The ERISA Litigation Newsletter - November 2015

Editor's Overview

This month we take a look at how the lower courts have been dealing with claims for retiree health benefits after the U.S. Supreme Court's ruling in M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015). As discussed below, notwithstanding what would seem to be a clear pronouncement by the Court to apply ordinary contract principles and that lower courts should not construe ambiguous writings to create lifetime promises, there remains uncertainty as to how the Court's ruling should be applied in practice. As always, please be sure to review the rulings, filings, and settlements of interest.

Retiree Health Benefits Post-Tackett: The Need For Clear and Unambiguous Language*

By Madeline Rea

Employers often agree in collective bargaining to provide their unionized employees with health benefits after employment ends and into retirement. The duration of these promises is sometimes unclear, however. Unlike pension benefits, which generally vest pursuant to ERISA, employers are usually permitted to stop providing retiree health benefits in their sole discretion. A facial review of the collective bargaining agreement (CBA) does not always resolve whether, by agreeing to provide retiree benefits, the employer intended to relinquish this right, such that the retiree benefits vest contractually.

Earlier this year, the U.S. Supreme Court resolved a long-standing issue as to what rules should govern the construction of promises of retiree benefits contained in CBAs. M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015). The Court ruled that there was no presumption favoring the vesting of these benefits, and that ordinary principles of contract construction should apply. Notwithstanding what would seem to be a clear pronouncement by the Court, there remains uncertainty as to how the Court's ruling should be applied in practice. This article reviews the Tackett decision and how the lower courts have applied it thus far, and concludes with some perspectives looking ahead.

M&G Polymers USA, LLC v. Tackett

In Tackett, a class of retirees sued their former employer's successor, M&G Polymers, after it announced that it would begin requiring retirees to contribute toward their health benefits. The CBA stated, in relevant part, that certain retirees 'will receive a full Company contribution towards the cost of [health care] benefits.' M&G Polymers claimed that the right to contribution-free health benefits expired at the conclusion of the CBA's term. The retirees argued that the language in the CBAs guaranteed them contribution-free benefits for life.

The district court granted M&G Polymer's motion to dismiss the retirees' claim and held that the CBA clearly did not give retirees a vested right to health benefits.

On appeal, the Sixth Circuit applied the principles it established more than three decades earlier in UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983). The Sixth Circuit relied on the context of labor negotiations to inform its decision and assumed it was 'unlikely' that the Union would have agreed to the provision as written if the employer could unilaterally change the contribution amount. It also relied on provisions in the CBA tying eligibility for health care to eligibility for pension benefits - which are for life - to find that there was an intent to vest the retiree health benefits. The Sixth Circuit thus held that the retirees had stated a plausible claim and remanded the case for further consideration. On remand, the district court...