Alcoa Retiree Health Benefits Dispute Headed for Trial

October 19, 2007 (PLANSPONSOR.COM) - A federal judge in Tennessee has turned away a request from a group of Alcoa retirees for an emergency court order mandating Alcoa Inc. not to drop their company health coverage.

U.S. District Judge Thomas W. Phillips of the U.S. District Court for the Eastern District of Tennessee also denied a plaintiffs’ request for a jury trial on claims that the company wanted to end benefits that were actually vested for the retirees’ lifetime and required under a union contract.

Phillips decided after reviewing a stack of legal documents relating to the Aloca retiree health benefits that the contested issue – whether the company could drop the coverage – was not sufficiently clear. He ordered further court hearings to examine the employer’s intent with the retiree benefits and whether Phillips should issue a preliminary injunction blocking any benefits changes.

According to the court, many of the relevant bargaining agreements indicated that Alcoa could change the retirees’ benefits or put caps on the amount of benefits it would provide.

However, Phillips said, the bargaining agreements along with summary plan descriptions issued to the retirees appeared to tie continued medical benefits to an employee’s eligibility for pension benefits and the 6 th U.S. Circuit Court of Appeals has repeatedly held that tying retiree health benefits to pension status is a strong indicator that the health benefits were vested, the district court said.

“Upon a careful review of the relevant contract documents, the court concludesthat they are ambiguous,” Phillips wrote in the opinion. “Reading the documents as a whole, it appears that the right hand often gives what the left hand attempts to take away. Under the circumstances, I find that extrinsic evidence will be admissible to determine the intent of the parties to the contracts. At this point, plaintiffs have not shown a likelihood of success on the merits. For that matter, neither has the defendant.

The ruling came in a lawsuit by a group of Alcoa retirees who had left the company between June 1, 1993, and June 30, 2006. The suit asserted that the plaintiffs, their spouses, and the surviving spouses of deceased retirees had lifetime retiree health benefits that could not be altered by Alcoa (See  Steelworkers Sue Alcoa over Retiree Health Coverage Cutbacks ).

The suit said the benefits were protected by the Employee Retirement Income Security Act (ERISA) and the Labor Management Relations Act (LIMRA). According toPhillips, the 6 th  Circuit has ruled several times that Seventh Amendment does not guarantee the right to a jury trial in retiree benefit claims brought under ERISA and LMRA.

The ruling in Curtis v. Alcoa Inc., E.D. Tenn., No. 3:06-cv-448, 10/17/07 is  here.