UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

WILLARD L. SLOAN, EUGENE J.

WINNINGHAM, and JAMES L. KELLEY,

on behalf of themselves and a similarly

situated class, Case No. 09-cv-10918

Hon. Paul D. Borman

Plaintiffs, Magistrate Mona K. Majzoub

v. Class Action

BORGWARNER, INC., BORGWARNER

FLEXIBLE BENEFITS PLANS and

BORGWARNER DIVERSIFIED

TRANSMISSION PRODUCTS, INC.,

Defendants.

__________________________________________________________________

David R. Radtke (P47016)

Roger J. McClow (P27170)

Patrick J. Rorai (P65091)

McKNIGHT, McCLOW,

CANZANO,

SMITH & RADTKE, P.C.

400 Galleria Officentre, Suite 117

Southfield, MI 48034

248-354-9650; fax 248-354-9656

dradtke@kmsmc.com

rmcclow@kmsmc.com

prorai@kmsmc.com

Attorneys for Plaintiffs

Bobby R. Burchfield

KING & SPALDING LLP

1700 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

202-626-5524; fax 202-626-3737

bburchfield@kslaw.com

Elisa Angeli Palizzi (P52088)

MILLER, CANFIELD, PADDOCK

& STONE, P.L.C.

150 W. Jefferson Avenue, Suite 2500

Detroit, MI 48226

313-496-7635; fax 313-963-6420

angeli@millercanfield.com

Attorneys for Defendants

__________________________________________________________________

PLAINTIFFS’ RESPONSE BRIEF

TO DEFENDANT’S SUPPLEMENTAL BRIEF

REGARDING TACKETT AND ITS

IMPACT ON THIS CASE

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TABLE OF CONTENTS

TABLE OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. THE SUPREME COURT’S OPINION IN TACKETT DOES NOT

REQUIRE THE COURT TO GRANT SUMMARY JUDGMENT

FOR DEFENDANTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A. This Court Applied Ordinary Principles of Contract

Law Because It Reviewed Express Contractual

Language.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. This Court Applied Ordinary Principles of Contract

Law Because It Examined Extrinsic Record Evidence

After Finding the Express Contractual Language

Ambiguous... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

C. This Court Did Not Rely on the Yard-Man Inference

Rejected by Tackett.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

D. Contrary to BorgWarner’s Assertion, Tackett Did

Not Reset the Law Regarding Vesting of Retiree

Health Care Benefits.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1. BorgWarner incorrectly asserts that general

durational clauses end all benefits on

termination of the CBA even when evidence

evinces a contrary intent... . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2. BorgWarner incorrectly asserts that explicit

lifetime language is the only way a party

can show an intent to vest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3. This Court’s previous rejection of BorgWarner’s 

arguments on the reservation of rights language in

the Summary Plan Description and the so-called

“Agreement to Disagree” language in the 1990 ACME

agreement are unaffected by the Tackett Decision.. . . . . . . . . . 9

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III. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

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TABLE OF AUTHORITIES

Del Valle v. BellSouth Telcomms., Inc., 

200 Fed. Appx. 528 (6th Cir. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Ins. Co. v. Dutcher, 95 U.S. 269 (1877).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

International Union, United Automobile, Aerospace &

Agricultural Implement Workers of America v. Yard-Man, Inc., 

716 F.2d 1476 (6th Cir. 1983). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Passim

Litton Fin. Printing Div. v. NLRB, 501 U.S. 190 (1991).. . . . . . . . . . . . . . . . . . . 7, 8

M&G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (2015). . . . . . . . . . . . . Passim

Price v. Bd. of Trustees of Ind. Laborer’s Pension Fund,

632 F.3d 288 (6th Cir. 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Rodriguez-Abreu v. Chase Manhattan Bank, 

986 F.2d 580 (1st Cir. 1993). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Sprague v. Gen. Motors Co., 133 F.3d 388 (6th Cir. 1988).. . . . . . . . . . . . . . . . . . 8

Stolt-Nielsen S.A. v. Animal Feeds Int’l Corp.,

559 U.S. 662 (2010).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Zanghi v. Freightcar Am., Inc., No. 3:13-cv-146, at 46

(W.D. Pa. Mar. 30, 2015).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 4

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I. INTRODUCTION

Defendants,BorgWarner,Inc.,BorgWarnerDiversifiedTransmission Products,

Inc. and BorgWarner Flexible Benefits Plans (hereinafter “Defendants” or

“BorgWarner”) Supplemental Brief inaccurately claims that the Supreme Court’s

decision in M&G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (2015) not only did

away with the inference in favor of vesting set forth in International Union, United

Automobile, Aerospace & Agricultural Implement Workers of America v. Yard-Man,

Inc., 716 F.2d 1476 (6th Cir. 1983), but swept away many contract interpretation

rules used in determining whether a collectively bargained agreement vests retiree

health care benefits. The Defendants’ claim about the breadth of the SupremeCourt’s

decision in Tackett is exaggerated and contrary to the Court’s holdings. If

Defendants’ interpretation of the Tackett decision was accurate, then the Supreme

Court would have simply ruled in favor of the employer in that case, rather than

remanding the case to the Sixth Circuit Court of Appeals.

This Court’s Order denying the parties’Cross Motions for Summary Judgment

did notrely upon the Yard-Man inference in denying Defendants’ Motion. (Dkt. #127

passim) The Court found that the Health Insurance Agreements (“HIAs”) negotiated

by the UAW and BorgWarner contained substantial contractual evidence and

extrinsic evidence showing an intent to vest retiree health care benefits. But, in

analyzing the HIAs’ terms and extrinsic evidence, this Court concluded that there was

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a genuine issue of material fact as to whether retiree health care benefits were vested

lifetime benefits. (Dkt. #127 pp. 19-24, 52-53) That decision is still correct, even after

Tackett.

II. THE SUPREME COURT’S OPINION IN TACKETT DOES NOT

REQUIRE THE COURT TO GRANT SUMMARY JUDGMENT FOR

DEFENDANTS.

Courts must use ordinary contract law principles when interpreting CBAs. See

Tackett, 135 S. Ct. at 933 (“We interpret [CBAs] . . . according to ordinary principles

of contract law, at least when those principles are not inconsistent with federal labor

policy”).

Under ordinary contract law principles, the parties’ intentions are controlling.

See Stolt-Nielsen S.A. v. Animal Feeds Int’l Corp., 559 U.S. 662, 682 (2010). To

discern the parties’ intentions, courts must look first at the contract language and

second to extrinsic record evidence; courts must stick to this two-step approach and

cannot rely on an inference that places a thumb on the scale for either side. Tackett,

135 S. Ct. at 933-35.

A. This Court Applied Ordinary Principles of Contract Law Because

It Reviewed Express Contractual Language.

Under ordinary principles of contract law, courts must interpret CBAs by

looking first and foremost to the written terms of the CBA itself. See Tackett, 135

S.Ct. at 933. If the written terms of a contract are unambiguous, then courts must

interpret the meaning of the contract in accordance with those express terms. (Id.)

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(“Where the words of a contract in writing are clear and unambiguous, its meaning

is to be ascertained in accordance with its plainly expressed intent”).

Here, this Court understood and conformed to this principle. (Dkt. #127 pp.

15-16) After articulating the concept, this Court then followed it by reviewing the

contract language to conclude there was an issue of fact as to whether BorgWarner

agreed to provide vested lifetime retiree healthcare benefits to Plaintiffs. (Id. pp. 32-

44)

B. This Court Applied Ordinary Principles of Contract Law Because

It Examined Extrinsic Record Evidence After Finding the Express

Contractual Language Ambiguous.

This Court applied ordinary principles of contract law because, after reviewing

applicable HIAs and finding the language ambiguous as to whether the contract

language was sufficient to vest the benefits, the Court then reviewed the extrinsic

evidence. (Id. at 45-52) When contractual language does notshow an express intent,

traditional principles of contract law require courts to examine extrinsic evidence as

the means for determining the parties’ intent. See Tackett, 135 S. Ct. at 935

(explaining that a court may derive its assessment of likely behavior from record

evidence); 135 S. Ct. at 938 (Ginsburg, J., concurring) (“[W]hen the contract is

ambiguous, a court may consider extrinsic evidence to determine the intentions of the

parties”); Zanghi v. Freightcar Am., Inc., No. 3:13-cv-146, at 46 (W.D. Pa. Mar. 30,

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2015) (“The parties’ [CBAs] are ambiguous . . . . Thus, . . . the Court may look to

extrinsic evidence to determine the intentions of the parties”).

The concept that courts should use extrinsic record evidence as a means of

discerning the parties’ intent when the contract terms are ambiguous is not new; this

concept has been a well-established principle of contract law for over 100 years. See

Ins. Co. v. Dutcher, 95 U.S. 269, 273 (1877) (“There is no surer way to find out what

the parties meant, than to see what they have done”); Del Valle v. BellSouth

Telcomms., Inc., 200 Fed. Appx. 528, 534-35 (6th Cir. 2006) (holding that the district

court properly considered extrinsic record evidence to verify the parties’ intent);

Rodriguez-Abreu v. Chase Manhattan Bank, 986 F.2d 580, 586 (1st Cir. 1993) (“If

the language of the contract is ambiguous, we turn to surrounding circumstances,

undisputed extrinsic evidence, to divine the parties’ intent”); 11 Williston on

Contracts §30:7 (4th ed.) (explaining that, when a written contract is ambiguous,

“relevant extrinsic evidence of the parties’ intent” should be considered).

Here, the Court found the extrinsic evidence “pointed in different directions,”

so that testimony was necessary to discern the meaning of the extrinsic evidence.

(Dkt. #127 p. 52)

C. This Court Did Not Rely on the Yard-Man Inference Rejected by

Tackett.

This Court applied ordinary principles of contract law because it completed the

two-step approach discussed above without relying on the Yard-Man inference. The

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Supreme Court held in Tackett that courts cannot, when confronted with ambiguous

contractual language and a dearth of extrinsic record evidence, rely on the inference

approved of in Yard-Man. See 135 S. Ct. at 935 (vacating the Sixth Circuit’s ruling

because it was based on the Yard-Man inference that placed a thumb on the scale in

favor of vesting). Specifically, the Supreme Court stated: “[T]he Sixth Circuit sided

with the retirees, relying on its conclusion in [Yard-Man] that retiree health care

benefits are unlikely to be left up to future negotiations. We . . . conclude that such

reasoning is incompatible with ordinary principles of contract law.” Id.

The Yard-Man court created and applied an inference in favor of vesting

because the contractual language at issue was ambiguous and there was no extrinsic

evidence of intent on which to rely. 716 F.2d at 1480. Faced with an ambiguous

CBA and no extrinsic evidence, the Sixth Circuit relied on the inference as a tiebreaker. Id. at 1482 (“[I]t is unlikely that such benefits, which are typically

understood as a form of delayed compensation . . . , would be left to the contingencies

of future negotiations”). 

Here, this Court, like in Yard-Man, found the HIA language ambiguous (as was

the extrinsic evidence), but unlike Yard-Man, it did not rely on an inference to find

the benefits vested. In fact, here the Court implicitly rejected the Yard-Man inference

in ordering a trial when it found the contract language ambiguous. The denial of

Plaintiffs’ Motion in the face of ambiguities in the contract language and extrinsic

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evidence belies BorgWarner’s claim that the Court relied upon the Yard-Man

inference in denying its Motion.

D. Contrary to BorgWarner’s Assertion, Tackett Did Not Reset the

Law Regarding Vesting of Retiree Health Care Benefits.

BorgWarner mischaracterizes Tackett as resetting the law on vesting of retiree

healthcare benefits. (Dkt. #141 pp. 7-9) As part of this mischaracterization,

BorgWarner sets forth a number of purported “rules of construction that must now

govern construction of CBAs.” (Id. pp. 8-9) These alleged rules are not rules at all,

and most of them do not even bear any relation to this case. Two of these “rules,”

however, require further discussion.

1. BorgWarner incorrectly asserts that general durational

clauses end all benefits on termination of the CBA even when

evidence evinces a contrary intent.

First, BorgWarner incorrectly asserts that a general durational clause will end

all benefits on termination of the CBA even when evidence demonstrates an intent

to continue those benefits. (Id. p. 8) In reality, because the parties’ intent is

dispositive for contract interpretation, if evidence shows an intent to continue the

retiree benefits beyond the life of the agreement, then courts are obligated to adhere

to that intent. See Tackett, 135 S. Ct. at 937 (explaining that, while contractual

obligations might usually cease upon termination of a CBA, such a principle “does

not preclude the conclusion that the parties intended to vest lifetime benefits for

retirees”).

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Indeed, as a general rule, the expiration of a CBA will not end obligations

accrued under the contract that have not yet been satisfied. (Id.) (holding that a CBA

may provide that certain benefits continue after the agreement’s expiration) (citing

Litton Fin. Printing Div. v. NLRB, 501 U.S. 190 (1991)); Litton, 501 U.S. at 206-07

(holding that post-expiration rights may arise from the terms of the CBA and that

whether obligations survive a contract’s expiration is determined by contract

interpretation). Thus, in Litton, which was cited to and approved by the Tackett

decision, the Supreme Court explained that a CBA’s expiration does not end

“obligations already fixed under the contract but as yet unsatisfied.” 501 U.S. at 206.

In the Supreme Court’s words: “Rights which accrued or vested under the agreement

will, as a general rule, survive termination of the agreement.” Id. at 207.

2. BorgWarner incorrectly asserts that explicit lifetime language

is the only way a party can show an intent to vest.

BorgWarner incorrectly asserts that, if a contract is silent as to the duration of

retiree benefits, then courts are not allowed to find that the parties intended those

benefits to vest for life. (Dkt. #141 p. 13)

Contractual obligations (such as lifetime vesting) may arise due to the express

or implied terms of the agreement. Tackett, 135 S. Ct. at 937-38 (Ginsburg, J.,

concurring) (“[N]o rule requires clear and express language in order to show that

parties intended health-care benefits to vest. Constraints upon the employer after the

expiration date of a [CBA] . . . may . . . arise from implied terms of the expired

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[CBA]”) (internal quotation marks and citation omitted); Litton, 501 U.S. at 206-07

(holding that post-expiration rights may “arise from the express or implied terms of

the agreement itself”) (emphasis added).

Said differently, Tackett teaches that contractual ambiguity cannot be resolved

by a judicially mandated inference and that courts must instead look to actual

evidence to determine the parties’ intent to vest. See Tackett, 135 S. Ct. at 937. Thus,

in Tackett, the contract at issue lacked a specific durational clause for retiree benefits,

and the Supreme Court nevertheless remanded the case to allow the Sixth Circuit to

apply ordinary rules of contract law. (Id.) If the Supreme Court believed that an

express term granting lifetime benefits was necessary, then the absence of one in

Tackett would have been dispositive and there would have been no reason to remand

the case. (Id.)

BorgWarner supports its misreading of Tackett by relying on Sprague v. Gen.

Motors Co., 133 F.3d 388 (6th Cir. 1988). But Tackett does not hold that the

standard enunciated in Sprague applies to the interpretation of CBAs. 135 S. Ct. at

937. Rather, Tackett merely notes the standard’s inconsistency with the Yard-Man

inference. (Id.) See also Price v. Bd. of Trustees of Ind. Laborer’s Pension Fund, 632

F.3d 288, 294 (6th Cir. 2011) (finding the Yard-Man inference inapplicable to

disability pension benefits and that Sprague does not apply to collectively bargained

benefits).

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3. This Court’s previous rejection of Borgwarner’s arguments

on the reservation of rights language in the Summary Plan

Description and the so-called “agreement to disagree”

language in the 1990 ACME Agreement are unaffected bythe

Tackett decision.

In this Court’s Order denying Defendants’ Motion for Summary Judgment, it

rejected Defendants’ argument that the reservation of rights clause in the Summary

Plan Description proved that the benefits were not vested. Instead, the Court found

that the reservation of rights clause in the Summary Plan Description presented a

contractual ambiguity which created a genuine issue of material fact. (Dkt. #127 pp.

41-42)

The Court also properly rejected BorgWarner’s argument that the “agreement

to disagree” in the 1990 ACME Agreement was dispositive that the parties did not

intend the retiree health care benefits to vest. (Id. p. 52) As this Court stated:

The ‘agreement to disagree’ is an unequivocalstatement by

BorgWarner beginning in 1989, or two decades before the

shutdown of the Muncie plant, denying that the 1989 CBA

and HIA obligated to provide health care benefits to these

Plaintiffs for life and an equally strong statement by the

Union that it interpreted the 1989 [CBA and HIA] . . .

controlling collectively bargained language differently.

Again, the extrinsic evidence does little to clarify the

parties’ intent in executing the 1990 ACME agreement,

necessitating further development of these facts at trial.

(Id.)

The holding in Tackett has no impact on the Court’s finding that “agree to

disagree” language in the 1990 ACME Agreement was not dispositive on the issue

of vesting.

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III. CONCLUSION

What the Supreme Court in Tackett directed the Sixth Circuit to do on remand

is precisely what this Court did in denying theCross Motions for Summary Judgment:

Apply ordinary principles of contract law to determine whether the parties’ CBA

created a vested right to retiree benefits without reliance on an inference in favor of

either side.

Here, the Court reviewed the facts in the light most favorable to each of the

non-moving parties, and using ordinary contract law principles, found the contract

language ambiguous and that the extrinsic evidence “point[ed] in both directions.”

The Yard-Man inference was simply not relevant to this decision. Thus, this Court’s

holding is consistent with Tackett and should not be reversed. This case should be

set for trial.

Respectfully submitted,

McKNIGHT, McCLOW, CANZANO,

SMITH & RADTKE, P.C.

By: /s/ David R. Radtke

 DAVID R. RADTKE (P47016)

 ROGER J. McCLOW (P27170)

 PATRICK J. RORAI (P65091)

 Attorneys for Plaintiffs

 400 Galleria Officentre, Suite 117

 Southfield, MI 48034

 248-354-9650

 dradtke@michworklaw.com

 rmcclow@michworklaw.com

Dated: June 4, 2015 prorai@michworklaw.com

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CERTIFICATE OF SERVICE

I hereby certify that on June 4, 2015, I electronically filed the foregoing paper

with the Clerk of the Court using the ECF system which will serve it upon:

Bobby R. Burchfield Elisa Angeli Palizzi

Respectfully submitted,

McKNIGHT, McCLOW, CANZANO,

SMITH & RADTKE, P.C.

By: /s/ David R. Radtke

 DAVID R. RADTKE (P47016)

 ROGER J. McCLOW (P27170)

 PATRICK J. RORAI (P65091)

 Attorneys for Plaintiffs

 400 Galleria Officentre, Suite 117

 Southfield, MI 48034

 248-354-9650

 dradtke@michworklaw.com

 rmcclow@michworklaw.com

 prorai@michworklaw.com

P:\RHC Cases\BorgWarner\2009 MI Lawsuit\Pleadings\Resp to PL Tackett Brief.wpd

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