United States: Supreme Court Overrules Sixth Circuit (Again) In Class Action Dispute Over Retiree Medical Benefits

Last Updated: February 23 2018
Article by Gregory V. Mersol

Is Yard-Man really dead this time?

This issue should never have arisen, the Supreme Court should not have had to address it in 2015, and it shouldn't have required Supreme Court attention a second time just three years later. But it did. In 1983, in the case of UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), the Sixth Circuit addressed the claims of a group of unionized workers who argued that they were entitled to lifetime medical benefits upon their retirement. In finding for the retirees, the court simply made up a set of "inferences" in favor of vesting, suggesting that they were just that – inferences – and that they should not be viewed as necessarily controlling. Over time, these "inferences" grew and began to function much like outright presumptions in favor of vesting. The court created new rules along the way largely eviscerating general termination provisions and requiring specific durational language directed at retiree benefits. These holdings resulted in employers losing the vast majority of such disputes in the Sixth Circuit, and cost manufacturing employers considerable expense to pay for benefits they had never promised. In the meantime, other circuits rejected the inferences and continued to apply ordinary rules of contract interpretation, as did the Sixth Circuit itself in such cases brought by non-unionized employees. In 2015, the Supreme Court addressed the Yard-Man line of cases for the first time. In M&G Polymers USA, LLC v. Tackett, 574 U.S. ___ (2015), it flatly rejected the Yard-Man inferences and directed the Sixth Circuit to decide retiree health insurance benefit cases using ordinary contract principles. It specifically held that the general termination provisions of collective bargaining agreement should be given effect unless overridden by more specific language. That should have ended the debate, but as we noted on March 9, 2016, some Sixth Circuit panels, while paying lip service to the majority opinion in Tackett, continued to find for the retirees based on arguments having no basis in contract law. Fractures soon appeared in the post-Tackett case law with ever more obvious splits even within the circuit and different outcomes in factually indistinguishable cases. These splits seemed to reach their zenith on April 20, 2017 when the Sixth Circuit issued three conflicting decisions on the same day, applying different law and having different outcomes. Reese v. CNH Indus., N.V., 854, F.3d 877 (6th Cir. 2017) (retirees prevailed); UAW v. Kelsey-Hayes, 854 F.3d 862 (6th Cir. 2017) (retirees prevailed); and Cole v. Meritor, Inc., 855 F.3d 695 (6th Cir. 2017) (employer prevailed). The dissent in one of the cases finding for the retirees described the analysis used by the majority as "Yard-Man re-born, re-built, and re-purposed for new adventures." Not surprisingly, rehearing en banc was sought, but what followed was even more remarkable. In one opinion denying review, a concurring judge commented "[a]n intra-circuit split accompanied by an inter-circuit divide followed by lack of conformity to a Supreme Court decision normally warranted en banc review," but that en banc review would be pointless granted because there wasn't a majority of judges ascribing to any one view of the law. In a separate opinion, the dissent noted that "[o]ur post-Tackett case law is a mess . . . ." Three petitions for certiorari followed. In the Meritor case, in which the employer prevailed, review was denied. In the Reese case, however, the Supreme Court reversed and found that the Sixth Circuit had erred in finding for the retirees. The Court was again required to state that Yard-Man was not good law and that the Sixth Circuit had simply resurrected the Yard-Man analysis in a new form. The Court specifically rejected the re-packaged Yard-Man analysis, including:

  • When a contract is silent on the issue of vesting, it does not vest benefits for life.
  • The general durational clause should be applied when the agreement "does not specify a duration for health care benefits in particular".
  • "If the parties had meant to vest health care benefits for life, they easily could have said so in the text."
  • The prior Sixth Circuit case law purporting to "tie" health benefits to pension benefits was wrong.

The Supreme Court remanded the case for further consideration due to that case's procedural posture, but it's not clear what would happen on remand given the Court's strong pronouncement on these issues – other than a dismissal. Yard-Man and its progeny should be dead, but we predicted that when Tackett was decided. With this firm re-rejection of Yard-Man in whatever form, courts in the Sixth Circuit should be far more prone to dismiss claims of lifetime retiree medical benefits springing from collective bargaining agreements. The bottom line: Wrongly decided cases can lead to decades of expensive litigation even when they have been overruled.

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