Yesterday, the Supreme Court wielded its rarely used power of summary reversal to bring good news to employers providing medical benefits to union retirees.
In CNH Industrial, N.V., v. Reese, the Supreme Court unanimously reversed a decision of the US Court of Appeals for the Sixth Circuit in an unsigned, per curiam opinion. 583 U.S. ___ (2018). The decision was issued without argument, on the basis of petition-stage briefing by the parties and their amici. Mayer Brown LLP filed an amicus brief in support of CNH.
Although the procedural posture was uncommon, the outcome is familiar. In 2015, the Supreme Court granted plenary review to a dispute over retiree benefits. In M&G Polymers USA, LLC v. Tackett, 574 U.S. __ (2015), the Court rejected the Sixth Circuit’s so-called Yard-Man inference, which presumed that retiree medical benefits would vest for life. The Court held that ordinary principles of contract law—rather than any presumption—must govern. See Medical Benefits After Tackett: Under “Ordinary Principles Of Contract Law,” US Court Of Appeals For The Sixth Circuit Holds That Retirees Have No Vested Right To Lifetime Benefits.
After Tackett, the Sixth Circuit acknowledged that the Yard-Man inference could not decide a case but nevertheless held that such an inference could create contractual ambiguity, thereby allowing courts to examine extrinsic evidence of the parties’ intent.
In this new opinion, the Supreme Court again admonished the Sixth Circuit not to rely on inferences. The Court held that a contract is not ambiguous unless it is subject, by its terms, to multiple interpretations and that the Sixth Circuit—which was unique in its approach—erred in its reliance on special inferences in favor of retirees.
Rather than remand the case so that the Sixth Circuit might apply the correct standard in the first instance, the Court resolved the case itself, describing the analysis as “straightforward.” The operative collective bargaining agreement contained a general durational clause that applied to all terms and conditions of employment and contained no provision stating health care benefits were subject to a different duration. Therefore, the Court held that the parties did not agree to lifetime health benefits.
After CNH, it is even clearer that companies deferring the modernization of their legacy benefits obligations should reevaluate their options under applicable agreements to implement health benefits changes for union retirees.