Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Sept. 29 — Doing an about-face, a federal court in Michigan ruled that CNH America LLC isn't required to pay lifetime health-care benefits to its retirees.
Relying on a recent U.S. Supreme Court decision that upended a long stretch of retiree-friendly precedent, Judge Patrick J. Duggan ruled Sept. 28 that the CNH retirees' right to employer-paid health-care benefits lasted only as long as each collective bargaining agreement. Duggan had ruled eight years earlier that the retirees' benefits were vested for their lifetimes.
The ruling is significant because it represents one of the first times a federal court within the jurisdiction of the U.S. Court of Appeals for the Sixth Circuit has had the opportunity to apply the U.S. Supreme Court's ruling in M&G Polymers USA, LLC v. Tackett, 2015 BL 16721, No. 13-1010, 1/26/15.
The Sixth Circuit has long been a hot-bed for retiree benefit litigation, particularly given that courts in that jurisdiction until Tackett had applied a retiree-friendly presumption that often led them to rule in favor of retirees seeking lifetime health-care benefits under collective bargaining agreements. Tackett changed the rules for retiree benefit litigation, as the Supreme Court did away with the Sixth Circuit's use of special presumptions and inferences and instead directed courts to apply ordinary contract principles.
Taking directions from Tackett, Duggan did away with the use of any special presumptions or inferences and, applying ordinary contract principles, found that the retirees had no vested right to lifetime health-care benefits from CNH.
The lawsuit between CNH and its retirees started more than 11 years ago when they counter-sued each other seeking a court declaration as to what right, if any, CNH had to make changes to the health-care benefits it had been providing at no-cost to the retirees. The retirees had worked for CNH's predecessor, Case Corp., and as employees were represented by the United Auto Workers.
From 1974 to 2004, the bargaining agreements provided that Case, and later CNH, would provide no-cost health-care benefits to retirees and their surviving spouses. CNH later began making changes to its retiree health benefit program, requiring retirees to share in the cost of their benefits.
Duggan ruled in 2007 that CNH was required to provide no-cost lifetime health benefits to people who retired after 2004
The case then made two trips to the U.S. Court of Appeals for the Sixth Circuit, which twice sent the case back to the district court to make further determinations about what changes, if any, CNH could make to its retiree health plan.
After the second remand, but before Duggan could rule, the Supreme Court handed down its Tackett decision.
With the case back in the hands of Duggan, the parties both made arguments about Tackett's applicability. CNH argued that Tackett mandated the conclusion that the health-care benefits promised to the retirees didn't survive the expiration of each CBA. The retirees argued, on the other hand, that Tackett as well as the Sixth Circuit's rulings supported the argument that their health-care benefits were intended to last forever.
CNH won the argument, as Duggan said CNH's position was consistent with what the Supreme Court said in Tackett.
Among other things, Duggan said the Tackett ruling did away with the inference that retirees' benefits are vested if a collective bargaining agreement ties retirees' eligibility for health-care benefits to their eligibility for pension benefits. It was this sort of inference that Duggan and the Sixth Circuit had previously adopted when it ruled that the CNH retirees' benefits were vested.
The retirees were represented by Klimist McKnight Sale McClow & Canzano.
CNH was represented by King & Spalding, McDermott Will & Emery, and Honigman Miller.
To contact the reporter on this story: Jo-el J. Meyer in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Cathleen O'Connor Schoultz at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)