Honeywell 2014 Annual Report Download - page 74

District of Michigan alleging that the MCBAs do not provide for CAPS on the Company’s liability for
healthcare coverage. The New Jersey action was dismissed and Honeywell subsequently answered
the UAW’s complaint in Michigan and asserted counterclaims for fraudulent inducement, negligent
misrepresentation and breach of implied warranty. The UAW filed a motion to dismiss these
counterclaims. The court dismissed Honeywell’s fraudulent inducement and negligent misrepresenta-
tion claims, but let stand the claim for breach of implied warranty. In the second quarter of 2014, the
parties agreed to stay the proceedings with respect to those retirees who retired before the initial
inclusions of the CAPS in the 2003 MCBA until the Supreme Court decided the M&G Polymers USA,
LLC v. Tackett case. In the Tackett case, the Supreme Court had to resolve a split between the U.S.
Court of Appeals for the Sixth Circuit, on the one hand, and the majority of other U.S. Court of Appeals,
on the other hand, as to whether retiree health insurance benefits provided in collective bargaining
agreements carry an inference that they are vested or guaranteed to continue for life where the
agreement is silent as to their duration. In a ruling on January 26, 2015, the Supreme Court held that
no such inference of vesting is appropriate, substantially bolstering Honeywell’s position in this
litigation. Honeywell is confident that the CAPS will be upheld and that its liability for healthcare
coverage premiums with respect to the putative class will be limited as negotiated and expressly set
forth in the applicable MCBAs. In the event of an adverse ruling, however, Honeywell’s other
postretirement benefits for pre-2003 retirees would increase by approximately $180 million, reflecting
the estimated value of these CAPS.
In December 2013, the UAW and certain of the plaintiffs filed a motion for partial summary
judgment with respect to those retirees who retired after the initial inclusion of the CAPS in the 2003
MCBA. The UAW sought a ruling that the 2003 MCBA did not limit Honeywell’s obligation to contribute
to healthcare coverage for the post-2003 retirees. That motion remains pending. Honeywell is confident
that the Court will find that the 2003 MCBA does, in fact, limit Honeywell’s retiree healthcare obligation
for post-2003 retirees. In the event of an adverse ruling, however, Honeywell’s other postretirement
benefits for post-2003 retirees would increase by approximately $120 million, reflecting the estimated
value of these CAPS.
Joint Strike Fighter Investigation—In 2013 the Company received subpoenas from the
Department of Justice requesting information relating primarily to parts manufactured in the
United Kingdom and China used in the F-35 fighter jet. The Company is cooperating fully with the
investigation. While we believe that Honeywell has complied with all relevant U.S. laws and regulations
regarding the manufacture of these sensors, it is not possible to predict the outcome of the
investigation or what action, if any, may result from it.
Given the uncertainty inherent in litigation and investigations (including the specific matters
referenced above), we do not believe it is possible to develop estimates of reasonably possible loss in
excess of current accruals for these matters (other than as specifically set forth above). Considering
our past experience and existing accruals, we do not expect the outcome of these matters, either
individually or in the aggregate, to have a material adverse effect on our consolidated financial position.
Because most contingencies are resolved over long periods of time, potential liabilities are subject to
change due to new developments, changes in settlement strategy or the impact of evidentiary
requirements, which could cause us to pay damage awards or settlements (or become subject to
equitable remedies) that could have a material adverse effect on our results of operations or operating
cash flows in the periods recognized or paid.
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HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)