Lead Opinion
SUTTON, J., delivered the opinion of the court in which BOGGS, J., joined. STRANCH, J. (pp. 274-82), delivered a separate dissenting opinion.
OPINION
At issue is whether several collective bargaining agreements entitle a class of retirees from Moen Inc. to vested healthcare benefits for life. The district court granted relief to the class based on UAW v. Yard-Man, Inc.,
I.
Between 1983 and 2005, Moen and its predecessor corporation entered into a series of (usually) three-year collective bargaining agreements (often called CBAs) with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America and its local affiliate. Each agreement offered two types of health-related benefits to individuals who retired from Moen’s plant in Ely-ria, Ohio: (1) hospitalization, surgical, and medical coverage and (2) Medicare Part B premium reimbursements, which compensated retirees for the expenses of participating in the federal government’s medical insurance program. Employees who retired between August 8, 1983, and March 1, 1996, along with their dependents, received “[cjontinued hospitalization, surgical and medical coverage ... without cost.” E.g., R. 52-11 at 42; R. 52-14 at 76. If the retirees were over age 65, the company also reimbursed the full cost of their Medicare Part B premiums, and it did the same' for retirees’ spouses over age 65. Employees who retired on or after March 1, 1996, along with their dependents, received hospitalization, surgical, and medical coverage upon payment of a co-premium. “The co-premium amount for the retiree,” the CBAs provided, “will be frozen- at the co-premium in effect at [the] time of retirement.” E.g., R. 52-15 at 37; R. 52-18 at 36. If over 65, these retirees (plus their over-65 spouses) received Medicare Part B premium reimbursements at specified rates.
The parties terminated the last CBA in 2008, when Moen shut down its Elyria operations. The UAW and its local affiliate entered into a “Closure Effects Agreement” with Moen, providing that healthcare coverage “shall continue” for retirees and their spouses “as indicated under the [final] Collective Bargaining Agreement.” R. 52-23 at 2, 7. The plant closed in December 2008.
After the plant closed, Moen continued to provide the same healthcare benefits to its retirees for a while. In March 2013, the company decreased the benefits available for retirees in response to “recent Medicare improvements” and “more effective supplemental benefit plans,” as well as the federal government’s imposition of an excise tax on high-cost “Cadillac plans” through the Patient Protection and Affordable Care Act, see 26 U.S.C. § 49801. R. 51-31 at 1; R. 52-30 at 5. After the changes, Medicare-eligible retirees no longer received healthcare coverage or Part B premium reimbursements, and the
Seven retirees and the UAW sued Moen in response. The retirees argued that their healthcare benefits had “vested” under the CBAs and the plant closing agreement, prohibiting Moen from changing their coverage. The district court certified a class of “all Moen healthcare benefits plan participants” who had retired from the Elyria plant and who were not covered by an earlier settlement agreement. R. 42 at 2. The class includes roughly 200 individuals. Both parties filed motions for summary judgment, and the district court granted the plaintiffs’ motion. Relying on Yard-Man, the court concluded that the CBAs and the plant closing agreement required Moen to offer the same healthcare benefits to the retirees for life. The court also granted $776,767.19 in attorney's fees and costs to the plaintiffs. Moen appealed.
II.
M & G Polymers USA, LLC v. Tackett, — U.S.—,
The Court offered one more piece of guidance. At the same time it rejected Yard-Man, it endorsed our decision in Sprague v. General Motors Corp.,
Guided by the Court’s directives about what to do and what not to do in this area, we must conclude that the MoenUAW collective bargaining agreements do
Continued hospitalization, surgical and medical coverage will be provided without cost to past pensioners and their dependents prior to March 1,1996.
Effective March 1, 1996, future retirees will be covered under the new medical plan. The co-premium amount for the retiree will be frozen at the co-premium in effect at time of retirement.
Future retirees as of [January 1999] will be reimbursed for Medicare Part B for employee and spouse at Medicare Part B $45.50/$91.00.
R. 52-18 at 36.
First and foremost, nothing in this or any of the other CBAs says that Moen committed to provide unalterable healthcare benefits to retirees and their spouses for life. That is what matters, and that is where the plaintiffs fall short. Tackett directs us to apply ordinary contract principles and not to tilt the inquiry in favor of vesting — a frame of reference that prompts two questions. What is the contract right that the plaintiffs seek to vindicate? And does the contract contain that right? The plaintiffs claim a right to healthcare benefits for life. But the contracts never make that commitment. Yes, Moen offered retirees healthcare benefits. And yes Moen, like many employers, 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. But the question is whether the two parties signed a contract to that effect. Nothing of the sort appears in the collective bargaining agreements. See Tackett,
Second, not only do the CBAs fail to say that Moen committed to provide unalterable healthcare benefits for life to retirees, everything they say about the topic was contained in a three-year agreement. If we do not expect to find “elephants in mouseholes” in construing statutes, see Whitman v. Am. Trucking Ass’ns,
Consistent with traditional contract interpretation principles and with prior precedents of the Supreme Court, “contractual obligations will cease, in the ordi
Third, each of the last three CBAs says that “[cjontinued hospitalization, surgical and medical coverage will be provided without cost to past pensioners and their dependents prior to March 1, 1996.” E.g., R. 52-16 at 39 (emphasis added). Consistent with the three-year term of these CBAs, the language provides “continued” healthcare benefits to “past pensioners”— namely, former employees who retired under prior CBAs. There would be no need to “continue” such benefits if prior CBAs had created vested rights to such benefits. And indeed no comparable language appears in the CBA provisions dealing with pension benefits that vested under prior agreements.
Fourth, while the authors of the CBAs opted not to say that retiree healthcare benefits were vested for life, they explicitly vested pension benefits for qualifying retirees. The difference in language demands a difference in meaning. “It is understood that when [certain] benefits are no longer payable,” each CBA provides, “the normal monthly survivor pension benefit will be paid for the rest of the survivor’s life.” E.g., R. 52-18 at 34. Because a contract “should be read to give effect to all its provisions and to render them consistent with each other,” Mastro-buono v. Shearson Lehman Hutton, Inc.,
Fifth, the agreements contain reservation-of-rights clauses that evidence an intent not to vest and that apply to employees and retirees. “The Company,” one such clause says, “shall have the right to amend, cancel or reinsure the policies or change the underwriters thereof, so long as [specified] benefits are maintained for the life of this Agreement^]” R. 52-18 at 33. How can one simultaneously say that healthcare benefits are “vested” but may be “canceled]” by the employer? Even the caveat — that certain “benefits” must be “maintained” — applies only “for the life of this Agreement,” a timeline that is incompatible with construing the agreement to create vested and unalterable benefits. And although the reservation-of-rights clause comes in a paragraph discussing employee benefits, it does not limit itself to those benefits. It instead refers to Moen’s right to cancel the insurance “policies,” which — as other sections of the CBAs demonstrate — covered employees and retirees. The CBAs, moreover, sometimes
Sixth, these principles yield a similar conclusion when applied to the plant closing agreement. “Healthcare ... and related benefits shall continue under Article XVTI [of the CBA],” the contract says, “for all retirees and spouses as indicated under the Collective Bargaining Agreement.” R. 52-23 at 7 (emphasis added). Although this provision does not specify which CBA it refers to, we presume (and the parties agree) that the relevant CBA is the final one, the 2005 agreement. The most natural reading of the plant closing contract is that it offers the same benefits under the same conditions as the 2005 CBA. Because a right to permanent healthcare benefits did not vest under that CBA, it did not vest under the plant closing agreement either.
Seventh, the above analysis not only respects the language of the relevant agreements and Tackett, but it also brings our court into alignment with other circuits around the country. No court to our knowledge has found, or would find, a promise of lifetime unalterable healthcare benefits based on CBA language of this sort in a time-limited agreement. See Senior v. NSTAR Elec. & Gas Corp.,
The plaintiffs offer several contrary arguments. They point out that the CBAs state that “[c]ontinued” coverage “will be provided”; that future retirees “will be covered”; that co-premiums “will be frozen”; that “[p]ension payments will be increased by the amount of current Medicare charges”; and that the employer “will pay the monthly premium charge” for retirees’ health insurance. E.g., R. 52-13 at 81; R. 52-18 at 36 (emphasis added). If Tackett tells us anything, however, 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.
The plaintiffs invoke provisions in the CBAs that include specific durational limits, claiming that the absence of a comparable limit in the retiree healthcare provisions shows that the parties intended the commitment to last for life. The 2005 CBA, for example, says that “Hospitalization, Surgical and Medical Benefits for terminated employees, including lay-off, will continue in effect for the duration of the month for which premiums have been paid, except as [specified in another provision].” R. 52-18 at 35. The absence of specific durational limits in the retiree benefits provisions, argue the plaintiffs, means that these benefits were meant to last for life. But specific and general terms usually work in tandem, and that is just the case here. The CBAs’ general durational clauses provide a baseline or default rule, a point at which the agreements expire absent more specific limits relevant to a
Referring to some of our Yardr-Man cases, the plaintiffs note that we have inferred that retiree healthcare benefits vest when CBAs tie eligibility for retiree healthcare benefits to eligibility for pensions. See, e.g., Noe v. PolyOne Corp.,
Moving beyond the language of the agreements, the plaintiffs claim that each CBA incorporates background understandings that favor lifetime vesting ,of retiree healthcare benefits. At the time the parties negotiated each CBA, plaintiffs note, Yard-Man governed and thus the parties would have assumed that those inferences (and the unalterable lifetime healthcare benefits that go with them) would have applied. The short answer is that this new inference about prior assumptions would have been just as true in Tackett — a case from our circuit that involved a collective bargaining agreement negotiated when Yard-Man remained good law. And yet nothing in Tackett (or the concurrence) hints at the idea that Yardr-Man would linger, vest as it were, as a precedent that would bind future interpretations of such agreements. This theory of background understandings also sits at a lofty level of generality, one that, if accepted, might have to account for other ever-uncertain assumptions about the future. Would healthcare costs rise at the same pace as general inflation or would they far exceed it? Would the National Government enact a national healthcare law? And, if so, would that new law impose a tax on generous, so-called Cadillac healthcare plans? Nor is it fair to assume that all parties who entered such CBAs were certain about the fate of Yard-Man. That explains why our court upheld substantial class-action settlements between Ford and the UAW and General Motors and the UAW that were premised in part on uncertainty about the future of Yardr-Man. UAW v. Gen. Motors Corp.,
The plaintiffs also make several arguments related to the plant closing agreement. They begin by pointing to the agreement’s promise that healthcare benefits “shall continue,” noting that the contract includes neither a general nor a specific durational clause that might limit the period of continuation. But this argument ignores the context of the relevant language, which states that healthcare benefits “shall continue ... as indicated under the [2005] Collective Bargaining Agreement.” R. 52-23 at 7 (emphasis added). The contract thus did not need explicit durational language because it incorporated the terms of the 2005 CBA, which did not provide for vested benefits.
But, the plaintiffs persist, doesn’t this interpretation make the “shall continue” clause redundant? An earlier provision of the plant closing agreement provided that “[a]ll terms and conditions of the 2005-2008 Collective Bargaining Agreement shall remain in effect until all bargaining unit employees cease working at the facility.” Id. at 2. If the contract already provided that the 2005 CBA would govern until the last unionized employee left, then it would not have been necessary to include an additional provision stating that benefits “shall continue” for as long as the 2005 CBA permits. But the rule that courts should interpret contracts to avoid superfluous words is a “tool[ ] for dealing with ambiguity, not a tool for creating ambiguity in the first place.” TMW Enters., Inc. v. Fed. Ins. Co.,
The plaintiffs point to two cases to support their reading of the plant closing contract, but both are inapposite. The plant closing agreements in Temme v. Bemis Co.,
The plaintiffs point to extrinsic evidence, such as the fact that Moen continued paying healthcare benefits for five years after the plant closing agreement expired, claiming that this shows the parties’ “inten[t]” to create vested and unalterable retiree healthcare benefits. Appellees’ Br. 57. Two responses. The 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. That language and these canons offer no evidence of any intent to fix these benefits permanently into the future. Absent ambiguity from
One other point. Moen argues that Tackett creates a clear-statement rule— that, before a retiree may impose a duty on a company to provide vested and unalterable healthcare benefits, it must satisfy the rigors of clarity associated with waivers of sovereign immunity and the like. See United States v. Nordic Vill., Inc.,
Tackett does not create such a rule. It tells courts to apply “ordinary principles of contract law” — identifying relevant principles in this setting along the way — and tells courts to follow those principles where they lead.
III.
Moen also challenges the district court’s award of attorney’s fees and costs. Because we reverse the district court’s judgment, we vacate its fee award too. See Reese v. CNH Am. LLC,
IV.
For these reasons, we reverse the district court’s grant of summary judgment, vacate the attorney’s fee award, and remand the case for the district court to enter judgment for the defendant.
Dissenting Opinion
dissenting.
DISSENT
I agree that the Supreme Court’s decision in M & G Polymers USA, LLC v. Tackett, — U.S.—,
The question presented is whether Moen Incorporated’s Retirees (a designation that includes their spouses and eligible dependents) are correct in their claim that the collective bargaining agreements and plant closing agreement grant vested, lifetime healthcare benefits to Retirees. The majority determines that ordinary contract principles compel the conclusion that the agreements unambiguously do not grant lifetime healthcare benefits and then declines to address the bulk of the extrinsic evidence presented by Retirees. I disagree with both determinations. I conclude that the language of the agreements — when properly viewed in their entirety — is ambiguous and that the extrinsic evidence resolves the ambiguity in favor of Retirees. I therefore respectfully dissent.
I. Applying Ordinary Principles of Contract Law
In interpreting a collective bargaining agreement, as with any other contract, “the parties’ intentions control.” Tackett,
Because courts consider both industry customs or usages and extrinsic evidence to determine the meaning of a contract, context matters. See Tackett,
Recognizing the importance of context, Retirees urge this court to consider the background understandings of the parties. Tackett III acknowledged that the Supreme Court “did not purport to discuss all of the ordinary principles of contract law” and identified other ordinary contract principles showing that courts may consider background understandings. See Tackett III,
The majority’s refusal to acknowledge distinctions regarding the nature of collective bargaining causes it to mischaracterize Retirees’ argument that courts should consider the background understandings of the parties as nothing more than a
Retirees’ argument is not about whether today we can posit uncertainties — it merely proposes a proper examination of “the entire agreement in light of relevant industry-specific ‘customs, practices, usages, and terminology’ ” and other ordinary principles of contract law. Tackett,
A. Language of the Agreements
The majority serially examines and rejects each contract argument of Retirees as insufficient to show either a contractual commitment to provide lifetime healthcare benefits or an ambiguity in the contract documents that would allow for examination of extrinsic evidence. But this divide and conquer analysis transgresses the “cardinal principle” of contract interpretation: the intention of the parties to a contract is “to be gathered from the whole instrument.” Id. (quoting 11 Williston § 30:2, p. 27). Characteristics and particulars of the whole instrument — the collective bargaining agreements and the plant closing agreement — must be considered together. I turn now to examination of these agreements.
Retirees argue that the use of future tense language throughout the collective bargaining agreements evidences intent to vest retiree healthcare. The majority opines that, “[i]f Tackett tells us anything,” it is that the future tense language used by the parties, without more, “does not guarantee lifetime benefits.” (Maj. Op. at 271 (citing Tackett,
The majority dismisses out of hand the standalone argument based on future
Turning to other evidence of intent to vest that can be gleaned from the “whole instrument,” Retirees cite the link in the agreements between retiree healthcare benefits and pensioner status. The 2005 collective bargaining agreement states that health benefits “will be provided without cost to past pensioners and their dependents” and includes Medicare Part B reimbursements in “pension payments.” The majority presumes this language to refer to eligibility and then concludes that “Tackett rejected this kind of ‘tying’ analysis.” (Maj. Op. at 272.) The Supreme Court did reject as an improper inference the conclusion that “the tying of eligibility for health care benefits to receipt of pension benefits suggested an intent to vest health care benefits.” Tackett,
Retirees also argue that intent to vest is suggested by the agreements’ inclusion of explicit durational limitations for other benefits but not retiree healthcare. For example, the 2005 collective bargaining agreement limits the time in which terminated and laid-off employees may receive healthcare, and the plant closing agreement gives healthcare benefits to employees for certain time periods based on the employee’s length of service. The majority dismisses this argument based on the collective bargaining agreements’ inclusion of general durational clauses. Noting that “we should not expect to find lifetime com
As acknowledged by Tackett III, the majority’s formulation is neither authorized nor compelled by Tackett and improperly places a thumb on the employers’ scale. See Tackett III,
Relevant contract language also includes the 2008 plant closing agreement, which states that the 2005 collective bargaining agreement shall cease to exist, “except for items as agreed to in this agreement,” when “all bargaining unit employees cease working at the facility.” Retiree healthcare is identified as an item that will not cease to exist upon plant closure: “Healthcare, Sub and Pension and related benefits shall continue ... for all retirees and spouses as indicated under the [2005 agreement].” Retirees argue that the only way to make this benefits continuation clause not redundant or superfluous is to interpret it as recognizing the intent to vest retiree healthcare benefits in the collective bargaining agreements and authorizing provision after the plant’s closing. See TMW Enters., Inc. v. Fed. Ins. Co.,
The majority rejects Retirees’ argument by concluding that the plant closing agreement simply incorporates the terms of the 2005 collective bargaining agreement and, because that agreement did not provide for vested benefits, “an agreement that incorporates it by reference does not do so
Again, contract principles dictate that we seek the intention of the parties from the whole of the contract language — here, both the collective bargaining agreements and the plant closing agreement. Interpreting the collective bargaining agreements as not vesting retiree healthcare benefits renders the plant closing agreement’s “shall continue” clause superfluous. If retiree healthcare was not vested by the 2005 collective bargaining agreement, then the benefits would have terminated pursuant to the plant closing agreement’s general provision that the 2005 agreement will cease to exist upon plant closing. There would have been no reason for the parties to reiterate, in the same document, that the benefits “shall continue” for as long as the 2005 agreement permits. It did not do so for any other non-vested provisions. Interpreting the 2005 agreement as vesting retiree healthcare, on the other hand, would give the plant closing agreement’s “shall continue” clause meaning. Specifically, the clause would confirm that retiree healthcare benefits, as vested by the 2005 agreement, are not subject to the plant closing agreements’ general provision that the 2005 agreement will cease to exist upon plant closing. The rule against superfluous words thus resolves ambiguity that could have arisen in the language of the two contracts.
As a final point, the majority construes the collective bargaining agreements’ reservation-of-rights clauses as evidencing an intent not to vest. (Maj. Op. at 270-71.) The answer to that is simple: that provision does not unambiguously apply to Retirees. In each of the collective bargaining agreements, the reservation-of-rights clause is contained in a separate paragraph furnishing insurance for Moen’s “employees,” not their “retirees,” while different contract paragraphs govern retiree health insurance. The term “employee” has meaning: “[t]he ordinary meaning of ‘employee’ does not include retired workers; retired employees have ceased to work for another for hire.” Allied Chem. & Alkali Workers of Am., Local Union No. 1 v. Pittsburgh Plate Glass Co., Chem. Div.,
Applying ordinary contract principles and the Supreme Court’s instructions in Tackett to all of the relevant contract language viewed in light of industry practices reveals ambiguity within the various contract provisions. Because the parties’ intentions cannot be derived unambiguously from the language of the agreements, I turn to the extrinsic evidence to see whether the ambiguity may be resolved.
B. Extrinsic Evidence
The record contains objective evidence of the parties intent to vest retiree healthcare benefits. That evidence includes statements from Moen representatives to Retirees — made in negotiating sessions, before the pension committee, and in one-on-one conversations' — 'that their benefits were “for life” or “forever” and advising surviving spouses that they were “entitled” to continue medical benefits upon the death of a Retiree. Moen’s Retirement Health Enrollment Forms contain no indication to Retirees that their health benefits could be cancelled or the premiums
In addition, the record reveals that many employees, following the plant closing agreement but before plant closure, chose to take a significantly reduced pension and retire early under an active 2005 collective bargaining agreement in order to qualify for retiree healthcare benefits. By choosing to retire early, these employees accepted an actuarial reduction in their pension of “a percentage equal to 1/2 of 1%” for each month prior to their 62nd birthday. One employee, for example, qualified for and took early retirement at age 58 and testified to suffering a 23% reduction in his lifetime monthly pension benefit. The choice to take a significantly reduced pension across their lifetime makes no sense unless these employees were told and believed that, by retiring during the term of the 2005 collective bargaining agreement, they would receive vested retiree healthcare.
The majority responds that the language of the agreements is unambiguous and thus extrinsic evidence must be ignored. It then indirectly addresses the parties’ actions regarding retiree healthcare by doing just what Tackett warned against— assessing intent based on its own suppositions that have no support in the record (and are in fact contradicted by it). See Tackett,
The majority points to no record evidence supporting these assessments of the parties’ intentions. Such conclusions of benevolence are belied by the statements and admissions regarding Moen’s contractual responsibilities. The majority’s assessments, therefore, are speculative and far removed from the context of these particular agreements and the practices of this industry, and thus cannot be used to explain away the extrinsic evidence that reveals an intent to vest retiree healthcare benefits.
II. Conclusion
The majority examines the contractual agreements piece-by-piece while broadening and misapplying the Supreme Court’s decision in Tackett to find that the parties’
Notes
. The Supreme Court's remand marked the case's third appearance before this court (Tackett III), which previously heard appeals from the district court’s dismissal of the complaint, Tackett v. M & G Polymers USA, LLC,
. Pabst presents the same issue as this case but is inapplicable because it arises under the Seventh Circuit's presumption that, under a collective bargaining agreement that is silent on the issue, entitlement to healthcare benefits expires with that agreement unless a canvass of its language reveals a patent ambiguity or there is objective evidence showing a latent ambiguity.