Tackett v. M & G Polymers USA, LLC

• Decision Date: 21 January 2016
• Docket Number: No. 12–3329.,12–3329.
• Citation: 811 F.3d 204
• Parties: Hobert Freel TACKETT, et al., Plaintiffs–Appellees, v. M & G POLYMERS USA, LLC, et al., Defendants–Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

811 F.3d 204

Hobert Freel TACKETT, et al., Plaintiffs–Appellees,

v.M & G POLYMERS USA, LLC, et al., Defendants–Appellants.

No. 12–3329.

United States Court of Appeals, Sixth Circuit.

Argued: Oct. 6, 2015.

Decided and Filed: Jan. 21, 2016.

ARGUED:K. Winn Allen, Kirland & Ellis LLP, Washington, D.C., for Amicus Curiae Erisa. Allyson N. Ho, Morgan, Lewis & Bockius LLP, Dallas, Texas, for Appellants. Julia Penny Clark, Bredhoff & Kaiser, P.L.L.C., Washington, D.C., for Appellees. ON BRIEF:Allyson N. Ho, John C. Sullivan, Morgan, Lewis & Bockius LLP, Dallas, Texas, Christopher A. Weals, Morgan, Lewis & Bockius LLP, Washington, D.C., for Appellants. Julia Penny Clark, Jeremiah A. Collins, Bredhoff & Kaiser, P.L.L.C., Washington, D.C., David M. Cook, Jennie G. Arnold, Cook & Logothetis, LLC, Cincinnati, Ohio, for Appellees. K. Winn Allen, Kirland & Ellis LLP, Washington, D.C., Douglas A. Darch, Baker & McKenzie LLP, Chicago, Illinois, Bobby R. Burchfield, King & Spalding LLP, Washington, D.C., for Amici Curiae.

Before: COLE, Chief Judge; KEITH and MERRITT, Circuit Judges.

OPINION

COLE, Chief Judge.

This case returns to us for the third time, this time on remand from the Supreme Court, which abrogated the primary precedent on which our prior decisions relied. See M & G Polymers USA, LLC v. Tackett, ––– U.S. ––––, 135 S.Ct. 926, 190 L.Ed.2d 809 (2015) (vacating Tackett v. M & G Polymers USA, LLC, 733 F.3d 589 (6th Cir.2013) ("Tackett II "); abrogating Int'l Union, United Auto., Aerospace, & Agric. Implement Workers of Am. (UAW) v. Yard–Man, Inc., 716 F.2d 1476 (6th Cir.1983) ). On remand, we were directed to construe the parties' agreements using "ordinary principles of contract law." M & G Polymers, 135 S.Ct. at 937.

Because prior factual determinations as to the parties' agreements were made in the "shadow of Yard–Man, " we remand to the district court to make these determinations, in the first instance, in light of the Supreme Court's holding.

I. BACKGROUND¹

A. Factual Background

Plaintiffs–Appellees are Ohio residents, retirees, and spouses of retirees ("Retirees") from a plant owned by Defendant–Appellant M & G Polymers USA, LLC ("M & G"). From 1991 to 2005, the Retirees entered into several collective bargaining agreements ("CBA") with M & G and its predecessors, which included Pension and Insurance Agreements ("P & I") outlining retiree health care benefits (collectively, "Agreements"). The P & Is provide that the employer will make "a full Company contribution towards the cost of [health care] benefits" for certain retirees. In December 2006, M & G announced that Retirees would, for the first time, be required to contribute to their health care costs or risk being dropped from the plan.

B. Procedural History

Retirees filed a class action suit against M & G and its health care plans (collectively, "Defendants") alleging that the Agreements under which they retired granted a vested right to lifetime contribution-free health care benefits. Defendants argued certain side letters or "cap letters" established caps they would pay towards Retirees' cost of benefits. Defendants further argued Retirees had always been expected to contribute to the cost of their health care benefits, but M & G never required them to do so until 2006.

Initially, the district court dismissed the complaint, finding the Agreements and cap letters foreclosed Retirees' claims based on "simple principles of contract construction." Tackett v. M & G Polymers USA, LLC, 523 F.Supp.2d 684, 695 (S.D.Ohio 2007) ("Tackett 2007 "). On appeal, we held "[i]n determining whether the parties intended health care benefits to vest, this Court applies the principles first described in Yard–Man. " Tackett v. M & G Polymers USA, LLC, 561 F.3d 478, 489 (6th Cir.2009) (per curiam) ("Tackett I "). In applying Yard–Man to the limited language at issue in the P & I, we found that the Agreements evinced an intent to vest Retirees' with lifetime contribution-free health care benefits. Id. at 489–91.

First, the "full Company contribution" language suggests that the parties intended the employer to cover the full cost of health-care benefits for those employees meeting the age and term-of-service requirements. Keeping in mind the context of the labor-management negotiations identified in Yard–Man, [716 F.2d 1476 (6th Cir.1983) ] we find it unlikely that Plaintiff USW would agree to language that ensures its members a "full Company contribution," if the company could unilaterally change the level of contribution. The CBA has no limitation on the amount of a company contribution and if the Defendants' argument were accepted, the company presumably could lower the contribution to zero without violating this language. Such a promise would be illusory.

Second, the limiting language, "[e]mployees will be required to pay the balance of the health care contribution," follows the provision requiring contributions by those retirees who had not attained the requisite seniority points. From the placement of this language, we can reasonably infer that it did not apply to all retirees, but only to those retirees who had not attained the requisite seniority points.

Third, the collective bargaining agreement tied eligibility for health-care benefits to pension benefits. This is another factor indicating that the parties intended the health care benefits to vest upon retirement.

Id. at 490.

On remand, the district court held that Retirees had a vested right to contribution-free health care benefits based on the inference in Yard–Man. See Tackett v. M & G Polymers USA, LLC, No. 2:07–CV–126, 2011 WL 3438489, at *13–14 (S.D.Ohio Aug. 5, 2011) ("Tackett Bench Trial "). Following a bench trial, the district court held that the cap letters did not apply to Retirees, id. at *19, and granted a permanent injunction reinstating Retirees' lifetime contribution-free health care benefits, Tackett v. M & G Polymers USA, LLC, 853 F.Supp.2d 697, 698–99 (S.D.Ohio 2012).

When Defendants appealed, we cited the Yard–Man contract interpretation principles embraced by Tackett I.

(1) "[L]ook to the explicit language," (2) evaluate that language "in light of the context" that led to its use, (3) "interpret each provision ... as part of the integrated whole," (4) construe each provision "consistently with the entire document and the relative positions and purposes of the parties," (5) construe the terms "so as to render none nugatory" and to "avoid illusory promises," (6) look to other words and phrases in the document to resolve ambiguities, and (7) "review the interpretation ... for consistency with federal labor policy."

Tackett II, 733 F.3d at 599 (quoting Tackett I, 561 F.3d at 489 n. 7 (quoting Yard–Man, 716 F.2d at 1479–80 )). We found that the district court did not clearly err in finding the cap agreements inapplicable to Retirees. Tackett II, 733 F.3d at 597. As a result, we affirmed the district court's finding that Retirees' lifetime contribution-free health care benefits had vested. Id. at 600.

The qualifying language in Tackett I implied that the CBA language, though indicating intent to vest, contained enough ambiguity to permit examination of such additional evidence [as the cap letters].

The district court's presumption that, in the absence of extrinsic evidence to the contrary, the agreements indicated an intent to vest lifetime contribution-free benefits was in accordance with both Tackett I and the CBA language promising a "full contribution" to qualifying employees. To the extent that vesting was presumed, it was not the district court that, sua sponte, shifted the burden of proof, but rather the language of the CBA and its linkage of health care benefits to pension benefits that led to the conclusion that retirees had a vested right to health care benefits and, in the absence of evidence to the contrary, a vested right to contribution-free health care benefits. Having reached the conclusion that benefits were vested, it was then reasonable for the district court to conclude that those benefits could not be bargained away without retiree permission.

Id. (internal citation omitted).

On certiorari, the Supreme Court abrogated Yard–Man and its progeny, finding that Yard–Man required us to analyze CBAs with a "thumb on the scale" in favor of vesting. M & G Polymers, 135 S.Ct. at 935 ; id. at 938 (Ginsburg, J., concurring). On remand, the Supreme Court directed us to review the parties' agreements and determine whether benefits vested using "ordinary principles of contract law." M & G Polymers, 135 S.Ct. at 937 (unanimous op.).

II. ORDINARY PRINCIPLES OF CONTRACT LAW

Our review begins with the Supreme Court's decision in M & G Polymers, which unanimously concluded we should review the Agreements applying "ordinary principles of contract law." See id. at 935–37 ; id. at 938 (Ginsburg, J., concurring). Such "ordinary principles" include the following:

• [A]s with any other contract, the parties' intentions control.

• Where the words of a contract in writing are clear and unambiguous, its meaning is to be ascertained in accordance with its plainly expressed intent.

• Although a court may look to known customs or usages in a particular industry to determine the meaning of a contract, the parties must prove those customs or usages using affirmative evidentiary support in a given case.

• [T]he written agreement is presumed to encompass the whole agreement of the parties.

• Courts [should] avoid constructions of contracts that would render promises illusory because such promises cannot serve as consideration for a contract .... [A] promise that is "partly" illusory is by definition not illusory.

• [C]ourts should not construe ambiguous writings to create lifetime promises.... [C]ontracts that are silent as to their duration will ordinarily be treated not as "operative in perpetuity" but as "operative for a reasonable time."

• [T]raditional rules of contractual interpretation require a clear manifestation of intent before conferring a

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