Court Opinion

ID: 9576037
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:19:58.673443+00
Date Added: 2024-06-11T12:55:24.951097
License: Public Domain

GRADER, Circuit Judge,
dissenting:
I respectfully dissent.
A. The majority confuses subject matter jurisdiction with the merits.
“Federal courts have an ‘unflagging’ duty to hear cases that are properly before them.” Cinema Arts, Inc. v. County of Clark, 722 F.2d 579, 582 (9th Cir.1983) (quoting Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976)). The majority shirks this responsibility by closing the courthouse door to plaintiffs who raise colorable claims under federal law. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117-18, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) (“In order to establish that he or she may become eligible for benefits [under ERISA], a claimant must have a colorable claim that (1) he or she will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future.”). In so doing, the majority ignores fundamental Supreme Court precedent and makes the mistake of conflating our jurisdictional inquiry with an inquiry into the merits of Plaintiffs’ claims.
We recently explored the distinction between a lack of subject matter jurisdiction and a failure to state a federal claim on the merits, also in the ERISA context. In Cement Masons Health & Welfare Trust Fund v. Stone, 197 F.3d 1003, 1005 (9th Cir.1999), the district court had dismissed an ERISA claim for lack of subject matter jurisdiction. We agreed that the complaint should have been dismissed, but held that the decision “should have been made on the merits rather than for want of subject matter jurisdiction.” Id. We explained:
The failure to state a federal claim, either on the pleadings or the facts, is not the same thing as a failure to establish subject matter jurisdiction. Any non-frivolous assertion of a federal claim suffices to establish federal question jurisdiction, even if that claim is later dismissed on the merits. As the Supreme Court wrote in Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 90 L.Ed. 939 (1946),
Jurisdiction ... is not defeated ... by the possibility that the averments might fail to state a cause of action on which petitioners could actually recover.... If the court ... exercise[s] its jurisdiction to determine that the allegations in the complaint do not state a ground for relief, then dismissal of the case would be based on the merits, not for want of jurisdiction.
See also Wheeldin v. Wheeler, 373 U.S. 647, 649, 83 S.Ct. 1441, 10 L.Ed.2d 605 (1963) (“We agree ... that on the face of the complaint the federal court had jurisdiction.... But on the undisputed facts, ... no federal cause of action can be made out.”).
Id. at 1008 (emphasis added) (ellipses and alteration in original).
So, here, it may be that Plaintiffs eventually would lose on the merits. But their federal claims are not frivolous. As I will explain in the next section, this dispute arises under the relevant collective bargaining agreements and benefit plans, which explicitly provide that early retirees’ and spouses’ health care benefits are to *1069continue after the agreements’ expiration. That being so, we have federal question jurisdiction, 28 U.S.C. § 1381, over this action, which is brought pursuant to the Labor Management Relations Act, 29 U.S.C. § 185(a), and ERISA, id. § 1132(a)(1)(B).
B. The collective bargaining agreements and benefit plans guarantee certain medical benefits after expiration of the contract.
Generally, when a collective bargaining agreement (“CBA”) expires, its terms survive only to define an employer’s obligations under the National Labor Relations Act, which fall under the exclusive jurisdiction of the National Labor Relations Board. Office & Prof'l Employees Ins. Trust Fund v. Laborers Funds Admin. Office of N. Cal., Inc., 783 F.2d 919, 921-22 (9th Cir.1986). Nevertheless, “the parties may themselves set out by agreement or by private design, as set out in plan documents, whether retiree welfare benefits vest, or whether they may be terminated.” Cinelli v. Sec. Pac. Corp., 61 F.3d 1437, 1441 (9th Cir.1995) (internal quotations marks omitted).
In other words, the parties may agree that the terms of a CBA survive expiration of the CBA. As explained by the Supreme Court, “an expired contract has by its own terms released all its parties from their respective contractual obligations, except obligations already fixed under the contract but as yet unsatisfied.” Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 206, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991) (emphasis added).
Rights which accrue[] or vest[] 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 anise under the agreement ....
Id. at 207, 111 S.Ct. 2215 (emphasis added); see also Nolde Bros. v. Local No. 358, Bakery & Confectionery Workers Union, 430 U.S. 243, 249, 97 S.Ct. 1067, 51 L.Ed.2d 300 (1977) (“[T]here is ... no reason why parties could not if they so chose agree to the accrual of rights during the term of an agreement and their realization after the agreement had expired .... The dispute therefore, although arising after the expiration of the collective-bargaining contract, clearly arises under that contract.” (citation, footnote, and internal quotation marks omitted)).
Here, Plaintiffs’ claims are contractual. They sued under the Labor Management Relations Act “for violation of contract[ ],” 29 U.S.C. § 185(a), and under ERISA “to recover benefits due ... under the terms of [their] plan,” id. § 1132(a)(1)(B). They argue that they have a “right to retiree health care benefits pursuant to the terms of the collective bargaining agreements under which they retired.” They contend that the CBAs “only allow[ ] changes to be made subject to negotiation with the union,” that the term “negotiation” has the usual labor law meaning of bargaining to impasse, see id. § 158(a)(5) & (d), and that the record on summary judgment demonstrates a genuine issue of material fact as to whether Defendant bargained in good faith. Defendant counters that Plaintiffs’ right to benefits did not vest under the CBAs. Alternatively, Defendant argues that, under the CBAs, “negotiation” over termination of retiree health care benefits does not require anything more than advance notification, which it gave.
The relevant CBAs provide, in substance, that early retirees will retain company health insurance benefits until age 65. Similarly, their spouses are to receive coverage until age 65 or until certain other conditions occur. The contracts also incor*1070porate the terms of benefits booklets. The benefits booklets, in turn, provide that Defendant employer “reserves the right to alter, amend, delete, cancel or otherwise change” the welfare plan benefits “at any time, subject to negotiation with the Union.” (Emphasis added.) The most reasonable reading of that provision is that the CBAs grant Plaintiffs the continuing benefit of health insurance until age 65, which Defendant retains the right to end at any time, but not unilaterally.1 Under Litton and Nolde Brothers, the parties thus contracted for a benefit to survive termination of the CBAs, and we therefore have jurisdiction to examine this dispute that arises under those CBAs.
On this record, both the interpretation of the “subject to negotiation” clause and the extent to which that clause, however it is properly interpreted, was followed are disputed issues of fact. The text of the CBAs requires that Defendant’s right to terminate benefits is “subject to negotiation with the Union,” but the CBAs do not explain what the parties intended the term “subject to negotiation” to require. Parties’ past practices inform the meaning of terms in a CBA. See Operating Eng’rs Pension Trusts v. B & E Backhoe, Inc., 911 F.2d 1347, 1352 (9th Cir.1990) (“A collective bargaining agreement is not governed by the same principles of interpretation applicable to private contracts ... and cannot be interpreted without considering the scope of other related collective bargaining agreements as well as the practice, usage and custom pertaining to all such agreements.” (citation omitted)). But the district court did not allow the parties to develop a factual record on what they considered “negotiation” to require, nor did the court examine what actions occurred in advance of the benefits’ termination that might have constituted negotiation.
Because the CBAs granted Plaintiffs the right to continue receiving health benefits until age 65 subject to Defendant’s negotiating with the Union, which may or may not have occurred, summary judgment in favor of Defendant was inappropriate. Genuine issues of material fact remain.
In refusing to entertain the present litigation at all, the majority makes two further errors. First, it adopts an out-of-context definition of vesting. Second, it ignores basic principles of contract law. Each error contravenes Supreme Court precedent.
The majority holds that “unalterability in the absence of consent from the person holding the right[] is required before a right is deemed vested” because “[a] ‘vested right’ is commonly defined as a ‘right that so completely and definitely belongs to a person that it cannot be impaired or taken away without the person’s consent.’ ” Majority op. at 1065-66 (quoting Black’s Law Dictionary 1349 (8th ed.2004)). There is nothing “common” about the majority’s definition of a vested right; rather, its definition applies specifically to the vesting of constitutional rights, not generally to contractual rights.2 See Black's Law Dictionary 1349 (explaining the quoted definition of “vested right” by citing *1071constitutional law sources). As to contractual rights, the majority’s imposition of a requirement of unalterability has no basis in precedent or common usage.3
As the majority acknowledges, here, “whether such benefits are vested is a matter of private contract.” Majority op. at 1065. In the context of private employment contracts, the Supreme Court has stated that a right to a benefit is vested simply if “the employee’s right to the benefit would survive a termination of his employment.” Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 363-64, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980); see United States v. Weiland, 420 F.3d 1062, 1079 n. 16 (9th Cir.2005) (“[W]e are bound to follow a controlling Supreme Court precedent until it is explicitly overruled by that Court.”). This principle comports with the common, non-constitutional definition of a “vested” right as “a completed, consummated right for present or future enjoyment.” Black’s Law Dictionary 1595 (emphasis added); see United States v. Wealth & Tax Advisory Servs., Inc., 526 F.3d 528, 530 (9th Cir.2008) (per curiam) (“Courts often turn to dictionaries to determine the plain, unambiguous, and common meaning of terms.”). In other words, the CBAs vest whatever their terms state, whether agreed to be paid in the present or in the future (after expiration of the CBA).
The majority is mistaken that this court’s precedents and our sister circuits’ precedents “have applied a similar interpretation” of vesting. Majority op. at 1066. In Bower v. Bunker Hill Co., 725 F.2d 1221, 1223 (9th Cir.1984), we stated that, “if the pensioners’ medical insurance constituted a vested benefit, that benefit could not be ended without the pensioners’ consent.” See majority op. at 1066 (quoting Bower). But this statement merely establishes what occurs if & benefit vests— it does not explain how a benefit vests.4 Similarly, the other precedents that the majority cites establish only that a vested right is “forever unalterable,” not that a right must be forever unalterable in order to vest. See Bland v. Fiatallis N. Am., Inc., 401 F.3d 779, 784 (7th Cir.2005) {“Upon vesting, benefits become forever unalterable ....” (emphasis added)); Int’l Union, United Auto. Workers of Am. v. Skinner Engine Co., 188 F.3d 130, 139 (3d Cir.1999) (“In applying these standards, it must be remembered that to vest benefits is to render them forever unalterable.” (emphasis added)); see also Sprague v. Gen. Motors Corp., 133 F.3d 388, 400 (6th Cir.1998) (en banc) (“To vest benefits is to render them forever unalterable.” (emphasis added)).
In short, the precedents unremarkably state that, if a benefit is vested, then that bargained-for benefit cannot be changed.5 *1072See 23 Williston on Contracts § 63:1, p. 434 (4th ed. 2002) (“As a contract consists of a binding promise or set of promises, a breach of contract is a failure, without legal excuse, to perform any promise that forms the whole or part of a contract.” (footnote omitted)). The majority, on the other hand, relies on the precedents to adopt the converse principle — only if a benefit is unalterable does the benefit vest. The majority’s precedential analysis thus relies on a logical fallacy.
The majority also quotes Halliburton Co. Benefits Committee v. Graves, 463 F.3d 360, 377 (5th Cir.2006), majority op. at 1066, but its quotation is incomplete. In Halliburton, the Fifth Circuit wrote that “[a]n employer ‘vests’ a benefit under ERISA when it intends to confer unalterable and irrevocable benefits on its employees.” 463 F.3d at 377. The court went on to hold: “The parties were free to impose contractual obligations on the right to amend or terminate the [retiree benefits], and they did. Because of these limitations, [the employer] cannot alter the retiree program, except as consistent with the plan.... ” Id. at 378. Consequently, regardless of the Fifth Circuit’s definition of vesting, the court exercised jurisdiction over alterable benefits and bound the employer to the bargained-for contractual limitations on its ability to change retiree benefits — an approach in direct conflict with the path taken by the majority.
Most importantly, the majority’s holding violates basic principles of contract law. The majority holds that Plaintiffs’ benefits are not vested because Defendant can terminate them “subject to negotiation with the Union.” But, under the terms of the CBAs, Plaintiffs have an absolute contractual right to their benefits unless and until such negotiation occurs (or until they turn 65). The act of negotiation therefore operates as a condition subsequent. See 13 Williston on Contracts § 38:9, p. 408 (“A condition subsequent has been defined as a future event upon the happening of which the agreement or obligations of the parties would be no longer binding.”). Under contract law, “[t]he fact that rights are future and conditional does not prevent their recognition and protection.... A contract creating such rights is legally effective according to its terms. ... [T]hese rights are vested.” 8 Corbin on Contracts § 30:5, p. 8 (rev. ed.1999) (emphases added); see also 13 Williston on Contracts § 38:1 (stating that a condition that qualifies a party’s duty to perform does not qualify the existence of a contract).
Consistent with this basic understanding, the Supreme Court has held that benefits vest even if subject to a condition subsequent and that the terms of the condition are enforceable. See Nachman, 446 U.S. at 378, 100 S.Ct. 1723 (“[E]ven if the actual realization of expected benefits might depend on the sufficiency of plan assets, they were nonetheless considered vested.”); see also Modzelewski, 14 F.3d at 1378 (“The Supreme Court ... has noted that vested pension rights may still be subject to certain conditions subsequent.” (citing Nachman)); Helwig v. Kelsey-Hayes Co., 93 F.3d 243, 250 (6th Cir.1996) (“[Ejmployers may modify or terminate vested rights where their power [to] do so was an explicit part of the agreement between the parties.”). Consequently, under Litton, we have jurisdiction over “disputes as to such continuing benefits.” 501 U.S. at 207, 111 S.Ct. 2215.
C. Conclusion
In summary, the CBAs gave Plaintiffs the vested right to medical benefits until *1073the age of 65, unless and until “negotiation with the Union” resulted in a change. The interpretation of that negotiation clause and the extent to which it was followed are disputed issues of fact, which require us to reverse and remand the case for further proceedings. We have federal question jurisdiction because Plaintiffs’ non-frivolous claims arise under the Labor Management Relations Act and ERISA. The majority contravenes Supreme Court precedent and basic principles of contract law in holding otherwise. I therefore am compelled to dissent.

. Although the bargained-for closure agreement does not address the status of early retiree health benefits, it does appear to assume that retiree welfare benefits will continue under the terms of the superseded CBA: “Employees who are curtailed as a result of the closure ... will be eligible for retiree medical coverage in accordance with the provisions of the Benefits Plan Booklet." (Emphasis added.)

. The majority also cites to ERISA’s equating of "vested” with "nonforfeitable” as evidence that a right must be unalterable in order to be vested. Majority op. at 1066 n. 1. But "under the ERISA definition, nonforfeitable does not mean that the payments must be absolutely unconditional.” Modzelewski v. Resolution Trust Corp., 14 F.3d 1374, 1378 (9th Cir.1994).

. The unalterability requirement also has no basis in logic. For example, if a contract guaranteed pension payments of $X in year one, $X + $1,000 in year two, and $X + $2,000 in year three, we would have jurisdiction over a claim to those benefits, just as we would if the contract gave retirees $X each year.

. The majority's citation to Grosz-Salomon v. Paul Revere Life Insurance Co., 237 F.3d 1154 (9th Cir.2001), is equally inapposite. In that case, the benefit plan "could change ... upon written request from the policyholder.” Id. at 1160. In other words, no consent or negotiation was required from anyone — the contract had a standard, limitless reservation of rights clause. Here, Defendant’s right to change the benefits is not unfettered; it is subject to negotiation with the Union.

.The Supreme Court stated as much when it required that a benefit be "fixed under the contract but as yet unsatisfied.” Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 206, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991). What the majority fails to realize is that Plaintiffs' benefits are fixed. They have a right to benefits unless and until Defendant negotiates with the Union (or they reach age 65). It is a *1072right that can be divested, but that does not change the fact that it is vested until negotiation occurs.