RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 10a0157p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

DANIEL WOOD; RONALD GOINS; PRISCILLA

SUE STREET,

Plaintiffs-Appellees,

v.

DETROIT DIESEL CORPORATION,

Defendant-Appellant,

and

INTERNATIONAL UNION, UNITED

AUTOMOBILE, AEROSPACE AND

AGRICULTURAL IMPLEMENT WORKERS OF

AMERICA and ITS LOCAL 163,

Third Party.

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No. 09-1252

Appeal from the United States District Court

for the Eastern District of Michigan at Detroit.

No. 05-74106—Denise Page Hood, District Judge.

Argued: January 22, 2010

Decided and Filed: June 3, 2010 

Before: SILER, ROGERS, and McKEAGUE, Circuit Judges.

_________________

COUNSEL

ARGUED: Thomas G. Kienbaum, KIENBAUM, OPPERWALL, HARDY & PELTON,

P.L.C., Birmingham, Michigan, for Appellant. Andrew A. Nickelhoff, SACHS

WALDMAN, Detroit, Michigan, for Appellees. ON BRIEF: Thomas G. Kienbaum,

William Bruce Forrest, III, KIENBAUM, OPPERWALL, HARDY & PELTON, P.L.C.,

Birmingham, Michigan, for Appellant. Andrew A. Nickelhoff, SACHS WALDMAN,

Detroit, Michigan, for Appellees.

ROGERS, J., delivered the opinion of the court, in which SILER, J., joined.

McKEAGUE, J. (pp. 16-19), delivered a separate dissenting opinion.

1
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 2

_________________

OPINION

_________________

ROGERS, Circuit Judge. Detroit Diesel Corporation and the union representing

Detroit Diesel’s workers entered into a series of agreements purporting to cap Detroit

Diesel’s contributions to retiree health care benefits for workers who retired between 1993

and 2004. Both Detroit Diesel and the union intended this agreement to reduce Detroit

Diesel’s balance sheet liability after an accounting rule change in late 1992 required—for

the first time—that Detroit Diesel account for retiree health care costs on an accrual basis.

Detroit Diesel and the union did not renew the agreements capping benefits in the 2004

bargaining cycle, instead implementing a new retiree health care program for post-2004

retirees. The parties dispute whether the caps continue to apply to 1993-2004 retirees.

Interpreting the relevant agreements to provide for continued application of the caps is the

most sensible reading of those agreements, is consistent with Detroit Diesel’s accounting

obligations, and is consistent with our precedents. The agreed caps therefore continue to

apply to 1993-2004 retirees.

I.

Detroit Diesel Corporation designs and manufactures diesel engines at a plant in

Detroit, Michigan. The International Union, United Automobile, Aerospace, and

Agricultural Workers of America Local 163 (UAW) represents the production and

maintenance personnel employed by Detroit Diesel. Operating under an agreement

collectively bargained between Detroit Diesel and the UAW, Detroit Diesel provided health

care insurance coverage to its retirees as of 1993. In that year, Detroit Diesel and the UAW

entered into the first of a series of “Cap Agreements,” which purported to limit the yearly

expenditures by Detroit Diesel for the health care costs of workers who retired after the first

Cap Agreement’s effective date. This case concerns the interpretation of those agreements.

The parties entered into the negotiations that eventually led to the first of the Cap

Agreements as a result of an accounting rule—FAS 106—promulgated by the Financial

Accounting Standards Board in December 1992. That rule required, for the first time, that

publicly traded companies, including Detroit Diesel, account for retiree health care costs on
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 3

an accrual basis. FAS 106 required companies to recognize a liability for the present value

of all of their future payments for retiree health care expenditures immediately, rather than

including these costs on the company’s balance sheet on a pay-as-you-go basis. See United

Steelworkers v. Cooper Tire & Rubber Co., 474 F.3d 271, 274 n.5 (6th Cir. 2007). FAS 106

also required a presumption that companies would continue to provide the same level of

health care benefits, even when those benefits were not vested. Detroit Diesel’s thenChairman and CEO testified that Detroit Diesel had a capital base of approximately fifty to

seventy million dollars in late 1992 and early 1993, and that FAS 106, if implemented

without any change to Detroit Diesel’s collective bargaining agreements (CBAs), would

have resulted in Detroit Diesel’s recognizing a one hundred million dollar liability. Such a

change, the then-Chairman testified, could have bankrupted the company by rendering it

unable to obtain capital.

To avoid this outcome, as well as to protect the employees’ profit sharing and jobs,

Detroit Diesel and the UAW entered into the first of the Cap Agreements on January 7, 1993.

This 1993 Cap Agreement provided:

The parties agree to limit [Detroit Diesel]’s contribution toward

retiree health benefit premiums. The 1993 contribution limit will be 110%

of 1992 cost per average hourly employee. The 1994 contribution limit will

be 110% of the 1993 limit or 110% of the 1993 cost per average employee,

whichever is greater. These limits are for retirees under the age of 65. Post

age 65 contribution limits are 50% of the pre-65 amounts.

The above contribution limit is the maximum amount that [Detroit

Diesel] will pay per year for health care premium values for each eligible

retiree.

The above contribution limits apply to employees who have

retirement dates effective on or after the signing date of this agreement.

The impact of FAS 106 transition obligation will not affect

employee profit sharing.

The 1993 contribution limit proved to be $6,710, and the 1994 limit was $7,381. The 1993

Cap Agreement also provided that the parties would establish a Voluntary Employee Benefit

Association (VEBA) Trust. The agreement provided that the parties would “utilize this

VEBA Trust to automatically pay any premiums in excess of the contribution limit for retiree

health care costs and such other benefits as may be allowed under VEBA regulations and

agreed to by the parties.” Detroit Diesel agreed to contribute $200,000 to the trust in 1993
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 4

1

The parties submitted a great deal of extrinsic evidence relating to the 1993 Cap Agreement.

Because the agreement was unambiguous, as explained below, we do not rely on that evidence in deciding

this case and therefore do not summarize it here. See Noe v. PolyOne Corp., 520 F.3d 548, 552 (6th Cir.

2008).

and $100,000 in 1994. The parties also agreed that the Detroit Diesel/UAW Joint Training

Fund would contribute $100,000 to the trust in each of 1993 and 1994. The 1993 Cap

Agreement further provided that “[i]f either party has an issue regarding benefits paid out

of the [VEBA] [T]rust and/or the amount or sources of funding into the trust that cannot be

resolved by the [VEBA] Committee, then . . . such issue will be collectively bargained

among the parties.”1

Contemporaneously with the signing of the 1993 Cap Agreement, Detroit Diesel

Senior Vice-President Paul Walters signed a letter addressed to UAW Region 1A

Director Robert King, which stated in part:

It is the purpose of this letter to state unequivocally that:

1. The [1993 Cap Agreement] limits were established for

the purpose of minimizing the financial impact of FAS

106 while still complying with the purpose and intent of

such standard.

. . . .

3. [Detroit Diesel] fully recognizes, acknowledges and

hereby confirms that retiree health care benefits for

[Detroit Diesel]/UAW employees have been and will

continue to be life-time benefits and that establishment of

“contribution limits” in no way modifies or negates this

commitment.

The CBA in effect in 1993 expired in 1994. After collective bargaining, the

parties entered into the second Cap Agreement, dated August 26, 1994, which was a

companion to the 1994 Master CBA. This 1994 Cap Agreement provided, “The current

limit of [Detroit Diesel]’s contribution toward post-retirement Health Care, of $7,381,

will remain at that amount during the life of the 1994 [Detroit Diesel]/UAW Master

Agreement.” The 1994 Cap Agreement also provided that the VEBA Trust would

receive $1,000,000 per year from the following sources: $420,000 per year from the

employee profit-sharing pool, $500,000 per year from the Detroit Diesel/UAW Joint

Training Fund, and $80,000 per year from Detroit Diesel.
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 5

The 1994 CBA expired in 1998. The third Cap Agreement was signed around

March 3, 1999, as a companion to the 1998 Master CBA, and it provided:

1. The current [sic] of [Detroit Diesel]’s contribution toward

post-retirement healthcare for those employees hired prior

to August 30, 1998 of $7,381 will remain at that amount

during the life of the 1998 [Detroit Diesel]/UAW Master

agreement.

2. Annual Contributions of $500,000 will be made into the

[Detroit Diesel] VEBA Trust for the years [1999-2004]

from the [Detroit Diesel]/UAW Joint Training Fund

account.

The 1998 Master CBA expired in 2004. Detroit Diesel and the UAW entered into a new

Master CBA in 2004 that implemented a new health care program for post-2004 retirees.

The parties did not enter into any additional agreements regarding Detroit Diesel’s

contribution limits for 1993-2004 retirees or regarding post-2004 contributions to the

VEBA Trust. Within the next two years, the funds in the VEBA Trust were depleted.

In August 2005, Detroit Diesel notified retirees who had retired between 1993 and 2004

that they would be responsible for the above-cap costs of their health care beginning in

January 2006. For some retirees, such costs were more than eight hundred dollars per

month.

Plaintiffs, who are among the retirees notified that they would have to pay abovecap costs, sued Detroit Diesel in October 2005 under the Labor-Management Relations

Act, 29 U.S.C. § 185, and the Employee Retirement Income Security Act, 29 U.S.C.

§ 1132(a)(1)(B), arguing that they were entitled to fully funded, lifetime health care

benefits. The district court granted plaintiffs’ motion for a preliminary injunction

requiring Detroit Diesel to continue providing fully funded health care benefits to the

retirees during the pendency of this action. Wood v. Detroit Diesel Corp., No. 05-74106,

2005 WL 3579169 (E.D. Mich. Dec. 30, 2005). The district court reasoned that because

none of the agreements between Detroit Diesel and the UAW expressly stated that

retirees would have to contribute to health care premiums, the plaintiffs had

demonstrated a likelihood of success on the merits. Id. at *5. We rejected this reasoning
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 6

on appeal, holding that the lack of express provision for retiree contributions was not

sufficient by itself to establish a likelihood of success because the burden was on the

plaintiffs to demonstrate that they had vested rights to health care benefits. Wood v.

Detroit Diesel Corp., 213 F. App’x 463, 466-67 (6th Cir. 2007) (citing Yolton v. El Paso

Tenn. Pipeline Co., 435 F.3d 571, 579-80 (6th Cir. 2006)). But we nevertheless upheld

the grant of a preliminary injunction, holding that based on the language in the Paul

Walters letter that “health care benefits for [Detroit Diesel]/UAW employees have been

and will continue to be life-time benefits,” the plaintiffs had “some likelihood” of

success, though perhaps not a “strong likelihood.” Id. at 471.

The parties conducted additional discovery before the district court and then filed

cross-motions for summary judgment. The district court granted the plaintiffs’ motion

for summary judgment and denied the defendant’s motion. Wood v. Detroit Diesel

Corp., No. 05-74106, slip. op. at 44-45 (E.D. Mich. Feb. 10, 2009). The district court

primarily relied on its conclusion that the CBAs in effect from 1993-2004 demonstrated

an intent to vest fully funded, lifetime health care benefits to Detroit Diesel retirees. See

id. at 7-24. The district court found that the Cap Agreements could not alter this vested

obligation. Id. at 30, 36. The district court also found that the Cap Agreements were

ambiguous and that the extrinsic evidence conclusively revealed that the Cap

Agreements were never intended to have any substantive effect. Id. at 38-43. Detroit

Diesel now appeals, arguing that the Cap Agreements apply and that they

unambiguously establish that retirees are entitled only to capped benefits.

II.

Detroit Diesel is entitled to summary judgment because the only coherent reading

of the Cap Agreements establishes that Detroit Diesel retirees are entitled to lifetime,

capped health care benefits. For a Detroit Diesel employee who retired in a given year

under one of the Cap Agreements, the cap amount applicable to that year both

determined and limited the extent of Detroit Diesel’s vested obligation to that retiree.

The language of the Cap Agreements plainly determines this outcome for the

years enumerated by those Cap Agreements. Consistent with the arguments of the
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 7

parties, we assume that the CBA in effect before the signing of the 1993 Cap Agreement

granted Detroit Diesel retirees fully funded, lifetime health care benefits under the rules

announced by Cole v. ArvinMeritor, Inc., 549 F.3d 1064 (6th Cir. 2008), and Noe v.

PolyOne Corp., 520 F.3d 548 (6th Cir. 2008). In the 1993 Cap Agreement, Detroit

Diesel and the UAW “agree[d] to limit [Detroit Diesel]’s contribution toward retiree

health benefit premiums.” The 1993 Cap Agreement also provided for the creation of

a VEBA Trust and the funding of that trust, and the parties agreed to “utilize this VEBA

Trust to automatically pay any premiums in excess of the contribution limit for retiree

health care cost.” Detroit Diesel employees who retired after the effective date of the

1993 Cap Agreement received their vested health care benefits subject to the limitations

imposed by that agreement. Thus, an employee retiring in 1994 did so knowing that

Detroit Diesel would pay only the capped amount for that employee’s retirement benefits

in 1994, and that the VEBA Trust would pay any excess costs to the extent that the trust

had sufficient funds. Detroit Diesel was plainly not obligated to pay amounts above the

cap levels, even if the VEBA Trust had insufficient funds, as the 1993 Cap Agreement

provided that the specified contribution limits were “the maximum amount that [Detroit

Diesel] will pay per year for health care premium values for each eligible retiree.” The

necessary implication of this contract provision is that retirees were responsible for

above-cap costs to the extent that the VEBA Trust was insufficient to pay those costs,

even if the 1993 Cap Agreement did not directly state this fact.

The same cap continued to apply after the dates covered by a given Cap

Agreement under the plainest reading of the Cap Agreements in light of this court’s

vesting rules. Under this circuit’s precedents—which predate the Cap Agreements at

issue in this case—health care benefits vest at the point of retirement. Winnett v.

Caterpillar, Inc., 553 F.3d 1000, 1010-11 (6th Cir. 2009); UAW v. Yard-Man, Inc., 716

F.2d 1476, 1482 & n.8 (6th Cir. 1983). In the 1993 Cap Agreement, the parties agreed

“to limit [Detroit Diesel]’s contribution toward retiree health benefit premiums” without

providing for an expiration date for the limitation. This indicates the broad shift made

by the Cap Agreements, which was from an entitlement of a defined benefit—fully

funded, lifetime health care benefits—to a defined contribution—the capped dollar
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 8

amount. The vested rights of an employee who retired under one of the Cap Agreements

were restricted by the parties’ agreement “to limit [Detroit Diesel]’s contribution,” and

thus that employee could not have been entitled—at the point of that employee’s

retirement—to vested, lifetime, unlimited health care benefits.

This conclusion is supported by the fact that a vested right to fully funded,

lifetime health care benefits would be inconsistent with this court’s obligation to

interpret the provisions of the Cap Agreements “as part of the integrated whole” and

“consistently with the entire document and the relative positions and purposes of the

parties.” Yolton, 435 F.3d at 579 (quoting Yard-Man, 716 F.2d at 1479). If the caps

imposed by the Cap Agreements expired after the dates covered by a given Cap

Agreement, this would render those agreements incoherent and would directly

undermine the undisputed purpose of the Cap Agreements, which was, in the language

of the Paul Walters letter, “minimizing the financial impact of FAS 106 while still

complying with the purpose and intent of such standard.” Taking the 1993 Cap

Agreement as an example, it cannot be that the caps imposed for workers retiring in

1994 expired in 1995 when that Cap Agreement no longer applied to newly retiring

workers. In part, this is because it would not make any sense to impose a cap on retiree

health care expenses only in the first year of retirement; such an agreement would not

be consistent with any applicable purpose. More specifically, it certainly would not be

consistent with the parties’ clear purpose to reduce Detroit Diesel’s FAS 106 liability

while still complying with the purpose and intent of FAS 106. If the cap applicable to

a 1994 retiree expired in 1995, then the total expected liability for that retiree’s health

care expenses would not be reduced for any year after 1994. To achieve the purpose of

the Cap Agreements, those agreements must have limited the vested rights of Detroit

Diesel retirees both during and after the years covered by the Cap Agreements. 

That FAS 106 requires employers to presume that current policies will be

continued in the future does not mean that Detroit Diesel could have been obligated to

provide fully funded lifetime health care benefits yet report a lower obligation to

investors. FAS 106 generally provides that, “[a]bsent evidence to the contrary, it shall
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 9

be presumed that an employer that has provided postretirement benefits in the past or is

currently promising those benefits to employees will continue to provide those future

benefits.” This prevents employers from falsely assuming that they will cease offering

retirement benefits to workers who retire in future years merely because those workers

are not yet entitled to vested benefits. FAS 106 similarly provides that “[a]ll

assumptions shall presume that the plan will continue in effect in the absence of

evidence that it will not continue.” FAS 106 does not allow companies to presume the

impossible, for the presumption only applies in the absence of evidence to the contrary.

If retirees had a vested right to fully funded, lifetime health care expenses after the years

covered by a given Cap Agreement, then Detroit Diesel could not have presumed

otherwise.

Additionally, our precedents with respect to general durational clauses in CBAs

support the conclusion that the caps continued to apply after the years specifically

covered by the Cap Agreements. The durational limits in the Cap Agreements were

much like the general durational clauses in many CBAs. We have repeatedly considered

CBAs that contain language which, for instance, states that the insurance provisions of

a CBA “shall continue in effect until the termination of the [CBA] of which this is a

part.” Cole, 549 F.3d at 1071. Even though this language would apparently imply that

retiree health benefits would also expire at the termination of the CBA, the rule in this

circuit is that “[g]eneral durational provisions only refer to the length of the CBAs and

not the period of time contemplated for retiree benefits. Absent specific durational

language referring to retiree benefits themselves, courts have held that the general

durational language says nothing about those retiree benefits.” Id. (quoting Yolton, 435

F.3d at 580-81). We apply this rule because while “the retirement package available to

someone contemplating retirement will change with the expiration and adoption of

CBAs, . . . someone already retired under a particular CBA continues to receive the

benefits provided therein despite the expiration of the agreement itself.” Id. (emphasis

omitted) (quoting Yolton, 435 F.3d at 581). This rule applies to manage the tension

between this court’s vesting rules, which contemplate fixed, long-term benefits, and the

contracts we are called upon to interpret, which are durationally limited. Likewise, the
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 10

2

This reading of the contract leaves some uncertainty whether workers who retired in 1993 are

entitled to the 1993 cap level ($6,710) or the 1994-2004 cap level ($7,381). Because Detroit Diesel is

apparently capping all retiree benefits at the higher, 1994-2004, level, we need not resolve this question.

3

For this reason, the caps did not deprive Detroit Diesel employees of any vested rights, as

suggested by the court below, Wood v. Detroit Diesel Corp., No. 05-74106, slip. op. at 30, 36 (E.D. Mich.

Feb. 10, 2009).

Cap Agreements in this case impact the vested, long-term rights of Detroit Diesel

retirees even though the Cap Agreements themselves are limited to certain years. By

analogy to general durational clauses, thus, the caps applicable “to someone

contemplating retirement will change with the expiration and adoption” of Cap

Agreements, but “someone already retired under a particular” Cap Agreement “continues

to receive the benefits provided therein despite the expiration of the agreement itself.”2

Cf. id.

An interpretation of the Cap Agreements under which the caps applied only as

long as they were renewed by the parties is also inconsistent with the policy

considerations underlying our precedents regarding vested benefits. This court’s vesting

precedents are based on the idea that “it is unlikely that [life and heath insurance benefits

for retired workers], which are typically understood as a form of delayed compensation

or reward for past services, would be left to the contingencies of future negotiations.”

Yard-Man, 716 F.2d at 1482. Thus, retiree health care benefits are vested at the point

of retirement because “the union owes no obligation to bargain for continued benefits

for retirees” and because it would be unfair to allow future agreements between the

employer and the union to reduce the pension benefits of retirees when neither the union

nor the employer is required to represent those retirees. See id. There is therefore no

difference between saying that the union and the employer were able to continue the

caps in future bargaining rounds and saying that any above-cap benefits were not vested.

If the employees had a vested right to above-cap contributions from Detroit Diesel, then

no agreement between Detroit Diesel and the UAW could have reduced that right. The

Cap Agreements recognized this fact by explicitly exempting already-retired workers

from the caps.3

 But workers who retired after the Cap Agreements were effective

received vested rights subject to the cap. Detroit Diesel and the UAW might have
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 11

altruistically agreed in later years to provide greater benefits to the retirees—as they

effectively did, by agreeing to VEBA Trust contributions—but the vested rights were

only to the capped contributions.

Because there is no textually plausible alternative interpretation of the Cap

Agreements that is consistent with both Detroit Diesel’s accounting obligations and our

precedents, the Cap Agreements unambiguously continue to limit the vested benefits to

which 1993-2004 Detroit Diesel retirees are entitled. Detroit Diesel is therefore entitled

to summary judgment, and we need not consider any of the extrinsic evidence presented

by the parties. See Noe, 520 F.3d at 552.

This conclusion withstands a number of arguments advanced, implicitly or

explicitly, by the plaintiffs. The Cap Agreements cannot be regarded as sham

agreements intended only to disguise the nature of Detroit Diesel’s retiree obligations

for accounting purposes. Detroit Diesel substantially reduced the financial liability it

reported under FAS 106 on the basis of the Cap Agreements. If those agreements had

no binding effect, then this was plainly deceptive accounting. As explained above, no

creative reading of FAS 106’s presumption rules could allow Detroit Diesel to report

capped future liabilities if retirees were entitled to vested uncapped benefits. Nor is it

a sufficient response for the plaintiffs to argue that any reporting issues were the

company’s responsibility alone. The parties entered into the agreement with the joint

purpose of reducing Detroit Diesel’s reported liabilities under FAS 106, and not only

must we interpret the Cap Agreements “consistently with . . . the purposes of the

parties,” Yolton, 435 F.3d at 579, but we are loath to determine that the two sophisticated

parties in this case entered into an agreement that was inconsistent with the applicable

accounting standards. Additionally, the interpretation of the Cap Agreements as

meaningless finds no grounding in the text of that agreement, as that text both

specifically delineates the caps for Detroit Diesel’s obligations and states that Detroit

Diesel will not have to pay any amounts above those caps.

The fact that the VEBA Trust was set up to pay above-cap costs does not answer

the question of who is responsible for above-cap costs when that trust is depleted. There
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 12

are three plausible parties that could contribute to retiree health care costs: Detroit

Diesel, the VEBA Trust, and the retirees. Detroit Diesel is responsible for payments up

to the capped amounts, but those capped amounts are “the maximum amount that

[Detroit Diesel] will pay per year for health care premium values for each eligible

retiree.” The VEBA Trust was created “to automatically pay any premiums in excess

of the contribution limit for retiree health care costs,” but it could only do so to the

extent that it was not depleted. Once the VEBA Trust was depleted, the only parties

remaining who could pay above-cap costs were the retirees. Additionally, as discussed

above, any implicit requirement that Detroit Diesel pay above-cap costs, even if limited

to the case in which the VEBA Trust was depleted, would have been inconsistent with

the reporting position taken by Detroit Diesel.

As with the assumptions regarding the caps themselves, the assumptions required

by FAS 106 with respect to the VEBA Trust do not change this reality. Detroit Diesel

would not be able to assume under FAS 106 that there would be future contributions to

the VEBA Trust and thus reduce its projected liability if its retirees had vested rights to

fully funded, lifetime health care benefits. FAS 106 allows money placed in a trust for

the payment of benefits to be considered an asset of the benefit plan (and thus reduce the

employer’s liability). But FAS 106 explicitly states that “[a]ssets not segregated in a

trust, or otherwise effectively restricted, so that they cannot be used by the employer for

other purposes are not plan assets for the purpose of this Statement, even though the

employer may intend that those assets be used to provide postretirement benefits.” This

prevents Detroit Diesel from assuming, for FAS 106 purposes, that additional

contributions would be made to the VEBA Trust from some unspecified source such that

the VEBA Trust would always pay for healthcare benefit costs above the capped

amount. A natural reading of FAS 106 therefore prevents Detroit Diesel from assuming

that its obligations to its retirees were capped unless its liability truly was limited.

The plaintiffs argue that Cole and Noe, as well as the Paul Walters letter,

establish that Detroit Diesel employees had, as of 1993, a vested right to fully funded,

lifetime health care benefits, and that the Paul Walters letter promises that those benefits
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 13

will not in any way be reduced. This argument conflicts with the language of that letter,

which states only that “retiree health care benefits . . . have been and will continue to be

life-time benefits,” and which does not comment upon whether the benefits are capped

or uncapped. The plaintiffs respond that this reading renders the Paul Walters letter

valueless, for it merely states that the retirees have lifetime benefits, and this was certain

given the underlying CBAs. This response relies upon an anachronistic view of the Cap

Agreement negotiations; although it might be clear now, after Noe and Cole, that the

CBA in effect in 1993 provided Detroit Diesel workers with vested benefits, this was not

clear at the time. The plaintiffs cite what they call the Golden-Meridian line of cases for

the proposition that the CBAs in effect in 1993 provided for vested benefits. See Golden

v. Kelsey-Hayes Co., 73 F.3d 648 (6th Cir. 1996); McCoy v. Meridian Auto. Sys., Inc.,

390 F.3d 417 (6th Cir. 2004). But both Golden and Meridian post-date the Paul Walters

letter. Further, when reviewing the preliminary injunction, this court held that it was

unclear whether even Golden and Meridian provided a sufficient basis on which to hold

that the CBA in effect in 1993 provided vested benefits, Wood, 213 F. App’x at 467, and

the district court held that this uncertainty was only fully resolved in light of Cole

(decided in 2008), Wood v. Detroit Diesel Corp., No. 05-74106, slip. op. at 10-11 (E.D.

Mich. Feb. 10, 2009). Thus, because it was unclear in 1993 whether Detroit Diesel

retirees were entitled to vested benefits, the commitment to lifetime benefits in the Paul

Walters letter was valuable even though it did not promise lifetime, uncapped benefits.

That the Cap Agreements never directly state that retirees might have to pay outof-pocket costs does not demonstrate much. As we recognized in our opinion reviewing

the district court’s grant of a preliminary injunction, any argument based on the lack of

such language “implicitly applie[s] a presumption that the retirees’ right to health care

benefits was vested and then require[s] Detroit Diesel to rebut the presumption by

identifying contractual language specifically authorizing the modification it tried to

implement. Detroit Diesel correctly argues that such a presumption is improper, as the

burden of proving intent to vest rests on plaintiffs.” Wood, 213 F. App’x at 466-67

(citing Yolton, 435 F.3d at 579-80).
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 14

The plaintiffs also argue that if the Cap Agreement created “vested” caps, then

those agreements should also be read to create vested obligations to contribute to the

VEBA Trust. The language of the 1993 Cap Agreement, which provides only for

specifically enumerated payments and states that disputes over the funding sources of

the VEBA Trust are to be resolved by collective bargaining, shows that this argument

is not valid.

The plaintiffs support their theory that the Cap Agreements were intended as

mere accounting devices with a significant amount of extrinsic evidence, including an

unsigned letter, purportedly from Detroit Diesel President Roger Penske, promising that

the company would provide sufficient funds to ensure that retiree costs would be fully

paid if the VEBA Trust even contained insufficient funds. We do not consider this

extrinsic evidence given our conclusion that the Cap Agreements are unambiguous. See

Noe, 520 F.3d at 552. Additionally, the promise in the purported Roger Penske letter

would turn the caps provided by the Cap Agreements into mere shams; if Detroit Diesel

had made an enforceable promise to provide lifetime, fully funded health care benefits

to retirees, then it could not have reported lesser liabilities to investors under FAS 106.

None of this is to say that the parties did not intend to provide sufficient funds

for retiree health care benefits. The parties clearly hoped that they would be able to

provide such benefits, and they relied upon future negotiations over the VEBA Trust to

reach that result. However, to accomplish the parties’ joint goal of reducing Detroit

Diesel’s reported liabilities under FAS 106, it was necessary to shift the risk of abovecap costs off the company by capping retirees’ vested health care benefits. If lifetime

fully funded benefits remained in place—no matter how structured or hidden—then

reporting a reduced liability level to investors would not have been consistent with

Detroit Diesel’s accounting responsibilities. Under the only interpretation of the Cap

Agreements that is consistent with their plain language, with honesty to investors, and

with our precedents, the caps continue to apply to 1993-2004 retirees.
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 15

 III.

For these reasons, we REVERSE the judgment of the district court and

REMAND with instructions to grant Detroit Diesel’s motion for summary judgment.
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 16

_________________

DISSENT

_________________

McKEAGUE, Circuit Judge, dissenting. Despite my colleagues’ substantial and

worthy efforts, I remain unpersuaded that Detroit Diesel succeeded, through the

language of the Cap Agreements, in altering its undisputed pre-existing commitment to

provide fully-funded lifetime health care benefits to its retirees. Because the Cap

Agreement language itself and subsequent communications between Detroit Diesel and

its employees assiduously avoided informing them of any transfer of funding

responsibility for health care benefits from Detroit Diesel to retirees before they retired,

I would hold that their entitlement to fully-funded lifetime benefits vested upon

retirement and that Detroit Diesel’s unilateral attempt to alter this entitlement in 2006

was impermissible. I therefore respectfully dissent. 

In short, my disagreement with the majority stems from five considerations.

First, Detroit Diesel does not dispute that until 1993, when the first Cap Agreement was

entered into, it had, under the governing collective bargaining agreements, provided

fully-funded lifetime health care coverage to its employees after retirement. From 1993

to 2004, plaintiffs in this action continued to work for Detroit Diesel under materially

identical collective bargaining agreements, as supplemented by the Cap Agreements.

That the material language in these UAW collective bargaining agreements effectively

gave rise to vested entitlement to fully-funded lifetime health care benefits upon

retirement is clearly established by our decisions in Cole v. ArvinMeritor, Inc., 549 F.3d

1064, 1069-70 (6th Cir. 2008), and Noe v. PolyOne Corp., 520 F.3d 549, 552 (6th Cir.

2008). These are the factual and legal premises for the fundamental question presented

in this case: whether the Cap Agreements altered the employees’ otherwise vested right

to health care benefits upon retirement.

Second, the Cap Agreement language, succinct and carefully worded, does not,

on its face, in any way limit retirees’ benefits. What is limited, or “capped,” is Detroit

Diesel’s premium contribution obligation. Further, the Cap Agreement expressly
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 17

provides that any required premiums in excess of Detroit Diesel’s contribution limit

would be paid, not by the retirees, but by the VEBA Trust, which was jointly established

and administered by Detroit Diesel and the UAW. Thus, the Cap Agreement language

does not inform employees of any change in the rights otherwise conferred on them by

the governing collective bargaining agreement. In other words, their pre-existing right

to fully-funded lifetime health care benefits upon retirement was not affected by the

plain language of the Cap Agreement. 

Third, that the plain language of the Cap Agreement meant only what it

purported to say was confirmed by Detroit Diesel in a writing executed

contemporaneously with the first Cap Agreement in 1993. Insofar as the Cap Agreement

language might be construed as impliedly transferring potential responsibility for future

above-cap costs to retirees, the UAW sought clarification from Detroit Diesel prior to

entering into the first Cap Agreement. The reassuring answer came in the form of a

letter from Detroit Diesel Senior Vice President Paul F. Walters to UAW Regional

Director Robert King, “the Walters letter,” which both sides urge us to consult in

construing the Cap Agreement language. Walters made it clear that Detroit Diesel

continued to fully recognize, acknowledge and confirm that retiree health care benefits

had been and would continue to be lifetime benefits and that the establishment of limits

on Detroit Diesel’s premium contribution obligation in no way modified or negated this

commitment. The Walters letter could hardly be clearer: the Cap Agreement limits on

Detroit Diesel’s premium contribution obligation were not to modify retiree benefits in

any way. Only after receiving this reassurance did the UAW enter into the first Cap

Agreement. 

Fourth, this understanding of the Cap Agreements’ non-impact on retirees’ rights

was substantiated by the subsequent course of conduct between the parties. For

example, in a joint presentation to employees by Detroit Diesel Chairman Roger Penske

and UAW Vice President Robert King in early 1993, the premium contribution limit was

portrayed, in conjunction with the VEBA Trust, as part of a cooperative effort to control

health care costs while protecting and maintaining existing retiree health care benefits.
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 18

Any reference to a possibility of future retiree contributions was conspicuously avoided.

And indeed, for the twelve years that the Cap Agreements were in place, the parties

managed to cooperate in such a way as to effectively limit Detroit Diesel’s liability for

retiree health care costs while continuing to afford fully-funded benefits without

requiring retiree contributions. 

Fifth, inasmuch as the Cap Agreements were precipitated in part by Detroit

Diesel’s desire to minimize the negative impact of new accounting requirements

imposed by Financial Accounting Standard 106 (“FAS 106”), it is noteworthy that

Detroit Diesel was entitled, under the terms of FAS 106, to report its retiree health care

coverage liability as effectively limited by the Cap Agreements even though the

contribution limits in place from 1993 through 2004 were not necessarily immutable.

See FAS 106, ¶¶ 30, 35, 56, 175, 180 and 182 (providing essentially that an employer

is entitled to report retiree health care liability based on assumptions derived from the

best information available and current plan terms, reducing its projected costs based on

cost-sharing provisions (e.g., VEBA Trust contributions), without needing to anticipate

any possibility of future changes, as changes are to be reported as gains or losses only

when they occur). In other words, holding that the Cap Agreements, consistent with

their plain language, did not alter employees’ right to fully-funded lifetime health care

benefits upon retirement, would not render Detroit Diesel’s past reporting of its retiree

health care liability fraudulent or deceptive or otherwise improper under FAS 106. 

In sum, these considerations lead me to conclude that the Cap Agreements,

though effective to serve their designed purpose while in effect, did not alter Detroit

Diesel employees’ otherwise vested right to fully-funded lifetime health care benefits

upon retirement. In my opinion, Detroit Diesel, by refraining from expressly transferring

responsibility for future above-cap costs to the retirees (i.e., in the event the VEBA Trust

and other cost control efforts failed), and by expressly disclaiming any intent to do so

in the Walters letter, effectively left employees’ pre-existing rights intact and assumed

the risk that the burden of above-cap costs could revert to it if the Cap Agreements were

not continued. It follows that when the Cap Agreements expired and were not
No. 09-1252 Wood, et al. v. Detroit Diesel Corp. Page 19

continued, it became incumbent on Detroit Diesel to fulfill its pre-existing and

continuing collective bargaining agreement promise, even though this could require it

to bear costs in excess of the previously applicable premium contribution limits. I do not

maintain that the majority’s contrary analysis of the existing record under the governing

law is untenable. Yet, for the reasons summarized above, I would affirm the result

reached by the district court.