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Pacheco v. Honeywell International Inc.

United States Court of Appeals, Eighth Circuit

March 21, 2019

Augustine Pacheco; Vicki Hansen, for themselves and others similarly-situated Plaintiffs - Appellees
Honeywell International Inc. Defendant-Appellant

          Submitted: December 12, 2018

          Appeals from United States District Court for the District of Minnesota - Minneapolis

          Before LOKEN, MELLOY, and ERICKSON, Circuit Judges.


         This is a class action filed in November 2017 by former Minnesota employees of Honeywell International Inc. who retired before age 65 during the terms of Honeywell's 2007 and 2010 collective bargaining agreements (CBAs) with Local 1145 of the International Brotherhood of Teamsters. Plaintiffs alleged that Honeywell's announced plan to terminate early retiree healthcare benefits at the end of 2017 breached the CBAs and violated the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et. seq, because those healthcare benefits vested when each class member retired.[1] On December 29, 2017, and January 31, 2018, the district court granted Plaintiffs a provisional and then a final preliminary injunction, concluding they had a "fair chance of prevailing" on their claims of vested healthcare benefits. Honeywell appeals these orders. On February 20, 2018, the Supreme Court issued its decision in CNH Indus. N.V. v. Reese, 138 S.Ct. 761 (2018). We agree with the Sixth Circuit that Reese is controlling and conclude that, under Reese, Plaintiffs' retiree healthcare benefits are not vested as a matter of law. Therefore, we reverse.


         "When collective-bargaining agreements create pension or welfare benefits plans, those plans are subject to rules established in ERISA." M & G Polymers USA, LLC v. Tackett, 135 S.Ct. 926, 933 (2015). ERISA treats pension plans and welfare benefit plans differently. The statute "imposes elaborate minimum funding and vesting standards for pension plans," but it "explicitly exempts welfare benefits plans from those rules," leaving employers generally free "to adopt, modify, or terminate welfare plans" "for any reason at any time." Id. (citation omitted). However, though welfare benefits "do not automatically vest as a matter of law" under ERISA, employers and unions may contractually agree to extend welfare benefits beyond the expiration of a CBA. Anderson v. Alpha Portland Indus., Inc., 836 F.2d 1512, 1516 (8th Cir. 1988). Whether the parties to a CBA intended that the employer would provide vested welfare benefits is a question of contract interpretation. Id.

         In UAW v. Yard-Man, Inc., the Sixth Circuit held that, when an employer and union "contract for benefits which accrue upon achievement of retiree status, there is an inference that the parties likely intended those benefits to continue as long as the beneficiary remains a retiree." 716 F.2d 1476, 1482 (6th Cir. 1983), cert. denied, 465 U.S. 1007 (1984). Like most other circuits, we never adopted the Yard-Man inference; indeed, we explicitly rejected it as contrary to the statutory exemption of welfare benefits from ERISA's vesting requirements. See Anderson, 836 F.2d at 1517. Rather, we have consistently held that "[t]he absence of any explicit vesting language in [a CBA] is strong evidence of the parties' intent to limit retiree benefits to the term of the [CBA]." John Morrell & Co. v. UFCW, 37 F.3d 1302, 1307 (8th Cir. 1994); see Crown Cork & Seal Co. v. AFL-CIO, 501 F.3d 912, 917-18 (8th Cir. 2007); Anderson, 836 F.2d at 1517-18.

         In Tackett, the Supreme Court expressly rejected the Yard-Man inference "as inconsistent with ordinary principles of contract law." 135 S.Ct. at 937. Yard-Man and later Sixth Circuit decisions erred in "refus[ing] to apply general durational clauses to provisions governing retiree benefits," the Court explained, "requiring a contract to include a specific durational clause for retiree health care benefits to prevent vesting." Id. at 936. "Similarly, the Court of Appeals failed to consider the traditional principle that contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement." Id. at 937 (quotation omitted). Applying this traditional principle, "when a contract is silent as to the duration of retiree benefits, a court may not infer that the parties intended those benefits to vest for life." Id. The Court reiterated these principles in Reese, 138 S.Ct. at 766. Thus, our task in resolving this appeal is to interpret the retiree healthcare benefit provisions of Honeywell's 2007 and 2010 CBAs, applying the ordinary contract principles articulated in Tackett and Reese.


         The retiree healthcare benefit provisions at issue are found in Article 24 of the 2007 and 2010 CBAs. Section 1 provided, "The following insurance and benefit plans . . . shall be implemented and maintained as specified by the time periods outlined below for the duration of this agreement." (Emphasis added.) Section 2 provided that healthcare benefits for those who retired under age 65 prior to May 1, 2007 "will be provided . . . as negotiated under the previous [CBA]." Sections 3 to 6 specified healthcare benefit and benefit contribution levels. Section 8 specified Pension Benefit levels. Sections 9 to 12 provided savings plan and insurance benefits. Section 7, which set forth the new "Retiree Health Care (Pre 65 only)" benefits at issue on appeal, provided:

The subject of health care benefits for existing and future retirees, their dependents and surviving spouses . . . will be a mandatory subject of bargaining for all future collective bargaining agreement negotiations.
For all retirees prior to May 1, 2007, the Company will provide healthcare benefits as per the prior collective bargaining agreement, without regard to the limit described below.
[F]or all retirees after April 30, 2007 the limit upon the Company's contribution for post retirement health benefits shall be 2.0 times the 2007 ...

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