When an employee benefit plan is amended in a way an employer anticipates could be controversial, an employer might seek a declaratory judgment that the amendment complies with ERISA.  Generally, a declaratory judgment action will preclude later challenges by plan participants.  However, a recent decision by the Third Circuit demonstrates that the presumption in favor of a first-filed suit is not absolute.  In that case, the court upheld the dismissal of the employer’s declaratory judgment action in favor of a later-filed suit by a union.  (Honeywell Int’l Inc. v. International Union, United Auto., Aerospace and Ag. Implement Workers of Am. No. 11-4557 (3d Cir. 2012)). 

The Honeywell case involved caps on amounts that Honeywell was required to contribute for retiree medical benefits.  The caps were included in a collective bargaining agreement, but in the course of negotiations, the union indicated that it believed the caps were unlawful.  Shortly after bargaining completed, Honeywell filed a suit seeking a declaratory judgment that the contribution caps complied with ERISA and the Labor Management Relations Act.  Honeywell filed suit in New Jersey where it is domiciled.  The union later filed suit in Michigan challenging the caps.  In its recent decision, the Third Circuit upheld the New Jersey district court’s decision to dismiss Honeywell’s New Jersey suit in favor of the union’s later-filed Michigan suit.

The decision to dismiss Honeywell’s suit was based on the district court’s view that Michigan had a greater connection to the dispute, since:  (a) union negotiations had been conducted in Michigan for more than 50 years, (b) the particular language at issue had been negotiated in Michigan, (c) the union is located in Michigan, and (d) Honeywell’s chief negotiator is located in Michigan.  The Third Circuit also observed that Honeywell filed the declaratory judgment action before giving statutorily-required notice of the plan amendment to retirees; the court concluded that this “suggested that [the employer] was attempting to beat the Union to the courthouse.”

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Photo of Jenna Wallace Jenna Wallace

Jenna Wallace’s practice covers tax-qualified retirement plans, health and welfare plans, equity compensation, nonqualified deferred compensation plans, employment and restrictive covenant agreements, employee terminations and international employment arrangements, among other areas.  She has significant experience assisting employers with respect to the administration of…

Jenna Wallace’s practice covers tax-qualified retirement plans, health and welfare plans, equity compensation, nonqualified deferred compensation plans, employment and restrictive covenant agreements, employee terminations and international employment arrangements, among other areas.  She has significant experience assisting employers with respect to the administration of 401(k) and pension plans (including standards applicable to the investment of ERISA-covered assets), the new requirements of the Patient Protection and Affordable Care Act, Section 409A of the Internal Revenue Code, and management employment and equity arrangements.  Ms. Wallace also advises private funds regarding investments by employee benefit plans.