The opinion of the court was delivered by: Hon. Gerald E. Rosen
OPINION AND ORDER ADDRESSING PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION
At a session of said Court, held in the U.S. Courthouse, Detroit, Michigan on March 23, 2010.
On January 18, 2002, Robert Burcicki, William Burr, Paul Czekis, George DeGraeve, Frank Zaparanuk, Leonard Kuk and Edgar Pettey, seven retired employees of Defendant Newcor, Inc. and/or Newcor's subsidiary, Defendant Newcor M-T-L, Inc.,*fn1 instituted this action seeking declaratory and injunctive relief and damages for breach of a collective bargaining agreement pursuant to Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185 (the "LMRA"), and seeking to recover benefits due and to declare the right to future benefits due under an employee benefit plan pursuant to Section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132(a)(1)(B) ("ERISA"). At issue in the case is the Plaintiffs' claim that they were guaranteed lifetime health care benefits when the operations at Newcor's two Dearborn, Michigan facilities were terminated in 1985 and 1991. According to their Complaint, they were provided medical benefits as promised for more than a decade, but in November 2001, they were informed that Defendants intended to terminate their retiree health care benefits effective December 31, 2001.
Shortly after Plaintiffs filed their Complaint, but before either Defendant filed an Answer, Newcor, Inc., and its various subsidiaries, including Defendant Newcor M-T-L, Inc., filed for Chapter 11 bankruptcy.*fn2 In light of the automatic bankruptcy stay, this case was thereafter administratively closed. The Order for Administrative Closing provided that after the bankruptcy stay was lifted, the case could be re-opened on the motion of any party.
Newcor reorganized and emerged from bankruptcy on December 31, 2002. In accordance with the approved Plan of Reorganization, Newcor M-T-L, Inc. was dissolved in January 2003. The reorganized Newcor, Inc. continued thereafter to operate.
During and after the bankruptcy action, Newcor allegedly provided Plaintiffs Robert Burcicki, Frank Zaparanuk and George DeGraeve with continuous health care benefits.*fn3 On April 22, 2009, however, these three retirees were informed that Newcor intended to terminate their health care benefits effective April 30, 2009. Therefore, on May 28, 2009, they filed a motion to reopen this case as provided in the Court's April 16, 2002 Order.
On June 10, 2009, the Court entered an Order re-opening the case. A month later, Plaintiffs Burcicki, Zaparanuk and DeGraeve filed the instant motion seeking a preliminary injunction reinstating their retiree health care benefits pending a decision on the merits in this case. After settlement discussions failed to resolve the matter, Newcor filed its Answer, responded to Plaintiffs' motion for injunctive relief, and filed a counterclaim against the Plaintiffs. In its counterclaim, Newcor contends that since January 31, 2003, Plaintiffs Burcicki and Zaparanuk were provided benefits to which they were not entitled and that Plaintiff DeGraeve has been provided benefits to which he was not entitled since 1986. Newcor, therefore, seeks reimbursement from the Plaintiffs for the premiums for health care insurance paid on their behalf to Blue Cross and Blue Shield of Michigan.
Prior to 1985, the UAW and its Local 157 were parties to a series of collective bargaining agreements covering hourly production and maintenance employees at Dearborn Tool and Machine Corporation ("Dearborn Tool") facilities at two plants in Dearborn, Michigan, Plant # 1 on Ford Road and Plant # 2 on Diversey Street. On August 19, 1985, the UAW and Dearborn Tool entered into a Memorandum of Agreement relating to the closing of Dearborn Tool's Diversey Road Plant #2. [See Defendants' Ex. A.] This Memorandum of Agreement provided that the collective bargaining agreement covering Diversey Plant employees entered into between the Company and the Union on September 13, 1985, "shall be terminated . . . at midnight December 31, 1985." Id., p. 1.] All employees at the plant were terminated. Id.
This Memorandum of Agreement also provided that specifically designated eligible employees would be paid a severance package equal to one week's pay for each full year of service with the company as of the date of the employee's permanent layoff, and that the Company would continue for each such eligible employee "Group Hospital, Surgical and Medical coverage for six (6) months following the month in which the permanent layoff occurs. . . ." Id. p. 3. The Memorandum of Agreement further provided that it was "a final settlement by and between the Company and the Union with respect to the closing of the Plant, and fully and completely release[d] and discharge[d] the Company and the Union from any and all obligations. . . with respect to the closing of the plant under State, Federal or common law." Id., p.3.
Plaintiff George DeGraeve, who is now 86 years old, worked at Plant #2 for 22 1/2 years. He retired when the plant closed in 1985 and was designated in the Memorandum of Agreement as an "eligible employee" entitled to the severance package and continued health insurance coverage as set forth in the Agreement. See id., Appendix "A."
Shortly after Dearborn Tool closed the Diversey Street plant, Newcor purchased the Dearborn Tool plant on Ford Road, and under the name Newcor Machine Tool, Inc. (subsequently changed to "Newcor M-T-L, Inc."), assumed the existing CBA with the UAW. The last CBA between Newcor Machine Tool, Inc. and the UAW was dated September 11, 1989. [See Plaintiffs' Ex. 1-A.]
Article XV, Section 8 of the 1989 CBA provided that Newcor Machine Tool would provide retirees with the choice of a Health Alliance Plan or one of the Company's other insured or self-insured plans for hospital, surgical and medical coverage on a share-the-cost basis. [See Plaintiff's Ex. 1-A, p. 24]. Pursuant to this cost-sharing provision, employees who retired prior to September 10, 1986, and employees who retired on or after September 10, 1986 with 15 or more years of service, were required to pay 25% of the cost of the health care premium. Id. Employees who retired on or after September 10, 1986 with at least 10, but less than 15 years of service were required to pay 50% of the cost of the health care premium. Id. The CBA stipulated, however, that
It is understood that the Company's responsibility for providing health care coverage ceases upon the death of the retired employee (or the expiration of this Agreement or the ceasing of manufacturing operations whichever comes first.)
Newcor closed the Ford Road plant in the fall of 1991. Prior to the plant closing, on September 11, 1991, the UAW, UAW Local 157 and Newcor Machine Tool entered into a Termination Agreement regarding the plant closing. [See Defendants' Ex. B.] In relevant part, this Termination Agreement provided a severance package for those employees who were "active" employees on the Seniority List as of September 1, 1991. See id., Articles 3, 4. Pursuant to the Termination Agreement, eligible employees were paid specified number of weeks severance pay based upon the number of years service as of September 1, 1991, with a minimum severance package of 2 weeks pay for employees with 0-5 years seniority and a maximum of 15 weeks pay for employees with 16 or more years of service. Id., Article 3.
Such active employees on the Seniority List as of September 1, 1991 were also entitled to continuation of group life; accidental death and dismemberment insurance; dental; hospital; surgical; and medical coverage as defined in Article XV of the 1989 CBA "for six (6) months following September 30, 1991, or until covered by another group policy whichever is earlier." Id., Article 4. If not insured at the end of the six (6) month period, the Company further agreed to provide the right to continue these insurance plans for 24 additional months by the employee paying the premium in accordance with COBRA rules. Id.
The Termination Agreement also provided for the continuation of insurance coverage for employees who retired prior to December 31, 1991. For such retirees, the Company agreed to provide:
1. Continuation of life insurance for one (1) year following September 1, 1991.
2. Continuation of hospital, surgical and medical coverage in accordance with Article XV, Section 8 of the September 11, 1989 Labor Agreement. The Company reserves the right to revise or change the coverage and/or provider of this coverage to an equivalent program at any time in the future.
3. This coverage will continue for the life of the retiree, only unless Newcor, Inc. (parent company) ceases to be a legal entity or if mandated by law.
Plaintiff Frank Zaparanuk, who is 87 years old, retired from the Ford Road Plant #1 in March 1985 with 16 years of service. He is listed on Appendix B of the Termination Agreement as a "Retiree" as of September 11, 1991. See id., Appendix B. Plaintiff Robert Burcicki, who is 79 years old, was an active employee on the Newcor Machine Tool Seniority List as of September 1, 1991, see id., Appendix A, and was also Local 157's Chief Steward at the plant. He signed the 1991 Termination Agreement on behalf of the Union on September 11, 1991, and retired prior to December 31, 1991 "so that [he] would have lifetime health care coverage." See Declaration of Robert Burcicki, Plaintiff's Ex. 1, ¶ 7.
After the execution of the 1991 Termination Agreement, Defendants continued to provide medical insurance benefits to Plaintiffs Zaparanuk and Burcicki. For some unexplained reason, Plaintiff DeGraeve, who retired in 1985 at or about the time of the closing of the Diversey Street Plant #2, also continued to receive medical coverage. DeGraeve's coverage, however, was not pursuant to any contractual obligation, as the Memorandum of Agreement pertaining the closing of the Diversey Plant where he had worked contained no provision for "lifetime" retiree benefits.
Plaintiffs allege that they were informed by letter dated November 30, 2001 that the Company intended to terminate their retiree health care benefits effective December 31, 2001. See Complaint ¶ 23.*fn4 On January 18, 2002, Plaintiffs filed this lawsuit.
Defendants thereafter continued medical insurance benefits for the Plaintiffs on a month-to-month basis until Newcor, Inc., Newcor Machine Tool (then known as "Newcor -T-L), and Newcor's other subsidiaries filed jointly for Chapter 11 bankruptcy protection on February 25, 2002.
Defendants continued to provide Plaintiffs with health care benefits during the bankruptcy proceedings and, in Newcor's First Amended Plan for Reorganization assumed "all compensation and benefit plans of the Debtors applicable to their employees." See First Amended Plan, Plaintiffs' Ex. 3-B, p. 19. On December 31, 2002, the Bankruptcy Court entered its Order Confirming the First Amended Plan of Reorganization. Id. Ex. 3-A.
In its Order, the Bankruptcy Court approved the "substantive consolidation of the Debtors as contemplated in and to the extent set forth in Article II and Section V.K of the [First Amended] Plan." Id. at p. 11. The Order and Plan further provided that "all assets and liabilities of all Debtors will be treated as though the Debtors were merged" and "any obligation of any Debtor and all guarantees thereof executed by one or more of them will be deemed to be the obligation of the consolidated Debtors." Id. Order at p. 11; Plan at p. 18. The Order and Plan further specifically recognized the assumption by the surviving company, Newcor, Inc., of the obligation to provide medical benefits to Newcor's and its subsidiaries' retirees:
With respect to continuation of all retiree benefits, . . . Section VI.E [of the Plan] provides that, except as otherwise expressly provided in the Plan, all employment and severance agreements, and all compensation and benefit plans of the Debtors applicable to their employees, other than the Defined Benefit Pension Plans, shall be treated as executory contracts under the Plan and on the Effective Date will be deemed assumed pursuant to the provisions of sections 365 and 1123 of the Bankruptcy Code.
Id. Order at pp. 9-10; see also Plan, Article VI, § E at p. 19.
After confirmation of the First Amended Plan, Newcor M-T-L was dissolved on or about January 13, 2003. See Plaintiffs' Ex. 1-C.
The reorganized Newcor, Inc., however, continued to provide Plaintiffs with medical insurance benefits until April 30, 2009. In March 2009, Newcor sent Plaintiff DeGraeve a letter informing him that it intended to terminate his health care benefits effective April 30, 2009. See Defendants' Response to Plaintiffs' Interrogatory No. 4, Exh. B. to Plaintiffs' Motion to Schedule Hearing on Motion for Preliminary Injunction. On April 22, 2009, Newcor sent Plaintiffs Burcicki and Zaparanuk and DeGraeve such letters See id. See also, Plaintiffs' Ex. 1-C. The letter sent to Plaintiff Burcicki*fn5 stated, in relevant part:
Newcor Machine Tool, Inc. closed its operations and went out of business at the end of 1991. On January 13, 2003, Newcor Machine Tool, Inc. was dissolved and the dissolution was recorded in the records of the State of Michigan.
For some reason, which we have not been able to determine, NEWCOR, Inc. continued paying for your medical insurance for more than six (6) years after the obligation of Newcor Machine Tool, Inc. ended. Effective immediately, that error will be corrected and your supplemental BCBS medical insurance will terminate as of Thursday, April 30, 2009.
Further, we will need to make arrangements with you to reimburse us for the monies we have paid out on your behalf these many years after Newcor Machine Tool, Inc.'s obligation to provide medical insurance ended.
For the calendar year 2008, we advanced $626.93 per month for you and your wife, for a total of $7,523.16. For the current calendar year, 2009, we have advanced $654.05 for the months of January, February, March and April, for a total of $2,616.20.
The total due from you for the coverage from January 1, 2008 through April 30, 2009 is $10,139.36, less the $4.54.12 amount, which you paid in advance for coverage for May and June of 2009. This leaves a balance of $9,685.24. Pleas contact the undersigned at (248) 409-1070, ext. 222 to make arrangements to repay the above advances.
We are starting our research now to calculate the amounts that we advanced on your behalf for the period from January 13, 2003 through December 31, 2007, during which we paid for your medical insurance coverage. As we are able to determine the amounts you ...