A recent Law 360 story by Braden Campbell, “6th Circ. Reverses UAW’s Fee Win in Retiree Health Care Suit,” reports that the Sixth Circuit wiped out a $180,000 fee award for the United Auto Workers in a suit alleging an auto parts maker illegally eroded retirees' health benefits, saying a Michigan federal judge usurped the arbitrator who initially decided the dispute. The unanimous panel said the Eastern District of Michigan did not have the power to award the fees or find that TRW Automotive U.S. LLC violated the Employee Retirement Income Security Act when it replaced retirees' health plans with health reimbursement accounts, because these issues were the arbitrator's to decide.
The panel rejected the union's argument that the arbitrator left these issues unresolved and so teed them up for the court. While the arbitrator only purported to opine on the underlying contractual dispute, the ERISA claim was inextricably linked to this central issue, the panel said. "The relationship between the ERISA and [contract] claims and the parties' arguments during arbitration reveals that the arbitrator did in fact decide the ERISA claims," the panel said. "His decision that TRW breached the CBA meant that TRW also committed an ERISA violation."
The ruling is the Sixth Circuit's second in the long-running case, which concerns a shift in health coverage for retirees from a shuttered Michigan plant. The UAW sued TRW in late 2011 alleging the benefits change breached the parties' collective bargaining agreement and violated ERISA. The court sent the dispute to arbitration, per the CBA, and the arbitrator found TRW breached the contract and ordered the company to restore the prior plan. Though the union raised ERISA claims, the arbitrator framed the issue as "whether the adoption of the [health reimbursement accounts] structure as implemented by TRW constitutes a breach of contract," according to a portion of the decision discussing case background.
The company then challenged the arbitrator's ruling in the Eastern District of Michigan. Meanwhile, the union asked the court to award fees and grant summary judgment on the ERISA claim. The court affirmed the award and granted the union summary judgment, and the company appealed. In its first order, the Sixth Circuit said the arbitrator exceeded his authority, but it did not resolve the ERISA issue because the district court had yet to award fees. The order follows the district court's subsequent order granting fees to the union.
The union insisted the district court had jurisdiction to issue judgment and award fees despite contract language directing such issues to arbitration, arguing that the arbitrator did not resolve the ERISA claims. The panel ruled otherwise, saying the arbitrator's finding that TRW breached the contract resolved the ERISA claims because they likewise "turned on the CBA provisions guaranteeing certain health insurance benefits." Sixth Circuit precedent holds that violations of health provisions in CBAs double as violations of welfare plans under ERISA, the panel added.