Bowater Wins Benefit Liability Suit

September 9, 2005 ( - A US District Court judge for the District of Maine has ruled that Bowater Inc. is only liable to retirees for the health care benefits predating an amended plan that ceased coverage for the employees due to the sale of its company.

According to BNA, the judge agreed with Bowater that the new plan superseded the previous plans, but did not agree with the company that a stock purchase agreement Inexcon Maine Inc. used to purchase Bowater’s Great Northern Paper Co. automatically terminated the plans.

The court also granted Bowater’s motion for summary judgment on the Labor Management Relations Act (LMRA) claims of former employees that Bowater breached collective bargaining agreements reached with four union groups of employees that entitled retirees to lifetime benefits, BNA reports.   The court determined that the collective bargaining agreements provided that Bowater’s obligations under the agreements would terminate upon the sale of the company.

Prior to the sale of GNP to Inexcon in 1999 Bowater maintained health plans for employees of Bowater and GNP.   During the sale negotiations, Inexcon and GNP entered into agreements with the four union groups that represented the employees. The agreements provided that Bowater’s obligations under existing labor agreements would terminate upon the sale of GNP to Inexcon, BNA reports. When GNP began having financial difficulties, it denied the retirees health and welfare benefits.   After GNP filed bankruptcy in 2003, Bowater established another health plan, referred to by the court as the BI benefit plan, which was a continuation and amendment to the prior health plans, according to BNA. 

A lawsuit was filed by 15 retirees of GNP, for themselves and others similarly situated, to seek redress for their loss of health and welfare benefits. After the retirees commenced the lawsuit, Bowater amended the BI benefit plan to expressly preclude GNP retirees from seeking welfare benefits from Bowater. In July 2005, the court certified two classes and a subclass for the employees’ Employee Retirement Income Security Act and LMRA claims but refused to certify a class of retirees who alleged Bowater breached its fiduciary duty by failing to communicate that it would no longer fund retiree benefits (See  Breach of Fiduciary Duty Claim Denied Class Certification ).

The court determined that the 1999 agreements clearly ended Bowater’s obligations. Therefore, the retirees were not eligible for benefits under the new BI plan and the collective bargaining agreements.