Goodyear defends against retiree class action resulting in a landmark VEBA settlement
Clients Goodyear Tire & Rubber Co., Inc.
Goodyear Tire & Rubber Co., Inc. retained Jones Day to negotiate a resolution regarding the elimination of Goodyear's retiree health care liability for retirees from bargaining units represented by the United Steelworkers (USW). In 2006, this liability was estimated at approximately $1.2 billion, or over half of Goodyear's total Other Post-Employment Benefits (OPEB) liability, and was a significant reason that Goodyear's North American Tire division was financially underperforming.
To address this burden on its balance sheet, Goodyear sought to exercise its right to unilaterally modify or terminate retiree health benefits provided to USW retirees. In late 2006, Goodyear also decided that it would no longer subsidize retirees' obligations to pay for any health care premium costs that exceeded the "cap" Goodyear had placed on its annual expenditures for retiree health care. Not long thereafter, the USW engaged in an 86-day strike. To end the strike, the parties engaged in intensive negotiations, a key issue being finding a long-term solution to the rising cost and burden to Goodyear of retiree health care, while providing health care protection to USW retirees.
In late December 2006, Jones Day assisted in negotiating a watershed memorandum of understanding (MOU) between the parties that would completely eliminate Goodyear's OPEB liability for USW retirees. The parties agreed to establish an independent Voluntary Employees Beneficiary Association (VEBA) to which Goodyear would contribute $1 billion to help finance retiree health care benefits for current and future USW retirees. Following this contribution, and an orderly transition period, the VEBA will have sole responsibility for financing and administering USW retirees' health care benefits. Investors and stock analysts have applauded Goodyear's planned withdrawal from the costly and uncertain future of retiree health care financing. At the same time, the USW is satisfied that the agreement protects its membership by securing a means to finance this important benefit.
Jones Day assisted Goodyear in its negotiations with both the USW and Counsel for individual USW retirees regarding the structure and drafting of a comprehensive settlement agreement that would realize the vision of the MOU. After extensive talks hammering out the terms, the parties agreed to a preliminary settlement agreement in early July 2007. The USW and individual USW retirees, who will serve as class representatives, have now filed a class action in the United States District Court of the Northern District of Ohio, in which they will ultimately seek the court's approval of this settlement agreement.
On August 22, 2008, district court Judge Adams, after a series of extended filings and hearings regarding the fairness of the terms of the proposed settlement, entered his order and final judgment, and filed his 38-page findings of fact and conclusions of law, approving in full the class-wide resolution of plaintiffs' claims that their hourly healthcare benefits were vested and immutable.
Redington, et al. v. The Goodyear Tire & Rubber Company, Case No. 07-01999 (N.D. Ohio, July 3, 2007)