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Winnett v. Caterpillar

Appeals Court Overturns Injunction Prohibiting Reduction of Caterpillar Retiree Health Benefits

A federal appeals court reversed an order that had prohibited Caterpillar Inc. from changing retiree health benefits and ruled that the claims of an entire subclass must be thrown out because they were filed too late.

AARP Foundation Litigation attorneys joined as co-counsel representing post-1992 retirees of Caterpillar Inc. who brought a class action over company cutbacks in coverage and implementation of higher co-pays in connection with coverage for health benefits. The class consists of about 4,000 Caterpillar employees who retired between 1992 and 1998.

Caterpillar retiree health benefits were created through a series of collective bargaining agreements between Caterpillar and the workers' union, the UAW. In 1992, following the expiration of the controlling collective bargaining agreement with the UAW, Caterpillar announced its unilateral decision to cap retiree medical costs. The company declared that beginning Jan. 1, 2000, and thereafter, it would pay no more for retiree health benefits than it had paid in 1999. Caterpillar stated that it would assess monthly premiums to the retirees who retired after 1992 in order to make up the shortfall between the cost of the retiree health insurance program and the company's funding.

It was not until 1998, following a six-year lapse, that Caterpillar and the UAW negotiated a new collective bargaining agreement. In that agreement, the company and the UAW agreed to create a tax favored trust, known as a Voluntary Employee Benefit Association (VEBA) to temporarily cover the retiree health premiums in excess of the cap announced by Caterpillar until the VEBA was exhausted. The VEBA trust funded the retiree health benefit costs in excess of Caterpillar's contribution until October 2004, when the fund was exhausted. Effective that date, Caterpillar began charging the post-1992 retirees a monthly retiree health care premium, as well as increased deductibles and co-pays.

The Dispute

The plaintiffs in Winnett v. Caterpillar, Inc. claim that Caterpillar's actions in assessing premiums, co-pays and higher deductibles to the retirees violate the collective bargaining agreements under which they were working. The suit claims that the company may not cut back the retirees' coverage because the language of the applicable collective bargaining agreements promised continued health coverage for the life of the retirees and their surviving spouses. The plaintiffs also seek remedies under the Employee Retirement Income Security Act (ERISA), the main federal law governing employee benefits.

The Winnett plaintiffs are asking the court to order Caterpillar to perform its statutory and contractual obligations by reinstating full coverage for the class members, prohibiting Caterpillar from reducing coverage in the future and reinstating health benefit coverage for class members who stopped participating in the plan upon Caterpillar's implementation of charges for benefits.

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