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JOYCE v. CURTISS-WRIGHT CORP.

December 30, 1997

CHARLES A. JOYCE, JOSEPH C. MATESIC, RICHARD A. SAMER and VERNON P. TAYLOR, for themselves and all other persons similarly situated, Plaintiffs, -vs- CURTISS-WRIGHT CORPORATION, Defendant.


The opinion of the court was delivered by: CURTIN

 CURTIN, District Judge

 BACKGROUND

 Plaintiffs commenced this class action against Curtiss-Wright Corporation ("Curtiss-Wright") in December 1989 under section 502 of the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1132 ("ERISA") and Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185 ("LMRA"). Plaintiffs are a class of retired Curtiss-Wright employees who were represented by the United Steelworkers of America ("United Steelworkers"). Plaintiffs currently seek a determination that Curtiss-Wright breached its collective bargaining agreement ("CBA") with the United Steelworkers and violated ERISA when it terminated retiree health insurance benefits for class members in May 1987. Plaintiffs seek not only damages for the breach of the CBA, but specific performance of lifetime retiree health insurance through a permanent injunction prohibiting Curtiss-Wright from terminating retiree health benefits for class members in the future. The central question is whether the health insurance benefits were vested for the lives of plaintiff retirees. If the benefits were vested, then they could not be terminated unilaterally by defendant, and plaintiffs are entitled to relief. If they were not vested, then plaintiffs are not entitled to any relief.

 The court conducted a jury trial from April 22, 1996, to May 7, 1996. On May 7, 1996, the jury returned a special verdict answering each of the following two questions in the affirmative:

 
1. Did the United Steelworkers of America and Curtiss-Wright Corporation, the parties to the collective bargaining agreement, intend that the agreement would require Curtiss-Wright Corporation to continue to provide medical insurance coverage to retirees after the collective bargaining agreement expired?
 
2. Did Curtiss-Wright breach the agreement by failing to pay premiums for retirees' health insurance between May 1, 1987, and July 27, 1987?

 On June 4, 1996, this court entered judgment in favor of the plaintiffs (Item 123). On July 10, 1996, the court vacated this judgment, realizing that the judgment had been entered in error (Item 128).

 On June 18, 1996, plaintiffs filed a motion seeking (1) a permanent injunction enjoining defendant from terminating or reducing retiree health insurance benefits for the lifetime of the class members; (2) an order entering judgment finding that the plaintiff class members are entitled to benefits pursuant to ERISA, and that defendant's termination of retiree health insurance benefits from May 1, 1987, to July 23, 1987, violated its fiduciary duty to class-member participants under ERISA; (3) an order scheduling further proceedings on the amount of damages due to plaintiffs as a result of defendant's breach of its CBA and breach of its fiduciary duty when it terminated health insurance for retiree class members from May 1, 1987, to July 23, 1987; and (4) an award of attorneys' fees and costs pursuant to both ERISA, 29 U.S.C. § 1132(g)(1), and Fed.R.Civ.P. 54(d)(2) (Item 124).

 Defendant does not oppose an order scheduling further proceedings on the amount of damages; however, it suggests that such proceedings be deferred until plaintiffs have assembled, and defendant has had a chance to review, the evidence that would be used to prove such damages, and the parties have then conferred to determine whether further proceedings are necessary. Defendant opposes the three other items of relief requested in plaintiffs' motion, and urges the court to deny plaintiffs' request for a permanent injunction, and enter judgment dismissing plaintiff's claims under ERISA. More specifically, defendant urges the court to find that the retirees' health insurance benefits were not lifetime benefits, but were limited to the specific durational term of the CBA, contrary to the jury's special verdict.

 Defendant has not asked the court to reverse the jury's verdict as a matter of law. At oral argument, defendant explained that the jury verdict was merely a finding that defendant had violated the CBA and that the question remaining for the judge involves equitable remedies and defendant's liability for the future health care costs of the class members.

 The parties entered into a stipulation, that was signed by this court on July 24, 1996, in which defendant agreed not to terminate retiree health insurance benefits before midnight on September 30, 1996 (Item 130). This stipulation was necessary because the CBA then in effect was to expire on August 31, 1996. The parties acknowledged that by entering into this stipulation, defendant did not admit that it has a duty to continue retiree health insurance benefits after August 31, 1996, and that defendant's continuation of such benefits would not be used as evidence that retired employees had any right to the continuation of their health insurance benefits. At oral argument, defendant explained that it has continued to pay the retirees' health benefits during the pendency of this litigation.

 Both sides have supplied the court with numerous memoranda, affidavits, and case authority in support of their positions on the pending motion. They appeared before the court for oral argument on July 22, 1997.

 FACTS

 The United Steelworkers and its Local Union 4533 were the exclusive collective bargaining representatives for production and maintenance employees employed by defendant, including the plaintiff class members prior to their retirement from Curtiss-Wright. In 1965, Curtiss-Wright and the United Steelworkers Local 4533 negotiated a CBA which gave paid insurance benefits to retirees. The CBA stated:

 
Group Life, Hospital and Surgical, and other applicable insurance benefits are covered in a separate Insurance Agreement which will be attached to and become a part of the Agreement as Exhibit "A."

 (Joint Exhibit 7, p. 52, P 190). The Group Insurance Agreement ("GIA") provided retirees and their eligible dependants with certain medical, surgical, hospital, and health-care benefits (Joint Exhibit 1, pp. A-3, B-7 - B-9). This insurance program became effective on July 1, 1966, and it was limited to retirees receiving an early or disability pension under the Curtiss-Wright Pension Plan. The insurance continued until the retiree/dependent died or became eligible for Medicare benefits, whichever occurred first (Item 131, P 16; Joint Exhibit 1, p. B-9).

 The 1965 GIA provided for a right of conversion for employees and the spouses of formerly insured retirees to an individual health insurance policy without evidence of insurability in the event of termination of his/her group health insurance (Joint Exhibit 7). The agreement did not provide for conversion rights for retirees. Under the Curtiss-Wright Pension Plan, an employee could retire as early as age 55.

 Curtiss-Wright distributed a booklet bearing the date 5/66 describing the health insurance for employees, retirees, and dependents of employees and retirees (Joint Exhibit 18). This booklet explained that the insurance would terminate for the retiree or the retiree's dependent when or if (1) the retiree or the dependent reached Medicare age, (2) the retiree died, or (3) the group policy terminated (Id., Part II, p. 4). The booklet also explained the conversion rights that existed for a retiree's dependents, but it did not describe any conversion rights for the retiree (Id.).

 Both the 1965 CBA and the 1965 GIA contained general durational clauses specifying that each agreement would terminate at midnight on November 3, 1968 (Joint Exhibit 1, p. 5; Joint Exhibit 7, p. 55). Neither agreement explains how these general durational clauses affect the specific provision for retiree health coverage until the death of the retiree or the insured's reaching of Medicare age, which are both events that could occur beyond the general durational limits of the agreements.

 In 1968, Curtiss-Wright and the United Steelworkers Local 4533 negotiated a new CBA. Once again, the CBA stated:

 
Group Life, Hospital and Surgical, and other applicable insurance benefits are covered in a separate Insurance Agreement which will be attached to and become part of the Agreement as Exhibit "A."

 (Joint Exhibit 8, p. 47, P 191). The 1968 GIA changed the coverage for retirees providing:

 
Effective November 4, 1968, this insurance, which was formerly referred to as Post Retirement Group Hospital-Medical-Surgical Insurance, will be provided for employees receiving or becoming entitled to receive pension payments under The Curtiss-Wright Pension Plan by reason of the normal, automatic, early or disability retirement provisions of such Plan.

 (Joint Exhibit 2, p. B-11). This insurance agreement specified three conditions under which health coverage would not be provided: (1) to the extent a retiree was covered under another group policy, including Medicare; (2) in the event the retiree moved to a foreign country; and (3) in the event the retiree died.

 The GIA provided for a conversion benefit for employees when their insurance was terminated and for spouses and eligible dependents in the event of a retiree's death (Joint Exhibit 2, p. B-12). As with the 1965 agreement, the 1968 agreement did not provide for any conversion rights for retirees covered by the insurance, nor did it include any express language about the duration of retiree health insurance benefits (see Item 146, pp. 200-01). The 1968-71 CBA contained a general durational clause which stated that "the terms and conditions of this Agreement shall continue in effect until midnight, October 31, 1971." (Joint Exhibit 8, p. 51, P 209). A similar clause with the same date appeared at the end of the GIA.

 At trial, Curtiss-Wright negotiator J.T. Wright testified that he had no recollection of negotiating health insurance benefits during the 1968 negotiations (Item 147, pp. 347-48). He further testified that he did not recall that the agreements provided health insurance for retirees (Id., p. 362). Curtiss-Wright negotiator Art Clark testified that between 1968 and 1971, he understood that retiring employees had lifetime health insurance benefits (Id., ...


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