Watkins v. Honeywell Int'l Inc.

• Decision Date: 08 November 2017
• Docket Number: No. 17-3032,17-3032
• Parties: Ann WATKINS ; James Ulicny, for themselves and others similarly-situated, Plaintiffs-Appellants, v. HONEYWELL INTERNATIONAL INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

875 F.3d 321

Ann WATKINS ; James Ulicny, for themselves and others similarly-situated, Plaintiffs-Appellants,

v.HONEYWELL INTERNATIONAL INC., Defendant-Appellee.

No. 17-3032

United States Court of Appeals, Sixth Circuit.

Argued: October 10, 2017

Decided and Filed: November 8, 2017

Rehearing Denied November 28, 2017

ARGUED: William Wertheimer, LAW OFFICE OF WILLIAM WERTHEIMER, Bingham Farms, Michigan, for Appellants. K. Winn Allen, KIRKLAND & ELLIS LLP, Washington, D.C., for Appellee. ON BRIEF: William Wertheimer, LAW OFFICE OF WILLIAM WERTHEIMER, Bingham Farms, Michigan, Stuart M. Israel, John G. Adam, LEGGHIO & ISRAEL, P.C., for Appellants. K. Winn Allen, Craig S. Primis, P.C., Matthew P. Downer, KIRKLAND & ELLIS LLP, Washington, D.C., for Appellee.

Before: COLE, Chief Judge; ROGERS and GRIFFIN, Circuit Judges.

COLE, Chief Judge.

This is a too-familiar story. For almost 40 years, Honeywell International (or its predecessors) operated a manufacturing plant in Fostoria, Ohio. Many union workers, including Ann Watkins and James Ulicny, spent most of their working years at the plant. They retired at a time when Honeywell promised in a collective-bargaining agreement that it would pay for their health insurance. But Honeywell’s plans for Fostoria changed. When the final agreement expired in 2011, Honeywell did not renew it. It sold the plant and, later, stopped paying for its retirees' healthcare. Those retirees, no doubt feeling like the rug had been pulled out from under them, filed suit seeking to require Honeywell to continue to pay. The district court found that Honeywell’s promise to pay for healthcare ended when the agreement expired and dismissed the suit. The agreement promises healthcare "for the duration of this Agreement," and this promise means exactly that: Honeywell’s obligation to pay for its Fostoria retirees' healthcare ended when the agreement expired. We affirm.

I. BACKGROUND

A. Honeywell and the UAW’s Collective-Bargaining History

For the many years that it operated the Fostoria plant, Honeywell staffed it with employees represented by the United Automobile, Aerospace, and Agricultural Implement Workers of America ("the UAW"). Honeywell and the UAW engaged in collective bargaining for decades, and they memorialized the outcome of those negotiations in successive collective-bargaining agreements.

As part of these negotiations, Honeywell agreed to pay for healthcare benefits for employees and retirees. According to the complaint, Honeywell wrote to retirees (or their surviving spouses) that their healthcare "will continue during your retirement" and is "for your lifetime." (Compl., R. 1, PageID 5.) But the promise made in the collective-bargaining agreements was less generous. The last agreement, which went into effect in 2009 and expired in 2011, provided: "For the duration of this Agreement, the Insurance Program shall be that which is attached hereto, hereinafter referred to as the Program." (2009 agreement, R. 19-2, PageID 456.) The "duration of this Agreement" was spelled out in a provision that said "[t]his Agreement shall continue in full force and effect until 11:59 PM, October 31, 2011." (Id. at PageID 487.) Earlier agreements contained similar provisions.

The last collective-bargaining agreement expired in 2011, the same year that Honeywell sold the Fostoria plant. Honeywell nevertheless continued to underwrite retirees' healthcare benefits for a few years. But in late 2015, Honeywell changed course and notified retirees that it would terminate healthcare contributions in 2017.

B. The Retirees File Suit

This was an unwelcome development for the Fostoria retirees. Retirees Watkins and Ulicny each worked at the Fostoria plant for around 30 years when they retired in 2004. After Honeywell notified them that it was terminating their healthcare benefits, Watkins and Ulicny sued on behalf of a proposed class of nearly 1,000 retirees and their spouses and dependents. They alleged violations under the Labor-Management Relations Act and the Employee Retirement Income Security Act.

In their view, the collective-bargaining agreement "promise[d] lifetime healthcare coverage and benefits for retirees and their spouses, eligible dependents, and surviving spouses," and Honeywell had breached this agreement by ending its healthcare contributions. (Compl., R. 1, PageID 1.) To argue that Honeywell had promised vested healthcare benefits, they pointed out that Honeywell had imposed caps on medical payments for retirees in 2001 that only went into effect in 2010, after the then-governing collective-bargaining agreement expired. Even then, the caps only applied to employees who retired after 2001. The retirees also highlighted a letter that Honeywell wrote to the UAW, incorporated in the 2009 agreement, which said that the "latest projections estimate that the caps should not hit"—that is, have a practical effect on any retiree—"until after the 2009-2011 contract expires." (Id. at PageID 5.) That letter also noted Honeywell’s "legacy retiree medical expense." (Id. )

The complaint also alleged other indicia that Honeywell had planned to provide healthcare benefits for the duration of retirees' lives. As told in the complaint, Honeywell acknowledged that employees had "lifetime family healthcare." (Id. at PageID 4.) For instance, Honeywell wrote to retirees' surviving spouses that it would "continue medical for your lifetime." (Id. at 5.) It also rescinded a statement to its retirees that it "reserves the right" to "terminate" healthcare, explaining that the termination right "does not pertain to retiree medical benefits negotiated by a collective bargaining unit." (Id. ) Finally, the complaint pointed out that Honeywell provided healthcare benefits to Fostoria retirees for five years after the final collective-bargaining agreement expired.

Honeywell moved to dismiss the complaint for failure to state a claim under Rule 12(b)(6). The retirees moved for summary judgment and sought to enjoin Honeywell from ending its payments for their healthcare.

C. The Decision Below

The district court granted Honeywell’s motion to dismiss and denied as moot the retirees' summary judgment motion. The court below started with the text of the final collective-bargaining agreement, which provided that healthcare coverage would apply "[f]or the duration of this Agreement"—in other words, "until 11:59 PM, October 31, 2011." (Order, R. 29, PageID 1457–58 (quoting 2009 agreement, R. 19-2).) The court reasoned that this language "is clear and expresses an unambiguous intent and agreement that the benefits were assured only for three years, not for life." (Id. at PageID 1463.) The court contrasted the language in the agreement providing healthcare benefits with the language that discussed pension benefits. The language discussing pension benefits expressly said that pension benefits vested for life; no similar language said that healthcare benefits would vest for life. Finding the contract unambiguous, the district court did not consider any of the retirees' extrinsic evidence.

The retirees appealed.

II. ANALYSIS

A. The Agreement is Unambiguous

We review the district court’s grant of a Rule 12(b)(6) motion to dismiss without deference, interpreting the complaint in the way most favorable to the retirees. See Saab Auto. AB v. General Motors Co. , 770 F.3d 436, 440 (6th Cir. 2014). We "interpret contracts according to their plain meaning, in an ordinary and proper sense." See Rogers v. Internal Rev. Serv. , 822 F.3d 854, 860 (6th Cir. 2016). That means we do not look at extrinsic evidence unless the contract is ambiguous. See Tackett v. M & G Polymers USA, LLC , 811 F.3d 204, 208–09 (6th Cir. 2016) ( Tackett III ). True linguistic ambiguities are "rare in contract cases." Stryker Corp. v. Nat. Union Fire Ins. Co. , 842 F.3d 422, 426 (6th Cir. 2016) (quoting E. Allen Farnsworth, "Meaning" in the Law of Contracts, 76 Yale L.J. 939, 954 (1967) ).

1. Our Prior Opinions

Because this case does not come to us on a blank slate, a bit of history is in order. For many years, this court applied the so-called Yard-Man inference to collective-bargaining agreements. See Int'l Union, United Auto., Aerospace, & Agric. Implement Workers of Am. v. Yard-Man, Inc. , 716 F.2d 1476, 1479 (6th Cir. 1983). Under that inference, this court "plac[ed] a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements." M & G Polymers USA, LLC v. Tackett , ––– U.S. ––––, 135 S.Ct. 926, 935, 190 L.Ed.2d 809 (2015). We viewed an agreement’s general-durational clause—the clause that typically says when the contract goes into and out of effect—to "say[ ] nothing about the vesting of retiree benefits" unless the contract contained specific durational language that referred to retiree benefits. Noe v. PolyOne Corp. , 520 F.3d 548, 555 (6th Cir. 2008).

Tackett retired this inference. In Tackett , the Supreme Court said that a collective-bargaining agreement is first and foremost a contract, which should be interpreted "according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy." 135 S.Ct. at 933. In the Supreme Court’s view, the Yard-Man inference departed from ordinary contract principles. As it explained, "placing a thumb on the scale in favor of vested retiree benefits" has "no basis in ordinary principles of contract law" because it "distorts the attempt ‘to ascertain the intention of the parties.’ " Id. at 935 (citation and emphasis omitted). Courts should, instead, interpret collective-bargaining agreements according to their terms and record evidence. As part of that analysis, courts should not require contracts "to include a specific durational clause"—rather than a general-durational clause—"for retiree health care benefits to prevent vesting." Id. at 936. The Supreme Court also reminded courts to consider traditional contract principles that "courts should not construe...