Trend Favors Employers in Retiree Medical Litigation
Monday, March 26, 2018
employee benefits, retirees, sixth circuit

Two recent decisions, CNH Industrial N.V. v. Reese, 138 S. Ct. 761 (2018), and Cooper v. Honeywell International, Inc., 2018 WL 1190385 (6th Cir. Mar. 8, 2018), continue the trend favoring employers in litigation challenging the termination of retiree medical benefits. 

In CNH, the collective bargaining agreement (CBA) provided healthcare benefits to employees who retired during its term. The CBA contained a general durational clause, which provided that all terms and conditions provided through the CBA would expire when the CBA expired. The CBA expired in 2004 and CNH sought to terminate retirees’ healthcare benefits. CNH retirees sued, claiming their benefits were vested. A district court granted judgment in the retirees’ favor and the US Court of Appeals for the Sixth Circuit affirmed. According to the Sixth Circuit, the durational clause was not dispositive and other language “tied” healthcare benefits to pension eligibility. These provisions rendered the CBA ambiguous, opening the door to extrinsic evidence, which the court concluded established vesting.

In a summary reversal of the Sixth Circuit decision, the US Supreme Court held that the decision could not be squared with M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015), which rejected the “Yard-Man” inferences, overturned decades of flawed precedent in the Sixth Circuit, and directed courts to apply ordinary principles of contract interpretation. Shorn of these inferences, the Supreme Court found the case “straightforward.” The only reasonable interpretation was that retirees’ benefits expired along with the CBA. (On February 26, 2018, the Supreme Court summarily reversed and remanded another Sixth Circuit decision, UAW v. Kelsey-Hayes, 854 F.3d 862 (6th Cir. 2017), in light of CNH.)

A few weeks after CNH, the Sixth Circuit issued its opinion in Cooper, reversing a preliminary injunction preventing Honeywell from terminating retiree medical benefits. The Cooper retirees argued CBA language stating retirees “will continue to be covered under the [company’s medical] Plan, until age 65” vested benefits until age 65, while Honeywell contended the “until age 65” language “only explains who is eligible for benefits during the CBA’s operation,” and retiree medical benefits were subject to the general durational clause. Describing the Supreme Court’s decision in CNH as a “powerful indication that general durational clauses should dictate when benefits expire, unless an alternative end date is provided,” the Sixth Circuit found the “until age 65” language did not trump the CBA’s general durational clause.

CNH and Cooper should put to rest any dispute that M&G Polymers dramatically changed the framework for assessing retiree medical claims in the CBA context. Absent explicit language to the contrary, general durational clauses govern the duration of retiree medical benefits, and the obligation to provide such benefits expires with the applicable CBA. 


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