Appeals court upholds denial of retirees' benefits motion

By Jessica M. Karmasek | Sep 1, 2011

RICHMOND, Va. (Legal Newsline) - A federal appeals court last week upheld a denial of a motion by Century Aluminum Co. retirees for a preliminary injunction seeking continuation of certain health care benefits.

In 2007, Century Aluminum of West Virginia Inc. began experiencing financial difficulty. The company attributed it to, in part, escalating health care costs.

In February 2009, Century curtailed operations at its Ravenswood plant and, later that year, announced its plan to modify or terminate retiree health care benefits for retirees ages 65 or older who retired between Feb. 6, 1985 and June 1, 2006.

Shortly after, retirees and class representatives Harold Dewhurst and David Bryan, together with the AFL-CIO, filed a lawsuit in the U.S. District Court for the Southern District of Ohio. They argued that their benefits were vested and that Century's modification would violate both the Labor Management Relations Act and the Employee Retirement Income Security Act.

In December 2009, the case was transferred to the U.S. District Court for the Southern District of West Virginia.

The district court then denied the retirees' motion for a preliminary injunction, finding that the retirees failed to establish a likelihood of success on the merits.

The retirees appealed to the U.S. Court of Appeals for the Fourth Circuit.

They contend they are likely to succeed on the merits because the language of the relevant Collective Bargaining Agreements infers an intent for retiree health care benefits to extend beyond expiration of the relevant CBA -- despite language that limits benefits to the length of the agreement.

For instance, the retirees argue -- among other things -- the fact that Century did not specifically reserve the right to eliminate or alter benefits suggests that the bargainers did not intend to delegate to Century such a right.

However, as noted by the district court, "(i)t might just as easily be explained... that Century deemed a reservation of rights as to health care benefits unnecessary inasmuch as it deemed the subject to arise anew during each bargaining cycle."

The Fourth Circuit, in its Aug. 22 opinion, said even if the absence of a reservation of rights provision were to inject ambiguity into the relevant CBAs, that ambiguity alone could not satisfy the retirees' burden to make a "clear showing" that they are "likely to succeed on the merits."

The district court also did not agree with the retirees' contention that health care benefits should be deemed vested because their pension benefits are specifically written to be vested and the health care benefit plan requires eligibility to receive a pension as a precondition for eligibility for health care benefits.

"The district court aptly noted 'that language in the parties' pension agreements explicitly suggesting vesting as to pension benefits in actuality undercuts an inference of vesting as to health care benefits' because the health care provision contains no such language," Judge G. Steven Agee wrote for the Fourth Circuit.

The Fourth Circuit said it agreed with the district court that "for each contention offered by (the retirees), an equally or more compelling response is, in the main, presented by Century."

The appeals court said the retirees fail to show that they are likely to succeed on the merits and consequently fail to establish that they meet the standard in order to be awarded a preliminary injunction.

"The district court did not abuse its discretion in so holding," the Fourth Circuit wrote, calling the lower court's opinion "thorough" and "well-reasoned."

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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