Inter-Modal Rail Employees Association v. Atchison, Topeka and Santa Fe Railway Co.

The Inter-Modal Rail Employees Association (plaintiff) was a group comprised of former employees of Santa Fe Terminal Services, Inc. (Santa Fe) (defendant), a subsidiary of Atchison, Topeka and Santa Fe Railway Company (Atchison) (defendant). Santa Fe was tasked with transferring cargo between trucks and railcars at Atchison’s Hobart Yard in Los Angeles, California. While employed by Santa Fe, the employees were entitled to pension, health, and welfare benefits through Santa Fe’s employee benefit plans governed by the Employee Retirement Income Security Act (ERISA). Santa Fe was required by its collective-bargaining agreement with a local union to contribute to its pension, health, and welfare plans. Atchison terminated Santa Fe’s contract for the work at Hobart Yard, giving the work to In-Terminal Services (In-Terminal) (defendant). Hobart Yard workers either continued working for In-Terminal or were terminated. In-Terminal provided fewer pension and welfare benefits than Santa Fe due to a different collective-bargaining agreement. The employees who continued working at Hobart Yard filed suit in federal district court against Santa Fe, Atchison, and In-Terminal, alleging a violation of ERISA § 510. The employees claimed that by terminating Santa Fe’s contract, the companies intentionally denied the employees the increased welfare and pension benefits they should have received under Santa Fe’s benefit scheme. The district court dismissed the case, and the employees appealed to the United States Court of Appeals for the Ninth Circuit. The court of appeals reinstated the employees’ claim as to their pension benefits because § 510 protected plan participants from termination motivated by an employer’s desire to prevent a pension from vesting. However, the court of appeals affirmed the dismissal of the employees’ claim as to their welfare benefits because welfare benefits did not vest or create a present right to future benefits. The United States Supreme Court granted certiorari.