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International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) v. Kelsey-Hayes Co.

United States Court of Appeals, Sixth Circuit

April 20, 2017

International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW); James Ward; Marshall Hunt; Richard Gordon, Plaintiffs-Appellees,
v.
Kelsey-Hayes Company; TRW Automotive Holdings Corporation; Northrop Grumman Systems Corporation, Defendants-Appellants.

          Argued: September 28, 2016

         Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:11-cv-14434-Julian A. Cook, District Judge.

         ARGUED:

          Gregory V. Mersol, BAKER & HOSTETLER LLP, Cleveland, Ohio, for Appellants.

          William Wertheimer, LAW OFFICE OF WILLIAM WERTHEIMER, Bingham Farms, Michigan, for Appellees.

         ON BRIEF:

          V. Mersol, BAKER & HOSTETLER LLP, Cleveland, Ohio, for Appellants.

          William Wertheimer, LAW OFFICE OF WILLIAM WERTHEIMER, Bingham Farms, Michigan, Stuart M. Israel, John G. Adam, LEGGHIO & ISRAEL, P.C., Royal Oak, Michigan, for Appellees.

          Before: GILMAN, GIBBONS, and STRANCH, Circuit Judges.

          OPINION

          JULIA SMITH GIBBONS, Circuit Judge.

         Defendants Kelsey-Hayes, TRW Automotive Holdings, and Northrop Grumman appeal the grant of plaintiffs' motion for summary judgment and the permanent injunction entered in plaintiffs' favor. Plaintiffs are retirees who brought a class action alleging breach of a collective bargaining agreement ("CBA") under Section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, and violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq., including breach of fiduciary duty. For the reasons that follow, we affirm the district court's award of summary judgment and modify the permanent injunction.

         I.

         Plaintiffs are Medicare-eligible retirees from a Detroit automotive plant owned and operated by defendant Kelsey-Hayes Company, all of whom retired from the plant prior to its closing in 2001. Pre-retirement, plaintiffs were production and maintenance workers at the plant and members of a bargaining unit represented by United Automobile, Aerospace, and Agricultural Implement Workers of America ("UAW").

         Kelsey-Hayes owned and operated the plant from 1992 until 2000; the plant closed its doors in 2001.[1] UAW negotiated and signed a CBA with Kelsey-Hayes in 1998. This was the last CBA signed between UAW and Kelsey-Hayes on behalf of the plaintiffs. The CBA incorporated two separate documents related to health-insurance benefits: Supplement H and Supplement H-1. The CBA and its Supplements provided for comprehensive healthcare for retirees and their surviving spouses. When the plant closed in 2001, the UAW negotiated a Plant Closing Agreement ("PCA") with ACI that addressed benefits provided to retirees at the time of the plant's closing, the impact of the PCA on previous CBAs, and a method for resolving any disputes that arose from the PCA. Also party to the PCA was Kelsey-Hayes's parent corporation at the time, TRW.

         The PCA included a provision whereby the UAW and its members waived all claims against ACI, TRW, and Kelsey-Hayes. It also included an exception to the UAW waiver, which stated that the closing agreement did not extinguish pension or retiree healthcare obligations owed by ACI or TRW Inc., to the extent that either entity had obligations "under applicable law and benefit plans (including those provisions contained in collective bargaining agreements)."

         Northrop Grumman acquired TRW in 2002. Northrop Grumman sold a portion of TRW's automotive assets to a private equity firm, and these assets were then conveyed to a new entity, TRW Automotive Holdings Corp. ("TRW AHC").[2] TRW AHC went public in 2004 and presently owns Kelsey-Hayes.

         Kelsey-Hayes continued to provide healthcare coverage for its retirees and their surviving spouses for ten years following the PCA, consistent with the terms for coverage contained in the 1998 CBA. While coverage has remained consistent, it has undergone multiple changes. In 2007, Kelsey-Hayes changed insurance carriers from Blue Cross Blue Shield of Michigan to Meritain, and in 2009, it switched to Humana. According to Kelsey-Hayes, "[e]ach change in carrier was accompanied by a possible change in networks, providers, and/or the enrollment process."

         Kelsey-Hayes explained in a September 14, 2011 letter that, effective January 1, 2012, it was replacing retirees' current group-insurance plan with an "HRA" model. Under this model, Kelsey-Hayes created company-funded health reimbursement accounts ("HRAs") from which retirees could purchase individual plans for Medicare supplemental insurance. The letter stated that, due to the evolving healthcare and insurance market, there were "now numerous cost effective and valuable plans on the open market . . . . Given this expanded market and increased competition . . . health-insurance carriers have stepped forward to offer a variety of [Medicare supplement options] that in many cases offer the same or better coverage than you currently have from the TRW Retiree Health Care Plan." In 2012, Kelsey-Hayes contributed $15, 000 to each participant's HRA and in 2013 and 2014, it contributed $4, 300 per year.

         The Summary Plan Description for the new HRA plan included language that Kelsey-Hayes "may, at any time, increase, decrease or eliminate the amount that is allocated to your HRA account each year" and that it "reserves the right to amend, modify, suspend, replace or terminate any of its plans, policies or programs (including the HRA), in whole or in part, at any time and for any reason by appropriate company action." It also included the specific language that retirees "are neither vested in your retiree benefits nor does TRW Automotive intend to vest you in retiree healthcare benefits."

         Using the HRAs, Kelsey-Hayes has been able to provide insurance to its retirees at a substantially lower cost to the company. The HRAs, as funded from 2012 through 2014, have provided $49, 200 for each retiree and eligible spouse to purchase supplemental insurance.

         Following notice of these changes, plaintiffs filed for relief against Kelsey-Hayes, TRW AHC, and Northrop Grumman in the district court under Section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, and under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq.

         Kelsey-Hayes and TRW moved for an order to compel arbitration, relying on the PCA's arbitration clause. Northrop Grumman filed a separate motion to compel arbitration. The district court initially granted the motions to compel arbitration in their entirety, but upon reconsideration reversed in part, finding that a subset of plaintiffs-those who had retired before the 2001 plant closing-could not be bound by the PCA because their rights had already vested under the 1998 CBA and that their healthcare-related disputes were thus exempt from the CBA's arbitration clause. Kelsey-Hayes appealed the district court's order. We affirmed, holding that employees who retired prior to the 2001 PCA did not consent to the PCA's terms and could not be compelled to arbitrate pursuant to it. UAW v. Kelsey-Hayes Co., 557 F.App'x 532, 535 (6th Cir. 2014).

         Defendants moved to stay litigation pending the Supreme Court's decision in M&G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (2015), and we agreed. Tackett involved how to interpret silence concerning the duration of retiree healthcare benefits when construing CBAs, which would directly impact our decision in the case at hand. Following the Supreme Court's ruling in Tackett, which explicitly overruled decades of Sixth Circuit precedent established by UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), the parties re-filed cross-motions for summary judgment and re-briefed their arguments to incorporate the decision. The district court denied defendants summary judgment and granted the plaintiff-retirees partial summary judgment, as well as a permanent injunction ordering defendants to reinstate the retirees' group-insurance plan. Defendants timely appealed.

         II.

         We review a district court's grant of summary judgment de novo. Rose v. State Farm Fire & Cas. Co., 766 F.3d 532, 535 (6th Cir. 2014). "Summary judgment is appropriate 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.'" Meridia Prods. Liab. Litig. v. Abbott Labs., 447 F.3d 861, 866 (6th Cir. 2006) (citing Fed.R.Civ.P. 56(c)). We construe all reasonable inferences in favor of the nonmoving party. Ramsey v. Penn Mut. Life Ins. Co., 787 F.3d 813, 818 (6th Cir. 2015) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

         When considering a district court's order for a permanent injunction, we review factual determinations for clear error, legal conclusions de novo, and the injunction's scope for abuse of discretion. ACLU of Ky. v. McCreary Cty., 607 F.3d 439, 445 (6th Cir. 2010).

         III.

         "Section 301 of the LMRA provides a federal right of action for 'violation[s] of contracts between an employer and a labor organization representing employees.'" Moore v. Menasha Corp., 690 F.3d 444, 450 (6th Cir. 2012) (citing 29 U.S.C. § 185(a)). It also creates "a derivative ERISA claim, because the disputed healthcare benefits were agreed upon pursuant to a union-negotiated contract." Id. (citing Schreiber v. Philips Display Components Co., 580 F.3d 355, 363 (6th Cir. 2009)). The primary inquiry here is "whether the retirement health care benefits vested for life" and whether they are "fully funded" by the employer. See Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 574 (6th Cir. 2006). "We interpret collective bargaining agreements, including those establishing ERISA plans, according to ordinary principles of contract law, at least where those principles are not inconsistent with federal labor policy." Tackett, 135 S.Ct. at 933.

         A.

         Prior to Tackett, we applied principles first announced in Yard-Man, which stated that "when the parties contract for benefits which accrue upon achievement of retiree status, there is an inference that the parties likely intended those benefits to continue as long as the beneficiary remains a retiree." 716 F.2d at 1482. In Tackett, however, the Supreme Court found that the Yard-Man inference "violates ordinary contract principles by placing a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements." Tackett, 135 S.Ct. at 935. The Tackett court found that Yard-Man was based on "suppositions" about all collective bargaining and distorted attempts to discern the intention of the parties. Id. The Yard-Man inference was "too ...


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