Reese et al v. CNH America, L. L. C.
Filing
445
OPINION AND ORDER finding as moot 419 Motion for Summary Judgment; finding as moot 423 Motion for Summary Judgment; finding as moot 428 Motion to Strike; finding as moot 438 Motion for Summary Judgment; granting 439 Motion for Summary Judgment. Signed by District Judge Patrick J. Duggan. (MOre)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
JACK REESE, et al.,
Plaintiffs,
Civil Action No.
04-CV-70592
vs.
Honorable Patrick J. Duggan
CNH INDUSTRIAL N.V., et al.,
Defendants.
____________________________/
OPINION AND ORDER GRANTING DEFENDANTS’ LATER-FILED
MOTION FOR SUMMARY JUDGMENT (ECF NO. 439) AND DENYING
ALL OTHER PENDING MOTIONS AS MOOT (ECF NOS. 419, 423 & 428)
I. INTRODUCTION
This matter is before the Court on remand, for a second time, from the
United States Court of Appeals for the Sixth Circuit. In August 2007, the Court
granted summary judgment to Plaintiffs on their claim that they are entitled to
irreducible retiree healthcare benefits from Defendants that survive the expiration
of the pertinent collective bargaining agreement (“CBA”), which expired in 2004.
See Reese v. CNH Global N.V., No. 04-CV-70592, 2007 WL 2484989 (E.D. Mich.
Aug. 29, 2007). The Sixth Circuit affirmed the Court’s holding that Plaintiffs are
entitled to some healthcare benefits that survive the expiration of the CBA, holding
that Defendants may not terminate all healthcare benefits for retirees, but
determined that the scope of the benefits can be reasonably altered. The Reese I
panel remanded the action to this Court to determine how and in what
circumstances benefits may be altered. See Reese v. CNH Am. LLC, 574 F.3d 315
(6th Cir. 2009) (“Reese I”).
On remand, this Court again granted summary judgment to Plaintiffs,
concluding that Defendants could not unilaterally change the level of retiree
benefits. See Reese v. CNH Global N.V., No. 04-CV-70592, 2011 WL 824585
(E.D. Mich. Mar. 3, 2011). Defendants once again appealed and the Sixth Circuit
reversed, holding that Defendants can unilaterally reduce retiree benefits as long as
the changes are reasonable. See Reese v. CNH Am. LLC, 694 F.3d 681 (6th Cir.
2012) (“Reese II”). The Sixth Circuit remanded for a determination whether the
changes proposed by Defendants satisfy the reasonableness criteria that the panel
articulated in Reese II.
Back in this Court for the third time, the parties filed cross-motions for
summary judgment addressing the reasonableness of Defendants’ proposed
changes (ECF Nos. 419 & 423). Plaintiffs argue that the proposed changes are
unreasonable; Defendants argue the opposite. In addition, Plaintiffs filed a motion
to strike the declarations of two defense experts (ECF No. 428), which were
submitted in support of Defendants’ motion for summary judgment. The Court
held oral argument on these motions on February 3, 2015.
2
Three weeks after oral argument, Defendants filed a second motion for
summary judgment, arguing that Plaintiffs are not entitled to any healthcare
benefits lasting beyond the expiration of the CBA in light of the United States
Supreme Court’s decision in M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926
(2015), which was issued earlier this year during the pendency of these second
remand proceedings. Defendants contend that the conclusion of this Court and the
Sixth Circuit that Defendants may not terminate retiree healthcare benefits is no
longer viable in light of Tackett.
Defendants’ second summary judgment motion is fully briefed and the Court
will dispense with oral argument. See E.D. Mich. LR 7.1(f)(2). For the reasons
that follow, the Court agrees with Defendants that the previous determination that
Plaintiffs are entitled to healthcare benefits lasting beyond the expiration of the
CBA is no longer correct in light of Tackett. Constrained by the Supreme Court’s
decision, the Court has no choice but to grant Defendants’ second summary
judgment motion. Because Plaintiffs’ retiree healthcare benefits do not survive the
expiration of the CBA in light of Tackett, the Court does not consider whether
Defendants’ proposed changes to those benefits are reasonable, as that issue is now
moot. Accordingly, the Court will deny as moot the parties’ cross-motions for
summary judgment and Plaintiffs’ motion to strike.
II. BACKGROUND
3
A. Factual
The factual background of this case is well-known to the parties and the
Court and is not repeated here. The reader is directed to the citations contained in
the opening two paragraphs of this Opinion and Order for a detailed recitation of
the facts.
B. Procedural
This case was filed in February 2004, almost twelve years ago. In August
2007, this Court granted summary judgment in favor of Plaintiffs, holding that they
are entitled to irreducible lifetime healthcare benefits under the terms of the CBA
in effect at the time of their retirement (“1998 CBA”).1
1
The Court avoids the use of the word “vested” in this Opinion and Order because
the precise meaning of that word is unclear in light of the Sixth Circuit’s decisions
in Reese. Prior to those decisions, “vested” benefits referred to benefits that last
forever at a fixed level. See, e.g., Allied Chem. & Alkali Workers of Am. v.
Pittsburgh Plate Glass Co., 404 U.S. 157, 181 n.20, 92 S. Ct. 383, 398 n.20 (1971)
(“Under established contract principles, vested retirement rights may not be altered
without the pensioner’s consent. The retiree, moreover, would have a federal
remedy under § 301 of the Labor Management Relations Act for breach of contract
if his benefits were unilaterally changed.”); Moore v. Menasha Corp., 690 F.3d
444, 450 (6th Cir. 2012) (“An employer that contractually obligates itself to
provide vested healthcare benefits renders that promise ‘forever unalterable.’”);
Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 578 (6th Cir. 2006) (“If a
welfare benefit has vested, the employer’s unilateral modification or reduction of
those benefits constitutes a LMRA violation.”); Int’l Union v. Loral Corp., 107
F.3d 11 (Table), 1997 WL 49077, at *2 (6th Cir. Feb. 3, 1997) (unpublished) (“The
primary question . . . is whether the parties to the relevant agreements intended the
benefits to ‘vest,’ i.e., to remain at the same level for the lifetime of the
beneficiary.”). However, the Reese panels appear to have changed the definition of
“vested” inasmuch as they use that word to describe benefits that, while lasting for
4
On appeal, a panel of the Sixth Circuit consisting of Judges Sutton, Gibbons,
and Ryan affirmed this Court’s holding that Plaintiffs are entitled to lifetime
healthcare benefits under the 1998 CBA. However, the panel raised an issue that
was not addressed by the parties, that being: “What does vesting mean” in the
context of this case? Reese I, 574 F.3d at 321. The panel determined that, while
the CBA is properly interpreted to prohibit the altogether elimination of retiree
healthcare benefits, there is nothing in the CBA evincing a promise to forever
maintain lifetime benefits at the same level. Because the panel found nothing in
the CBA preventing Defendants from altering benefits, so long as they did not
entirely eliminate them, it looked to other evidence to determine whether the
parties intended the level of benefits to remain the same forever.2
life, are subject to unilateral reduction. See Reese I, 574 F.3d at 321-22, 324;
Reese II, 694 F.3d at 683-84. Rather than use a word with an uncertain or
imprecise meaning, the Court uses other words (e.g., “lifetime,” “forever,” “for
life,” “irreducible,” “at the same level,” etc.) to describe the duration and scope of
retiree benefits.
2
A panel of the Sixth Circuit previously rejected the notion that an employer may
unilaterally reduce lifetime healthcare benefits unless there is an agreement
allowing such unilateral action. See Loral Corp., 1997 WL 49077, at *3 (“[I]f the
employer retained discretion to cut [healthcare] benefits somewhat, there is nothing
to give us a standard by which to distinguish a 1% cut from a 99% cut that would
be virtually equivalent to a complete revocation. It might well be sensible for
parties to agree to allow the employer to retain some flexibility to deal with future
vicissitudes, but such an arrangement must be agreed to in the contract. It cannot
be imposed unilaterally by the employer or the courts.”).
5
Examining other evidence, the panel concluded that the parties did not view
the promised benefits as forever unalterable. To reach that conclusion, the panel
relied principally on one special fact or “historical feature” of this case.
Specifically, the panel found that the 1998 CBA modified the healthcare benefits
available to prior retirees who retired under earlier CBAs, without the consent of
the prior retirees and in a manner that disadvantaged the prior retirees. In light of
this factual finding, the panel concluded that it must have been the understanding
of the parties that the 1998 CBA, which included the same language as the earlier
CBAs, created lifetime healthcare benefits that could be unilaterally reduced
without the consent of the retirees. Crucial to the panel’s conclusion that the
parties viewed the benefits as subject to possible future unilateral reduction was the
panel’s determination that the benefits of prior retirees had been unilaterally
reduced in the past; the panel acknowledged that, had the benefits been improved
in the past without the consent of the prior retirees, “[t]hat sort of change would
not break any promises to provide irreducible benefits for life.” Reese I, 574 F.3d
at 325. Critically, however, this Court never made the crucial factual finding that
benefits had been reduced in the past. Rather, that factual determination was made
in the first instance by the Reese I panel – a clear encroachment on the factfinding
function of this Court. See Pullman-Standard v. Swint, 456 U.S. 273, 291-92, 102
S. Ct. 1781, 1791-92 (1982) (“[F]actfinding is the basic responsibility of district
6
courts, rather than appellate courts, and . . . the Court of Appeals should not have
resolved in the first instance [a] factual dispute which had not been considered by
the District Court.” (internal quotation marks and citation omitted)).
Based in large part on the “historical feature” discussed above, the Reese I
panel concluded that “CNH . . . cannot terminate all health-care benefits for
retirees, but it may reasonably alter them.” 574 F.3d at 327. In particular, the
panel held that the 1998 CBA “permit[s] modifications . . . that are ‘reasonably
commensurate’ with the benefits provided in the 1998 CBA, ‘reasonable in light of
changes in health care’ and roughly consistent with the kinds of benefits provided
to current employees.” Id. at 326 (quoting Zielinski v. Pabst Brewing Co., 463
F.3d 615, 619, 620 (7th Cir. 2006)). The panel then remanded the matter “to
decide how and in what circumstances CNH may alter such benefits – and to
decide whether it is a matter amenable to judgment as a matter of law or not.” Id.
at 327.
In this Court’s view, the panel sent conflicting messages regarding one
aspect of its decision. Relying on its own factfinding – principally, the finding that
prior retiree benefits had been downgraded in the past without the consent of the
prior retirees – the panel seemingly concluded that the 1998 CBA permitted
unilateral reductions to retiree healthcare benefits.
However, Judge Sutton’s
concurrence to the panel’s order denying Plaintiffs’ motion for rehearing
7
significantly confused matters.3 Using language suggesting an intent to speak on
behalf of the panel and offering insight into what the panel envisioned during the
remand proceedings, Judge Sutton wrote:
Plaintiffs also protest our assessment of the factual record arguing that
the prior retirees approved the changes to their benefits or at the least
that they helped them overall. But this argument overlooks the
posture of this case – summary judgment – in which the inferences
run in favor of the party that lost below: CNH. On remand, the parties
are free to develop evidence on this point. That evidence may show
that plaintiffs should win as a matter of law because the prior retirees
either approved the changes or they did not diminish the nature of the
benefits package that existed upon retirement. Or it may show that
CNH should be allowed to make reasonable modifications to the
health-care benefits of retirees, consistent with the way the parties
have interpreted and implemented prior CBAs containing similar
language.
Reese v. CNH Am. LLC, 583 F.3d 955, 956 (6th Cir. 2009) (Sutton, J.,
concurring).4 The parties and this Court were, therefore, given permission to
“develop the evidence” on whether “the prior retirees . . . approved the changes”
and on whether the previous modifications “diminished the nature of the [prior
3
Following Reese I, Plaintiffs filed a motion for rehearing, arguing that the panel
decided an issue that was not raised by the parties (i.e., “What does vesting mean”
in the context of this case?) and misconstrued the record, reaching factual
conclusions that were crucial to the panel’s holding but that were unsupported by
the record.
4
On remand, this Court addressed whether it could consider Judge Sutton’s
concurrence to clarify the panel’s decision, even though the other two judges on
the panel did not formally join it. Ultimately, the Court concluded that it could and
should consider the concurrence in light of the fact that Judge Sutton authored the
opinion for the unanimous panel in Reese I. See 2011 WL 824585, at *7.
8
retirees’] benefits package” – the special fact on which the panel relied to reach the
conclusion that this case is not subject to the usual rule that lifetime healthcare
benefits are unalterable.
In other words, the parties were given express
authorization to submit evidence on remand negating the reasoning underlying the
panel’s conclusion that lifetime healthcare benefits could be unilaterally reduced, a
conclusion that Judge Sutton indicated the panel reached as a result of an inference
applied in favor of Defendants – an inference that he said could be overcome
through the submission of evidence on remand.
In sum, the concurrence
demonstrates unequivocally that this Court was free on remand to conclude that
Defendants could not unilaterally modify the benefits, provided that the evidence
offered during the remand proceedings supported the conclusion that the special
inferred fact on which the panel relied to reach a contrary conclusion was not, in
fact, true.
On remand, this Court considered the evidence contemplated in the
concurrence and reached the conclusion that Defendants could not unilaterally
reduce the healthcare benefits conferred to Plaintiffs under the 1998 CBA. In so
holding, the Court concluded that the previous modifications, which were reached
through the bargaining process, were not disadvantageous to the prior retirees. See
Reese, 2011 WL 824585, at *8-9. Again, the concurrence authorized the parties to
submit evidence on this issue, noting that “[the] evidence may show that plaintiffs
9
should win as a matter of law” if it is proven on remand that “the changes . . . did
not diminish the nature of the benefits package that existed upon retirement.”
Reese, 583 F.3d at 956 (Sutton, J., concurring). Having concluded that the changes
did not diminish the nature of the benefits package that existed upon retirement,
this Court – following the path paved by the guiding words of the concurrence –
held that Plaintiffs should prevail as a matter of law.
Defendants appealed again, resulting in another Sixth Circuit decision –
Reese II. Writing on behalf of himself and Judge Gibbons, Judge Sutton faulted
this Court by stating that it “misread” Reese I and “disregarded [its] holding that
the company may make reasonable modifications to the plaintiffs’ healthcare
benefits,” Reese II, 694 F.3d at 685, without mentioning his opinion concurring in
the decision to deny a panel rehearing. The panel also adhered to its previous
factual finding, made in the first instance by a panel of appellate judges in Reese I,
that the healthcare benefits of the prior retirees had been reduced in the past.
Shockingly, the panel did not address this Court’s conclusion on remand – a
conclusion that Judge Sutton contemplated in his concurrence – that the past
changes were not a reduction of the prior retirees’ benefit package.
Judge Donald dissented. In her dissent, Judge Donald pointed out the errors
made by the majority and expressed her belief that Reese I should be overruled and
judgment entered in favor of Plaintiffs because “CNH may [not] unilaterally
10
modify the scope of Plaintiffs’ retirement health benefits under the 1998 CBA.”
Reese II, 694 F.3d at 691 (Donald, J., dissenting).
The Reese II panel instructed this Court as follows regarding its task on
remand – a task that the panel described as a “vexing one,” Reese II, 694 F.3d at
686:
To gauge whether CNH has proposed reasonable modifications to its
healthcare benefits for retirees, the district court should consider
whether the new plan provides benefits “reasonably commensurate”
with the old plan, whether the changes are “reasonable in light of
changes in health care” (including access to new medical procedures
and prescriptions) and whether the benefits are “roughly consistent
with the kinds of benefits provided to current employees.” Reese I,
574 F.3d at 326. In doing so, the district court should take evidence
on the following questions (and others it considers relevant to the
reasonableness question):
[1] What is the average annual total out-of-pocket cost to retirees
for their healthcare under the old plan (the 1998 Group Benefit
Plan)? What is the equivalent figure for the new plan (the 2005
Group Benefit Plan)?
[2] What is the average per-beneficiary cost to CNH under the old
plan? What is the equivalent figure for the new plan?
[3] What premiums, deductibles and copayments must retirees pay
under the old plan? What about under the new plan?
[4] How fast are the retirees’ out-of-pocket costs likely to grow
under the old plan? What about under the new plan? How fast are
CNH’s per-beneficiary costs likely to grow under each?
[5] What difference (if any) is there between the quality of care
available under the old and new plans?
11
[6] What difference (if any) is there between the new plan and the
plans CNH makes available to current employees and people
retiring today?
[7] How does the new plan compare to plans available to retirees
and workers at companies similar to CNH and with
demographically similar employees?
Id. at 685-86.
Following the second remand, Defendants submitted a proposed new plan
and the parties engaged in discovery relating to the seven considerations listed
above. In April 2014, after the conclusion of discovery, the parties filed crossmotions for summary judgment. In addition, Plaintiffs filed a motion to strike the
declarations of two defense experts.
Shortly before the Court heard oral argument on the parties’ cross-motions
for summary judgment, the Supreme Court issued its decision in Tackett, a case
that was on appeal from the Sixth Circuit. In that case, the Court held “that courts
must apply ordinary contract principles, shorn of presumptions, to determine
whether retiree health-care benefits survive the expiration of a collectivebargaining agreement.”
135 S. Ct. at 937 (Ginsburg, J., concurring).
In so
holding, the Court abrogated the line of cases in the Sixth Circuit, beginning with
International Union v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), that applied
presumptions or inferences in favor of the conclusion that retiree benefits were
12
intended to survive the expiration of the CBA in situations where the duration of
retiree benefits was not explicitly specified in the CBA.
Following the Supreme Court’s decision in Tackett, Defendants filed a
second motion for summary judgment. In their motion, Defendants argue that the
reasons underlying the conclusion of this Court and the Sixth Circuit that Plaintiffs
are entitled to lifetime healthcare benefits are no longer viable after Tackett.
According to Defendants, Tackett mandates a conclusion that the healthcare
benefits promised to Plaintiff do not survive the expiration of the CBA. Plaintiffs
disagree, arguing that the reasoning employed by this Court and the Sixth Circuit
to conclude that retiree healthcare benefits were intended to last forever is
consistent with the rules of contract interpretation set forth in Tackett.
The question at issue in Defendants’ second summary judgment motion –
whether the conclusion that retirees are entitled to lifetime healthcare benefits
remains correct after Tackett – is a threshold one. If Defendants are correct that
benefits do not survive the expiration of the CBA, then the Court need not decide
the issue that is the subject of the parties’ earlier-filed cross-motions for summary
judgment – whether the changes proposed by Defendants to Plaintiffs’ healthcare
benefits are reasonable under the standard articulated by the Sixth Circuit in Reese
II. The Court now addresses Tackett’s impact on this Court’s earlier determination
that Plaintiffs are entitled to healthcare benefits for life.
13
III. DEFENDANTS’ SECOND MOTION FOR SUMMARY JUDGMENT:
TACKETT’S IMPACT ON THIS CASE
A. The Parties’ Arguments
As discussed, the issue raised in Defendants’ second motion for summary
judgment is whether the Supreme Court’s recent decision in Tackett impacts this
Court’s earlier conclusion that Plaintiffs are entitled to healthcare benefits for life.
On the one hand, Defendants argue that Tackett mandates the conclusion that
retiree healthcare benefits do not survive the expiration of the CBA because the
Court’s contrary conclusion rested on the legal principles grounded in Yard-Man
that were abrogated by Tackett. On the other hand, Plaintiffs contend that Tackett
does not impact the Court’s conclusion that Plaintiffs are entitled to lifetime
benefits because, in reaching that conclusion, this Court relied on only the aspects
of the Yard-Man framework that remain viable after Tackett. For the reasons that
follow, the Court believes that Defendants’ argument is the more persuasive one.
B. The Tackett Decision
Tackett addressed how courts should determine how long retirees are
entitled to healthcare benefits when the applicable CBA confers such benefits but
does not explicitly specify their duration. The CBA in Tackett provided that
retirees of a certain age and with a certain level of seniority “will receive”
contribution-free benefits, but did not explicitly specify the duration of those
benefits. After the expiration of the CBA, the employer began requiring retirees to
14
contribute toward the cost of their health insurance. The retirees sued, alleging that
they had a right to free benefits that continued beyond the expiration of the CBA –
forever. The employer argued that it was only obligated to provide free benefits
during the life of the CBA, but not after its expiration.
Applying the Yard-Man framework, discussed below, the Sixth Circuit ruled
in favor of the retirees, concluding that they had a right to lifetime benefits. The
Supreme Court, however, vacated the Sixth Circuit’s judgment, holding that
certain aspects of the legal framework used by the Sixth Circuit to interpret the
CBA, derived from Yard-Man and its progeny, are inconsistent with ordinary
principles of contract interpretation.
The aspect of the Yard-Man framework that was most heavily criticized in
Tackett is the application of inferences or presumptions in favor of the conclusion
that parties intended to create lifetime benefits. Under the Yard-Man framework, if
a CBA is silent regarding the duration of benefits, courts could infer that the parties
intended them to last for life based on the “context” of labor-management
negotiations, see Yard-Man, 716 F.2d at 1482 (“[E]xamination of the context in
which these [retiree] benefits arose demonstrates the likelihood that continuing
insurance benefits for retirees were intended.”), and the general “nature” of retiree
benefits, see id. (“[R]etiree benefits are in a sense ‘status’ benefits which, as such,
carry with them an inference that they continue so long as the prerequisite status is
15
maintained.”). The Supreme Court concluded that these inferences conflict with
ordinary principles of contract interpretation by “placing a thumb on the scale in
favor of vesting retiree benefits in all collective-bargaining agreements.” Tackett,
135 S. Ct. at 935.
In addition to these inferences, Tackett faulted the Sixth Circuit’s
unwillingness to apply general durational clauses, CBA provisions specifying the
expiration date of the CBA, to retiree benefits. In Yard-Man, the Sixth Circuit
concluded that the inferences discussed in the preceding paragraph “outweigh any
contrary implications derived from a routine duration clause terminating the
agreement generally,” Yard-Man, 716 F.2d at 1482-83, and, in a subsequent case,
held that “a general durational clause says nothing about the vesting of retiree
benefits.” Noe v. PolyOne Corp., 520 F.3d 548, 555 (6th Cir. 2008). Tackett held
that the Sixth Circuit’s approach – refusing to apply general durational clauses to
retiree benefits conferred in the contract, instead requiring a contract to include a
specific durational clause mentioning retiree benefits to prevent vesting –
“distort[s] the text of the agreement and conflict[s] with the principle of contract
law that the written agreement is presumed to encompass the whole agreement of
the parties.” 135 S. Ct. at 936.
Tackett further criticized Yard-Man and its progeny for ignoring “the
traditional principle that courts should not construe ambiguous writings to create
16
lifetime promises” and for “fail[ing] to consider the traditional principle that
‘contractual obligations will cease, in the ordinary course, upon termination of the
bargaining agreement.’” 135 S. Ct. at 936-37 (quoting Litton Fin. Printing Div. v.
Nat’l Labor Relations Bd., 501 U.S. 190, 207, 111 S. Ct. 2215, 2226 (1991)). The
Court approved the Sixth Circuit’s holding that “‘traditional rules of contractual
interpretation require a clear manifestation of intent before conferring a benefit or
obligation,’” but faulted the Sixth Circuit for concluding that “‘the duration of the
benefit once clearly conferred is [not] subject to this stricture.’” Id. (quoting YardMan, 716 F.2d at 1481 n.2). According to the Supreme Court, the rule that
contract obligations normally cease upon expiration of the contract “does not
preclude the conclusion that the parties intended to vest lifetime benefits for
retirees,” but “a court may not infer that the parties intended benefits to vest for
life” “when a contract is silent as to the duration of [those] benefits.” Id. at 937. In
other words, for a court to conclude that the parties intended to confer lifetime
benefits for retirees, it must find both that the parties intended to confer retiree
benefits, as well as a clear manifestation of intent from the contract language that
they intended to confer them for life; courts may not infer that the parties intended
to confer lifetime benefits based simply on the fact that retiree benefits were
conferred.
17
Tackett concluded that the impermissible aspects of the Yard-Man
framework, discussed above, affected the outcome of the case because the Sixth
Circuit relied on the context of labor-management negotiations and the nature of
retiree benefits to reach the conclusion that the parties intended to create lifetime
benefits. See id. Because the Sixth Circuit “framed its analysis from beginning to
end in light of the principles it announced in Yard-Man and its progeny,” the Court
remanded the matter to the Sixth Circuit “to apply ordinary principles of contract
law in the first instance.” Id.
In sum, Tackett changed the rules governing the analysis of whether parties
intended to create lifetime retiree benefits in the following ways:
Courts may no longer infer that the parties intended to confer lifetime
benefits based on the context of labor-management negotiations.
Courts may no longer infer that the parties intended to confer lifetime
benefits based on the nature of retiree benefits.
Courts may no longer categorically refuse to apply general durational
clauses to retiree benefits.
Courts should give effect to the traditional contract principle that contractual
obligations will cease, in the ordinary course, upon termination of the
bargaining agreement.
Courts should give effect to the traditional contract principle that ambiguous
writings should not be construed to create lifetime benefits.
To conclude that the parties intended to confer lifetime benefits, there must
be a clear manifestation of intent, grounded in the contractual language, to
confer lifetime benefits.
18
C. Application of Tackett
The rationale underlying this Court’s prior determination that Plaintiffs are
entitled to lifetime healthcare benefits is consistent with the rules of interpretation
pronounced in Tackett in some respects, but inconsistent with those rules in other
respects. The Court addressed whether Plaintiffs are entitled to lifetime benefits in
its decision dated August 29, 2007. See Reese, 2007 WL 2484989, at *5-9. In
determining that the parties intended to confer lifetime benefits, the Court relied in
large part on its decision in Yolton v. El Paso Tennessee Pipeline Co., 318 F. Supp.
2d 455 (E.D. Mich. 2003), aff’d, 435 F.3d 571 (6th Cir. 2006), a companion case
over which this Court presided involving similar claims and a CBA that is nearly
identical to the one at issue in the present case. See Reese, 2007 WL 2484989, at
*6 (“The defendants in Yolton raised the same arguments to support their claim
that the [parties] did not intend retiree health insurance benefits to vest that CNH
presents now. For the same reason this Court rejected those arguments in Yolton, it
rejects them in this case.”).5 In both Yolton and the present case, the Court did not
infer that the parties intended to create lifetime benefits based on the context of
labor-management negotiations or the nature of retiree benefits. In fact, on review
5
Because the Court was tasked in Yolton with resolving a motion for preliminary
injunction, the relevant legal question there involved the retirees’ likelihood of
success on the merits as opposed to their actual success on the merits.
19
of this Court’s decision in Yolton, the Sixth Circuit explicitly noted that this Court
did not apply those inferences:
[T]here is no indication that the district court applied either a
presumption or relied unnecessarily on the Yard-Man inference.
Citing Yard-Man, the district court correctly stated that “courts must
apply basic rules of contract interpretation to discern the intent of the
parties.” Yolton, 318 F. Supp. 2d at 465. The district court did
mention the inference and noted that Sixth Circuit case law has not
repudiated the Yard-Man language, but the court’s analysis does not
in any sense rely on an inference. Id. at 465-68. Instead, the district
court interpreted the language of the agreement and found evidence
that the defendants intended to confer lifetime benefits upon the
plaintiffs. Id. at 466.
Yolton, 435 F.3d at 580 (emphasis in original). Inasmuch as the Court did not
apply the impermissible inferences, the Court’s analysis is consistent with Tackett.
However, as explained, the repudiated aspects of the Yard-Man framework include
more than just the inferences related to the context of labor management relations
and nature of retiree benefits.
In concluding that the parties intended to confer lifetime benefits to the
retirees in Yolton and the present case, the Court relied heavily on contract
language tying eligibility for contribution-free healthcare benefits to eligibility for
pension benefits. Because pension benefits are presumed to last for life, and
because eligibility for healthcare benefits is linked to eligibility for pension
benefits, the Court concluded that healthcare benefits, like pension benefits, were
intended to last for life. See Yolton, 318 F. Supp. 2d at 466; Reese, 2007 WL
20
2484989, at *6. However, for the reasons that follow, Tackett forecloses reliance
on this rationale.
Tackett referenced the tying rationale in the section of the decision
addressing how the impermissible aspects of the Yard-Man framework affected the
outcome of the case, observing that the Sixth Circuit below relied on contract
language “tying . . . eligibility for health care benefits to receipt of pension
benefits”:
There is no doubt that Yard-Man and its progeny affected the outcome
here. As in its previous decisions, the Court of Appeals here cited the
“context of . . . labor-management negotiations” and reasoned that the
Union likely would not have agreed to language ensuring its members
a “full Company contribution” if the company could change the level
of that contribution. It similarly concluded that the tying of eligibility
for health care benefits to receipt of pension benefits suggested an
intent to vest health care benefits. And it framed its analysis from
beginning to end in light of the principles it announced in Yard-Man
and its progeny.
135 S. Ct. at 937 (citations omitted). This reference to the tying rationale in the
Supreme Court’s discussion of how the impermissible aspects of the Yard-Man
framework affected the outcome of the case suggests, as Defendants argue, that the
Supreme Court deems the tying rationale to be one of the impermissible aspects of
the Yard-Man framework. Because the tying rationale was, in the words of the
Sixth Circuit, “[of] particular significance” to this Court in concluding that the
parties intended to confer lifetime healthcare benefits for retirees, Yolton, 435 F.3d
at 580, and because, according to Defendants, the tying rationale is no longer
21
sound after Tackett, Defendants argue that this Court’s decision that Plaintiffs are
entitled to lifetime benefits cannot stand.
Before proceeding further, the Court clarifies the precise nature of the tying
rationale that was criticized in Tackett. Tackett suggests that courts should not rely
on language “tying . . . eligibility for health care benefits to receipt of pension
benefits.” 135 S. Ct. at 937 (emphasis added). It does not suggest that courts
cannot rely on language tying the duration of retiree healthcare benefits to the
receipt of benefits. There is a difference. An example of the latter is contract
language providing that a retiree is entitled to contribution-free healthcare benefits
for as long as he or she is entitled to pension benefits. If it is settled that retirees
are entitled to pension benefits forever, then it would defy logic – and presumably
violate ordinary principles of contract interpretation – to hold that the parties did
not intend to confer healthcare benefits for life. Language like this speaks directly
to the duration of retiree benefits and there is nothing in Tackett suggesting that
courts cannot rely on such language.
The view that Tackett does not foreclose reliance on language tying the
duration of contribution-free healthcare benefits to the receipt of pension benefits
is shared by the four concurring Justices in Tackett. Joined by Justices Breyer,
Sotomayor, and Kagan, Justice Ginsburg observed in her concurrence: “Because
the retirees have a vested, lifetime right to a monthly pension, a provision stating
22
that retirees ‘will receive’ health-care benefits if they are ‘receiving a monthly
pension’ is relevant to [the vesting] examination,” and that she “understand[s] the
Court’s opinion to be consistent with” that approach. Id. at 938 (Ginsburg, J.,
concurring) (citations to the record omitted).
However, Tackett does suggest that courts should not rely on language tying
eligibility for contribution-free healthcare benefits to the receipt of pension
benefits. An example of such language is a provision providing that a retiree is
eligible for contribution-free healthcare benefits if he or she is receiving pension
benefits. This language arguably speaks to how retirees become eligible to start
receiving free healthcare benefits, not the amount of time they remain entitled to
those benefits. Because Tackett admonishes courts not to “construe ambiguous
writings to create lifetime promises,” 135 S. Ct. at 936, language tying mere
eligibility for contribution-free benefits to receipt of pension benefits, as opposed
to language tying the duration of contribution-free benefits to receipt of pension
benefits, no longer supports the conclusion that parties intended to create lifetime
benefits.
The pertinent contract language here ties eligibility for contribution-free
healthcare benefits to the receipt of pension benefits: “Employees who retire under
the Case Corporation Pension Plan for Hourly Paid Employees, or their surviving
spouses eligible to receive a spouse’s pension under the provisions of that Plan,
23
shall be eligible for” healthcare benefits, and “no contributions are required.” In
light of Tackett, this Court now interprets this provision as addressing how retirees
and their spouses become eligible to start receiving free healthcare benefits – i.e.,
retirees are “eligible” for free healthcare benefits if they “retire under” the
company’s pension plan, and surviving spouses are “eligible” for free healthcare
benefits if they are “eligible” to receive the deceased spouse’s pension – not the
amount of time retirees and their spouses remain entitled to those benefits.
Therefore, the tying language used here no longer supports the Court’s
determination that the parties intended to confer lifetime benefits.
The remainder of the reasons underlying the Court’s prior conclusion that
Plaintiffs are entitled to lifetime healthcare benefits are either not sufficient on
their own to support that conclusion or are no longer viable reasons under Tackett.
For example, the Court relied on the fact that the contract contained express
durational clauses for other categories of benefits but not for retiree healthcare
benefits. Relying on Yard-Man for the proposition that “the inclusion of specific
durational limitations in other provisions . . . suggests that retiree benefits, not so
specifically limited, were intended to survive,” 716 F.2d at 1481, this Court in
Yolton and the present case ascribed no weight to the general durational clauses
contained in the contracts and concluded that the absence of a durational clause
specifically governing retiree healthcare benefits suggested an intent to confer
24
lifetime benefits. Yolton, 318 F. Supp. 2d at 466-67; Reese, 2007 WL 2484989, at
*6. This reasoning, however, is not compatible with Tackett, which: (1) requires a
clear manifestation of intent showing that the parties intended to confer lifetime
benefits, see 135 S. Ct. at 936-37, (2) admonishes courts not to ignore general
durational clauses, see id. at 936, and (3) requires courts to “consider the
traditional contract principle that ‘contractual obligations will cease, in the
ordinary course, upon termination of the bargaining agreement.’”
Id. at 937
(quoting Litton, 501 U.S. at 207, 111 S. Ct. at 2226).
There is a disagreement among the parties whether “clear and express”
contract language is necessary under Tackett to show an intent to confer lifetime
benefits. On the one hand, Defendants contend that Tackett quoted with approval
language from a Sixth Circuit case stating that “‘the intent to vest must be found in
the plan documents and must be stated in clear and express language.’” Tackett,
135 S. Ct. at 937 (quoting Sprague v. Gen. Motors Corp., 133 F.3d 388, 400 (6th
Cir. 1998)).
Defendants also point to Tackett’s statement that “‘a collective-
bargaining agreement [may] provid[e] in explicit terms that certain benefits
continue after the agreement’s expiration.’” Id. (quoting Litton, 501 U.S. at 207;
111 S. Ct. at 2226). On the other hand, Plaintiffs emphasize the observation of the
concurring Justices that they “understand the Court’s opinion to be consistent”
with the principle that “no rule requires ‘clear and express’ language in order to
25
show that parties intended health-care benefits to vest.” Id. at 938 (Ginsburg, J.,
concurring).
Regardless of whether Tackett requires “clear and express” language to
show an intent to confer lifetime benefits, the Court believes, at a minimum, that a
court must find a clear manifestation of intent, evinced in the language of the
contract, before concluding that the parties intended to confer lifetime benefits.
See 135 S. Ct. at 936-37 (criticizing the Yard-Man principle that “a clear
manifestation of intent” is required to “confer[] a benefit or obligation” but not
required to discern “the duration of the benefit once clearly conferred”). Applying
the rules of interpretation articulated in Tackett, the Court does not find a clear
manifestation of intent to confer lifetime benefits in this case.
Finally, the Court rejects Plaintiffs’ argument that the “law of the case”
doctrine prevents the Court from revisiting its prior decision that the parties
intended to confer upon Plaintiffs lifetime healthcare. “Under this doctrine, a court
should not reopen issues decided in earlier stages of the same litigation.” Agostini
v. Felton, 521 U.S. 203, 236, 117 S. Ct. 1997, 2017 (1997). As Defendants
correctly point out, an exception to doctrine applies here. See id. (“Court of
Appeals erred in adhering to law of the case doctrine despite intervening Supreme
Court precedent”); Hanover Ins. Co. v. Am. Eng’g Co., 105 F.3d 306, 312 (6th Cir.
26
1997) (doctrine does not apply “where a subsequent contrary view of the law is
decided by the controlling authority”).6
For all these reasons, the Court concludes that its prior determination that the
parties intended to confer lifetime healthcare benefits is no longer viable in light of
the Supreme Court’s intervening decision in Tackett.
IV. CONCLUSION
For the reasons stated, Defendants’ later-filed motion for summary judgment
is GRANTED; all other pending motions are DENIED AS MOOT.
SO ORDERED.
Dated: September 28, 2015
s/PATRICK J. DUGGAN
UNITED STATES DISTRICT JUDGE
Copies to:
Counsel of Record
6
Plaintiffs also argue that the Court should defer ruling on Tackett’s impact on this
case pending the Sixth Circuit’s decision on remand in Tackett: “To the extent that
this Court has concerns over the impact of Tackett on the issue of vesting, this
Court should wait for guidance from the Sixth Circuit’s review of Tackett on
remand.” Pls.’ Resp. at 23 (ECF No. 441). However, Plaintiffs cite no authority
supporting this approach and the Court is aware of none.
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