Alday v. Raytheon Company

When a collective bargaining agreement clearly establishes rights for eligible retired employees, their rights cannot be abrogated by clauses contained in an ERISA plan that is not incorporated into the collective bargaining agreement.

Frances Alday, joined by retired employees and spouses at an Arizona defense plant and certified as a class by the district court, filed suit against Raytheon Company alleging violations under §301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. §185, and §502 of the Employee Retirement Income Security Act (“ERISA”) of 1974, 29 U.S.C. §1132, related to Raytheon Company’s attempt to charge monthly health insurance premiums to retirees who had previously met eligibility requirements under their prior collective bargaining agreement (“CBA”) for fully funded employer-provided health insurance. The district court determined that collective bargaining agreements “unambiguously established eligible retirees’ contractual right to premium-free health insurance until they reach age 65” and granted Alday’s summary judgment motion on claims under LMRA and ERISA, on which Raytheon appeals. The district court also granted a Raytheon motion to remove claims for punitive damages, on which Alday has filed a cross-appeal. The Ninth Circuit agreed with the district court in finding that the language of the CBA obligated Raytheon to provide in full company paid healthcare coverage to retirees until the age of 65 provided they meet eligibility requirements. To this point, Raytheon argued that the reservation of rights and no-vesting clauses it incorporated into its ERISA plans allowed Raytheon to unilaterally limit its payment obligations. However, the Ninth Circuit found that because the ERISA plan was not incorporated into the CBA and the CBA contained integration and modification clauses which prohibited modification unless executed in writing between the parties, Raytheon’s obligation to retirees under the CBA “could not be unilaterally abrogated by Raytheon.” Finally, the Ninth Circuit held that the district court was correct in not allowing Alday punitive damages as Alday failed to show conduct that was “sufficiently outrageous or egregious.” AFFIRMED.