* Parties agree cash payout provides certainty
* Dispute over rescinding of lifetime health benefits
* More than 9,300 retirees affected
(Adds background, details of settlement, byline)
By Jonathan Stempel
NEW YORK, May 17 Volvo AB (VOLVb.ST) has agreed
to pay $525 million to settle a class-action lawsuit by more
than 9,300 retirees, who accused its Mack Trucks Inc unit of
illegally reducing their lifetime health benefits.
U.S. District Judge R. Barclay Surrick granted preliminary
approval of the settlement on May 12, a filing with the U.S.
District Court in Philadelphia showed.
Under the settlement, the $525 million would be paid in
five annual installments into a trust to fund a new health care
plan, court papers showed.
Surrick scheduled a Sept. 7 hearing for a final
determination on whether the accord was fair and reasonable.
The dispute concerned whether Mack, which had been having
financial difficulties, could alter or rescind lifetime
benefits it had agreed to provide through collective bargaining
with the retirees' union, the UAW. Mack was bought by Swedish
company Volvo in 2001.
While the agreed-upon changes reduce medical coverage,
lawyers for the retirees, the UAW and Mack said in a joint
court filing that they provide "reliable" and "substantial"
benefits by reducing uncertainty about the availability of
In his ruling, Surrick said the settlement avoided
potential litigation concerning the "difficult and unsettled
issue" under federal labor law over whether the benefits had
He also said the settlement secured an up-front payment
that was guaranteed by Volvo, and neither dependent on Mack's
future performance nor subject to claims by its creditors.
"The proposed settlement provides the retirees with
significant lifetime medical benefits," and "falls well within
the range of reasonableness," Surrick wrote.
Lawyers for the retirees and Mack did not immediately
return requests for a comment.
The case combined lawsuits filed in federal courts in
Michigan and Pennsylvania. Mack has an assembly plant outside
Allentown, Pennsylvania, according to its website.
The case is Rachilla et al v. Mack Trucks Inc et al, U.S.
District Court, Eastern District of Pennsylvania, No.
(Reporting by Jonathan Stempel)