Articles Discussing Case:
Franczek Radelet P.C • February 04, 2015
The U.S. Supreme Court ruled in M&G Polymers USA, LLC v. Tackett, 574 U.S. ____ (2015) that ordinary principles of contract law should govern the interpretation of provisions for retiree healthcare benefits under collective bargaining agreements. In so holding, the Supreme Court rejected the “Yard-Man presumption,” pursuant to which the U.S. Court of Appeals for the Sixth Circuit has long presumed that retiree healthcare benefits provided under a collective bargaining agreement vest for life absent specific language to the contrary in the collective bargaining agreement. The Supreme Court remanded the case at hand to the Sixth Circuit to (1) in the first instance, review the agreement and determine whether the parties intended the retiree healthcare benefits to vest and (2) if a determination is made that the agreement itself is ambiguous, review extrinsic evidence to determine the intent of the parties. Our prior alert, which discusses the significant implications of the case for employers, is available here.
Franczek Radelet P.C • February 03, 2015
For the past quarter century, because of conflicting legal authority, employers who offer health care to their retirees, particularly in a unionized setting, have struggled to determine whether they can alter those benefits. In most of the nation, federal courts permit changes to retiree medical benefits upon the termination of the collective bargaining agreements that provide the benefits, absent specific language that mandates vesting of such benefits. In the territory covered by the United States Court of Appeals for the Sixth Circuit (covering Ohio, Michigan, Kentucky, and Tennessee), a presumption of vesting is afforded to retirees, making it much more difficult, if not impossible, for employers to alter retiree medical benefits. This state of affairs has led to wide-ranging results. For example, employers that operate in multiple states (and their unions) have engaged in forum shopping in their favored jurisdiction. The high cost of health care has forced employers with no other alternative to attempt to discharge retiree medical liabilities in bankruptcy, which in turn led to amendments to the Bankruptcy Code. Other employers have settled their liability by transferring significant sums to independent trusts, such as VEBAs, which then have the responsibility for providing retiree medical benefits.
Fisher Phillips • January 27, 2015
Today, in a unanimous decision, the U.S. Supreme Court held that courts must apply ordinary rules of contract interpretation when determining whether retiree healthcare benefits vest for life pursuant to the terms of a collective bargaining agreement. Writing for the Court, Justice Thomas wrote a scathing opinion overruling the 6th Circuit’s underlying decision, which had relied on UAW v. Yard-Man and its progeny to try to establish a presumption of lifetime vesting. M&G Polymers USA, LLC v. Tackett.
Ogletree Deakins • January 27, 2015
On January 26, 2015, the Supreme Court of the United States resolved a long-standing dispute between the Sixth Circuit Court of Appeals and the remainder of the federal judiciary in a case concerning the extent to which retiree health care benefits provided for in a collective bargaining agreement become vested where the agreement is silent on their duration. Justice Thomas, delivering the opinion of a unanimous Court, disagreed with the judgment of the Sixth Circuit, which had ruled in a number of prior instances that silence in a collective bargaining agreement regarding the duration of bargained-for retiree health care benefits should be construed as evidence of the parties’ intention that those benefits vest and continue indefinitely. Despite the Sixth Circuit’s claims to the contrary, the Court concluded that the “Sixth Circuit’s decision rested on principles that are incompatible with ordinary principles of contract law.” M&G Polymers USA, LLC v. Tackett, No. 13-1010, Supreme Court of the United States (January 26, 2015).