Inter-Modal Rail Employees Assn. v. Atchison, Topeka & Santa Fe Railway Company

PETITIONER:Inter-Modal Rail Employees Assn.
RESPONDENT:Atchison, Topeka & Santa Fe Railway Company

DOCKET NO.: 96-491
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 520 US 510 (1997)
ARGUED: Mar 17, 1997
DECIDED: May 12, 1997

Cornelia T. L. Pillard – On behalf of the United States, as amicus curiae, supporting the petitioners
James D. Holzhauer – Argued the cause for the respondents
Richard E. Schwartz – Argued the cause for the petitioners

Facts of the case

Employees of Santa Fe Terminal Services, Inc. (SFTS), a wholly owned subsidiary of The Atchison, Topeka and Santa Fe Railway Co. (ATSF), were entitled to pension, health and welfare benefits under the terms of their collective bargaining agreements. These benefit plans were subject to the Employee Retirement Income Security Act of 1974 (ERISA). In 1990, ATSF awarded the work performed by SFTS to In Terminal Services (ITS), and terminated those SFTS employees unwilling to continue work with ITS. The benefit plan offered by ITS was less favorable than the SFTS plan, and SFTS employees brought suit under, alleging that they had been discharged “for the purpose of interfering with the attainment” of rights to which they would have “become entitled under [their SFTS] plan.” ERISA Section 510. After the District Court dismissed the Section 510 claims, the Court of Appeals for the Ninth Circuit reinstated the employees’ pension claims because Section 510 prevented interference with vested rights, but dismissed the employees’ welfare benefit claims because such benefits did not vest.


Does Section 510 of ERISA bar interference only with vested rights?

Media for Inter-Modal Rail Employees Assn. v. Atchison, Topeka & Santa Fe Railway Company

Audio Transcription for Oral Argument – March 17, 1997 in Inter-Modal Rail Employees Assn. v. Atchison, Topeka & Santa Fe Railway Company

Audio Transcription for Opinion Announcement – May 12, 1997 in Inter-Modal Rail Employees Assn. v. Atchison, Topeka & Santa Fe Railway Company

The opinions of the Court in two cases will be announced by Justice O’Connor.

The first of the cases is Inter-Modal Rail Employees Association versus Atchison, Topika and Santa Fe Railroad, Number 96-491.

This case comes here on certiorari from the Ninth Circuit Court of Appeals.

The petitioners are former employees of a subsidiary of the Atchison, Topika & Santa Fe Railway Company.

The subsidiary was in charge of transferring cargo between rail cars and trucks at one of Santa Fe’s Los Angeles based rail yards.

In 1990, Santa Fe negotiated to have In Terminal Service or ITS for short, performed the same cargo transferring work that its subsidiary had performed.

The subsidiary gave the employees the option of — of going to work instead for ITS or being fired.

A number of them stayed on with ITS, but working for ITS was not as financially lucrative as working for the subsidiary had been.

For one thing, ITS provided fewer pension benefits and fewer welfare benefits, such as health insurance, dental insurance and sick leave, then had the Sante Fe subsidiary.

The petitioners then sued under the Employee Retirement Income Security Act known as “ERISA”.

They claimed that the transfer of work from the subsidiary to ITS forced them into accepting lower levels of pension and welfare benefits, and that Santa Fe and ITS had transferred the work for the purpose of reducing the amount of benefits provided to the petitioners.

The petitioners asserted that this transfer interfered with their right to make claims under the subsidiaries’ more generous benefits plan, and therefore, violated Section 510 of ERISA, which makes it unlawful to discharge pension on welfare plan beneficiaries for the purpose of interfering with their attainment of rights under those plans.

The District Court dismissed all of petitioners’ claims.

The Ninth Circuit Court of Appeals agreed with the District Court that petitioners’ claim for interference with their welfare benefit right should be dismissed.

The Court of Appeals held that Section 510 only protects rights that vest.

That is, only those rights to become irrevocable after a certain period of time.

And that welfare benefits do not vest because an employer is usually free to amend or even eliminate the welfare benefits it offers to its employees.

Because welfare benefits do not vest, the Ninth Circuit concluded they are not protected by Section 510.

We disagree, and in an opinion filed with the clerk today, we vacate this aspect of the Ninth Circuit’s judgment.

The plain language of Section 510 applies to plans.

Plans include welfare benefit plans, even though such benefits do not vest.

Section 510 draws no distinction between benefits that vest and those that do not.

We do not consider the additional arguments raised by the parties and leave them to be resolved in the first instance by the Ninth Circuit on remand.

The opinion is unanimous.