Nichols Ex Rel. Alcatel Network Systems Salaried Retirees Benefit Program v. Alcatel USA, Inc.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
June 20, 2008

No. 07-40477 Charles R. Fulbruge III
Clerk

JUDY NICHOLS, Individually and on behalf of the Alcatel Network Systems
Salaried Retirees Benefit Program and other persons similarly situated; JERRY
BROWN, Individually and on behalf of the Alcatel Network Systems Salaried
Retirees Benefit Program and other persons similarly situated; ROBERT
BRALEY, Individually and on behalf of the Alcatel Network Systems Salaried
Retirees Benefit Program and other persons similarly situated; ERMA SCOTT,
all persons in the proposed Union Retirees class; INTERNATIONAL UNION
ELECTRONIC, CWA Local 86787, Individually and on behalf of the Group
Insurance Plans, and others similarly situated; IUE, The International Division
of Communication Workers of America, AFL-CIO, CLC (IUE-CWA),

Plaintiffs-Appellants,
v.

ALCATEL USA, INC.,

Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of Texas

Before JONES, Chief Judge, and BARKSDALE and STEWART, Circuit Judges.
CARL E. STEWART, Circuit Judge:
This putative class action concerns the elimination of retirement medical
benefits for workers who retired from Alcatel USA, Inc. (“AUSA”) or its
predecessors. The retirees in this action are divided into two groups: Salaried
Retirees and Union Retirees (collectively “the Retirees”). AUSA provided the
 No. 07-40477

Salaried Retirees with a Salaried Retirees Benefit program and agreed to
provide medical benefits to Union Retirees under collective bargaining
agreements and other similar arrangements. The Salaried Retirees contend that
the Benefit program is a pension plan and consequently subject to vesting under
the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et
seq. They are also alleging claims of ERISA-estoppel and breach of fiduciary
duty. The Union Retirees contend that AUSA does not have the right to increase
the cost of retiree health benefits because they are fixed lifetime benefits which
individually vested at the time of each retiree’s retirement based upon the
agreement and course of action between the parties. The Retirees filed a motion
for preliminary injunction, which was subsequently denied by the district court.
The Retirees timely filed their notice of interlocutory appeal. Finding no error,
we AFFIRM.
FACTUAL AND PROCEDURAL BACKGROUND
In November 2003, AUSA announced that it planned to implement
changes to certain of its retiree medical welfare benefit plans, including a
gradual reduction over a three-year period in the amount of its contribution to
the costs of medical benefits. On March 17, 2005, four individual Retirees: Judy
Nichols, Jerry Brown, Robert Braley, and Erma Scott, as well as two unions: the
IUE, International Division of the Communications Workers of America, AFL-
CIO, CLC (IUE-CWA) and the IUE-CWA Local 86787, filed this lawsuit,
contesting the changes to the benefit plans. All of the Retirees alleged claims
under § 502(a) of ERISA, 29 U.S.C. § 1132(a). The Union Retirees also alleged
a claim under § 301 of the Labor Management Relations Act (“LMRA”), 29
U.S.C. § 185. Ultimately, the Retirees were seeking “to reinstate cancelled
benefits, to undo reductions in benefits, to be ‘made whole’ for losses due to
[AUSA’s] actions, to preserve and continue the medical benefits for the lifetimes
of the retirees, eligible dependents, and surviving spouses, and to recover

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attorney fees and costs.” On October 16, 2006, the Retirees filed a motion for
preliminary injunction seeking class-wide injunctive relief1 on behalf of the
Salaried Retirees participating in AUSA’s Plan B Retirement Medical Plan and
the Union Retirees participating in AUSA’s Plans E and F Retirement Medical
Plans.2 Specifically, the Retirees sought to prevent AUSA from: (1) eliminating
any portion of the health coverage savings accounts for Salaried Retirees; (2)
charging more for health insurance for Union Retirees who retired before May
2, 2000, than the monthly rate of $22 for individuals and $47.93 for families; (3)
increasing any health insurance costs to Union Retirees beyond 25% of the plan
costs; and (4) increasing the health insurance costs to the Retirees until the rates
can be justified. Pertinent background information regarding the three
retirement medical plans at issue in this case is included below.
Plan B: This plan includes the Salaried Retirees from several AUSA
facilities who retired between April 4, 1993 and December 31, 2002, and who met
the eligibility requirements or were grandfathered. Under this plan, Salaried
Retirees from AUSA can participate in the medical coverage option, participate
in the prescription drug only option, or elect to participate in a non-AUSA
medical plan. AUSA contributed to the cost of the medical coverage through a
calculated “medical credit.”3 No actual money was set aside to fund the medical

1
The Retirees’ motion for class certification has not been granted by the district court.
After they filed the motion, AUSA opposed in part and agreed in part with the request for class
certification. However, after the district court entered its order dismissing their motion for
preliminary injunction, the Retirees filed a motion to withdraw their request for class
certification. Neither the motion for class certification nor the motion to withdraw were
resolved by the district court before it entered a stay of the proceedings pending this court’s
ruling on the present interlocutory appeal.
2
AUSA has seven different retiree welfare plans. None of the named Retirees or any
of the individuals who testified or submitted declarations at the hearing in the district court
in support of the Retirees’ motion participate in Plans A, C, D, or G. Of the four named
Retirees, only Scott is a Union Retiree; the other three are Salaried Retirees.
3
The amount of the medical credit was determined through a calculation that
multiplied each year of credited service an employee had with the company by $1,000 (a spouse

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credits; rather the credits were conceptual “buckets of money.” AUSA only
contributed to medical coverage costs up to the amount of the medical credit,
regardless of how much premium amounts increased. Accordingly, retirees
under this plan could only offset their medical premiums up to the amount of the
aggregate medical credits that have been granted to them through the
allocations of the monthly medical amount. If their insurance premiums were
less than the monthly medical amount, any excess remained available to them
for future medical premiums. AUSA did not issue any 1099s to Plan B retirees
for the amount of the medical credits.
When Plan B was introduced, AUSA, through Terry Latham, its former
Vice President of Human Resources, explained to the employees that there was
no funding or vesting in this plan and that AUSA reserved the right to change,
amend, or terminate the Plan for any reason or purpose.4 The operative
documents for the plan are the Plan Document and Summary Plan Description
(“SPD”) and a brochure entitled “Straight Talk About Your Retirement Program”
(“Straight Talk brochure”). The SPD states that the plan is a “self-funded
employee welfare benefit plan” and expressly states that the plan does not create
a vested right. Similarly the Straight Talk brochure explains that: “There is no
cash option under this Plan. You may only use the Retirement Medical Credit
to help pay premiums for retirement medical coverage.” “A memo about Plan B”
also states that “the post-retirement medical plan could change in the future,
just as the current retirement medical plan could change.”

had a separate calculation that multiplied each year of credited service by $500). Once this
amount was calculated, it was annuitized using life expectancy charts to determine a monthly
medical amount. One the retiree and/or the eligible spouse became eligible for Plan B, AUSA
credited them this medical amount on a monthly basis. The monthly medical amount was cut
in half once the retiree and/or spouse reached age 65.
4
Latham testified for the Retirees at the hearing. He became the Vice President of
Human Resources for AUSA in 1991, and he remained in that position until 1998.

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In November 2003, AUSA announced that its contribution to the costs of
medical benefits for retirees under this Plan was going to be reduced to zero by
January 1, 2006.5 To that end, AUSA reduced its maximum contribution to 66%
in 2004, 33% in 2005, and 0% in 2006 and thereafter. Currently, AUSA
continues to offer retiree medical and prescription drug benefits through Plan
B. However, it no longer provides Plan B retirees with new medical credits to
offset the cost of coverage. Any monthly medical credits that were granted prior
to the plan change continue to be available to retirees until exhausted.
Plan F: This plan covers bargaining unit members who retired from
January 1, 1986 until before the last collective bargaining agreement (“CBA”)
became effective on May 1, 2000. This plan never included medical credits;
rather union retirees could pay $22 or $47.93 to receive single or family
coverage, respectively. In each CBA in the record, retiree medical benefits are
addressed in Article XX. Article XX of the 1985 CBA states that the insurance
provisions will remain available during the term of the agreement and also
states that once a retiree and/or their dependent “attains age sixty-five (65) the
coverage will be a Medicare carve out.” The other CBAs in the record contain
similar language. The SPD for Plan F explains:
Alcatel Network Systems, Inc. reserves the right to change in any
manner or to terminate all or any part of the Plan at any time and
to cancel all or any part of the coverages and benefits under the
Plan, except that if the Plan is maintained pursuant to a collective
bargaining contract no such action shall be taken during the term
of such contract or at any time thereafter until Alcatel Network
Systems, Inc. has complied with any collective bargaining obligation
which it may have with respect to the Plan.

Latham testified that the premiums had been set at the rate of $22 for
single coverage and $47.93 for family coverage since he initially became

5
Previously, in 2002, AUSA froze eligibility for participation in Plan B.

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responsible for the union retirees in 1983.6 While he contemplated raising the
premiums, he was told that there was a letter of understanding between AUSA
and the union that the rates were fixed. Latham never asked to see the letter,
and unlike other letter agreements, this purported agreement was never
incorporated into any CBA.
On August 24, 2001, AUSA Marketing, Inc. (“AUSA Marketing”) sold its
division that contained the bargaining unit to another company. Prior to the
sale, AUSA Marketing negotiated an agreement (“Termination Agreement”) with
the union that terminated the existing CBA and resolved any outstanding
obligations. The Termination Agreement states in part that “[t]he Union
acknowledges that the Company has fully satisfied its contractual obligations
under the CBA . . . . [T]he Company has satisfied all reimbursement, benefit
contributions and other contractual obligations to the Union and bargaining unit
employees under the CBA.”
AUSA continued to require contribution rates at $22 and $47.93 until
January 1, 2004, when it incrementally began raising the contribution rates to
the total cost of the medical coverage under AUSA plans as of January 1, 2006.
Plan E: Bargaining unit members who retired after May 2, 2000 are
covered under this plan. Plan E never included medical credits; these retirees
pay 25% of the cost of the standard medical option offered by AUSA. Thus, these
retirees contribute only 25% of the cost that other retirees pay for coverage
under the retiree medical standard option, or any other option that costs less
than the standard option, with the exception that retirees who select the

6
The practice of using, fixed premiums of $22 and $47.93 was established by Rockwell
International Corp., AUSA’s predecessor.

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prescription drug only option pay 100% of the cost. AUSA has maintained Plan
E retirees’ medical coverage at 25% under the standard plan.7
On March 17, 2005, the Retirees filed this putative class action; they filed
a motion for preliminary injunction on January 3, 2006. The district court
dismissed the motion without prejudice on September 27, 2006. Several weeks
later, on October 16, 2006, the Retirees re-filed the motion. On December 20,
2006, the district court held an evidentiary hearing on the Retirees’ motion, and,
after the hearing, the district court allowed the parties to supplement the record
with additional evidence. During the hearing, the district court allowed a
number of witnesses to testify as to the Retirees’ claim of irreparable harm.
These witnesses were all AUSA retirees (or their spouses) who had canceled
their health coverage with AUSA since the aforementioned changes were
implemented. In issuing its factual findings, the district court determined that
each of the witnesses had medical coverage and none of them were unable to
afford adequate medical care.8 Further, the district court concluded that
although a number of the witnesses, including Nichols, testified that when they
retired they believed that their medical benefits would be “locked-in,” none of
them testified that a specific AUSA employee misrepresented that the medical
plans could not be changed or terminated in the future.
The district court went on to lay out its conclusions of law and ultimately
denied the requested injunction. In so doing, the court concluded that the
Retirees had not demonstrated a substantial likelihood of success on the merits

7
None of the individuals who were involved in the hearing below ever participated in
Plan E. Nevertheless, the Retirees “request[ed] an accounting of the costs and an injunction
prohibiting the arbitrary and unsubstantiated increase until an acceptable accounting is
provided.”
8
The court did note that some of the witnesses testified that they had to either take on
additional employment in order to receive health care benefits or that they had to rely on the
health benefits their spouses received.

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for any of their claims. While the court did not find that the proposed injunction
would disserve the public interest, it did hold that the Retirees had neither
demonstrated a substantial threat of irreparable injury nor that the harm to the
Retirees outweighed the potential prejudice to AUSA if the injunction were
entered. The Retirees filed a notice of interlocutory appeal on May 8, 2007,
appealing the district court’s denial of injunctive relief pursuant to 28 U.S.C. §
1292(a)(1). On June 19, 2007, the district court granted a stay in the
proceedings pending the resolution of this appeal.
DISCUSSION
We review a district court’s decision to grant or deny a motion for
preliminary injunction for an abuse of discretion. Planned Parenthood of
Houston & S.E. Tex. v. Sanchez, 403 F.3d 324, 329 (5th Cir. 2005) (citing Doran
v. Salem Inn, Inc., 422 U.S. 922, 931-32 (1975) (“While the standard to be
applied by the district court in deciding whether a plaintiff is entitled to a
preliminary injunction is stringent, the standard of appellate review is simply
whether the issuance of the injunction . . . constituted an abuse of discretion.”)).
“A decision grounded in erroneous legal principles is reviewed de novo.”
Sanchez, 403 F.3d at 329 (internal citation omitted).
Plaintiffs seeking a preliminary injunction must show: (1) a substantial
likelihood of success on the merits, (2) a substantial threat that plaintiffs will
suffer irreparable harm if the injunction is not granted, (3) that the threatened
injury outweighs any damage that the injunction might cause the defendant, and
(4) that the injunction will not disserve the public interest. Id. “A preliminary
injunction is an ‘extraordinary remedy’ and should only be granted if the
plaintiffs have clearly carried the burden of persuasion on all four
requirements.” Id. (internal quotation marks and citation omitted). The parties
do not dispute that the Retirees’ requested injunction would not disserve the

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public interest; accordingly we now turn to examine whether the Retirees have
carried their burden as to the first three requirements.
A. Substantial Likelihood of Success on the Merits
The Retirees raise a number of claims; accordingly we examine the
likelihood of success on the merits of each claim in turn.
1. Salaried Retirees’ ERISA § 502(a)(1)(B) claim
ERISA § 502(a)(1)(B) states that: “A civil action may be brought by a
participant or beneficiary to recover benefits due to him under the terms of his
plan, to enforce his rights under the terms of the plan, or to clarify his rights to
future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). The
Retirees argue that the district court improperly concluded that Plan B is an
employee welfare benefit plan (“welfare plan”) and not an employee pension
benefit plan (“pension plan”), and therefore the district court improperly
assessed the claim under § 502(a)(1)(B) of ERISA. According to the Retirees,
Plan B worked like a savings account and provided retirees with deferred
retirement income, albeit to be used for payment of medical insurance
premiums, and therefore it met the requirements of a pension plan. They
contend that since it is a pension plan, it is subject to vesting, notwithstanding
language in the Plan’s controlling documents to the contrary. We disagree.
Under ERISA, there are two kinds of plans: welfare plans and pension
plans. The former is defined as “any plan, fund, or program which was
heretofore or is hereafter established or maintained by an employer . . . for the
purpose of providing for its participants or their beneficiaries, through the
purchase of insurance or otherwise, (A) medical, surgical, or hospital care or
benefits, or benefits in the event of sickness, accident, disability, death or
unemployment . . . .” 29 U.S.C. § 1002(1). A pension plan is defined as:
any plan, fund, or program which was heretofore or is hereafter
established or maintained by an employer or by an employee
organization, or by both, to the extent that by its express terms or as

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a result of surrounding circumstances such plan, fund, or program–
(i) provides retirement income to employees, or (ii) results in a
deferral of income by employees for periods extending to the
termination of covered employment or beyond, regardless of the
method of calculating the contributions made to the plan, the method
of calculating the benefits under the plan or the method of
distributing benefits from the plan.

29 U.S.C. § 1002(2)(A). The statute also states: “In the case of any arrangement
or payment a principal effect of which is the evasion of the standards or purposes
of this chapter applicable to pension plans, such arrangement or payment shall
be treated as a pension plan.” 29 U.S.C. § 1002(2)(B). Determining whether an
agreement constitutes a welfare or pension plan is a question of fact. Hansen v.
Continental Ins. Co., 940 F.2d 971, 976 (5th Cir. 1991).
Unlike welfare plans, pension plans are highly regulated with strict
statutory vesting requirements. 29 U.S.C. § 1051(1); Inter-Modal Rail
Employees Ass’n v. Atchison, Topeka & Santa Fe Ry. Co., 520 U.S. 510, 515
(1997) (“It is true that ERISA itself does not regulate the substantive content of
welfare benefit plans. Thus, unless an employer contractually cedes its freedom,
it is generally free under ERISA, for any reason at any time, to adopt, modify,
or terminate its welfare plan.” (internal citations omitted)); Curtiss-Wright Corp.
v Schoonejongen, 514 U.S. 73, 78 (1995) (“Nor does ERISA establish any
minimum participation, vesting, or funding requirements for welfare plans as
it does for pension plans.”).
Here, it is undisputed that Plan B is described in all of the Plan documents
as a welfare plan and that the SPD explicitly states that the Plan did not create
any vested rights. Having reviewed the record, we conclude that none of the
documentation or oral representations from AUSA could have reasonably led
anyone to believe that Plan B was a pension plan. Moreover, under the clear
language of ERISA, Plan B qualifies as a welfare plan: the medical credits could

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only be applied to medical and prescription drug plan premiums, and they could
never be redeemed for cash. See 29 U.S.C. § 1002(1). Further, as the district
court wrote, there was no funding of the medical credits or any vesting, two
elements that are required for pension plans.
The Retirees argue that the medical credit qualified as income, and they
contend that the district court erred by not considering either Musmeci v.
Schwegmann Giant Super Markets, Inc., 332 F.3d 339 (5th Cir. 2003) or Stoffels
v. SBC Communications, Inc., 430 F.Supp. 2d 642 (W.D. Tex. 2006). In
Musmeci, a panel of this Court held that grocery vouchers qualified as
retirement income. 332 F.3d at 345. Relying on “the interconnection between
ERISA and the [Internal Revenue Code (“IRC”)],” the panel highlighted that the
employer treated the vouchers as retirement income because it deducted the
expenditures on its tax returns and issued the retirees 1099 tax forms for the
value of the vouchers. Id. The panel also explained that terms like “income,”
which overlap in ERISA and IRC should be “consistently defined in both.” Id.
The reasoning of Musmeci, far from supporting the Retirees’ arguments, is
actually consistent with AUSA’s position, since the IRC states that as a general
rule “gross income of an employee does not include employer-provided coverage
under an accident or health plan.” 26 U.S.C. § 106(a). Here, the record
establishes that AUSA never issued 1099 tax forms to retirees for Plan B
benefits; rather, AUSA submitted to the IRS annual 5500 reports where Plan B
was represented as a welfare plan with no assets. In fact Latham, who designed
Plan B, testified for the Retirees, and was himself a Plan B participant, admitted
that he never treated the medical credits as income and that he never reported
them on his tax returns. In light of this all, the district court’s failure to cite
Musmeci was not in error.
Similarly, Stoffels is not applicable here. In that case, the district court
concluded that the free or discounted telephone service provided to retirees was

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a cash equivalent that qualified as income. 430 F.Supp. 2d at 653. However,
unlike the Salaried Retirees here, the plaintiffs in Stoffels were taxed for the
benefits they received from their former employer. Id. at 645. In sum, neither
Musmeci or Stoffels involved medical benefits, nor is the reasoning in those
opinions applicable here; the district court did not err by not considering them.
Since we have no difficulty concluding that Plan B is a welfare plan, we
hold that the district court properly concluded that the Salaried Retirees have
not demonstrated a substantial likelihood of success on the merits on their
ERISA § 502(a)(1)(B) claim.
2. Salaried Retirees’ ERISA-estoppel claim
Next, the Salaried Retirees assert that AUSA misrepresented the
existence of guaranteed lifetime medical benefits and is therefore estopped from
asserting either that Plan B does not vest or that it may be amended, modified,
or terminated at AUSA’s will. Specifically, the Retirees argue that the language
in the SPD is misleading and ambiguous because employees were led to believe
that separate, personal medical accounts were created upon retirement.9 They
argue that retirees, such as Nichols, relied on AUSA’s misrepresentations when
they retired early because they were led to believe that they would receive
medical credits for life. Once again, we agree with the district court that the
Retirees are unlikely to succeed on this claim as they failed to establish the
requisite elements of an ERISA-estoppel claim.

9
Further, the Salaried Retirees argue that the following terms of the Plan misled them
into believing that the plan could only be changed for active “employees,” but not for “retirees:”

The Plan may be changed by the Employer upon the execution of an
Amendment at any time without your prior notice or consent.

Your Employer may terminate the Plan at any time; however, the Employer has
established the Plan with the intent to maintain it for an indefinite period of
time.

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In order to establish an ERISA-estoppel claim, a plaintiff must prove: (1)
a material misrepresentation, (2) reasonable and detrimental reliance upon that
representation, and (3) extraordinary circumstances. Mello v. Sara Lee Corp.,
431 F.3d 440, 444-45 (5th Cir. 2005). “ERISA-estoppel is not permitted if based
on purported oral modification of plan terms.” Id. at 446 (internal quotation
marks and citation omitted). Also, there can be no “reasonable reliance on
informal documents in the face of unambiguous Plan terms.” Id. at 447; see High
v. E-Systems, Inc., 459 F.3d 573, 580 (5th Cir. 2006) (“[A] ‘party’s reliance can
seldom, if ever, be reasonable or justifiable if it is inconsistent with the clear and
unambiguous terms of plan documents available to or furnished to the party.’”
(quoting Sprague v. GMC, 133 F.3d 388, 404 (6th Cir. 1998))).
Based on our review of the record, the Salaried Retirees have not satisfied
either of the first two elements.10 First, they have not established any material
misrepresentation. When the Plan documents are examined in whole it is clear
that the Plan language indicates that none of the benefits in the Plan vested and
that AUSA explicitly reserved the right to change or terminate the Plan at any
time. Second, even assuming that there had been a material misrepresentation,
the Salaried Retirees have not established the second element: reasonable and
detrimental reliance upon that representation. The district court highlighted
that none of the named Retirees or witnesses who testified admitted to ever
reading or relying on the aforementioned provision that they claim is misleading.
Thus, there could have been no detrimental reliance. Further, even assuming
arguendo that some Retirees had read that provision, any reliance would have
been unreasonable as the SPD explicitly states that AUSA reserved the right to
change or terminate the Plan, as well as medical credits, at any time. As this
Court has previously stated, “the SPD must be read as a whole. It would be

10
Accordingly, there is no need to consider whether they are likely to meet the third
element: extraordinary circumstances.

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error to attend only to one paragraph, page, or portion of the summary.” McCall
v. Burlington Northern/Santa Fe Co., 237 F.3d 506, 512 (5th Cir. 2000).
Similarly, the Salaried Retirees’ argument that the use of terms such as
“annuity” and “works like a savings plan” misled them into thinking the medical
credit was a vested benefit is unavailing. Once again, not only does the SPD
explicitly state that the Plan does not create a vested right, but as noted in
McCall, it would be unreasonable for a person who sees the word “annuity” or
the phrase “works like a savings account” to conclude that the Plan created a
vested right when those words are read in the context of the entire SPD. As
AUSA observed in its brief, “the Salaried Retirees’ argument relies on isolated
terms taken out of context and having nothing to do with the clear reservation
of rights clauses.” We agree.
3. Salaried Retirees’ ERISA § 502(a)(2) claim
ERISA § 502(a)(2) states that: “A civil action may be brought by the
Secretary, or by a participant, beneficiary or fiduciary for appropriate relief
under section 409 [29 U.S.C. § 1109].” 29 U.S.C. § 1132(a)(2). Section 409
states, in relevant part:
§ 1109. Liability for breach of fiduciary duty
(a) Any person who is a fiduciary with respect to a plan who breaches
any of the responsibilities, obligations, or duties imposed upon
fiduciaries by this subchapter shall be personally liable to make good
to such plan any losses to the plan resulting from each such breach,
and to restore to such plan any profits of such fiduciary which have
been made through use of assets of the plan by the fiduciary, and
shall be subject to such other equitable or remedial relief as the court
may deem appropriate, including removal of such fiduciary.

29 U.S.C. § 1109(a). In Massachusetts Mutual Life Insurance Company v.
Russell, the Supreme Court explained that under the remedial scheme laid out
in ERISA, the remedies available under § 409 must inure to the benefit of the
plan as a whole. 473 U.S. 134, 140 (1985). The Court explained: “A fair

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contextual reading of the statute makes it abundantly clear that its draftsmen
were primarily concerned with the possible misuse of plan assets, and with
remedies that would protect the entire plan, rather than with the rights of an
individual beneficiary.” Id. at 142. Based on Russell, many courts have held
that claims for breach of fiduciary duty under § 502(a)(2) must be brought in a
representative capacity on behalf of the plan as a whole, with the goal of
protecting the financial integrity of the plan. See, e.g., LaRue v. DeWolff, Boberg
& Assocs., 128 S. Ct. 1020, 1023 (2008) (explaining that the court of appeals
rejected the petitioner’s claim under § 502(a)(2) because the remedy he sought
was “personal” and only related to his own plan benefits). However, in its recent
decision in LaRue, the Supreme Court narrowed the holding of Russell and held
that § 502(a)(2) “does authorize recovery for fiduciary breaches that impair the
value of plan asserts in a participants’ individual account.” Id. at 1026.11
The Salaried Retirees contend that substantial evidence has been
presented that AUSA breached its fiduciary duty by: misrepresenting its right
to reduce or eliminate benefits under Plan B, misrepresenting its intention to
lock-in the retirement benefits for those employees who retired early, and
disposing of the medical savings accounts. Therefore, the Retirees argue that
this Court should hold that they have shown a substantial likelihood of success
on the merits. However, we agree with AUSA that the Salaried Retirees’ §
502(a)(2) claim is unlikely to succeed because the Retirees have offered no
evidence that Plan B sustained losses; indeed, it would be impossible for them
to do so since, as explained above, Plan B is an unfunded Plan.12 Accordingly,

11
Specifically, the Court explained: “The ‘entire plan’ language in Russell speaks to the
impact of § 409 on plans that pay defined benefits. . . . Consequently, our references to the
‘entire plan’ in Russell, which accurately reflect the operation of § 409 in the defined benefit
context, are besides the point in the defined contribution context.” 128 S. Ct. at 1025.
12
AUSA also argues, relying on the district court’s ruling, that the Salaried Retirees’
§ 502(a)(2) claim is unlikely to succeed on the merits because the Retirees are seeking

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we hold that the district court did not abuse its discretion in concluding that the
Salaried Retirees failed to show a substantial likelihood of success on their
ERISA § 502(a)(2) claim.
4. Union Retirees’ claim that their Retirement Medical Benefits Vested
First, the Union Retirees assert that the district court erred by concluding
that their claim that the CBAs and the Termination Agreement vested Plan F
medical insurance benefits was unlikely to succeed on its merits. They argue
that the CBAs were ambiguous, and accordingly the district court should have
considered the extrinsic evidence which establishes that AUSA previously
specified that the medical benefits were fixed for the lifetime of the retirees.
Specifically, they also point to the letter agreement that states that the
premiums were fixed at $22 and $47.93. Second, the Union Retirees argue that
the district court erred by denying their request for an accounting of the costs
related to Plan E as well as for an injunction prohibiting the arbitrary and
unsubstantiated increase of Plan E until an acceptable accounting is provided.
The Union Retirees contend this is essential in order to prevent AUSA from
terminating the benefits under Plan E.
“[U]nder ERISA, welfare benefits, such as health care insurance, are
vested only if so provided by contract.” Int’l Ass’n of Machinists & Aero. Workers
v. Masonite Corp., 122 F.3d 228, 231 (5th Cir. 1997) (citing 29 U.S.C. § 1051(1)).
The Masonite panel, relying on Supreme Court precedent, explained:
Contractual obligations will cease, in the ordinary course, upon
termination of the bargaining agreement. Exceptions are
determined by contract interpretation. Rights which accrued or
vested under the agreement will, as a general rule, survive
termination of the agreement.

“individualized reliance damages” and are not seeking relief on behalf of the Plan. But this is
precisely the type of argument that was rejected by the Supreme Court in LaRue, which was
decided after briefing was completed in this case.

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Id. at 231-32 (citing Litton Financial Printing v. NLRB, 501 U.S. 190, 207
(1991)). Accordingly, whether a CBA vests insurance benefits in retirees is a
question of contractual interpretation. Masonite, 122 F.3d at 231. While the
interpretation of CBAs is governed by federal law, courts “may draw upon state
rules of contractual interpretation to the extent that those rules are consistent
with federal labor policies.” Id. (internal quotation marks and citation omitted).
If a CBA is found to be ambiguous, extrinsic evidence may be introduced to
determine the parties’ intent. United Paperworkers Int’l Union v. Champion
Int’l Corp., 908 F.2d 1252, 1256 (5th Cir. 1990). “A contract is ambiguous if it
is reasonably susceptible to more than one interpretation.” Id. at 1255 (internal
citations omitted).
Having reviewed the record, we find that the Retirees have offered no
evidence that the CBAs, the Termination Agreement, or the language in Plan F’s
SPD itself expressly states that the medical benefits are vested in the retirees.
Rather, as the district court noted, each CBA states that the hospitalization and
insurance provisions under which the retiree medical benefits are included “shall
be effective” only “during the term of this agreement.” It is undisputed that all
the CBAs have expired. Further, the Termination Agreement stated that AUSA
had satisfied all its obligations to its bargaining unit members. Therefore,
despite the Union Retirees’ arguments to the contrary, the CBAs were not
ambiguous; the retiree health benefits did not vest but were limited to the terms
of the agreements. Moreover, Plan F’s SPD contains a clause that reserves
AUSA’s right to terminate or change the plan. Accordingly, not only do the
Union Retirees not have any vested rights to benefits, but they do not have a
right to benefits at any fixed cost either. As the Eighth Circuit has written: “the
mere fact that employee welfare benefits continue in retirement does not
indicate that the benefits become vested for life at the moment of retirement.”

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Howe v. Varity Corp., 896 F.2d 1107, 1110 (8th Cir. 1990), aff’d, 516 U.S. 489
(1996).
Since the relevant language in the CBAs is not ambiguous, there is no
need to resort to extrinsic evidence. However, even if the Union Retirees’
extrinsic evidence were considered, the outcome would remain the same. The
Retirees point to a purported letter that fixed the monthly premiums for Plan F
retirees at $22 and $47.93. However, not only was that letter agreement never
incorporated into any of the CBAs or the Termination Agreement, but no one
who testified at the hearing has even seen this purported side agreement.
Accordingly, there is no admissible evidence that validates the existence of this
side agreement.
The Retirees’ reliance on Cole v. ArvinMeritor, Inc., 516 F.Supp. 2d 850
(E.D. Mich. 2005), is misplaced. The language in the CBAs in that case is
markedly different from the language in the CBAs at issue here, and more
importantly, Cole relies on the inference that retiree benefits vest unless there
is language in the CBA to the contrary. Id. at 865-67. This inference, known as
the Yard-Man inference (from the case International Union v. Yard-Man, Inc.,
716 F.2d 1476 (6th Cir. 1983)) has never been accepted by this court. Spacek v.
Maritime Ass’n, 134 F.3d 283, 293 (5th Cir. 1998), abrogated on other grounds
by, Central Laborers’ Pension Fund v. Heinz, 541 U.S. 739, 743 (2004) (“Courts
may not lightly infer an intent on the part of a plan to voluntarily undertake an
obligation to provided vested, unalterable benefits.” (internal quotation marks
and citation omitted)); United Paperworkers, 908 F.2d at 1261 n.12 (“To the
extent that Yard-Man held that there is, as a general proposition, an inference
of an intent to vest retirement benefits . . . [we] find no basis in logic or federal
labor policy for such a broad inference.”).

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Moreover, we find that the district court did not abuse its discretion in
concluding that the Retirees were unlikely to succeed on their Plan E claim.13
As noted above, the Retirees have not even alleged any contractual or statutory
violation as to Plan E; they merely are requesting an accounting. We agree with
AUSA that the Retirees are simply trying “to lump their discovery request into
their pursuit of injunctive relief.”
For the foregoing reasons, we hold that the district court did not abuse its
discretion in determining that the Union Retirees were not likely to succeed on
the merits of their Plan F or E claims.
B. Substantial Threat that Plaintiffs Will Suffer Irreparable Harm
Even assuming arguendo that the Retirees have demonstrated a
substantial likelihood of success on the merits on some and/or all of their claims,
we nevertheless still conclude that the district court did not abuse its discretion
in denying the motion for preliminary injunction because the Retirees have
failed to demonstrate that they face a substantial threat of irreparable harm.
The Retirees’ arguments that they and their spouses will face irreparable injury
if the preliminary injunction is not issued is belied by the district court’s
extensive findings of fact. The district court carefully reviewed the testimony of
every retiree who testified, and determined that no one was currently uninsured
or unable to pay for coverage. The district court also highlighted that no
evidence was offered that suggests these retirees could not continue their
current coverage until a judgment is rendered in this lawsuit. The Retirees have
not credibly challenged these determinations on appeal, and accordingly we hold
that they have failed to carry their burden in demonstrating they will suffer
irreparable harm if the preliminary injunction is not granted.

13
Specifically, the district court concluded that “Plaintiffs’ request for an ‘accounting’
is insufficient to warrant a preliminary injunction against increases. Plaintiffs have not shown
a substantial likelihood of success on claims by Plan E Union Retirees.”

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 No. 07-40477

C. Whether the Threatened Injury Outweighs any Damage the Injunction might
cause the Defendant
Moreover, we hold that the district court properly determined that the
threatened injury to the Retirees would not outweigh any damage the injunction
might cause AUSA. AUSA has stated that it would face significant
administrative hurdles and considerable costs if the injunction were issued and
the company was required to reverse all the changes that have been
implemented since 2003. However, the Retirees have only offered to post a
“modest bond.” Not only would such a bond violate the Federal Rules of Civil
Procedure, but it would also be insufficient to compensate AUSA for any
damages it has suffered if AUSA ultimately prevails in this case, the likely
outcome given the above discussion regarding the Retirees’ likelihood of success
on the merits of their claims.
Federal Rule of Civil Procedure 65(c) states:
Security. The court may issue a preliminary injunction or a
temporary restraining order only if the movant gives security in an
amount that the court considers proper to pay the costs and
damages sustained by any party found to have been wrongfully
enjoined or restrained.

We have previously highlighted the importance of the bond requirement. “It
assures the enjoined party that it may readily collect damages . . . in the event
that it was wrongfully enjoined, without further litigation and without regard
to the possible insolvency of the applicant, and it provides the plaintiff with
notice of the maximum extent of its potential liability . . . . Because of the
importance of the bond requirement, failure to require the posting of a bond or
other security constitutes grounds for reversal of an injunction.” Phillips v.
Chas. Schreiner Bank, 894 F.2d 127, 131 (5th Cir. 1990) (internal quotation
marks and citations omitted). Since the Retirees appear unable to meet the
bond requirement of Rule 65(c), we hold that the damage the preliminary

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injunction might cause AUSA greatly outweighs any threatened injury to the
Retirees.
CONCLUSION
For the foregoing reasons, the judgment of the district court is
AFFIRMED.

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