Retirement Heist: how companies plunder and profit from the nest eggs of American workers

Still, she found in a later decision that the language was ambiguous, rejecting the company’s motion for judgment on the papers alone, and she allowed the suit to move forward to a trial by jury, a move that may have led to a favorable settlement for the retirees. But the case was then assigned to Judge Patrick Schiltz, a former law clerk for Supreme Court Justice Antonin Scalia. Schiltz didn’t think the language in the contract was ambiguous and, rather than go to trial, where a jury would hear the facts, he invited Rexam to move for reconsideration, meaning it could file another motion asking the judge to decide the case on the papers alone. Rexam was happy to oblige. Schiltz concluded that the language in the documents was unambiguous for approximately 80 percent of the retirees, and clearly gave the company the right to unilaterally change the benefits that it had a contractual agreement to provide.

Occasionally, a judge will refuse to hear a case in the jurisdiction where it is originally filed and send it to another circuit. But this doesn’t occur often. Crown Cork & Seal, a Philadelphia-based packaging company that makes wrappers for such things as Mars bars and bottles of beer, sued its union retirees in U.S. district court in Chicago, but the judge wasn’t convinced that was where the case belonged.

“From day one, it seemed to me that Illinois was an unlikely home for this litigation,” Judge Milton Shadur told Crown’s lawyers, according to a transcript of a meeting he held in his chambers in August 2003 to determine whether the case should remain in Chicago or move to Cincinnati, where the retirees had countersued.

“I am not faulting you for this, but it’s pretty obvious why you chose the Seventh Circuit as your forum,” he said. “Because it’s very unfriendly to the idea of retiree benefits being vested at all.” He added that he was inclined to send the case to Pittsburgh. “You know, they [the retirees’ attorneys] want Ohio, because I think they view the Sixth Circuit on this subject of retirees as more favorable, but I am not going to give them that.”

“They shopped more than we did, Judge,” said James Rydzel, a lawyer with Jones Day, in Cleveland, representing Crown.

“Well, I am not sure about that,” the judge responded. He subsequently sent the case to Pittsburgh, where a number of the company’s retirees lived. The Crown retirees were initially hopeful because the case was assigned to a judge with a proworker reputation. However, the judge recused himself because his mother had worked in a factory at Continental Can, a predecessor company, and was potentially a member of the class. The next judge sent the case to Cincinnati, where it ultimately went to arbitration.

It may be routine for litigants to try to pick a favorable jurisdiction. If two parties sue each other, the courts generally hear the case that’s filed first. But a court can dismiss or transfer a case if it believes a company is “forum shopping” or suing retirees as a preemptive strike to deprive them of their rights, as “natural plaintiffs,” to sue in the court they would choose.

ACF Industries, a railroad-car maker headquartered in St. Charles, Missouri, took the additional step of provoking a retiree and then filing suit, claiming that the company was suing to protect itself. The company didn’t dispute that the contract promised health coverage at “$100 per month for life,” but said this referred only to the major medical coverage, not explicitly to the hospital/surgical portion.

And it maintained that St. Louis was the proper venue for the suit because “a substantial part of the activities and events giving rise to these claims occurred in this district.” Most of its 678 retirees and dependents lived four hundred miles away, in West Virginia, in the Fourth Circuit, which had ruled in favor of retirees in a similar case.

ACF, controlled by CEO Carl Icahn through an investment vehicle in New York, prepared its suit and had its legal guns lined up when its human resources vice president called up a retiree in Barboursville, West Virginia. Basil Chapman, a retired union representative, was sitting on his porch with his dog, Bo, enjoying a mild Friday in December, when he got the call. The executive told him that ACF was going to start charging the union retirees for their benefits. Chapman had been the chair of the union’s bargaining committee and had helped negotiate contracts in which the trade-off for lower salary increases was lifetime health coverage that would cost retirees a flat $100 a month.