On November 10, 2014, the Supreme Court heard oral arguments in M & G Polymers USA, LLC v. Tackett, a case that has the potential to reshape significantly the legal landscape of retiree health benefit provisions in collective bargaining agreements (CBA).
At issue is the legal framework courts should apply when faced with CBA retiree health benefit cases. There is currently a wide split among several federal circuits on the issue. On the employer-friendly end of the spectrum, the Third Circuit requires that CBA’s contain a clear statement that health-care benefits are intended to vest before retirees receive any such benefits. By contrast, the Sixth Circuit, in the seminal case of United Auto Workers v. Yard-Man, 716 F.2d 1476 (6th Cir. 1983), imposes a presumption in favor of the retirees unless there is a clear statement in the CBA that these benefits do not vest upon retirement. The Second and Seventh Circuits have each adopted a middle ground, requiring that there must be some language (i.e., something short of a clear statement) in favor of vesting; if the agreement is completely silent, then there is no vested right.
If oral arguments are any indication, the Court appears strongly inclined to rule that only ordinary principles of contract interpretation apply in these cases, rather than importing the Yard-Man presumption from the Sixth Circuit. Under such principles, as Justice Kagan mentioned, “first, [the court] would look at the agreement, and if the agreement said something clearly either way, whether it was for vesting or against vesting, the agreement would control . . . . [a]nd if the agreement was ambiguous, [the court] could take extrinsic evidence to clarify the terms of the agreement.” The Court may well, as Chief Justice Roberts suggested, permit courts to refer to (and allow evidence based on) industry custom and practice in interpreting such ambiguities.
The question of how much further the Court goes beyond this baseline in announcing a standard, however, is anyone’s guess. The Second and Seventh Circuits’ standard was unappealing to the justices, in part because it is rare that a CBA will truly be silent on the issue. On the other hand, adopting either presumption at the extremes of the spectrum would also be roundly criticized as a political maneuver by the Court.
It appears that, as noted by counsel for the retirees, “there is no one-size-fits-all solution here.”
Such a holding would leave it to trial courts to make findings on a case-by-case basis. This holding would also incentivize parties to agree clearly on whether retiree benefits vest when bargaining, and stating that in writing as part of the CBA, in order to avoid prolonged litigation on the issue. A shift toward express statements would be welcomed in this setting, as only about 60% of agreements nationwide clearly state that retiree health benefits are unvested, a figure cited by Justice Kagan.
The Court has until June to make and announce its decision. For those interested in further reading, a copy of the briefs filed by the parties and amici in this case can be found at http://www.scotusblog.com/case-files/cases/mg-polymers-usa-llc-v-tackett/.