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Pacheco v. Honeywell International Inc.

United States District Court, D. Minnesota

January 31, 2018

Augustine Pacheco and Vicki Hansen, for themselves and others similarly-situated, Plaintiffs,
v.
Honeywell, International Inc., Defendant.

          John G. Adam, Legghio & Israel, P.C., and Katrina E. Joseph, Teamsters Local No. 120, Blaine, Minnesota 55434, counsel for Plaintiffs.

          Donald M. Lewis, Jeremy D. Robb, and Joseph G. Schmitt, Nilan Johnson Lewis PA, Craig S. Primis, Kathleen Ann Brogan, and Kenneth Winn Allen, Kirkland & Ellis, counsel for Defendant.

          AMENDED MEMORANDUM OPINION AND ORDER

          SUSAN RICHARD NELSON UNITED STATES DISTRICT JUDGE

         Plaintiffs Augustine Pacheco and Vicki Hansen filed this suit on November 7, 2017, on their own behalf and on behalf of similarly-situated retirees, under the Employment Retirement Income Security Act (ERISA) and the Labor Management Relations Act (LMRA). They assert claims against their former employer Honeywell International, Inc. (“Honeywell”) for breaches of certain collective bargaining agreements (“CBAs”) that they allege contain collectively-bargained promises of Honeywell-sponsored healthcare benefits until age 65 for employees who took early retirement under the Honeywell-sponsored benefits plan. (See Compl. ¶¶ 103-39 [Doc. No. 1].)

         Shortly after filing this suit, Plaintiffs moved for injunctive relief, seeking an order prohibiting Honeywell from terminating their healthcare coverage, and their families' coverage, which was set to expire January 1, 2018, during the pendency of this litigation. (See Pls.' Mot. for Prelim. Inj. at 1 [Doc. No. 18].) Following an expedited briefing schedule and a December 21, 2017 motion hearing, the Court issued a provisional ruling on December 29, 2017, granting Plaintiffs' request for a preliminary injunction through January 31, 2018. (See Dec. 29, 2017 Order [Doc. No. 39].) The ruling was provisional because the Court had only four business days between Christmas and New Years in which to issue the order. The Court stated that it would thoroughly review the record and the pertinent authorities and issue an amended order no later than January 31, 2018. (See id. at 32.)

         Now, having had the opportunity to conduct its thorough review, the Court issues this Amended Order. For the reasons set forth in the December 29, 2017 Order, incorporated herein, and below, Plaintiffs' Motion for a Preliminary Injunction is granted, pending an adjudication on the merits of Plaintiffs' claims or further order of this Court after notice and hearing.

         I. BACKGROUND

         Plaintiffs Pacheco and Hansen are former members of the production and maintenance collective bargaining unit at Honeywell's Minnesota facilities and were represented by the International Brotherhood of Teamsters Local 1145 (“the Union”). (See Compl. ¶ 5.) Defendant Honeywell is a Fortune 100 company, with operations in approximately 1, 250 cities throughout the world, with sales of approximately $38 billion. (Id. ¶ 10.)

         A. Factual History

         In 2007 and 2010, Honeywell entered into CBAs with the Union, which included pension and welfare provisions for employees who elected to take: (1) “normal retirement” at age 65 or later; or (2) “early retirement, ” for employees with at least 15 years of credited service, who were at least 55 years old, but younger than 65, at the time of retirement. (Id. ¶ 14; Ex. 3 to Pls.' Mot., Art. 24, § 7 (2007 CBA), Ex. 5 to Pls.' Mot., Art. 24, § 7 (2010 CBA).)[1] Employees who took early retirement received a reduced pension for the rest of their lives, based on a formula that accounted for the employees' age and years of service. (See Compl. ¶¶ 15-16.) At issue here are the healthcare benefits available to the employees who took early retirement during the periods of the 2007 and 2010 CBAs.

         1. Pre-2007 CBA

         Plaintiffs allege that for more than 30 years prior to the 2007 CBA, Honeywell sponsored and provided healthcare benefits for eligible early retirees, starting from the date of retirement and continuing after the expiration of the CBA in effect when retirement began, until the retiree reached age 65. (Id. ¶ 20.) These benefits, Plaintiffs allege, also extended to the retiree's spouse or surviving spouse until age 65, and to the retiree's dependent children until age 26. (Id.)

         In support of these allegations, Plaintiffs point to a 2005-2006 document entitled “Frequently Asked Questions and Answers Regarding Retirement.” (See id. ¶ 21.) Among the information in the FAQ documents, Honeywell provided the following:

Q: When I reach age 65 my medical coverage ceases for myself. I have a spouse and dependents, what medical coverage will they have?
A: Medical coverage that you had selected for your spouse and eligible dependents continues until your spouse reaches age 65.

(Ex. 1 to Pls.' Mot. (FAQ at 7).)

         Plaintiffs also identify a 2001 agreement between Honeywell and the Union concerning severance in the event of restructuring or relocating which also incorporated retiree healthcare benefits. A section entitled “Insurance Continuation” provides that terminated employees who are eligible to retire “will be eligible for retiree medical in accordance with the terms of the applicable plan.” (Ex. 2 to Pls.' Mot. (2001 Agmt. at 68).) In addition, in a section labeled “Pension Benefits, ” it states: “Employees shall receive Pension benefits in accordance with the provisions of the Pension Plan, including retiree medical.” (Id.) Plaintiffs contend that this agreement remains in effect. (See Compl. ¶ 22.)

         2. The 2007 CBA

         The healthcare benefits provisions in the 2007 CBA are found in Article 24. In Section 7 of Article 24, entitled “Retiree Health Care (Pre 65 only)” Honeywell promised that it “will provide” certain contributions to the healthcare expenses for its pre-65 retirees, their dependents, and surviving spouses. (See Ex. 3 to Pls.' Mot., Art. 24, § 7.) It further stated, “The Company does not provide healthcare benefits for Local 1145 retirees after age 65.” (Id.)

         The first sentence of Section 1 of Article 24 stated that these insurance and benefit plans would be implemented and maintained “as specified by the time periods outlined below for the duration of this Agreement.” (Id., Art. 24, § 1.) The 2007 CBA also contained a general durational clause, stating, “This Agreement shall become effective February 1, 2007 and shall remain in force and effect up to midnight January 31, 2010.” (Id., Art. 35, § 1.)

         Subsequent to the 2007 CBA, Honeywell appears to have provided its employees with “answers” to questions about the 2007 CBA retiree healthcare coverage, including the following:

Q: What healthcare coverage is provided to retirees?
A: Local 1145 retirees are eligible for healthcare coverage through Honeywell until age 65. After age 65[, ] they are eligible for Medicare with no subsidy from Honeywell.

(Ex. 4 to Pls.' Mot. (Answers to Question at 2).) In the same document, Honeywell informed its employees that limits on its annual contributions to retiree healthcare benefits were not expected to “hit until 2018, ” eight years after the 2010 expiration of the 2007 CBA. (Id.)

         3. The 2010 CBA

         The nearly identical healthcare provisions for pre-65 retirees in the 2010 CBA are likewise found in Article 24 of that agreement. Again, in Section 7 of Article 24, also entitled “Retiree Health Care (Pre 65 only), ” Honeywell promised that it “will provide” certain contributions to the healthcare expenses for the pre-65 retirees, their dependents, and surviving spouses. (See Ex. 5 to Pls.' Mot., Art. 24, § 7.) As with the 2007 CBA, Honeywell stated, “The Company does not provide healthcare benefits for Local 1145 retirees after age 65.” (Id.)

         In Section 1 of Article 24, the 2010 CBA also stated that the healthcare provisions were to be implemented and maintained “as specified by the time periods outlined below for the duration of this Agreement. (The plans list a time period 1/1/13-12/31/13, it is understood that the Agreement expires 1/31/2013.)” (Id., Art. 24, § 1.) And, as with the 2007 CBA, the 2010 CBA contained a general durational clause, stating, “This Agreement shall become effective February 1, 2010 and shall remain in force and effect up to midnight January 31, 2013.” (Id., Art. 31, § 1.)

         The new, different language in the 2010 CBA, pertinent here, outlined certain procedures for a “Special Retirement Program.” (Id., Art. 24, § 7.) The procedures applied to employees who retired on or after February 1, 2010, for whom Honeywell would not contribute any amount toward the retirees' medical premiums, except as follows:

Employees who provide the Company with at least four (4) months advance written notice of his or her irrevocable decision to retire on a date certain between August 1, 2010 and February 1, 2013 and are not terminated for cause will be eligible for retiree medical coverage under the 1145 retiree medical plan with respect to which Honeywell will contribute towards the annual retiree medical premium.

(Id.)

         Honeywell provided its employees a document entitled “Pension and Medical Question[s]” regarding the Special Retirement Program. (See Ex. 7 to Pls.' Mot. (Pension & Medical Document).) In the document, Honeywell stated that the Special Retirement Program represented a limited window of opportunity during which eligible employees could take early retirement and still receive medical benefits:

Q: If I retire after 2/1/2013 will I have Retiree Medical?
[A:] No. 2010 CBA - Effective February 1, 2011, for each employee who terminates and retires on or after February 1, 2010[, ] Honeywell will not contribute any amount toward the annual retiree medical [premium] except under the “[S]pecial ...

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