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Court upholds lower court ruling in Maytag retiree benefit fight with Whirlpool

Mike Mendenhall, Newton Daily News, Iowa –

The Eighth Circuit U.S. Court of Appeals has upheld a district court ruling Tuesday stating Whirlpool Corp. had the right to alter Maytag retiree benefits after their union contract expired in 2008.

The appeal was brought to the higher court by the United Auto Workers Local 997 on Aug. 24 on behalf of nearly 3,000 Newton retirees, and the court heard oral arguments in the case April 18.

Ultimately, the St. Louis-based court agreed with the lower court’s decision stating that the union failed to prove that a “case or controversy” did not exist at the time Whirlpool filed legal action on July 24, 2008, one week before giving the retirees notice of the unilateral modifications to the retirement benefits. The union advised Whirpool that they would not bargain on the issue of Maytag retirement medical benefits after the appliance company’s July 1, 2008, modification proposal.

In it’s decision, the three-judge panel stated that Whirlpool knew that if the company was to unilaterally modify Maytag retiree’s benefits, it would cause case or controversy, and judicial action was the appropriate forum for the argument.

“Whirlpool had contractual obligations to the retirees and to the Union under the expiring CBA (collective bargaining agreement), statutory responsibilities to the retirees under the ERISA (Employee Retirement Income Security Act ) and statutory responsibilities to the Union under the federal labor laws,” the judges said in their opinion. “As the district court found, Whirlpool knew from the decades of negotiations that the Union considered retiree health benefits provided in the 2004 CBA to be vested. But Whirlpool believed they were not vested and therefore subject to unilateral change when the CBA expired.”

The court continued by saying, “In these circumstances, Whirlpool reasonably concluded that the contractual dispute was real, substantial and existing. The dispute was ripe for immediate judicial resolution because whether retiree benefits were vested turned on historical rather they hypothetical facts. And Whirlpool’s statutory and contractual obligations to treat the 3,000 retirees properly made timely resolution of the dispute in a single forum a bona fide business necessity.”

The lower court originally ruled on July 25, 2011, in the U.S. District Court for the Southern District of Iowa. The UAW argued in the appeal, as it did in district court, that each employee contract since the Maytag employee negotiations in 1961 provided vested retiree medical benefits for life.

But the court stated that when the union originally field suit against Whirlpool in a federal district court in the appliance maker’s home state of Michigan, it argued the unilateral modifications of retiree benefits in 2009 violated 2004 contract agreement. The judges said, “In other words, the class did not claim that each member has a vested right to the retiree medical benefits being provided when he or she retired.”

The court ruled that due to this language in the suit, the union was claiming that the retirees had a vested right to the benefits provided solely in the 2004 contract which expired in 2008. The court said that the intent to vest must be found in the language in the ERISA of the 2004 contract in order to prove the benefits were a lifetime benefit.

According to court documents, ERISA requires the benefit plan’s administrators to publish a summary plan description (SPD) so the plan can be understood by the average participant. The court said that the SPD “covering ‘eligible (Newton) hourly retirees during the term of the (2004) collective bargaining agreement’ stated, ‘The benefits described in this booklet are not vested benefits, and Maytag reserves the right to modify, suspend or terminate the plan or any component of successor plan, in whole or in part, at any time and for any reason, except to the extent that the federal labor laws require it to bargain any such changes with the union.'”

The judges stated there was evidence that the union had an active part in editing the SPD before it was published. The union argued the parties represented in the class action suit have a bargaining history that provides “overwhelming extrinsic evidence” of their intent to vest retiree medical benefits.

The three appellate judges said the union did not satisfy the burden of proving the existent of the vesting language, and it was the courts decision that Whirlpool has the right to alter the benefits.

Circuit court judges Steven Michael Colloton, Bobby E. Shepherd and James B. Loken heard the case with a decision written by Loken.

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