Red train on a track

FreightCar To Pay Retirees $30 Million To Settle Pension Dispute

Retirees who filed a class action lawsuit accusing FreightCar America Inc. of unfairly cutting off their pension health benefits have asked a Pennsylvania federal judge to approve the $30 million settlement to end their long-running dispute. The retirees, including the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO (formerly known as the United Steelworkers of America), and the FreightCar Defendants, filed a joint motion last month asking U.S. District Judge Kim R. Gibson to give preliminary approval to a settlement that would allow some 675 class members to net $30 million.

Under the settlement, which the parties reached in August just days before the dispute was set to head to trial, FreightCar will make a one-time contribution of $31.45 million to a voluntary employees’ beneficiary association (VEBA) trust fund that would be set up by the union for the purpose of providing class members post-retirement medical and life insurance benefits. FreightCar also agreed to pay $1.3 million in attorneys’ fees and costs to the class counsel provided that the court approves that amount. But if the court approves an amount less than that for the attorneys’ fees, then FreightCar will pay the difference between that award and $1.3 million as an additional payment to the VEBA, according to the settlement agreement.

If FreightCar fails to make those payments before Feb. 16, 2016, interest on the unpaid amounts will accrue at 5 percent per year, with interest capped at $250,000. Under the settlement, the Plaintiffs will fully and finally release all claims against FreightCar related to the instant litigation, or the trio of cases known as the Deemer, Britt and Sowers lawsuits that included similar allegations.

A group of retirees sued the rail manufacturer in a Pennsylvania federal court in 2013, alleging that the company breached a collective bargaining agreement by cutting off their pension health benefits. Five named Plaintiffs and the union contended that the company’s unilateral decision to end the benefits violated the Labor Management Relations Act and the Employee Retirement Income Security Act.

According to the complaint, the class members – who built railroad cars in Johnstown, Penn. – negotiated the benefits through their union with several predecessors to FreightCar America; which were Bethlehem Steel Corp., (which owned the facility until 1991); and then Johnstown America Industries, (which owned the facility until 1999); followed by Johnstown America Corp., (which became known to the public as FreightCar America in 2004). The facility ceased production in 2008.

In 2002, Johnstown America announced that it intended to unilaterally eliminate the retiree health and life insurance benefits of about 250 retirees and spouses, which caused the litigation to begin. The Plaintiffs are represented by William T. Payne, Pamina Ewing and Joel R. Hurt of Feinstein Doyle Payne & Kravec LLC, and Joseph P. Stuligross, associate general counsel for the United Steelworkers. The case is in the U.S. District Court for the Western District of Pennsylvania.


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