Alaska Employment Law

The 9th Circuit has held that the employer’s ability to modify the vesting of early retiree health benefits deprived the retirees of standing, and thus deprived the District Court of subject matter jurisdiction over their claim of wrongful termination of those benefits.

the district court was correct in concluding that the early retirees’ health benefits are not vested. The CBA and closure agreement both incorporate the plan booklet, which expressly reserves to Simpson “the right to alter, amend, delete, cancel or otherwise change welfare . . . plan benefits at any time, subject to negotiation with the Union.” Thus, while the plan booklet also provides a specific duration in which the benefits at issue apply, which can in some circumstances indicate vesting, see Bland, 401 F.3d at 785-86, when read together with the reservation of- rights provision, the plan allows such benefits to be altered, or even terminated, without the retirees’ consent, which defeats vesting. Id. at 786; see also Abbruscato v. Empire Blue Cross & Blue Shield, 274 F.3d 90, 100 (2d Cir. 2001)(holding where durational language and reservation of rights is included in same document, the language cannot be construed as vesting benefits for the stated duration). The Seventh Circuit explained such result as follows:

[T]he presence of a reservation of rights clause fundamentally alters the interpretation of [durational] language; both the clause and the [durational] language must be read together, creating a tension that is best relieved by finding that retirees are entitled to benefits for [the stated duration], but that this entitlement is subject to change at the employer’s will.  Bland, 401 F.3d at 786.

The early retirees argue that the negotiation qualifier in Simpson’s reservation of rights demonstrates that the employer does not have a unilateral right to change their retirement benefits, and thus the clause does not defeat vesting.  Even assuming such interpretation of the qualifying clause is correct, as to which we express no opinion, it does not get the early retirees to where they wish to be. Whatever authority Simpson may have relinquished, on the express terms of the clause, the retirees do not control their continued receipt of benefits. A duty to negotiate is not of the same character as a duty to secure consent. Regardless of what Simpson is required to do in satisfying its obligation to negotiate, it ultimately retains the exclusive authority to change retirement health benefits irrespective of the outcome of such negotiations.

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Because the early retirees do not have vested rights to the retirement health benefits they seek, they lack standing under ERISA, and we must dismiss such claims for lack of subject matter jurisdiction. See Burrey, 159 F.3d at 392.

Poore v. Simpson Paper, 2008 WL _______ (9th Cir. Sept. 22, 2008)

Doug Parker of Preston Gates in Anchorage represented the employer; Thomas Doyle from Portland’s Bennett, Hartman represented the class of retirees.

The case arose in the District of Oregon.