Cook County Record

Thursday, January 23, 2020

Appeals court: Company must honor agreement promising pensioners health care for life

Federal Court

Dec 3, 2019

Chicago federal courthouse flamingo from rear
Jonathan Bilyk

CHICAGO -- The U.S. Court of Appeals for the Seventh Circuit has ruled that a pension agreement that promised retired steelworkers and their families health care for life must be honored, even though the underlying benefits agreement was terminated by a successor to the original employer.

The Seventh Circuit panel, including judges Diane S. Sykes, David F. Hamilton and Michael B. Brennan, noted the federal Employee Retirement Income Security Act (ERISA) does not require retiree health care benefits be vested. Employers, employees and unions can, however, provide for health care benefits that survive the underlying agreement so they do, in fact, last a lifetime. These provisions may be explicit or implicit in the language of the contract, the court ruled.

According to court documents, Harold Stone and John Woestman worked for decades at the Acme Packaging Corporation Plant in Riverdale as members of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (AFL-CIO-CLC). In 1994 Acme and the union entered into an agreement providing health insurance benefits to retirees with at least 15 years of service and their families. The contract specifically provided that once a person was covered by the agreement, the coverage could not be terminated “notwithstanding the expiration of this agreement.”

In 2016 Stone and Woestman filed a class action lawsuit complaining that the health care benefits they and their families had been promised for life had ceased at the end of 2015, when Acme successor Signode Industrial Group LLC unilaterally ended the underlying union contract.

Signode had acquired the employer obligations of the contract in 2014, when it was created by Illinois Tool Works, which had bought the Riverdale plant from Acme and closed it a decade before, the complaint states.

The class accused Illinois Tool and Signode of breaching the agreement in violation of the Labor Management Relations Act (LMRA) and ERISA. The union joined the suit on the charges of violating the LMRA.

The district court granted summary judgment to the plaintiffs and entered a permanent injunction ordering Signode to reinstate health care benefits. The injunction was stayed pending appeal.

“The pensioners’ agreement unambiguously provided retirees with vested lifetime health care benefits,” the Seventh Circuit judges wrote. “The coverage provision said as plainly as possible that coverage would survive expiration of the agreement.”

The company had argued that a term provision that allowed either the company or union to terminate the agreement with 120 days’ notice gave them the right to end all the trappings of the agreement, including the retiree health care provision.

“Contrary to defendants’ arguments, the term provision did not transform the right to terminate the agreement itself into a loophole that nullified the plain promise that benefits would survive expiration of the agreement,” the federal court wrote. “Separating the term of coverage from the term of the agreement clearly signaled that it was possible – actually, expected – that the agreement could end without affecting the continued health care coverage.”

The court affirmed the district court’s permanent injunction, reinstating the health care benefits for those retirees who had already been receiving them when Signode stopped the coverage in 2015.

The plaintiffs have been represented by attorneys John G. Adam and Stuart M Israel, of Legghio & Israel P.C., of Royal Oak, Mich., and George A. Luscombe III and Stephen Anthony Yokich, of Dowd, Bloch, Bennett, Cervone, Auerbach & Yokich, of Chicago. 

Illinois Tool Works and Signode have been represented by attorney Joseph James Torres, of Jenner & Block LLP, of Chicago. 

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Organizations in this Story

Martens Ice Geary Klass Legghio Israel and GorchowIllinois Tool WorksU.S. District Court for the Northern District of IllinoisU.S. Court of Appeals for the Seventh CircuitDowd, Bloch, Bennett, Cervone, Auerbach & YokichSignodeJenner & Block

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