UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

CNH AMERICA, LLC,

Plaintiff,

v. Case No. 09-10584

Honorable Patrick J. Duggan

INTERNATIONAL UNION, UNITED

AUTOMOBILE, AEROSPACE AND

AGRICULTURAL IMPLEMENT WORKERS

OF AMERICA,

Defendant.

____________________________/

OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

At a session of said Court, held in the U.S.

District Courthouse, Eastern District

of Michigan, on July 10, 2009.

PRESENT: THE HONORABLE PATRICK J. DUGGAN

 U.S. DISTRICT COURT JUDGE

On August 26, 2008, Plaintiff CNH America, LLC (“CNH” or “company”)

initiated this action against Defendant International Union, United Automobile,

Aerospace and Agricultural Implement Workers of America (“UAW” or “union”). In its

Complaint, CNH alleges that the UAW breached the terms of a collective bargaining

agreement which CNH claims released it of liability for certain retiree health insurance

benefits. CNH further alleges that the UAW misrepresented its authority to enter into the

agreement on behalf of the retirees. Specifically, CNH asserts the following claims in its

Complaint: (I) breach of a collective bargaining agreement in violation of § 301 of the

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Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185; (II) breach of an implied

warranty of authority in violation of Wisconsin law; (III) intentional misrepresentation in

violation of Wisconsin law; and, (IV) negligent misrepresentation in violation of

Wisconsin law.

Presently before the Court is the UAW’s motion to dismiss CNH’s Complaint,

filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The motion has

been fully briefed. On June 22, 2009, this Court held a motion hearing.

I. Applicable Standard

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the

legal sufficiency of the complaint. RMI Titanium Co. v. Westinghouse Elec. Corp., 78

F.3d 1125, 1134 (6th Cir. 1996). Under Federal Rule of Civil Procedure 8(a)(2), a

pleading must contain a “short and plain statement of the claim showing that the pleader

is entitled to relief.” To survive a motion to dismiss, a complaint need not contain

“detailed factual allegations,” but it must contain more than “labels and conclusions” or

“a formulaic recitation of the elements of a cause of action . . .” Bell Atlantic Corp. v.

Twombly, 550 U.S. 555, 570, 127 S. Ct. 1955, 1964-65 (2007). A complaint does not

“suffice if it tenders ‘naked assertions’ devoid of ‘further factual enhancement.’” 

Ashcroft v. Iqbal, – U.S. – , 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at

557, 127 S. Ct at 1966).

As the Supreme Court recently provided in Iqbal, “[t]o survive a motion to

dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a

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claim to relief that is plausible on its face.’” Id. (quoting Twombly, 550 U.S. at 570, 127

S. Ct. at 1974). “A claim has facial plausibility when the plaintiff pleads factual content

that allows the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556, 127 S. Ct. at 1965). The

plausibility standard “does not impose a probability requirement at the pleading stage; it

simply calls for enough facts “to raise a reasonable expectation that discovery will reveal

evidence of illegal [conduct].” Twombly, 550 U.S. at 556, 127 S. Ct. at 1965.

In deciding whether the plaintiff has set forth a “plausible” claim, the court must

accept the factual allegations in the complaint as true. Id.; see also Erickson v. Pardus,

551 U.S. 89, 127 S. Ct. 2197, 2200 (2007). This presumption, however, is not applicable

to legal conclusions. Iqbal, 129 S. Ct. at 1949. Therefore, “[t]hreadbare recitals of the

elements of a cause of action, supported by mere conclusory statements, do not suffice.” 

Id. (citing Twombly, 550 U.S. at 555, 127 S. Ct. at 1964-65).

II. Factual and Procedural Background

This case emanates from a class action lawsuit that certain retirees and surviving

spouses of retirees filed against CNH and El Paso Tennessee Pipeline Company (“El

Paso”) in 2002: Yolton v. El Paso Tennessee Pipeline Co., Case No. 02-75164 (E.D.

Mich) (“Yolton”). In Yolton, the plaintiffs claim that they are entitled to fully-funded,

lifetime retiree health insurance benefits based on collective bargaining agreements

between the retirees’ former employer and the UAW and that CNH and El Paso are liable

for the cost of those benefits above a certain “cap.” Before the Yolton lawsuit was filed,

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The agreement in fact was between the UAW and the “Case Corporation.” This Court

held in Yolton, however, that CNH is merely a continuation or alter ego of Case. Yolton, Case

No. 02-75164, 2008 WL 2566860 (E.D. Mich. March 7, 2008). Therefore, to avoid confusion,

the Court will refer to the company that entered into the 1998 agreement with the UAW as CNH.

2

In its pleadings, CNH refers to these retirees as the “Pre-Reorganization Retirees.” The

Class in Yolton includes these retirees, as well as the surviving spouses of the retirees. For ease

of reference, and because the parties know well whose benefits this case and Yolton concern, the

Court will simply use “retirees.”

4

the UAW and the retirees jointly sued CNH and El Paso. UAW v El Paso Tennessee

Pipeline Co., Case No. 02-74276 (E.D. Mich.) That previous action, however, was

voluntarily dismissed by the plaintiffs. Although the UAW is not a plaintiff in the

pending Yolton case, CNH contends that the union nevertheless has been funding the

litigation.

In Yolton, CNH has asserted that the plaintiffs are barred from recovering the

above-cap cost of their health care benefits from the company based on an agreement

between the UAW and CNH in connection with their 1998 collective bargaining

negotiations, which became an attachment to their 1998 Collective Bargaining

Agreement.1

 (See Compl. Ex. 1 Att. F.) CNH contends that, pursuant to this agreement,

it paid $24.7 million into a Voluntary Employee Benefit Association trust created to

defray the cost of health insurance premiums for certain retirees (i.e. the “Pre IPO

retirees”).2

 CNH further contends that, in exchange, the UAW promised to release CNH

of any liability for the future cost of the retirees’ benefits. CNH maintains that, at all

times during the 1998 negotiations, the UAW represented itself as the bargaining agent

for the retirees, with authority to enter into the agreement (hereafter “VEBA

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Agreement”). The Yolton plaintiffs have responded to CNH’s “accord and satisfaction”

defense arguing that the UAW lacked the authority to bargain away their vested benefits. 

This issue remains pending before this Court in Yolton.

In the meantime, CNH filed the present action seeking to hold the UAW liable for

allegedly misrepresenting its authority to enter into the VEBA Agreement on behalf of

the retirees during the 1998 negotiations. CNH alleges in its Complaint that, at all times

during the 1998 negotiations, the UAW presented itself as the bargaining agent for the

retirees, with full authority to enter into the agreement that was reached, and that CNH

reasonably relied on the UAW’s authority. CNH claims that the UAW breached the

VEBA Agreement by suing the company and funding litigation that seeks to hold the

company liable for the above-cap cost of the retiree health insurance benefits.

Regardless of the outcome of the remaining issue in Yolton, CNH contends that the

UAW is liable for substantial monetary damages. If the Yolton plaintiffs prevail, CNH

argues that it will have been deprived of the benefit of its $24.7 million bargain. If CNH

prevails, it argues that it will have lost millions of dollars in attorneys’ fees and litigation

costs as a result of the UAW’s sponsorship of the Yolton lawsuit in direct contravention

of the release.

III. Analysis

In its pending motion to dismiss, the UAW argues that each of the claims that

CNH asserts in its Complaint fails as a matter of law. As indicated above, these claims

are: (I) breach of the 1998 agreement in violation of the LMRA; (II) breach of an implied

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warranty of authority in violation of Wisconsin law; (III) intentional misrepresentation in

violation of Wisconsin law; and, (IV) negligent misrepresentation in violation of

Wisconsin law.

A. Breach of the VEBA Agreement in Violation of the LMRA

The VEBA Agreement provides, in relevant part:

During the 1998 negotiations, the Company and Union had

extensive discussions of the medical plan maintained by El

Paso Natural Gas Company for pre IPO retirees. Although

these retirees retired prior to the formation of Case and sales

of its stock to the public, Case has agreed with the UAW to

create a VEBA and to fund it with $24,700,000 in order to

pay a portion of the cost of benefits above the cost cap limit

under the El Paso Plan (plus $300,000 in 1998 to pay for the

1998 Medicare Part “B” coverage).

. . . 

The parties recognize that the VEBA is intended to complete

Case’s funding of the above cap cost and that Case will not be

required to make any further contributions to the VEBA from

its own funds.

(Compl. Ex. 1 Att. F.) Relying on this language, CNH alleges in Count I of its Complaint

that, in consideration for its payment of $24.7 million into the VEBA trust, the UAW

released CNH of any further liability for the cost of the retirees’ health care benefits. 

CNH further alleges that the UAW breached this release by suing it and funding the

Yolton litigation.

The UAW raises two arguments in support of its motion to dismiss this claim. 

First, the UAW argues that CNH’s interpretation of the agreement as a release of its

liability is not plausible based on the plain language of the agreement and because CNH

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could not have reasonably believed that the UAW could release the retirees’ vested

benefits. Second, the UAW argues that the common law does not permit CNH to sue the

UAW for breach of a “release.” Because the Court concludes that CNH’s breach of

contract claim is precluded based on the UAW’s second argument, it will address that

argument only at this time.

The UAW maintains that under the common-law and early case law, there is a

distinction between a release of liability and a covenant not to sue in that the former can

be used as an affirmative defense, only. In this Court’s review of the authority cited by

the UAW, however, the primary distinction under the common law between these two

legal instruments lies in whether joint-tortfeasors are relieved from liability (a release was

viewed as extinguishing claims against all wrongdoers; a covenant not to sue was viewed

as having no effect on the liability of other wrongdoers). See, e.g., Joseph G. Nassif,

When is a Release Not a Covenant, Part I, 34 Mo. B.J. 12 (1978); Pellett v. Sonotone

Corp., 160 P.2d 783, 786 (Calif. 1945). The authority cited by both parties nevertheless

is significant because it indicates that, regardless of the title assigned to the instrument,

the effect of the instrument “shall be determined in accordance with the intention of the

parties.” Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 345-46, 91 S. Ct.

795, 809-10 (1971); see also Simpson, 128 S.E.2d at 846 (“Where . . . construction is

necessary to determine whether it is a release or a covenant not to sue, the problem is to

determine the intention of the parties”); Nassif, When is a Release Not a Covenant, 34

Mo. B.J. at 14 (“One prime factor courts seem to look to rather consistently is the intent

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of the parties. Instruments in the form of releases may be construed as covenants not to

sue in order to carry out the intention of the parties. Intent has been held to govern . . .”). 

As they would with any contract, courts first look to the language used by the parties to

determine their intent.

For example, in Anchor Motor Freight, Inc. v. International Brotherhood of

Teamsters, Local 377, the Sixth Circuit remanded the matter to the district court to

determine whether the company’s action against the union was in fact filed in violation of

a purported covenant not to sue and thus supported the union’s counterclaim for damages

incurred in defending against the company’s action. 700 F.2d 1067, 1072 (6th Cir. 1983). 

In Isaacs v. Caterpillar, Inc., the District Court for the Central District of Illinois

dismissed the company’s counterclaim alleging that the plaintiffs’ lawsuit breached

releases they signed when their employment was terminated because the court found no

language in the releases “specifically promising not to file a lawsuit, or providing for

damages if a lawsuit is filed . . ., or providing for attorney’s fees and costs.” 702 F. Supp.

711, 713 (C.D. Ill. 1988). The court reasoned: “Caterpillar could have drafted this release

to include language giving it an offensive right of action in the event of a lawsuit. It did

not include such language.” Id. at 714. 

Turning to the present matter, nothing in the language of the VEBA Agreement

suggests that it should be construed as a covenant not to sue. The agreement mentions

nothing about lawsuits or claims against CNH, let alone a promise by the UAW not to sue

CNH. Compare the language at hand with the following language from the agreement in

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Widener v. Arco Oil & Gas Co.– where the court found the plaintiffs liable for the

damages the defendants incurred as a result of the plaintiffs’ lawsuit:

In consideration for the Special Payment Allowance under the

Atlantic Richfield Special Termination Plan offered to me by

the Company I release and discharge the Company . . . from

all claims, liabilities, demands, and causes of action known or

unknown, fixed or contingent, which I may have or claim to

have against the Company as a result of this termination and

do hereby covenant not to file a lawsuit to assert such claims.

. . . 

717 F. Supp. 1211, 1213-14 (N.D. Tex. 1989). Also compare the language in the plant

closing agreement at issue in Terrell v. Dura Mechanical Components, Inc.– which the

parties in that case agreed contained a covenant not to sue and the district court concluded

was breached by the union when it funded the plaintiffs’ lawsuit:

The Union, on behalf of itself and its members, and the

Company waive all legal claims against each other including

claims for breach of collective agreement, ERISA, wrongful

discharge, employment discrimination, the WARN Act,

National Labor Relations Act or any other statute or theory of

law. It is the intent of the parties to resolve all potential

claims by this plant closing agreement.

934 F. Supp. 874, 877 (N.D. Ohio 1996). This Court must presume that the drafters of

the VEBA Agreement would have included similar language if they intended the

agreement to include an offensive right of action in the event of a lawsuit. Absent such

language, the Court concludes that CNH is limited to employing the agreement “as a

shield rather than as a sword.” Artvale, Inc. v. Rugby Fabrics Corp., 363 F.2d 1002, 2008

(2d Cir. 1966).

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CNH argues that construing the VEBA Agreement in this matter “would allow the

UAW to obtain plainly unjust results.” (Pl.’s Mot. at 12.) According to CNH, it would

derive nothing from its $24.7 million payment into the VEBA trust. The district court

rejected a similar argument in Isaacs, reasoning that the only claim the plaintiff alleged

was a claim for breach of contract and resulting damages, not a claim for restitution based

on an “unjust enrichment” theory. 702 F. Supp. at 714. The same is true here and, to

evaluate CNH’s breach of contract claim, the Court must focus only on the intent of the

parties as set forth in their express agreement.

In conclusion, because the plain language of the VEBA Agreement cannot be

construed as a covenant not to sue, CNH’s claim that the UAW breached the agreement

by funding the Yolton litigation fails as a matter of law. The Court therefore grants the

UAW’s motion to dismiss Count I of CNH’s Complaint.

B. CNH’s state law claims

The UAW argues that CNH’s state law claims alleging breach of implied warranty

of authority (Count II) and intentional and negligent misrepresentation (Counts III and

IV) are preempted by the LMRA. Alternatively, the UAW argues that CNH fails to

allege facts sufficient to satisfy the elements of these claims.

1. Whether the LMRA preempts CNH’s state law claims

Section 301(a) of the LMRA provides:

Suits for violation of contracts between an employer and a

labor organization representing employees . . . may be

brought in any district court of the United States having

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jurisdiction of the parties . . .

29 U.S.C. § 185(a). The Supreme Court has interpreted this section as conferring federal

jurisdiction over controversies involving collecting bargaining agreements, as well as

“call[ing] on the federal courts to create a uniform federal common law of collective

bargaining.” Voilas v. Gen. Motors Corp., 170 F.3d 368, 372 (3d Cir. 1999) (citing

Textile Workers Union of Am. v. Lincoln Mills, 253 U.S. 448, 455-56, 77 S. Ct. 912, 918

(1957). To further that goal, “the Court has held that state laws that might produce

differing interpretations of the parties’ obligations under a collective bargaining

agreement are preempted [by the LMRA].” Id. (citing Local 174, Teamsters of Am. v.

Lucas Flour Co., 369 U.S. 95, 103-04, 82 S. Ct. 571, 576-77 (1962)).

The Supreme Court first articulated the standard for determining when LMRA

preemption arises in Allis-Chalmers Corp. v. Lueck. 471 U.S. 202, 105 S. Ct. 1904

(1985). The Court held: “[W]hen resolution of a state-law claim is substantially

dependent upon analysis of the terms of an agreement made between the parties in a labor

contract, that claim must either be treated as a § 301 claim . . . or dismissed as pre-empted

by federal labor-contract law.” Id. at 220, 105 S. Ct. at 1916 (internal citations omitted)

(emphasis added). The Court reasoned: 

The interests in interpretive uniformity and predictability that

require that labor-contract disputes be resolved by reference

to federal law also require that the meaning given a contract

phrase or term be subject to uniform federal interpretation. 

Thus, questions relating to what the parties to a labor

agreement agreed, and what legal consequences were

intended to flow from breaches of that agreement, must be

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resolved by reference to uniform labor law, whether such

questions arise in the context of a suit for breach of contract

or in a suit alleging liability in tort. Any other result would

elevate form over substance and allow parties to evade the

requirements of § 301 by relabeling their contract claims as

claims for tortious breach of contract.

Id. at 211, 105 S. Ct. at 1911. The focus in determining whether a state law claim is

preempted, the Allis-Chalmers Court explained, is on whether the claim “confers

nonnegotiable state-law rights on employers or employees independent of any right

established by contract, or, instead, whether evaluation of the tort claim is inextricably

intertwined with consideration of the terms of the labor contract.” Id. at 213, 105 S. Ct. at

1912 (emphasis added).

In Lingle v. Norge Division of Magic Chef, Inc., 486 U.S. 399, 108 S. Ct. 1877

(1988), the Supreme Court further elaborated on the terms “substantially dependent on”

and “inextricably intertwined with” an analysis of the terms of a collective bargaining

agreement with respect to § 301 preemption. Evaluating the plaintiff’s state law

retaliatory discharge claim, the Court concluded that the tort claim was not preempted

because the elements of the claim– that the employee was discharged or threatened with

discharge and that the employer’s motive was to deter him from exercising his statutory

rights– did not implicate the collective bargaining agreement. Id. at 407, 108 S. Ct. at

1882. The Court explained: “Each of these purely factual questions pertains to the

conduct of the employee and the conduct and motivation of the employer. Neither of the

elements requires a court to interpret any term of a collective-bargaining agreement.” Id. 

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As the Court further explained, the state law claim is not “inextricably intertwined” with

the terms of the collective bargaining agreement simply because the analysis of the state

law claim might involve consideration of the same facts as the determination of whether

the plaintiff was fired for just cause in accordance with the collective bargaining

agreement. Id. at 408, 108 S. Ct. at 1883.

Based on the above precedent, the Sixth Circuit Court of Appeals developed a twopart test to determine whether a state law claim is preempted by § 301 in Terwilliger v.

Greyhound Lines, Inc., 882 F.2d 1033 (6th Cir. 1989). First, the court must determine

whether resolution of the claim(s) requires interpretation of the terms of a collective

bargaining agreement. Id. at 1037. Second, the court must ask whether the claim(s) is

based on rights created by the collective bargaining agreement or under state law. Id. If

contract interpretation is not required and the right arises from state law, § 301

preemption is not warranted. Alongi v. Ford Motor Co., 386 F.3d 716, 724 (6th Cir.

2004). Stated in the reverse, if contract interpretation is required or the claim is based on

rights created by the collective bargaining agreement, the claim is preempted. Id. In the

present matter, the UAW argues that CNH’s state law claims only can be resolved by

interpreting the VEBA Agreement and that therefore those claims are preempted.

Under Wisconsin law, “[o]ne who purports to bind another but has no authority to

so act thereby becomes subject to personal liability on the basis of an implied warranty of

authority.” Martinson v. Brooks Equip. Leasing, Inc., 152 N.W.2d 849, 855 (Wis. 1967). 

In this Court’s view, whether the UAW purported to bind the retirees when it entered into

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the VEBA Agreement with CNH and whether it had the authority to so act only can be

determined by interpreting the agreement. This is because, if the VEBA Agreement is

interpreted as a release only of CNH’s obligation to contribute additional funds to the

VEBA trust and not as a complete release of CNH’s liability for the above-cap cost of the

retirees’ benefits, it is not a contract binding (or purporting to bind) the retirees. The

union’s power to bind the retirees– or its lack thereof– only becomes relevant if the

VEBA Agreement is interpreted as a release of CNH’s liability for the retirees’ vested

health care benefits. The UAW only needed the consent of the retirees to negotiate the

VEBA Agreement if the parties to the agreement were attempting to alter the retirees’

vested benefits therein. Allied Chem. & Alkali Workers of Am. v. Pittsburgh Plate Glass

Co., 404 U.S. 157, 181 n. 20, 92 S. Ct. 383, 398 n. 20 (1971); Mesa v. Gen. Battery

Corp., 908 F.2d 1262, 1271-72 (5th Cir. 1990). The Court therefore holds that CNH’s

implied warranty of authority claim under Wisconsin law is preempted by § 301.

CNH’s negligent and intentional misrepresentation claims under Wisconsin law

require proof of these common elements: “(1) the defendant making a factual

representation, (2) which was untrue, and (3) which the plaintiff believed to be true and

relied on to his or her detriment.” Grube v. Daun, 496 N.W.2d 106, 114 (Wis. Ct. App.

1992) (citing Whipp v. Iverson, 168 N.W.2d 201, 203 (Wis. 1969)). In addition, the

factual misrepresentation must be “material.” See Ramsden v. Farm Credit Servs. of

North Cent. Wisconsin ACA, 590 N.W.2d 1, 5 (Wis. Ct. App. 1998). CNH’s

misrepresentation claims are based on the following alleged factual representation:

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[T]he UAW [intentionally/negligently] misrepresented its

authority regarding the Pre-Reorganization Retirees by never

communicating to CNH America that it lacked authority to

bind the Pre-Reorganization Retirees in connection with the

VEBA trust and release.

(Compl. ¶¶ 51, 58.) This Court believes that the “materiality” of this alleged

misrepresentation cannot be determined without interpreting the VEBA Agreement.

As discussed above, the union’s authority to represent the retirees only would have

been material if the VEBA Agreement was intended to release CNH of its liability for the

retirees’ vested benefits. If the VEBA Agreement is interpreted as releasing CNH only of

its future obligation to fund the VEBA trust, the UAW’s alleged misrepresentation of its

authority to represent the retirees during the 1998 negotiations was not material. 

Resolution of an element of CNH’s misrepresentation claims– i.e. the materiality of the

UAW’s alleged factual representations– therefore is “inextricably intertwined with

consideration of the terms of the labor contract.” Allis-Chalmers, 471 U.S. at 213, 105 S.

Ct. at 1912. As a result, the Court concludes that CNH’s misrepresentation claims also

are preempted by § 301.

It is because CNH’s state law claims require interpretation of the VEBA

Agreement that the present matter is distinguishable from Northwestern Ohio

Administrators, Inc. v. Walcher & Fox, Inc., 270 F.3d 1018 (6th Cir. 2001)– a case on

which CNH heavily relies. In Walcher & Fox, the company claimed that the union

fraudulently induced it to sign Employer Participation Agreements (“project agreements”)

that incorporated the terms and conditions of a collective bargaining agreement by

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representing that the project agreements only would cover a limited number of workers on

a per job basis. Id. at 1022. The Sixth Circuit concluded that the company’s claim only

concerned the representations made by the union and its representative prior to the

formation of the project agreements, “not any terms of the agreements themselves.” Id. at

1031. It therefore held that the LMRA did not preempt the company’s state law fraud

claim. Id. The court relied on the Ninth Circuit’s decision in Operating Engineers

Pension Trust v. Wilson, in which the employer’s state law claim of fraudulent

inducement was premised on the union’s assertion that the employer had to sign a project

agreement immediately in order to continue working on a particular job. 915 F.2d 535,

536 (1990).

CNH’s state law claims also are premised on representations allegedly made by the

UAW prior the formation of the VEBA Agreement. However, in comparison with

Walcher & Fox and Wilson, a determination of whether those representations were

material or false requires interpretation of the labor agreement. In other words, the trier

of fact cannot conclude that the elements of CNH’s misrepresentation claims are satisfied

simply by finding that the UAW represented that it had the authority to negotiate on

behalf of the retirees prior to the formation of the VEBA Agreement. To decide whether

that representation was false and material, the trier of fact also must conclude that the

parties intended to alter the vested benefits of the retirees and determining the parties’

intent requires interpretation of their agreement.

2. Whether CNH has adequately pleaded viable claims of breach of

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an implied warranty of authority and intentional and negligent

misrepresentation

The UAW alternatively argues that CNH fails to state claims upon which relief can

be granted in Counts II-IV of its Complaint. With respect to all three counts, the UAW

argues that CNH fails to allege a viable claim because each claim depends upon the

company’s interpretation of the VEBA Agreement as releasing it of liability for the

retirees’ health care benefits. The UAW argues that this interpretation is not plausible

based on the plain language of the agreement and because CNH could not have

reasonably believed that the UAW could release the retirees’ vested benefits.

With respect to the plain language of the agreement, the UAW argues that the use

of “funding” to refer to CNH’s future obligation for the above-cap cost of the retirees’

health care benefits, demonstrates that the parties to the VEBA Agreement did not intend

to release CNH of its liability for those benefits. As the UAW explains, “funding” has a

particular meaning when used in the context of pension and/or welfare benefits in that it

refers to the deposit of money in a trust fund to pay for those benefits. Unlike pension

benefits, welfare benefits (such as the retirees’ health care benefits) can be “funded” or

“unfunded.” Whether welfare benefits are funded or unfunded, an employer’s liability for

those benefits remains if they are vested.

The UAW argues that, when describing the intent of the parties with respect to the

VEBA Agreement in its Complaint, CNH in fact only alleges that “[t]he parties intended

the VEBA trust to complete CNH America’s funding of the cost of the . . . Retirees’

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health care benefits . . .” (Def.’s Mot. at 12 (quoting Compl. ¶ 22) (emphasis added by

Def.).) Although acknowledging that CNH alleges elsewhere that its funding of the

VEBA trust was “in consideration of a full and complete release of any further liability

for CNH America with respect to the . . . Retirees’ above-cap health care costs” (Compl.

¶ 21), the UAW argues that CNH alleges no facts to support this assertion. (Id.)

The UAW also argues that the VEBA Agreement cannot be interpreted as

releasing CNH of its liability for the retirees’ vested health care benefits because the

parties could not have intended this meaning. As the UAW explains, the intent of the

parties guides a court’s interpretation of a collective bargaining agreement. (Def.’s Mot.

at 8 (citing Int’l Union, UAW v. Yard-Man, Inc., 716 F.2d 1476, 1479 (6th Cir. 1983).) 

The UAW further explains that, when the VEBA Agreement was negotiated, it was wellestablished that a union lacked the authority to modify the vested benefits of retirees

without their consent. See, e.g., Pittsburgh Plate Glass, 404 U.S. at 181 n. 20, 92 S. Ct. at

398 n. 20; Meza, 908 F.2d at 1271-72. Thus the UAW argues that, absent the retirees’

consent, the parties to the VEBA Agreement could not have intended the agreement to

modify retiree benefits. The UAW notes that CNH fails to allege in its Complaint that the

UAW made any express representation in bargaining that it received the retirees’ consent.

In response to the UAW’s first argument, CNH maintains that the “ordinary”

meaning of “funding”– that being, “the provision or allocation of money for a specific

purpose”– supports its interpretation of the VEBA Agreement. (Pl.’s Resp. at 5 (quoting

Black’s Law Dictionary 697-98 (8th ed. 2004).) CNH maintains that there is no basis for

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concluding that “funding” has any meaning but its ordinary one. As to the UAW’s

second argument, CNH argues that federal labor law does not prohibit a union from

representing retirees in negotiations and, absent a legal prohibition, it was reasonable for

CNH to rely on common-law principles of agency to conclude that the UAW was

authorized to act for the retirees during the 1998 negotiations. CNH argues that the

UAW’s authority to negotiate on behalf of the retirees therefore could have been apparent

or implied.

This Court finds that CNH demonstrates an ambiguity with respect to a critical

term of the VEBA Agreement, such that the Court cannot conclude based only on the

contract’s terms whether CNH’s or the UAW’s interpretation represents the intent of the

parties to the agreement. CNH further demonstrates that, if the retirees’ consent was

implied or apparent, the parties could have intended the agreement to release CNH of any

future liability for the above-cap cost of the retirees’ health care benefits. Admittedly, the

question is close as to whether CNH alleges sufficient facts to make its legal conclusion

that the retirees’ consent was implied or apparent plausible. The Court believes, however,

that CNH’s factual allegations are sufficient “to raise a reasonable expectation that

discovery will reveal [additional supporting] evidence . . ..” Twombly, 550 U.S. at 556,

127 S. Ct. at 1965. For example, CNH alleges that “the UAW led CNH America to

believe, and CNH America understood, that the UAW had authority to negotiate the

VEBA trust and the related release on behalf of the Pre-Reorganization Retirees.” 

(Compl. ¶ 44.) CNH also alleges that “[t]he UAW made clear that it intended to negotiate

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with CNH America on behalf of the . . . Retirees as well as CNH America’s current

UAW-represented employees.” (Id. ¶ 18.) These allegations must be presumed true

when ruling on the UAW’s motion. Erickson, 127 S. Ct. at 2200.

With respect to CNH’s intentional misrepresentation claim (Count III), the UAW

also argues that CNH fails to allege facts necessary to support its assertion that the UAW

had a duty to disclose its purported lack of authority to bind the retirees.

One element that a plaintiff must prove to establish an intentional

misrepresentation claim under Wisconsin law is that the defendant made a factual

representation. Kaloti Enterprises v. Kellogg Sales Co., 699 N.W.2d 205, 211 (Wis.

2005). CNH does not allege in its Complaint that the UAW made an express statement of

an untrue material fact. Instead, CNH claims that the UAW is liable for failing to

disclose a material fact– specifically, that it lacked the authority to release the company of

its obligation to pay the above-cap cost of the retirees’ health care benefits. The UAW

argues that silence is insufficient under Wisconsin law to support an intentional

misrepresentation claim unless the party had a duty to disclose the fact and that CNH fails

to allege facts to support a finding that the UAW had such a duty.

Under Wisconsin law, “[t]he usual rule is that there is no duty to disclose in an

arm’s-length transaction.” Kaloti Enterprises, 699 N.W.2d at 212 (citing Ollerman, 288

N.W.2d at 99-100). However, the Wisconsin courts have held that a duty arises where

the following elements are satisfied:

(1) the fact is material to the transaction; (2) the party with

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knowledge of that fact knows that the other party is about to

enter into the transaction under a mistake as to the fact; (3) the

fact is peculiarly and exclusively within the knowledge of one

party, and the mistaken party could not reasonably be

expected to discover it; and (4) on account of the objective

circumstances, the mistaken party would reasonably expect

disclosure of the fact.

Id. at 213. The UAW argues that CNH has not alleged sufficient facts to support the

second, third, or fourth elements and, therefore, it has not adequately pleaded that a duty

to disclose arose to support its claim.

In its Complaint, CNH alleges that “the UAW had a duty to disclose to CNH

America any limitations on the UAW’s authority to bind the Pre-Reorganization

Retirees.” (Compl. ¶ 50.) CNH fails to set forth sufficient factual allegations, however,

to support this legal conclusion. “The question of whether the UAW had a duty to

disclose . . . [is] ‘an extremely complex [one] that may have factual components that

make it unsuitable to address on a motion to dismiss.” (CNH’s Resp. at 21 (quoting Doe

v. Archdiocese of Milwaukee, 734 N.W.2d 827, 842 (Wis. 2007).) Nevertheless, this

complexity does not relieve CNH of its obligation to comply with Rule 8's pleading

requirements as recently clarified by the Supreme Court. According to the Court: “While

legal conclusions can provide the framework of a complaint, they must be supported by

factual allegations.” Iqbal, 129 S. Ct. at 1950. Therefore, the Court concludes that CNH

has failed to satisfy the pleading requirements necessary to state a viable intentional

misrepresentation claim based on silence.

Turning lastly to CNH’s negligent misrepresentation claim (Count IV), the UAW

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argues that the claim fails because Wisconsin has not created a tort of negligent

misrepresentation for failure to disclose. In response, CNH cites two cases in which the

Wisconsin Court of Appeals recognized such a claim. (Pl.’s Resp. at 24 (citing Conell v.

Coldwell Banker Premier Real Estate Inc., 512 N.W.2d 239 (1994) and Grube v. Daun,

496 N.W.2d 106 (1992).) The UAW replies that these cases neither created nor support a

common law claim of negligent misrepresentation by silence because the duty to disclose

in both cases was based on a state statute. CNH also provides, however, Wisconsin’s

pattern jury instruction for negligent misrepresentation which indicates that a claim may

be based on a party’s silence and that a duty to speak may arise even when a statute does

not create such a duty:

Representations of fact do not have to be in writing or by

word of mouth, but may be acts or conduct on the part of

(defendant), or even by silence if there is a duty to speak. [A

duty to speak may arise when information is asked for; or

where the circumstances would call for a response in order

that the parties may be on equal footing; or where there is a

relationship of trust or confidence between the parties.]

(Pl.’s Resp. Ex. 4 [2 Wis. Civil Jury Instructions Comm., Wisconsin Jury Instructions:

Civil § 2403, at 1 (1993)].) The Court therefore concludes that CNH’s negligent

misrepresentation claim does not fail as a matter of law because it is based on silence.

IV. Conclusion

In summary, the Court concludes that CNH’s breach of contract claim under § 301

of the LMRA (Count I) fails to state a claim upon which relief can be granted because the

plain language of the VEBA Agreement does not support a covenant not to sue. 

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With respect to CNH’s breach of implied warranty of authority and negligent

misrepresentation claims (Counts II and IV), the Court concludes that CNH has pleaded

sufficient facts to state viable claims. CNH, however, fails to plead sufficient facts to

support its legal assertion that the UAW had a duty to disclose its lack of authority to

negotiate on behalf of the retirees and that it therefore fails to state a viable intentional

misrepresentation claim (Count III). The Court also holds that § 301 preempts CNH’s

misrepresentation claim, as well as its other state law claims, because a determination of

whether the elements of those claims are met is dependent upon the Court’s interpretation

of the VEBA Agreement. The Court therefore holds that all of CNH’s claims must be

dismissed.

Accordingly,

IT IS ORDERED, that the UAW’s motion to dismiss is GRANTED.

s/PATRICK J. DUGGAN

UNITED STATES DISTRICT JUDGE

Copies to:

Bobby R. Burchfield, Esq.

Norman C. Ankers, Esq.

Julia Penny Clark, Esq.

Judith Miller, Esq.

Daniel W. Sherrick, Esq.

Michael F. Saggau, Esq.

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