CHICAGO (CN) – The 7th Circuit reinstated a labor lawsuit filed by paper producer NewPage Wisconsin, seeking a declaratory judgment affirming its right to reduce the health insurance premium subsidy that it pays to retirees.
In an effort to cut costs, NewPage closed several paper mills and planned to stop subsidizing retirees’ health insurance. The retire’s union filed suit against parent company, NewPage Corp in 2009 in Ohio. Eliminating the subsidy, the union claimed, violated the collective bargaining agreement, federal labor law and the Employee Retirement Income Security Act.
While the Ohio action was pending, NewPage Wisconsin sought a declaratory judgment in its favor. But Wisconsin federal Judge Barbara Crabb determined that she lacked jurisdiction. 7th Circuit precedent derived from Newell Operating Co. v United Auto Workers prevented federal intervention because NewPage was not asking for equitable relief, Crabb ruled.
A three-judge appellate panel remanded the case, overturning the precedent referenced by Crabb.
“A federal district court is the right forum for a dispute about the meaning of ERISA and the validity of changes to a welfare benefit plan,” wrote Chief Judge Frank Easterbrook, “Overruling a precedent is not a step we take lightly… Nevertheless a correction is required, because this circuit stands alone.”
The Wisconsin case is now the most developed, the court noted. The Ohio suit was dismissed because NewPage Corp was not responsible for its subsidiary’s decision to cut the benefits. The Ohio federal judge also declined to substitute NewPage Wisconsin as a defendant, because the company is out of state. The Sixth Circuit will not hear the Union’s appeal until fall.
“Because the Wisconsin district court has subject-matter jurisdiction over all issues and personal jurisdiction over all of the contestants, the declaratory-judgment suit now seems a more attractive means of handling the controversy than it did while the Ohio litigation was ongoing,” Easterbrook wrote.