Court Opinion

ID: 8412000
Source: CourtListenerOpinion
Date Created: 2022-11-02 19:18:16.320902+00
Date Added: 2024-06-11T16:47:54.677025
License: Public Domain

MARTHA CRAIG DAUGHTREY, Circuit Judge,
concurring in part and dissenting in part.
I agree with the majority’s conclusion that the VEBA trust fund agreement does not contain a covenant not to sue and, for that reason, that the UAW’s funding of the Yolton litigation did not constitute a breach of the collective bargaining agreement (CBA) between the parties to this suit, of which the VEBA agreement was a part. However, I cannot agree with the majority’s decision to reverse the district court’s sound ruling that CNH America’s state-law claims against the UAW are preempted by federal law.
*796That majority decision flows primarily from reliance on, and a misreading of, the Supreme Court’s opinion in Textron Lycoming Reciprocating Engine Division, Avco Cotp. v. UAW, 523 U.S. 653, 118 S.Ct. 1626, 140 L.Ed.2d 863 (1998). In my judgment, as detailed below, the controlling case in this instance is not Textron but the Court’s earlier opinion in Allis-Chalmers Cow v. Lueck, 471 U.S. 202, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985), and its precedents and progeny, including Lingle v. Norge Division of Magic Chef, Inc., 486 U.S. 399, 108 S.Ct. 1877, 100 L.Ed.2d 410 (1988). Although the majority opinion cites both Allis-Chalmers and Lingle, my colleagues have failed to note that the latter two cases are wholly distinguishable from Textron. For this reason, I dissent from the majority’s determination that the plaintiffs state-law claims are not preempted. In view of the plaintiffs deliberate decision to pass up the opportunity to seek alternative relief on those claims in the district court, I would affirm the district court’s order granting the defendant’s motion to dismiss and dismiss the complaint without necessity of a remand.
The complaint filed by CNH America in this case refers to the VEBA trust fund agreement exclusively as a “release of liability.” Given our unanimous conclusion that the VEBA trust agreement did not protect CNH America from suit in the Yolton litigation, the remaining questions are whether that agreement did, in fact, create a release and, if so, what was actually released. CNH America alleged in its complaint that the UAW “provided CNH America with a full release from liability for the future cost of the retirees’ health care benefits that exceeded an agreed-upon ‘cap’.” The UAW, on the other hand, denies the existence of such a broad release and reads the agreement to relieve CNH America of precisely what the agreement states, i.e., the need “to make any further contributions to the VEBA from its own funds.” (Emphasis added.) The resolution of this dispute necessarily requires an interpretation of the CBA and its incorporated VEBA trust agreement, because if there was no release, there is no basis for the state-law claims.
The resolution of the dispute also requires an understanding of the context in which it arose. Hence, at the risk of trying the patience of the reader, especially with regard to the seemingly ever-changing identities of the parties in this litigation, I offer as brief a description of the context of the dispute as possible, as follows.
At the time this litigation was initiated, CNH America was the successor company to Case Corporation (formerly J.I. Case Co.), a subsidiary of Tenneco, Inc. (later El Paso Tennessee Pipeline Company). Case and the UAW had a long history of collective bargaining that had resulted in successive agreements covering, among other things, health benefits for retired employees. In 1993, Case and the UAW agreed to limit the amount of those benefits for accounting purposes,1 in what has been referred to throughout this litigation as a “cap letter.” That agreement also provided that no retiree would have to pay “above-cap costs” for health benefits before April 1, 1998.
When Tenneco reorganized in June 1994, it spun off Case in an initial public offering (IPO). As part of the reorganization, Tenneco retained liability for providing health benefits to those Case employ*797ees who retired before the IPO, leaving Case to assume the other obligations under the CBA then in effect. Faced with rapidly escalating costs, however, Tenneco (by then merged with El Paso) notified the pre-IPO retirees in October 1997 that effective April 1, 1998, they would be required to contribute $56 per month for continued health care coverage. See Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 576 (6th Cir.2006).
This notice occurred while Case and the UAW were negotiating a new CBA with a six-year duration, to take effect on April 1, 1998. As part of the new agreement, and despite the fact that El Paso was liable for the cost of health benefits for the pre-IPO retirees, Case agreed to establish a trust fund, under what was described for tax purposes as a Voluntary Employee Benefit Association or VEBA plan,2 to pay the above-cap costs of the pre-IPO retirees’ health care benefits. “ ‘[A]s a show of good will toward the UAW’,” Case contributed $24.7 million to the VEBA trust fund while, at the same time, “insisting] that it had no legal obligation to pay for the health care benefits.” Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 576 (6th Cir.2006). As part of the settlement, the parties agreed that “the VEBA [wa]s intended to complete Case’s funding of the above cap cost and that Case w[ould] not be required to make any further contributions to the VEBA from its own funds.”
Case and the UAW undoubtedly intended the VEBA trust funds to cover the above-cap costs throughout the six-year term of the 1998 CBA. As it turned out, however, the funds were exhausted by mid-2002; and El Paso notified the prereorganization retirees that they would have to contribute $290 in monthly premiums in order to continue receiving health care benefits, increasing to $501 in January 2003. Id. at 578. At that point, the pre-IPO retirees filed suit, jointly with the UAW, against both El Paso and Case, insisting that the defendant companies were responsible for the entire cost of the their benefits, including the above-cap amounts. See UAW v. El Paso Tenn. Pipeline Co., Case No. 02-74276 (E.D.Mich.2003). That action was voluntarily dismissed and then re-filed with only the retirees as plaintiffs. See Yolton v. El Paso Tenn. Pipeline Co., 318 F.Supp.2d 455 (E.D.Mich.2003). The union did, however, provide litigation support for the retirees.
The central issue in Yolton was the legal effect of successive CBA provisions guaranteeing fully-funded health care benefits to retired employees for life, which dated back as far as 1975 and had been reiterated in a series of summary-plan descriptions of benefits that Case provided annually to its employees. The retirees contended that those benefits had vested under the Sixth Circuit’s interpretation of the Employee Retirement Income Securi*798ty Act (ERISA), 29 U.S.C. § 1001 et seq., and that the failure to provide fully-funded, non-capped, lifetime benefits violated section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185. Both the district court and this court agreed. See Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 578-85 (6th Cir.2006). Once that issue was resolved in the plaintiff retirees’ favor, defendants Case and El Paso were left to dispute between themselves the question of liability for the costs of the health care benefits owed the retirees. Ultimately, we held in Yolton that El Paso alone was responsible for maintaining fully-funded health care benefits, including the above-cap costs, based on predecessor Tenneco’s assumption of liability under the 1994 reorganization agreement. Id. at 592-94.
Despite that victory, CNH America — as Case’s successor company — filed this suit against the UAW in February 2009, alleging breach of contract in violation of the LMRA’s section 301 and setting out, in addition, three state-law claims growing out of the VEBA agreement: breach of the UAW’s implied warranty of authority to release CNH America from any further obligation to pay the pre-IPO retirees’ benefits, and the union’s intentional misrepresentation and negligent misrepresentation of that authority. Citing the Supreme Court’s seminal rulings in Allis-Chalmers, 471 U.S. at 220, 105 S.Ct. 1904 (holding that “when 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 preempted by federal labor-contract law”), and in Lingle, 486 U.S. at 407, 108 S.Ct. 1877 (a state law claim “inextricably intertwined with” an analysis of the terms of a CBA is likewise pre-empted), the district court relied on the two-part test that we developed in Terwilliger v. Greyhound Lines, Inc., 882 F.2d 1033 (6th Cir.1989), to determine whether the state law claims in this case required interpretation of the CBA or the VEBA plan incorporated into the CBA:
First, the court must determine whether resolution of the claim(s) requires interpretation of the terms of a collective bargaining agreement. [Terwilliger, 882 F.2d] at 1037. Second, the court must ask whether the elaim(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.
CNH America, LLC v. UAW, 634 F.Supp.2d 851, 860 (E.D.Mich.2009). The district court held in favor of preemption, concluding that:
[W]hether the UAW purported to bind the retirees when it entered into the VEBA Agreement with CNH America 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 re*799tirees — 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, 30 L.Ed.2d 341 (1971); Meza v. Gen. Battery Corp., 908 F.2d 1262, 1271-72 (5th Cir.1990).
Id. Because the need for the retirees’ consent existed only if CNH America and the UAW were attempting to alter the retirees’ vested benefits, the district court correctly held that the implied-warranty-of-authority claim was preempted by section 301 of the LMRA.
In addition, the district court carefully interpreted and applied Wisconsin law with regard to CNH America’s claims of intentional and negligent misrepresentation, noting that:
[U]nder Wisconsin law, [such claims] 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.” Grabe v. Daun, 173 Wis.2d 30, 496 N.W.2d 106, 114 (Wis.Ct.App.1992) (citing Whipp v. Iverson, 43 Wis.2d 166, 168 N.W.2d 201, 203 (1969)). In addition, the factual misrepresentation must be “material.” See Ramsden v. Farm Credit Servs. of North Cent. Wisconsin ACA, 223 Wis.2d 704, 590 N.W.2d 1, 5 (Wis.Ct.App.1998).
Id. at 860-61. The district court observed that in its complaint, CNH America’s misrepresentation claims were based on the factual allegation that the UAW intentionally or 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.” But, the court said, the materiality of the alleged misrepresentation could not be determined without interpreting the VEBA agreement, given that the union’s authority to represent the retirees would be material only if the VEBA agreement was intended to release CNH America from its liability for the retirees’ vested benefits. If, on the other hand, the VEBA agreement was intended merely to release CNH America from making any further contributions to the VEBA trust fund, as the UAW contended (and as the language of the agreement reads), then the UAW’s alleged misrepresentation of its authority to bind the retirees during the 1998 negotiations was not material. Hence, the district court concluded, “an element of CNH America’s misrepresentation claims — i.e., the materiality of the UAW’s alleged factual [misrepresentations — therefore is ‘inextricably intertwined with consideration of the terms of the labor contract,’ ” and those claims are preempted by federal law. Id. at 861 (quoting Allis-Chalmers, 471 U.S. at 213, 105 S.Ct. 1904).
In reaching that conclusion, the district court addressed the argument, emphasized by the majority here, that the state-law claims were premised on representations allegedly made by the UAW prior to the formation of the VEBA agreement and, thus, could be considered independent of the VEBA agreement itself. But, as the court observed, “a determination of whether those representations were material or false requires interpretation of the labor agreement.” Id. As a result, “the trier of fact [could] not conclude that the elements of CNH’s misrepresentation claims are satisfied simply by finding that the UAW *800misrepresented that it had the authority to negotiate on behalf of the retirees prior to the formation of the VEBA agreement,” because in order 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.” Id. at 861-62. Thus, the district court held, the Supreme Court’s decisions in Allis-Chalmers and Lingle, as well as the Sixth Circuit cases interpreting those decisions, require federal pre-emption of the plaintiffs state-law claims.
In reaching this determination, the district court did not rely on or even cite to the Supreme Court’s opinion in Textron. But if, as the majority would have us believe, Textron is the dispositive case here, how did the district court miss it? Equally puzzling, why did Justice Scalia, the author of Textron, fail to acknowledge that the court was effectively overruling Allis-Chalmers and Lingle? Upon a close reading of these two sets of cases, the answer becomes obvious — they are wholly distinguishable, because they deal with entirely separate situations and, therefore, require different analyses.
In Allis-Chalmers, an employee filed an action in state court seeking to recover for the company’s bad faith in handling payments under a disability plan that, as here, was incorporated into a CBA that Allis-Chalmers had negotiated with the UAW. Instead of grieving the company’s periodic withholding of disability payments, as required by the CBA, the employee filed a state-law action that the Supreme Court ultimately held pre-empted by federal law:
[Wjhen resolution of a state-law claim is substantially dependent upon the terms of an agreement made between the parties in a labor contract, that claim must either be treated as a § 301 claim, see Avco Corp. v. Aero Lodge 735, 390 U.S. 557 [88 S.Ct. 1235, 20 L.Ed.2d 126] (1968), or dismissed as pre-empted by federal labor-contract law.
Allis-Chalmers, 471 U.S. at 220, 105 S.Ct. 1904.
The employee in Lingle had submitted what the employer considered a false workers’ compensation claim and was discharged on that basis. She then filed a retaliatory-discharge action in an Illinois state court, alleging that she had been wrongfully discharged for exercising her rights under the state workers’ compensation statute. After removal to federal court, the company filed a motion to dismiss the case as pre-empted by § 301 of the LMRA, arguing that the retaliatory discharge claim was “inextricably intertwined” with the applicable CBA provision prohibiting discharge without “just” cause. The Supreme Court rejected this argument:
Illinois courts have recognized the tort of retaliatory discharge for filing a worker’s compensation claim, and have held that it is applicable to employees covered by union contracts. “[T]o show retaliatory discharge, the plaintiff must set forth sufficient facts from which it can be inferred that (1) he was discharged or threatened with discharge and (2) the employer’s motive in discharging or threatening to discharge him was to deter him from exercising his rights under the Act or to interfere with his exercise of those rights.” 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. To defend against a retaliatory discharge claim, an employer must show that it had a nonre*801taliatory reason for the discharge; this purely factual inquiry likewise does not turn on the meaning of any provision of a collective-bargaining agreement. Thus, the state-law remedy in this case is “independent” of the collective-bargaining agreement in the sense of “independent” that matters for § 301 preemption purposes: resolution of the state-law claim does not require construing the collective-bargaining agreement.
Lingle, 486 U.S. at 406-07, 108 S.Ct. 1877 (citations omitted). The Supreme Court emphasized that it was following not only the holding in Allis-Chalmers, but also its decisions in earlier cases such as Teamsters v. Lucas Flour Co., 369 U.S. 95, 103, 82 S.Ct. 571, 7 L.Ed.2d 593 (1962) (holding that a state-law claim for breach of contract involving the calling of a strike by the union was pre-empted by § 301 because the “possibility that individual contract terms might have different meanings under state and federal law would inevitably exert a disruptive influence upon both the negotiation and administration of collective agreements”), and Electrical Workers v. Hechler, 481 U.S. 851, 860, 107 S.Ct. 2161, 95 L.Ed.2d 791 (1987) (holding that a state-law claim for breach of duty to provide an employee with a safe workplace was pre-empted by § 301 because “[t]he threshold inquiry for determining if a cause of action exists is an examination of the contract to ascertain what duties were accepted by each of the parties and the scope of those duties”).
In contrast, the dispute in Textron did not raise a question of section 301 preemption,3 because there were no state claims involved in the suit, which was filed in federal court seeking relief under federal law. Nor did resolution of the dispute require judicial interpretation of the terms of the applicable CBA. Indeed, the relevant terms were clear: the union agreed to a no-strike provision and, perhaps in return, the company agreed to notify the union before subcontracting out work that could otherwise be performed by union employees. After the CBA took effect, Textron subcontracted so extensively that it caused the loss of work for approximately one-half of the union members. The union filed suit in federal court under section 301, alleging that Textron had fraudulently induced the union to sign the CBA by failing to share information during negotiations regarding the company’s then-existing plan to subcontract out work, despite repeated requests for such information by the union. The complaint sought damages and a declaratory judgment that the agreement was voidable at the union’s option.
In determining that the federal courts did not have subject-matter jurisdiction over the Textron dispute, the Supreme Court focused on the text of section 301 and concluded, after some extended and exquisite parsing, that jurisdiction over “suits for violation of contracts between an employer and a labor organization,” 29 U.S.C. § 185(a), is limited to actions “filed because a contract has been violated ” and that the statute does not authorize a direct challenge to a CBA’s validity by means of a declarative judgment action. Id. at 658, 118 S.Ct. 1626 (emphasis in original). But, it should be clear from the context of the dispute in Textron, as well as the ruling itself, that no issue of pre-emption was raised in the case and that no interpreta*802tion of the contract or any of its terms was required in the resolution of the appeal. It follows that there is no reason to conclude, as the majority apparently does, that Textron has had the effect, directly or sub silentio, of overruling Allis-Chalmers, its controlling precedents, or its progeny. The question of whether a state-law claim stemming from a labor dispute is — or is not — preempted by section 301 nowhere appears in the Textron majority or concurring opinions. It is nothing short of jurisprudential folly to claim that Textron is nevertheless controlling here.
The majority in this case also relies on our opinion in Alongi v. Ford Motor Co., 386 F.3d 716 (6th Cir.2004), but that decision is of little help to the analysis here. In the first place, Alongi misstated the holding of Textron, at least in part and, significantly, in the part that is most relevant here, saying that in Textron, “the Supreme Court made clear that a simple claim of fraudulent inducement to sign a labor contract, without more, is not a ‘suit for violation of contracts,’ and so is not pre-empted by § 301.” Id. at 725 (emphasis in the original). Perhaps even more significant is the fact that none of the four claims contained in the complaint filed in Alongi required a judicial interpretation of, nor made any reference to, the CBA. Instead, the plaintiffs, union members, claimed that the defendant company had bribed a union negotiator, who then deliberately failed to include a provision protecting union members in the event of a plant closing; that the company’s negotiator misrepresented the company’s financial soundness; and that after the plant closed, the company failed to rehire the workers at another Ford entity, in violation of Michigan criminal law and public policy. Because the state-law claims in Alongi did not present a federal question, the case was properly remanded to state court, despite its obvious but ultimately irrelevant mischaracterization of Textron.
Finally, it seems to me that the majority opinion, while paying lip-service to Allis-Chalmers, fails to respect the policy behind the decision in that case, the cases on which it relied, and the many decisions that have followed it. The Supreme Court acknowledged that under section 301, federal jurisdiction exists over “suits for violation of contracts between an employer and a labor organization,” 471 U.S. at 209, 105 S.Ct. 1904, but the Court also said:
If the policies that animate § 301 are to be given their proper range, however, the pre-emptive effect of § 301 must extend beyond suits alleging contract violations. These policies require that “the relationships created by [a collective-bargaining] agreement” be defined by application of “an evolving federal common law grounded in national labor policy.” Bowen v. United States Postal Service, 459 U.S. 212, 224-225, 103 S.Ct. 588, 74 L.Ed.2d 402 (1983). 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 resolved by reference to uniform federal 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 [state-law] claims....
Id. at 210-11, 105 S.Ct. 1904 (emphasis added).
*803Until the Supreme Court chooses explicitly to extend Textron to a dispute raising a question of pre-emption in which resolution of state-law claims requires the application of federal labor law to the agreement that is the subject of the dispute, or explicitly overrules Allis-Chalmers, I contend that we must follow Allis-Chalmers. In this case, the district court did just that, and the district court got it right. I would therefore affirm the determination that the state claims included in CNH America’s complaint are preempted by federal law for the very reasons set out in the district court opinion and, likewise, affirm the judgment of dismissal.
For these reasons, I respectfully dissent.

. Under Financial Accounting Standards Board Rule 106, Case Corporation was required to reflect on its balance sheet a liability equal to the present value of future non-pension benefits for retirees.

. The VEBA “letter of understanding” reads as follows:
During the 1998 negotiations, the Company and Union had extensive discussions of the medical plan maintained by El Paso Natural Gas Company for the 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” overage). An additional 2.8M from the economic settlement will be contributed for total VEBA funding of approximately $27,800,000. 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.

. The Textron case clearly did not raise a question of pre-emption, despite our later misreading of the opinion in Alongi v. Ford Motor Co., 386 F.3d 716 (6th Cir.2004) (noting, erroneously, that “the Supreme Court [in Textron ] made clear that a simple claim of fraudulent inducement to sign a labor contract, without more, is not a 'suit for violation of contracts,' and so is not pre-empted by § 301”). Id. at 725 (emphasis in original).