By Shawn Namet

On September 28, 2017, the Forth Circuit issued a published opinion in Di Biase v. SPX Corp.  Plaintiffs, retirees of SPX Corporation (“SPX”) as well as the International Union United Automobile, Aerospace and Agricultural Implement Workers of America, UAW (collectively, “Plaintiffs”) filed a motion for preliminary injunction in an action to enforce the terms of two prior settlement agreements.  Plaintiffs sought interlocutory appeal from the district court’s denial of its motion for preliminary injunction.  The Fourth Circuit affirmed the district court’s finding that Plaintiffs failed to satisfy the requirements for a preliminary injunction and remanded the action for further proceedings.

Facts and Procedural History

 In 2003, the parties to a class action suit against SPX signed settlement agreements that required SPX to provide lifetime health coverage to identified retirees and their families through specified group insurance plans or through “coverage which is substantially equivalent in benefits.”  SPX provided the coverage required by the settlement agreements from 2004 to 2015. SPX announced in 2014 that as of January 1, 2015, the group insurance plans would be cancelled and replaced with annual healthcare reimbursement accounts (“HRA”) that would provide funds to beneficiaries to purchase their own insurance plans.

In November 2014, Plaintiffs brought the underlying class action suit against SPX, alleging that the proposed HRA accounts did not constitute “coverage which is substantially equivalent in benefits” to the original group insurance plans and that SPX therefore intended to breach the settlement agreements.  Plaintiffs filed a motion for preliminary injunction, seeking to prevent SPX from moving forward with the proposed coverage changes on the effective date.  Resolution of the motion was delayed, however, until after the HRA accounts were implemented.

The district court denied the motion for preliminary injunction in September, 2015 on the basis that the motion was moot, as the HRA accounts had already gone into effect.  Alternatively, the court found that Plaintiffs failed to meet the standard required to warrant a preliminary injunction.

Motion for Preliminary Injunction Not Moot When Status Quo May Be Restored

 Defendant argued that the motion for preliminary injunction was rendered moot when the HRA accounts were implemented.  The Fourth Circuit recognized that the purpose of a preliminary injunction is to maintain the status quo, as stated in Pashby v. Delia.  709 F.3d 307, 319 (4th Cir. 2013).  However, under Aggarao v. MOL Ship Mgmt. Co., a preliminary injunction may also act to restore the status quo even when the event sought to be prevented has already occurred.  675 F.3d 355.  The Fourth Circuit found that the district court erred in failing to consider, in light of the decisions in Pashby and Aggarao, whether Plaintiff’s motion was still moot even after the HRA accounts were implemented.  The Court further rejected SPX’s argument that cancelling the HRA accounts and reinstating the previous group insurance plans would be unduly burdensome, holding that difficulties in restoring the status quo were not sufficient to render the Plaintiffs’ motion moot.

Plaintiffs Failed to Meet Requirements for Preliminary Injunction

 In support of a motion for preliminary injunction, a plaintiff must establish that (1) he is likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of the injunction, (3) that the balance of equities tips in his favor and (4) that the injunction is in the public interest. Winter v. National Resource Defense Council, Inc., 555 U.S. 7, 20 (2008).  The Fourth Circuit agreed with the district court that Plaintiffs failed to present evidence sufficient to establish that they were likely to ultimately succeed on the merits.  Plaintiffs argued that the words “plan” and “coverage” in the settlement agreements had clear meanings to which the HRA accounts did not conform.  The Court found the meanings of the words “plan” and “coverage” in the agreement to be ambiguous, and therefore declined to say it was likely the Plaintiffs’ argument would be successful.  The Court further found no irreparable harm to the Plaintiffs in absence of an injunction, as they presented no evidence that any beneficiaries of the HRA accounts were unable to acquire health insurance. Finally, the balance of equities and public interest were best served by proceeding to a decision on the merits, as an injunction requiring a change in insurance plans at the time, and another potential change later if the Plaintiffs did not prevail, would be a burden on both parties.

Conclusion

The Fourth Circuit found that the district court erred in finding the Plaintiffs’ motion for preliminary injunction moot, but affirmed the district court’s denial of the motion on the grounds that Plaintiffs failed to meet the standard requirements for a preliminary injunction.

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