Frances Alday v. Raytheon Company

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
FRANCES ALDAY; JANICE ALESHIRE; 
MARK AGRAVES; FRANK ARMENTA;
MILORAD ARNOKOVICH; LEONARD
BECWAR; JOAN BERNAL; IRMA
BRAVO; JANE BRAVO; THURMAN
BROOKS; HOWARD BROWNSTEIN;
MARLENE BURGER; JAMES BYRNES,
SR.; DAVID CARLESS; JOE
CARRASCO; LIPA CARRASCO;
ROSEMARY CESARE; ERNIE CORRAL;
RACHEL DELACRUZ; JOAN
DONNELLY; PATRICK ECCLES; LUCY
ESPARZA; REBECCA FEDERICO; JERRY
FITCH; DICKIE FLORES; ALICE 
GALLARDO; PATRICIA GARCIA;
SANDRA GARY; RICHARD GEHRKE,
SR.; DONALD GENUNG; RONALD
GEUDER; KATHLEEN GLASER;
GEORGE GONZALES; JEANETTE GRAY;
JOSE GUTIERREZ; JEANNE HARRIS;
ROBERT HARRIS; GLORIA
HERNANDEZ; ELOISE HERRAN;
GERALD HOTCHKISS; SHARON
HUDSON; JOHN JACKSON; JOE
KEIFLIN; LARRY KIDNEY; CLARE
L’ARMEE; DAVID LILLIE;

9755
9756 ALDAY v. RAYTHEON COMPANY
LESLIE LLAMAS; ERIC MARTINEZ; 
JIMMIE MARTINEZ; MARIA
MARTINEZ; MARY MCKENNA;
PATRICIA MCPHERON; JOSEPHINE
MEADOWS; ROY MESA; BILL
MEYER; THOMAS MILLER; MICHAEL
MINCHEFF; CARMEN MIRANDA;
LARRY MITCHELL; HENRY
MODRZEJEWSKI; LOIS MOORE; HEIDE
MORAN; GRACE MORENO; ABDO
MORGAN; CARLOS OCHOA; FELICITA
ORTEGA; JUAN ORTIZ; RICHARD
PAYNE; LARRY POLLOCK; CLIFTON
PRICE; JACK QUATTLEBAUM; IGNACIO
REA; JACK ROBINSON; BRUCE 
ROGERS; JENNIE SAENZ; ROBERT
SAGER; ESPERANZA SALTZBERRY;
RUSSELL SCIRA; JEANNIE SIDES;
DAVID SIMS; JEROLD SMALL; JAMES
SMITH, JR.; JULIA SOLTERO;
MICHAEL SOMMER; GINA SOTO;
DONALD SPROSS; RONALD
STALLINGS; DONALD STRAUSS; JAMES
SULLIVAN; MARY TERPENING; JOHN
TERRY; DONALD ULLIMAN; MARTHA
VILLA; STEVE VUICH; LAWRENCE
WICKERSHAM; MARY WILLIAMS;
GEORGE ZUKOWSKI,
Plaintiffs-Appellees,

ALDAY v. RAYTHEON COMPANY 9757
v.  No. 08-16984
RAYTHEON COMPANY, a Delaware
corporation,
 D.C. No.
4:06-cv-00032-DCB
Defendant-Appellant.

MARK AGRAVES; RONALD GEUDER; 
CLARE L’ARMEE; DAVID LILLIE,
Plaintiffs-Appellants,
and
FRANCES ALDAY; JANICE ALESHIRE;
FRANK ARMENTA; MILORAD
ARNOKOVICH; LEONARD BECWAR;
JOAN BERNAL; IRMA BRAVO; JANE
BRAVO; THURMAN BROOKS;
HOWARD BROWNSTEIN; MARLENE
BURGER; JAMES BYRNES, SR.; DAVID 
CARLESS; JOE CARRASCO; LIPA
CARRASCO; ROSEMARY CESARE;
ERNIE CORRAL; RACHEL DELACRUZ;
JOAN DONNELLY; PATRICK ECCLES;
LUCY ESPARZA; REBECCA FEDERICO;
JERRY FITCH; DICKIE FLORES; ALICE
GALLARDO; PATRICIA GARCIA;
SANDRA GARY; RICHARD GEHRKE,
SR.; DONALD GENUNG; KATHLEEN
GLASER; GEORGE GONZALES;
JEANETTE GRAY; JOSE GUTIERREZ;

9758 ALDAY v. RAYTHEON COMPANY
JEANNE HARRIS; ROBERT HARRIS; 
GLORIA HERNANDEZ; ELOISE
HERRAN; GERALD HOTCHKISS;
SHARON HUDSON; JOHN JACKSON;
JOE KEIFLIN; LARRY KIDNEY; LESLIE
LLAMAS; ERIC MARTINEZ; JIMMIE
MARTINEZ; MARIA MARTINEZ; MARY
MCKENNA; PATRICIA MCPHERON;
JOSEPHINE MEADOWS; ROY MESA;
BILL MEYER; THOMAS MILLER;
MICHAEL MINCHEFF; CARMEN
MIRANDA; LARRY MITCHELL; HENRY
MODRZEJEWSKI; LOIS MOORE; HEIDE
MORAN; GRACE MORENO; ABDO
MORGAN; CARLOS OCHOA; FELICITA
ORTEGA; JUAN ORTIZ; RICHARD
PAYNE; LARRY POLLOCK; CLIFTON 
PRICE; JACK QUATTLEBAUM; IGNACIO
REA; JACK ROBINSON; BRUCE
ROGERS; JENNIE SAENZ; ROBERT
SAGER; ESPERANZA SALTZBERRY;
RUSSELL SCIRA; JEANNIE SIDES;
DAVID SIMS; JEROLD SMALL; JAMES
SMITH, JR.; JULIA SOLTERO;
MICHAEL SOMMER; GINA SOTO;
DONALD SPROSS; RONALD
STALLINGS; DONALD STRAUSS; JAMES
SULLIVAN; MARY TERPENING; JOHN
TERRY; DONALD ULLIMAN; MARTHA
VILLA; STEVE VUICH; LAWRENCE
WICKERSHAM; MARY WILLIAMS;
GEORGE ZUKOWSKI,
Plaintiffs,

ALDAY v. RAYTHEON COMPANY 9759
v.  No. 08-16985
RAYTHEON COMPANY, a Delaware D.C. No.
corporation, 4:06-cv-00032-DCB
Defendant-Appellee. ORDER
AMENDING
OPINION AND
 DENYING
PETITION FOR
REHEARING AND
PETITION FOR
REHEARING EN
BANC AND
AMENDED
 OPINION
Appeal from the United States District Court
for the District of Arizona
David C. Bury, District Judge, Presiding
Argued and Submitted
May 9, 2011—San Francisco, California
Filed May 21, 2012
Amended August 27, 2012
Before: M. Margaret McKeown, William A. Fletcher, and
Marsha S. Berzon, Circuit Judges.
Opinion by Judge Berzon
9762 ALDAY v. RAYTHEON COMPANY
COUNSEL
Robert Gregory, Mesa, Arizona, for the plain-
tiffs/appellees/appellants.
ALDAY v. RAYTHEON COMPANY 9763
Christopher Landau, Washington, DC, for the defen-
dant/appellant/appellee.
ORDER
The Slip Opinion filed on May 21, 2012, is amended as fol-
lows:
[Slip Opinion at page 5547:]
After the words “violates both LMRA § 301 and ERISA.
See id.” in the last full paragraph on page 5547, add a footnote
that reads:
Such a breach gives rise to a cause of action under
not just the LMRA, but also ERISA, for the reasons
first laid out in Armistead v. Vernitron Corp., 944
F.2d 1287 (6th Cir. 1991). With regard to the retir-
ees’ ERISA claim in that case, the Sixth Circuit rea-
soned: “The medical insurance plan agreed to in the
CBA is a welfare benefits plan under ERISA. The
terms of the benefits plan are established in the
CBA. Having concluded that Vernitron had no right
to terminate plaintiffs’ insurance benefits under the
CBA, we must also conclude that it had no right to
terminate them when we consider the terms of the
CBA as a benefits plan under ERISA.” Id. at 1298.
Welfare plans must “ ‘provide a policy and a method
for funding the plan’ ” and “ ‘specify a basis for pay-
ments to and from the plan.’ ” Cinelli v. Sec. Pac.
Corp., 61 F.3d 1437, 1441 (9th Cir. 1995) (citation
omitted). An ERISA plan fulfilling these require-
ments need not be in any particular form, nor need
it be in an official plan document. See Winterrowd
v. Am. Gen. Annuity Ins. Co., 321 F.3d 933, 938-39
(9th Cir. 2003); Scott v. Gulf Oil Corp., 754 F.2d
9764 ALDAY v. RAYTHEON COMPANY
1499, 1503 (9th Cir. 1985), abrogated on other
grounds by Fort Halifax Packing Co. v. Coyne, 482
U.S. 1 (1987); Donovan v. Dillingham, 688 F.2d
1367, 1372 (11th Cir. 1982) (en banc). The terms of
a CBA can therefore establish the terms of an
ERISA plan and give rise, if violated, to an ERISA
cause of action.
With this amendment, the panel has voted to deny the peti-
tion for rehearing and to reject the suggestion for rehearing en
banc.
The full court has been advised of the suggestion for
rehearing en banc and no active judge has requested a vote on
whether to rehear the matter en banc. Fed. R. App. P. 35.
The petition for rehearing is DENIED and the suggestion
for rehearing en banc is REJECTED.
No future petitions for rehearing or rehearing en banc will
be entertained.
OPINION
BERZON, Circuit Judge:
Employees at a defense plant in Arizona collectively bar-
gained for the right to receive employer-provided healthcare
coverage after they retired. We consider whether those
employees—now retirees—are contractually entitled to
receive premium-free healthcare coverage until age 65, or
whether the contracts on which the retirees rely as providing
that entitlement allowed their prior employer to start charging
them for their insurance. Our analysis depends on the lan-
guage of the relevant documents, considered against the back-
ground of employee benefits law and labor law precepts.
ALDAY v. RAYTHEON COMPANY 9765
I
The plaintiffs here are a class of retirees who had worked
at a defense plant in Tucson, Arizona, as well as their eligible
spouses and dependents.1 The plant was owned by Hughes
Missile Systems Group until 1997, at which point it was taken
over by the Raytheon Company. Hughes and then Raytheon
entered into a series of collective bargaining agreements
(“CBAs”) with the International Association of Machinists
and Aerospace Workers, AFL-CIO and its Local Old Pueblo
Lodge, No. 933 (“the union”). From 1972 to 1999, the CBAs
entered into consistently stipulated that the “Employer” would
provide health insurance for eligible employees who retired
under the retirement plan’s so-called “contributory option.”
To participate in the retirement plan’s contributory option,
employees had to contribute three percent of their eligible
compensation.
Before the 2003-2006 CBA became operative on Novem-
ber 2, 2003, Raytheon provided fully funded healthcare cover-
age for eligible retirees who had participated in the
contributory option of their respective retirement plans. The
2003 CBA, however, expressly limited Raytheon’s contribu-
tions towards future eligible retirees’ healthcare coverage. In
2004, Raytheon applied this policy to all employees who had
retired while previous CBAs were in place, by starting to
charge such retirees monthly premiums for their health insur-
ance.
Several retirees sued on behalf of themselves and a class of
other retirees, alleging claims under § 301 of the Labor Man-
agement Relations Act (“LMRA”), 29 U.S.C. § 185, and
§ 502 of the Employee Retirement Income Security Act of
1974 (“ERISA”), 29 U.S.C. § 1132. The district court certi-
1
The spouses’ and dependents’ rights under the contracts are derivative
of the retirees’. For the sake of brevity, we refer most often only to the
claims of the retirees themselves.
9766 ALDAY v. RAYTHEON COMPANY
fied a class of retirees, together with their eligible spouses and
dependents, (“Retirees”) who had retired under the 1990,
1993, 1996, and 1999 CBAs, and otherwise satisfied the
CBAs’ eligibility criteria for employer-provided retiree health
insurance. The court subsequently granted Retirees’ motion
for summary judgment on the LMRA and ERISA claims,
holding that the CBAs’ terms unambiguously establish eligi-
ble retirees’ contractual right to premium-free health insur-
ance until they reach age 65. Raytheon appeals the order
granting summary judgment.
In a separate order, the district court granted Raytheon’s
motion for judgment on the pleadings regarding Retirees’
claims for extracontractual and punitive damages, holding that
Retirees are not entitled to such damages. Retirees cross-
appeal that order.
II
Because the parties’ positions depend on their differing
interpretations of the relevant CBA and ERISA plan provi-
sions, we begin by surveying these provisions in detail. Gen-
erally, “[a] retired worker’s labor rights are governed by the
CBA under which she retired and the terms of any ERISA
plans incorporated therein.” Coffin v. Bowater Inc., 501 F.3d
80, 97 n.15 (1st Cir. 2007). We therefore look to the contrac-
tual documents in effect when Retirees left the active work-
force.
As noted, the class includes retirees who retired under four
different CBAs—those entered into in 1990, 1993, 1996, and
1999.2 While the last three CBAs were in effect, Raytheon
issued the 1994, 1997, 1999, and 2003 ERISA welfare bene-
fits plans (“the Plans”). Both the CBAs and the Plans changed
2
Hughes executed the 1990-1996 CBAs. Raytheon merged with Hughes
in 1997, and was substituted as the employer in the 1996 CBA. Raytheon
executed the 1999 CBA.
ALDAY v. RAYTHEON COMPANY 9767
over time in pertinent ways. We therefore consider both
classes of documents in some detail.
The CBAs
Each CBA carried a three- or four-year effective term.
According to all the CBAs’ Current and Supplemental Agree-
ments provision, Article XIX § F, each CBA constituted the
sole agreement between the parties during its effective term.
Article XIX § F further states that the CBAs’ terms and con-
ditions cannot be altered or rescinded except as executed in
writing between the parties.
The CBAs’ Group Benefits Article (Article XIII of the
1990 and 1993 CBAs; Article XII of the 1996 and 1999
CBAs) covers the group benefits provided to both active
employees and retirees. In each instance, § J(1) of the Group
Benefits Article obligates the Employer to pay the Compre-
hensive Medical Plan premiums of active employees, subject
to the provisions of § A. Section A(5), in turn, establishes a
detailed schedule for determining an active employee’s man-
datory individual contribution (if any), based primarily on the
employee’s selected medical plan and “coverage level.” Cov-
erage levels include: Employee Only; Employee and Spouse;
Employee and Children; and Family.
Section D of the Group Benefits Article encompasses the
medical coverage provisions pertaining specifically to retir-
ees. It establishes a distinct dichotomy, for medical coverage
purposes, between participants in the retirement plan’s con-
tributory and non-contributory options. With respect to
contributory-option participants, § D(1) stipulates that the
Employer will continue to provide the Comprehensive Medi-
cal Plan coverages for which the retiree was covered as an
active employee, until the retired employee attains age 65.3 To
3
The 1999 CBA substitutes the Raytheon Medical Plan for the Compre-
hensive Medical Plan. We do not refer to the Raytheon Medical Plan sepa-
rately, but instead include it in our references to the Comprehensive
Medical Plan.
9768 ALDAY v. RAYTHEON COMPANY
qualify for this entitlement, retirees must be between the ages
of 55 and 65, have at least five years of continuous employ-
ment, and have at least three years of continuous participation
in the company retirement plan’s contributory option immedi-
ately preceding retirement. Section D(5)(e) of the 1993, 1996,
and 1999 CBAs further specifies that qualifying retirees pay
“no weekly premium/charge” for their medical plans.4
The CBAs treat quite differently retirees who participated
in the retirement plan’s non-contributory option. Section D(5)
of the 1990 CBA states that employees who retire with partic-
ipation in the non-contributory option do not receive
employer-provided medical coverage. Section D(6) of the
1993 and 1996 CBAs, and § D(7) of the 1999 CBA, elaborate
that a non-contributory option participant may “extend enroll-
ment” in the medical coverages he or she enjoyed as an active
employee, but further specify that enrollment is contingent on
the retiree’s payment of COBRA medical plan premiums.5
The Plans
The CBAs’ Group Benefits Articles frequently reference
Raytheon’s ERISA welfare benefits plans (“the Plans”). Sec-
tions A(2) and D(2) stipulate that the “benefits” of both active
and retired employees will be administered in accordance
with the Employer’s Plan documents. Section J(4) further pro-
vides that nothing in the CBAs shall “change any provisions
of the Group Benefit Plans provided under this Article XIII
[Article XII in the 1996 and 1999 CBAs] as currently in
effect, other than those changes specifically referred to here-
4
As we explain below, the 1990 CBA also assured eligible retirees of
no-cost retiree health insurance.
5
The Consolidated Omnibus Budget Reconciliation Act, 29 U.S.C.
§ 1161 et seq. (“COBRA”), “requires group health care plan sponsors to
provide continuation coverage for employees who are terminated from
their employment under certain specified circumstances, including lay-
offs.” Local 217, Hotel & Rest. Emp. Union v. MHM, Inc., 976 F.2d 805,
806-07 (2d Cir. 1992).
ALDAY v. RAYTHEON COMPANY 9769
in.” Finally, § J(5) expressly subordinates “[a]ll benefits of
employees, retired employees, laid off employees and insured
dependents” to the “terms of the applicable Plan documents
under which payment is claimed.” Section 2.5 of the 1999 and
2003 Plans defines “[b]enefits” as “any payments or services
made under the Plan to a Participant or other person eligible
to receive payments or services pursuant to any Benefit Pro-
gram”; the term “benefits” is not defined in the excerpts of the
earlier Plans included in the record.
The Plans in the record begin with the 1994 Plan; no Plan
in the record covers the 1990-94 period, and the parties point
to no relevant language in any Plan covering that period. The
Plans for 1994 and thereafter contain various reservation-of-
rights provisions, on which Raytheon now relies in claiming
the unilateral authority to eliminate any premium-payment
obligations otherwise established by the CBAs.
Specifically, Section III of the 1994 Plan and § VIII(Q) of
the 1997 Plan state that the Employer “reserves the right to
alter, amend, modify, revoke or terminate in whole or in part
the Plan, except as provided in any agreement with a Collec-
tive Bargaining Agent.” The 1999 and 2003 Plans contain a
reservation-of-rights provision, § 8.1, which similarly autho-
rizes Raytheon to amend the Plan, but without any explicit
reference to CBAs.
In addition, the 1999 and 2003 Plans contain two provi-
sions that might affect the Employer’s unilateral authority to
amend its healthcare coverage obligations to retirees. First,
§ 9.2 of the 1999 and 2003 Plans (“the no-vesting clause”)
affirmatively prevents the vesting of any right to, or interest
in, benefits provided under the Plans, except as specifically
provided under a Benefit Program.6 Second, § 5.2 of the 1999
6
Section 2.3 of the 1999 and 2003 Plans defines “Benefit Program(s)”
as “the benefit plans maintained by the Company listed on Appendix A to
the Plan, as such programs and such Appendix A may be amended from
9770 ALDAY v. RAYTHEON COMPANY
and 2003 Plans (“the contributions clause”) gives the Com-
pany sole discretion to change the contributions required of
Plan participants.
Raytheon argues that these Plan provisions authorize it uni-
laterally to limit or discontinue Retirees’ contractual right to
premium-free health insurance. Retirees respond that their
contractual rights under the CBAs cannot be extinguished or
otherwise modified by provisions in Raytheon’s unilaterally
adopted Plans. For the reasons set forth below, we hold that,
under the terms of the particular agreements here relevant,
Raytheon lacked the authority to abrogate unilaterally its col-
lectively bargained premium-payment obligations.
III
“Section 301 of the LMRA, 29 U.S.C. § 185(a), creates a
federal cause of action for breach of collective bargaining
agreements.” Miller v. AT&T Network Sys., 850 F.2d 543, 545
(9th Cir. 1988). ERISA provides a cause of action to benefits
plan participants or beneficiaries for recovery of benefits due
under a plan, to enforce rights under the plan, or to clarify
their rights to future benefits under the plan’s terms. 29
U.S.C. § 1132(a)(1)(B).
Under ERISA, post-retirement medical benefits are classi-
fied as welfare benefits. 29 U.S.C. § 1002(1). Welfare bene-
fits, unlike pension benefits, “do not vest unless and until the
employer says they do.” Grosz-Salomon v. Paul Revere Life
Ins. Co., 237 F.3d 1154, 1160 (9th Cir. 2001). An employer
time to time.” Appendix A, in turn, identifies the benefit packages avail-
able to Plan participants. Appendix A to the 2003 Plan, for example, states
that the Employee Medical Benefits, Employee Dental Benefits, Employee
Vision Care Benefits, Retiree Medical Benefits, Retiree Dental Benefits,
Flexible Spending Account Plan, and Employee Assistance Programs shall
be “incorporated into and made a part of the Plan,” effective “as of Janu-
ary 1, 1999.”
ALDAY v. RAYTHEON COMPANY 9771
is therefore “generally free under ERISA, for any reason at
any time, to adopt, modify, or terminate” welfare benefits
unless “[it] contractually cedes its freedom.” Inter-Modal Rail
Emps. Ass’n v. Atchison, Topeka & Santa Fe Ry. Co., 520
U.S. 510, 515 (1997) (quoting Curtiss-Wright Corp. v.
Schoonejongen, 514 U.S. 73, 78 (1995)) (internal quotation
marks omitted).
[1] The terms of medical coverage agreed to in a CBA
constitute such a contractual commitment. See, e.g., Winnett
v. Caterpillar, Inc., 553 F.3d 1000, 1009 n.5 (6th Cir. 2009).
When such a contractual commitment is in place, an employ-
er’s breach of its contractual duty to provide benefits violates
both LMRA § 301 and ERISA. See id. 7 Our question, then,
is whether the CBAs under which Retirees worked when
employed obligated Raytheon to continue paying their health
insurance premiums until they attain age 65; if the CBAs
impose such an obligation, Raytheon may be held liable under
both the LMRA and ERISA.
7
Such a breach gives rise to a cause of action under not just the LMRA,
but also ERISA, for the reasons first laid out in Armistead v. Vernitron
Corp., 944 F.2d 1287 (6th Cir. 1991). With regard to the retirees’ ERISA
claim in that case, the Sixth Circuit reasoned: “The medical insurance plan
agreed to in the CBA is a welfare benefits plan under ERISA. The terms
of the benefits plan are established in the CBA. Having concluded that
Vernitron had no right to terminate plaintiffs’ insurance benefits under the
CBA, we must also conclude that it had no right to terminate them when
we consider the terms of the CBA as a benefits plan under ERISA.” Id.
at 1298. Welfare plans must “ ‘provide a policy and a method for funding
the plan’ ” and “ ‘specify a basis for payments to and from the plan.’ ”
Cinelli v. Sec. Pac. Corp., 61 F.3d 1437, 1441 (9th Cir. 1995) (citation
omitted). An ERISA plan fulfilling these requirements need not be in any
particular form, nor need it be in an official plan document. See Winter-
rowd v. Am. Gen. Annuity Ins. Co., 321 F.3d 933, 938-39 (9th Cir. 2003);
Scott v. Gulf Oil Corp., 754 F.2d 1499, 1503 (9th Cir. 1985), abrogated
on other grounds by Fort Halifax Packing Co. v. Coyne, 482 U.S. 1
(1987); Donovan v. Dillingham, 688 F.2d 1367, 1372 (11th Cir. 1982) (en
banc). The terms of a CBA can therefore establish the terms of an ERISA
plan and give rise, if violated, to an ERISA cause of action.
9772 ALDAY v. RAYTHEON COMPANY
In construing a CBA, we apply federal common law princi-
ples of contract interpretation, which take into account the
policies underlying our national labor laws. See Textile Work-
ers Union v. Lincoln Mills, 353 U.S. 448, 456-57 (1957); Nw.
Adm’rs, Inc. v. B.V. & B.R., Inc., 813 F.2d 223, 226 (9th Cir.
1987). To apply those principles, we begin by looking to the
CBA’s express written terms. Id. at 225. In so doing, “[w]e
interpret written terms in the context of the entire agreement’s
language, structure, and stated purpose.” Trs. of S. Cal.
IBEW-NECA Pension Trust Fund v. Flores, 519 F.3d 1045,
1047 (9th Cir. 2008).
As we are reviewing the district court’s grant of summary
judgment to the Retirees, we must decide whether the CBAs
unambiguously establish Retirees’ right to company-paid
health insurance until age 65. See Ariz. Laborers, Local 395
Health & Welfare Trust Fund v. Conquer Cartage Co., 753
F.2d 1512, 1518 (9th Cir. 1985). The district court did not
consider any extrinsic evidence; we similarly limit our analy-
sis to the relevant documents’ terms, which we find suffi-
ciently clear in themselves.
We must determine: (A) whether Retirees had a contractual
right to premium-free health insurance; if so, (B) whether that
right survived the CBAs’ expiration; and if so, (C) whether
Raytheon could terminate that right unilaterally.
A. Contractual Right to Premium-Free Healthcare
Coverage
As to the first question—whether the collective bargaining
agreements before the one entered into in 2003 required the
employer to pay the premiums for Retirees’ medical insurance
until age 65—we had thought that there was agreement
between the parties that the CBAs do so provide. In a post-
argument letter, however, Raytheon appears to be disputing
that basic premise. We therefore consider the question briefly.
ALDAY v. RAYTHEON COMPANY 9773
[2] First, as to the 1993, 1996, and 1999 agreements, there
is absolutely no question as to the intent of the parties to the
CBAs. Each of these CBAs includes, in § D(5)(e) of the sec-
tion covering “Retired Employees Medical Benefits,” the
assurance that “[t]here is no weekly premium/charge for the
Preferred Plan, the Hughes Medical Plan, or an HMO.” As the
rest of § D(5) specifies that those are the only medical plan
choices available to retirees, there is no doubt that the eligible
retirees were not required to make any payments toward their
medical benefits.8
Second, even without that explicit assurance, the CBAs,
including the 1990 CBA, established that the employer will
pay for eligible retirees’ medical coverage. Each CBA speci-
fied that:
For employees who hereafter retire, with at least
three (3) years of continuous participation in the con-
tributory option of the Retirement Plan immediately
preceding the employee’s date of retirement, and
who are at least age 55 but less than age 65 and who
have five (5) or more years of continuous employ-
ment with the Employer, the Employer agrees to
continue to provide the Comprehensive Medical Plan
coverages for which they were covered while active
employees, until the retired employee attains age 65.
Construing “provide” to mean “make available,” Raytheon
suggests that this section obligates it to make available the
same coverages Retirees enjoyed as active employees, but
does not obligate the company to pay for that coverage. We
cannot agree.
Looking at the 1990 CBA as a whole—the only one as to
8
Some active employees, depending on their choice of benefit plan, did
have to pay toward their medical coverage, while others received cash
payment from the employer for choosing a less selective plan.
9774 ALDAY v. RAYTHEON COMPANY
which this contention could matter, as the others contain the
additional, express clarification just discussed—one notices,
first, that Section D distinguishes between retirees who partic-
ipated in the Retirement Plan’s contributory option and those
who participated in the non-contributory option. Whereas
§ D(1) states that Raytheon must “provide” contributory
option participants with the same Comprehensive Medical
Plan Coverages they enjoyed as active employees, § D(5) of
the 1990 CBA states that “employees who retire with partici-
pation in the non-contributory option of the Retirement Plan
will not receive employer provided medical coverage.”
(Emphasis added). Sections D(1) and D(5) of the 1990 CBA
thus establish a basic dichotomy: Contributory option partici-
pants enjoy employer-provided health insurance; non-
contributory option participants do not. Article XIV § B(3)(b),
describing some of the differences between the Retirement
Plan’s contributory and non-contributory options, clarifies the
meaning of this distinction. It states that “[t]he non-
contributory benefit will have different qualifications for nor-
mal and early retirement, no automatic cost-of-living pay-
ment, and no eligibility for company-paid medical per Article
XIII, Section D, paragraph 5.” (Emphasis added).9 So, Arti-
cles XIII § (D)(5) and XIV § (B)(3)(b), read together, equate
“company paid medical” and “employer provided medical.”
This gloss on the CBA’s meaning of “provide” in the context
of Medical Plan coverage indicates that “provide” means “pay
for” and not simply “make available at the employee’s
expense.”10
9
Article XIV § (B)(3)(b) remained substantially the same, in this
respect, throughout the 1993, 1996, and 1999 CBAs.
10
The terms of subsequent CBAs continue to support this interpretation
of § D(1). The 1993, 1996, and 1999 CBAs state that, for non-contributory
option participants, “the Employer agrees that the employees may extend
enrollment in the Comprehensive Medical Plan or HMO coverages for
which [non-contributory option participants] were covered as active
employees, until the retired employee attains age sixty-five (65),” but fur-
ther stipulate that “[t]he covered individual(s) shall pay the full retiree
ALDAY v. RAYTHEON COMPANY 9775
Of course, one could “provide” partial rather than full pay-
ment. But, were that the case, there would have to be some
indication as to the parties’ respective contributions, such as
that spelled out for active employees under § A(5). Without
an explicit payment schedule, reading “provide” to mean “pay
in part” would render the promise effectively illusory, as Ray-
theon could fulfill its obligation by contributing a penny. See
Tackett v. M & G Polymers, USA, LLC, 561 F.3d 478, 490
(6th Cir. 2009) (per curiam) (“The CBA has no limitation on
the amount of a company contribution and if the Defendants’
argument were accepted, the company presumably could
lower the contribution to zero without violating this language.
Such a promise would be illusory.”). “As in all contracts, the
collective bargaining agreement’s terms must be construed so
as to render none nugatory and avoid illusory promises.”
Smith v. ABS Indus., Inc., 890 F.2d 841, 845 (6th Cir. 1989)
(citing Cordovan Assocs., Inc. v. Dayton Rubber Co., 290
F.2d 858, 861 (6th Cir. 1961)). Finally, § D(5)(e) of the 1993,
1996, and 1999 CBAs confirms this interpretation: With the
“provide” language of § D(1) still in place, § D(5)(e) confirms
that employees who retire under the retirement plan’s contrib-
utory option pay “no weekly premium/charge” for the rele-
vant medical plans.
[3] We therefore hold that § D(1) of the various CBAs
obligates Raytheon fully to pay eligible retirees’ health insur-
ance premiums until they attain age 65.
COBRA Group Premium for the medical plan of benefits in which they
are enrolled.” 1993 CBA § D(6); 1996 CBA § D(6); 1999 CBA § D(7).
The use of the phrase “the Employer agrees that the employees may
extend enrollment” instead of “the Employer agrees to continue to pro-
vide,” in a section otherwise directly analogous to § D(1), indicates that
the parties were careful to state clearly a limited obligation to make cover-
age available in §§ D(6) and D(7), and intended a greater obligation (i.e.,
“company-paid medical”) in § D(1). “[W]hen parties to the same contract
use such different language to address parallel issues . . . it is reasonable
to infer that they intend this language to mean different things.” Taracorp,
Inc. v. NL Indus., Inc., 73 F.3d 738, 744 (7th Cir. 1996).
9776 ALDAY v. RAYTHEON COMPANY
B. Retirees’ Medical Coverage Post-Contract
[4] Having concluded that § D(1) obligates Raytheon fully
to pay eligible retirees’ health insurance premiums, we must
address whether this obligation survived after each CBA’s
expiration. “As a general rule, where the contract at issue has
expired, the parties are ‘released . . . from their respective
contractual obligations’ and any dispute between them cannot
be said to arise under the contract.” Poore v. Simpson Paper
Co., 566 F.3d 922, 927 (9th Cir. 2009) (omission in original)
(quoting Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 206
(1991)). As with many rules, however, there are exceptions:
Certain benefits continue past expiration “where, under nor-
mal principles of contract interpretation, the disputed contrac-
tual right survives expiration of the remainder of the
agreement.” Id. (quoting Litton, 501 U.S. at 206) (internal
quotation marks omitted).
Applying normal contract interpretation principles, Retir-
ees’ right to premium-free health insurance did not expire
with the CBAs. Eligible retirees’ right to premium-free health
insurance was one of two group coverages for which the
CBAs supplied a specific duration — “until the retiree attains
age 65.”11 In similar cases, this distinction has been disposi-
tive.
[5] In Turner v. Local Union No. 302, Int’l Bhd. of Team-
sters, 604 F.2d 1219 (9th Cir. 1979), for example, the reason
“appellant’s rights to the health and welfare benefits . . . .
could be terminated at the end of any one of the collective
bargaining agreements” was that “[n]one of the documents
11
At least some of the CBAs provided cost-free life insurance to certain
“eligible employees retiring during the term of this Agreement,” for five
years after retirement, in decreasing amounts. After the fifth year, retirees
were required to pay for their insurance, in an amount “subject to change
based on claims experience.” Group Benefits § C, Retiree Group Life
Insurance Plan.
ALDAY v. RAYTHEON COMPANY 9777
establishing the . . . benefits made any representation as to the
length of the period during which these benefits would con-
tinue to be paid, other than ‘throughout the term of this agree-
ment.’ ” Id. at 1225. In contrast, where a CBA links eligibility
for a particular right “to an event that would almost certainly
occur after the expiration of the agreement”—e.g., turning 65
or becoming eligible for Medicare—such linkage “signal[s]
the parties’ intent to continue retirement health benefits not-
withstanding expiration.” Quesenberry v. Volvo Trucks N.
Am. Retiree Healthcare Benefit Plan, 651 F.3d 437, 441 (4th
Cir. 2011); see Poore, 566 F.3d at 924, 927 (holding that
jurisdiction existed under the LMRA because the retirees had
established “a colorable claim that they have a right to bene-
fits which survived the expiration of the remainder of the
agreement,” where a benefit booklet incorporated into the
CBAs stated that medical coverage “would continue until the
retiree ‘bec[ame] eligible for Medicare, attain[ed] age 65, or
until . . . death, whichever occurs first,’ ” but stating that there
was ambiguity regarding how this commitment could be mod-
ified (alterations and omission in original)).12 Because the
CBAs here require Raytheon to “continue to provide” Retir-
ees with premium-free healthcare coverage until they reach
age 65, Raytheon’s obligation to pay Retirees’ medical insur-
ance premiums continued after the CBAs themselves expired.13
12
See also, e.g., Dewhurst v. Century Aluminum Co., 649 F.3d 287, 292
(4th Cir. 2011); Maurer v. Joy Techs., Inc., 212 F.3d 907, 918 (6th Cir.
2000). Compare Diehl v. Twin Disc, Inc., 102 F.3d 301, 307 (7th Cir.
1996) (Flaum, J.) (holding that the CBA’s “clear provision for lifetime
benefits. . . . abrogated whatever right [the employer] may have had to ter-
minate coverage”) with UAW v. Rockford Powertrain, Inc., 350 F.3d 698,
705 (7th Cir. 2003) (Flaum, J.) (distinguishing Diehl, and holding that a
company could terminate ongoing retiree health benefits, on the ground
that the CBA “contain[ed] no statement regarding the period of time dur-
ing which retirees would be entitled to benefits”).
13
The CBAs’ use of specific durational language to limit the employer’s
obligations to a fixed period for each retiree—i.e., until the retiree attains
age 65, and for similarly fixed periods for spouses and dependants—
differentiates this case from those in which courts have recognized the
employer’s “natural[ ] reluctan[ce] to saddle itself with [the] indefinite
future obligations” inherent in a promise to provide benefits for life.
Bidlack v. Wheelabrator Corp., 993 F.2d 603, 609 (7th Cir. 1993) (en
banc) (emphasis added).
9778 ALDAY v. RAYTHEON COMPANY
C. Unilateral Abrogation of Fully-Paid Retiree Medical
Coverage
[6] Having resolved these fairly straightforward issues, we
come to the question at the heart of this case: Do the Plans’
provisions limit Raytheon’s contractual obligation, bilaterally
agreed upon with the union representing now-retired employ-
ees while they were still employed, to provide premium-free
healthcare coverage for eligible retirees? We conclude that
they do not. The Plans’ reservation-of-rights provisions were
not incorporated into the CBAs with regard to the obligation
to pay for eligible retirees’ medical coverage, and the CBAs
expressly prevented Raytheon from unilaterally abrogating its
contractual premium-payment obligations.
1. The CBAs’ relationship to the Plans
In arguing that the CBAs incorporated the Plans’
reservation-of-rights provisions, Raytheon relies on three sep-
arate CBA clauses — Sections J(4), J(5), and D(2). We
address each in turn.
a. Section J(5)
First, Raytheon argues that § J(5) of the CBAs’ Group Ben-
efits Article expressly subordinates the CBAs’ group benefits
provisions in their entirety (including §§ D(1) and D(5)(e))
to the Plans’ terms, including the Plans’ reservation-of-rights
provisions. Section J(5) of the various CBAs states that “[a]ll
benefits of employees [and] retired employees . . . are subject
in every respect to the terms of the applicable Plan documents
under which payment is claimed.” Raytheon maintains that
the term “benefits” includes commitments regarding plan con-
tributions and premium payments, and concludes that § J(5)
subordinates § D(1)’s promise—that Raytheon would fully
pay eligible retirees’ health insurance—to the Plans’
reservation-of-rights provisions, thereby allowing unilateral
ALDAY v. RAYTHEON COMPANY 9779
modification of the CBAs’ promises of employer-provided
retiree health insurance.
[7] We disagree. Generally, under ERISA, “benefits” are
payments made or services provided, pursuant to the plan, to
claiming participants or beneficiaries, while premiums or con-
tributions cover the cost of those “benefits.” Compare 29
U.S.C. § 1002(22)-(23) (benefits are amounts paid out of the
plan)14 with 29 C.F.R. § 2520.102-3(p) (contributions are
amounts paid into the plan);15 see also Kadane v. Hofstra
14
29 U.S.C. § 1002(22) states:
The term “normal retirement benefit” means the greater of the
early retirement benefit under the plan, or the benefit under the
plan commencing at normal retirement age. The normal retire-
ment benefit shall be determined without regard to—
(A) medical benefits, and
(B) disability benefits not in excess of the qualified disability
benefit.
For purposes of this paragraph, a qualified disability benefit is a
disability benefit provided by a plan which does not exceed the
benefit which would be provided for the participant if he sepa-
rated from the service at normal retirement age. For purposes of
this paragraph, the early retirement benefit under a plan shall be
determined without regard to any benefit under the plan which
the Secretary of the Treasury finds to be a benefit described in
section 1054(b)(1)(G) of this title. (Emphasis added).
Section 1002(23) declares:
The term “accrued benefit” means—
(A) in the case of a defined benefit plan, the individual’s accrued
benefit determined under the plan and, except as provided in sec-
tion 1054(c)(3) of this title, expressed in the form of an annual
benefit commencing at normal retirement age, or
(B) in the case of a plan which is an individual account plan, the
balance of the individual’s account.
The accrued benefit of an employee shall not be less than the
amount determined under section 1054(c)(2)(B) of this title with
respect to the employee’s accumulated contribution.
15
29 C.F.R. § 2520.102-3(p) provides that “[t]he sources of contribu-
tions to the plan — for example, employer, employee organization,
9780 ALDAY v. RAYTHEON COMPANY
Univ., 682 F. Supp. 166, 169-70 & n.3 (E.D.N.Y. 1988) (“The
fact that these employer contributions are transformed into
Plan benefits as they are paid out pursuant to the Plan does
not make the contributions plan benefits.”); cf. Leister v.
Dovetail, Inc., 546 F.3d 875, 881 (7th Cir. 2008)
(“Contributions to a plan and benefits owed by a plan are not
necessarily equivalent [in amount] . . . .”). Thus, for example,
a defined contribution pension plan requires the employer to
contribute a certain percentage of payroll or profits to partici-
pants’ accounts, whereas a defined benefit plan promises to
pay participants a fixed benefit upon retirement. See, e.g.,
Hurlic v. S. Cal. Gas Co., 539 F.3d 1024, 1029 (9th Cir.
2008) (quoting Pension Benefit Guar. Corp. v. LTV Corp.,
496 U.S. 633, 637 n.1 (1990)).
[8] Although these examples center on pension benefits,
the general concept that contributions and benefits differ and
are separately provided for in ERISA plans is not so limited,
as the reference to “medical benefits” in § 1002(22) indicates.
A right to employer contributions may also be construed as a
benefit where the failure to make contributions economically
undermines the monetary benefits promised. See Frulla v.
CRA Holdings, Inc., 543 F.3d 1247, 1253 (11th Cir. 2008).
Here, however, as we have seen, the promise to “provide”
coverage assures that the employer will pay the contributions.
And § J(5)’s language also otherwise implies the narrower
meaning outlined above.
[9] Section J(5) states that benefits are subject to the terms
of the Plan “under which payment is claimed.” This phrasing
closely resembles the statutory language used in ERISA to
employees — and the method by which the amount of contribution is cal-
culated” shall be included in the summary plan description of both
employee welfare benefit plans and employee pension benefit plans. The
regulation further notes that “[d]efined benefit pension plans may state
without further explanation that the contribution is actuarially deter-
mined.”
ALDAY v. RAYTHEON COMPANY 9781
refer specifically to a participant’s claim for payments from
the plan. See 29 U.S.C. § 1133(1) (requiring the employer to
“provide adequate notice in writing to any participant or ben-
eficiary whose claim for benefits under the plan has been
denied”) (emphasis added).
The language of § J(5) also resembles the phrasing used by
Raytheon’s Plans. Section 2.5 of the 1999 and 2003 Plans
defines “Benefits” as “any payments or services made under
the Plan to a Participant or other person eligible to receive
payments or services pursuant to any Benefit Program.”
(Emphasis added). Similarly, § 5.3 of the 1999 and 2003
Plans, entitled “Contributions Used to Provide Benefits,”
states that “[c]ontributions shall be held by the Employer and
distributed for the benefit of Participants solely for the pay-
ment of Benefits under, and in accordance with the provisions
of, the applicable Benefit Program pursuant to which such
contributions were made.” (Emphasis added). Raytheon’s
Plans thus confirm that the company distinguished “contribu-
tions” from “benefits,” and meant to refer only to the latter by
agreeing to the terms of § J(5).16
16
Section J(5)’s explicit focus on “benefits,” as distinct from “contribu-
tions,” distinguishes this case from United Mine Workers v. Brushy Creek
Coal Co., 505 F.3d 764 (7th Cir. 2007). The retiree plaintiffs in that case,
relying on a clause in a nationwide CBA—which stated that “ ‘the benefits
and benefit levels provided by an Employer under its Employer plan are
established for the term of this Agreement only, and may be jointly
amended or modified in any manner at any time after the expiration or ter-
mination of this agreement’ ”—argued that Brushy Creek had violated the
LMRA and ERISA when it relied on a reservation-of-rights clause con-
tained in its healthcare plans to modify unilaterally the retirees’ medical
benefits. See id. at 766-67 (emphasis added). “[A]nother provision of the
nationwide collective bargaining agreement,” however, broadly “state[d]
that ‘the specific provisions of the plans will govern in the event of any
inconsistencies between the general description and the plans.’ ” Id. at
767. Observing that the joint amendment clause “appear[ed] in the part of
the nationwide agreement captioned ‘general description of the health and
retirement benefits,’ ” the Seventh Circuit held that the broad subordina-
tion provision required the court to disregard the joint amendment clause,
because it was inconsistent with the plans’ reservation-of-rights provi-
sions. Id. Here, by contrast, the subordination clause is narrower, pertain-
ing only to the benefits provisions in the Plans.
9782 ALDAY v. RAYTHEON COMPANY
Further, the structure of the CBAs confirms our under-
standing. The CBAs first cover in detail, as we have seen, the
payments to be made for medical coverage, as well as the
types of “coverages” available—for the employee or retiree
alone, or for various family configurations. Absolutely noth-
ing in the CBAs specifies what payments will be made to or
on behalf of covered individuals for which medical services
and under what circumstances.17 In other words, the “benefits”
provided are not spelled out in the CBAs, but instead “are
subject in every respect to the terms of the applicable Plan
documents under which payment is claimed.”
[10] We therefore reject Raytheon’s contention that § J(5)
evinces the parties’ intent to subordinate to the Plans the
CBAs’ provisions regarding healthcare coverage. Instead,
§ J(5) means exactly what it says—that when a covered indi-
vidual claims medical services or payment for a medical cost,
whether he or she is entitled to the “benefits” claimed is deter-
mined according to the “applicable Plan documents.”18
17
As we are all aware, such provisions can be quite complex and change
regularly. See Reese v. CNH Am. LLC, 574 F.3d 315, 324 (6th Cir. 2009)
(citing Diehl, 102 F.3d at 309). The provisions of a healthcare coverage
plan typically spell out the participants’ substantive medical benefits—
e.g., which office visits, hospital stays, laboratory tests, and drugs are cov-
ered, including any limitations to particular providers, referral require-
ments, prior authorization requirements, and so on. See, e.g., Brushy
Creek, 505 F.3d at 766 (“The collective bargaining agreement entitles
employees who retire during its term, such as the 63 individual plaintiffs,
to health benefits ‘for life.’ The memorandum of understanding creates the
health plan that lists the benefits to which employees are entitled for
life.”); Armistead v. Vernitron Corp., 944 F.2d 1287, 1290-91 (6th Cir.
1991); cf. 42 U.S.C. § 18022(b)(1) (enumerating some of the general ben-
efits categories that must be included in a health plan’s “essential health
benefits package”).
18
Raytheon also argues that Retirees’ right to company-paid healthcare
coverage premiums would be meaningless if Raytheon could gut the sub-
stantive medical benefits, pursuant to § J(5) and the Plans’ reservation-of-
rights provisions. This position is rather ironic, as Raytheon is essentially
arguing that the CBA provisions are meaningless. In any event, we do not
ALDAY v. RAYTHEON COMPANY 9783
b. Section J(4)
Raytheon also argues that § J(4) subordinates the CBAs’
Group Benefits provisions to the Plans. That section states
that “[n]othing herein shall change any provisions of the
Group Benefit Plans provided under this Article XIII [or XII]
as currently in effect, other than those changes specifically
referred to herein.” (Emphasis added). Quoting this provision
only partly, Raytheon contends that § J(4) entirely subordi-
nates the CBAs’ group benefits provisions to any future
changes in the Plans.
Raytheon is incorrect. Section J(4)’s language demonstrates
that the provision was a temporal one, not one directed at
allowing unilateral Plan provisions promulgated after the
CBA went into effect to trump the agreement the employer
negotiated with the union. The clause speaks of “changes”
from the Plans “currently in effect”—that is, the Plans in
effect at the time the CBA was entered into. As such, it sim-
ply prevented the CBAs from modifying the pre-existing
Plans by omission. Section J(4) did not, as Raytheon would
have it, permit future changes in the Plans unilaterally to
override the CBAs.19
dispute that a company may assume contractually binding contribution
obligations while reserving the right to alter unilaterally employees’ sub-
stantive medical benefits. See Mississippi Power Co. v. NLRB, 284 F.3d
605, 624-25 (5th Cir. 2002). Moreover, although we do not presume to
resolve § J(5)’s full scope, it is at least plausible to construe that provision
as authorizing Raytheon to modify the benefits plans so long as such mod-
ifications are reasonably commensurate with the benefits originally pro-
vided under the CBA and reasonable in light of changes to the provision
of healthcare generally. See Reese, 574 F.3d at 326 (citing Diehl, 102 F.3d
at 310).
19
We note that this interpretation accords with, rather than contradicts,
the zipper provision, which (as discussed further below) prohibits Ray-
theon from modifying the Plans in a manner that would violate its contrac-
tual commitments under the CBAs.
9784 ALDAY v. RAYTHEON COMPANY
c. Section D(2)
Finally, Raytheon suggests, in passing, that § D(2)—which
states that “Retired Employees Medical Benefits will be
administered by the Employer in accordance with the provi-
sions of the Comprehensive Medical Plan Document prepared
by the Employer”—incorporates the Plans, and so their
reservation-of-rights provisions, by reference.
Section D(2) cannot bear even the slim weight Raytheon
places on it. The provision nowhere purports to authorize
Raytheon to terminate or modify its contractual agreement to
pay Retirees’ healthcare coverage premiums. Rather, it obli-
gates Raytheon to administer medical benefits (which, again,
are not themselves spelled out in the CBAs) according to the
Plans. In other words, not only are the terms of the medical
benefits spelled out in the Plans, pursuant to § J(5), the
administrative manner in which they are provided—i.e.,
whether reimbursement or direct payments to services provid-
ers are available; what claims-filing forms must be used; how
a covered individual can dispute a benefits denial; and so on
—are all determined under Plan documents and not spelled
out in the CBAs. Thus, § D(2) simply reiterates and makes
more specific the division of responsibility between the CBAs
and the Plans, clarifying that the latter spell out not only
which specific medical costs will be covered, but also in what
manner. See, e.g., Karl Schmidt Unisia, Inc. v. UAW, 628 F.3d
909, 916 (7th Cir. 2010) (holding that a CBA’s passing refer-
ence to the employer’s pension plan—“ ‘[the Pension Plan]
shall continue in effect’ for the term of the CBA”—did not
incorporate the Pension Plan’s dispute resolution procedure
into the CBA); Printing Specialties & Paper Prods. Union
Local 680 v. Nabisco Brands, Inc., 833 F.2d 102, 105 (7th
Cir. 1987) (“The collective bargaining agreement did not
incorporate the provisions of the Pension Plan, but merely
stated that Nabisco would keep the Pension Plan in full force
and effect. . . . [T]he ‘mere mentioning of the Retirement Plan
in the General [collective bargaining] Agreement is insuffi-
ALDAY v. RAYTHEON COMPANY 9785
cient reason to construe the Retirement Plan as part and parcel
of the General Agreement.’ ”) (alterations in original) (quot-
ing RCA Corp. v. Local 241, Int’l Fed’n of Prof’l & Technical
Eng’rs, 700 F.2d 921, 927 (3d Cir. 1983)).
d. Conclusion
[11] Looking at §§ J(5), J(4), and D(2) together, it is evi-
dent that the bargaining parties assigned the CBAs and the
Plans different functions with respect to medical coverage.
Section D(2) requires the employer to administer Plan “bene-
fits” in accordance with Plan documents. Section J(5) ensures
that Plan “benefits” are governed by the Plan documents in
which they appear. Finally, Section J(4) guarantees that the
CBAs do not modify preexisting Plans absent the express
agreement of the bargaining parties. Taken altogether, these
three provisions ensure that the Plans, not the CBAs, govern
the payments or services provided to the concerned individu-
als. But none of these provisions allows the employer unilat-
erally to override express terms in the bilateral CBA,
governing who is to be covered and who is to pay for cover-
ages, whether by unilaterally writing conflicting language into
the Plans referenced by the CBAs or otherwise. The Plans’
reservation-of-rights provisions therefore cannot qualify the
CBAs’ promise of premium-free healthcare coverage, as that
promise is not affected by the Plans. See, e.g., Int’l Ass’n of
Machinists & Aerospace Workers v. Masonite Corp., 122
F.3d 228, 233 (5th Cir. 1997); Diehl, 102 F.3d at 307.20
20
Our conclusion in this regard accords with a common-sense under-
standing of the collective bargaining context. Active employees know that
their collective bargaining influence will wane upon retirement, because
the retirement benefits of current retirees are not mandatory subjects of
collective bargaining, Allied Chem. & Alkali Workers v. Pittsburgh Plate
Glass Co., 404 U.S. 157, 181-82 & n.20 (1971), and because retirees gen-
erally do not pay union dues, vote in union elections, or vote in representa-
tion elections, see Bidlack, 993 F.2d at 609. Active employees thus have
strong incentives to lock-in their future retiree welfare benefits through
collective bargaining, as a form of deferred compensation. See id. This
9786 ALDAY v. RAYTHEON COMPANY
2. The Plans’ Reservation-of-Rights Provisions
[12] Our conclusion thus far does not depend on the pre-
cise reach of the reservation-of-rights provisions contained in
the Plans and relied on by Raytheon. But broadening the
scope of our inquiry to include those provisions reinforces our
conclusion, for a number of reasons.
a. The Reservation-of-Rights and No-Vesting
Clauses
First, Raytheon’s Petition for Rehearing states that “the rel-
evant Plans were issued in 1994, 1997, 1999, and 2003.”
Indeed, there is no language from any pre-1994 Plan recited
or relied upon by Raytheon as limiting or qualifying the
promise of fully paid medical benefits to age 65 made in the
1990 and 1993 CBAs. The question whether Raytheon’s
reservation-of-rights provisions in its Plans authorized it uni-
laterally to limit its premium-payment obligations therefore
arises at all only with regard to employees who retired after
the 1994 Plan went into effect.
As to the reservation-of-rights provisions that are in the
record, Raytheon relies on four: a limited reservation-of-rights
in the 1994 and 1997 Plans; a differently worded reservation-
of-rights in the 1999 and 2003 Plans; a no-vesting clause in
reasoning is particularly salient here, because retirees who participated in
the retirement plan’s contributory option actually gave up three percent of
their eligible compensation in order to enjoy a specific slate of collectively
bargained privileges, including premium-free healthcare coverage. Ray-
theon’s position is essentially that contributory option participants for-
feited three percent of their eligible compensation in the hopes of one day
attaining a collectively bargained privilege that could be unilaterally abro-
gated at the employer’s discretion. Of course, a CBA could so provide,
explicitly or through a broad subordination clause such as the one in
Brushy Creek. See 505 F.3d at 767. But we should not read such an autho-
rization into a CBA when it does not appear there.
ALDAY v. RAYTHEON COMPANY 9787
the 1999 and 2003 Plans; and a clause in the 1999 and 2003
Plans granting Raytheon sole authority to determine partici-
pants’ contributions (“the contributions clause”).
In general, a reservation-of-rights provision is effective
only against contractual obligations explicitly covered by the
reservation. In Vallone v. CNA Fin. Corp., 375 F.3d 623 (7th
Cir. 2004), for example, the Seventh Circuit held that a com-
pany’s reservation-of-rights clause allowed it to abrogate a
promise of lifetime benefits, because the clause applied to all
benefits described in the company’s retirement guide, and the
promise of lifetime benefits was contained therein. See id. at
636-37. Conversely, in Patterson v. Tenet Healthcare, Inc.,
113 F.3d 832 (8th Cir. 1997), the Eighth Circuit held that a
reservation-of-rights provision contained in an employee
handbook did not apply to the handbook’s arbitration clause,
because “[t]he reservation of rights language refers to the
handbook provisions relating to employment, not to the sepa-
rate provisions of the arbitration agreement.” Id. at 835.
Here, all of the provisions relied on by Raytheon, except
for the contributions clause, apply exclusively to rights
granted under the Plans and incorporated Benefit Programs
(e.g., Raytheon’s Retiree Medical Benefits Program), rather
than to rights granted under the CBAs. The 1994 and 1997
Plans’ reservation-of-rights provision, for example, states that
the Employer “reserves the right to alter, amend, modify,
revoke or terminate in whole or in part the Plan, except as
provided in any agreement with a Collective Bargaining
Agent.” (Emphasis added). This clause is thus expressly lim-
ited in scope to the Plans, and affirmatively requires Plan
amendments to conform to the CBAs. Such a provision does
not authorize the modification of the CBA, but instead
expressly recognizes that the CBA prevails over any Plan
modifications. See McCoy v. Meridian Auto. Sys., Inc., 390
F.3d 417, 425 (6th Cir. 2004) (holding that a modification is
not “subject to” a CBA where it contradicts the CBA’s
express terms); cf. Poore, 566 F.3d at 927 (rejecting an
9788 ALDAY v. RAYTHEON COMPANY
employer’s argument that it could terminate retirees’ benefits
at any time, where the plan document at issue stated that its
terms could be modified “subject to negotiation with the
Union”) (internal quotation marks omitted).
The parallel reservation-of-rights provision in the 1999 and
2003 Plans does not refer to the CBAs, but its scope remains
limited to the Plans and incorporated Benefit Programs. It
provides that the Employer “reserves the absolute right to
amend the Plan and any or all Benefit Programs incorporated
herein from time to time, including, but not limited to, the
right to reduce or eliminate benefits provided pursuant to the
provisions of the Plan or any Benefit Program as such provi-
sions currently exist, or may hereafter exist.” 1999 Plan § 8.1;
2003 Plan § 8.1. (Emphases added). Similarly, the 1999 and
2003 Plans’ no-vesting clause states that “[n]o [Plan] Partici-
pant . . . shall have any right to, or interest in, any benefits
provided under this Plan . . . except as specifically provided
under a Benefit Program.” 1999 Plan § 9.2; 2003 Plan § 9.2.
(Emphasis added). For the same reasons surveyed with
respect to the meaning of “benefits” under the CBA, these
Plan provisions do not affect, because they do not purport to
affect, the contribution obligations imposed by the CBAs.
Instead, they focus on the employer’s right to change the ben-
efits provided—that is, the terms of the payments for medical
services or direct services provided to covered employees.
This focus is entirely consistent with the dichotomy discussed
earlier: The CBAs leave the designation of the precise medi-
cal benefits provided, and the procedures for obtaining them,
to the Plans, and the Plans permit the Employer to modify the
Plans accordingly.
At least with respect to the 1999 Plan, the timing of the
negotiations further supports this conclusion. The Raytheon
Medical Plan—the only health benefits plan available under
the 1999 CBA—was adopted effective January 1, 1999. The
1999 CBA, however, was negotiated subsequent to the 1999
Plan and did not become effective until October 25, 1999. The
ALDAY v. RAYTHEON COMPANY 9789
later-adopted CBA clearly states that “written notice of desire
to modify or amend” the CBA may be given by either party
and provides the manner in which the parties will negotiate
any proposed modification. It defies reason to accept Ray-
theon’s contention that the earlier-adopted 1999 Plan obviated
the company’s obligation under the later-adopted CBA to pro-
vide written notice and negotiate with the Union prior to
changing the Retirees’ entitlement to premium-free health-
care.
b. The Contributions Clause
Section 5.2(a) of the 1999 and 2003 Plans, however, does
purport to govern the contributions required of Plan partici-
pants. It states that “Participants’ contributions shall be sub-
ject to change by and in the sole discretion of the Company.”
Raytheon argues, albeit somewhat in passing, that this contri-
butions clause gave it total discretion to adjust Retirees’ pre-
mium payments as of 1999. We reject this assertion.
First, it is noteworthy that the language of the contributions
provision is not limited to retirees. Thus, if read without
regard to the CBAs, it would appear to allow the Employer
unilaterally to abrogate the commitments made in the CBAs
with respect to paying for the medical benefits of active
employees during the CBA’s term.
As a general matter, we are skeptical that the Union would
have agreed to give Raytheon unilateral authority to modify
the contribution requirements for retirees and active employ-
ees. Doing so would render non-binding both § D’s
contributory/non-contributory dichotomy and § A(5)’s
detailed schedule for maximum active employee contribu-
tions. In other words, Raytheon’s proposed interpretation of
the scope of the contributions clause in the 1999 and 2003
Plans would permit it to “increase or decrease its [collectively
bargained] contribution to the existing policy” as it sees fit,
“without any consultation with or recourse for the Union.”
9790 ALDAY v. RAYTHEON COMPANY
See NLRB v. Gen. Elec. Co., 418 F.2d 736, 747 (2d Cir.
1969).
At oral argument, Raytheon contended that we need not
interpret the contributions clause and other reservation-of-
rights provisions in light of their implications for active
employees, because the statutory rights of active employees
are distinct from the rights of retirees. See Rockford
Powertrain, 350 F.3d at 704 n.1 (citing Pittsburgh Plate
Glass, 404 U.S. at 188). Specifically, Raytheon noted, accu-
rately, that the National Labor Relations Act (“NLRA”) gen-
erally imposes a statutory obligation to bargain regarding
modifications to the conditions of employment for active
employees. See 29 U.S.C. §§ 158(a)(5), (d). But, contrary to
Raytheon’s submission, the NLRA does not necessarily
require bargaining where there is an applicable reservation of
management’s rights to act unilaterally. See, e.g., Conoco Inc.
v. NLRB, 91 F.3d 1523, 1527-28 (D.C. Cir. 1996) (per
curiam) (holding that an applicable management’s rights
clause authorized the unilateral modification of rights and
obligations, where such unilateral modification was expressly
provided for by the CBA). If, as Raytheon maintains, the
CBAs incorporated the Plans wholesale, the Plans’
reservation-of-rights provisions would apply equally to both
groups, as the reservation-of-rights provisions themselves do
not distinguish between the two. Such a result would provide
a “convincing reductio ad absurdum” of Raytheon’s argu-
ment, because, “as a matter of contractual interpretation, it
seems highly unlikely that the Union would have ever consid-
ered such a clause” with respect to its active employees. See
Gen. Elec. Co., 418 F.2d at 747.21
On our view of the division of responsibility between the
CBAs and the Plans, however, this anomaly does not arise. As
we have explained, the bargaining parties to the CBAs did not
21
We note that this aspect of our analysis does not apply to the 2003
Plan, which governed the medical benefits of retirees alone.
ALDAY v. RAYTHEON COMPANY 9791
need to contemplate such a possibility, because they under-
stood that the CBAs incorporated the Plans’ reservation-of-
rights provisions only insofar as the provisions pertained to
modifying the substance of, or the procedures for payment or
direct provision of, medical services. Contribution questions
were thus reserved to the CBAs, and not subject to the Plans’
reservation-of-rights provisions.
Solidifying our conclusion in this regard is the consider-
ation that the CBAs themselves expressly preclude the very
result Raytheon seeks to effect. In each CBA, the Current and
Supplemental Agreements provision, Article XIX § F, con-
tains both an integration clause and, more importantly, a mod-
ifications clause. The integration clause states that the CBA
“constitutes the sole and entire existing agreement between
the parties . . . for the period of this Agreement”; the modifi-
cations clause separately provides that “[n]o alteration, varia-
tion, waiver or modification of any of the terms, conditions,
or covenants contained herein . . . shall be valid or binding
unless such is made and executed in writing between the par-
ties hereto.” (Emphasis added).22
Such hybrid provisions are called “zipper clauses.” See,
e.g., Pace v. Honolulu Disposal Serv., Inc., 227 F.3d 1150,
1159 (9th Cir. 2000). They are traditionally “intended to fore-
close claims of any representations outside the written con-
tract aside from those made in another written document
executed by the parties,” thus “zipping up” the CBA. See id.
Read together with the contributions clause’s reservation-of-
rights, however, the zipper provision at issue here takes on
added significance. Specifically, because the zipper provision
prohibits modification except through a written instrument
executed between the parties, it affirmatively prevents the
22
Although the zipper provision’s integration clause is limited to “the
period of this Agreement,” the modifications clause does not include this
limitation.
9792 ALDAY v. RAYTHEON COMPANY
unilateral modification of retirees’ contractual rights under the
CBAs.
We find Prater v. Ohio Education Association, 505 F.3d
437 (6th Cir. 2007), instructive as to this matter, although the
precise problem here is slightly different from the one there
at issue. In Prater, the employer unilaterally terminated retir-
ees’ health benefits pursuant to a reservation-of-rights provi-
sion contained in Summary Plan Descriptions (“SPDs”) not
incorporated in the relevant CBAs. See id. at 440-41, 444-45.
Under Sixth Circuit precedents, an unincorporated SPD’s
reservation-of-rights clause will be enforced if the union does
not grieve or file suit in response to the employer’s reserva-
tion of the right to modify a CBA, so long as the reservation
was sufficiently clear that the union can fairly be expected to
protest immediately upon notification. See McCoy, 390 F.3d
at 424-25 (citing Maurer, 212 F.3d at 913, 919).23 Prater held
that the unions could not fairly be expected to protest the
SPD’s reservation-of-rights clause, because the court
observed that the CBAs’ zipper provisions—which provided
that the agreements could not be amended without signed,
mutual consent—effectively precluded any unilateral termina-
tion of rights. See 505 F.3d at 444-45. Thus, “the unions . . .
could not fairly ‘be compelled to protest the SPD language’
— at least when the summary does not explicitly renounce the
collective bargaining agreement — because both sets of
[CBAs] explicitly said that their bargained-for rights could
not be terminated in such a manner.” Id. at 445 (quoting
McCoy, 390 F.3d at 425) (citation omitted). “When a contract
contains formal procedures requiring mutual, written assent to
amend,” the court wrote, “that language preempts future uni-
lateral termination of rights.” Id. at 444.
23
McCoy, for example, held that an SPD’s reservation-of-rights provi-
sion, which stated that any termination of benefits was “ ‘subject to the
provisions of any applicable collective bargaining agreement,’ ” id. at 421,
could not “fairly . . . have prompted the union immediately to protest,” id.
at 425.
ALDAY v. RAYTHEON COMPANY 9793
Prater’s holding does not directly apply to this case, but its
rationale does. Because the particular right at issue—that the
company would pay for eligible retirees’ medical insurance—
is expressly contained in the CBAs themselves, it is protected
from unilateral amendment by the CBAs’ zipper provision.24
Raytheon’s assertion of unilateral authority to abrogate that
right, under the contributions clause, would both go beyond
the degree to which the CBAs explicitly deferred to the Plans
and run headlong into the zipper provision’s prohibition
against unilateral modification of the CBA. See Brushy Creek,
505 F.3d at 766-67 (observing that a clause requiring “joint
amendment” of the CBA was inconsistent with a plan’s
reservation-of-rights provision, but holding that the CBA’s
subordination provision required the court to resolve the
inconsistency by disregarding the joint amendment clause).
This understanding of the relationship between the CBAs
and the 1999 and 2003 Plans’ contributions clause does not
wash out the clause’s importance in other respects. The con-
tributions clause authorized Raytheon unilaterally to adjust
active employees’ weekly contribution requirements, so long
as Raytheon did not require more than the maximum amount
specified under § A(5). It also authorized Raytheon unilater-
ally to alter the contribution requirements of retirees who par-
ticipated in the retirement plan’s non-contributory option, and
so were not promised any employer contribution at all.
Finally, and most obviously, it permitted Raytheon to change
the contributions required of those unrepresented employees
covered by the Plans but not covered by the CBAs at all. The
clause did not, however, authorize Raytheon to abrogate eligi-
ble employees’ contractual right to company-paid health
insurance contributions during the term of the CBA, or to
24
Rockford Powertrain, for example, held that an ERISA plan’s
reservation-of-rights clause authorized the employer to amend welfare
benefits, despite the CBA’s prohibition on unilateral modifications,
because the CBA did not provide for any particular benefits, only the Plan
did. See 350 F.3d at 704-05.
9794 ALDAY v. RAYTHEON COMPANY
eliminate eligible retirees’ right to company-paid insurance
until age 65, in accordance with the agreement in effect at the
time they retired.
IV
As to the Retirees’ cross-appeal, the Retirees contend that
the district court erred in rejecting their claims for punitive
and extra-contractual damages under the LMRA or ERISA.
We do not agree.
[13] As Retirees concede, punitive and extra-contractual
damages are generally not allowed under the LMRA for
breach of a CBA. See Moore v. Local Union 569 of Int’l Bhd.
of Elec. Workers, 989 F.2d 1534, 1542 (9th Cir. 1993) (“The
general rule . . . is that punitive damages are not allowed in
actions for breach of contract brought under Section 301 [of
the LMRA].”); Desert Palace, Inc. v. Local Joint Exec. Bd.,
679 F.2d 789, 794 (9th Cir. 1982) (“Generally, the remedy for
breach of a collective bargaining agreement is limited to an
award of compensatory damages. Ordinarily, an award that
exceeds the monetary loss which an injured party suffered as
a result of a contract breach is considered punitive.”). Retirees
contend, however, that there are exceptions to this general
rule: A court may award punitive damages if it would deter
persistent misconduct and may award extra-contractual dam-
ages if the defendant’s conduct was particularly likely to
result in serious emotional distress.
[14] We need not resolve whether such exceptions exist.
Retirees pleadings do not allege sufficient facts to support any
claim for punitive and extra-contractual damages. In particu-
lar, “[e]ven if we were to conclude that punitive damages are
available in appropriate circumstances,” Retirees have alleged
no facts showing that “the defendants’ conduct in this case is
. . . sufficiently ‘outrageous’ or ‘egregious’ to warrant an
award of punitive damages against them.” Wilson v. Int’l Bhd.
of Teamsters, 83 F.3d 747, 755 (6th Cir. 1996). We therefore
ALDAY v. RAYTHEON COMPANY 9795
affirm the district court’s grant of judgment on the pleadings
to Raytheon as to the availability of punitive and extra-
contractual damages.
V
In sum, we hold: that Raytheon expressly agreed to provide
100% company-paid healthcare coverage for eligible Retirees;
that Raytheon’s obligation survived the expiration of the
CBAs; and that Raytheon’s agreed-upon obligation could not
be unilaterally abrogated by Raytheon, regardless of the rights
Raytheon reserved for itself in Plan documents, because the
CBAs did not incorporate the Plans’ reservation-of-rights pro-
visions with respect to employer contribution issues, as
opposed to issues relating to the provision of monetary or in-
kind benefits for particular medical services. We further hold
that the district court did not err in rejecting Retirees’ claim
for punitive and extra-contractual damages.
AFFIRMED.