Ding-Dong, Yard-Man Is Dead! Supreme Court Decision In Tackett A Huge Win For Employers In The Retiree Healthcare Arena

On Monday, a unanimous United States Supreme Court issued its decision in M & G Polymers USA, LLC v. Tackett, Supreme Court Case No. 13-101, vacating and remanding the Sixth Circuit's holding that a group of retirees was entitled to lifetime healthcare benefits per the terms of various collective bargaining agreements. In doing so, the Supreme Court rejected UAW v. Yard-Man Inc., 716 F.2d 1476 (6th Cir. 1983), and its progeny, and directed lower courts to determine whether retiree health benefits vest based on ordinary contract principles without any presumption or inference in favor of vesting.

For employers located in the 46 states outside the Sixth Circuit, it may be unclear why this case is a big deal. For the lucky majority, a brief history lesson is in order. Outside the Sixth Circuit, a collective bargaining agreement, and the obligations it contains, expires on its expiration date. Thus, the parties must come to agreement as to the new terms at relatively regular intervals, taking into account market forces, changes in their relative bargaining positions, and their respective interests. However, in 1983, the United States Court of Appeals for the Sixth Circuit rendered its decision in Yard-Man, in which it manufactured an "inference" that retiree welfare benefits, primarily paid health insurance, would "vest" and would survive the clear expiration of the agreement.

In the 32 years following Yard-Man, employers have been subject to numerous class actions brought by unions and retired bargaining unit employees seeking fully paid health insurance benefits. The Sixth Circuit continued to apply the Yard-Man inference in addition to creating new rules of contract construction to promote the vesting of retiree health insurance benefits in the collective bargaining context. No other circuit court of appeals agreed with Yard-Man, and every other federal appellate court to consider it rejected it. In the meantime, in the four states lying within the Sixth Circuit, manufacturing employers have paid billions of dollars in legacy retiree medical benefits for which they would not have been liable anywhere else. Numerous employers tried getting the Supreme Court to weigh in on the issue, only to be repeatedly denied. Many of these matters have ended with the employer's bankruptcy.

After years of pleading, the Supreme Court finally accepted certiorari in Tackett and examined Yard-Man and the vesting "inferences" it spawned. The...