M&G Polymers United States, LLC v. Tackett ( 2015 )

(Slip Opinion) OCTOBER TERM, 2014 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
M&G POLYMERS USA, LLC, ET AL. v. TACKETT ET AL
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE SIXTH CIRCUIT
No. 13–1010. Argued November 10, 2014—Decided January 26, 2015
When petitioner M&G Polymers USA, LLC (M&G), purchased the
Point Pleasant Polyester Plant in 2000, it entered a collective-
bargaining agreement and related Pension, Insurance, and Service
Award Agreement (P & I agreement) with respondent union. As rel-
evant here, the P & I agreement provided that certain retirees, along
with their surviving spouses and dependents, would “receive a full
Company contribution towards the cost of [health care] benefits”;
that such benefits would be provided “for the duration of [the]
Agreement”; and that the agreement would be subject to renegotia-
tion in three years.
Following the expiration of those agreements, M&G announced
that it would require retirees to contribute to the cost of their health
care benefits. Respondent retirees, on behalf of themselves and oth-
ers similarly situated, sued M&G and related entities, alleging that
the P & I agreement created a vested right to lifetime contribution-
free health care benefits.
The District Court dismissed the complaint for failure to state a
claim, but the Sixth Circuit reversed based on the reasoning of its
earlier decision in International Union, United Auto, Aerospace, &
Agricultural Implement Workers of Am. v. Yard-Man, Inc., 716 F. 2d
1476. On remand, the District Court ruled in favor of the retirees,
and the Sixth Circuit affirmed.
Held: The Sixth Circuit’s decision rested on principles that are incom-
patible with ordinary principles of contract law. Pp. 5–14.
(a) The Employee Retirement Income Security Act of 1974 (ERISA)
governs pension and welfare benefits plans, including those estab-
lished by collective-bargaining agreements. ERISA establishes min-
imum funding and vesting standards for pension plans, but exempts
2 M&G POLYMERS USA, LLC v. TACKETT
Syllabus
welfare benefits plans—which provide the types of benefits at issue
here—from those rules. See 29 U. S. C. §§1051(1), 1053, 1081(a)(2),
1083. “[E]mployers have large leeway to design . . . welfare plans as
they see fit.” Black & Decker Disability Plan v. Nord, 538 U. S. 822,
833. Pp. 5–7.
(b) This Court interprets collective-bargaining agreements, includ-
ing those establishing ERISA plans, according to ordinary principles
of contract law, at least when those principles are not inconsistent
with federal labor policy. See Textile Workers v. Lincoln Mills of Ala.,
353 U. S. 448, 456–457. When a collective-bargaining agreement is
unambiguous, its meaning must be ascertained in accordance with its
plainly expressed intent. 11 R. Lord, Williston on Contracts §30:6, p.
108. P. 7.
(c) In Yard-Man, the Sixth Circuit found a provision governing re-
tiree insurance benefits ambiguous as to the duration of those bene-
fits; and, looking to other provisions of the agreement, purported to
apply ordinary contract law to resolve the ambiguity. First, the court
inferred from the existence of termination provisions for other bene-
fits that the absence of a termination provision specifically address-
ing retiree benefits expressed an intent to vest those benefits for life.
The court then purported to apply the rule that contracts should be
interpreted to avoid illusory promises, reasoning that, absent vesting,
the promise would be illusory for the subset of retirees who would not
become eligible for those benefits before the contract expired. Final-
ly, the court relied on “the context” of labor negotiations to resolve
the ambiguity, inferring that the parties would have intended such
benefits to vest for life because they are not mandatory subjects of
collective bargaining; are “typically understood as a form of delayed
compensation,” 716 F. 2d, at 1482; and are keyed to the acquisition of
retirement status. The court concluded that these contextual clues
“outweigh[ed] any contrary implications derived from a routine dura-
tion clause.” Id., at 1483. The Sixth Circuit has since extended its
Yard-Man analysis in a series of other cases. Pp. 7–10.
(d) The inferences applied in Yard-Man and its progeny do not rep-
resent ordinary principles of contract law. Yard-Man distorts the at-
tempt to ascertain the intention of the parties by placing a thumb on
the scale in favor of vested retiree benefits in all collective-bargaining
agreements. Rather than relying on known customs and usages in a
particular industry as proven by the parties, the Yard-Man court re-
lied on its own suppositions about the intentions of parties negotiat-
ing retiree benefits. It then compounded the error by applying those
suppositions indiscriminately across industries. Furthermore, the
Sixth Circuit’s refusal to apply general durational clauses to provi-
sions governing retiree benefits distorts an agreement’s text and con-
Cite as: 574 U. S. ____ (2015) 3
Syllabus
flicts with the principle that a written agreement is presumed to en-
compass the whole agreement of the parties.
Perhaps tugged by its inferences, the Sixth Circuit also misapplied
the illusory promises doctrine. It construed provisions that admitted-
ly benefited some class of retirees as “illusory” merely because they
did not benefit all retirees. That interpretation is a contradiction in
terms—a promise that is “partly illusory” is by definition not illusory.
And its use of this doctrine is particularly inappropriate in the con-
text of collective-bargaining agreements, which often include provi-
sions inapplicable to some category of employees.
The Sixth Circuit also failed even to consider other traditional con-
tract principles, including the rule that courts should not construe
ambiguous writings to create lifetime promises and the rule that
“contractual obligations will cease, in the ordinary course, upon ter-
mination of the bargaining agreement,” Litton Financial Printing
Div., Litton Business Systems, Inc. v. NLRB, 501 U. S. 190, 207.
Pp. 10–14.
(e) Though there is no doubt that Yard-Man and its progeny affect-
ed the outcome here, the Sixth Circuit should be the first to review
the agreements under ordinary principles of contract law. P. 14.
733 F. 3d 589, vacated and remanded.
THOMAS, J., delivered the opinion for a unanimous Court. GINSBURG,
J., filed a concurring opinion, in which BREYER, SOTOMAYOR, and KAGAN,
JJ., joined.
Cite as: 574 U. S. ____ (2015) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 13–1010
_________________
M&G POLYMERS USA, LLC, ET AL., PETITIONERS v.
HOBERT FREEL TACKETT ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SIXTH CIRCUIT
[January 26, 2015]
JUSTICE THOMAS delivered the opinion of the Court.
This case arises out of a disagreement between a group
of retired employees and their former employer about the
meaning of certain expired collective-bargaining agree-
ments. The retirees (and their former union) claim that
these agreements created a right to lifetime contribution-
free health care benefits for retirees, their surviving
spouses, and their dependents. The employer, for its part,
claims that those provisions terminated when the agree-
ments expired. The United States Court of Appeals for
the Sixth Circuit sided with the retirees, relying on its
conclusion in International Union, United Auto, Aerospace,
& Agricultural Implement Workers of Am. v. Yard-Man,
Inc., 716 F. 2d 1476, 1479 (1983), that retiree health care
benefits are unlikely to be left up to future negotiations.
We granted certiorari and now conclude that such reason-
ing is incompatible with ordinary principles of contract
law. We therefore vacate the judgment of the Court of
Appeals and remand for it to apply ordinary principles of
contract law in the first instance.
2 M&G POLYMERS USA, LLC v. TACKETT
Opinion of the Court
I
A
Respondents Hobert Freel Tackett, Woodrow K. Pyles,
and Harlan B. Conley worked at (and retired from) the
Point Pleasant Polyester Plant in Apple Grove, West
Virginia (hereinafter referred to as the Plant). During
their employment, respondent United Steel, Paper and
Forestry, Rubber, Manufacturing, Energy, Allied Indus-
trial and Service Workers International Union, AFL-CIO-
CLC, or its predecessor unions (hereinafter referred to as
the Union), represented them in collective bargaining.
Tackett and Pyles retired in 1996, and Conley retired in
1998. They represent a class of retired employees from
the Plant, along with their surviving spouses and other
dependents. Petitioner M&G Polymers USA, LLC, is the
current owner of the Plant.
When M&G purchased the Plant in 2000, it entered a
master collective-bargaining agreement and a Pension,
Insurance, and Service Award Agreement (P & I agree-
ment) with the Union, generally similar to agreements the
Union had negotiated with M&G’s predecessor. The P & I
agreement provided for retiree health care benefits as
follows:
“Employees who retire on or after January 1, 1996
and who are eligible for and receiving a monthly pen-
sion under the 1993 Pension Plan . . . whose full years
of attained age and full years of attained continuous
service . . . at the time of retirement equals 95 or more
points will receive a full Company contribution to-
wards the cost of [health care] benefits described in
this Exhibit B–1 . . . . Employees who have less than
95 points at the time of retirement will receive a re-
duced Company contribution. The Company contribu-
tion will be reduced by 2% for every point less than
95. Employees will be required to pay the balance of
Cite as: 574 U. S. ____ (2015) 3
Opinion of the Court
the health care contribution, as estimated by the
Company annually in advance, for the [health care]
benefits described in this Exhibit B–1. Failure to pay
the required medical contribution will result in can-
cellation of coverage.” App. 415–416.
Exhibit B–1, which described the health care benefits at
issue, opened with the following durational clause: “Effec-
tive January 1, 1998, and for the duration of this Agree-
ment thereafter, the Employer will provide the following
program of hospital benefits, hospital-medical benefits,
surgical benefits and prescription drug benefits for eligible
employees and their dependents . . . . ” Id., at 377–378
(emphasis deleted). The P & I agreement provided for
renegotiation of its terms in three years.1
B
In December 2006, M&G announced that it would begin
requiring retirees to contribute to the cost of their health
care benefits. Respondent retirees, on behalf of them-
selves and others similarly situated, sued M&G and re-
lated entities, alleging that the decision to require these
contributions breached both the collective-bargaining
agreement and the P & I agreement, in violation of §301 of
the Labor Management Relations Act, 1947 (LMRA) and
§502(a)(1)(B) of the Employee Retirement Income Security
Act of 1974 (ERISA), 88 Stat. 891.2 Specifically, the retir-
ees alleged that M&G had promised to provide lifetime
contribution-free health care benefits for them, their
surviving spouses, and their dependents. They pointed to
——————
1 In accordance with this provision, M&G and the Union began bar-
gaining anew in 2003, ultimately reaching a new agreement in 2005.
The provisions of the existing agreements remained in effect during the
course of those negotiations. See App. to Pet. for Cert. 25, n. 1.
2 The Union was a plaintiff in the suit and is a respondent here. For
ease of reference, we refer to the respondents collectively as “the
retirees.”
4 M&G POLYMERS USA, LLC v. TACKETT
Opinion of the Court
the language in the 2000 P & I agreement providing that
employees with a certain level of seniority “will receive a
full Company contribution towards the cost of [health
care] benefits described in . . . Exhibit B–1.” The retirees
alleged that, with this promise, M&G had created a vested
right to such benefits that continued beyond the expiration
of the 2000 P & I agreement.
The District Court dismissed the complaint for failure to
state a claim. 523 F. Supp. 2d 684, 696 (SD Ohio 2007). It
concluded that the cited language unambiguously did not
create a vested right to retiree benefits.
The Court of Appeals reversed based on the reasoning of
its earlier decision in Yard-Man. 561 F. 3d 478 (CA6
2009) (Tackett I). Yard-Man involved a similar claim that
an employer had breached a collective-bargaining agree-
ment when it terminated retiree benefits. 716 F. 2d, at
1478. Although the court found the text of the provision in
that case ambiguous, it relied on the “context” of labor
negotiations to resolve that ambiguity in favor of the
retirees’ interpretation. Id., at 1482. Specifically, the
court inferred that parties to collective bargaining would
intend retiree benefits to vest for life because such benefits
are “not mandatory” or required to be included in collective-
bargaining agreements, are “typically understood as a
form of delayed compensation or reward for past services,”
and are keyed to the acquisition of retirement status.
Ibid. The court concluded that these inferences “out-
weigh[ed] any contrary implications [about the termina-
tion of retiree benefits] derived from” general termination
clauses. Id., at 1483.
Applying the Yard-Man inferences on review of the
District Court’s dismissal of the action, the Court of Ap-
peals concluded that the retirees had stated a plausible
claim. Tackett I, 561 F. 3d, at 490. “Keeping in mind the
context of the labor-management negotiations identified in
Yard-Man,” the court found “it unlikely that [the Union]
Cite as: 574 U. S. ____ (2015) 5
Opinion of the Court
would agree to language that ensures its members a ‘full
Company contribution,’ if the company could unilaterally
change the level of contribution.” Ibid. The court con-
strued the language about “employees” contributing to
their health care premiums as limited to employees who
had not attained the requisite seniority points to be enti-
tled to a full company contribution. Ibid. And it discerned
an intent to vest lifetime contribution-free health care
benefits from provisions tying eligibility for health care
benefits to eligibility for pension benefits. Id., at 490–491.
On remand, the District Court conducted a bench trial
and ruled in favor of the retirees. It declined to revisit the
question whether the P & I agreement created a vested
right to retiree benefits, concluding that the Court of
Appeals had definitively resolved that issue. It then
issued a permanent injunction ordering M&G to reinstate
contribution-free health care benefits for the individual
respondents and similarly situated retirees. 853 F. Supp.
2d 697 (SD Ohio 2012).
The Court of Appeals affirmed, concluding that, al-
though the District Court had erred in treating Tackett I as
a conclusive resolution of the meaning of the P & I agree-
ment, it had not erred in “presum[ing]” that, “in the ab-
sence of extrinsic evidence to the contrary, the agreements
indicated an intent to vest lifetime contribution-free bene-
fits.” 733 F. 3d 589, 600 (CA6 2013) (Tackett II). And
because the District Court had concluded that the prof-
fered extrinsic evidence was inapplicable, it had not clearly
erred in finding that the agreement created those vested
rights.
We granted certiorari, 572 U. S. ___ (2014), and now
vacate and remand.
II
This case is about the interpretation of collective-
bargaining agreements that define rights to welfare bene-
6 M&G POLYMERS USA, LLC v. TACKETT
Opinion of the Court
fits plans. The LMRA grants federal courts jurisdiction to
resolve disputes between employers and labor unions
about collective-bargaining agreements. 29 U. S. C. §185.
When collective-bargaining agreements create pension or
welfare benefits plans, those plans are subject to rules
established in ERISA. ERISA defines pension plans as
plans, funds, or programs that “provid[e] retirement in-
come to employees” or that “resul[t] in a deferral of in-
come.” §1002(2)(A). It defines welfare benefits plans as
plans, funds, or programs established or maintained to
provide participants with additional benefits, such as life
insurance and disability coverage. §1002(1).
ERISA treats these two types of plans differently.
Although ERISA imposes elaborate minimum funding and
vesting standards for pension plans, §§1053, 1082, 1083,
1084, it explicitly exempts welfare benefits plans from
those rules, §§1051(1), 1081(a)(1). Welfare benefits plans
must be “established and maintained pursuant to a writ-
ten instrument,” §1102(a)(1), but “[e]mployers or other
plan sponsors are generally free under ERISA, for any
reason at any time, to adopt, modify, or terminate welfare
plans,” Curtiss-Wright Corp. v. Schoonejongen, 514 U. S.
73, 78 (1995). As we have previously recognized,
“[E]mployers have large leeway to design disability and
other welfare plans as they see fit.” Black & Decker Dis-
ability Plan v. Nord, 538 U. S. 822, 833 (2003). And, we
have observed, the rule that contractual “provisions ordi-
narily should be enforced as written is especially appro-
priate when enforcing an ERISA [welfare benefits] plan.”
Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U. S.
___, ___ (2013) (slip op., at 7). That is because the “focus
on the written terms of the plan is the linchpin of a system
that is not so complex that administrative costs, or litiga-
tion expenses, unduly discourage employers from offering
[welfare benefits] plans in the first place.” Id., at ___ (slip
op., at 8) (internal quotation marks, brackets, and citation
Cite as: 574 U. S. ____ (2015) 7
Opinion of the Court
omitted).
We interpret collective-bargaining agreements, includ-
ing those establishing ERISA plans, according to ordinary
principles of contract law, at least when those principles
are not inconsistent with federal labor policy. See Textile
Workers v. Lincoln Mills of Ala., 353 U. S. 448, 456–457
(1957). “In this endeavor, as with any other contract, the
parties’ intentions control.” Stolt-Nielsen S. A. v. Animal-
Feeds Int’l Corp., 559 U. S. 662, 682 (2010) (internal quo-
tation marks omitted). “Where the words of a contract in
writing are clear and unambiguous, its meaning is to be
ascertained in accordance with its plainly expressed in-
tent.” 11 R. Lord, Williston on Contracts §30:6, p. 108 (4th
ed. 2012) (Williston) (internal quotation marks omitted).
In this case, the Court of Appeals applied the Yard-Man
inferences to conclude that, in the absence of extrinsic
evidence to the contrary, the provisions of the contract
indicated an intent to vest retirees with lifetime benefits.
Tackett II, 733 F. 3d, at 599–600. As we now explain,
those inferences conflict with ordinary principles of con-
tract law.
III
A
1
The Court of Appeals has long insisted that its Yard-
Man inferences are drawn from ordinary contract law. In
Yard-Man itself, the court purported to apply “traditional
rules for contractual interpretation.” 716 F. 2d, at 1479.
The court first concluded that the provision governing
retiree insurance benefits—which stated only that the
employer “will provide” such benefits—was ambiguous as
to the duration of those benefits. Id., at 1480. To resolve
that ambiguity, it looked to other provisions of the agree-
ment. The agreement included provisions for terminating
active employees’ insurance benefits in the case of layoffs
8 M&G POLYMERS USA, LLC v. TACKETT
Opinion of the Court
and for terminating benefits for a retiree’s spouse and
dependents in case of the retiree’s death before the expira-
tion of the collective-bargaining agreement, but no provi-
sion specifically addressed the duration of retiree health
care benefits. Id., at 1481–1482. From the existence of
these termination provisions and the absence of a termi-
nation provision specifically addressing retiree benefits,
the court inferred an intent to vest those retiree benefits
for life.
The court then purported to apply the rule that con-
tracts should be interpreted to avoid illusory promises. It
noted that the retiree insurance provisions “contain[ed] a
promise that the company will pay an early retiree’s in-
surance upon such retiree reaching age 65 but that the
retiree must bear the cost of company insurance until that
time.” Id., at 1481. Employees could retire at age 55, but
the agreement containing this promise applied only for a
3-year term. Ibid. Thus, retirees between the ages of 55
and 62 would not turn 65 and become eligible for the
company contribution before the 3-year agreement ex-
pired. In light of this fact, the court reasoned that the
promise would be “completely illusory for many early
retirees under age 62” if the retiree benefits terminated
when the contract expired. Ibid.Finally, the court turned to “the context” of labor nego-
tiations. Id., at 1482. It observed that “[b]enefits for
retirees are . . . not mandatory subjects of collective bar-
gaining” and that “employees are presumably aware that
the union owes no obligation to bargain for continued
benefits for retirees.” Ibid. Based on these observations,
the court concluded that “it is unlikely that such benefits
. . . would be left to the contingencies of future negotia-
tions.” Ibid. It also asserted that “retiree benefits are in a
sense ‘status’ benefits which, as such, carry with them an
inference that they continue so long as the prerequisite
status is maintained.” Ibid.Cite as: 574 U. S. ____ (2015) 9
Opinion of the Court
Although the contract included a general durational
clause—meaning that the contract itself would expire at a
set time—the court concluded that these contextual clues
“outweigh[ed] any contrary implications derived from a
routine duration clause.” Id., at 1483.
2
Two years after Yard-Man, the court took this analysis
even further. In a dispute between retirees and a steel
company over retiree health insurance benefits, it con-
strued the language “will continue to provide at its ex-
pense, supplemental medicare and major medical benefits
for Pensioners aged 65 and over” to “unambiguously con-
fe[r]” lifetime benefits. Policy v. Powell Pressed Steel Co.,
770 F. 2d 609, 615 (CA6 1985) (emphasis added). Yet it
had interpreted similar language—“will provide insurance
benefits equal to the active group”—to be ambiguous in
Yard-Man. The court refused to give any weight to provi-
sions that supported a contrary construction—namely, one
establishing a fund to pay pension, but not welfare, bene-
fits, and another providing for the continuation of pension,
but not welfare, benefits after the agreement expired.
Policy, 770 F. 2d, at 615–616. According to the court, a
contrary interpretation “would render the Company’s
promise [of benefits for retirees aged 65 and over] in sub-
stantial part nugatory and illusory” to retirees who were
62 or younger when the 3-year agreement was signed.
Ibid. And it faulted the District Court for failing “to give
effect” to Yard-Man’s admonition “that retiree benefits
normally . . . are interminable.” 770 F. 2d, at 616.
The Court of Appeals has continued to extend the rea-
soning of Yard-Man. Relying on Yard-Man’s statement
that context considerations outweigh the effect of a gen-
eral termination clause, it has concluded that, “ ‘[a]bsent
specific durational language referring to retiree benefits
themselves,’ a general durational clause says nothing
10 M&G POLYMERS USA, LLC v. TACKETT
Opinion of the Court
about the vesting of retiree benefits.” Noe v. PolyOne
Corp., 520 F. 3d 548, 555 (CA6 2008) (emphasis added). It
has also held that a provision that “ties eligibility for
retirement-health benefits to eligibility for a pension . . .
[leaves] little room for debate that retirees’ health benefits
ves[t] upon retirement.” Id., at 558 (internal quotation
marks omitted). Commenting on these extensions of
Yard-Man, the court has acknowledged that “there is a
reasonable argument to be made that, while th[e] court
has repeatedly cautioned that Yard-Man does not create a
presumption of vesting, [it] ha[s] gone on to apply just
such a presumption.” Cole v. ArvinMeritor, Inc., 549 F. 3d
1064, 1074 (CA6 2008).
B
We disagree with the Court of Appeals’ assessment that
the inferences applied in Yard-Man and its progeny repre-
sent ordinary principles of contract law.
As an initial matter, Yard-Man violates ordinary con-
tract principles by placing a thumb on the scale in favor of
vested retiree benefits in all collective-bargaining agree-
ments. That rule has no basis in ordinary principles of
contract law. And it distorts the attempt “to ascertain the
intention of the parties.” 11 Williston §30:2, at 18 (empha-
sis added); see also Stolt-Nielsen, 559 U. S., at 682. Yard-
Man’s assessment of likely behavior in collective bargain-
ing is too speculative and too far removed from the context
of any particular contract to be useful in discerning the
parties’ intention.
And the Court of Appeals 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. See
Yard-Man, 716 F. 2d, at 1482. For example, it asserted,
without any foundation, that, “when . . . parties contract
for benefits which accrue upon achievement of retiree
Cite as: 574 U. S. ____ (2015) 11
Opinion of the Court
status, there is an inference that the parties likely in-
tended those benefits to continue as long as the benefi-
ciary remains a retiree.” Ibid.; see also ibid. (“[I]t is unlikely
that [retiree] benefits . . . would be left to the contingen-
cies of future negotiations”). Although a court may look to
known customs or usages in a particular industry to de-
termine the meaning of a contract, the parties must prove
those customs or usages using affirmative evidentiary
support in a given case. 12 Williston §34:3; accord, Robin-
son v. United States, 13 Wall. 363, 366 (1872); Oelricks v.
Ford, 23 How. 49, 61–62 (1860). Yard-Man relied on no
record evidence indicating that employers and unions in
that industry customarily vest retiree benefits. Worse, the
Court of Appeals has taken the inferences in Yard-Man
and applied them indiscriminately across industries. See,
e.g., Cole, supra, at 1074 (automobile); Armistead v. Ver-
nitron Corp., 944 F. 2d 1287, 1297 (CA6 1991) (electron-
ics); Policy, supra, at 618 (steel).
Because the Court of Appeals did not ground its Yard-
Man inferences in any record evidence, it is unsurprising
that the inferences rest on a shaky factual foundation.
For example, Yard-Man relied in part on the premise that
retiree health care benefits are not subjects of mandatory
collective bargaining. Parties, however, can and do volun-
tarily agree to make retiree benefits a subject of mandato-
ry collective bargaining. Indeed, the employer and union
in this case entered such an agreement in 2001. App.
435–436. Yard-Man also relied on the premise that re-
tiree benefits are a form of deferred compensation, but
that characterization is contrary to Congress’ determi-
nation otherwise. In ERISA, Congress specifically defined
plans that “resul[t] in a deferral of income by employ-
ees” as pension plans, §1002(2)(A)(ii), and plans that offer
medical benefits as welfare plans, §1002(1)(A). Thus,
retiree health care benefits are not a form of deferred
compensation.
12 M&G POLYMERS USA, LLC v. TACKETT
Opinion of the Court
Further compounding this error, the Court of Appeals
has refused to apply general durational clauses to provi-
sions governing retiree benefits. Having inferred that
parties would not leave retiree benefits to the contingen-
cies of future negotiations, and that retiree benefits gener-
ally last as long as the recipient remains a retiree, the
court in Yard-Man explicitly concluded that these infer-
ences “outweigh[ed] any contrary implications derived
from a routine duration clause terminating the agreement
generally.” 716 F. 2d, at 1482–1483. The court’s subse-
quent decisions went even further, requiring a contract to
include a specific durational clause for retiree health care
benefits to prevent vesting. E.g., Noe, supra, at 555.
These decisions distort the text of the agreement and
conflict with the principle of contract law that the written
agreement is presumed to encompass the whole agreement
of the parties. See 1 W. Story, Law of Contracts §780 (M.
Bigelow ed., 5th ed. 1874); see also 11 Williston §31:5.
Perhaps tugged by these inferences, the Court of Ap-
peals misapplied other traditional principles of contract
law, including the illusory promises doctrine. That doc-
trine instructs courts to avoid constructions of contracts
that would render promises illusory because such promises
cannot serve as consideration for a contract. See 3
Williston §7:7 (4th ed. 2008). But the Court of Appeals
construed provisions that admittedly benefited some class
of retirees as “illusory” merely because they did not equally
benefit all retirees. See Yard-Man, supra, at 1480–
1481. That interpretation is a contradiction in terms—a
promise that is “partly” illusory is by definition not illusory.
If it benefits some class of retirees, then it may serve
as consideration for the union’s promises. And the court’s
interpretation is particularly inappropriate in the context
of collective-bargaining agreements, which are negotiated
on behalf of a broad category of individuals and conse-
quently will often include provisions inapplicable to some
Cite as: 574 U. S. ____ (2015) 13
Opinion of the Court
category of employees.
The Court of Appeals also failed even to consider the
traditional principle that courts should not construe am-
biguous writings to create lifetime promises. See 3 A.
Corbin, Corbin on Contracts §553, p. 216 (1960) (explain-
ing that contracts that are silent as to their duration will
ordinarily be treated not as “operative in perpetuity” but
as “operative for a reasonable time” (internal quotation
marks omitted)). The court recognized that “traditional
rules of contractual interpretation require a clear manifes-
tation of intent before conferring a benefit or obligation,”
but asserted that “the duration of the benefit once clearly
conferred is [not] subject to this stricture.” Yard-Man,
supra, at 1481, n. 2. In stark contrast to this assertion,
however, the court later applied that very stricture to
noncollectively bargained contracts offering retiree bene-
fits. See Sprague v. General Motors Corp., 133 F. 3d 388,
400 (CA6 1998) (“To vest benefits is to render them forever
unalterable. Because vesting of welfare plan benefits is
not required by law, an employer’s commitment to vest
such benefits is not to be inferred lightly; the intent to vest
must be found in the plan documents and must be stated
in clear and express language” (internal quotation marks
omitted)). The different treatment of these two types of
employment contracts only underscores Yard-Man’s devia-
tion from ordinary principles of contract law.
Similarly, the Court of Appeals failed to consider the
traditional principle that “contractual obligations will
cease, in the ordinary course, upon termination of the
bargaining agreement.” Litton Financial Printing Div.,
Litton Business Systems, Inc. v. NLRB, 501 U. S. 190, 207
(1991). That principle does not preclude the conclusion
that the parties intended to vest lifetime benefits for
retirees. Indeed, we have already recognized that “a
collective-bargaining agreement [may] provid[e] in explicit
terms that certain benefits continue after the agreement’s
14 M&G POLYMERS USA, LLC v. TACKETT
Opinion of the Court
expiration.” Ibid. But 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.
C
There is no doubt that Yard-Man and its progeny af-
fected the outcome here. As in its previous decisions, the
Court of Appeals here cited the “context of . . . labor-
management negotiations” and reasoned that the Union
likely would not have agreed to language ensuring its
members a “full Company contribution” if the company
could change the level of that contribution. Tackett I, 561
F. 3d, at 490 (internal quotation marks omitted). It simi-
larly concluded that the tying of eligibility for health care
benefits to receipt of pension benefits suggested an intent
to vest health care benefits. Ibid. And it framed its anal-
ysis from beginning to end in light of the principles it
announced in Yard-Man and its progeny. See 561 F. 3d,
at 489; see also Tackett II, 733 F. 3d, at 599–600.
We reject the Yard-Man inferences as inconsistent with
ordinary principles of contract law. But because “[t]his
Court is one of final review, not of first view,” Ford Motor
Co. v. United States, 571 U. S. ___, ___ (2013) (per curiam)
(slip op., at 2) (internal quotation marks omitted), the
Court of Appeals should be the first to review the agree-
ments at issue under the correct legal principles. We
vacate the judgment of the Court of Appeals and remand
the case for that court to apply ordinary principles of
contract law in the first instance.
It is so ordered.
Cite as: 574 U. S. ____ (2015) 1
GINSBURG, J., concurring
SUPREME COURT OF THE UNITED STATES
_________________
No. 13–1010
_________________
M&G POLYMERS USA, LLC, ET AL., PETITIONERS v.
HOBERT FREEL TACKETT ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SIXTH CIRCUIT
[January 26, 2015]
JUSTICE GINSBURG, with whom JUSTICE BREYER,
JUSTICE SOTOMAYOR, and JUSTICE KAGAN join,
concurring.
Today’s decision rightly holds that courts must apply
ordinary contract principles, shorn of presumptions, to
determine whether retiree health-care benefits survive the
expiration of a collective-bargaining agreement. Under
the “cardinal principle” of contract interpretation, “the
intention of the parties, to be gathered from the whole
instrument, must prevail.” 11 R. Lord, Williston on Con-
tracts §30:2, p. 27 (4th ed. 2012) (Williston). To determine
what the contracting parties intended, a court must exam-
ine the entire agreement in light of relevant industry-
specific “customs, practices, usages, and terminology.” Id.,
§30:4, at 55–58. When the intent of the parties is unam-
biguously expressed in the contract, that expression con-
trols, and the court’s inquiry should proceed no further.
Id., §30:6, at 98–104. But when the contract is ambigu-
ous, a court may consider extrinsic evidence to determine
the intentions of the parties. Id., §30:7, at 116–124.
Contrary to M&G’s assertion, Brief for Petitioner 25, no
rule requires “clear and express” language in order to
show that parties intended health-care benefits to vest.
“[C]onstraints upon the employer after the expiration date
of a collective-bargaining agreement,” we have observed,
2 M&G POLYMERS USA, LLC v. TACKETT
GINSBURG, J., concurring
may be derived from the agreement’s “explicit terms,” but
they “may arise as well from . . . implied terms of the
expired agreement.” Litton Financial Printing Div., Litton
Business Systems, Inc. v. NLRB, 501 U. S. 190, 203, 207
(1991).
On remand, the Court of Appeals should examine the
entire agreement to determine whether the parties in-
tended retiree health-care benefits to vest. 11 Williston
§30:4, at 55–57. Because the retirees have a vested, life-
time right to a monthly pension, App. 366, a provision
stating that retirees “will receive” health-care benefits if
they are “receiving a monthly pension” is relevant to this
examination. Id., at 415. So is a “survivor benefits” clause
instructing that if a retiree dies, her surviving spouse will
“continue to receive [the retiree’s health-care] benefits . . .
until death or remarriage.” Id., at 417. If, after consider-
ing all relevant contractual language in light of industry
practices, the Court of Appeals concludes that the contract
is ambiguous, it may turn to extrinsic evidence—for ex-
ample, the parties’ bargaining history. The Court of Ap-
peals, however, must conduct the foregoing inspection
without Yard-Man’s “thumb on the scale in favor of vested
retiree benefits.” Ante, at 10; see International Union,
United Auto, Aerospace, & Agricultural Implement Work-
ers of Am. v. Yard-Man, Inc., 716 F. 2d 1476 (1983).
Because I understand the Court’s opinion to be con-
sistent with these basic rules of contract interpretation, I
join it.