Trio of Retiree Health Benefit Decisions Delivered by 6th Cir.

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By Jacklyn Wille

Unions and companies litigating over retiree health benefits got a lot to digest on April 20, when the U.S. Court of Appeals for the Sixth Circuit issued three opinions in long-running retiree health-care disputes.

Construction equipment designer CNH Industrial N.V. and auto parts manufacturer Kelsey-Hayes Co. owe certain retirees vested lifetime health benefits at specified levels, the court ruled, while fellow auto parts maker Meritor Inc. is free to modify the health benefits it extends to retirees.

All three cases involve collective bargaining agreements with the United Auto Workers. In each ruling, the court closely examined the language of the parties’ CBAs to determine whether retiree health benefits were intended to vest for a retiree’s lifetime. That analysis followed the U.S. Supreme Court’s 2015 decision in M&G Polymers USA, LLC v. Tackett.

In Tackett, the Supreme Court held that disputes over collectively bargained retiree health benefits should be resolved through ordinary principles of contract interpretation. That was a departure from the “thumb on the scale” in favor of retirees previously used by some courts, particularly the Sixth Circuit. Many judges have read Tackett as favoring employers by giving wins to companies including BorgWarner Inc., Weyerhaeuser Co. and Johnson Controls Inc., but the Sixth Circuit’s new trio of opinions suggests that the proper inquiry is very fact-specific and will depend largely on the language of the relevant bargaining agreements.

The opinions also suggest that Sixth Circuit judges may not be on the same page in interpreting post- Tackett rulings—specifically, the Sixth Circuit’s 2016 ruling in Gallo v. Moen Inc. and its ruling on remand in Tackett itself. The decisions favoring the CNH and Kelsey-Hayes retirees, both written by Judge Julia Smith Gibbons, drew concurring and dissenting opinions. The unanimous decision in favor of Meritor was written by Judge Ronald L. Gilman, who dissented from the Kelsey-Hayes decision.

“On a quick read, the most obvious theme of these three cases is the tension between” the Sixth Circuit’s remand decision in Tackett and its ruling in Gallo, Julia Penny Clark, a member of Bredhoff & Kaiser in Washington, told Bloomberg BNA.

Clark, who argued the Tackett case before the Supreme Court on behalf of the retirees, said the decision in favor of Meritor “relies on and follows Gallo as ‘legally indistinguishable,’” while the two rulings favoring the retirees rely more on the remand decision in Tackett, to the extent that there are differences between those two earlier opinions.

The cases are United Autoworkers v. Kelsey-Hayes Co. , 2017 BL 129620, 6th Cir., No. 15-2285, 4/20/17 ; Reese v. CNH Indus. N.V. , 2017 BL 129745, 6th Cir., No. 15-2382, 4/20/17 ; and Cole v. Meritor, Inc. , 2017 BL 129716, 6th Cir., No. 06-2224, 4/20/17 .

Two Retiree Victories

The case against Kelsey-Hayes challenged the company’s decision to move certain retirees off company-paid health insurance and into health reimbursement accounts. The court found that the operative bargaining agreement was ambiguous as to whether retirees had a vested interest in the prior system and therefore looked to extrinsic evidence. That evidence suggested that the benefits were vested, the Sixth Circuit said, because Kelsey-Hayes representatives regularly told retiring employees that they would have company-paid health coverage “for life,” among other things

The court also found CNH’s bargaining agreement ambiguous, despite the presence of a general durational clause. That’s because the agreement was silent as to the duration of retiree health benefits, the court said, even though it carved out other types of benefits that would continue past the agreement’s termination. Looking to extrinsic evidence—including CNH’s practice of considering an employee’s projected lifespan when calculating retiree health benefit costs—the Sixth Circuit determined that the benefits had vested for life. It sent the case to the district court for a determination of how CNH should handle retiree health benefits going forward.

Both decisions were written by Gibbons. Judge Jane B. Stranch joined the Kelsey-Hayes opinion, from which Gilman dissented. The CNH opinion drew a concurrence from Judge Bernice B. Donald and a dissent from Judge Jeffrey S. Sutton.

One Employer Win

The Meritor case produced a different result, with the court finding the agreement unambiguous. Because the agreement contained a general durational clause, and because language suggesting that retiree health benefits “shall be continued” didn’t override that durational clause, the court ruled that the benefits weren’t vested for life and thus could be modified by the company.

Gilman wrote this unanimous decision, which was joined by Judges Richard F. Suhrheinrich and Helene N. White.

Legghio & Israel P.C. represented the Meritor retirees, and King & Spalding represented Meritor. Law Office of William Wertheimer represented the Kelsey-Hayes retirees, and Baker & Hostetler represented Kelsey-Hayes. McKnight Canzano Smith Radtke & Brault P.C. represented the CNH retirees, and King & Spalding represented CNH.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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