United Steelworkers of America, AFL-CIO-CLC v. Kelsey-Hayes Company et al

Filing 107

OPINION AND ORDER DENYING DEFENDANTS RENEWED MOTION FOR SUMMARY JUDGMENT 100 AND GRANTING PLAINTIFFS MOTION TO REAFFIRM PRIOR GRANT OF SUMMARY JUDGMENT AND PERMANENT INJUNCTION 101 . Signed by District Judge Gershwin A. Drain. (TBan)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
UNITED STEEL, PAPER AND FORESTRY,
RUBBER, MANUFACTURING, ENERGY,
ALLIED INDUSTRIAL AND SERVICE
WORKERS INTERNATIONAL UNION, ALFCIO-CLC; AND RONALD STRAIT AND
DANNY O. STEVENS, FOR THEMSELVES
AND OTHERS SIMILARLY SITUATED,
Case No. 4:11-CV-15497
Plaintiffs,
UNITED STATES DISTRICT COURT JUDGE
GERSHWIN A. DRAIN

v.
KELSEY-HAYES COMPANY; TRW
AUTOMOTIVE, INC.; AND TRW
AUTOMOTIVE HOLDINGS
CORPORATION,
Defendants.
/

OPINION AND ORDER DENYING DEFENDANTS’ RENEWED MOTION FOR SUMMARY
JUDGMENT [100] AND GRANTING PLAINTIFFS’ MOTION TO REAFFIRM PRIOR
GRANT OF SUMMARY JUDGMENT AND PERMANENT INJUNCTION [101]
I. INTRODUCTION
On December 15, 2011, Ronald Strait and Danny O. Stevens, along with
their union, United Steel, Paper and Forestry, Rubber, Manufacturing, Energy,
Allied Industrial and Service Workers International, AFL-CIO-CLC (collectively,
“Plaintiffs”), filed a case action suit against Kelsey-Hayes Company, TRW
Automotive, Inc., and TRW Automotive Holdings Corporation (collectively,
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“Defendants”), alleging breach of their collective bargaining agreement (CBA)
under Section 301 of the Labor-Management Relations Act (LMRA), 29 U.S.C.
§ 185, and a breach of the Employee Retirement Income Security Act (ERISA), 29
U.S.C. § 1001 et seq. Dkt. No. 1. On March 18, 2013, the Court granted class
certification. Dkt. No. 58.
The Court granted Plaintiffs’ Motion for Summary Judgment and denied
Defendants’ Motion for Summary Judgment on April 24, 2013. Dkt. No. 65. One
year later, the Sixth Circuit affirmed the Court’s judgment. Dkt. No. 90. On July
28, 2015, the Sixth Circuit vacated its opinion and remanded the case back to
district court for reconsideration in light of the Supreme Court’s decision in M & G
Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015). Dkt. No. 97.
This matter is before the Court on Defendants’ Renewed Motion for
Summary Judgment. Dkt. No. 100. Plaintiffs filed a Brief in Support of
Reaffirmation of Summary Judgment and Permanent Injunction. Dkt. No. 101.
These matters are fully briefed and the Court concludes that oral argument will not
aid in their resolution. Accordingly, pursuant to E.D. Mich. L.R. 7.1(f)(2), these
matters will be resolved on the briefs. For the reasons discussed below, the Court
will deny Defendants’ Motion and will reaffirm its prior award of summary
judgment to Plaintiffs.

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II. BACKGROUND
Plaintiffs Strait and Stevens represent a class of retirees who worked at the
Kelsey-Hayes manufacturing plant in Jackson, Michigan, which closed in July
2006. Dkt. No. 37, p. 10 (Pg. ID No. 1411). Jackson plant employees were parties
to a series of CBAs, the last of which was negotiated in 2003. Id. at 20 (Pg. ID No.
2182). The CBAs incorporated two supplements, Supplement C and Supplement
C-1, to govern the negotiated insurance benefits. Id. The Supplements were “made
part of [the CBAs] as if set out in full herein, subject to all provisions” of the
CBAs. 1995 CBA, Art. XVII (Pg. ID No. 198).
Defendants provided the promised insurance coverage to retirees before and
after the Jackson plant closed in 2006. Dkt. No. 39, p. 22 (Pg. ID No. 2184).
Employees eligible for retirement at the time the plant closed were given the
opportunity to accept a one-time cash payment, based on the individual’s age and
actuarial life expectancy, in return for permanently giving up the right to retirement
healthcare. Dkt. No. 101, pp. 18–19 (Pg. ID No .6440–41).
On September 14, 2011, TRW Automotive wrote to Jackson plant retirees to
announce a change in the health insurance program. Dkt. No. 39-18, p. 2 (Pg. ID
No. 2666). The letter stated that TRW would establish individual health
reimbursement accounts (HRAs), in place of the original retiree plan, effective
January 1, 2012. Id. at 2–3. Retirees would be required to purchase individual
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plans for Medicare supplemental insurance paid for, at least initially, by TRW’s
contributions to the HRAs. Id. at 3. TRW stated that it would provide a one-time
contribution of $15,000 to the HRAs for each eligible retiree and eligible spouse
for 2012 and $4,800 for 2013. Id. Under the new program, Defendants had sole
discretion to decide whether or not to contribute to the retirees’ HRAs as of 2014.
The September 2011 letter noted that “TRW’s contribution to the HRA will
be reviewed annually and is subject to change” and “TRW retains the right to
amend or terminate the HRA.” Id. TRW also provided retirees with a booklet,
entitled “2012 New Coverage New Choices,” that further addressed the change
from the retirees’ existing health insurance plans to HRAs. Dkt. No. 39-19. The
booklet states, in relevant part:
You are neither vested in your retiree healthcare benefits nor does
TRW Automotive intend to vest you in retiree healthcare benefits. To
the fullest extent permitted by law, TRW Automotive reserves the
right to amend, modify, suspend, replace or terminate any of its plans,
policies or programs (including the HRA), in whole or in part, at any
time and for any reason, by appropriate Company action. For
example, TRW Automotive may, at any time, increase, decrease or
eliminate the amount that is allocated to your HRA account each year.
Id. at 12 (Pg. ID No. 2680).
On January 1, 2012, Defendants discontinued group coverage insurance for
eligible retirees and spouses, age 65 and older, and replaced it with the HRA

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funding program. Dkt. No. 39, p. 23 (Pg. ID No. 2185). Under this program,
Plaintiffs worked with Extend Health1 to select the individual insurance plan from
selected carriers. Plaintiffs were to pay their premiums directly to the insurance
provider, and then submit their claims to Extend Health for reimbursement,
provided their HRAs contain sufficient funds. Id. at 24.
Plaintiffs alleged that the change to HRAs meant that retirees bore the
administrative and financial risks and responsibilities formerly borne by
Defendants. Id. at 6. Additionally, Plaintiffs contended that the HRA program
subjected them to time-consuming and frustrating administrative burdens, anxiety,
and uncertainty. Id. Plaintiffs asserted that the unilateral modification of healthcare
benefits was a breach of the 1995, 1999, and 2003 CBAs and a violation of federal
labor policy and ERISA.
III. LEGAL STANDARD
Federal Rule of Civil Procedure 56(c) “directs that summary judgment shall
be granted if ‘there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.’ ” Cehrs v. Ne. Ohio Alzheimer’s
1

Extend Health is a subsidiary of Towers Watson, the firm which advised
Defendants on the 2012 changes. Extend Health does not provide health benefits;
rather it is authorized by certain carriers to sell their insurance plans. Extend
Health receives commissions from the insurance carriers on every policy it sells to
the retirees.
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Research Ctr., 155 F.3d 775, 779 (6th Cir. 1998). The court must view the facts,
and draw reasonable inferences from those facts, in the light most favorable to the
non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). No
genuine dispute of material fact exists where the record “taken as a whole could
not lead a rational trier of fact to find for the non-moving party.” Matsushita Elec.
Indus., Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Ultimately, the court
evaluates “whether the evidence presents a sufficient disagreement to require
submission to a jury or whether it is so one-sided that one party must prevail as a
matter of law.” Anderson, 477 U.S. at 251–52.
IV. DISCUSSION
A. The Supreme Court’s Tackett Decision
There is a federal right of action for “violations of contracts between an
employer and a labor organization representing employees” under section 301 of
the LMRA. 29 U.S.C. § 185(a). A LMRA claim may also create a derivative
ERISA claim, where “the disputed healthcare benefits were agreed upon pursuant
to a union-negotiated contract.” Moore v. Menasha Corp., 690 F.3d 444, 450 (6th
Cir. 2012). The central issue in this Court’s reconsideration of the parties’ motions
for summary judgment, in light of Tackett, is whether the parties intended to vest
lifetime, fully-funded healthcare benefits for Plaintiff retirees and eligible spouses.

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The Supreme Court’s decision in Tackett did not set forth new rules for
interpreting collective bargaining agreements. Rather, Tackett ordered courts to
“interpret collective-bargaining agreements, including those establishing ERISA
plans, according to ordinary principles of contract law, at least when those
principles are not inconsistent with federal labor policy.” 135 S. Ct. at 933. In
doing so, the Supreme Court rejected the Yard-Man inference that, in close cases,
contract interpretation should favor vesting. Tackett, 135 S. Ct. at 935.
Accordingly, in line with Tackett, the Court will rely on the ordinary principles of
contract interpretation to determine whether the contracts in question created
vested rights.
In the concurring opinion in Tackett, Justice Ginsburg clarified how courts
were to apply ordinary contract principles:
Under the “cardinal principle” of contract interpretation, “the
intention of the parties, to be gathered from the whole instrument,
must prevail.” 11 R. Lord, Williston on Contracts § 30:2, p. 27 (4th
ed. 2012) (Williston). To determine what the contracting parties
intended, a court must examine the entire agreement in light of
relevant industry-specific “customs, practices, usages, and
terminology.” Id., § 30:4, at 55–58. When the intent of the parties is
unambiguously expressed in the contract, that expression controls, and
the court's inquiry should proceed no further. Id., § 30:6, at 98–104.
But when the contract is ambiguous, a court may consider extrinsic
evidence to determine the intentions of the parties. Id., § 30:7, at 116–
124.

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Id. at 937–38 (Ginsburg, J., concurring). Cf. Tackett v. M & G Polymers USA,
LLC, No. 12-3329, 2016 WL 240414, at *4 (6th Cir. Jan. 21, 2016) (“Reliance on
Justice Ginsburg’s concurrence is appropriate in this instance because it identifies
other principles of contract law.”).
Although Defendants argue that vesting must now be established by
unequivocal, explicit language within the CBA, the Supreme Court did not adopt
this standard in Tackett. Instead, the majority’s reference to Sprague v. General
Motors Corp., 133 F.3d 388, 400 (6th Cir. 1998), upon which Defendants rely,
served merely to illustrate the inconsistencies within the Sixth Circuit’s
jurisprudence on employment contracts. Sprague, unlike the case at hand, did not
involve collectively bargained agreements. “When a healthcare plan is not the
product of collective bargaining, ‘the intent to vest must be found in the plan
documents and must be stated in clear and express language,’ ” whereas, plans
resulting from collective bargaining are to be interpreted according to “ordinary
principles of contract interpretation.” Moore v. Menasha Corp., 690 F.3d 444, 450
(6th Cir. 2012) (quoting Sprague, 133 F.3d at 400)). Thus, finding Defendants’
proposed standard to be inapplicable, the Court will proceed with contract
interpretation through the use of ordinary principles.

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B. The Collective Bargaining Agreements and Supplements C and C-1
The Court’s original award of summary judgment to Plaintiffs did not rely
on any of the Yard-Man inferences found to be improper by the Supreme Court.2
Nevertheless, to the extent that the Court relied on the Sixth Circuit’s Yard-Man
progeny, the Court reconsiders its prior ruling, as necessary, to ascertain parties’
intent from the written agreements under ordinary principles of contract law.
1. Promises Regarding Healthcare
Article XVII of the 1995 CBA provides that Supplement C and Supplement
C-1 contain the full text of the agreement regarding the parties’ insurance program.
Dkt. No. 39-2, p. 54 (Pg. ID No. 2279). The 1995 Supplement C states, in relevant
part:
The Company will establish an amended insurance program,
hereinafter referred to as the “Program,” a copy of which is attached
hereto as Supplement C-1 and made part of this Agreement . . . ,
however . . . [i]n the event any conflict between the provisions of the
Program and the provisions of this Agreement, the provisions of this
Agreement will supersede the provisions of the Program to the extent
necessary to eliminate such conflict.
Dkt. No. 39-3, p. 4 (Pg. ID No. 747).

2

The Court’s original opinion and order quoted Yard-Man to note that
“ ‘traditional rules for contract interpretation apply to the enforcement of collective
bargaining agreements.” Dkt. No. 65, pp. 8–9 (Pg. ID No. 4994–95). The YardMan quotes that followed merely summarized basic principles of contract
interpretation, without use of the suspect inference. See id. at 9.
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Supplement C-1 also addresses healthcare coverages and benefits.
Supplement C-1 states that “Kelsey-Hayes Company will establish an Insurance
Program either through a self-insured plan or under a group insurance policy or
policies issued by an insurance company or insurance companies . . . as set forth in
Articles II and III . . . .” Dkt. No. 39-4, p. 4 (Pg. ID No. 2324). Article III, Section
5, titled “Continuance of Health Care Coverages Upon Retirement or Termination
of Employment at Age 65 or Older,” subsection (a) provides:
The health care coverages an employee has under this Article at the
time of retirement or termination of employment at age 65 or older . . .
shall be continued thereafter provided that suitable arrangements for
such continuation, can be made with the carrier(s).
Id. at 41 (Pg. ID No. 2361). Section 6 addresses the promise of “continuance” of
healthcare for employees’ and retirees’ surviving spouses. Id.
In Article I, Section 3(b), Supplement C-1 addresses the issue of company
contribution for healthcare coverages. Specifically, Supplement C-1 provides:
(7) For Retired Employees and Certain Former Employees
The Company shall contribute the full premium or subscription charge
for health care coverages continued in accordance with Article III,
Section 5, for:
(i) A retired employee and his eligible dependents, if any, provided
such retired employee is eligible for benefits under Article II of the
Kelsey-Hayes Hourly-Rate Employees Pension Plan, and;
(ii) An employee and his eligible dependents, if any, terminating at
age 65 or older for any reason other than a discharge for cause with
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insufficient credited services to entitle him to a benefit under Article
II of the Kelsey-Hayes Hourly-Rate Employees Pension Plan.
(8) For Surviving Spouses
(i) The Company shall contribute the full premium or subscription
charge for health care coverages continued in accordance with Article
III, Section 6(b) on behalf of a surviving spouse as defined in Article
III, Section 6(b), (1), (2), (3) and (4) and in Article III, Section 6(c)
. . . and the eligible dependents of any such spouse, provided, however
that the contributions on behalf of a surviving spouse for the month
the surviving spouse becomes age 65 and subsequent months shall be
made only for months that the surviving spouse has the voluntary
coverage that is available under the Federal Social Security Act by
making contributions.
Id. at 8 (Pg. ID No. 2328).
2. Duration Provisions
The 1995 CBA contained a duration provision in Article XIX, which
specified that the agreement was to continue until February 7, 1999. Dkt. No. 39-2,
p. 55 (Pg. ID No. 2280). The agreement could also continue past February 7, 1999,
on a year-to-year basis, if the parties did not give notice of termination. Id. The
1999 CBA’s duration provision stated that it would continue until February 9,
2003, and also contained a year-to-year provision. Dkt. No. 39-5, p. 5 (Pg. ID No.
2401). The 2003 CBA was to continue until February 11, 2007, Dkt. No. 39-6, p. 5
(Pg. ID No. 2406), but Kelsey-Hayes ceased operations at the Jackson plant prior
to that date. Dkt. No. 40-12, p. 2 (Pg. ID No. 2734). Each of the CBAs provided
that modification or termination of the agreement required written notice sixty days
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prior to the specified February dates. See Dkt. No. 39-2, p. 55 (Pg. ID No. 2280);
Dkt. No. 39-5, p. 5 (Pg. ID No. 2401); Dkt. No. 39-6, p. 5 (Pg. ID No. 2406).
Additionally, the CBAs provide that Supplement C and Supplement C-1
were “made part of this Agreement as if set out in full herein, subject to all
provisions of this Agreement.”3 Dkt. No. 39-2, p. 54 (Pg. ID No. 2279); Dkt. No.
39-5, p. 4 (Pg. ID No. 2400); Dkt. No. 39-6, p. 4 (Pg. ID No. 2405). Supplement C
states in Section 11 that it “shall continue in effect until the termination” of the
CBA of which it is a part. Dkt. No. 39-3, p. 8 (Pg. ID No. 2319).
Supplement C-1 provides for the specific duration of health insurance
coverage for employees who were laid-off, fired, or took a leave of absence in
Article III, Sections 3 and 4. Dkt. No. 39-4, pp. 39–41 (Pg. ID No. 2359–61).
Employees who were laid-off received coverage for “up to 12 consecutive months
following the last month of coverage.” Id. at 39. For an employee on a leave of
absence due to disability, coverage was to continue “for a period equal to a
maximum of the employee’s Years of Seniority.” Id. at 40. “Health care coverages
for an employee who quits or is discharged shall automatically cease as of the last
day” of the termination month. Id. at 41. If the Jackson Plant were to close,

3

The sole exception is that the insurance contract was not subject to the
same grievance procedure as the CBAs.
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Supplement C-1 provided that employees terminated as a result of closing would
be covered for “a maximum period of 12 months.” Id.
Sections 3 and 4 illustrate that the parties knew how to limit the duration of
health insurance coverage expressly within the contract. Yet, notably, in Sections 5
and 6, covering retirees and eligible spouses, the parties declined to set a
termination date for coverages. Instead, Section 5 states that once an employee has
retired or terminated employment after age sixty-five, the retiree’s health benefits
“shall be continued thereafter.” Id.
3. Modification Provisions
Supplement C-1 contains a provision that allows for replacement or
supplementation of plan coverages: “If in its judgment the Company considers it
advisable in the interest of the employees, another arrangement may be substituted
for all or part of the coverages referred to in subsection (a) above.” Dkt. No. 39-8,
p. 26 (Pg. ID No. 2439). However, Supplement C dictates that the provisions of
Supplement C supersede the provisions of Supplement C-1, in the event of a
conflict. Dkt. No. 39-3, p. 4 (Pg. ID No. 747). Supplement C requires mutual
agreement between the parties for any modification:
In the event the initiation of any benefit described in Article III of the
Program does not prove practicable or is not permitted . . . , the
Company in agreement with the Union will provide new benefits
and/or coverages as closely related as possible and of equivalent value
to those not provided.
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Id. In sum, Supplement C restricts the Defendants’ ability to modify healthcare
benefits governed by the parties’ agreement by requiring not only that the Union
agree with the change, but also that any changes made be closely related and
equivalent to the previous benefits provided.
C. The Jackson Plant Shutdown Agreement
On September 30, 2005, the parties executed a Shutdown Agreement after
Kelsey-Hayes notified the union of its intention to permanently cease operations at
the Jackson plant no later than July 31, 2006. Dkt. No. 40-12, p. 2 (Pg. ID No.
2734). The Shutdown Agreement extended the 2003 CBA to remain in effect at the
facility until it closed, except for the provisions modified within the Shutdown
Agreement. Id. at 7, ¶ 18. Additionally, it provided that the provisions of the
Shutdown Agreement would govern in the event of any inconsistency between the
Shutdown Agreement and the CBA. Id. at ¶ 15.
Specific to employees eligible for retirement, the Shutdown Agreement
allowed those eligible employees to “make a voluntary one-time irrevocable
election to opt out of the Kelsey-Hayes Company Jackson Hourly Retiree Medical
Plan and receive a lump sum cash benefit in place thereof.” Id. at 6, ¶ 13.

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D. Interpretation of the Parties’ Contracts
The main goal of contract interpretation is to ascertain the parties’ objective
intent at the time the contract was entered, in light of the surrounding
circumstances and relevant considerations. 11 R. Lord, Williston on Contracts §
30:6, pp. 98–104 (4th ed. 2012) (Williston). “[N]o rule requires ‘clear and express’
language in order to show that parties intended health-care benefits to vest.”
Tackett, 135 S. Ct. at 938 (Ginsburg, J., concurring). Instead, vesting may arise
from implied terms, as well as explicit ones. See id. (citing Litton Financial
Printing Div., Litton Business Systems, Inc. v. NLRB, 501 U.S. 190, 203, (1991)).
After reviewing the parties’ agreements for a second time, the Court again finds
that the unambiguous language of the CBAs, Supplements, and Shutdown
Agreement shows that the parties intended to provide for vested lifetime health
insurance coverage.
The CBAs specify that Supplements C and C-1 contain the full text of the
parties’ agreement regarding health insurance. Dkt. No. 39-2, p. 54 (Pg. ID No.
2279). Within those supplements, the parties’ negotiated language provides that
healthcare benefits will be continued at the time of retirement, and that those
coverages “shall be continued thereafter.” Dkt. No. 39-4, p. 41 (Pg. ID No. 2361).
Where the parties intended to limit the duration of healthcare benefits, they
included specific language to do so. Id. at 39–41 (Pg. ID No. 2359–61). In stark
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contrast, the parties included no duration limitation on the provision of healthcare
benefits to retirees. Id. at 41.
Moreover, employees eligible for retirement at the time of the Shutdown
Agreement were offered the opportunity to take a “lump sum cash benefit” in the
place of the medical plan benefits they were to receive during retirement. Dkt. No.
40-12, p. 6, ¶ 13 (Pg. ID No. 2738). Were the Court to accept Defendants’
argument that the retirees’ healthcare benefits expired with the CBA, this provision
in the Shutdown Agreement would bizarrely provide cash for benefits retirees were
not entitled to receive. Such a reading is contrary to traditional principles of
contract interpretation. See Savedoff v. Access Grp., Inc., 524 F.3d 754, 763 (6th
Cir. 2008) (“In determining whether contractual language is ambiguous, the
contract ‘must be construed as a whole,’ . . . so as ‘to give reasonable effect to
every provision in the agreement.’ ”).
Accordingly,

having

found

the

parties’

contracts

unambiguously

demonstrated intent to provide for vested healthcare benefits for retirees, beyond
the duration of the CBAs, the Court need not consider extrinsic evidence.
E. Preclusion Doctrines
For the same reason as International Union v. Kelsey-Hayes Co., No. 11CV-14434, 2015 WL 5460631, at *8 (E.D. Mich. Sept. 17, 2015), the Court will
decline to address Plaintiffs’ preclusion arguments. (“This court believes it is
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inadvisable, as well as unnecessary, to address plaintiffs’ preclusion arguments
because all of the decisions referred to by plaintiff were made before the Supreme
Court issued its opinion in Tackett.”). To apply the preclusion doctrine to these
pre-Tackett decisions may run the risk of perpetuating the now invalid Yard-Man
inference. See C.I.R. v. Sunnen, 333 U.S. 591, 606–07 (1948) (noting that the
doctrine of collateral estoppel may not apply where there has been “sufficient
change in the legal climate”).
Similarly, the Court will not apply the Carbon Fuel doctrine. The doctrine
stands for the proposition that judicial interpretations of CBA terms become part of
those terms in later CBAs, if not altered by the parties’ agreement. Carbon Fuel
Co. v. UMWA, 444 U.S. 212, 222 (1979). As mentioned above, since prior cases
may have been tainted by the Yard-Man inference, the Court will not engage in the
application of this doctrine.
V. CONCLUSION
For the reasons stated herein, the Court reaffirms its initial award of
Summary Judgment and Injunctive Relief to Plaintiffs. The Court will DENY
Defendants’ Renewed Motion for Summary Judgment [100].
IT IS SO ORDERED.

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Dated:

January 28, 2016
/s/Gershwin A Drain
HON. GERSHWIN A. DRAIN
United States District Court Judge

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