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Ohio: Employer Must Continue Retiree Health Benefits After Closing Plant

By Susan R. Heylman  7/29/2014
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Retirees, spouses and dependents of Moen’s Elyria, Ohio, plant have vested lifetime retirement health care benefits under their collective bargaining agreement, an Ohio federal court ruled. The court issued a permanent injunction enjoining Moen from terminating the retirement health care benefits for the class of plaintiffs in the case.

The ruling was sought by a class of the company’s retirees, their spouses and dependents, and the United Automobile Workers union, in a suit that claimed that the company intended to end retirement health benefits even though the parties had long agreed that these retirement benefits would be lifetime benefits. Moen claimed, however, that the benefits were not vested lifetime benefits and that it could terminate them. 

In issuing the injunction, the federal court evaluated whether the collective bargaining and plant closing agreements were unambiguous about the vesting of retirement health care benefits, the impact of extrinsic evidence on the question of vesting, and the impact of the summary plan description.

Unambiguous Language of Agreements

The court held that the collective bargaining agreements unambiguously granted vested, lifetime health care benefits for retirees.

“The collective bargaining agreement language; the collective bargaining agreement negotiations; the defendant’s statements during collective bargaining; and the parties’ long history of not changing retiree health insurance benefits even while reducing current employee benefits show that the parties intended to vest retirees’ right to the health insurance benefits,” the court concluded.

“Perhaps even more important, Moen agreed to a shut down agreement with the union that agreed that retirees would continue even though the union would no longer have a collective bargaining agreement with Moen.”

Extrinsic Evidence

Because the court found that the agreements showed an intent to vest retirees with a right to health insurance, extrinsic evidence was unnecessary. The court noted, however, that the extrinsic evidence also showed the parties’ intent to vest the right to retiree health insurance benefits.

For example, the court said, the fact that Moen had continued to pay the benefits for six years after it had closed the Elyria plant and terminated the collective bargaining agreement with the union was evidence that it understood the benefits were vested.

Summary Plan Description

Although Moen argued that a pension summary plan description included minor changes and the union did not object, so that there was no meeting of the minds on vesting, the court rejected the argument. Nothing in the summary plan description reserved Moen’s right to terminate the benefits.

In addition, the law did not require contracting parties to share a subjective meeting of the minds to establish a valid contract, and in any event, the contract was unambiguous so an objective meeting of the minds had occurred.

Gallo v. Moen Inc., N.D. Ohio, No. 1:13-CV-02440 (June 23, 2014).

Susan R. Heylman, J.D., is a freelance legal writer and editor based in the Washington, D.C., area.
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