Lead Opinion
SUTTON, J., delivered the opinion of the court in which GIBBONS, J., joined. DONALD, J. (pp. 686-91), delivered a separate dissenting opinion.
OPINION
In litigation, as in film, sequels rarely satisfy. This case is no exception. Three
I.
Our previous opinion makes it unnecessary to recount the protracted history of this litigation. See Reese v. CNH America LLC,
In answering the second question (“What does vesting mean in this setting?”), we rejected the suggestion that the scope of this commitment in the context of healthcare benefits, as opposed to pension benefits, meant that CNH could make no changes to the healthcare benefits provided to retirees. Unlike pension obligations, we explained, healthcare benefits cannot readily be monetized at retirement or for that matter practically fixed. See Reese I,
The rub for retirees and employers alike is that healthcare benefits — what is provided and what it costs — have not been remotely static in modern memory. The reason has little to do with traditional causes of inflation and more to do with the expansion of the benefit: the remarkable growth in modern life-saving and comfort-improving medical procedures, devices and drugs. New and better medical procedures arise while others become obsolete. And it is the rare medical innovation that costs less than the one it replaces. Retirees, quite understandably, do not want lifetime eligibility for the medical-insurance
All of this was borne out by the parties’ implementation of the relevant collective bargaining agreements — in at least two respects. As explained in our prior opinion, the 1998 CBA “created a Managed Health Care Network Plan for past and future retirees. In other words, it imposed managed care on all of them, which represented a reduction in the effective choices of coverage available for all retirees and the coverage actually provided to many, if not most, of them.” Reese I,
Also confirming that the parties did not perceive the relevant CBAs as establishing fixed, unalterable benefits was the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub.L. No.. 108-173, 117 Stat.2066. No one batted an eye when the healthcare plans for which retirees were eligible were modified to account for the creation of Medicare Part D, the prescription-drug benefit for seniors.
In view of the distinction between the vesting of eligibility for a benefit and the scope of that commitment and in view of the parties’ practice under the 1998 CBA of altering healthcare benefits under CBAs with materially identical language, we concluded that CNH could make “reasonable” changes to the healthcare plan covering eligible retirees. Reese,
Back in the district court, CNH moved for approval of its proposed modifications to the benefits, introducing evidence (including affidavits from its employee-benefits director and an employee-benefits consultant and attorney) that the changes were reasonable. The plaintiffs introduced little new evidence on the issue of
II.
The plaintiffs and the district court misread the panel opinion. In holding that “CNH ... may reasonably alter” the plaintiffs’ benefits, we recognized that CNH could alter them on its own, not as part of a new collective-bargaining process. Reese I,
That leaves two options: remand the case to the district court yet again or resolve the reasonableness question as a matter of law based on the evidence in the record. It is tempting to resolve the case now. This long-running dispute needs to come to an end, and it is particularly unfair to prolong the dispute when the status quo — a preliminary injunction in favor of the plaintiffs — not only favors just one party but also risks mooting the economic stakes of the case for the other party. Yet this sticky reality remains. The case turns in part on facts not in the record: How much did retirees pay for their health care under the old plan? How much did CNH pay? How much will the retirees and CNH each pay under the new plan, and how quickly are each side’s costs likely to grow? How does the quality of care provided under the old plan compare to the quality of care under the new plan? Do the retirees’ benefits differ in material respects from those offered to current employees and people retiring today? How do the benefits compare to benefits offered by other companies in similar industries? In the absence of a record on these points, the answer to the reasonableness question is a shot in the dark.
To gauge whether CNH has proposed reasonable modifications to its healthcare benefits for retirees, the district court should consider whether the new plan provides benefits “reasonably commensurate” with the old plan, whether the changes are “reasonable in light of changes in health care” (including access to new medical procedures and prescriptions) and whether the benefits are “roughly consistent with the kinds of benefits provided to current employees.” Reese I,
• What is the average annual total out-of-pocket cost to retirees for their healthcare under the old plan (the 1998 Group Benefit Plan)? What is the equivalent figure for the new plan (the 2005 Group Benefit Plan)?
• What is the average per-beneficiary cost to CNH under the old plan? What is the equivalent figure for the new plan?
• What premiums, deductibles and co-payments must retirees pay under the old plan? What about under the new plan?
• How fast are the retirees’ out-of-pocket costs likely to grow under the oldplan? What about under the new plan? How fast are CNH’s per-benefíciary costs likely to grow under each?
• What difference (if any) is there between the quality of care available under the old and new plans?
• What difference (if any) is there between the new plan and the plans CNH makes available to current employees and people retiring today?
• How does the new plan compare to plans available to retirees and workers at companies similar to CNH and with demographically similar employees?
It is not lost on us that the reasonableness inquiry is a vexing one. But the difficulty of the inquiry flows at least in part from the vagueness of the commitment underlying this litigation. It is well to remember the language of the relevant commitment: “Employees who retire under the Case Corporation Pension Plan for Hourly Paid Employees after 7/1/94, or their surviving spouses eligible to receive a spouse’s pension under the provisions of that Plan, shall be eligible for the Group benefits as described in the following paragraphs.” Id. at 318. What that means in the context of ever-changing medical-care developments, and ever-changing healthcare plans, is not easy. But if the parties cannot resolve the point on their own, we (and the district court) will do our best to resolve it for them.
One other thing on this score: the district court concluded that the East Moline Shutdown Agreement created “unalterable and irreducible” healthcare benefits for those who retired under it. R. 304 at 22. The Moline Agreement, however, governs only the “economic closedown benefits and the eligibility rules established and set forth in” that agreement. R.290-2 at 19. Nothing in the agreement speaks to healthcare. It neither establishes nor sets forth healthcare benefits, which are instead found in the 1998 CBA, which are vested, and which remain subject to reasonable modification.
In view of this disposition of the appeal, we think it premature to address the parties’ attorney-fees arguments. For one, this case is not over. For another, the district court may wish to revisit its attorney-fee decision based on its resolution of the questions identified above.
The dissent proposes a different path— that we reconsider our decision in Reese I and go back to square one. Unlike Judge Gibbons and me, Judge Donald did not sit on Reese I, so it would not be fair to call this an about-face or buyer’s remorse. At the same time, the law-of-the-case doctrine presents a serious impediment to this approach. And the reality that neither party to this dispute has invoked an exception to the law-of-the-case doctrine presents a conclusive impediment to it.
III.
For these reasons, we reverse and remand for proceedings consistent with this opinion.
Dissenting Opinion
Circuit Judge, dissenting.
My review of the issues presented here leads me to the conclusion that the majority’s approach to modifying the scope of the retirees’ vested health care benefits, both past and present, involves a misapprehension of the relevant law. While reasonableness is a common standard in the law, I cannot agree that resorting to what is reasonable provides the proper analytical framework in the instant case. When faced with contract terms that result in unanticipated consequences for the parties, courts are naturally tempted to play the role of arbiter and seek to resolve the case equitably. This Court, however, is one of
When affirming in part the district court’s first grant of summary judgment to Plaintiffs in the instant dispute, this Court held that the retirees “have a vested right to receive health care benefits for life.” Reese I,
At the same time, the Court reversed the district court’s holding that “these [vested health care] benefits must be maintained precisely at the level provided for in the 1998 CBA.” Reese I,
While the “law of the case” doctrine typically prevents an appellate court from reconsidering a prior decision on a subsequent appeal, that doctrine is “salutary” and designed to support a specific policy rationale: bringing an end to litigation. General Am. Life Ins. Co. v. Anderson,
Several decisions of this Court, as well as Supreme Court precedent, express the principle that, once a retiree’s health care benefits have vested for life, an employer’s unilateral modification of the scope of those benefits is a violation of the Labor Management Relations Act. Yolton,
The Maurer case is especially relevant to this discussion because the Maurer court confronted the same issues, in the same procedural posture, that this Court dealt with in Reese I: whether unclear language in a CBA indicated that “the parties intended the retirement benefits either to vest as lifetime benefits or to terminate at the end of the ... term of the CBA granting the benefits.” Maurer,
Thus, clearly established precedent, in this Circuit leads to the conclusion that, because retirees’ health care benefits vested for life, the level of those benefits must be deemed vested in scope and not subject to unilateral modification by CNH. Accordingly, the district court correctly applied the law of this Circuit when it held on remand that “even if changes can be made to retiree vested health care benefits, those changes must be reached through negotiation and agreement between the union and the employer.” Reese v. CNH Global N.V., No. 04-70592,
The district court’s conclusion is also consistent with this Circuit’s principle that “basic rules of contract interpretation apply” when federal courts fashion a body of federal common law for interpretation of collective bargaining agreements. Noe,
I recognize that the terms of the 1998 CBA, as interpreted according to Sixth Circuit precedent, posé a fundamental problem for the employer: how to fulfill its open-ended obligation to provide the health care benefits described in the CBA in spite of the rapid change and growth in the health care and health insurance industries. While this case presents a difficult choice between diametrically opposed interpretations of the 1998 CBA, it is the parties to the contract — not the court— who bear the burden of solving this dilemma. Presumably the parties have a shared interest in reaching an accommodation which ensures the retirees the continuity of health care coverage to which they are contractually entitled without bankrupting the employer or obligating it to provide services which are no longer appropriate. The Court’s role in this context is to underscore that such an accommodation can
As mentioned above, the majority relies on our conclusion in Yolton v. El Paso Tennessee Pipeline Co. and other cases to support Reese I’s conclusion that the retirees’ health care benefits vested for life. The majority, however, does not apply Yolton’s plain statement of the law regarding unilateral modification of vested welfare benefits: “If a welfare benefit has vested, the employer’s unilateral modification or reduction of those benefits constitutes a LMRA violation.”
The majority also errs in its choice of standard for determining whether CNH’s modifications to the scope of the retirees’ health care benefits are reasonable. The majority relies on the United States Court of Appeals for the Seventh Circuit’s opinion in Zielinski v. Pabst Brewing Co.,
Unlike the Seventh Circuit in Zielinski, however, this Court has no gap filling role to play in the instant case. We know exactly what the parties agreed to in 1998: “The Group [Benefit] Plan over forty-one pages sets forth in extensive detail the types of benefits and levels of coverage that the [retirees’] and [CNH] agreed to through collective bargaining.” Reese,
In addition to the above legal errors, the majority also mischaraeterizes the nature of the shift from the indemnity plan to managed care under the 1998 Group Benefit Plan, as well as how the parties previously modified the retirees’ benefits. The majority claims that the negotiated and collectively bargained shift from an indemnity plan to a managed care plan in 1998 supports its conclusion that “the parties did not perceive the relevant CBAs as establishing fixed, unalterable benefits.” Both Reese I and the majority opinion, however, are incorrect in their assertion that “managed care ... represented a re
On the issue of choice, the district court found, based on evidence submitted by the retirees, that, under the managed care plan, “close to 100% of the providers who had treated [CNH] employees were participants in the network and 100% of the hospitals in the area were within the network. Promises also were made that doctors not in the network would be approached to join.” Reese,
On the issue of coverage, the district court found that while the indemnity plan covered 100% of the “reasonable and customary charges” for Type A (hospital expenses) and Type B (surgery and in-patient procedures) benefits, it only covered 80% of the more common Type C benefits (out-of-hospital doctor visits). Reese,
Finally, the majority also reasoned that “[p]ast changes to retiree healthcare benefits ... had not been collectively bargained,” and this fact supports its conclusion that CNH may unilaterally modify retirees’ benefits now. This statement, however, is not followed by factual support; the assertion is followed by a citation to the legal proposition that a union is not required to negotiate on behalf of its retirees in collective bargaining. Even accepting Reese /’s claim that those CNH employees who retired between 1994 and 1998 did not consent to shifting from the indemnity plan to managed care, Reese I,
Because Plaintiffs have demonstrated they are entitled to judgment as a matter