Kendzierski v. Macomb Cnty.

• Decision Date: 30 May 2019
• Docket Number: Docket No. 156086
• Parties: Rita KENDZIERSKI, Bonnie Haines, Greg Dennis, Louise Bertolini, John Barker, James Cowan, Vincent Powierski, Robert Stanley, Alan Moroschan, and Gaer Guerber, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs-Appellees, v. MACOMB COUNTY, Defendant-Appellant.
• Court: Michigan Supreme Court

503 Mich. 296

931 N.W.2d 604

Rita KENDZIERSKI, Bonnie Haines, Greg Dennis, Louise Bertolini, John Barker, James Cowan, Vincent Powierski, Robert Stanley, Alan Moroschan, and Gaer Guerber, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs-Appellees,

v.MACOMB COUNTY, Defendant-Appellant.

Docket No. 156086

Supreme Court of Michigan.

Argued on application for leave to appeal November 19, 2018.

Decided May 30, 2019.

Markman, J.

The issue here is whether plaintiffs' collective-bargaining agreements (CBAs) with defendant, Macomb County, granted plaintiffs a vested right to lifetime and unalterable retirement healthcare benefits. The trial court held that while plaintiffs are entitled to lifetime healthcare benefits, defendant can make reasonable modifications to those benefits. On appeal, the Court of Appeals held that plaintiffs are entitled to lifetime and unalterable healthcare benefits and that such benefits cannot be modified absent plaintiffs' consent. Because we conclude that the CBAs did not grant plaintiffs a vested right to lifetime and unalterable benefits, we reverse the judgment of the Court of Appeals and remand to the Macomb Circuit Court for entry of an order granting summary disposition to defendant consistent with this opinion.

I. BACKGROUND

This is a class action brought on behalf of approximately 1600 unionized Macomb County employee retirees who worked for defendant under various CBAs dating back to 1989. Plaintiffs claim that in 2009 and 2010 defendant breached these agreements by reducing and altering their healthcare benefits; plaintiffs now seek both monetary damages and injunctive relief. It is undisputed that each CBA contained an express three-year durational provision and that none of the CBAs contained a provision expressly granting a vested right to lifetime and unalterable retirement healthcare benefits. The trial court granted defendant’s motion for summary disposition, concluding that while plaintiffs are entitled to lifetime healthcare benefits under the agreements, defendant is permitted to make reasonable modifications to those benefits. The Court of Appeals affirmed in part and reversed in part, concluding that while plaintiffs are entitled to lifetime healthcare benefits, those benefits cannot be modified absent plaintiffs' consent. Kendzierski v. Macomb Co. , 319 Mich. App. 278, 286-289, 901 N.W.2d 111 (2017). We ordered and heard oral argument on whether to grant defendant’s application for leave to appeal. Kendzierski v. Macomb Co. , 501 Mich. 966, 905 N.W.2d 602 (2018).

II. STANDARDS OF REVIEW

"This Court reviews de novo a trial court’s decision on a motion for summary disposition." Bazzi v. Sentinel Ins. Co. , 502 Mich. 390, 398, 919 N.W.2d 20 (2018). "This Court also reviews de novo questions of ... the proper interpretation of a contract." Id.

III. ANALYSIS

It is undisputed that all of the CBAs contain the following provisions or provisions that are "materially similar":¹

Retirees: The Employer will provide fully paid Blue Cross/Blue Shield Hospital-Medical coverage to the employee and the employee’s spouse, after eight (8) years of service with the Employer, for the employee who leaves employment because of retirement and is eligible for and receives benefits under the Macomb County Employees' Retirement Ordinance ....

* * *

Coverage shall be limited to the current spouse of the retiree, at the time of retirement, provided such employee shall retire on or after January 1, 1974. Coverage for the eligible spouse will terminate upon the death of the retiree unless the retiree elects to exercise a retirement option whereby the eligible current spouse receives applicable retirement benefits following the death of the retiree.

Coverage shall be limited to Blue Cross/Blue Shield MVF1 Master Medical with ML Rider, or its substantial equivalence.

* * *

Retired employees and/or their current spouse, upon reaching age 65, shall apply if eligible, and participate in the Medicare Program at their expense as required by the Federal Insurance Contribution Act, a part of the Social Security Program, at which time the Employer’s obligation shall be only to provide "over 65 supplemental" hospital-medical benefit coverage. Failure to participate in the aforementioned Medicare Program, shall be cause for termination of Employer paid coverage of applicable hospital-medical benefits, as outlined herein for employees who retire and/or their current spouse.

Employees who retire under the provisions of the Macomb County Employees' Retirement Ordinance, and/or their current spouse, who subsequently are gainfully employed, shall not be eligible for hospital-medical benefits, during such period of gainful employment ....

* * *

The parties acknowledge that during the negotiations which resulted in this Agreement each had the unlimited right and opportunity to make demands and proposals with respect to all subjects of collective bargaining and that all agreements and understandings, expressed, implied, written or oral, are set forth in this Agreement. This Agreement expresses the complete understanding of the Parties on the subject of wages, working conditions, hours of work, benefits and conditions of employment.

* * *

This Agreement shall continue in full force and effect until December 31, 2007. [Paragraph lettering omitted.]

The issue is whether the CBAs granted plaintiffs vested rights to lifetime and unalterable retirement healthcare benefits. In Int'l Union, United Auto., Aerospace & Agricultural Implement Workers of America (UAW) v. Yard-Man, Inc. , 716 F.2d 1476, 1478 (C.A. 6, 1983), the United States Court of Appeals for the Sixth Circuit held that the CBAs at issue in that case granted the plaintiffs vested rights to lifetime and unalterable retirement healthcare benefits. However, as recognized by Arbuckle v. Gen. Motors LLC , 499 Mich. 521, 885 N.W.2d 232 (2016), the United States Supreme Court in M & G Polymers USA, LLC v. Tackett , 574 U.S. 427, 135 S.Ct. 926, 190 L.Ed. 2d 809 (2015), overruled Yard-Man (and its progeny) in an opinion that

characterized [ Yard-Man and its progeny] as "placing a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements." Those decisions, the Supreme Court explained, "distort the text of [a collective-bargaining] agreement and conflict with the principle of contract law that the written agreement is presumed to encompass the whole agreement of the parties." Indeed, basic principles of contract interpretation instruct that "courts should not construe ambiguous writings to create lifetime promises" and, absent a contrary intent, that "contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement." For "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." [ Arbuckle , 499 Mich. at 540, 885 N.W.2d 232, quoting Tackett , 574 U.S. at ––––, 135 S.Ct. at 935-937 (quotation marks omitted; second alteration in Arbuckle ).]^{[2 ]}

Tackett specifically rejected many of the same arguments raised by plaintiffs in the instant case. For example, Tackett rejected Yard-Man ’s presumption that a general durational clause, which specifies when a contract will expire, states nothing about the vesting of retiree benefits.³

Tackett , 574 U.S. at ––––, 135 S.Ct. at 937. It also rejected the presumption of vesting based on provisions that: (a) tie eligibility for retirement health benefits to eligibility for a pension, (b) enable continuation of a surviving spouse’s healthcare coverage following the death of the retiree, and (c) specify that the employer will pay a retiree’s insurance once he or she reaches age 65 when employees could retire at age 55.⁴ Id. at ––––, 135 S.Ct. at 937.

Yard-Man , 716 F.2d at 1482, held that "if [employees] forego wages now in expectation of retiree benefits, they would want assurance that once they retire they will continue to receive such benefits"; "[a]s such, it is unlikely that such benefits ... would be left to the contingencies of future negotiations." It further held that "when ... parties contract for benefits which accrue upon achievement of retiree status, there is an inference that the parties likely intended those benefits to continue as long as the beneficiary remains a retiree." Id. Tackett , 574 U.S. at ––––, 135 S.Ct. at 935, 937, rejected these inferences as "inconsistent with ordinary principles of contract law," explaining that " Yard-Man ’s assessment of likely behavior in collective bargaining is too speculative and too far removed from the context of any particular contract to be useful in discerning the parties' intention" and that the Yard-Man Court "derived its assessment of likely behavior not from record evidence, but instead from its own suppositions about the intentions of employees, unions, and employers negotiating retiree benefits." Furthermore, Tackett held that Yard-Man failed to recognize the traditional principle that "contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement"⁵ and that while "a collective-bargaining agreement may provide in explicit terms that certain benefits continue after the agreement’s expiration[,] ... 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 ––––, 135 S.Ct. at 937 (quotation marks, citation, and brackets omitted).

Post- Tackett , "the Sixth Circuit [in Reese v. CNH Indus. N.V. , 854 F.3d 877, 882-883 (C.A. 6, 2017),] held that the same Yard-Man inferences it once used to presume lifetime vesting can now be used to render a collective-bargaining agreement ambiguous as a matter of law, thus allowing courts to consult extrinsic evidence about lifetime vesting." CNH Indus. N.V. v. Reese , 583 U.S. ––––, ––––, 138 S.Ct. 761, 763, 200 L.Ed. 2d 1 (2018). The...