Supreme Court Resolves Circuit-Split For Vesting Of Retiree Medical Benefits

On January 26, 2015, in M&G Polymers USA, LLC v. Tackett,1 the U.S. Supreme Court unanimously rejected a presumption that a promise of retiree medical benefits contained in a collective bargaining agreement was intended to confer lifetime benefits. Tackett resolves a split among the circuits as to whether retiree medical benefits are vested after expiration of the collective bargaining, and reverses a long-standing precedent in UAW v. Yard-Man, Inc.2 from the Sixth Circuit which created such a presumption.

Background

In Yard-Man, the Sixth Circuit held that retiree medical benefits would be considered to be "vested" in the absence of an explicit provision in a collective bargaining agreement setting forth the duration of the retiree medical benefits. In other words, an employer's obligation to provide retiree medical benefits would continue beyond the term of the collective bargaining agreement. In reaching its conclusion, the Sixth Circuit claimed to have relied on ordinary principles of contract law.

Other circuits rejected the Yard-Man presumption and adopted varying other standards for determining whether ambiguous language in collective bargaining agreements reflected an intent to provide lifetime retiree medical benefits. In the Second Circuit, while the court will look at the totality of communications to determine the intent of the parties, a plaintiff must point to some written language capable of reasonably being interpreted as a promise to vest such benefits.3

Tackett

The plaintiffs in Tackett were retirees who worked at a plant that was acquired by M&G Polymers USA (M&G). The collective bargaining agreement provided that M&G would pay all of the medical benefit costs for retirees who met certain criteria. There was no specific provision regarding the duration of the retiree medical benefits.

In 2006, M&G announced that retirees would be required to contribute to the cost of their retiree medical benefits. The retirees sued claiming that they had a vested right to receive retiree medical benefits paid for by M&G.

Applying the Yard-Man presumption, the Sixth Circuit concluded that in the absence of extrinsic evidence to the contrary, the collective bargaining agreement indicated an intent to provide lifetime cost-free retiree medical benefits. In reaching its conclusion, the Sixth Circuit claimed that if the collective bargaining agreement were to be read that the promise of cost-free retiree medical benefits could be terminated...