For a group of former union employees, the appellate
court ruled that a district court erred in concluding that
a Collective Bargaining Agreement unambiguously states that
Philips only "agreed to provide retirees 'basic'
and 'major' medical insurance for the duration of the
2000 CBA."
For a group of former salaried employees, the court
agreed with the retirees that because non-party retirees
who retired before July 1, 2001, still receive benefits,
the health plans are not terminated. The court found LG
Philips had to amend or modify the plans to exclude
plaintiff retirees, and it failed to comply with the
Employee Retirement Income Security Act (ERISA) procedures
to do so; therefore its refusal to provide health benefits
to the retirees is a breach of fiduciary duty.
In its opinion, the 6
th
Circuit said the district court erred under precedent in
construing the CBA for union employees as including a
specific durational clause limiting retiree healthcare
benefits to the duration of the CBA. The court case
establishing the precedent found a durational limitation
must include a specific mention of retiree benefits in
order to apply to such benefits. The 6
th
Circuit determined there is no language in the CBA that
specifically states retiree benefits expire upon the
termination of the agreement.
In addition, the appellate court said a "Medical
Plans" section in the CBA is ambiguous, so the
district court was wrong to not consider the health
plan's Summary Plan Description and extrinsic evidence
when making its decision.
The court also rejected LG Philips argument that a prior
arbitration opinion, in which the arbitrator held that
Philips had no obligation to provide life insurance
benefits to retirees who retired after the expiration of
the CBA, collaterally estops plaintiffs from asserting
their claims. According to the opinion, the precise issue
raised in the present case must have been raised and
actually litigated in the prior proceeding.
For the former salaried employees, the district court
disposed of their claims, saying that "any breach of
fiduciary duty by Defendants must come from the decision
made by defendants' parent company to transfer its
assets and liabilities" to LG Philips. Because this
act was "part of a business decision implemented by
their parent company," the district court held that
"Defendants did not breach an ERISA fiduciary duty
when Plaintiffs [sic] retiree health care benefits were
terminated."
However, the appellate court said the fact that Philips'
decision to transfer assets was not a fiduciary one under
ERISA does not mean that it did not trigger ERISA
obligations. While it "is firmly established . . .
that 'a company does not act in a fiduciary capacity when
deciding to amend or terminate a welfare benefits
plan,'" ERISA still provides instructions as to
how an employer should properly amend or terminate a plan,
the court said.
The case was remanded to the district court for further
proceedings.
The decision in Schreiber v. Philips Display
Components Company is
here
.