CBA") was a multi-year agreement that provided the terms and conditions of employment for employees represented by the Union (Doc. 1, ¶6, Doc. 14, ¶6). Prior to or upon the expiration of the then current CBA the Union and AK Steel would negotiate the terms of a new CBA. Each CBA provides for health insurance benefits for active and retired employees of AK Steel. Each CBA incorporates by reference the health benefit plan, collectively known as the "Insurance Benefit Plan" ("the Plan")(Doc. 1, ¶8, Doc. 14, ¶8). The Insurance Benefit Plan includes medical, prescription, dental, vision, Medicare subsidy benefits, life insurance and related benefits for the active and retired employees and their spouses and dependents. This Plan is provided at virtually no cost to the retirees (Doc. 1, ¶9, Doc. 14, ¶9).

The most recent CBA expired on February 28, 2006. Unfortunately, the Union and AK Steel were unable to come to an agreement on a new CBA. AK Steel locked out its union represented employees on March 1, 2006 following a vote a by an overwhelming majority of the union represented employees to authorize a strike. (Perkins Decl. ¶ 3 and 4). On June 1, 2006 AK Steel announced that it was terminating the Insurance Benefit Plan for retirees effective October 1, 2006 and implementing a new retiree insurance program. The new retiree insurance program includes monthly premiums to be paid by the retirees. It also terminates the dental, vision and medicare subsidy benefits, and reduces the life insurance benefits for retirees. Pre-Medicare eligible retirees and dependents may keep their current medical and prescription drug benefits for a $55 per person per month premium. Medicare eligible retirees and dependents must pay a $163 per person per month premium plus $88.50 per person per month for Medicare Part B. On January 1, 2007 the cost and benefits will change again. (Simon Decl. Ex. 7).

Plaintiffs allege that AK Steel is not permitted to change the Insurance Benefit Plan as to retirees as those benefits vested upon the retiree's retirement. AK Steel alleges that it does, in fact, have the right to terminate benefits and that the benefits are not vested for retirees.

LAW AND ANALYSIS

In determining whether to grant injunctive relief, the trial court must balance and weigh the following factors: (1) the plaintiffs' likelihood of success on the merits, (2) the existence of irreparable harm to the plaintiffs in the absence of an injunction, (3) whether others will be harmed if an injunction is issued, and (4) the public's interest in issuing an injunction. McPherson v. Michigan High Sch. Athletic Ass'n, Inc., 119 F.3d 453, 459 (6th Cir. 1997). These factors are not prerequisites to issuing an injunction but factors to be balanced. See Unsecured Creditors' Comm. of DeLorean Motor Co. v. DeLorean, 755 F.2d 1223, 1229 (6th Cir. 1985). The Court, however, should not issue a preliminary injunction where there is no likelihood of success on the merits. Michigan State AFL-CIO v. Miller, 103 F.3d 1240, 1249 (6th Cir. 1997).

I. Plaintiffs Likelihood of Success on the Merits

Retiree insurance benefits are welfare benefit plans under ERISA. Maurer v. Joy Techs., Inc., 212 F.3d 907, 914 (6th Cir. 2000). ERISA does not require that retiree insurance benefits be vested but such benefits may vest if the parties agree to vesting. International Union, United Auto., etc. v. Yard-Man, Inc., 716 F.2d 1476, 1479 (6th Cir. 1983). Whether retiree insurance benefits continue beyond the expiration of the collective bargaining agreement depends upon the intent of the parties. Id., citing John Wiley & Sons v. Livingston, 376 U.S. 543, 555, 11 L.Ed. 2d 898, 84 S.Ct. 909 (1964). See also Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 578 (6th Cir. 2006) (To prove this, the plaintiffs must show that the defendant and the union intended to include a right to lifetime benefits when they negotiated the CBAs at issue). The basic principles of contract interpretation are appropriate for determining the parties' intent in collective bargaining agreements. Yard-Man, Inc., 716 F.2d at 1479. The court should first look to the explicit language of the collective bargaining agreement for clear manifestations of intent. Id. citing Kellogg Co. v. NLRB, 457 F.2d 519, 524 (6th Cir. 1972). The Court should also look to the context which gave rise to the inclusion of the clause being interpreted and interpret each provision in question as part of the integrated whole while considering the relative positions and purposes of the parties. Id. See also Kellogg Co., supra, 457 F.2d at 524; Florida Canada Corp. v. Union Carbide & Carbon Corp., 280 F.2d 193 (6th Cir. 1960). The terms of the collective bargaining agreement shall be construed so as to render none nugatory and avoid illusory promises. Yard-Man, Inc.,716 F.2d at 1480. Where ambiguities do exist, the court may consider other words and phrases in the collective bargaining agreement for guidance. Id. The Court should also "review the interpretation ultimately derived from its examination of the language, context and other indicia of intent for consistency with federal labor policy. This is not to say that the collective bargaining agreement should be construed to affirmatively promote any particular policy but rather that the interpretation rendered not denigrate or contradict basic principles of federal law." Id.

A. Article XVIII, Section C

The Company asserts that it has the right to terminate the Insurance Benefits Plan based on the following language contained in the CBAs at Article XVIII, Insurance, Section C - Termination:

Notwithstanding the provisions of Article XXVI of this Agreement [the general duration provision which provides for an expiration date of February 28, 2006], the Insurance Benefits Plan shall remain in effect until July 31, 2006, and thereafter subject to the right of either party to terminate on 120 days' written notice served on or after April 3, 2006.*fn3

AK Steel contends that this is a specific durational clause that is clear and unambiguous. Despite assertions to the contrary by AK Steel, the Court finds this clause to be ambiguous and the intent of the parties to be unclear. The clause "the Insurance Benefits Plan shall remain in effect until July 31, 2006" could be read to mean, as the Defendants assert, that the Plan and the underlying benefits remain in effect until such date as to current employees and as to previously retired employees. Or, it could be read to mean, as Plaintiffs assert, that the Plan and the underlying benefits remain in effect until such date as to current employees only. This ambiguity requires a review of other provisions of the CBA for evidence of intent and an interpretation that is consistent with the entire CBA agreement. See Yard-Man, supra at 1480.

The Sixth Circuit in Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571(6th Cir. 2006) addressed a similar fact pattern to that that is before this Court. In Yolton the relevant durational clause in the CBA stated "The group insurance plan agreed to between the parties will run concurrently with this Agreement and is hereby made a part of this Agreement." Basically, the group insurance plan would expire at the same time the CBA expired. The Defendants in Yolton, like AK Steel here, argued that this clause was clear and explicit language demonstrating that health insurance benefits were not intended to vest and were only to last as long as the CBA. The district court in Yolton found that "a number of courts have held that such general durational provisions only refer to the length of the CBAs and not the period of time contemplated for retiree benefits." Yolton, supra at 580, citing Yolton v. El Paso Tenn. Pipeline Co., 318 F. Supp. 2d 455, 467. "Absent specific durational language referring to retiree benefits themselves, courts have held that the general durational language says nothing about those retiree benefits. Id. (emphasis added); see also Yard-Man, 716 F.2d at 1482; Schalk v. Teledyne, Inc., 751 F. Supp. 1261, 1265 (W.D. Mich. 1990), aff'd 948 F.2d 1290 (6th Cir. 1991) ("the existence of a general durational clause which provide[s] that the collective bargaining agreement should remain in effect until a certain date does not demonstrate an intent that all benefits described in the agreement also terminate[ ] on that date."). The Court went on to state:

The durational language only affects future retirees -- that is, someone who retired after the expiration of a particular CBA would not be entitled to the previous benefits, but is rather entitled only to those benefits newly negotiated under a new CBA. Thus, the retirement package available to someone contemplating retirement will change with the expiration and adoption of CBAs, but someone already retired under a ...


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