In the ERISA world, the Supreme Court has already granted a petition for certiorari of a Sixth Circuit case in order to consider one significant “presumption” this term – when it agreed to evaluate whether the Moench “presumption of prudence” regarding employer stock is a proper legal standard for evaluating breach of fiduciary duty claims. However, on May 5, the high court granted a petition for certiorari of yet another Sixth Circuit case regarding yet another significant presumption – this time, the judicially-crafted presumption that retiree health benefits are intended to vest for life, when the plan and collective bargaining agreement are silent on the issue.
In Tackett v. M & G Polymers USA, LLC et al., 733 F.3d 589 (6th Cir. 2013), retirees brought a class action against their employer asserting claims under the Labor Management Relations Act and ERISA, arising from their employer’s alleged violation of various collective bargaining agreement provisions granting them lifetime contribution-free health care benefits. Relying heavily on its prior decision in United Auto Workers v. Yard-Man, Inc., 716 F2d 1476 (6th Cir. 1983), the Sixth Circuit affirmed its position that a court may “presume” retiree health benefits are intended to vest for life, when the collective bargaining agreement is silent on the issue (colloquially known as the “Yard-Man inference”). The Sixth Circuit then held that the retirees were entitled to lifetime health care, and affirmed a permanent injunction precluding their employer from collecting any medical contributions.
In February, M & G petitioned for Supreme Court review. Noting that collective bargaining agreements “almost never” explicitly address the duration of retiree benefits, M & G contended that the Circuits were “badly split” over the issue of how to construe that “contractual silence.” While the Sixth Circuit construes silence or ambiguity in a collective bargaining agreement as creating an “inference” or “presumption” that the agreement vests a right to lifetime contribution-free benefits, the Third Circuit requires the opposite presumption, M & G noted. Specifically, the Third Circuit requires a clear statement in the collective bargaining agreements that he parties intend the benefits to continue indefinitely. Moreover, M & G explained, the Second and Seventh Circuits (among others) have adopted a “middle ground” in requiring “some language” in a collective bargaining agreement that can support interpreting that agreement to provide health benefits indefinitely. It is no surprise, M & G noted, that Judge Posner has characterized the Circuits as being “all over the lot” in applying different legal rules to this issue.
As a result of this obvious Circuit split, the Supreme Court agreed to consider M & G’s first question presented, specifically:
Whether, when construing collective bargaining agreements in Labor Management Relations Act (LMRA) cases, courts should presume that silence concerning the duration of retiree health-care benefits means the parties intended those benefits to vest (and therefore continue indefinitely), as the Sixth Circuit holds; or should require a clear statement that health-care benefits are intended to survive the termination of the collective bargaining agreement, as the Third Circuit holds; or should require at least some language in the agreement that can reasonably support an interpretation that health-care benefits should continue indefinitely, as the Second and Seventh Circuits hold.
This case is certainly one to watch this term. Among other things, the Supreme Court’s decision should bring a national standard to this issue, and put a stop to abusive forum-shopping in such retiree health care benefits cases.