Federal District Court Tosses $450 Million Retiree Health Care Suit Against GM

A federal district court in Michigan dismissed a breach-of-contract suit against General Motors over a $450 million payment for retiree medical benefits. Int’l Union, UAW v. Gen. Motors, LLC, No. 10-11366, 2013 U.S. Dist. LEXIS 173793 (E.D. Mich. Dec. 10, 2013). As part of a settlement agreement with the UAW in 2007, General Motors promised to make a $450 million payment to a voluntary employee’s beneficiary association (i.e., a trust established to mitigate medical costs for UAW-affiliated retirees). However, prior to making the $450 million payment, General Motors filed for chapter 11 protection. After emerging from bankruptcy, the newly restructured General Motors entered into a new agreement with the UAW (the “2009 Agreement”), which explicitly superseded all prior agreements between General Motors and the UAW regarding retiree medical benefits. The 2009 Agreement was silent on the $450 million payment obligation contained in the 2007 Agreement. When General Motors later refused to make the $450 million payment, the UAW sued for breach of the 2007 Agreement. Despite the complete absence of language in the 2009 Agreement as to the $450 million payment, the UAW argued that General Motors’ $450 million obligation remained. According to the UAW, if the parties had wished to extinguish such a large obligation, they would have explicitly said so in the 2009 Agreement. The court disagreed, holding that the 2009 Agreement superseded the 2007 Agreement and explaining that General Motors assumed only the obligations contained in the 2009 Agreement. Essentially, the court found that the “UAW’s efforts to turn the absence of language into language [was] reminiscent of the efforts to capture a ‘will o’ the wisp.’”

Topics:  Breach of Contract, Compliance, Employee Benefits, General Motors, Healthcare, Retirement Plan

Published In: General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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