Reese v. CNH Am. LLC

• Decision Date: 06 November 2012
• Docket Number: 11–1969.,11–1857,Nos. 11–1359,s. 11–1359
• Citation: 694 F.3d 681
• Court: U.S. Court of Appeals — Sixth Circuit
• Parties: Jack REESE, Frances Elaine Pidde, James Cichanopsky, Roger Miller and George Nowlin, Plaintiffs–Appellees (11–1359), Plaintiffs–Appellees/Cross–Appellants (11–1857 & 11–1969), Ronald Hitt, Plaintiff, v. CNH AMERICA LLC, fka Case Corporation and CNH Global NV, Defendants–Appellants (11–1359), Defendants–Appellants/Cross–Appellees (11–1857 & 11–1969).

694 F.3d 681

Jack REESE, Frances Elaine Pidde, James Cichanopsky, Roger Miller and George Nowlin, Plaintiffs–Appellees (11–1359), Plaintiffs–Appellees/Cross–Appellants (11–1857 & 11–1969),Ronald Hitt, Plaintiff,

v.CNH AMERICA LLC, fka Case Corporation and CNH Global NV, Defendants–Appellants (11–1359), Defendants–Appellants/Cross–Appellees (11–1857 & 11–1969).

Nos. 11–1359, 11–1857, 11–1969.

United States Court of Appeals,Sixth Circuit.

Argued: June 5, 2012.

Decided and Filed: Sept. 13, 2012.

Rehearing and Rehearing En Banc^* Denied Nov. 6, 2012.^**

ARGUED:Bobby R. Burchfield, McDermott, Will & Emery LLP, Washington, D.C., for Appellants and Appellants/Cross–Appellees. Roger J. McClow, McKnight, McClow & Canzano, P.C., Southfield, Michigan, for Appellees and Appellees/Cross–Appellants. ON BRIEF:Bobby R. Burchfield, Joshua David Rogaczewski, McDermott, Will & Emery LLP, Washington, D.C., for Appellants and Appellants/Cross–Appellees. Roger J. McClow, McKnight, McClow & Canzano, P.C., Southfield, Michigan, for Appellees and Appellees/Cross–Appellants.

Before: GIBBONS, SUTTON and DONALD, Circuit Judges.

SUTTON, J., delivered the opinion of the court in which GIBBONS, J., joined. DONALD, J. (pp. 686–91), delivered a separate dissenting opinion.

OPINION

SUTTON, Circuit Judge.

In litigation, as in film, sequels rarely satisfy. This case is no exception. Three years ago, we remanded this dispute to the district court for factfinding necessary to determine whether CNH America's proposed modifications to its retiree healthcare benefits are reasonable. The district court did not reach the reasonableness question and did not create a factual record that would permit us to answer the question on our own. As a result, we reverse and remand for further proceedings.

I.

Our previous opinion makes it unnecessary to recount the protracted history of this litigation. See Reese v. CNH America LLC, 574 F.3d 315, 318–20 (6th Cir.2009). There, we considered two questions: “Did [CNH] in the 1998 CBA agree to provide health-care benefits to retirees and their spouses for life? And, if so, does the scope of this promise permit CNH to alter these benefits in the future?” Id. at 321. In answering the first question, we rejected CNH's claim that the CBA permitted the company to terminate the benefits, holding that eligibility for lifetime healthcare benefits had “vested.” Id. at 322;see Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 580 (6th Cir.2006); UAW v. Yard–Man, Inc., 716 F.2d 1476, 1482 (6th Cir.1983).

In answering the second question (“What does vesting mean in this setting?”), we rejected the suggestion that the scope of this commitment in the context of healthcare benefits, as opposed to pension benefits, meant that CNH could make no changes to the healthcare benefits provided to retirees. Unlike pension obligations, we explained, healthcare benefits cannot readily be monetized at retirement or for that matter practically fixed. See Reese I, 574 F.3d at 324. Doctors and medical-insurance providers come and go. Medical plans change from year to year. And fixed, unalterable medical benefits at all events are not what retirees want. Nothing, indeed, would make employers happier than to know that vesting in the healthcare-benefits context meant the same thing as vesting in the pension context. For then, a company faced with the obligation could account for what it had spent on each employee for healthcare benefits on the day of retirement, then commit to spend no less through the end of the retiree's (and spouse's) life. Nor would most employers be troubled if this commitment, like most defined-benefit pension plans, increased based on inflation as measured by the consumer-price index. The reality is that, even though we have relied on language tying healthcare benefits to pension benefits as a basis for determining that healthcare benefits have vested, vesting in the context of healthcare benefits provides an evolving, not a fixed, benefit. See Yolton, 435 F.3d at 583 (relying on language in the summary plan descriptions saying that “ continued coverages will be the same as those that were in effect on the day preceding your retirement”); see also Noe v. PolyOne Corp., 520 F.3d 548, 558 (6th Cir.2008); McCoy v. Meridian Auto. Sys., Inc., 390 F.3d 417, 422 (6th Cir.2004); Golden v. Kelsey–Hayes Co., 73 F.3d 648, 656 (6th Cir.1996).

The rub for retirees and employers alike is that healthcare benefits—what is provided and what it costs—have not been remotely static in modern memory. The reason has little to do with traditional causes of inflation and more to do with the expansion of the benefit: the remarkable growth in modern life-saving and comfort-improving medical procedures, devices and drugs. New and better medical procedures arise while others become obsolete. And it is the rare medical innovation that costs less than the one it replaces. Retirees, quite understandably, do not want lifetime eligibility for the medical-insurance plan in place on the day of retirement, even if that means they would pay no premiums for it. They want eligibility for up-to-date medical-insurance plans, all with access to up-to-date medical procedures and drugs. Whatever else vesting in the healthcare context means, all appear to agree that it does not mean that beneficiaries receive a bundle of services fixed once and for all. Companies want the freedom to change health-insurance plans. And beneficiaries want something more than a fixed, unalterable bundle of services; they want coverage to account for new and better, yet likely more expensive, procedures and medications than the ones in existence at retirement.

All of this was borne out by the parties' implementation of the relevant collective bargaining agreements—in at least two respects. As explained in our prior opinion, the 1998 CBA “created a Managed Health Care Network Plan for past and future retirees. In other words, it imposed managed care on all of them, which represented a reduction in the effective choices of coverage available for all retirees and the coverage actually provided to many, if not most, of them.” Reese I, 574 F.3d at 325. “Pre–1998 retirees thus saw their coverage downgraded in at least one respect: Unlike the prior plan, under which they could choose any doctor without suffering a financial penalty, they generally had to pay more for choosing an out-of-plan doctor.” Id. Other cases reach the same conclusion. Winnett v. Caterpillar, Inc., 609 F.3d 404, 412–13 (6th Cir.2010) (explaining that a change to managed care is a “significant change” representing a “reduction” in benefits); cf. UAW v. Aluminum Co. of Am., 932 F.Supp. 997, 1011 (N.D.Ohio 1996) (challenging employer's adoption of a managed-care plan as a reduction in benefits).

Also confirming that the parties did not perceive the relevant CBAs as establishing fixed, unalterable benefits was the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub.L. No. 108–173, 117 Stat.2066. No one batted an eye when the healthcare plans for which retirees were eligible were modified to account for the creation of Medicare Part D, the prescription-drug benefit for seniors.

In view of the distinction between the vesting of eligibility for a benefit and the scope of that commitment and in view of the parties' practice under the 1998 CBA of altering healthcare benefits under CBAs with materially identical language, we concluded that CNH could make “reasonable” changes to the healthcare plan covering eligible retirees. Reese, 574 F.3d at 325–27;see also Zielinski v. Pabst Brewing Co., 463 F.3d 615, 619 (7th Cir.2006) (distinguishing the vesting of healthcare benefits from the scope of that commitment and holding that the employer was obligated to provide benefits “reasonably commensurate” with pre-retirement plans). We listed three considerations: Does the modified plan provide benefits “reasonably commensurate” with the old plan? Are the proposed changes “reasonable in light of changes in health care”? And are the benefits “roughly consistent with the kinds of benefits provided to current employees”? Reese I, 574 F.3d at 326. We remanded the case to the district court to take evidence and to decide in the first instance the legal question whether CNH's proposed modifications were reasonable. Id. at 327.

Back in the district court, CNH moved for approval of its proposed modifications to the benefits, introducing evidence (including affidavits from its employee-benefits director and an employee-benefits consultant and attorney) that the changes were reasonable. The plaintiffs introduced little new evidence on the issue of reasonableness. They instead relitigated several questions our court had already decided, moving for summary judgment on the ground that CNH lacks the ability to modify any benefits, save at the approval of the union that once represented them. The district court agreed and granted their motion.

II.

The plaintiffs and the district court misread the panel opinion. In holding that “CNH ... may reasonably alter” the plaintiffs' benefits, we recognized that CNH could alter them on its own, not as part of a new collective-bargaining process. Reese I, 574 F.3d at 327. Past changes to retiree healthcare benefits, we noted, had not been collectively bargained, which comes as no surprise since “a union does not represent retired employees when it bargains a new contract for its employees.” Id. at 324;see Allied Chem. & Alkali Workers of Am., Local Union No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 172, 92 S.Ct. 383, 30 L.Ed.2d 341 (1971). The district court, in short, erred when it disregarded our holding that the company may make reasonable modifications to the plaintiffs' healthcare benefits.

That leaves two options: remand the case to the district court yet again or resolve the reasonableness question as a matter of law based on the evidence in the record....