Quesenberry v. Volvo Trucks North America Retiree Healthcare Benefit Plan

651 F.3d 437, 51 Employee Benefits Cas. (BNA) 2565, 191 L.R.R.M. (BNA) 2034, 2011 U.S. App. LEXIS 14161, 2011 WL 2675923
CourtCourt of Appeals for the Fourth Circuit
DecidedJuly 11, 2011
DocketNo. 10-1491
StatusPublished
Cited by14 cases

This text of 651 F.3d 437 (Quesenberry v. Volvo Trucks North America Retiree Healthcare Benefit Plan) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Quesenberry v. Volvo Trucks North America Retiree Healthcare Benefit Plan, 651 F.3d 437, 51 Employee Benefits Cas. (BNA) 2565, 191 L.R.R.M. (BNA) 2034, 2011 U.S. App. LEXIS 14161, 2011 WL 2675923 (4th Cir. 2011).

Opinion

OPINION

WILKINSON, Circuit Judge:

The question in this case is whether a collective bargaining agreement permitted Volvo to make unilateral changes to the health benefits of retirees from its New River Valley assembly plant after the agreement expired. After a jury determined that the parties did not intend to grant Volvo that power, the district court ordered the restoration of any health benefits lost due to Volvo’s changes and enjoined Volvo from making such modifications in the future. We conclude as a matter of law that Volvo was not permitted to make unilateral modifications to the retirees’ health benefits after the expiration of the collective bargaining agreement unless it followed the mechanism agreed to by both parties in that agreement. Because Volvo did not and could not employ that mechanism in this case, we affirm.

I.

The collective bargaining agreement (“CBA”) at issue here was the latest in the long history of negotiations between Volvo Group North America, LLC (‘Volvo”) and the union representing workers at Volvo’s New River Valley assembly plant (“NRV”) in Pulaski County, Virginia. Employees and retirees from NRV have been represented by the United Automobile, Aerospace, and Agricultural Workers of America (“UAW”) and UAW Local 2069 (collectively, “the Union”) since the mid-1970s. Starting with the 1984 CBA and up through the 2005 CBA, each collective bargaining agreement provided that health benefits for pension-eligible employees “will be continued into retirement with [Volvo] making the full contribution.” None of the agreements reserved a right for Volvo to modify retiree health benefits unilaterally. Benefits were subject to some changes, however, in subsequent bilateral agreements. Three different CBAs in the 1990s provided for health insurance coverage modifications (including both increases and decreases in benefits, such as an increase in the co-pay for prescription drugs) that applied both to active employees and to retirees.

Volvo and the Union agreed to a new collective bargaining agreement in 2005 that again provided for health benefits, both for current employees and for employees who retired in 1988 and thereafter. That agreement crystallized the health insurance coverage terms for retirees in two separate provisions of the 2005 CBA’s Welfare Benefit Program, namely the Coverage and Cost paragraphs. The former stated generally that Volvo would “continue coverage under the Volvo-UAW health, dental and prescription drug programs” for retiree participants “for the duration of this Agreement.”

The Cost paragraph then fleshed out some of the particulars, including the limits on Volvo’s financial obligations under the Coverage paragraph. Volvo’s liability for retiree health insurance expenses was limited to an average cost of $13,606 per year for each non-Medicare-eligible retiree and $3,292 for each Medicare-eligible retiree. To resolve the problems posed by potential costs in excess of those caps, Volvo agreed to create a Voluntary Employees’ Beneficiary Association (VEBA) trust, to which it was required to contribute a total of $3,943 million, including $1,585 million on the last day of the 2005 CBA’s term in 2008. Of that amount, Volvo in 2005 projected that only $400,000 [439]*439would be necessary for cumulative above-cap costs until the agreement’s expiration on January 31, 2008. The VEBA assets were to be held “for the exclusive purpose of paying all costs incurred by Retiree Participants under the Volvo Plan that exceed the limits set forth above.”

The Cost paragraph then described a negotiated mechanism to deal with healthcare costs too burdensome even for the VEBA trust. In the event that the VEBA trust was projected to be exhausted within a calendar year, Volvo and the UAW were required to meet to discuss how to reduce healthcare costs. If those negotiations proved unsuccessful, Volvo could charge each retiree for any costs over the caps according to a formula set forth in the Cost paragraph. The provision did not specify any other relief for Volvo in the event that the costs of health benefits proved overly burdensome.

The Cost provision initially contained a durational limit like the Coverage provision, but this was deleted at the request of the UAW. Volvo later claimed that this deletion was to prevent redundancy with similar language in the Coverage provision, but a contemporaneous Volvo email did not explain the deletion under this theory. The Union, however, had requested its deletion on the grounds that such a limitation would destroy the effectiveness of the VEBA trust, which it understood to survive the expiration of the agreement.

At the start of the collective bargaining negotiations that ultimately led to the 2008 CBA, Volvo announced that it would not engage in negotiations regarding retiree health benefits and that it intended to restructure those benefits unilaterally. Volvo did not claim at that point that the VEBA trust was projected to be exhausted within one year. In response, NRV employees went on strike for approximately seven weeks in early 2008, after which the parties agreed on another collective bargaining agreement on March 17, 2008. The 2008 CBA does not contain a negotiated plan of health benefits for employees who retired before March 17, 2008, and on December 31, 2008, Volvo announced that it would unilaterally restructure retiree coverage, effective March 1, 2009 for non-Medicare-eligible retirees and July 1, 2009 for Medicare-eligible retirees. This restructuring included new deductibles, increased co-payments and co-insurance, and a new monthly premium for non-Medicare-eligible retirees. Volvo also terminated coverage for Medicare-eligible retirees and replaced their insurance with a $3500 annual health reimbursement account.

On January 21, 2009, plaintiffs filed a complaint under section 301 of the Labor Management Relations Act (LMRA) and section 502(a) of the Employee Retirement Income Security Act (ERISA) on behalf of a class of several hundred retirees who had retired before the 2008 CBA’s effective date. The retirees sought a permanent injunction preventing Volvo from making any unilateral modifications to retiree health benefits in the future, and an award of the health benefits the retirees would have already received but for Volvo’s unilateral changes.

The district court denied Volvo’s motion to strike the jury demand for the retirees’ LMRA § 301 claim, concluding that it sounded in law rather than equity. The court concluded that the ERISA claim was equitable, however, and later made its own judgment on the ERISA issue under Fed. R.Civ.P. 52. After trial, the court submitted the LMRA claim to the jury to decide whether it was the joint intent of Volvo and the Union that retiree health insurance benefits could not be unilaterally changed by Volvo after the expiration of the 2005 CBA.

[440]*440The jury found in favor of the retirees, and the district court entered judgment on the LMRA claim, stating that “Volvo and the Volvo Plan are hereby permanently enjoined from unilaterally terminating or modifying the health care benefits provided to the Class and are directed and required to restore such benefits to the extent of any unilateral changes previously made.” The district court later awarded the retirees attorneys’ fees and ruled in their favor on the ERISA claim as well.

II.

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Bluebook (online)
651 F.3d 437, 51 Employee Benefits Cas. (BNA) 2565, 191 L.R.R.M. (BNA) 2034, 2011 U.S. App. LEXIS 14161, 2011 WL 2675923, Counsel Stack Legal Research, https://law.counselstack.com/opinion/quesenberry-v-volvo-trucks-north-america-retiree-healthcare-benefit-plan-ca4-2011.