Reese v. CNH Industrial N.V.
854 F.3d 877
6th Cir.2017Background
- Retirees who left CNH between 1994–2004 sued seeking a declaration that their retiree healthcare benefits vested for life, injunctive relief to maintain benefits, and damages if terminated; the dispute centers on a 1998 CBA provision making pension-eligible retirees and spouses "eligible for Group benefits" including medical and prescription coverage.
- Earlier appeals produced conflicting guidance: Reese I held benefits vested but allowed CNH some modification and remanded; Reese II provided seven reasonableness factors for evaluating unilateral changes and remanded again for factual development.
- The Supreme Court’s decision in M & G Polymers v. Tackett abrogated the Yard‑Man presumption favoring retirees and instructed courts to apply ordinary contract principles, prompting reconsideration of vesting here.
- The district court initially read Tackett to preclude vesting, but on reconsideration found the CBA ambiguous and, relying on extrinsic evidence (company accounting treating costs over retirees’ lifespans; company communications), concluded benefits vested for life and that CNH’s 2005 proposed plan was not reasonably commensurate.
- The Sixth Circuit majority affirms vesting, holding the CBA ambiguous (silence + tying to pension eligibility + carveouts), accepts extrinsic evidence indicating intent to vest, but remands for the district court to reevaluate the Reese II seven-factor reasonableness analysis (including properly weighing increased benefits, Medicare cost-shifting, comparators, and potential severability of plan terms).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the 1998 CBA create vested lifetime retiree healthcare benefits? | Retirees: CBA ambiguous; extrinsic evidence (company accounting, communications, bargaining history) shows parties intended lifetime vesting. | CNH: CBA lacks explicit durational language for lifelong benefits and contains a general durational clause ending the agreement; Tackett forbids inferring vesting from silence. | Court: CBA is ambiguous; extrinsic evidence supports intent to vest; affirmed that benefits vested for life. |
| After vesting, may CNH unilaterally modify benefit scope, and if so, when are modifications reasonable? | Retirees: Even if vested, scope should be protected; unilateral modification violates LMRA (concurrence emphasizes this). | CNH: Even if vested, it may make reasonable unilateral changes; district court should apply Reese II seven-factor test. | Court: Remands — accepts that CNH can propose changes but district court must reweigh Reese II factors (cost-shifting, benefits from medical advances, Medicare share, comparators, and severability of plan terms). |
| Role of Tackett and Yard‑Man in contract interpretation here? | Retirees: Tackett requires ordinary contract analysis but does not impose an employer-favoring explicit-language rule; extrinsic evidence may show vesting. | CNH: Tackett and durational clause foreclose vesting absent explicit language; Yard‑Man inference disapproved. | Court: Applies Tackett; finds ambiguity is permissible, and extrinsic evidence may be considered to determine intent (rejects treating silence as dispositive against vesting). |
| Proper application of Reese II factors by district court? | Retirees: District court correctly emphasized increased retiree costs and harms under proposed plan. | CNH: District court misweighed factors — overstated non‑Medicare cost impact, ignored Medicare cost-shift to federal program, undervalued similarity to plans for current employees and industry comparators, and failed to analyze severability. | Court: Vacates the reasonableness finding and remands for the district court to reassess those factors and consider benefits from medical advances, Medicare coverage, industry comparators, and potentially severable reasonable terms. |
Key Cases Cited
- M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015) (Supreme Court overruling Yard‑Man; directs ordinary contract principles for CBAs and forbids inferring vesting from silence)
- Reese v. CNH Am. LLC, 574 F.3d 315 (6th Cir. 2009) (Reese I) (earlier appellate decision addressing vesting and remanding for scope-of-modification analysis)
- Reese v. CNH Am. LLC, 694 F.3d 681 (6th Cir. 2012) (Reese II) (sets seven-factor test for reasonableness of unilateral plan changes)
- UAW v. Yard‑Man, Inc., 716 F.2d 1476 (6th Cir. 1983) (established employee‑favoring presumption later abrogated by Tackett)
- Litton Fin. Printing Div. v. NLRB, 501 U.S. 190 (1991) (explains that an expired CBA may impose constraints derived from express or implied terms)
- Gallo v. Moen, Inc., 813 F.3d 265 (6th Cir. 2016) (application of Tackett to durational clauses and vesting analysis)