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Reese v. CNH Industrial N.V.

United States Court of Appeals, Sixth Circuit

April 20, 2017

Jack Reese; Frances Elaine Pidde; James Cichanofsky; Roger Miller; George Nowlin, Plaintiffs-Appellees,
v.
CNH Industrial N.V.; CNH Industrial America, LLC, Defendants-Appellants.

          Argued: October 19, 2016

         Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:04-cv-70592-Patrick J. Duggan, District Judge.

         ARGUED:

          Bobby R. Burchfield, KING & SPALDING LLP, Washington, D.C., for Appellants.

          Darcie R. Brault, MCKKNIGHT, CANZANO, SMITH, RADTKE & BRAULT, P.C., Royal Oak, Michigan, for Appellees.

         ON BRIEF:

          Bobby R. Burchfield, KING & SPALDING LLP, Washington, D.C., for Appellants.

          Darcie R. Brault, MCKKNIGHT, CANZANO, SMITH, RADTKE & BRAULT, P.C., Royal Oak, Michigan, for Appellees. Douglas A. Darch, BAKER & MCKENZIE LLP, Chicago, Illinois, for Amicus Curiae.

          Before: GIBBONS, SUTTON, and DONALD, Circuit Judges.

          OPINION

          JULIA SMITH GIBBONS, Circuit Judge.

         Defendants-appellants CNH Industrial N.V. and CNH Industrial America LLC (collectively "CNH") appeal the district court's order granting plaintiffs' motion for reconsideration. The trial court reversed its grant of summary judgment for CNH and instead granted summary judgment for plaintiffs. In this appeal, CNH again asks this court to find that plaintiffs' right to lifetime healthcare benefits failed to vest. If, however, we were to find that plaintiffs' right had vested, CNH believes the district court erred in finding that CNH's proposed changes were not "reasonably commensurate" with plaintiffs' current plan.

         This matter is complicated by a change in the law since this long-running litigation began. In light of M & G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (2015), which abrogated this circuit's Yard-Man line of cases, the district court had to revisit the question of whether plaintiffs had a vested right to lifetime healthcare benefits. The court ultimately found that they did. Because we find that the CBA is ambiguous, and because the extrinsic evidence indicates that parties intended for the healthcare benefits to vest for life, we affirm the district court's vesting determination. Remand to the district court is proper, however, because it failed to properly weigh the costs and the benefits of the proposed plan, as instructed by Reese II.

         I.

         This case's long and complicated factual and procedural history has been recounted several times by this court and by the district court. Plaintiffs, former employees of CNH who retired between 1994 and 2004, filed suit in the Eastern District of Michigan in 2004, seeking a declaration that they were entitled to lifetime healthcare benefits, an injunction requiring CNH to "maintain the level of retiree health care benefits currently in effect, " and damages for injuries the retirees might sustain if the benefits were terminated. Reese v. CNH Am. LLC, 574 F.3d 315, 319 (6th Cir. 2009) (Reese I). In 1971, CNH (then known as Case Corporation) and the United Automobile, Aerospace, and Agricultural Workers of America ("UAW") entered into a collective-bargaining agreement ("CBA"), in which CNH agreed "to provide health-care insurance to its retired employees and their spouses who were receiving a [pension or a spouse's pension]" from the company. Id. at 318. "From 1974 through 1995, each CBA (in three- or four-year terms) renewed this commitment in 'substantially unchanged' form, and each CBA provided that employees did not have to pay premiums in order to receive coverage." Id. (internal citations omitted).

         In 1998, CNH and UAW entered into the CBA that generated this lawsuit. Id. That CBA was in effect until May 2, 2004, and provided that:

Employees who retire under the Case Corporation Pension Plan for Hourly Paid Employees after 7/1/94, or their surviving spouses eligible to receive a spouse's pension under the provisions of that Plan, shall be eligible for the Group benefits as described in the following paragraphs.

Id. The paragraphs that followed listed the "Medical" and "Prescription Drug" benefits available to all classes of covered retirees regardless of the duration of their service before retirement. Id. "The CBA does not spell out what 'Medical' benefits are included; it just says that eligibility for specific coverage will be based on each plan's eligibility requirements, and goes on to note that no contributions . . . are required for the Health Care Plans . . . ." Id. (internal quotations and citations omitted.)

         Ultimately, the district court and the Reese I court faced two questions: "Did [CNH] in the 1998 CBA agree to provide health-care benefits to retirees and their spouses for life? And, if so, does the scope of this promise permit CNH to alter these benefits in the future?" Reese v. CNH Am. LLC, 694 F.3d 681, 683 (6th Cir. 2012) (Reese II). In Reese I, this court answered both questions in the affirmative, but remanded to the district court so that it could determine "how and in what circumstances CNH may alter [the healthcare benefits] . . . ." Reese I, 574 F.3d at 327. On remand, the district court failed to reach the reasonableness question and did not create a factual record upon which this court could rule. Reese II, 694 F.3d at 683. Instead, it found that CNH could not unilaterally make changes to the scope of plaintiffs' healthcare benefits, which was in conflict with our commands in Reese I. Thus, the case was remanded to the district court again, this time with a list of seven factors to consider when making its reasonableness-of-the-proposed-plan determination and with clear instructions that CNH could make unilateral changes to the plan.[1] Reese II, 694 F.3d at 685-86.

         While on this second remand, another unexpected wrinkle was added to this case when the Supreme Court abrogated this circuit's Yard-Man decision and its progeny. M & G Polymers USA, LLC v. Tackett, 135 S.Ct. 926, 930 (2015) (Tackett). Because Yard-Man created an inference in favor of employees in collective-bargaining cases, Reese I, 574 F.3d at 321, the district court was required to reconsider whether plaintiffs had a vested right to lifetime healthcare benefits. Initially, the district court found that they did not, noting that it was "[c]onstrained by the Supreme Court's decision" in Tackett. (DE 445, Op. & Order, Page ID 16912.) However, on plaintiffs' motion for reconsideration, the district reversed course and found not only that plaintiffs' rights were vested even after Tackett, but also that CNH's proposed changes were unreasonable. Thereafter, CNH filed this timely appeal.

         II.

         We review the district court's grant of summary judgment de novo. Domingo v. Kowalski, 810 F.3d 403, 410 (6th Cir. 2016) (citing Green Party of Tenn. v. Hargett, 767 F.3d 533, 542 (6th Cir. 2014)). Construing the evidence in the light most favorable to the nonmovant, id. (citing Villegas v. Metro. Gov't of Nashville, 709 F.3d 563, 568 (6th Cir. 2013)), summary judgment is appropriate if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a).

         III.

         Before the Supreme Court decided Tackett, the rights created by collective-bargaining agreements were reviewed with a thumb on the scale in favor of employees. Tackett, 135 S.Ct. at 935. This doctrine, known most commonly as the Yard-Man inference, was the law in this circuit for more than thirty years. And it was the law in effect when this court and the district court initially reviewed the rights at issue in this case. In Tackett, the Supreme Court abrogated the Yard-Man inference and instructed courts to apply "ordinary principles of contract law" when reviewing collective-bargaining agreements. Id. at 937. Thus, the Supreme Court found, despite Yard-Man and its progeny's claim to the contrary, that we had not been employing ordinary contract-interpretation principles. What is hard to disentangle, however, is how many, if any, of the contract principles created by the Yard-Man line of cases survive Tackett. Presumably, not every contract-interpretation principle found in those cases impermissibly relied on inferences in favor of employees. But, Tackett required us to revisit those old rules to weed out impermissible assumptions and inferences.

         On remand from the Supreme Court, we interpreted the high Court's instructions, and noted the following, non-exhaustive list of ordinary principles of contract law:

• [A]s with any other contract, the parties' intentions control.
• Where the words of a contract in writing are clear and unambiguous, its meaning is to be ascertained in accordance with its plainly expressed intent.
• Although a court may look to known customs or usages in a particular industry to determine the meaning of a contract, the parties must prove those customs or usages using affirmative evidentiary support in a given case.
• [T]he written agreement is presumed to encompass the whole agreement of the parties.
• Courts [should] avoid constructions of contracts that would render promises illusory because such promises cannot serve as consideration for a contract. . . . [A] promise that is "partly" illusory is by definition not illusory.
• [C]ourts should not construe ambiguous writings to create lifetime promises. . . . [C]ontracts that are silent as to their duration will ordinarily be treated not as "operative in perpetuity" but as "operative for a reasonable time."
• [T]raditional rules of contractual interpretation require a clear manifestation of intent before conferring a benefit or obligation.
• Contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.
• When a contract is silent as to the duration of retiree benefits, a court may not infer that the parties intended those benefits to vest for life.

Tackett v. M & G Polymers USA, LLC, 811 F.3d 204, 208 (6th Cir. 2016) (Tackett III) (citing Tackett, 135 S.Ct. at 933-37). The Tackett III court went on to cite additional principles highlighted ...


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