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Careful, Careful: Arbitration of Benefit Claims Under Collective Bargaining Agreements
October 02, 2018
In Cup v. Ampco Pittsburgh Co., 2018 WL 4101049 (3rd Cir. Aug. 29, 2018), the Third Circuit addressed a case concerning the arbitrability of benefit claims by retirees in the context of collective bargaining agreements ("CBA"). In Cup, the retirees of a company subject to a CBA brought suit against a successor in interest that decided to terminate the retirees' health care benefits. Although the case advanced three causes of action, the only issue the court addressed substantively was the district court's decision that the retirees' claims were required to be arbitrated under the terms of the CBA and/or a memorandum of agreement concerning retiree benefits pursuant to the Labor Management Relations Act ("LMRA"). On appeal by the successor corporation, the Third Circuit disagreed.

In essence, the court concluded the retirees were not covered by the definition of "employee" under the CBA, inasmuch as the plaintiff and the similarly situated individuals were not employed at the time of the CBA's execution, and the CBA did not expressly cover retirees. Thus, the provision of the CBA requiring arbitration was inapplicable to the dispute. Furthermore, the court rejected the argument that the memorandum of agreement, which established the contribution rate of retirees, was incorporated into the CBA because there was no language to indicate such an incorporation. And, in fact, the court reasoned the mere reference of "Medical Insurance" in the CBA was insufficient to incorporate the memorandum of agreement on the subject of retiree healthcare. The court remanded the case to the district court to allow the retirees to assert claims under section 301 of the LMRA and ERISA. 

The key insight of Cup is the language of ERISA contracts matters, and that careful drafting can prevent costly litigation over the terms of CBAs, related agreements, and ERISA plan documents.
ERISA & Managed Care