Seyfarth Synopsis: Disputes over lifetime retiree health benefits for union retirees may become a memory of the past. For the second time in three years, the Supreme Court confirms that collective bargaining agreements must interpreted based on ordinary principles of contract law and it is inappropriate to presume that an agreement allows lifetime vesting of retiree benefits.
On February 20, 2018, in CNH Industrial N.V. v. Reese, No. 17-515 (per curium), the Supreme Court rejected the Sixth Circuit's attempt to revive the Yard-Man inference. In 2015, the Court in M&G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (2015), struck down the Sixth Circuit's use of the Yard-Man inference, which courts used to infer that negotiated retiree benefits were intended to continue for the retirees' lives. The Court found that when a contract is silent as to the duration of retiree benefits, "a court may not infer that the parties intended for those benefits to vest for life." Rather, collective bargaining agreements must be interpreted based on ordinary principles of contract law. You can read about the Court's decision in M&G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (2015), here.
In Reese, the Sixth Circuit basically decided that, if it could not use the Yard-Man inference to infer vested benefits, it could still use the inference to find collective bargaining agreements ambiguous regarding the vesting of retiree health such as to permit the introduction of extrinsic evidence of vesting. While the Sixth Circuit acknowledged it was basically applying Yard-Man to find an ambiguity, it reasoned that "[t]here is surely a difference between finding ambiguity from silence and finding vesting from silence."
The Supreme Court once again said "no." It rejected the Sixth Circuit's way of handling these disputes, which the justices said was rooted in inferences and assumptions and not the text of the applicable collective bargaining agreements. The agreement at issue contained a general durational clause that applied to all benefits unless otherwise specified. As such, the Court held that the general durational clause meant the agreement unambiguously provided that CNH retirees were entitled to company-provided health benefits only until the agreement expired and not indefinitely. The Sixth Circuit's decision to the contrary inappropriately used inferences inconsistent with Tackett. The Court reverse the Sixth Circuit's judgment and remanded the case for further proceedings consistent with this opinion.
Thus, for the second time in three years, the Supreme Court has rejected Yard-Man and has definitively held that collective bargaining agreements are to be interpreted according to ordinary principles of contract law. Yard-Man is dead. The interference cannot even be used to find an ambiguity in a contract. Hopefully, this time the Sixth Circuit will listen.
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