M & G Polymers USA, LLC v. Tackett

Decision Date26 January 2015
Docket NumberNo. 13–1010.,13–1010.
Citation190 L.Ed.2d 809,135 S.Ct. 926,574 U.S. 427
Parties M & G POLYMERS USA, LLC, et al., Petitioners v. Hobert Freel TACKETT et al.
CourtU.S. Supreme Court

Allyson N. Ho, Dallas, TX, for Petitioners.

Julia P. Clark, Washington, DC, for Respondents.

Christopher A. Weals, Morgan, Lewis & Bockius LLP, Washington, DC, R. Randall Tracht, Andrew Scroggins, Morgan, Lewis & Bockius LLP, Pittsburgh, PA, Allyson N. Ho, Counsel of Record, John C. Sullivan, Morgan, Lewis & Bockius LLP, Dallas, TX, for Petitioners.

David M. Cook, Jennie G. Arnold, Cook & Logothetis, LLC, Cincinnati, OH, Joseph P. Stuligross, Pittsburgh, PA, Julia Penny Clark, Counsel of Record, Jeremiah A. Collins, Joshua B. Shiffrin, Laurence Gold, Bredhoff & Kaiser, P.L.L.C., Washington, DC, for Respondents.

Justice THOMAS delivered the opinion of the Court.

This case arises out of a disagreement between a group of retired employees and their former employer about the meaning of certain expired collective-bargaining agreements. The retirees (and their former union) claim that these agreements created a right to lifetime contribution-free health care benefits for retirees, their surviving spouses, and their dependents. The employer, for its part, claims that those provisions terminated when the agreements expired. The United States Court of Appeals for the Sixth Circuit sided with the retirees, relying on its conclusion in International Union, United Auto., Aerospace and Agricultural Implement Workers of Am. v. Yard–Man, Inc., 716 F.2d 1476, 1479 (1983), that retiree health care benefits are unlikely to be left up to future negotiations. We granted certiorari and now conclude that such reasoning is incompatible with ordinary principles of contract law. We therefore vacate the judgment of the Court of Appeals and remand for it to apply ordinary principles of contract law in the first instance.

I
A

Respondents Hobert Freel Tackett, Woodrow K. Pyles, and Harlan B. Conley worked at (and retired from) the Point Pleasant Polyester Plant in Apple Grove, West Virginia (hereinafter referred to as the Plant). During their employment, respondent United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC, or its predecessor unions (hereinafter referred to as the Union), represented them in collective bargaining. Tackett and Pyles retired in 1996, and Conley retired in 1998. They represent a class of retired employees from the Plant, along with their surviving spouses and other dependents. Petitioner M & G Polymers USA, LLC, is the current owner of the Plant.

When M & G purchased the Plant in 2000, it entered a master collective-bargaining agreement and a Pension, Insurance, and Service Award Agreement (P & I agreement) with the Union, generally similar to agreements the Union had negotiated with M & G's predecessor. The P & I agreement provided for retiree health care benefits as follows:

"Employees who retire on or after January 1, 1996 and who are eligible for and receiving a monthly pension under the 1993 Pension Plan ... whose full years of attained age and full years of attained continuous service ... at the time of retirement equals 95 or more points will receive a full Company contribution towards the cost of [health care] benefits described in this Exhibit B–1.... Employees who have less than 95 points at the time of retirement will receive a reduced Company contribution. The Company contribution will be reduced by 2% for every point less than 95. Employees will be required to pay the balance of the health care contribution, as estimated by the Company annually in advance, for the [health care] benefits described in this Exhibit B–1. Failure to pay the required medical contribution will result in cancellation of coverage." App. 415–416.

Exhibit B–1, which described the health care benefits at issue, opened with the following durational clause: "Effective January 1, 1998, and for the duration of this Agreement thereafter, the Employer will provide the following program of hospital benefits, hospital-medical benefits, surgical benefits and prescription drug benefits for eligible employees and their dependents...." Id., at 377–378 (emphasis deleted). The P & I agreement provided for renegotiation of its terms in three years.1

B

In December 2006, M & G announced that it would begin requiring retirees to contribute to the cost of their health care benefits. Respondent retirees, on behalf of themselves and others similarly situated, sued M & G and related entities, alleging that the decision to require these contributions breached both the collective-bargaining agreement and the P & I agreement, in violation of § 301 of the Labor Management Relations Act, 1947 (LMRA) and § 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 891.2 Specifically, the retirees alleged that M & G had promised to provide lifetime contribution-free health care benefits for them, their surviving spouses, and their dependents. They pointed to the language in the 2000 P & I agreement providing that employees with a certain level of seniority "will receive a full Company contribution towards the cost of [health care] benefits described in ... Exhibit B–1." The retirees alleged that, with this promise, M & G had created a vested right to such benefits that continued beyond the expiration of the 2000 P & I agreement.

The District Court dismissed the complaint for failure to state a claim. 523 F.Supp.2d 684, 696 (S.D.Ohio 2007). It concluded that the cited language unambiguously did not create a vested right to retiree benefits.

The Court of Appeals reversed based on the reasoning of its earlier decision in Yard–Man . 561 F.3d 478 (C.A.6 2009) (Tackett I ). Yard–Man involved a similar claim that an employer had breached a collective-bargaining agreement when it terminated retiree benefits. 716 F.2d, at 1478. Although the court found the text of the provision in that case ambiguous, it relied on the "context" of labor negotiations to resolve that ambiguity in favor of the retirees' interpretation. Id., at 1482. Specifically, the court inferred that parties to collective bargaining would intend retiree benefits to vest for life because such benefits are "not mandatory" or required to be included in collective-bargaining agreements, are "typically understood as a form of delayed compensation or reward for past services," and are keyed to the acquisition of retirement status. Ibid. The court concluded that these inferences "outweigh[ed] any contrary implications [about the termination of retiree benefits] derived from" general termination clauses. Id., at 1483.

Applying the Yard–Man inferences on review of the District Court's dismissal of the action, the Court of Appeals concluded that the retirees had stated a plausible claim. Tackett I, 561 F.3d, at 490. "Keeping in mind the context of the labor-management negotiations identified in Yard–Man, " the court found "it unlikely that [the Union] would agree to language that ensures its members a ‘full Company contribution,’ if the company could unilaterally change the level of contribution." Ibid. The court construed the language about "employees" contributing to their health care premiums as limited to employees who had not attained the requisite seniority points to be entitled to a full company contribution. Ibid. And it discerned an intent to vest lifetime contribution-free health care benefits from provisions tying eligibility for health care benefits to eligibility for pension benefits. Id., at 490–491.

On remand, the District Court conducted a bench trial and ruled in favor of the retirees. It declined to revisit the question whether the P & I agreement created a vested right to retiree benefits, concluding that the Court of Appeals had definitively resolved that issue. It then issued a permanent injunction ordering M & G to reinstate contribution-free health care benefits for the individual respondents and similarly situated retirees. 853 F.Supp.2d 697 (S.D.Ohio 2012).

The Court of Appeals affirmed, concluding that, although the District Court had erred in treating Tackett I as a conclusive resolution of the meaning of the P & I agreement, it had not erred in "presum[ing]" that, "in the absence of extrinsic evidence to the contrary, the agreements indicated an intent to vest lifetime contribution-free benefits." 733 F.3d 589, 600 (C.A.6 2013) (Tackett II ). And because the District Court had concluded that the proffered extrinsic evidence was inapplicable, it had not clearly erred in finding that the agreement created those vested rights.

We granted certiorari, 572 U.S. 1099, 134 S.Ct. 2136, 188 L.Ed.2d 1123 (2014), and now vacate and remand.

II

This case is about the interpretation of collective-bargaining agreements that define rights to welfare benefits plans. The LMRA grants federal courts jurisdiction to resolve disputes between employers and labor unions about collective-bargaining agreements. 29 U.S.C. § 185. When collective-bargaining agreements create pension or welfare benefits plans, those plans are subject to rules established in ERISA. ERISA defines pension plans as plans, funds, or programs that "provid[e] retirement income to employees" or that "resul[t] in a deferral of income." § 1002(2)(A). It defines welfare benefits plans as plans, funds, or programs established or maintained to provide participants with additional benefits, such as life insurance and disability coverage. § 1002(1).

ERISA treats these two types of plans differently. Although ERISA imposes elaborate minimum funding and vesting standards for pension plans, §§ 1053, 1082, 1083, 1084, it explicitly exempts welfare benefits plans from those rules, §§ 1051(1), 1081(a)(1). Welfare benefits plans must be "established and maintained pursuant to a written instrument," § 1102(a)(1), but "[e]mployers or other plan...

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