Gallo v. Moen Inc.

• Decision Date: 08 February 2016
• Docket Number: 14–3918.,Nos. 14–3633,s. 14–3633
• Citation: 813 F.3d 265
• Parties: John L. GALLO, et al., Plaintiffs–Appellees, v. MOEN INCORPORATED, Defendant–Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

813 F.3d 265

John L. GALLO, et al., Plaintiffs–Appellees,

v.MOEN INCORPORATED, Defendant–Appellant.

Nos. 14–3633

14–3918.

United States Court of Appeals, Sixth Circuit.

Argued: Oct. 15, 2015.

Decided and Filed: Feb. 8, 2016.

Rehearing En Banc Denied March 16, 2016.^*

ARGUED:Bobby Roy Burchfield, King & Spalding LLP, Washington, D.C., for Appellant. Joyce Goldstein, Goldstein Gragel LLC, Cleveland, Ohio, for Appellees. ON BRIEF:Bobby Roy Burchfield, King & Spalding LLP, Washington, D.C., Joshua David Rogaczewski, McDermott Will & Emery LLP, Washington, D.C., Kirk Watkins, McDermott Will & Emery LLP, Chicago, Illinois, for Appellant. Joyce Goldstein, Richard L. Stoper, Jr., Goldstein Gragel LLC, Cleveland, Ohio, for Appellees. Douglas A. Darch, Baker & McKenzie LLP, Chicago, Illinois, Christopher Landau, K. Winn Allen, Kirkland & Ellis LLP, Washington, D.C., for Amici Curiae.

Before: BOGGS, SUTTON, and STRANCH, Circuit Judges.

SUTTON

, J., delivered the opinion of the court in which BOGGS, J., joined. STRANCH, J. (pp. 274–82), delivered a separate dissenting opinion.

OPINION

SUTTON

, Circuit Judge.

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., 716 F.2d 1476 (6th Cir.1983)

, and other Sixth Circuit decisions applying Yard–Man. In M & G Polymers USA, LLC v. Tackett, ––– U.S. ––––, 135 S.Ct. 926, 190 L.Ed.2d 809 (2015), decided after the district court's decision in this case, the Court repudiated the Yard–Man line of cases. Consistent with Tackett, we must reverse the district court's decision.

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 Elyria, 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 "[c]ontinued 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. § 4980I

. 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 company shifted non-Medicare-eligible retirees to a healthcare plan that required higher out-of-pocket payments.

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. ––––, 135 S.Ct. 926, 190 L.Ed.2d 809 (2015)

, orients this appeal. In reversing a decision from our court, the Supreme Court instructed us to interpret collective bargaining agreements "according to ordinary principles of contract law." Id. at 933. The Court then instructed us what not to do in applying these principles. It repudiated Yard–Man and its heirs, directing us not to "plac[e] a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements." Id. at 935. It rejected our prior "inferences" in favor of vesting healthcare benefits for life as "too speculative and too far removed from the context of any particular contract to be useful in discerning the parties' intention." Id. It rejected our prior assumption that "retiree health care benefits are not subjects of mandatory collective bargaining," pointing out that parties frequently "voluntarily agree" to bargain about retiree healthcare. Id. at 936. It rejected our "premise that retiree benefits are a form of deferred compensation," reminding us that Congress has rejected that premise. Id.; see 29 U.S.C. § 1002(1), (2)(A)(ii). It directed us to consider the general durational clauses in the CBAs (usually three years) in deciding how long a company has committed to provide healthcare benefits to retirees. 135 S.Ct. at 936. It told us that "courts should not construe ambiguous writings to create lifetime promises." Id. And it explained that, "when a contract is silent as to the duration of retiree benefits, a court may not infer that the parties intended those benefits to vest for life." Id. at 937 ; see generally Tackett v. M & G Polymers USA, LLC, No. 12–3329, 811 F.3d 204, 208, 2016 WL 240414, at *4 (6th Cir. Jan. 21, 2016).

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., 133 F.3d 388 (6th Cir.1998)

(en banc). Sprague rejected the application of Yard–Man in the context of noncollectively bargained contracts about retiree healthcare benefits and refused to infer from silence and ambiguous contracts a commitment to unalterable healthcare benefits to retirees for life. Id. at 400. Tackett thus directed us to treat collectively and noncollectively bargained contracts about retiree healthcare benefits similarly—to apply the same basic rules of contract interpretation to both sets of contracts. See 135 S.Ct. at 936–37.

Guided by the Court's directives about what to do and what not to do in this area, we must conclude that the Moen–UAW collective bargaining agreements do not provide unalterable healthcare benefits for life to the Elyria retirees and their dependents. Here are the key provisions of the 2005 CBA, similar in relevant part to the earlier CBAs:

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. SeeTackett , 135 S.Ct. at 937

.

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, 531 U.S. 457, 468, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001)

, we should not expect to find lifetime commitments in time-limited agreements, Tackett, 135 S.Ct. at 936. Each of the CBAs made commitments for approximately three-year terms—well short of...