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Newell Operating Co. v. International Union of United Automobile

July 2, 2008

NEWELL OPERATING CO., ET AL., PLAINTIFFS-APPELLANTS,
v.
INTERNATIONAL UNION OF UNITED AUTOMOBILE, AEROSPACE, AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, U.A.W., AND MARCELLA COGSWELL, ET AL., DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Northern District of Illinois, Western Division. No. 06 C 50010-Philip G. Reinhard, Judge.

The opinion of the court was delivered by: Kanne, Circuit Judge.

ARGUED FEBRUARY 11, 2008

Before BAUER, KANNE, and WILLIAMS, Circuit Judges.

Newell Operating Co. ("Newell") amended its employee welfare benefits plan to allow administrators to charge retirees uniform monthly premiums. This simple corporate action produced complex litigation when two federal lawsuits over the validity of Newell's amendments were filed in quick succession. First, Newell, its subsidiary, Newell Window Furnishings Company, Kirsch Division ("Newell Window"), and the Newell Rubbermaid Health and Welfare Program 506 ("the Plan") filed this suit in the Northern District of Illinois, seeking declaratory relief against over 500 retirees of a Michigan manufacturing plant, as well as their labor union, the International Union of United Automobile, Aerospace, and Agricultural Implement Workers of America, U.A.W., AFL-CIO, and its local chapter, the U.A.W. Local 797 (collectively, "UAW"). The complaint requested a judgment declaring that the amendments to the Plan did not violate the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., or the Labor Management Relations Act (LMRA), 29 U.S.C. § 141 et seq. See 28 U.S.C. § 2201. Second, while the declaratory-judgment suit was pending in Illinois, the UAW and retirees brought their own lawsuit in the Western District of Michigan, challenging the new premiums under ERISA and the LMRA. The Northern District of Illinois yielded to the action filed in the Western District of Michigan by declining to exercise its jurisdiction and dismissing the declaratory-judgment suit. We believe that the decision to dismiss the case was sound, and we affirm.

I. HISTORY

Newell Window's corporate predecessor, the Kirsch Company ("Kirsch"), manufactured drapery hardware and custom window coverings at several plants in Sturgis, Michigan. The UAW-which represented all production, tool-room, and maintenance employees who performed work at these plants-entered into collective-bargaining agreements with Kirsch that obligated Kirsch to provide certain health benefits for life to its employees and their families. In 1997, Newell Window acquired Kirsch, and, pursuant to the sale, the employees of Kirsch became employees of Newell Window and members of the Plan, an employee welfare benefits plan sponsored by Newell and governed by ERISA. See 29 U.S.C. § 1002(1). In October 2000, Newell decided to close the Sturgis plants and entered into a shut-down agreement with the UAW, which agreed to waive all claims it had, or would ever have, against Newell.

In November 2005, Newell sent a letter to the retirees of Kirsch and Newell Window, notifying them that the Newell Rubbermaid Inc. Benefit Plans Administrative Committee ("the Committee") had decided to consolidate all of Newell's retiree health programs, including the Plan. The consolidation would allow a new insurance carrier, CIGNA Healthcare, to assume the daily administration of all of Newell's programs beginning on January 1, 2006. Around the time Newell mailed the notice to retirees, Newell also amended the Plan to allow the Committee to charge a uniform monthly premium once CIGNA took over. The Committee set the premium at $40 per month. Prior to 2006, some retirees had never been charged a monthly premium, and many of the retirees that had paid a premium paid less than $40 per month.

Anticipating backlash for the new charges, Newell, the Plan, and Newell Window filed this action against the UAW and the retirees in the Northern District of Illinois on January 12, 2006, requesting a declaratory judgment "that the transfer of the administration of the Plan" and "the corresponding changes in the terms and conditions of the benefits provided under the Plan" did not violate either ERISA or the LMRA. Of the 474 retirees named in the original complaint as individual defendants, only one resided in Illinois-in Charleston, which is situated in the Central District of Illinois. On February 15, 2006, the UAW and four retirees filed their own lawsuit in the Western District of Michigan, claiming that Newell, Newell Window, and the Plan had breached the collective-bargaining agreements and violated ERISA and the LMRA by charging the new $40 premium. The retirees filed their complaint both individually and as purported representatives of a class. A few weeks after filing the complaint in Michigan, the UAW filed a motion to dismiss the Illinois case for lack of subject-matter jurisdiction, see Fed. R. Civ. P. 12(b)(1), or in the alternative, to transfer venue to the Western District of Michigan, see 28 U.S.C. § 1404(a).

In response to the UAW's motion, Newell, Newell Window, and the Plan amended their complaint in March 2006 to add the Committee as a plaintiff. In addition to pleading the same allegations as the initial complaint, the amended complaint added a new count on behalf of the Committee, which sought a declaration that it did not violate its fiduciary duties under ERISA § 502(a)(3) by charging the premiums. See 29 U.S.C. § 1132(a)(3)(B)(ii). The amended complaint also requested an injunction that would allow the Committee to condition the retirees' participation in the Plan on their payment of the premiums and would preclude any retiree who fails to pay from participating in the Plan.

After the appellants amended their complaint in the Northern District of Illinois, the UAW and individual retirees filed new motions to either dismiss the case, or transfer it to the Western District of Michigan. Newell, Newell Window, the Plan, and the Committee then moved for partial summary judgment against the UAW, and for summary judgment against the individual defendants. The district court for the Northern District of Illinois took all of the motions under advisement and allowed the parties to conduct discovery.

In March 2007, the district court for the Northern District of Illinois granted the motions by the UAW and the individual defendants to dismiss the case for lack of subject-matter jurisdiction under Fed. R. Civ. P. 12(b)(1). The district court recognized that ERISA § 502(a)(3) provides exclusive jurisdiction over an action by a plan fiduciary "to obtain other appropriate equitable relief" in order to enforce the terms of ERISA or an ERISA plan. See 29 U.S.C. § 1132(a)(3)(B)(ii). But the court reasoned that the Committee's fiduciary action did not provide a basis for subject-matter jurisdiction in this case because the suit was not one to enforce the terms of ERISA or the Plan: "Plaintiffs amended the plan to require premium payments by retirees. Plaintiffs do not need any court action to enforce the provisions of the plan." The district court relegated its analysis of jurisdiction under LMRA § 301, 29 U.S.C. § 185, to a footnote that stated, "[t]he court notes that jurisdiction for a declaratory judgment action that plaintiffs' actions did not violate a collective bargaining agreement appears to be proper under Section 301 of the LMRA . . . but the court need not reach this question either."

The district court reasoned, "[i]f the plaintiffs are to have their case heard here, it must be under the Declaratory Judgment Act," and noted that "[e]ven where subject matter jurisdiction may be exercised over a declaratory judgment action, the court has discretion to decline to hear it." The district court exercised its discretion and declined to hear the case because, in its view, the retirees were the natural plaintiffs of the underlying ERISA and LMRA disputes and "the vast majority of the retirees, and the site of the CBAs negotiations [were] all Michigan." The court then denied the motions for transfer and for partial summary judgment as moot.

After this case was docketed for appeal, the district court for the Western District of Michigan ruled on a motion by Newell, Newell Window, and the Plan to dismiss the Michigan action or to transfer that case to the Northern District of Illinois. The Michigan court issued an opinion in July 2007, which denied the motion to transfer and the motion to dismiss with respect to the individual defendants. However, the Michigan court granted the motion to dismiss with respect to the UAW because the court believed that the UAW had waived its claims against Newell by acceding to the shut-down agreement in October 2000. After oral argument in this ...


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