MBJ Victory: Court Upholds Employer’s Right to Change Retiree Health Benefits

In a pair of opinions issued by the U.S. Court of Appeals for the First Circuit on May 31, 2006, the court upheld an employer’s right to make changes to retiree dental benefits.  These two opinions are the first issued by the First Circuit in the important area of retiree health benefits.  Morgan, Brown & Joy successfully represented the employer in both cases.

At issue in Senior v. NSTAR Electric & Gas Corp., Case No. 05-2015, was whether a predecessor of NSTAR had violated a memorandum of agreement with a labor union in modifying the dental benefits available to retirees.  The union’s suit originally had focused on a number of changes to retiree health benefits, in addition to the changes to dental benefits.  By the time the case reached the First Circuit, the union was alleging only that the changes to dental benefits were contrary to a memorandum of agreement between a predecessor of NSTAR and the union, in violation of Section 301(a) of the Labor Management Relations Act (LMRA), 29 U.S.C. §185(a).  The court upheld the District Court’s entry of summary judgment for NSTAR, holding that the memorandum of agreement did not provide retirees with vested benefits.  The court relied upon numerous factors, including the memorandum’s terms, related agreements between the parties, the documents underlying the company’s health plans, and the “practice, usage and custom” of the parties.

In Balestracci v. NSTAR Electric & Gas Corp., Case No. 05-1894, the court considered a related claim brought by management retirees regarding the same changes to retiree dental benefits at issue in Senior.  The management retirees relied upon the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §1001 et seq.  The court held that the retirees’ dental benefits were not vested, and that the changes to dental benefits did not violate ERISA.  The court further rejected the retirees’ claim that NSTAR’s predecessor had breached any fiduciary duty owed to the retirees under ERISA.  The court’s ruling was based largely on the underlying plan documents, which reserved to the employer the right to change benefits.

Keith B. Muntyan and Robert P. Morris represented NSTAR.