Sixth Circuit District Courts Dismiss Retiree Benefits Claims

by BakerHostetler
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Less than two years ago, the United States Supreme Court overruled 32 years of Sixth Circuit authority that had the practical effect of shackling unionized employers to retiree health insurance benefits far beyond the time they had intended. UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983). By requiring inferences in favor of retirees, and ultimately turning those inferences into ironclad rules of contract construction that eliminated most employer defenses, the court often dictated the provision of retiree health care for the life of the retirees and their dependents. See, e.g., Noe v. Polyone Corp., 520 F.3d 548 (6th Cir. 2008). That ended on Jan. 26, 2015, with the Supreme Court’s decision in M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015). We blogged that opinion here.

The holding of Tackett was clear – that the Sixth Circuit’s prior rules of construction inappropriately favored the retirees and that promises of retiree health care in labor contracts were to be governed by ordinary rules of contract construction. What became less clear was the extent to which the Sixth Circuit, after years of increasingly favoring the retirees, would actually follow that holding. In early 2016, the court of appeals issued a pair of decisions that reflected differing applications of the new Tackett rules. In the Tackett case itself (on remand from the Supreme Court), the court curiously attempted to divert the issue to the concurring opinion in Tackett rather than the majority. In the second, Gallo v. Moen, Inc., 813 F.3d 265 (2016), the court followed Tackett and its dictates much more closely. We blogged those cases here. At present, there are at least three other retiree medical cases pending before the Sixth Circuit.

In the wake of these cases, two Sixth Circuit district courts have issued back-to-back rulings in class action retiree medical cases following the Tackett majority and Gallo. In the first, Sloan v. BorgWarner, Inc., Case No. 09-cv-10918 (E.D. Mich., Dec. 5, 2016), the Eastern District of Michigan addressed retiree medical claims in a suit that was pending for seven years arising out of a tortuous bargaining history over a 1989 strike and the subsequent closing of a plant in Muncie, Indiana. Incidentally, the claims were almost certainly filed in Michigan to take advantage of the Sixth Circuit case law that was far better for the retirees than that in the Seventh Circuit (covering Indiana). In 2014 (before Tackett), the district court denied summary judgment for both parties, but vacated its order after the Supreme Court issued its decision. Under the new Tackett standards, the court found that the contract’s durational clause prevailed and granted summary judgment for the employer.

On Sloan’s heels, the Northern District of Ohio addressed the same issues in Watkins v. Honeywell Int’l, Inc., Case No. 3:16CV01925 (N.D. Ohio Dec. 19, 2016). The most interesting part of the Watkins decision was that it was a ruling on a motion to dismiss. Based upon the unambiguous contract expiration clause, the court, in a case in which the union was represented by experienced counsel in retiree benefit cases, found the terms to be unambiguous and refused to consider extrinsic evidence. It dismissed the union’s claims on a Rule 12 motion, not even requiring a motion for summary judgment.

Sloan and Watkins demonstrate that Tackett requires the dismissal of retiree benefit claims in the collective bargaining context — claims that might have been easy wins for the unions and retirees only two years ago. It remains to be seen whether the Sixth Circuit will follow Tackett as these courts did or depart from standard contract interpretation rules as it has in the past.

The bottom line: District courts in the Sixth Circuit are beginning to dismiss claims for retiree welfare benefits in the Sixth Circuit, but it remains to be seen how closely the court of appeals will adhere to Tackett’s dictates.

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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