Kelly v. Honeywell Int'l, Inc., 933 F.3d 173

Background

Textron (predecessor) and UAW Locals 1010 and 376 negotiated three linked agreements in 1994: a Collective Bargaining Agreement (CBA), a Supplemental Group Insurance Agreement, and an Effects Bargaining Agreement (EBA) addressing impacts of a plant sale to AlliedSignal.
The EBA expressly provided: “All past and future retired employees and surviving spouses shall continue to receive ... full medical coverage ... for the life of the retiree or surviving spouse.” The EBA was effective May 30, 1994 and set to expire June 6, 1997 unless extended.
AlliedSignal (later Honeywell) assumed the agreements, terminated the CBA/EBA at the earliest permissible date (June 6, 1997), but continued to provide retiree medical coverage afterward until announcing termination in 2015–2016.
Plaintiffs: union retirees who retired before June 6, 1997 (Pre-Expiration) and those who retired after June 6, 1997 (Post-Expiration), plus surviving spouses, sued to enjoin termination, claiming vested lifetime medical benefits under the EBA.
District court granted summary judgment and a permanent injunction for Pre-Expiration Plaintiffs; it issued a preliminary injunction for Post-Expiration Plaintiffs. Honeywell appealed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the EBA vests lifetime medical benefits for retirees who retired before the EBA expired	The EBA’s phrase “for the life of the retiree or surviving spouse” is affirmative lifetime language and vests benefits	Durational/cancellation clauses in the CBA and Supplemental Agreement prevent vesting or function as a reservation of rights	Held for plaintiffs: EBA unambiguously vests lifetime benefits; durational/cancellation clauses do not defeat vesting
Whether retirees who retired after the EBA expired (Post-Expiration) are entitled to lifetime coverage under the EBA	“Future retired employees” includes employees who retired after the EBA expired if they were employed while EBA was in effect; prior employer practice supports that interpretation	Once the EBA expired it could not create new obligations to later retirees; “future” limited to retirees who retired during EBA’s term	Ambiguous: court found reasonable conflicting interpretations and sufficient extrinsic evidence to raise serious questions; preliminary injunction affirmed

Key Cases Cited

Litton Fin. Printing Div., a Div. of Litton Bus. Sys., Inc. v. NLRB, 501 U.S. 190 (Sup. Ct. 1991) (general rule that contractual obligations cease on agreement termination; vested rights survive)
M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (Sup. Ct. 2015) (collective-bargaining agreements interpreted under ordinary contract principles; parties may expressly vest lifetime benefits)
CNH Indus. N.V. v. Reese, 138 S. Ct. 761 (Sup. Ct. 2018) (when an agreement specifies duration for health benefits, that specific duration controls over a general durational clause)
Joyce v. Curtiss‑Wright Corp., 171 F.3d 130 (2d Cir. 1999) (default rule that welfare benefits are not vested absent contractual promise)
Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72 (2d Cir. 1996) (employer may contract to vest welfare benefits)
Am. Fed. of Grain Millers v. Int’l Multifoods Corp., 116 F.3d 976 (2d Cir. 1997) (enforce promises that vest benefits when language is unambiguous)
Abbruscato v. Empire Blue Cross & Blue Shield, 274 F.3d 90 (2d Cir. 2001) (reservation/cancellation language can prevent vesting when it clearly preserves employer’s amendment/cancellation rights)
Devlin v. Empire Blue Cross & Blue Shield, 274 F.3d 76 (2d Cir. 2001) (identifies what constitutes affirmative lifetime language)
Faiveley Transp. Malmo AB v. Wabtec Corp., 559 F.3d 110 (2d Cir. 2009) (standard for preliminary injunction: likelihood of success or sufficiently serious questions and balance of hardships/irreparable harm)
Whelan v. Colgan, 602 F.2d 1060 (2d Cir. 1979) (loss of medical benefits can constitute irreparable harm)