Windstream Corporation v. Johnny Lee
757 F.3d 798
8th Cir.2014Background
- Valor (later acquired by Windstream) and the CWA negotiated MOAs (including a 2005 MOA) setting retiree health premium contribution schedules; Valor’s SPD and MOAs referenced these schedules.
- The 2005 MOA used the word “will” to describe the company’s payment of a percentage of retiree premiums and did not contain an explicit vesting clause or the later “notify-and-confer” paragraph that appeared in earlier MOAs.
- Johnny Lee retired in 2006 with 28 years’ service and received an 80% premium subsidy under the 2005 MOA; Valor/Windstream continued benefits after the MOA expired.
- Windstream’s comprehensive plan and SPD reserved the company’s right to amend or terminate the plan “at any time and for any reason.” Paragraph 6 of the MOAs also vested administration and premium amounts with the company.
- Windstream attempted to renegotiate subsidy levels in 2008 and 2009; after bargaining failed it unilaterally reduced retiree contributions in 2010; Lee lost coverage and sued, and the CWA intervened under §301 LMRA.
- The district court granted Windstream summary judgment and declaratory relief, holding plan documents reserved unilateral amendment rights and retiree subsidies were not vested; Lee and the CWA appealed and the court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether retiree premium subsidies were contractually vested | Lee: the 2005 MOA (e.g., “will pay”) and bargaining history show intent to vest lifetime benefits | Windstream: plan/SPD and MOA reservation clauses reserve the right to amend/terminate; no affirmative vesting language | Held: Not vested; MOA and plan reserve rights allow unilateral modification |
| Whether extrinsic evidence may be considered to find vesting | Lee/CWA: bargaining history and post-expiration continuation of benefits show implicit vesting | Windstream: reservation-of-rights in plan forecloses vesting absent affirmative contractual language | Held: Extrinsic evidence does not render the MOA reasonably susceptible to vesting; reservation clauses control |
| Whether Windstream’s modification violated ERISA | Lee: unilateral change breaches ERISA because benefits were vested | Windstream: ERISA permits termination/modification of welfare benefits unless vested | Held: No ERISA violation because benefits were not vested |
| Whether CWA stated a §301 breach of contract claim | CWA: the bargaining agreement/MOA created enforceable vested promises | Windstream: no contractual vesting; company retained authority | Held: CWA’s claim dismissed for failure to state a claim; no enforceable vesting found |
Key Cases Cited
- Allied Chem. & Alkali Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157 (1971) (retiree welfare benefits are not vested absent contractual agreement)
- Hughes v. 3M Retiree Med. Plan, 281 F.3d 786 (8th Cir. 2002) (vesting requires employer to have contracted otherwise)
- Crown Cork & Seal Co. v. Int’l Ass’n of Machinists, 501 F.3d 912 (8th Cir. 2007) (durational clauses inconsistent with intent to vest lifetime health benefits)
- John Morrell & Co. v. Local Union 304A, 913 F.2d 544 (8th Cir. 1990) (standard for when plan language is "reasonably susceptible" to union/retiree interpretation)
- Stearns v. NCR Corp., 297 F.3d 706 (8th Cir. 2002) (reservation-of-rights in plan defeats vesting absent affirmative indication)
- Maytag Corp. v. Int’l Union, UAW, 687 F.3d 1076 (8th Cir. 2012) (extrinsic evidence may be barred where plan documents lack vesting language)