Yolton v. El Paso Tennessee Pipeline Co. ( 2006 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 06a0019p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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X
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GLADYS YOLTON, WILBUR MONTGOMERY, ELSIE
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TEAS, ROBERT BETKER, EDWARD MAYNARD, and
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GARY HALSTED, on behalf of themselves and a
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Nos. 04-1182/1818/1821/2492
similarly situated class,
,
Plaintiffs-Appellees, >
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v.
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Defendant-Appellant -
EL PASO TENNESSEE PIPELINE CO.,
(04-1821/2492), -
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CASE CORPORATION, now known as CNH AMERICA, -
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Defendant-Appellant -
LLC,
(04-1182/1818). -
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N
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 02-75164—Patrick J. Duggan, District Judge.
Argued: December 6, 2005
Decided and Filed: January 17, 2006
Before: MARTIN, COLE, and GILMAN, Circuit Judges.
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COUNSEL
ARGUED: Bobby R. Burchfield, McDERMOTT, WILL & EMERY, Washington, D.C., Stephanie
J. Goldstein, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, New York, New York, for
Defendants. Roger J. McClow, KLIMIST, McKNIGHT, SALE, McCLOW & CANZANO,
Southfield, Michigan, for Plaintiffs. ON BRIEF: Bobby R. Burchfield, Jason A. Levine, Douglas
G. Edelschick, McDERMOTT, WILL & EMERY, Washington, D.C., Stephanie J. Goldstein,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, New York, New York, Thomas G.
Kienbaum, Noel D. Massie, William B. Forrest III, KIENBAUM, OPPERWALL, HARDY &
PELTON, Birmingham, Michigan, Norman C. Ankers, HONIGAN, MILLER, SCHWARTZ, AND
COHN, Detroit, Michigan, for Defendants. Roger J. McClow, Samuel C. McKnight, KLIMIST,
McKNIGHT, SALE, McCLOW & CANZANO, Southfield, Michigan, for Plaintiffs.
1
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_________________
OPINION
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BOYCE F. MARTIN, JR., Circuit Judge. The plaintiffs in these four consolidated appeals
are retirees or surviving spouses of the J.I. Case Company or the Case Corporation, and they seek
fully funded lifetime retiree health care benefits from the defendants. The district court found that
the plaintiffs demonstrated a likelihood of success on the merits and entered a preliminary injunction
requiring the continued payment of the health care benefits. In three of the consolidated appeals,
the underlying issue is whether the retirement health care benefits vested for life. We conclude that
the district court did not abuse its discretion in determining that the plaintiffs are likely to succeed
on their claim that their health care benefits are fully vested for life. So concluding, we turn to the
question presented in the fourth consolidated appeal, and hold that the district court correctly
determined that the contract between El Paso and CNH America unambiguously allocates the full
cost of those benefits to El Paso. We therefore AFFIRM the district court’s judgment in all respects.
I.
In their complaint, the plaintiffs alleged two counts against the defendants: (1) breach of
labor agreements in violation of Section 301 of the Labor Management Relations Act, 29 U.S.C.
§ 185,1 by requiring the plaintiffs to contribute premiums to maintain their retiree or surviving
spouse health care benefits, and (2) breach of fiduciary duties under the various labor agreements
which constitute employee welfare plans within the meaning of the Employee Retirement Income
Security Act, 29 U.S.C. § 1001 et seq.
The defendants are El Paso Tennessee Pipeline Company and CNH America, LLC. JI Case,
not a party to the dispute, was established in 1842 and became a wholly owned subsidiary of
Tenneco (now El Paso) in 1970. JI Case remained a wholly owned subsidiary of Tenneco until 1994
when Tenneco underwent a reorganization and decided to spin off its own and JI Case’s agriculture
and construction business assets. Tenneco therefore formed a new corporation, Case Equipment
Corporation, and pursuant to a Reorganization Agreement, transferred these assets to Case
Equipment. Included was all of the JI Case business (defined as the farm and construction
equipment business of Tenneco) except for Tenneco’s JI Case stock, certain demand notes and
subordinated debt, as well as the Retained Assets and Retained Liabilities. Case Equipment was
then spun off on July 1, 1994, in an initial public offering of its shares. Case Equipment then2
changed its name to Case Corporation, then to Case, LLC, and is now known as CNH America.
In 1996, Tenneco merged with a subsidiary of El Paso Natural Gas Company and is now known as
El Paso Tennessee Pipeline Company.
The International Union, United Automobile, Aerospace and Agricultural Workers of
America (UAW) represented JI Case employees in collective bargaining. Over the years, UAW and
JI Case negotiated a number of collective bargaining agreements (CBAs). UAW and JI Case also
negotiated a series of Group Insurance Plans which addressed group insurance benefits for various
categories of employees and former employees. The CBAs between UAW and JI Case from 1971
1
Section 301(a) states that: “Suits for violation of contracts between an employer and a labor organization
representing employees in an industry affecting commerce as defined in this chapter, or between any such labor
organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect
to the amount in controversy or without regard to the citizenship of the parties.” 29 U.S.C. § 185(a).
2
For ease of discussion, at times the opinion will refer to CNH America by its previous names.
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forward contain the following language in Section 4A with respect to the Group Insurance Plans:
“The group insurance plan agreed to between the parties will run concurrently with this Agreement
and is hereby made a part of this Agreement.” In Section 4C the CBA states: “The pension plan
agreed to between the parties will run concurrently with this Agreement and is hereby made part of
this Agreement.” In 1974, JI Case agreed to pay the full cost of health care benefits for retirees and
eligible surviving spouses regardless of age. Under the section “Contribution for Coverage,” the
plan states that “the Company shall pay the full premium cost of the above coverages.” The
language of the Group Insurance Plans remained substantially unchanged through 1990.
Over the years, Metropolitan Life Insurance Company prepared benefit booklets describing
insurance benefits provided under the Group Policy contracts between JI Case and Metropolitan.
These booklets included language that “it is hoped that the Group Policies will be continued
indefinitely through the years, but your employer necessarily reserves the right, subject to the
applicable provisions of the Labor Agreement [CBAs], to terminate or change the Plan in the
future.”
The 1990 Agreement is the CBA under which the plaintiffs retired. The 1990 CBA was
effective from June 2, 1990 through October 2, 1993. On November 5, 1993, however, JI Case and
UAW entered into an Extension Agreement that extended the 1990 CBA through February 2, 1995.
In Section 9 of the Extension Agreement, JI Case and UAW agreed to adopt, effective on October
3, 1993, a Letter of Agreement (“the FAS-106 Letter”) that appears to cap JI Case’s liability for
certain health care benefits. The Letter states:
This will confirm our understanding that the average per capita annual cost to the
Company of providing medical and related benefits under the Case Group Benefit
Plan to retired employees and surviving spouses of deceased employees shall not
exceed $2,750 for Medicare eligible individuals and $8,500 for those individuals
who are not eligible for Medicare. Notwithstanding the foregoing, no covered
person shall be required to pay a portion of any excess amount prior to April 1, 1998.
The parties dispute the effect of this letter.3
On June 23, 1994, pursuant to Tenneco’s transfer of its and Case’s farm and construction
equipment assets to Case Equipment, Tenneco, JI Case, and Case Equipment signed a number of
agreements, including a Reorganization Agreement and an Employee Benefits and Compensation
Allocation Agreement. As part of the agreement, Tenneco assumed “Retained Liabilities” and
agreed to “pay, perform and discharge in due course all of the Retained Liabilities.” The agreement
defines “Retained Liabilities” as: “[T]he Case Liabilities for postretirement health and life insurance
benefits (to the extent that Case is obligated on the Reorganization Date [June 23, 1994]) of retirees
of the Case Business in the United States and current employees of the Case Business in the United
States who retire on or before July 1, 1994 and their dependents as more fully described in the
benefits agreement.” Tenneco further agreed to indemnify Case Equipment “from and against any
and all Liabilities, and any claims, demands and rights of the [Case Equipment] Indemnitees arising
out of or due to . . . the failure or alleged failure of Tenneco or any Tenneco subsidiary to pay . . .
any of the Retained Liabilities . . .”
3
The defendants contend that JI Case and UAW intended the Letter to be a “cost sharing agreement” between
JI Case and its retirees whereby JI Case’s obligations for retiree and surviving spouse health care benefits would be
limited, effective April 1, 1998. The plaintiffs, on the other hand, contend that the parties intended the Letter to serve
only as an accommodation for accounting purposes under FAS-106, whereby UAW agreed to allow JI Case to
temporarily reduce the FAS-106 accounting figure that it reported on its financial records.
Nos. 04-1182/1818/1821/2492 Yolton, et al. v. El Paso Tenn. Pipeline Co., et al. Page 4
Section 7.2.2 of the agreement further provides that Tenneco will “retain all liability with
respect to postretirement health and life insurance benefits to the extent that Case is obligated on the
Closing Date for United States employees retired prior to the Closing Date and their Dependants.”
Section 7.4 provides a limitation on Tenneco’s responsibility:
Tenneco shall not be liable for any postretirement health and life insurance benefit
costs which result from any action of [Case Equipment] after the Closing Date which
increases such benefits, except to the extent that such benefit increases are required
by applicable law. To the extent that Tenneco is not liable for such benefits, [Case
Equipment] shall be liable. Without limiting the generality of the foregoing, it is
specifically provided that Tenneco shall not be liable for any increase in the cost of
providing postretirement health and life insurance benefits that result from any
agreement by [Case Equipment] to increase or otherwise modify the per capita
annual cost limits set forth in [the FAS-106 Letter].
Case LLC assumed the existing CBAs between JI Case and the UAW.
After the Reorganization, Case LLC continued to operate the same farm and construction
business that JI Case had under the same management, at the same locations, with the same
equipment, with the same supervision, producing the same products, with the same employees,
working under the same CBAs. Tenneco then began paying the full cost of the plaintiffs’s health
care benefits in 1994. In November 1996 Tenneco sent a letter to its retirees advising them of its
impending merger with El Paso and advising those individuals who retired from JI Case that their
health care benefits would be maintained by El Paso after the merger. On October 27, 1997, El Paso
sent a letter to the plaintiffs informing them that they would be required to contribute $56 per month
for health care coverage as of April 1, 1998. El Paso based this requirement on the FAS-106 Letter.
In the meantime and as part of negotiations for a new CBA, UAW asked Case LLC to pay
the $56 per month contribution that El Paso sought from pre-IPO retirees for their health care
coverage. Case LLC agreed to pay the contributions “as a show of good will toward the UAW,” but
insisted that it had no legal obligation to pay for the health care benefits. On October 1, 1998, Case
LLC and the UAW entered into the Voluntary Employee Beneficiary Association Agreement
whereby both Case LLC and UAW agreed “to make deposits of specified amounts in trust to be
applied to defray partially the cost of medical benefits in excess of the Cap under El Paso’s medical
plan for Pre-IPO Retirees and Surviving Spouses . . .”
Case LLC then informed pre-IPO retirees and surviving spouses that it would pay their $56
per month premium through the end of 1998. In the summer of 2002, the funds contributed by
UAW and Case LLC were exhausted. UAW asked Case LLC and El Paso to make additional
contributions to fund the above-cap health care insurance costs for pre-IPO retirees; they both
refused. In August 2002, El Paso sent a letter to pre-IPO retirees informing them that they would
need to contribute $290 per month in order to continue receiving retiree health care benefits. In
December, El Paso sent another letter to the effect that premiums would increase to $501 per month
as of January 2003. The plaintiffs filed this lawsuit on December 23, 2002. Subsequently, in
October 2003, El Paso informed retirees that the monthly contribution would increase to $561 as of
January 2004.
On December 31, 2003, the district court granted the plaintiffs’s motion for a preliminary
injunction, concluding that the plaintiffs were likely to succeed on their claim that CNH America
was obligated to provide fully paid, lifetime health care benefits. Yolton v. El Paso Tennessee
Pipeline Co., 318 F. Supp. 2d 455 (E.D. Mich. 2003). The injunction was limited to those retirees
who had retired before October 3, 1993 (the date of the FAS-106 Letter). Id. at 473. The district
court further concluded that pursuant to the 1994 Reorganization, El Paso (as Tenneco’s successor)
Nos. 04-1182/1818/1821/2492 Yolton, et al. v. El Paso Tenn. Pipeline Co., et al. Page 5
had assumed CNH America’s obligation to provide the benefits. Id. at 474-75. El Paso moved for
reconsideration, arguing that it was premature to resolve the issue of the allocation of liability under
the Reorganization Agreement. The district court granted El Paso’s motion. On March 9, 2004, the
district court concluded that CNH America, as the signatory to the CBAs (via Case LLC), had a
direct obligation to the retirees. Nevertheless, on September 3, 2004, the district court granted
summary judgment to CNH America on its cross-claim against El Paso for indemnification under
the Reorganization Agreement for all of CNH America’s pre-Reorganization retiree health care
benefit liabilities. These appeals followed the district court’s orders.
II.
The first issue for our consideration is whether the district court abused its discretion when
it concluded that the plaintiffs were likely to succeed on their claim that their retirement health care
benefits are vested. We conclude that the district court did not abuse its discretion because the
CBAs demonstrate an intent to vest the benefits. Because we conclude that the district court did not
abuse its discretion when issuing the injunction, we must determine whether the district court erred
in granting CNH America summary judgment on its cross-claim that El Paso is liable for the full
cost of the plaintiffs’s health care benefits. We conclude that the contract was unambiguous, and
the district court correctly granted summary judgment in favor of CNH America.
III.
A. The Standard of Review is Abuse of Discretion
This Court reviews a district court’s grant of a preliminary injunction for an abuse of
discretion. Tucker v. City of Fairfield, 398 F.3d 457, 461 (6th Cir. 2005). “A district court abuses
its discretion when it relies on clearly erroneous findings of fact, improperly applies the law, or uses
an erroneous legal standard.” Id. This Court reviews the district court’s conclusions of law de novo
and its findings of fact for clear error. Golden v. Kelsey-Hayes Co., 73 F.3d 648, 653 (6th Cir.
1996). “Questions of contract interpretation are generally considered questions of law subject to de
novo review.” Id.
To determine whether to grant a preliminary injunction, a district court must consider:
“(1) the plaintiff’s likelihood of success on the merits; (2) whether the plaintiff may suffer
irreparable harm absent the injunction; (3) whether granting the injunction will cause substantial
harm to others; and (4) the impact of an injunction upon the public interest.” Deja Vu of Nashville,
Inc. v. Metro. Gov’t of Nashville & Davidson County, 274 F.3d 377, 400 (6th Cir. 2001). “None of
these factors, standing alone, is a prerequisite to relief; rather, the court should balance them.”
Golden, 73 F.3d at 653.
B. The district court did not abuse its discretion in this case.
The district court considered each of the four factors listed above when issuing the
preliminary injunction. The defendants primarily challenge the district court’s findings on the first
factor — that is, the court’s determination that the plaintiffs are likely to succeed on the merits. The
plaintiffs are likely to succeed on the merits if they can prove that they have a vested right to the
insurance benefits they claim. “To prove this, the plaintiffs must show that the defendant and the
union intended to include a right to lifetime benefits when they negotiated the CBAs at issue.”
Golden, 73 F.3d at 653.
A retiree health care insurance benefit plan is a welfare benefit plan under ERISA. Maurer
v. Joy Tech., Inc., 212 F.3d 907, 914 (6th Cir. 2000) (citing Boyer v. Douglas Components Corp.,
986 F.2d 999, 1005 (6th Cir. 1993)). Unlike pension plans, “[t]here is no statutory right to lifetime
Nos. 04-1182/1818/1821/2492 Yolton, et al. v. El Paso Tenn. Pipeline Co., et al. Page 6
health benefits.” Golden, 73 F.3d at 653.4 If lifetime health care benefits exist for the plaintiffs, it
is because the UAW and the defendants agreed to vest a welfare benefit plan. Id. at 654; see also
Boyer, 986 F.2d at 1005. If a welfare benefit has not vested, “after a CBA expires, an employer
generally is free to modify or terminate any retiree medical benefits that the employer provided
pursuant to that CBA.” Bittinger v. Tecumseh Prod. Co., 83 F. Supp. 2d 851, 857 (E.D. Mich. 1998)
(quoting Am. Fed’n of Grain Millers v. Int’l Multifoods, 116 F.3d 976, 979 (2d Cir. 1997)). If a
welfare benefit has vested, the employer’s unilateral modification or reduction of those benefits
constitutes a LMRA violation. Maurer, 212 F.3d at 914.
The district court applied this Court’s decision in UAW v. Yard-Man, Inc., 716 F.2d 1476,
1479 (6th Cir. 1983), to determine whether the parties intended for the retiree health insurance
benefits to vest. Yolton, 318 F. Supp. 2d at 465. Yard-Man recognized that parties to CBAs can
agree to vest benefits that survive the termination of the agreement. Yard-Man, 716 F.2d at 1479.
Whether the benefits vest depends upon the intent of the parties. Golden, 73 F.3d at 654. “Courts
can find that rights have vested under a CBA even if the intent to vest has not been explicitly set out
in the agreement.” Maurer v. Joy Technologies, Inc., 212 F.3d 907, 915 (6th Cir. 2000). In Golden,
the Court clarified that in determining the intent of the parties to a CBA, “basic rules of contract
interpretation apply.” Golden, 73 F.3d at 654. Thus, Yard-Man makes clear that courts “should first
look to the explicit language of the collective bargaining agreement for clear manifestations of
intent.” Yard-Man, 716 F.2d at 1479. Moreover, courts “should also interpret each provision in
question as part of the integrated whole. If possible, each provision should be construed consistently
with the entire document and the relative positions and purposes of the parties.” Id. When
ambiguities exist, courts may look to other provisions of the document and other extrinsic evidence.
Id. at 1480; see also Golden, 73 F.3d at 654.
Part of the Yard-Man decision has generated controversy. Examining the context of the CBA
negotiations, the Court wrote that “it is unlikely that [life and health insurance benefits], which are
typically understood as a form of delayed compensation or reward for past services, would be left
to the contingencies of future negotiations.” Yard-Man, 716 F.2d at 1482. Thus, “retiree benefits
are in a sense ‘status’ benefits which, as such, carry with them an inference that the parties likely
intended those benefits to continue as long as the beneficiary remains a retiree.” Id. (emphasis
added). This inference has caused much consternation for employers despite the remainder of the
Court’s opinion:
This is not to say that retiree insurance benefits are necessarily interminable by their
nature. Nor does any federal labor policy . . . presumptively favor the finding of
interminable rights to retiree insurance benefits when the collective bargaining
agreement is silent. Rather, as part of the context from which the collective
bargaining agreement arose, the nature of such benefits simply provides another
inference of intent. Standing alone, this factor would be insufficient to find an intent
to create interminable benefits. In the present case, however, this contextual factor
buttresses the already sufficient evidence of such intent in the language of the
agreement itself.
Id. (emphasis added). Later cases further clarified the inference. Shortly after Yard-Man, this Court
stated that “there is no legal presumption based on the status of retired employees.” Int’l Union,
United Auto. Workers v. Cadillac Malleable Iron Co., 728 F.2d 807, 808 (6th Cir. 1984). Moreover,
“Yard-Man does not shift the burden of proof to the employer, nor does it require specific anti-
4
ERISA provides for two types of employee benefit plans: pension plans and welfare benefit plans. 29 U.S.C.
§ 1002(1), (2)(A). Pension plans are subject to mandatory participation, vesting, and funding requirements. 29 U.S.C.
§ 1051. Welfare benefits are not subject to these requirements. Id. Retiree health insurance benefit plans are classified
as welfare benefit plans under ERISA. 29 U.S.C. § 1002(1).
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vesting language before a court can find that the parties did not intend benefits to vest. Rather, the
Yard-Man inference, and the other teachings of the opinion regarding contract interpretation and the
consideration of extrinsic evidence, simply guide courts faced with the task of discerning the intent
of the parties from vague or ambiguous CBAs.” Golden, 73 F.3d at 656.
Both El Paso and CNH America devote a great deal of energy to disputing the correctness
of the Yard-Man inference. El Paso even suggests that this panel should overrule Yard-Man.5 Aside
from a panel’s lack of authority to do so, these concerns are significantly overstated. El Paso and
CNH America misinterpret the term “inference” and confuse it with a legal presumption. Under
Yard-Man we may infer an intent to vest from the context and already sufficient evidence of such
intent. Absent such other evidence, we do not start our analysis presuming anything. If Yard-Man
required a presumption, the burden of rebutting that presumption would fall on the defendants.
However, under Yard-Man, “[t]here is no legal presumption that benefits vest and that the burden
of proof rests on plaintiffs.” Maurer, 212 F.3d at 917. This Court has never inferred an intent to vest
benefits in the absence of either explicit contractual language or extrinsic evidence indicating such
an intent. Rather, the inference functions more to provide a contextual understanding about the
nature of labor-management negotiations over retirement benefits. That is, because retirement
health care benefits are not mandatory or required to be included in an agreement, and because they
are “typically understood as a form of delayed compensation or reward for past services” it is
unlikely that they would be “left to the contingencies of future negotiations.” Yard-Man, 716 F.2d
at 1481-82 (citations omitted). When other contextual factors so indicate, Yard-Man simply
provides another inference of intent. All that Yard-Man and subsequent cases instruct is that the
Court should apply ordinary principles of contract interpretation. There is no need to revise,
reconsider, or overrule Yard-Man.
Furthermore, there is no indication that the district court applied either a presumption or
relied unnecessarily on the Yard-Man inference. Citing Yard-Man, the district court correctly stated
that “courts must apply basic rules of contract interpretation to discern the intent of the parties.”
Yolton, 318 F. Supp. 2d at 465. The district court did mention the inference and noted that Sixth
Circuit case law has not repudiated the Yard-Man language, but the court’s analysis does not in any
sense rely on an inference. Id. at 465-68. Instead, the district court interpreted the language of the
agreement and found evidence that the defendants intended to confer lifetime benefits upon the
plaintiffs. Id. at 466. Of particular significance to the district court was language in the Group
Insurance Plan that tied benefits to the pension plans — that is, the Group Insurance Plan provided
that employees retiring under the pension plan are eligible for the lifetime health care insurance.
Id. Because the pension plan is a lifetime plan and the health insurance benefits are tied to the
pension plan, the district court found that the health insurance benefits were vested and intended to
be lifetime benefits. Id. at 466-67. This language is similar to Golden, where the district court’s key
finding was the provisions in each of the CBAs that tied retiree benefits and surviving spouse
eligibility for health insurance coverage to eligibility for vested pension benefits. “Since retirees
are eligible to receive pension benefits for life, the court found that the parties intended that the
company provide lifetime health benefits as well.” Golden, 73 F.3d at 656.
The defendants counter this finding by pointing to the durational clause in the CBA, which
states in section 4A that the insurance plan “will run concurrently with [the CBA] and is hereby
made part of this Agreement.” The defendants argue that this is clear and explicit language that
demonstrates that the health insurance benefits were not intended to vest and were only to last as
long as the CBA. Thus, every time a CBA expires, the company would be free to modify benefits
5
The defendants also advance the argument that this Court already overruled Yard-Man in Sprague v. General
Motors Corp., 133 F.3d 388 (6th Cir. 1998) (en banc). Prior panels have already addressed and explicitly rejected this
argument. Maurer, 212 F.3d at 917 (rejecting claim that Sprague overruled Yard-Man and further rejecting the claim
that explicit vesting language is necessary for welfare benefits to vest).
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until another CBA is agreed to. Stated another way, retiree’s health insurance coverage is subject
to change every few years based on new bargaining agreements.
The district court did not abuse its discretion in rejecting the defendants’s arguments for two
reasons. First, as the district court found, “a number of courts have held that such general durational
provisions only refer to the length of the [CBAs] and not the period of time contemplated for retiree
benefits.” Yolton, 318 F. Supp. 2d at 467 (citing Golden v. Kelsey-Hayes Co., 845 F. Supp. 410
(E.D. Mich. 1994)). Absent specific durational language referring to retiree benefits themselves,
courts have held that the general durational language says nothing about those retiree benefits. Id.;
see also Yard-Man, 716 F.2d at 1482; Schalk v. Teledyne, Inc., 751 F. Supp. 1261, 1265 (W.D.
Mich. 1990), aff’d 948 F.2d 1290 (6th Cir. 1991) (“the existence of a general durational clause
which provide[s] that the collective bargaining agreement should remain in effect until a certain date
d[oes] not demonstrate an intent that all benefits described in the agreement also terminate[] on that
date.”).
That reasoning as applied to the agreements before us means that the concurrent language
does nothing to those employees who have already retired under the plan. The durational language
only affects future retirees — that is, someone who retired after the expiration of a particular CBA
would not be entitled to the previous benefits, but is rather entitled only to those benefits newly
negotiated under a new CBA. Thus, the retirement package available to someone contemplating
retirement will change with the expiration and adoption of CBAs, but someone already retired under
a particular CBA6 continues to receive the benefits provided therein despite the expiration of the
agreement itself.
Second, section 4C of the CBA states that “The pension plan agreed to between the parties
will run concurrently with this agreement and is hereby made part of this Agreement.” The plaintiffs
point to this language as strongly supporting their argument that the retirement benefits are vested.
This is because pension benefits are vested benefits. There is no suggestion that a retiree’s pension
plan is subject to change under each new CBA. The plaintiffs assert, therefore, that because pension
plans are vested benefits and because the CBA uses the same durational language for pension plans
that it uses for the health care benefits, the health care benefits also must be vested benefits. They
argue that 7the agreements would not use the same language in sections 4A and 4C if it had different
meanings. This argument further bolsters the interpretation noted above that the expiration of a
CBA affects only future retirees in the context of benefits. Reviewing “each provision in question
as part of the integrated whole,” the use of similar language in sections 4A and 4C provides
substantial support for the plaintiffs’s position. Yard-Man, 716 F.2d at 1479.8
6
This is perhaps where the Yard-Man inference makes the most sense. Retirees, who have left their bargaining
unit, and can no longer rely on their union to maintain their benefits, are not likely to leave their benefits alterable based
on the changing whims and relative bargaining power of their former union and employer. See Golden, 845 F. Supp.
at 413.
7
The district court in Golden likewise rejected the defendant’s argument regarding the durational clauses
because the same language was used regarding pensions and health insurance benefits. The district court stated that
“[g]iven the defendant’s logic, because its pension plan was incorporated into the collective bargaining agreement, its
obligation to provide pensions ended with the expiration of the agreement.” Golden, 845 F. Supp. at 415 n.1.
8
The district court in Golden characterized Yard-Man as “recogniz[ing] that employees are aware when they
accept retiree benefits in exchange for lower wages, that they cannot rely on their union to maintain those benefits once
they have retired and left their bargaining unit. Thus, ‘finding an intent to create interminable rights to retiree insurance
benefits in the absence of explicit language, is not, in any discernible way, inconsistent with federal labor law.’” Golden,
845 F. Supp. at 413 (quoting Yard-Man, 716 F.2d at 1482).
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The district court also cited specific durational limits on other types of benefits in the Group
Insurance Plan. The Yard-Man court held that “the inclusion of specific durational limitations in
other provisions . . . suggests that retiree benefits, not so specifically limited, were intended to
survive . . .” Yard-Man, 716 F.2d at 1481-82; see also Kelsey-Hayes, 954 F. Supp. at 1187. In the
plans at issue here, the district court cited the specific durational limitations for workers on lay-off
and on maternity leave. Yolton, 318 F. Supp. 2d at 466-67.
In response to the defendants’s arguments, the district court distinguished the language in
this case from the plans at issue in UAW v. Cleveland Gear Corp., 1983 WL 2174 (N.D. Ohio 1983),
and Bittinger v. Tecumseh Products Co., 83 F. Supp. 2d 851 (E.D. Mich. 1998), upon which the
defendants’s rely.9 In Cleveland Gear, the CBA between the parties stated that: “The Insurance
Agreement and Insurance Plan, as revised, shall be effective as provided therein and shall remain
in full force and effect during the term of this collective bargaining agreement.” Cleveland Gear,
1983 WL 2174 at *2. The court concluded that the parties did not intend the benefits to vest and
there was no language indicating that the benefits were lifetime benefits. Id. In the instant case, the
district court acknowledged the Cleveland Gear conclusion, but distinguished it. In Cleveland Gear,
in addition to the general durational language in the CBA, the insurance agreement itself contained
similar limiting language. The insurance plan stated that it remained in effect “until discontinued
or superseded either in whole or in the termination or suspension of such Collective Bargaining
Agreement.” Cleveland Gear, at *3. Moreover, the district court in the instant case noted that the
agreements in Cleveland Gear did not contain language that tied health insurance benefits to pension
benefits as is the case here.
Likewise, the agreements in Bittinger were devoid of any language that tied health insurance
benefits to pension benefits. The defendants rely on Bittinger principally because the Summary Plan
Descriptions10 in Bittinger reserved to the company the “absolute right, through the collective
bargaining process, to amend, modify, or discontinue any or all of the benefits described in the
[labor agreement] or the [health care plan] . . .” Bittinger, 83 F. Supp. 2d at 858. In the plans at
issue here, from 1974 to 1980 the Summary Plan Descriptions also contain some reservation of
rights via the following language: “It is hoped that the Group Policies will be continued indefinitely
through the years, but your employer necessarily reserves the right, subject to the applicable
provisions of the Labor Agreement between the Union and the Company, to terminate or change the
Plan in the future.” Yolton, 318 F. Supp. 2d at 468. The district court rejected the defendants’s
arguments that this language permitted the modification of retirement benefits by finding that the
“right to modify the Group Insurance Plans is expressly limited to the terms of the [CBAs].” Id.
Because the district court found that the CBA creates the vested lifetime benefits, the court further
concluded that this language does not reserve to the defendants the right to modify those benefits.
Id.
Regarding the Summary Plan Descriptions from the post-1980 agreements, the district court
noted that they no longer included the reservation language, but rather a “Cessation of Benefits”
provision stating that coverage will cease if the plan is cancelled in whole or in part. Id. The
Cessation of Benefits refers to “the Sections of this booklet entitled ‘Retirement’ and ‘Termination
of Coverage,’” where there is no “Cessation of Benefits” provision. Id. “Rather this section, like
the Group Insurance Plan, only ties the continuation of retirement benefits to the retiree’s or
surviving spouse’s eligibility for pension benefits: ‘Employees who retire under the J.I. Case
9
Of note, Bittinger was decided by the same district court as the instant case.
10
A summary plan description is a publication explaining the benefits of a particular welfare benefit plan and
ERISA requires employers to distribute the descriptions to employees. 29 U.S.C. § 1022. Furthermore, this Court has
held that “statements in a summary plan are binding and if the statements conflict with those in the plan itself, the
summary shall govern.” Edwards v. State Farm Mut. Auto Ins. Co., 851 F.2d 134, 136 (6th Cir. 1988).
Nos. 04-1182/1818/1821/2492 Yolton, et al. v. El Paso Tenn. Pipeline Co., et al. Page 10
Pension Plan for Hourly Paid Employees, or their surviving spouses eligible to receive a spouse’s
pension under the provisions of that plan, will be eligible for the benefits described in this section.’”
Id. Further, this section provides that: “Except where noted, the benefits and maximums under these
continued coverages will be the same as those that were in effect on the day preceding your
retirement.” Id. (emphasis added).11
Finally, while the plain language of the CBAs requires us to conclude that the district court
did not abuse its discretion by issuing the injunction, we also note that like the Golden case,
“[d]efendant’s conduct also indicates that plaintiffs’[s] benefits were vested.” Golden, 845 F. Supp.
at 415. The district court identified substantial evidence indicating an understanding that the health
insurance benefits were lifetime benefits. This evidence includes statements from Case benefits
employees that they were told and in turn told retiring employees “that their medical insurance
benefits would continue unchanged for their lifetime . . .” Yolton, 318 F. Supp. 2d at 469. A letter
from Case’s Director of Benefits & Practices sent to retirees in 1971 stated that the Company would
fully cover benefits and that benefits would be in effect for life. Id. Documents related to various
plant shutdown retirement agreements reflect that health insurance benefits “continu[ed] unchanged”
“[f]or lifetime.” Id. Medical insurance cards issued to retirees from Case’s Industrial Relations
Department in Terre Haute, Indiana contain the words “Lifetime” or “Lifetime Coverage.” Id. The
plaintiffs also presented benefits information issued to employees upon retirement that stated that
the retiree and his wife were entitled to full health insurance coverage and that if the retiree pre-
deceased his wife, her coverage “would continue as before” and would only change if she remarried.
Id. at 469-70. Further, under a section entitled “Spouse’s Benefits,” the summary provided to the
employee states that “In the event that you should die before your spouse and a spouse’s option was
spplied [sic] for, she will receive 55% of your pension for her lifetime along with the insurance
which was mentioned previously.” Id. at 470. The plaintiffs further offered affidavits of numerous
other retirees and surviving spouses who were told by Case benefits representatives that they would
receive post-retirement lifetime health insurance coverage fully paid for by the company. Id. Some
of the affidavits include the accompanying documentation promising fully funded health insurance
for life. Id.
On the other side, the defendants presented the testimony of Case’s chief union negotiator
and the former Director of Employee Benefits who stated that the company understood benefits to
last only as long as the CBAs were in effect and that benefits were not fixed. Id. at 470. The district
court rejected this testimony finding that it was not entitled “to considerable weight” because the
union negotiator is still employed by Case and the former director receives $20,000 per month in
consulting fees from the company. Id. at 471.
The most relevant extrinsic evidence the defendants present is evidence that during the
negotiations that led to the FAS-106 Letter, UAW asked to add “lifetime” language to the Letter
which was rejected by the company. Id. The defendants argue that this demonstrates that the parties
understood that the benefits were not vested. The district court rejected this argument, finding that
it “does not necessarily mean that the union’s representatives believed that the earlier agreements
did not provide vested health care benefits. The representatives may have been attempting to more
clearly state what they believed earlier agreements provided, particularly where the ‘agreement’ at
issue established other limitations on those benefits.” Id. As the injunction issued by the district
court is a preliminary injunction, the defendants may continue to press their arguments below, but
we do not find them sufficient to demonstrate that the district court abused its discretion in this case.
11
The section also provides that “The cost of this coverage is fully paid by the Employer.” Yolton, 318 F. Supp.
2d at 468.
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For all of the reasons discussed, the district court did not abuse its discretion by concluding
that the plaintiffs were likely to succeed on the merits of their claim that they were entitled to fully
funded lifetime health care benefits.
None of the parties’s briefs contest the additional inquiries in the preliminary injunction
context, and we find the district court’s conclusions sound. The district court found that the
plaintiffs would suffer irreparable harm without the injunction. Id. at 471-72. The court pointed to
the limited and fixed incomes of the retirees, resulting in an inability to meet the expense of the
premiums or resulting in retirees being unable to afford prescriptions or doctor visits. Id.
Additionally, the court noted that to receive any health insurance benefits, El Paso was requiring the
plaintiffs to contribute $501 per month. Accordingly, “the Court can surmise that the putative class
members overall cannot afford to contribute such an amount until this case is resolved. Unable to
afford the $501 premium, Plaintiffs will lose their health insurance, will not be able to pay for
necessary prescription medications, and will not receive all of the medical care they need.
Reimbursing Plaintiffs for their contributions at the end of the case, therefore, will not afford them
relief.” Id. at 472.
The district court also found that while the injunction will place a substantial expense on the
defendants, this factor did not weigh heavily against the injunction. Id. at 473. According to the
district court, “Defendants have paid the full costs of health care benefits for retirees and their
surviving spouses for years prior to August 2002, and in this Court’s opinion, the financial impact
on Defendants being required to continue to pay these benefits is far less than the financial burden
which would be placed on Plaintiffs if their request for a preliminary injunction is denied.” Id.
Finally, the district court found that the injunction supports the public interest in enforcing CBAs
and preventing ERISA and LMRA violations. Id.
We therefore conclude that the district court did not abuse its discretion by issuing the
injunction. Prior cases of this Court have highlighted factors indicating an intent to vest benefits that
were present in this case. Additionally, we believe that the district court correctly interpreted the
plain language of the CBAs and Group Insurance Plans as well as the agreement as a whole. The
language tying health care benefits to pension benefits and the context of the bargaining demonstrate
an intent to provide lifetime benefits. Furthermore, we do not believe that the general durational
language in the CBA limits the duration of the health care benefits themselves, but rather merely
provides a limitation on the agreement itself. The use of identical language in the CBAs referring
to pension benefits and health care benefits provides strong additional support that the benefits are
tied together and that they are lifetime benefits. Even if the agreements were ambiguous, the
extrinsic evidence cited by the district court would support its finding and would not lead to the
conclusion that the district court abused its discretion in issuing the injunction.
C. Whether El Paso or CNH America is Liable for the Health Care Benefits
The remaining dispute is between El Paso and CNH America. Each contends that the other
is liable for the plaintiffs’s health insurance benefits above the apparent cap imposed by the FAS-
106 Letter. CNH America contends that El Paso, as Tenneco’s successor, is solely responsible for
all of the plaintiffs’s health care benefits. El Paso argues that in the 1994 Reorganization Agreement
it assumed liability for pre-IPO retiree health care benefits subject to the negotiated cap set forth in
the FAS-106 Letter; thus, according to El Paso, CNH America is liable for costs in excess of the cap.
Initially, in its opinion issuing the preliminary injunction, the district court found that El Paso
is primarily liable for the entire health care costs for pre-IPO retirees and their surviving spouses.
Yolton, 318 F. Supp. 2d at 474-75. The district court reasoned that the Reorganization Agreement’s
“Retained Liabilities” section provided that Tenneco assumed CNH America’s liabilities for post-
retirement health insurance benefits for pre-IPO retirees and their dependents. Nevertheless, the
Nos. 04-1182/1818/1821/2492 Yolton, et al. v. El Paso Tenn. Pipeline Co., et al. Page 12
court found that CNH America “has not been released from its liability to provide fully funded,
lifetime health insurance benefits to its retirees and their surviving spouses.” Id. at 474.
Notwithstanding Tenneco’s assumption of the liabilities, the court held that CNH America remains
secondarily responsible to the plaintiffs for the cost of the benefits. In sum, the district court
concluded “that El Paso is liable for the full costs of the pre-IPO retirees’ and surviving spouses’
health insurance benefits. The Court may subsequently conclude that [CNH America] is also liable
for these costs.” Id. at 475.
Following the district court’s opinion, El Paso filed a motion for reconsideration pursuant
to Federal Rule of Civil Procedure 60(b). In ruling on the motion in an opinion issued on March 8,
2004, the district court noted that its original conclusion that El Paso was primarily liable was based
on the 1994 Reorganization Agreement. In its motion for reconsideration, El Paso argued that it was
premature to resolve the issue of whether El Paso was required to indemnify CNH America for the
health insurance benefits without providing El Paso the opportunity to address the issue and without
fully resolving CNH America’s liability for the costs as signatory to the relevant CBAs.
The court concluded “that El Paso is entitled to relief, as the Court erred in overlooking the
fact that, as the signatory to the CBAs, [CNH America] retained liability for Plaintiffs’[s] health care
costs despite El Paso’s subsequent assumption of those liabilities in the Reorganization Agreement
and Benefits Agreement.” D. Ct. Op. of March 8, 2004 at 3. To reach this conclusion, the district
court needed to address whether CNH America is a party to the CBAs — in essence, whether CNH
America is the alter ego of JI Case.
CNH America’s position is that it did not exist before July 1, 1994 when Case LLC it was
created by JI Case executives; having not existed until this time, CNH America claims, it could not
possibly have been a party to the CBAs signed before this date. CNH America further asserts that
it is not the alter ego or successor of JI Case. The district court disagreed and found that CNH
America is the alter ego or mere continuance of JI Case and therefore assumed the CBAs and their
liabilities.
As the district court correctly noted, the Supreme Court has held that a successor corporation
generally is not liable for its predecessors liabilities unless expressly assumed. See e.g., NLRB v.
Burns Int’s Sec. Servs., 406 U.S. 272, 279, 286-88 (1972). This rule is not absolute, however, as the
Court has held that a CBA might remain in force “in a variety of circumstances involving a merger,
stock acquisition, reorganization or assets purchase.” Id. at 291. The Supreme Court has also held
that when there is a “mere technical change in the structure or identity of the [old] employing entity,
frequently to avoid the effect of the labor laws, without any substantial change in its ownership or
management . . . the courts have little difficulty holding that the successor is in reality the same
employer and is subject to all the legal and contractual obligations of the predecessor.” Howard
Johnson Co. v. Detroit Local Joint Executive Bd., 417 U.S. 210, 259 n.5 (1974) (citing Southport
Petroleum Co. v. NLRB, 315 U.S. 100, 106 (1942)).
This Court has applied these principles in several relevant cases. To start, “[w]hether a
company or individual is responsible for the financial obligations of another company or individuals
is a question of federal law when it arises in the context of a federal labor dispute. Although state
law cases may provide guidance in fashioning the content of federal law, they are not binding and
thus do not control” the analysis. NLRB v. Fullerton Transfer & Storage Limited, Inc., 910 F.2d
331, 335 (6th Cir. 1990). This Court recognized, however, that federal law, like state law, generally
recognizes the concept of limited liability. As the Supreme Court has stated, “[t]he insulation of a
stockholder from the debts and obligations of his corporation is the norm, not the exception.” NLRB
v. Deena Artware, Inc., 361 U.S. 398, 402-03 (1960).
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Fullerton Transfer, the case upon which CNH America relies, asked “which doctrine referred
to as an ‘alter ego doctrine’ applies to this case.” Id. at 366. “The alter ego doctrine was developed
to prevent employers from evading obligations under the Act merely by changing or altering their
corporate form.” NLRB v. Allcoast Transfer, Inc., 780 F.2d 576, 579 (6th Cir. 1986). Quite
correctly, the Court recognized that the term alter ego “has accumulated a great deal of baggage in
the context of labor disputes.” Fullerton Transfer, 910 F.2d at 366. The doctrine is most commonly
used in “labor cases to bind a new employer that continues the operations of an old employer 12 in
those cases where the new employer is ‘merely a disguised continuance of the old employer.’”
Id. (quoting Southport Petroleum, Co. v. NLRB, 315 U.S. 100, 106 (1942)); see also Howard
Johnson Co., 417 U.S. 249 (1974). To determine alter ego status in this situation, courts ask
“whether the two enterprises have substantially identical management, business, purpose, operation,
equipment, customers, supervision and ownership.” Id. (quoting Nelson Electric v. NLRB, 638 F.2d
965, 968 (6th Cir. 1981)); see also NLRB v. Allcoast Transfer, Inc., 780 F.2d 576, 579 (6th Cir.
1986).13 The Court described this as a “more relaxed, less exacting” application of the alter ego
doctrine “[i]n order to effectuate federal labor policies.” Id. Determination of alter ego status is a
question of fact to be reversed only if clearly erroneous. Allcoast Transfer, 780 F.2d at 579 (citing
Southport Petroleum, 315 U.S. at 106). In an alter ego analysis, “[n]o factor is controlling and all
need not be present.” Tanaka Construction, Inc. v. NLRB, 675 F.2d 1029, 1033 (9th Cir. 1982). The
analysis is “flexible” and “no one element should become a prerequisite to imposition of alter ego
status; rather, all the relevant factors must be considered together.” Allcoast Transfer, 780 F.2d at
582.14
In Fullerton Transfer, however, the Court declined to apply the more relaxed alter ego
doctrine because it found that the facts before it did not present a case where the alleged alter egos
are “engaged in the same business as the original company . . . Rather, they are, respectively, a
corporation engaged in a different business and stockholders and officers of another corporation.”
Id. at 337. Consequently, the Court determined that the rationales justifying application of the
relaxed standard were absent. Id.
The facts here, however, indicate that the more relaxed standard is appropriate. CNH
America argues otherwise; particularly, CNH America argues that the so-called relaxed doctrine
applies only to situations where there is evidence of an intent to avoid labor obligations. It points
to Fullerton Transfer in support of its claim, but the language of Fullerton Transfer is not helpful.
All that Fullerton Transfer stands for is the conclusion that the relaxed standard was not appropriate
for the particular facts of that case.
Furthermore, post-Fullerton Transfer cases repudiate CNH America’s claim. See e.g.,
Wilson v. Int’l Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of Am., AFL-
CIO, 83 F.3d 747 (6th Cir. 1996). In Wilson, the Court rejected the defendants’s insistence that the
alter ego doctrine “applies only to situations in which a change in the corporate form allows an
employer to evade collective bargaining obligations, and that common ownership and evidence of
12
The Court also noted that “[i]ncreasingly, the term also is applied to so-called double-breasted operations
to determine whether two or more coexisting employers performing the same work are in fact one business, separated
only in form.” Id. at 336.
13
The Court mentioned that “[t]he successorship doctrine is often confused with the alter ego doctrine. The
successorship doctrine is used to determine whether a new employer has an obligation to bargain when there is a bona
fide sale of the employing company. A bona fide sale is found when there is any substantial change in ownership or
management.” Id. at 336 n. 6 (citation and quotation marks omitted).
14
Moreover, even when a reorganization is supported by legitimate reasons, the employer may be prevented
from avoiding its prior labor obligations. Allcoast Transfer, 780 F.2d at 582.
Nos. 04-1182/1818/1821/2492 Yolton, et al. v. El Paso Tenn. Pipeline Co., et al. Page 14
an intent to avoid labor agreements are essential to an alter ego claim.” Id. at 758-59. CNH
America nevertheless insists that the district court erred by making an alter ego finding without
evidence of an intent to evade labor obligations. We disagree. This Court, even in light of the
language of Fullerton Transfer, has made clear that “common ownership or an intent to evade
federal labor law obligations are not necessary prerequisites to a finding of alter ego status.” Id. at
759. We need not, therefore, look for evidence of CNH America’s intent to evade any labor
obligations in determining whether it remains liable under the CBAs as the alter ego to JI Case.
Rather, “the essential inquiry under an alter ego analysis is ‘whether there was a bona fide
discontinuance and a true change of ownership . . . or merely a disguised continuance of the old
employer.” Allcoast Transfer, 780 F.2d at 579 (quoting Southport Petroleum, 315 U.S. at 106).
We conclude that the district court applied the appropriate standard. The court asked
“whether the two enterprises have substantially identical management, business purpose, operation
equipment, customers, supervision and ownership.” D. Ct. Op. of May 8, 2004 (citing Allcoast
Transfer, 780 F.2d at 579 (citations omitted)). JI Case and UAW were the parties to the CBAs. In
1994, Tenneco divested itself of its agriculture and construction assets by creating Case Equipment
Corporation (which eventually became Case LLC and then CNH America). Upon the creation of
the new corporation, Tenneco, JI Case, and Case Equipment entered into the Reorganization and
Benefits Agreement whereby Tenneco and JI Case’s assets were transferred to Case Equipment.
Immediately following the reorganization, Case Equipment conducted an IPO and changed its name
to Case Corporation and in September 2002 to Case LLC and later to CNH America.
Other factors indicate that CNH America is, for purposes of this case, the alter ego of JI
Case. The Reorganization Agreement was signed for Case Equipment by Jean Pierre Rosso as its
President and CEO. D. Ct. Op. Of May 8, 2004 at 6. At the time, Mr. Rosso was also the president
and CEO of JI Case. Id. Prior to the Reorganization, Mr. Rosso, as the president and CEO of JI
Case, sent a letter to retirees announcing that “[t]he leadership of Case and Tenneco have announced
an action that, when completed, will make Case a publicly traded company.” Id. The
Reorganization Agreement was signed for JI Case by Theodore R. French, its Senior Vice President,
CFO, and Treasurer. Id. at 6-7. Mr. French then held the same position with Case Equipment and
in fact signed the Benefits Agreement as Senior Vice President, CFO, and Treasurer of Case
Equipment and JI Case. Id.
A few days after the Reorganization Agreement was executed, JI Case executed a Certificate
of Amendment, effective July 1, 1994 at 12:01 a.m., changing its name to Tenneco Equipment
Corporation. Id. at 7. Effective at 12:02 a.m., Case Equipment changed its name to Case
Corporation. Id. “The same individual, acting in the same capacity for the new and old Case
Corporations, executed both certificates.” Id.
The district court also found that those individuals who were officers of JI Case prior to
12:01 a.m. on July 1, 1994, were the same individuals named as officers of Case Corporation at
12:02 a.m. Id. The new Case Corporation (Case LLC and then CNH America) operated under the
same name as JI Case in the same manufacturing facilities with the same officers, employees, and
business. Id. The new Case Corporation continued to correspond with retirees of JI Case using the
same JI Case letterhead previously used by the old corporation. Id. at 7-8. “The letters from the
new Case Corporation were signed by the same employees, working at the same locations, and in
the same positions as the letters from the old Case Corporation.” Id. at 8.
The Benefits Agreement included a provision that, except as otherwise specifically stated
within the agreement, CNH America assumed and agreed to pay “all employment, compensation
and benefit liabilities, whether arising prior to or after [the date of the agreement], with respect to
all employees and former employees of [each subsidiary of Tenneco that assigned assets used in the
farm and construction business to Case Corporation].” Id. Furthermore, CNH America assumed
Nos. 04-1182/1818/1821/2492 Yolton, et al. v. El Paso Tenn. Pipeline Co., et al. Page 15
all CBAs covering employees of the farm and construction equipment business of JI Case, including
the 1990 CBA. Id.
Based on the above factors, the district court concluded that the plaintiffs were likely to
establish that CNH America is the alter ego of JI Case and therefore retained JI Case’s labor law
obligations. Id. The court further concluded, however, that the plaintiffs were not likely to succeed
in their claim against El Paso regarding the labor law obligations because Tenneco was never a party
to any CBAs. Thus, the district court concluded that the plaintiffs “will not likely succeed in
establishing that El Paso is obligated under those agreements to pay the costs of Plaintiffs’[s] health
insurance benefits.” Id. at 9 (emphasis in original) (citing Serv., Hosp., Nursing Home & Pub.
Employees Union v. Commercial Property Servs., Inc., 755 F.2d 499, 503 (6th Cir. 1985)
(concluding that non-signatory to a CBA who is neither a successor or alter ego of signatory to the
CBA cannot be bound by the provisions of the agreement)).
Finally, the district court noted that it may ultimately be correct in its initial conclusion that
El Paso assumed CNH America’s obligations to provide the benefits in the Reorganization
Agreement, but noted that the plaintiffs do not seek relief based upon the Reorganization Agreement.
Instead, El Paso’s liability arises only as a result of CNH America’s cross-claim against El Paso for
breach of those agreements. Therefore, the court concluded it was premature to adjudicate that
claim when addressing the plaintiffs’s motion for a preliminary injunction. We agree with the
district court’s approach and affirm its judgment.
IV.
No. 04-2492: CNH America’s Cross Claim Against El Paso
A. Additional Background
The remaining issue is CNH America’s cross-claim against El Paso. This claim requires the
Court to determine who will pay for the benefits should the plaintiffs succeed on their claim. To
start, we turn to yet another opinion from the district court. On September 3, 2004, the district court
granted CNH America summary judgment on its cross-claim against El Paso. The district court
found that pursuant to the liability and indemnification provisions of the Reorganization and
Benefits Agreement, El Paso had indemnified CNH America against all pre-Reorganization
obligations CNH America had for retiree benefits. This included liabilities above the alleged cap
agreed to in the FAS-106 Letter.
To recap, on October 3, 1993, as part of the Extension Agreement, JI Case and the UAW
agreed to adopt the FAS-106 Letter of Agreement. The letter states:
This will confirm our understanding that the average per capita annual cost to the
Company of providing medical and related benefits under the Case Group Benefit
Plan to retired employees and surviving spouses of deceased employees shall not
exceed $2,750 for Medicare eligible individuals and $8,500 for those individuals
who are not eligible for Medicare. Notwithstanding the foregoing, no covered
person shall be required to pay a portion of any excess amount prior to April 1, 1998.
When issuing the preliminary injunction discussed above, the district court found that this
Letter had no effect on those retiring before its adoption (because those benefits vested) and
therefore limited the scope of the preliminary injunction to those retiring before the date of the
Letter.
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During the Reorganization in 1994, additional agreements were signed allocating assets and
liabilities of the various corporate entities. Section 3.02(c) of the Reorganization Agreement
describes certain liabilities assumed by Tenneco for the pre-IPO retires:
Except as set forth in the Benefits Agreement or the Tax Sharing Agreement,
Tenneco or a Tenneco Subsidiary, as appropriate, (i) shall assume the Retained
Liabilities effective as of the Reorganization Date and (ii) shall thereafter pay,
perform and discharge in due course all of the Retained Liabilities.
The Reorganization Agreement then defines “Retained Liabilities” as:
(ii) the Case Liabilities for postretirement health and life insurance benefits (to the
extent that Case is obligated on the Reorganization Date) of retirees of the Case
Business in the United States and current employees of the Case Business in the
United States who retire on or before July 1, 1994 and their dependents as more fully
described in the [Allocation] Agreement.
CNH America agreed to assume all other Case liabilities “other than the Retained Liabilities.” In
addition to the language in the Reorganization Agreement, the Allocation (or Benefits) Agreement
has additional language providing guidance. Section 7.2.2 of the Allocation Agreement states:
Subject to Section 7.4,15 Tenneco shall retain all liability with respect to
postretirement health and life insurance benefits to the extent that Case is obligated
on the Closing Date [i.e., the date of the agreement] for United State Employees
retired prior to the Closing Date and their dependents.
Article V of the Reorganization Agreement further provides indemnification provisions
requiring CNH America and Tenneco to defend and indemnify one another for failing to perform
their obligations under the agreements. Section 5.01 requires Tenneco to
indemnify, defend and hold harmless [Case LLC] . . . from and against any and all
Liabilities, and any claims, demands and rights . . . arising out of or due to . . . the
failure or alleged failure of Tenneco or any Tenneco Subsidiary to pay, perform or
otherwise discharge in due course any of the Retained Liabilities . . . and . . . to
perform its obligations under this Agreement or any of the Ancillary Agreements.
Section 5.02 required the same of CNH America with respect to its obligations.
The district court reviewed the agreements pursuant to Delaware law as provided for in the
agreements themselves. Under Delaware law, the terms of a contract “will be controlling when they
establish the parties’ common meaning so that a reasonable person in the position of either party
would have no expectation inconsistent with the contract language.” Eagle Indus., Inc. v. De Vilbiss
Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) (citation omitted). Thus, in the absence of any
15
Section 7.4 provides the following limitation on the liabilities Tenneco assumed.
Tenneco shall not be liable for any postretirement health and life insurance benefit costs which result
from any action of [Case LLC] after the Closing Date which increases such benefits, except to the
extent that such benefit increases are required by applicable law. To the extent that Tenneco is not
liable for such benefits, [Case LLC] shall be liable. Without limiting the generality fo the foregoing,
it is specifically provided that Tenneco shall not be liable for any increase in the cost of providing
postretirement health and life insurance benefits that result from any agreement by [Case LLC] to
increase or otherwise modify the per capita annual cost limits set forth in the October 3, 1993
agreement between Case and the UAW regarding “FAS-106 out-year Cost Limiters.”
Nos. 04-1182/1818/1821/2492 Yolton, et al. v. El Paso Tenn. Pipeline Co., et al. Page 17
ambiguity, the express terms of the contract control. Haft v. Dart Group Corp., 841 F. Supp. 549,
564 (D. Del. 1993) (citing Harry H. Rosin Co. v. Eksterowicz, 73 A.2d 648, 651 (Del. Super. Ct.
1950), and Myers v. Myers, 408 A.2d 279, 280 (Del. 1979)). Extrinsic evidence may not be used
if the terms of a contract are unambiguous. Eagle Indus., 702 A.2d at 1232 (citations omitted).
The district court further noted that contract interpretation is a question of law. Hudson v.
State Farm Mut. Ins. Co., 569 A.2d 1168, 1170 (Del. 1990). If a contract is unambiguous, therefore,
summary judgment is appropriate because extrinsic evidence is neither relevant nor admissible to
ascertain the parties’s intent. SBC Interactive, Inc. v. Corporate Media Partners, 714 A.2d 758, 761
(Del. 1998). Finding the contract unambiguous, the district court concluded “that since Tenneco
(and thereby El Paso) assumed ‘all liability with respect to postretirement health and life insurance
benefits to the extent that Case [was] obligated on the Closing Date . . .’ and since that liability
actually included costs above the cap at least for individuals retiring prior to the effective date of the
FAS-106 Letter, El Paso is liable for the above-cap costs of Plaintiffs’[s] health insurance benefits.”
CNH America argued that Tenneco’s liability for pre-IPO retiree health benefits is
unambiguously established by Section 3.02(c) of the Reorganization Agreement and Section 7.2.2
of the Allocation Agreement. El Paso argued that Tenneco assumed only below-cap costs of those
benefits because Section 3.02(c) and Section 7.2.2 limit liability “to the extent that Case is obligated
on the Reorganization Date.” El Paso argued that the parties’s agreements were premised on the
belief that benefits were capped as of that date, and therefore, Tenneco assumed only the below-cap
costs. El Paso supported its argument with extrinsic evidence. The district court rejected the
extrinsic evidence, concluding that:
This extrinsic evidence is not persuasive. It is simply statements made by parties
after the Reorganization Agreement was entered into and reaffirms the parties’ belief
that retiree health benefit costs were capped. There is no dispute that at the time of
the agreement El Paso (or Tenneco) and Case LLC believed that the costs were
capped. This extrinsic evidence does not persuade the Court that it was the intent of
the parties that Case LLC retained the liability for the above-cap costs.
The district court noted that the problem in this case arises because of the FAS-106 Letter. The
court concluded already, however, that the Letter does not cap the benefits of pre-Letter retirees and
therefore, CNH America’s liability was not capped with respect to those retirees. It therefore
follows, according to the district court, that El Paso assumed these above-cap liabilities.
The district court found additional support for its conclusion in other parts of the parties’s
agreements. The Reorganization Agreement’s definition of “Liabilities” includes “foreseen or
unforeseen” liabilities as well as “known or unknown” liabilities arising pursuant to, among other
things, an “Action,” “before any court.” Therefore, the district court stated:
In summary, the Court concludes that the terms of the Reorganization Agreement
and Allocation Agreement unambiguously reflect the parties’[s] intent that Tenneco
would assume all of Case’s liability for postretirement health insurance benefits to
the extent Case was obligated for those benefits on June 23, 1994, including those
which were unforeseen and/or unknown at the time. The Court has preliminarily
determined that the FAS-106 Letter did not effectively cap Case’s obligations with
respect to hourly retirees who retired or elected to retire prior to the letter’s effective
date. It therefore follows that on June 23, 1994, Case was obligated for the full costs
of Plaintiffs’[s] health insurance benefits. Pursuant to the unambiguous terms of the
Reorganization Agreement and Allocation Agreement, Tenneco and now El Paso
assumed those obligations.
Nos. 04-1182/1818/1821/2492 Yolton, et al. v. El Paso Tenn. Pipeline Co., et al. Page 18
Thus, the district court granted summary judgment in favor of CNH America.
B. The Contracts Are Unambiguous and the District Court Properly Granted Summary
Judgment to CNH America
On appeal, El Paso argues first that the agreements cannot be “read as conclusively
establishing” its liability — that is, El Paso argues that its interpretation of the agreements is a
reasonable one that should be tried to a jury. Second, El Paso argues that there is at least a latent
ambiguity based on CNH America’s conduct over a five-year period, its failure to ever state that El
Paso had obligations extending beyond the capped amounts, and its repeated statements
acknowledging that El Paso’s obligations were limited.
Regarding its first argument, El Paso points to the Delaware Supreme Court’s decision in
Eagle Indus., 702 A.2d 1228. The court held that:
Contract terms themselves will be controlling when they establish the parties’[s]
common meaning so that a reasonable person in the position of either party would
have no expectations inconsistent with the contract language. When the provisions
in controversy are fairly susceptible of different interpretations or may have two or
more different meanings, there is ambiguity.
Id. at 1232. El Paso argues that the contract language is fairly susceptible to different interpretations
and that summary judgment was therefore inappropriate. El Paso’s argument is essentially that the
district court erred by ignoring the language “to the extent that Case is obligated on the Closing
Date.” This language, El Paso argues, is evidence of the parties’s intent to limit liabilities according
to their “contemporaneous understanding of what they were.” Brief of El Paso at 22. Thus,
according to El Paso, any liabilities not contemporaneously allocated were assumed as contingent
obligations by CNH America. For this, El Paso points to section 2.1 of the Benefits Agreement.
On the other hand, CNH America points to the contract language as unambiguously
establishing that Tenneco retained all liabilities related to the health care costs whether “foreseen
or unforeseen, . . . accrued or unaccrued, known or unknown,” that were incurred by JI Case prior
to the Reorganization. Moreover, CNH America argues that it is irrelevant that the defendants
believed that Tenneco’s liability was capped by the FAS-106 Letter. The agreement explicitly
allocated the risk of unforeseen liabilities on Tenneco. Regarding the disputed language (“to the
extent Case is obligated on the Closing Date”), CNH America argues that it merely creates a clear
division between Tenneco’s “Retained Liabilities,” i.e., those obligations to pre-Reorganization
retirees on the closing date, and CNH America’s future liabilities, i.e., those obligations to
employees who would retire after the Closing Date. According to CNH America, the fact that it
ended up with more liabilities on the Closing Date than Tenneco suspected does not turn the tide in
El Paso’s favor because this risk was specifically assumed by Tenneco by the language “unforeseen
and unknown liabilities.” Finally, CNH America argues that its course of conduct is not relevant
because the contract language is unambiguous and “[i]f a contract is unambiguous, extrinsic
evidence may not be used to interpret the intent of the parties, to vary the terms of the contract or
to create an ambiguity.” Eagles Indus., 702 A.2d at 1232.
We believe that the district court correctly concluded that the contract is unambiguous and
properly granted summary judgment in favor of CNH America. We recognize that the defendants
claim16
that when they signed the FAS-106 Letter, they intended to cap JI Case’s liability in October
1993. When Case and Tenneco signed the reorganization agreements in June 1994, they both
anticipated that Case’s obligations for retirement benefits were capped by the FAS-106 Letter and
16
The Union claims, however, that the FAS-106 Letter was signed as a temporary accounting accommodation.
Nos. 04-1182/1818/1821/2492 Yolton, et al. v. El Paso Tenn. Pipeline Co., et al. Page 19
that the retirees themselves would be responsible for above-cap costs. Hence, the parties included
the language that Tenneco would assume Retained Liabilities “to the extent that Case is obligated
on the Reorganization Date . . .” In the absence of other language in the contract, we might have
been persuaded to conclude that the parties were agreeing that Tenneco was assuming liability for
a specific dollar amount — the below-cap costs. We would have been compelled to conclude as
much if the parties had specifically so stated. Nevertheless, the parties were not so specific and we
are required to turn to other language and read the document as an integrated whole. In the parties’s
definition of Liabilities, we find that Liabilities (and hence Retained Liabilities) includes those
liabilities “foreseen or unforeseen . . . known or unknown . . . accrued or unaccrued.” Thus, we read
the contract unambiguously to allocate to Tenneco Case’s Retained Liabilities, including those
unforeseen or unknown. The parties’s beliefs about the extent of the liabilities and their actions
pursuant to those beliefs do not demonstrate any ambiguities in the contract language allocating
unknown or unforeseen liabilities to El Paso. That is, the only ambiguity in this case is the amount
of the liabilities because of the parties’s assumption that the FAS-106 Letter capped benefits. The
language of the agreements, adopted by sophisticated entities with able counsel, allocated, as most
contracts do, the risk of increased liabilities upon one of those parties — El Paso. “Contract
language is not ambiguous simply because the parties disagree concerning its intended
construction.” Eagles Indus., 718 A.2d at 1232 n.8.
El Paso does rely heavily on CNH America’s course of conduct after the Reorganization —
specifically the fact that it never stated that El Paso had liability above the caps, the fact that it paid
above cap costs of $25 million in 1998, and its repeated written statements that El Paso’s obligations
were limited. The extrinsic evidence, however, cannot be considered when contract language is
unambiguous. In any event, we also agree with the district court that the extrinsic evidence merely
demonstrates the parties’s belief that their obligations were capped by the FAS-106 Letter and does
not indicate that the indemnification contract language itself was ambiguous.
In sum, Section 7.2.2 provides that Tenneco would assume all postretirement health care
benefits for those who retired prior to July 1, 1994 to the extent that JI Case was obligated on the
Closing Date. The district court has not abused its discretion in issuing a preliminary injunction on
the basis that the benefits were lifetime benefits vested for those who retired prior to October 3, 1993
and, thus, the FAS-106 Letter could not limit those benefits. This means, therefore, that despite the
parties’s error regarding the extent of liabilities, CNH America is likely to be held liable for the
vested lifetime health care benefits for those who retired prior to October 3, 1993 on the Closing
Date. Section 7.2.2, however, provides that Tenneco assumed those liabilities. This is reinforced
by the parties’s definition of “Liabilities” to include those “absolute or contingent, matured or
unmatured, liquidated or unliquidated, foreseen or unforeseen . . .accrued or unaccrued, known or
unknown, whether having arisen or arising in the future.” We are convinced that the contract is
unambiguous and therefore affirm the district court’s judgment.
Finally, based on this interpretation, the district court did not abuse its discretion in cutting
off discovery or in fashioning an equitable remedy under the indemnification provision.
V.
For the foregoing reasons, we AFFIRM the district court’s judgment in all respects on each
of the four appeals.