Court Opinion

ID: 3004158
Source: CourtListenerOpinion
Date Created: 2015-09-24 22:36:56.8585+00
Date Added: 2024-06-11T11:45:55.652792
License: Public Domain

In the

United States Court of Appeals
               For the Seventh Circuit

No. 09-3542

B OEING C OMPANY,
                                                  Plaintiff-Appellant,
                                  v.

INTERNATIONAL U NION OF U NITED A UTOMOBILE,
A EROSPACE AND A GRICULTURAL IMPLEMENT
W ORKERS OF A MERICA (UAW), et al.,

                                               Defendants-Appellees.

             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
             No. 09 C 2213—Robert W. Gettleman, Judge.

    A RGUED F EBRUARY 23, 2010—D ECIDED M ARCH 18, 2010

  Before B AUER, P OSNER, and SYKES, Circuit Judges.
  P OSNER, Circuit Judge. This case is before us on Boeing’s
appeal from the denial by the district court of a challenge
to an arbitration award in favor of the UAW. 9 U.S.C. §§ 9,
10. The appeal requires us to consider the interplay be-
tween ERISA, 29 U.S.C. §§ 1001 et seq., and section 301 of
the Labor-Management Relations (Taft-Hartley) Act, 29
U.S.C. § 185, in the context of arbitration.
2                                              No. 09-3542

  Boeing had manufacturing facilities in Tulsa and
McAlester, Oklahoma. The hourly employees were repre-
sented by the UAW, which had negotiated with Boeing
a collective bargaining agreement that entitled em-
ployees who were laid off when or after they turned 50
and had at least ten years of service to retire from the
company at age 55 with a Boeing pension, plus lifetime
health insurance also paid for by the company.
  In 2005 Boeing sold its Oklahoma facilities to a com-
pany now called Spirit Aerosystems. The company hired
a number of the workers and when that happened
Boeing deemed their employment with Boeing to have
“terminated as a result of divestiture.” Boeing transferred
to Spirit’s pension fund the assets in the former employ-
ees’ retirement accounts and denied that it had any
further pension or benefits obligations to them. It treated
the workers who didn’t receive jobs with Spirit as
having resigned.
  The union filed a grievance, charging that Boeing’s
refusal to treat the workers as if it had laid them off
violated the collective bargaining agreement. The union
sued to compel arbitration of its grievance; the suit was
settled by Boeing’s yielding to the union’s insistence
on arbitration.
  A provision of the collective bargaining agreement states
that a worker loses his seniority rights, which include
the pension and health benefits provided in the Boeing
ERISA plans, if his employment is “terminated” in any
of 11 specified ways. (There is no suggestion that termina-
tion deprived the workers of rights that ERISA itself
No. 09-3542                                               3

makes nonforfeitable. 29 U.S.C. § 1053(a).) Divestiture of
Boeing facilities, plant closure, and other possible charac-
terizations of what Boeing did are not among the listed
ways and the arbitrator ruled that therefore the workers
retained their entitlement to Boeing pension and health
benefits.
  Boeing has no argument worth a second’s pause that the
arbitrator exceeded his authority in concluding that
Boeing had violated the collective bargaining agreement
by repudiating its obligations to the laid-off workers.
Its only (barely) colorable complaint is about the relief
that the arbitrator ordered. He directed the affected
employees (some 150 to 200) to apply to Boeing’s plan
administrator for the benefits to which the plan entitled
them, but he further ruled that should the plan admin-
istrator deny their benefits claims, either because it con-
cludes that they’re no longer participants in the plan
because they were laid off by Boeing, or because of
the transfer of plan assets to Spirit’s pension fund,
then Boeing must assume the plan’s obligations to those
workers minus any entitlement that they may have
under their Spirit pension and health-insurance plans.
The arbitration award gives the workers who didn’t go
to work for Spirit the same relief as those who did, except
that the former have no Spirit benefits to deduct
from Boeing benefits. We needn’t discuss those workers
separately.
  Boeing argues that the relief ordered by the arbitrator
violates ERISA because not only must a claim for ERISA
benefits be submitted in the first instance to the plan
4                                               No. 09-3542

administrator—as indeed ordered by the arbitrator—but
if the claim is denied, the claimant’s only remedy is a
suit under ERISA challenging the plan administrator’s
interpretation of the plan. Judicial review of that inter-
pretation would be deferential, Metropolitan Life Ins. Co.
v. Glenn, 128 S. Ct. 2343, 2347-48 (2008); Firestone Tire &
Rubber Co. v. Bruch, 489 U.S. 101, 110-15 (1989); Call v.
Ameritech Management Pension Plan, 475 F.3d 816, 822
(7th Cir. 2007), provided the plan grants the admin-
istrator discretion to interpret it—as Boeing’s plan does.
  We’ll assume that the plan administrator will deny the
claims on the ground that the workers “terminated as
a result of divestiture” ceased to be plan participants.
The administrator is not a party to either the collective
bargaining agreement or the arbitration and will not
feel bound by either. So unless the arbitrator is authorized
to require Boeing to provide the benefits to which the
workers would be entitled had Boeing not violated the
collective bargaining agreement, Boeing’s consent to the
arbitration will have proved to be illusory.
  Arbitrators are authorized to order legally enforceable
remedies for the violation of contracts that they’re
called on to enforce. Yellow Cab Co. v. Democratic Union
Organizing Committee, Local 777, S.I.U.N.A., AFL-CIO, 398
F.2d 735, 738 (7th Cir. 1968); Anderman/Smith Operating
Co. v. Tennessee Gas Pipeline Co., 918 F.2d 1215, 1219-20
(5th Cir. 1990); Tobacco Workers Int’l Union, Local 317 v.
Lorillard Corp., 448 F.2d 949, 955-56 (4th Cir. 1971);
Fairweather’s Practice and Procedure in Labor Arbitration
§ 15.IV, pp. 468-70 and n. 64 (4th ed., Ray J. Schoonhoven
No. 09-3542                                                5

ed., 1999); Marvin F. Hill, Jr. & Anthony V. Sinicropi,
Remedies in Arbitration 42-48 (2d ed. 1991); David E. Feller,
“The Remedy Power in Grievance Arbitration,” 5 Indus.
Rel. L.J. 128, 136-37 (1982). That is the difference
between arbitration and mediation. If Boeing agreed to the
arbitration with its fingers crossed—hoping to win but
determined that the workers would get nothing if it
lost—it committed a fraud of sorts on the arbitrator and
the union.
  The argument that ERISA forbade the arbitrator to
order relief is frivolous. Suppose a plan administrator
paid a plan participant’s medical bill, the employer ap-
propriated the money as it was en route to the payee,
and the payee then billed the participant. The plan admin-
istrator, unless complicit in the employer’s conversion,
would not have to pay the second bill; but the plan par-
ticipant could sue the employer for conversion of the
money that the plan would have paid the medical provider
had it not been for the employer’s misconduct. This case
is the same, except that the misconduct consisted of vio-
lating a collective bargaining agreement rather than
committing the tort of conversion.
  Or suppose that Boeing unlawfully confiscated all the
plan assets and fired the plan administrator’s entire
staff, and as a result no plan participant could obtain
benefits. Could not the participant sue Boeing directly
and obtain a judgment? The implication of Boeing’s
position is that the answer is “no.”
  Boeing argues that the union should not be heard to
complain about the workers’ “termination as a result of
6                                                 No. 09-3542

divestiture” because it did not object to the transfer to
Spirit’s pension fund of the Boeing retirement-plan assets
allocable to those “terminated” employees who went to
work for Spirit. But why should the union have objected?
It doesn’t care where the assets are, and therefore
whether the workers are given their pensions and
health benefits (when they reach 55) by the plan adminis-
trator or by Boeing—an extremely prosperous company
well able to make up the difference between what these
workers are owed under the plan and the lesser benefits
they’ll receive from Spirit.
   Section 208 of ERISA, 29 U.S.C. § 1058, has been inter-
preted to require that a plan that transfers liabilities to
another plan (Boeing’s plan transferred liabilities to
Spirit’s plan because the workers hired by Spirit ac-
quired rights under Spirit’s pension and welfare plans)
must transfer enough assets to ensure that participants
(assuming some triggering event) would receive the same
benefits the day after the transfer as they would have
received the day before. Systems Council EM-3 v. AT&T
Corp., 159 F.3d 1376, 1380 (D.C. Cir. 1998); Sengpiel v. B.F.
Goodrich Co., 156 F.3d 660, 664-65 n. 4 (6th Cir. 1998); Gillis
v. Hoechst Celanese Corp., 4 F.3d 1137, 1147 (3d Cir. 1993);
Bigger v. American Commercial Lines, 862 F.2d 1341, 1344-45
(8th Cir. 1988). Boeing thus was obligated to transfer
assets to Spirit’s pension fund when it transferred liabil-
ities. The union’s objection is to the transfer of liabilities;
and while it could have presented its objection in the
form of a demand that Boeing bargain collectively over
these and any other consequences of the sale of the plants,
First National Maintenance Corp. v. NLRB, 452 U.S. 666, 677-
No. 09-3542                                              7

78 n. 15 (1981), it was equally entitled to follow the al-
ternative route of grievance and arbitration.
  Boeing’s reply brief summarizes the company’s position
as follows: the arbitrator “award[ed] ERISA-covered
benefits as a remedy for a violation of a collective bar-
gaining agreement where the collective bargaining agreement
expressly vests the administrator of the plan with the
exclusive authority to decide benefit claims pursuant to
ERISA’s claims resolution regime” (emphasis added). Not
so. The arbitrator awarded what amount to damages for
breach of contract measured by the benefits of which the
breach deprived the workers, who were third-party
beneficiaries of the collective bargaining contract.
  One imagines that Boeing’s concern in making these
desperate arguments is with having to pay lifetime
health benefits to early retirees. For it and we now know
how that commitment in the UAW’s collective bar-
gaining agreements with the Detroit automakers helped
drive those companies to the brink of bankruptcy—and
General Motors and Chrysler over the brink. But Boeing
is stuck with the commitments that it negotiated with
the union unless it can renegotiate them. It was not re-
quired to agree to provide lifetime benefits to workers
represented by the UAW but it agreed to do so and must
live with its decision.
                                                A FFIRMED.

                          3-18-10