Court Dismisses Health Coverage Contribution Challenge

November 29, 2007 ( - Polyester plant retirees were hit with a legal defeat as a federal judge in Ohio threw out their class action lawsuit alleging their former employer illegally required them to pitch in to pay for their health care benefits.

U.S. District Judge Gregory L. Frost of the U.S. District Court for the Southern District of Ohio ruled that there was no legal basis for the plaintiffs’ claims that the Houston-based M&G Polymers USA LLC violated the Employee Retirement Income Security Act (ERISA) and the Labor Management Relations Act (LMRA).

Frost asserted that a paragraph in a collective bargaining agreement (CBA) submitted by the retirees stated that “employees … will receive a full Company contribution towards the cost of [health] benefits…” That meant that qualifying retirees would receive the company’s potential contribution toward the cost of health benefits, not that the company would cover the full cost if the benefits exceeded a contribution cap, Frost said.

“There is simply no contractual right to contribution-free health benefits, even if agreements have long deferred the eventual collection of the retirees’ shares,” Frost declared.

The court dismissed the ERISA fiduciary breach claim, finding that the retirees failed to present evidence of wrongful imposition of retiree contributions, imprudent conduct, or failure to act for the plan purpose

Filing the suit were members of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC. The retirees filed a class action under Section 301 of LMRA and Section 502 of ERISA after M&G modified their health care benefits by shifting a large part of the health care costs to the retirees beginning in 2007, according to the court.

The plant had been owned by Goodyear Tire & Rubber Co. until 1992, then Shell Chemical Co. until 2000, and then M&G.   M&G and the union had a CBA obligating M&G to pay for “a full company contribution” to the retirees’ health care costs.

In deciding to dismiss the suit, Frost asserted that a letter of understanding incorporated into the CBA in 1991 said that for employees retiring after May 1991, if health care benefits exceeded the specified amount, the cost would be allocated evenly to all retirees in that group. There were similar letters from 1994, 1997, and 2001, the court said.

The case is Tackett v. M&G Polymers USA LLC, S.D. Ohio, No. 2:07-cv-126, 11/21/07.