Court Opinion

ID: 4161954
Source: CourtListenerOpinion
Date Created: 2017-04-20 17:04:15.768406+00
Date Added: 2024-06-11T07:46:48.931485
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                            Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                   File Name: 17a0090p.06

                  UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT
                                 _________________

 ROBERT COLE, JOHN ADAMS, RICHARD S. LANTER           ┐
 (03-73872) and LOIS E. LAST, DAVID REAMER,           │
 CHARLES A. SCHMIDT (04-73656), on behalf of          │
 themselves and a similarly situated class;           │
 INTERNATIONAL UNION, UNITED AUTOMOBILE,               >       No. 06-2224
                                                       │
 AEROSPACE AND AGRICULTURAL IMPLEMENT                  │
 WORKERS OF AMERICA,                                   │
                           Plaintiffs-Appellees,       │
                                                       │
                                                       │
       v.                                              │
                                                       │
 MERITOR, INC., fka ArvinMeritor, Inc.; ROCKWELL │
 AUTOMATION, INC.; ROCKWELL INTERNATIONAL │
 CORPORATION;                                          │
                                                       │
                             Defendants-Appellants.
                                                       │
                                                       ┘
                        Appeal from the United States District Court
                       for the Eastern District of Michigan at Detroit.
               Nos. 03-73872; 04-73656—Nancy G. Edmunds, District Judge.

                                Argued: October 18, 2016

                            Decided and Filed: April 20, 2017

             Before: SUHRHEINRICH, GILMAN, and WHITE, Circuit Judges.

                                   _________________

                                       COUNSEL

REARGUED: Bobby R. Burchfield, KING & SPALDING LLP, Washington, D.C., for
Appellants. Stuart M. Israel, LEGGHIO & ISRAEL, P.C., Royal Oak, Michigan, for Appellees.
ON PETITION FOR REHEARING AND SUGGESTION FOR REHEARING EN BANC:
Bobby R. Burchfield, KING & SPALDING LLP, Washington, D.C., for Appellants. ON
RESPONSE: Stuart M. Israel, LEGGHIO & ISRAEL, P.C., Royal Oak, Michigan, for
Appellees.

                                             1
No. 06-2224                          Cole et al. v. Meritor et al.                        Page 2

     GILMAN, J., delivered the superseding opinion of court in which SUHRHEINRICH and
WHITE, JJ., joined. WHITE, J. (pg. 12), delivered a separate concurring opinion.
                                 ___________________________

                                   SUPERSEDING OPINION
                                 ___________________________

       RONALD LEE GILMAN, Circuit Judge. The key issue in this case is whether the
retired employees of Meritor, Inc. and Meritor’s predecessors have a vested right to lifetime
healthcare benefits. In this court’s prior decision in Cole v. ArvinMeritor, Inc., 549 F.3d 1064
(6th Cir. 2008), we held that the retirees have such a right. Our decision was controlled by this
court’s earlier cases of UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), Yolton v. El Paso
Tenn. Pipeline Co., 435 F.3d 571 (6th Cir. 2006), and Noe v. PolyOne Corp., 520 F.3d 548 (6th
Cir. 2008).

       Meritor filed a timely petition to rehear. The petition was held in abeyance for eight
years while the parties attempted to settle their dispute, initially on their own and later under the
auspices of this court’s Mediation Office. When we were informed in July 2016 that a final
impasse had been reached, Meritor’s petition to rehear was placed back on the docket for
consideration.

       In the intervening eight years, a sea change in the applicable law has occurred. The
Supreme Court abrogated the Yard-Man line of cases in M & G Polymers USA, LLC v. Tackett,
135 S. Ct. 926 (2015), and this court in Gallo v. Moen Inc., 813 F.3d 265 (6th Cir.), cert. denied,
__U.S.__ (Oct. 31, 2016), held that a series of collective bargaining agreements (CBAs)
materially indistinguishable from those involved here did not provide the retirees with lifetime
healthcare benefits.

       This case is now controlled by Tackett and Gallo. We therefore GRANT Meritor’s
petition to rehear, REVERSE the judgment of the district court, and REMAND the case for any
further proceedings that might be necessary.
No. 06-2224                          Cole et al. v. Meritor et al.                          Page 3

                                        I. BACKGROUND

A.     Factual background

       Rockwell Automation, Inc., a diversified manufacturer that supplied parts to the
automotive industry, owned industrial plants throughout the United States. In 1997, Rockwell
spun off its automotive division, which eventually became Meritor, Inc. Meritor manufactures
automotive integration systems, modules, and components for manufacturers of passenger
vehicles, commercial trucks, and trailers. Between the late 1970s and 2003, either Rockwell or
Meritor closed the twelve plants at issue in this litigation, which were located in Illinois, Indiana,
Kentucky, Michigan, Ohio, and Wisconsin.

       All of the hourly employees at the closed plants were represented by the United
Automobile, Aerospace, and Agricultural Implement Workers of America (the UAW).
Rockwell/Meritor and the UAW have engaged in collective bargaining for decades, producing a
succession of CBAs. The CBAs typically covered a three-year period and followed a consistent
format, including a master agreement (the National Agreement) and several supplemental
agreements addressing different topics that were expressly incorporated into the National
Agreement. For example, the Supplemental Insurance Agreement (always Exhibit B) and its
accompanying Insurance Program (always Exhibit B-1) addressed the health insurance coverage
at issue in this case. Company-paid retiree healthcare benefits were established in 1962, with
Rockwell paying half the cost. In the 1965 CBA, Rockwell agreed to pay the full cost of retiree
healthcare benefits.

       The benefits language at issue in this case first appeared in the 1968 CBA and continued
through to the 2000 CBA. Over those years, the benefits changed in modest ways, but the core
language regarding retiree healthcare coverage remained essentially unchanged. See Cole v.
ArvinMeritor, Inc. (Cole II), 515 F. Supp. 2d 791, 795 (E.D. Mich. 2006). Then, in 2003,
Meritor unilaterally eliminated dental, vision, and hearing-aid coverages for the retirees. It also
increased the deductibles, copays, and out-of-pocket maximums. Finally, Meritor announced
plans in 2005 to eliminate all healthcare benefits as of the next year for the retirees, their eligible
dependents, and their surviving spouses.
No. 06-2224                         Cole et al. v. Meritor et al.                        Page 4

B.     Procedural background

       In 2003, the UAW and a class of retirees brought suit against Meritor and Rockwell in
the United States District Court for the Eastern District of Michigan. They asserted claims under
§ 301 of the Labor Management Relations Act, 29 U.S.C. § 185, and § 501(a)(1)(B) of the
Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a)(1)(B). The lawsuit
was based on Meritor's unilateral reduction of benefits and the increase in out-of-pocket
expenses for the retirees in 2003. In September 2004, the UAW, along with another class of
retirees, filed a substantially identical lawsuit in the Eastern District of Michigan. The cases
were eventually consolidated, with the district court certifying a class of approximately 2,900
UAW-represented retirees (along with eligible dependents and surviving spouses), who currently
or formerly received retiree healthcare benefits from Meritor.

       While the lawsuit was proceeding, Meritor made the 2005 announcement mentioned
above that would have eliminated all healthcare benefits for the affected groups. This caused the
plaintiffs to file a motion for a preliminary injunction to force Meritor to continue providing
those benefits. After an evidentiary hearing, the district court granted the preliminary injunction.
Cole v. ArvinMeritor, Inc. (Cole I), 516 F. Supp. 2d 850, 880 (E.D. Mich. 2005). The court
found that “the contracting parties’ intention to provide lifetime retiree health coverage” was
expressed in the “explicit language” of the CBAs and confirmed by prior precedent and a
multitude of extrinsic evidence. Id. at 865–67.

       Following the entry of the preliminary injunction, each side moved for summary
judgment, with Meritor essentially repeating the arguments that it had made at the preliminary-
injunction stage. The district court granted the plaintiffs’ motion, denied Meritor’s motion, and
permanently enjoined Meritor from altering or canceling retiree healthcare benefits. Cole II,
515 F. Supp. 2d at 794. This timely appeal followed.

                                         II. ANALYSIS

A.     Applicable law

       CBA’s typically create both pension and welfare-benefit plans. M & G Polymers USA,
LLC v. Tackett, 135 S. Ct. 926, 933 (2015).               Although ERISA imposes “elaborate
No. 06-2224                           Cole et al. v. Meritor et al.                         Page 5

minimum funding and vesting standards for pension plans,” welfare benefits are excepted from
those rules. Id. Welfare-benefit plans, including retiree healthcare, must instead be “established
and maintained pursuant to a written instrument.” Id. To determine whether welfare benefits are
vested, we must interpret the relevant CBA according to the “ordinary principles of contract law,
at least when those principles are not inconsistent with federal labor policy.” Id.

          Prior to the Supreme Court’s decision in Tackett, this circuit interpreted CBA healthcare
provisions under the guiding principles established in Yard-Man. The Yard-Man court held that
“when the parties contract for benefits which accrue upon achievement of retiree status, there is
an inference that the parties likely intended those benefits to continue as long as the beneficiary
remains a retiree.” Yard-Man, 716 F.2d at 1482. Although this Yard-Man inference was
purportedly based on the basic rules of contract interpretation, its application over the years
resulted in a de facto presumption in favor of vesting. See Cole, 549 F.3d at 1074. In our prior
decision in this case, we in effect applied this presumption to find that the Meritor retirees were
entitled to lifetime healthcare benefits.

          Yard-Man was abrogated by the Supreme Court in 2015. The Court in Tackett held that
“Yard-Man violates ordinary contract principles by placing a thumb on the scale in favor of
vested retiree benefits in all collective-bargaining agreements.” Tackett, 135 S. Ct. at 935.
It concluded that the so-called Yard-Man inference distorted the attempt to ascertain the intent of
the parties, which, “as with any other contract, . . . control[s].” Id. at 933 (quoting Stolt-Nielsen
S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 682 (2010)).

          In applying the Yard-Man inference, this court was also faulted for failing to consider
several traditional contractual principles, such as the rule that “contractual obligations will cease,
in the ordinary course, upon termination of the bargaining agreement.” Id. at 937 (citing Litton
Fin. Printing Div., Litton Business Systems, Inc. v. NLRB, 501 U.S. 190, 207 (1991)).
Furthermore, the Tackett Court cautioned that “when a contract is silent as to the duration of
retiree benefits, a court may not infer that the parties intended those benefits to vest for life.” Id.
at 937.
No. 06-2224                          Cole et al. v. Meritor et al.                        Page 6

       The Supreme Court ultimately remanded Tackett to this court with instructions to apply
these ordinary contract principles. In Tackett v. M & G Polymers USA, LLC, 811 F.3d 204 (6th
Cir. 2016) (Tackett III), several additional contract principles were discussed, such as the rule
that “when the contract is ambiguous, a court may consider extrinsic evidence to determine the
intentions of the parties.” Id. at 208–09. But this court in Tackett III did not resolve the merits
of the case, instead sending it back to the district court to interpret the relevant CBA in the first
instance using the ordinary principles of contract law.

       In Gallo, this court for the first time interpreted a specific CBA according to the contract
principles espoused in Tackett and Tackett III. The ordinary principles of contract law were
applied to conclude that the CBA before the court was unambiguous in not vesting retiree
healthcare benefits for life. Gallo, 813 F.3d at 273–74. Because the facts of Gallo are materially
indistinguishable from the facts before us, we reach the same conclusion in this case.

B.     Key terms of the CBAs

       The language relevant to the retirees’ claim of lifetime healthcare benefits first appeared
in the 1968 CBA. Although a new CBA was renegotiated every three years, the applicable
language remained unchanged. We will therefore include the numbering and sections from the
1968 CBA, as we did in our prior decision.

       According to the UAW, the language in Exhibit B to the 1968 CBA promised the retirees
healthcare benefits for life. The UAW specifically points to Section 5 of Exhibit B, titled
“Continuance of Healthcare Coverages Upon Retirement or Termination of Employment at 65 or
Older.” Section 5(a) provides as follows:

       The Health Care . . . Coverages an employee has under this Article at the time of
       retirement or termination of employment at age 65 or older . . . shall be
       continued thereafter provided that suitable arrangements can be made with the
       Carrier(s). Contributions for coverages so continued shall be in accordance with
       Article I, Section 3(b)(6).

(Emphasis added).
No. 06-2224                          Cole et al. v. Meritor et al.                        Page 7

       Meritor, on the other hand, argues that these healthcare benefits are limited by Exhibit
B’s durational clause. The relevant language, contained in Section 8 of Exhibit B to the 1968
CBA, reads as follows:

       This [Insurance] Agreement and [Insurance] Program as modified and
       supplemented by the [Insurance] Agreement shall continue in effect until the
       termination of the Collective Bargaining Agreement of which this is a part.

       The district court held that the “shall be continued thereafter” language unambiguously
promised retirees healthcare benefits for life and that the durational clause in Section 8 did not
alter this conclusion. Section 8, the court explained, was just a general durational clause that
could not trump contractual promises of lifetime benefits. Cole II, 515 F. Supp. 2d at 802.
We affirmed, citing this circuit’s then-binding precedent in Yolton for the proposition 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.” Cole, 549 F.3d at 1071 (quoting Yolton, 435 F.3d at 580-81). In addition,
the Yolton reasoning had been applied to durational clauses that “referred even more specifically
to healthcare benefits than does [Section] 8.” Id. at 1073. This court was therefore bound by
precedent to conclude that Section 8 did not limit the duration of the retirees’ healthcare benefits.
Id. at 1073–74.

       Because of the intervening decisions in Tackett and Gallo, the district court’s conclusions
are no longer sustainable. The reasoning espoused in Yard-Man, Yolton, and Noe has been
abrogated by the Supreme Court.        Instead, we must apply ordinary contract principles as
instructed by Tackett and as applied in Gallo.

       Gallo is legally indistinguishable from the present case. The Gallo court faced an

identical issue: whether a series of CBAs entitled a class of retirees to lifetime healthcare

benefits. Gallo’s CBA contained terms stating that healthcare benefits for retirees “will be

provided,” “will be covered,” and would “[c]ontinue.” Id. at 269. These provisions were

determined not to be specific enough to override the CBA’s general durational clause and,
No. 06-2224                           Cole et al. v. Meritor et al.                          Page 8

therefore, the healthcare benefits did not vest for life. Id. The Gallo court held that “[a]bsent a

longer time limit in the context of a specific provision, the general durational clause supplies a

final phrase to every term in the CBA.” Id. In making that determination, this court did not look

“beyond the contract’s four corners” and ruled that, because the contract was unambiguous, the

consideration of extrinsic evidence was inappropriate. Id. at 273–74.

       In this case, the 1968 CBA and every subsequent CBA provided that retiree healthcare
benefits “shall be continued.” There is no language in Exhibit B to the 1968 CBA that provides
a specific expiration date for those benefits. All of the CBAs, however, included a general
durational clause that terminated the agreement after three years. See, e.g., Article XVIII,
1968 CBA; Article XIX of the 2000 CBA. In addition, Exhibit B to each CBA had its own
durational clause, identical in wording to that previously quoted from Section 8 of the 1968
CBA, that explicitly tied healthcare benefits to the continuing existence of the CBA in question.

       The “shall be continued” language in Exhibit B is thus not sufficient to vest the retirees
with healthcare benefits for life. As stated in Gallo, “[i]f Tackett tells us anything, . . . it is that
the use of the future tense without more—without words committing to retain the benefit for
life—does not guarantee lifetime benefits.” Id. at 271. Like the CBAs at issue in Gallo, the
CBAs between the UAW and Meritor made commitments for “approximately three-year terms—
well short of commitments for life.” Id at 269.

       The CBAs also contained durational clauses that supplied a concrete date of expiration
for retiree healthcare benefits.    These durational clauses give meaning to the promise that
healthcare benefits “shall be continued.” That is, Meritor guaranteed healthcare benefits only
until the expiration of the final CBA, nothing more. See id. This result is in line with the
ordinary principles of contract law, which dictate that “contractual obligations will cease, in the
ordinary course, upon termination of the bargaining agreement.” Id. at 279 (quoting Tackett,
135 S. Ct. at 937).

        Despite the foregoing analysis, the plaintiffs argue that the promise of lifetime retiree
healthcare benefits is confirmed by the “contractual context.” It points to two examples: the
No. 06-2224                             Cole et al. v. Meritor et al.                    Page 9

provision of certain healthcare benefits for specific durational periods of less than life and a
section of the 2000 CBA that detailed future premium increases for medical care. Neither of
these arguments, however, alters the conclusion that the CBAs are unambiguous in not vesting
retiree healthcare benefits for life.

        With regard to the first example, the plaintiffs point out that the CBAs “set specific
durational limits on continued healthcare for employees on layoff and leave—up to 24 months—
but set no duration limits on retiree healthcare.” See 2000-2003 CBA, p. 68. This absence of
specific limits on retiree healthcare, the argument goes, shows that the parties intended the
benefits to vest for life. But Gallo addressed and rejected a similar argument. Noting that
specific and general contractual terms usually work in tandem, the Gallo court held that “[t]he
CBAs’ general durational clauses provide a baseline or default rule, a point at which the
agreements expire absent more specific limits relevant to a particular term. In the absence of
specific language in the retiree healthcare provisions, the general durational clause controls.” Id.
at 271–72 (emphasis in original). The same logic applies here.

        Along those same lines, the CBAs also provided that pension benefits would last for the
life of each retiree. For example, the 1991 CBA defined the basic benefit provided by the
pension plan as “[t]he monthly benefit payable under the Plan for the lifetime of a retired or
separated Employee[.]” The provision of pension benefits for life, however, actually supports
the conclusion that retiree healthcare benefits were not intended to extend for the lifetime of the
retirees. That is, we must “assume that the explicit guarantee of lifetime benefits in some
provisions and not others means something.” Id. at 270. Meritor and the UAW could have
negotiated similar lifetime provisions when negotiating healthcare benefits. Instead, they simply
provided that these benefits “shall be continued.” This “difference in language demands a
difference in meaning.” Id. The difference has to be that the healthcare benefits were meant to
continue for some period less than the lifetime of the retirees.

        The plaintiffs second “contractual context” example that purportedly supports their
argument is based on the 2000 CBA’s provisions requiring those “retiring on and after October
1, 2002” to “share future premium increases.” These “retiree medical cost caps” provided “for
cost-sharing of premium increases above a formula-based threshold, with a downward
No. 06-2224                           Cole et al. v. Meritor et al.                       Page 10

adjustment or freeze first when a retiree ‘reaches Medicare eligibility’ (i.e., age 65), and later
when the retiree ‘reaches age 80.’” Cole I, 516 F. Supp. 2d at 870. In addition, the 2000 CBA
included a “hypothetical example” showing how the caps would apply to a worker retiring “on
1/1/2003 at age 55.” The hypothetical example goes on to describe how the caps would operate
when the worker reached age 80 in 2028, 25 years after the final CBA’s expiration. Because the
caps were future-oriented, the district court determined that “[t]he only reasonable conclusion is
that the agreements intend[ed] that both pension and retiree health benefits [were] to continue for
the lifetimes of retirees, eligible dependents, and surviving spouses.” Id.

        We respectfully disagree. To be sure, the caps section of the 2000 CBA indicates that the
parties contemplated that retiree healthcare benefits would continue. But the continuation of
retiree healthcare would have been consistent with every CBA renewal since 1968. Both parties
understandably anticipated that these caps would come into play based on this history of
renewal. But the fact that they anticipated, or even hoped, that these benefits would continue
does not mean that Meritor is bound to provide these benefits for the life of the retirees.

        Gallo instead tells us that, although the parties “may have wished that business conditions
and stable healthcare costs (hope springs eternal) would permit it to provide similar healthcare
benefits to retirees throughout retirement[,] . . . the question is whether the two parties signed a
contract to that effect.” Gallo, 813 F.3d at 269. Meritor and the UAW signed no such contract.
To the contrary, the durational clause in Exhibit B to the 2000 CBA is unambiguous in not
vesting retiree healthcare benefits for life.

        Because the language of the 2000 CBA is unambiguous, “no basis for going beyond the
contract’s four corners exists.” Id. at 274. Legally, that is the end of the matter. Yet one can
understandably be puzzled by the apparent discrepancy between the extrinsic evidence that
assured the retirees of lifetime healthcare benefits and our conclusion that the 2000 CBA is
unambiguous in not providing such vesting. We believe that the answer to this puzzle lies in the
fact that retiree healthcare benefits were a feature in every CBA between the parties since 1968.
The parties, in other words, simply assumed that the benefits would continue for life because
neither side anticipated the upheaval in the automotive industry or had any reason to think that
any future CBA would alter the pattern of the past several decades. This likely led to “loose
No. 06-2224                          Cole et al. v. Meritor et al.                        Page 11

talk” about lifetime healthcare benefits, with no one feeling the need to articulate the implied
caveat that these benefits, like all employee benefits not explicitly vested for life, were dependent
on the existence of a current CBA between Meritor and the UAW.

       In any event, “[t]he first and best way to divine the intent of the parties is from the four
corners of their contract and from traditional canons of contract interpretation.” Id. at 273. The
language in the 2000 CBA, as interpreted by the ordinary principles of contract law, is
unambiguous in not vesting retiree healthcare benefits for life. To rule otherwise would be
inconsistent with Gallo, which reached the same conclusion based on a materially
indistinguishable series of CBAs. See Salmi v. Sec’y of Health & Human Servs., 774 F.2d 685,
689 (6th Cir. 1985) (holding that “[a] panel of this Court cannot overrule the decision of another
panel. The prior decision remains controlling authority unless an inconsistent decision of the
United States Supreme Court requires modification of the decision or this Court sitting en banc
overrules the prior decision.”).

                                       III. CONCLUSION

       For all of the reasons set forth above, we GRANT Meritor’s petition to rehear,
REVERSE the judgment of the district court, and REMAND the case for any further
proceedings that might be necessary.
No. 06-2224                        Cole et al. v. Meritor et al.                      Page 12

                               ___________________________

                                      CONCURRENCE
                               ___________________________

       HELENE N. WHITE, Circuit Judge, concurring. I reluctantly concur. Yard-Man is
dead. Its demise should have heralded a return to general rules of contract interpretation.
Instead, the cry “The king is dead, long live the king!” echoes in the aftermath. Gallo v. Moen,
813 F.3d 265 (6th Cir. 2016), has installed duration clauses as the new absolute determiner of
intent, regardless of the actual intent of the parties. I do not agree with Gallo, and would have
found the CBA in that case ambiguous and its interpretation subject to parol evidence. However,
there is no question that if the CBA in Gallo unambiguously provided for the termination of
health-care benefits upon the termination of the CBA, the instant agreement does so as well,
given that the duration clause in Section 8 of the instant agreement is more specific than the
clause in Gallo.