United States: Sixth Circuit Issues Different Opinions On Retiree Medical Coverage After Tackett

For 33 years, unionized employers in the Sixth Circuit had to deal with the holding and, worse still, the application of the decision in UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), which created what it called an "inference" that retiree health insurance benefits under collective bargaining agreements would "vest." Although Yard-Man itself appeared to provide only an "inference" of vesting, its subsequent use by the Sixth Circuit increasingly reflected that the court would convert that "inference" largely into a presumption and create new rules on the fly to hold employers liable. See, e.g., Noe v. PolyOne Corp., 520 F.3d 548 (6th Cir. 2008). These decisions were likely premised more on a policy the court unofficially adopted, that employers would be found liable regardless of what the contract might say, than on ordinary principles of contract law. During those three decades, employers in four states were forced to provide hundreds of millions of dollars of healthcare benefits they had never agreed to.

As we wrote last year, the Supreme Court finally accepted a Yard-Man case for review and, in a unanimous decision, reversed Yard-Man, refuting in detail its legal and factual underpinnings as well as its expansion in later cases. Among other things, the Court made it clear that collective bargaining agreements were to be governed by ordinary principles of contract law and that Yard-Man, despite what it might have said, departed from those principles in very important respects. The Supreme Court also restored defenses to employers, including the right to rely upon contract termination clauses, that the Sixth Circuit had erased in Yard-Man's wake.

That should have spelled the end of it, but unfortunately it did not.

On remand, the Sixth Circuit in Tackett did a most curious thing. Rather than rely on the majority opinion (which garnered the vote of all nine justices), it went off on the concurrence of a single justice, Justice Ginsburg. The authority for the unusual proposition that in the face of a unanimous decision the court should look to a single concurrence is a string cite that includes the case of Alexander v. Sandoval, 532 U.S. 275, 285 n.2 (2001), a case that specifically rejected use of a concurrence. In any case, the Sixth Circuit "punted" and sent the case back for reconsideration by the district court.

Two weeks later, a different panel of the Sixth Circuit issued a more sensible decision that actually relied on the Tackett majority in Gallo v. Moen Inc., Case No. 14-3633/3918 (6th Cir., Feb. 8, 2016). Among many other critical holdings, this decision recognized that:

  • The Supreme Court rejected not only Yard-Man, but also the premises it relied upon to find vesting in the past.
  • General expiration clauses in labor contracts are to be given full effect, even on issues of retiree medical care. Indeed, such clauses mean that benefits are available only until the collective bargaining agreement expires.
  • The Supreme Court endorsed the Sixth Circuit's en banc decision in Sprague v. General Motors Corp., 133 F.3d 388 (6th Cir. 1998), a case that involved no collective bargaining agreement. This holding is highly significant because the Sprague decision held such claims to a higher standard, and the court now recognizes that that same standard should apply even for claims under a labor contract.
  • A contract that does not use terms such as "lifetime" and "for life" suggests strongly that no lifetime commitment was intended.
  • The use of the word "continue" in a contract means exactly the opposite of what Yard-Man and its progeny found. Instead of denoting vesting, particularly when applied to past retirees, it suggests that there was no vesting because otherwise there would be no need to provide for the "continuation" of benefits.
  • The fact that vesting language exists for the pension plan and not for welfare benefits means that the parties did not intend health insurance benefits to vest.
  • Clauses that permit changes suggest that there is no vesting.
  • The fact that health coverage is only available to those receiving pensions does not "tie" the two together and does not support a claim that the welfare benefits might vest.
  • Courts may not use the fact that employers complied with the erroneous Yard-Man decision while it was in effect as evidence of vesting.
  • Promises of lifetime care must be premised on strong language. As the opinion notes, "we do not expect to find 'elephants in mouseholes.'"

There are still many Yard-Man cases pending throughout the Sixth Circuit. The Supreme Court's Tackett decision should have brought an end to most of them. Perhaps the Gallo decision will. But it is obvious that at least some judges on the Sixth Circuit dislike Tackett and may resist its application despite the Supreme Court's clear pronouncements.

The bottom line: The Supreme Court's Tackett decision should have brought an end to Yard-Man retiree benefit claims, but some Sixth Circuit panels may still be reluctant to dismiss such claims.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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