Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-08-16985/USCOURTS-ca9-08-16985-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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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; 

13497

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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, 

13498 ALDAY v. RAYTHEON COMPANY

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v. 

No. 08-16984

RAYTHEON COMPANY, a Delaware  D.C. No. corporation, 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; 

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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, 

13500 ALDAY v. RAYTHEON COMPANY

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v.  No. 08-16985

RAYTHEON COMPANY, a Delaware D.C. No.  corporation, 4:06-cv-00032-DCB

Defendant-Appellee. OPINION 

Appeal from the United States District Court

for the District of Arizona

David C. Bury, District Judge, Presiding

Argued and Submitted

February 9, 2010—San Francisco, California

Filed September 7, 2010

Before: David R. Thompson, M. Margaret McKeown and

Marsha S. Berzon, Circuit Judges.

Opinion by Judge Thompson

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COUNSEL

Robert Gregory, Mesa, Arizona, for the plaintiffs/appellees/appellants.

Christopher Landau, Washington, DC, for the defendant/appellant/appellee.

OPINION

THOMPSON, Senior Circuit Judge:

The plaintiffs are a class of retirees from Raytheon and its

predecessor, Hughes Missile Systems, along with their

spouses and eligible dependents. Since 1972, Hughes, and

later Raytheon, paid insurance premiums for healthcare coverage for early retirees until age 65 pursuant to a series of collective bargaining agreements (“CBAs”) with the plaintiffs’

union. In 2004, Raytheon limited its contributions to premiums for this insurance and started charging the plaintiffs

monthly payments for their healthcare coverage. The plaintiffs sued alleging that Raytheon breached the CBAs and violated the Labor Management Relations Act (“LMRA”), 29

U.S.C. § 185, and the Employee Retirement Income Security

Act of 1974 (“ERISA”), 29 U.S.C. § 1132. The district court

concluded that the CBAs obligated Raytheon to continue to

pay the premiums and granted summary judgment in favor of

the plaintiffs. Raytheon appeals the order granting summary

judgment. 

In a separate order, the district court granted Raytheon’s

motion for judgment on the pleadings, concluding that the

plaintiffs were not entitled to punitive and extra-contractual

damages. The plaintiffs appeal that judgment.

We have jurisdiction under 28 U.S.C. § 1291, and we

affirm the district court’s summary judgment in favor of the

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plaintiffs and its judgment on the pleadings in favor of Raytheon.

I

Background

The CBAs that apply to the plaintiffs are those adopted in

1990, 1993, 1996 and 1999. Each CBA provided premiumfree medical insurance coverage to qualified retirees until they

attained the age of 65 years, as well as their spouses and eligible dependents. To qualify, retirees had to be at least age 55

but less than age 65, with five years of continuous employment, and three years of continuous participation in the company retirement plan.

Hughes Missile Systems executed the 1990-1996 CBAs. In

1997, Hughes Missile Systems merged into Raytheon and

Raytheon was substituted as the employer in the 1996 CBA.

In 1999, Raytheon executed a new CBA that continued to

provide retirees with premium-free medical insurance coverage. 

The relevant provisions of the 1990-1999 CBAs remained

largely unchanged. Each CBA carried a three-year term. For

qualifying retirees, Hughes and Raytheon agreed “to continue

to provide the Comprehensive Medical Plan coverages for

which they were covered while active employees, until the

retired employee attain[ed] age 65 . . . .” This promise assured

retirees of premium-free medical insurance coverage, because

a separate provision of the CBAs obligated Hughes and Raytheon to pay the premiums for the Comprehensive Medical

Plan for active employees. Starting in 1993, a provision was

added to the CBAs confirming that for retirees “there is no

weekly premium/charge” for the Preferred Plan, the Hughes

Medical Plan, or an HMO. Raytheon continued to pay the full

premiums for retirees until 2004. 

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In 2003, Raytheon negotiated a new CBA that eliminated

its obligation to pay the full medical insurance premiums for

retirees. The 2003 CBA obligated Raytheon to pay only a portion of the premiums for retiree medical insurance coverage.

Raytheon applied this new agreement retroactively and, in

2004, began charging the plaintiffs monthly payments to keep

their medical insurance coverage in force.

II

Continuing Obligation

As an initial matter, we must decide whether Raytheon’s

obligation to pay the premiums for retiree medical insurance

coverage survived the three-year term of each of the CBAs.

We conclude that it did.

[1] In general, “contractual obligations will cease, in the

ordinary course, upon termination of the bargaining agreement.” Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 207

(1991); see also Poore v. Simpson Paper Co., 566 F.3d 922,

927 (9th Cir. 2009). There are exceptions, however, which

“are determined by contract interpretation.” Litton, 501 U.S.

at 207. As the Supreme Court has explained:

Rights which accrued or vested under the agreement

will, as a general rule, survive termination of the

agreement. And of course, if a collective-bargaining

agreement provides in explicit terms that certain

benefits continue after the agreement’s expiration,

disputes as to such continuing benefits may be found

to arise under the agreement . . . .

Id. at 207-08.

[2] The CBAs explicitly provided that the retirees’ rights

to fully paid premiums for medical insurance would continue

after the CBAs’ expiration. Id.; Poore, 566 F.3d at 927 (“An

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exception to this general rule exists, however, where the parties’ dispute concerns a ‘right that accrued or vested under the

agreement, or where, under normal principles of contract

interpretation, the disputed contractual right survives expiration of the remainder of the agreement.’ ” (quoting Litton, 501

U.S. at 206) (emphasis added)). 

[3] Hughes and Raytheon expressly agreed to continue to

provide premium-free medical insurance coverage for retirees

until age 65 notwithstanding the CBAs’ three-year terms. See

Litton, 501 U.S. at 206 (recognizing that “obligations already

fixed under the contract but as yet unsatisfied” do not expire

with the agreement). Unlike other group coverages in the

CBAs, premium payments for retiree medical insurance coverage were not limited to the “term of the agreement.”

1 Compare United Mine Workers v. Brushy Creek Coal Co., 505

F.3d 764, 766-67 (7th Cir. 2007) (concluding that retiree benefits, although described as “for life” in one provision of a

CBA, were limited to the term of the CBA under a separate

provision so stating expressly); Crown Cork & Seal Co., Inc.

v. Int’l Ass’n of Machinists & Aerospace Workers, AFL-CIO,

501 F.3d 912, 917-18 (8th Cir. 2007) (holding that retiree

benefits did not vest under a CBA in part because the CBA

expressly precluded only “modification for the life of” the

agreement). 

Retiree medical insurance coverage with premiums paid by

Raytheon was not limited to the CBAs’ expiration dates by

virtue of the general integration clause, which applied the

CBAs’ term limits to group coverages that did not specify duration.2

 As the district court determined, retiree medical insur1For example, Raytheon agreed to provide retirees over the age of 65

with at least two medicare supplemental insurance plans, but only “during

the term of this Agreement.” 

2The integration clause stated that the CBA was “the sole and entire

existing agreement between the parties . . . and expressed all obligations

of, and restrictions imposed on, the Company and the Union for the period

of the Agreement.” 

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ance coverage, with premiums paid by Raytheon, was the

only group coverage under the CBAs that supplied a specific

duration—“until the retiree attains age 65”—and therefore

survived the expiration of the CBAs. Compare Turner v.

Local Union No. 302, Int’l Bhd. of Teamsters, Chauffeurs,

Warehousemen & Helpers of Am., 604 F.2d 1219, 1225 (9th

Cir. 1979) (concluding that the CBAs made no “representation as to the length of the period during which [retiree] benefits would continue to be paid, other than ‘throughout the term

of this agreement’ ” and therefore “could be terminated at the

end of any one [CBA]”); Int’l Union of United Auto., Aerospace & Agric. Implement Workers of Am. v. Rockford

Powertrain, Inc., 350 F.3d 698, 705 (7th Cir. 2003) (holding

that a company could terminate ongoing retiree health benefits because the “CBA contains no statement regarding the

period of time during which retirees would be entitled to benefits”). 

[4] The language of the CBAs makes clear that Raytheon’s

agreement to pay retiree medical insurance premiums continued beyond the term of the CBAs even where its agreement

to pay non-retired employee premiums did not. The CBAs

provided retirees with medical insurance coverage “for which

they were covered while active employees,” which was,

undisputedly, premium-free.3 In addition, letters from Raytheon to retirees between 1998 and 2002 support the understanding that retirees and their qualified dependents were

“eligible for Company-Paid retiree medical coverage until the

age of 65.” Thus, Raytheon agreed to continue providing

retirees with the same premium-free medical insurance coverage they had as active employees, until they turned 65. 

[5] While Raytheon argues that this promise was merely an

3Raytheon apparently recognized the significance of this language, as

the 2003 CBA revised the language to provide retirees with the “Raytheon

Medical Plans available to active employees,” not with the same coverage

the retirees had had as active employees. 

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agreement to pay some portion of retirees’ medical coverage

until age 65, the language of the CBAs supports the plaintiffs’

contention that it obligated Raytheon to continue the

premium-free coverage that retirees enjoyed as employees.

The CBAs provide different retirement benefits to employees

who enrolled in the “contributory option” of the Retirement

Plan from those who enrolled in the “non-contributory

option,” and the difference sheds light on the correct interpretation of “Company-Paid.” The CBAs exclude from the noncontributory benefit what they alternately called “employer

provided medical coverage” and “company-paid medical.”

Instead, employees opting for the non-contributory benefit

were required to “pay the full retiree COBRA Group Premium for the medical plan of benefits in which they are

enrolled,” if they wished to maintain coverage after retirement. The difference is clear. Retirees who elected the noncontributory benefit pay for their insurance, while retirees

who elected the contributory benefit receive the same

“company-paid medical” they received as employees until

they turn 65.

III

Right to Terminate

[6] The 1990-1999 CBAs each contained a general provision stating 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 contends that this provision subordinates the CBAs

to Raytheon’s subsequent ERISA Plans, which purportedly

give Raytheon the right to unilaterally revoke its agreement to

pay the medical insurance premiums. We disagree. 

[7] First, while the CBAs contain a general subordination

provision, the Plans are likewise restricted by the CBAs. In

the 1994 and 1997 Plans, the employer “reserves the right to

alter, amend, modify, revoke or terminate in whole or in part

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the Plan, except as provided in an agreement with a Collective

Bargaining Agent.” Thus, because the CBAs specifically provide for company-paid insurance to retirees from age 55 to

age 65, the Plans may not be altered to deprive retirees of

their company-paid health insurance. The Plans further state

in disclaimers regarding the potential future of the Plans that

amendment or termination “will not diminish any rights established prior to such amendment or termination.”

[8] Raytheon tightened the language in its favor in the

1999 and 2003 Plans, expressly reserving “the absolute and

unconditional right to terminate the Plan and any and all Benefit Programs, in whole or in part, with respect to some or all

of the Employees.” However, “employee” is defined in the

1999 and 2003 Plans as a “person performing compensated

services for the Employer who meets the definition of

‘employee’ for income tax withholding purposes under [Treasury Regulation] 31.3401(c)-1.” Treasury Regulation

31.3401(c)-1 includes a list of factors to use in distinguishing

between employees and independent contractors, not between

current and retired employees. See Vizcaino v. Microsoft

Corp., 120 F.3d 1006, 1009 (9th Cir. 1997). Retirees do not

reasonably fall within the definition of “employee” used in

the Plans. Thus, Raytheon’s leeway to amend the Plans does

not allow it to alter the terms of the CBAs under which it

agreed to provide company-paid health insurance to retirees.

Second, Raytheon’s 1999 and 2003 Plans provide that,

while amendments can take retroactive effect, “no amendment

can reduce benefits accrued as of the date the amendment is

approved.” Thus, even on the terms of the 1999 and 2003

Plans, Raytheon may not amend the Plans to deprive plaintiffs

of premium-free medical insurance coverage.

[9] Third, the so-called subordination provision applies to

“benefits.” It does not apply to contributions or medical insurance coverage. Cf. Poore, 566 F.3d at 924 (holding that

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nation rights where the CBA provided that “the coverages

agreed to in [the] labor agreement” were “[s]ubject to all the

provisions of the Benefit Plan Booklet”).4 That “premiums” or

“coverages” are not “benefits” of a Plan is clear from the

CBAs’ language. Under the CBAs, the company “agrees to

continue to provide the . . . coverages for which [retirees]

were covered while active employees, until the retired

employee attains age 65 . . . .” The company also “agrees to

pay the premiums for . . . coverages for eligible employees.”

“Coverage” does not include, however, the specific “benefits” provided under a plan. Although “coverage” is not specifically defined in the CBA, one CBA provision describes

levels of “benefit coverage” as those for an “employee,” “employee and spouse,” or “employee and child(ren).” These

examples suggest that “coverage” refers to how and for whom

benefits in general become available, not the specific benefits

themselves.5

[10] Thus, while Raytheon could establish the specific

benefits of medical insurance coverage in the Plans, and could

terminate those benefits to the extent the Plans permit it to do

so, it cannot terminate its agreement to pay the medical insurance premiums it had obligated itself to pay. Whatever termi4

Indeed, the other two CBAs at issue in Poore clearly specified what the

CBAs here do not: “all participants covered by the health care plans will

be subject to the same level of contributions as active employees and to

the same health care plan provision changes which take effect from time

to time.” 566 F.3d at 924. Here, only the “benefits” are subject to the Plan

terms. 

5This interpretation is supported by the Plans as well. As Raytheon concedes, the 1994 and 1997 Plans do not even discuss contributions or premiums. And the 1999 and 2003 Plans clearly state that the Plan, which has

as its purpose the provision of “certain employee welfare benefits,” “shall

be funded by Employer and Participant contributions.” (Emphasis added.)

The 1999 and 2003 Plans also define ‘benefits’ as “any payments or services made under the Plan,” (emphasis added), not the payments made by

employees to the Plan, if any, to obtain coverage. Thus, the Plans’ plain

language distinguishes between “benefits” and premium “contributions.”

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nation rights Raytheon reserved for itself in the Plans with

respect to benefits do not apply to Raytheon’s existing obligation to provide premium-free medical insurance coverage. Cf.

Brushy Creek Coal, 505 F.3d at 767 (holding that the Plan

terms controlled where the CBA provided that “the specific

provisions of the plans will govern in the event of any inconsistencies” between the CBA and the Plans). 

Other provisions in the CBAs that incorporate the Plans do

not give Raytheon the right to alter its agreement to pay

retiree medical insurance premiums. For example, the CBAs

provide that “[t]he Retired Employees Medical Benefits will

be administered by the Employer in accordance with the provisions of the Comprehensive Medical Plan Document prepared by the Employer.” This provision enables Raytheon to

administer medical benefits according to the Plans, not terminate or modify its agreement to pay the insurance premiums.

[11] Raytheon nevertheless contends that all provisions of

the CBAs are “subject . . . to” the Plans. And because the

Plans allegedly give Raytheon an unfettered right to modify

or terminate benefits, Raytheon contends it can revoke any

plan-related obligation it agreed to in a CBA—even, apparently, an obligation to active employees during the CBA’s

term. Raytheon’s interpretation, however, renders the CBAs

illusory. Nothing in the CBAs at issue here enables Raytheon

to modify or terminate its obligation to pay medical insurance

premiums at any time it pleases simply by saying it can do so

in Plan documents governing “benefits.” We therefore hold

that Raytheon breached the CBAs and violated the Plans, and

so affirm the district court’s grant of summary judgment on

this basis.

IV

Punitive and Extra-Contractual Damages

The plaintiffs contend the district court erred in granting

Raytheon judgment on the pleadings. By that judgment, the

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court rejected the plaintiffs’ claims for punitive and extracontractual damages under the LMRA and their claim for

breach of contract. 

[12] At the outset, the plaintiffs concede that 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 under [the

LMRA].”); Desert Palace, Inc. v. Local Joint Executive Bd.

of Las Vegas, 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.”). The plaintiffs, however, contend that there are exceptions to this general rule; a court may award punitive damages

if it would deter persistent misconduct and may award extracontractual damages if the defendant’s conduct was particularly likely to result in serious emotional distress. 

[13] We need not resolve whether such exceptions exist,

because the plaintiffs failed to allege sufficient facts supporting their claim for punitive and extra-contractual damages.

“Even if we were to conclude that punitive damages are available in appropriate circumstances,” the plaintiffs 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, Chauffeurs, Warehousemen & Helpers of Am.,

AFL-CIO, 83 F.3d 747, 755 (6th Cir. 1996).

V

Conclusion

[14] Raytheon expressly agreed to continue to pay premiums for medical insurance for the plaintiffs until retirees and

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their spouses became 65 years of age. Raytheon’s agreement

survives the expiration of the CBAs and cannot be unilaterally

terminated by Raytheon regardless of the rights Raytheon

reserved for itself in other Plan documents. The district court

did not err in rejecting the plaintiffs’ claim for punitive and

extra-contractual damages. 

We affirm the district court’s summary judgment in favor

of the plaintiffs. We also affirm the district court’s judgment

on the pleadings in favor of Raytheon. 

AFFIRMED.

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