Disney Sued in Benefits Dispute

Music man Al Francis marched Main Street for 25 years with Disneyland’s band--until playing sax while pounding the pavement literally loosened his teeth. In 1984 he went on disability.

While his pay as a band man was nothing to brag about, topping out at $506 a week, it supported his family of four. And Francis knew that if he stayed an employee in good standing for 20 years, Walt Disney Co. would provide him free medical insurance beginning at age 62. Or so he thought.

Now Francis, 72, is on the front lines of a legal war accusing Disney of reneging on that promise to 4,000 former and current employees.

The amounts are not huge. Francis, who lives alone in his Anaheim mobile home and has suffered a stroke, wrote a quarterly premium check Wednesday for $96.20. Most of the retirees pay $255 per quarter for themselves and their spouses.

But they believe they had a solemn promise that they would not have to pay for medical coverage in retirement.

And they grow angry when they consider Michael Ovitz, the former talent agent who spent 14 months as Disney’s president before departing with a “golden parachute” of $38 million in cash and far more than that in stock options.

“That’s what kills me,” Francis says. “They give a guy that was at the company a year $91 million, and they’re taking peanuts away from the laborer.”

Disney contends that fine print in contracts allowed it to begin charging retirees for medical coverage as it does current employees--a change brought on by rising costs.

“Medical costs were escalating at a huge rate,” said Tom Deegan, a corporate spokesman.

Many large companies have sought to modify retiree benefits in recent years because of those increases and costly changes in pension accounting rules. A series of legal rulings have made it easier for companies to make such changes, particularly when unions aren’t involved, said Stephen R. Bruce, author of “Pension Claims, Rights and Obligations.”

Advocates for retirees accuse corporations of exploiting the elderly.

“The bottom line is that employers cut retirees’ health benefits because they are trying to save money,” said Mary Ellen Signorille, a pension specialist with the American Assn. of Retired Persons. “And unlike your active employee, who could potentially leave your employ, retirees have nowhere else to go--they are a truly captive audience.”

But employees sometimes win. In another dispute over medical coverage for retirees, 23,000 workers and their spouses reached a February 1997 settlement with McDonnell Douglas Corp. that the employees’ lawyer, Kevin Roddy, estimated to be worth more than $400 million.

In Disney’s case, the company decided in 1994 that workers would have to wait until 65 to collect medical retirement benefits, instead of 62. The company began charging the retirees premiums for health insurance in 1995 unless they joined health maintenance organizations.

The dispute seemed to be resolved last November. Francis and six others filed a federal lawsuit over changes in the retirement benefits. But a tentative settlement was announced the same day that the suit was filed in U.S. District Court in Los Angeles.

Disney agreed to reduce health-coverage premiums by 90% for retirees on Medicare. Premiums for employees not on Medicare would have been reduced by 50%, said the employees’ lawyer, William T. Payne of Los Angeles. Under that agreement, for example, the premiums for many couples on Medicare would have fallen from about $1,000 a year to $100.

But that settlement fell apart days later, when lawyers for the workers said they learned that Disney officials were contending that they still could increase the cost of the retirees’ medical benefits in the future, Payne said.

“Even while both sides were putting out a press release saying everything was settled, we find out they’re back in Burbank changing the wording in their favor,” said Robert T. Carbines, a retired maintenance foreman who spent 32 years at Disneyland, keeping the Autopia rides on track.

Deegan, the Disney spokesman, said the employees had simply misunderstood the settlement terms.

The evidence in the case includes material given to Carbines and his wife when he decided to retire at age 62 in 1991. He said he had asked his supervisors whether he would have health coverage if he retired, “and the answer was always yes--we get the medical and there’s no premiums.”

Carbines and his wife attended a series of seminars designed to prepare them for retirement. The last one, on medical coverage, was accompanied by a chapter of a loose-leaf binder that included the following example about a hypothetical Disney worker:

“At age 62 she can receive her medical coverage for life at no cost, or she can purchase the medical insurance coverage until age 62 when she will receive free coverage,” it read.

“So I retired” at 62, Carbines said. “They gave me a party. And I thought like everyone else that this is what we want, this is great.”

Then came the 1995 letter saying he’d have to pay premiums or join an HMO. Carbine said he tried the HMO, but gave it up in disgust when his much-needed surgery to remove a gallstone was repeatedly delayed.

The federal lawsuit seeks class-action status to pursue damages for 4,000 workers, including about 1,600 current and former Disneyland employees, said Payne, the employees’ lawyer. Most of the others are Disney theme park workers in Orlando, Fla., and a few Disney employees in Burbank and Glendale.

Disney filed a motion to try to enforce the earlier settlement in March, but U.S. District Judge Terry J. Hatter denied it. Hatter also denied a Disney request to impose a gag order in the case.

Last month, Hatter took under submission the motion to certify the suit as a class action. He has yet to rule.