Jack Reese v. CNH American, LLC

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 09a0266p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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JACK REESE, FRANCES ELAINE PIDDE, JAMES
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CICHANOFSKY, ROGER MILLER, and GEORGE
NOWLIN, -
Plaintiffs-Appellees/Cross-Appellants, -
Nos. 08-1234/1302/1912
,
>
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v.
CNH AMERICA LLC (f/k/a Case Corporation) -
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and CNH GLOBAL N.V., -
Defendants-Appellants/Cross-Appellees. -
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Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 04-70592—Patrick J. Duggan, District Judge.
Argued: March 3, 2009
Decided and Filed: July 27, 2009
Before: RYAN, GIBBONS, and SUTTON, Circuit Judges.
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COUNSEL
ARGUED: Bobby R. Burchfield, McDERMOTT, WILL & EMERY LLP, Washington,
D.C., for Appellants. Roger J. McClow, KLIMIST, McKNIGHT, SALE, McCLOW &
CANZANO, P.C., Southfield, Michigan, for Appellees. ON BRIEF: Bobby R. Burchfield,
Jason Alan Levine, McDERMOTT, WILL & EMERY LLP, Washington, D.C., Norman C.
Ankers, HONIGMAN MILLER SCHWARTZ AND COHN LLP, Detroit, Michigan, for
Appellants. Roger J. McClow, KLIMIST, McKNIGHT, SALE, McCLOW & CANZANO,
P.C., Southfield, Michigan, for Appellees.
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OPINION
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SUTTON, Circuit Judge. At stake in this appeal is whether a collective bargaining
agreement (CBA) grants retirees lifetime health-care benefits upon retirement. Consistent
1
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with our precedents in this area, we hold that it does so. That conclusion, however, does not
resolve the scope of those benefits. Because the CBA and related documents do not say
anything about subsequent modifications to these benefits and because the application of the
relevant CBA provisions suggests that the parties contemplated reasonable modifications,
we remand the case to the district court to determine what types of changes are permitted.
I.
The Parties. CNH America LLC, formerly known as Case Corporation, makes
construction and agricultural equipment in Racine, Wisconsin. It was once a wholly owned
subsidiary of Tenneco, Yolton v. El Paso Tenn. Pipeline Co., 318 F. Supp. 2d 455, 459 (E.D.
Mich. 2003), but as part of a corporate restructuring, Tenneco sold its interest in the
company in a public offering in June 1994. Id. at 459–60.
The plaintiffs represent a class of retired Case employees and their spouses (who
retired from July 1, 1994 through November 12, 1999) and CNH employees and their
spouses (who retired from November 12, 1999 through November 1, 2004). Each employee
retired after the Tenneco reorganization in July 1994 but before November 1, 2004.
The 1998 CBA. In 1971, Case entered into a CBA with the United Automobile,
Aerospace and Agricultural Workers of America (“UAW”), in which Case agreed to provide
health-care insurance to its retired employees and their spouses who were “receiving
a J I Case Pension [or] a Spouse’s Pension.” JA 144. From 1974 through 1995, each CBA
(in three- or four-year terms) renewed this commitment in “substantially unchanged” form,
JA 91, and each CBA provided that employees did not have to pay premiums in order to
receive coverage.
Case and the UAW entered into the CBA that prompted this lawsuit in 1998, and it
lasted until May 2, 2004. Under the 1998 CBA, Case agreed that:
Employees who retire under the Case Corporation Pension Plan for Hourly
Paid Employees after 7/1/94, or their surviving spouses eligible to receive
a spouse’s pension under the provisions of that Plan, shall be eligible for the
Group benefits as described in the following paragraphs.
JA 1288; see also JA 1213 (noting that “[t]he group insurance plan agreed to between the
parties . . . is hereby made a part of this Agreement”). The next paragraphs listed “Medical”
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and “Prescription Drug” benefits available to all classes of covered retirees regardless of the
duration of their service before retirement. JA 1288–91. The CBA does not spell out what
“Medical” benefits are included; it just says that “[e]ligibility for specific coverage [will be]
based on each plan’s eligibility requirements.” JA 1290. “No contributions,” the CBA adds,
“are required for the Health Care Plans . . . .” JA 1291.
A Letter of Understanding concerning the “[c]ost of [h]ealthcare [c]overage”
supplemented the 1998 CBA. JA 1304. “[O]ver the term of the 1998 labor agreement,” it
said, “employees and retirees who are enrolled in a Company offered HMO, PPO or other
plan will not have to pay any additional employee contributions above those which may be
required for enrollment in the Case Network Plan (if any).” Id. The letter added that Case
was “responsible for the retention of HMOs, PPOs and other health care delivery
mechanisms during the [CBA’s] term,” and that Case could “terminate” a provider giving
inadequate coverage and adopt a “replacement plan [that] will provide comparable benefits
and access to the type of plan it replaces,” provided that the new plan satisfied “the UAW’s
standards regarding access and quality.” Id.
The Wisconsin case. On February 11, 2004, CNH filed a declaratory judgment
action against the UAW in the United States District Court for the Eastern District of
Wisconsin. It sought a declaration that the post-reorganization retirees were not entitled to
lifetime health-care benefits under the 1998 CBA and that it could “modify or terminate” the
retirees’ benefits “at its discretion” at the end of the CBA. JA 1513. The district court
dismissed the action in August 2004 because ERISA does not give a plan fiduciary the right
to seek an order clarifying its plan obligations and because the Labor-Management Relations
Act, 29 U.S.C. § 141 et seq., does not create a cause of action in the absence of a claim that
a CBA has been violated.
The Reese case. On February 18, 2004, a group of former employees, who retired
from the company between 1994 and 2004, as well as spouses of such employees, filed the
present case in the Eastern District of Michigan, seeking a declaration that they were entitled
to lifetime health-care benefits, an injunction requiring CNH to “maintain the level of retiree
health care benefits currently in effect” and damages for injuries the retirees might sustain
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if the benefits were terminated. JA 1533. In February 2005, the district court denied CNH’s
motion to transfer the case to the Eastern District of Wisconsin.
In August 2007, the district court granted the retirees’ motion for summary judgment,
concluding that the 1998 CBA unambiguously granted lifetime health-care benefits to the
retirees. In a separate opinion filed the same day, the district court granted CNH’s motion
to strike the retirees’ demand for a jury trial, concluding that there is no Seventh Amendment
right to a jury trial for ERISA or LMRA claims. The district court also awarded $1.4 million
in attorney’s fees to the retirees. See 29 U.S.C. § 1132(g); Reese v. CNH Global N.V., No.
04-70592, 2008 WL 2546936, at *5 (E.D. Mich. June 20, 2008).
The Yolton case. One more layer of complication exists: There is a parallel lawsuit
involving the same types of claims under different CBAs against two successors in interest
to CNH—CNH America and El Paso Tennessee Pipeline Co. Yolton v. El Paso Tenn.
Pipeline Co., 435 F.3d 571, 574 (6th Cir. 2006). In December 2002, a group of former
employees of Tenneco and Case, all of whom had retired before July 1, 1994, filed a class
action against CNH America and El Paso. Yolton, 318 F. Supp. 2d at 459–60, 464. In
December 2003, the United States District Court for the Eastern District of Michigan issued
a preliminary injunction, reasoning that the retirees were likely to succeed on the merits of
their claim that the 1990 CBA gave them a right to lifetime health-care benefits. Id. at 471,
476. The court thus ordered the employer to continue to provide the benefits during the
litigation. Id. at 460, 471, 473. In 2006, the Sixth Circuit upheld the preliminary injunction,
Yolton, 435 F.3d at 585, and the case is currently pending in front of Judge Duggan, the same
judge who is handling the present dispute.
II.
CNH first challenges the district court’s refusal to transfer the case to the Eastern
District of Wisconsin. “For the convenience of parties and witnesses, in the interest of
justice, a district court may transfer any civil action to any other district or division where
it might have been brought.” 28 U.S.C. § 1404(a). As the permissive language of the
transfer statute suggests, district courts have “broad discretion” to determine when party
“convenience” or “the interest of justice” make a transfer appropriate. Only when the district
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court “clearly abuse[s] its discretion” in balancing these considerations will we reverse.
Phelps v. McClellan, 30 F.3d 658, 663 (6th Cir. 1994).
In resolving the motion, the court considered six factors: “the convenience of the
parties and witnesses,” the accessibility of evidence, “the availability of process” to make
reluctant witnesses testify, “the costs of obtaining willing witnesses,” “the practical problems
of trying the case most expeditiously and inexpensively” and “the interests of justice.” JA
76; see Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 30 (1988); Moses v. Bus. Card
Express, Inc., 929 F.2d 1131, 1136–37 (6th Cir. 1991). And it kept in mind that, “unless the
balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be
disturbed.” Cf. Dowling v. Richardson-Merrell, Inc., 727 F.2d 608, 612 (6th Cir. 1984); JA
76.
The key question is whether the district court properly applied those factors. On one
side of the ledger, several considerations favored a transfer: CNH is headquartered in
Wisconsin, the CBA negotiations took place there, CNH administers the health-care plans
there, most of the class members live in Wisconsin and few class members live in Michigan,
all of which suggests that Wisconsin is the most convenient forum for the parties and
witnesses. On top of that, CNH stores its documents in Wisconsin, which means that a
Wisconsin forum would make it easier to obtain access to the evidence.
On the other side of the ledger: The case was assigned to the same Michigan trial
judge who had handled the Yolton case (and was still handling the case), giving him a leg
up on the legal and factual issues presented, and suggesting that the objectives of trying the
case expeditiously and inexpensively would benefit from a Michigan forum. There also is
much to be said from an interests-of-justice perspective for applying the same law to both
cases rather than Sixth Circuit law to one case and Seventh Circuit law to the other.
The answer to this question, as an original matter, is not self-evident. The locus of
the dispute, the key parties and the location of most of the evidence favor Wisconsin. But
at the same time, it makes sense to resolve the health benefits of both sets of retirees—both
of whom worked in the same plant for the same effective employer—under the same circuit
law and in front of the same district court judge. In the end, the issue turns on the standard
of review. Compelling considerations favor both parties’ positions, making it difficult to say
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that the district court would have abused its discretion had he picked either location as the
more appropriate forum. The court, in short, had authority to keep the case.
III.
Turning to the merits, we face two questions: Did Case in the 1998 CBA agree to
provide health-care benefits to retirees and their spouses for life? And, if so, does the scope
of this promise permit CNH to alter these benefits in the future?
A.
In answering these questions, we have several ground rules. First, we give fresh
review to the district court’s summary judgment ruling—that the “plain language” of the
contract conveyed an “intent to grant lifetime retiree health insurance coverage to retirees,”
JA 109—and we draw all factual inferences in favor of the party opposing summary
judgment: CNH. See Cline v. BWXT Y-12, LLC, 521 F.3d 507, 509 (6th Cir. 2008).
Second, we assess promises to pay retirement benefits differently depending on the
type of obligation involved. ERISA makes a promise to pay a covered “pension” binding
at retirement, 29 U.S.C. § 1053(a), but it exempts “employee welfare benefit plans” from this
requirement, see id. § 1051(1). Thus, while ERISA heavily regulates promises to provide
pension benefits, health benefits are purely a matter of contract—permitting a company to
guarantee health benefits for life or to make them changeable, or even terminable, at the will
of the company. See Noe v. PolyOne Corp., 520 F.3d 548, 552 (6th Cir. 2008); Sprague v.
Gen. Motors Corp., 133 F.3d 388, 400 (6th Cir. 1998).
Third, we assess health-care-benefit promises differently depending on whether the
contract stemmed from a CBA or not. When the health plan was not collectively bargained,
we require a clear statement before we will infer that an employer meant to promise health
benefits for life. “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.”
Sprague, 133 F.3d at 400 (internal quotation marks omitted).
When the health plan stems from a CBA, by contrast, we apply “ordinary principles
of contract interpretation” to determine whether benefits have vested, see Yolton, 435 F.3d
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at 580, and to the extent we put a thumb on the scales in this setting, it favors vesting.
Although we do not apply a “legal presumption that benefits vest” and although we require
plaintiffs to bear the burden of proving that vesting has occurred, we apply an “inference”
that “it is unlikely that [welfare benefits] would be ‘left to the contingencies of future
negotiations,’” so long as we can find either “explicit contractual language or extrinsic
evidence indicating” an intent to vest benefits. Yolton, 435 F.3d at 580 (quoting UAW v.
Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir. 1983)). The precise weight of the Yard-Man
“inference,” we appreciate, is elusive. “[S]tanding alone,” on the one hand, this factor is
“insufficient to find an intent to create interminable benefits.” Yard-Man, 716 F.2d at 1482;
see Yolton, 435 F.3d at 579–80; Maurer v. Joy Techs., Inc., 212 F.3d 907, 917 (6th Cir.
2000). But, on the other, it must mean something or else there would be no point in having
it. In the end, it may come to nothing more than this: a nudge in favor of vesting in close
cases. See Yolton, 435 F.3d at 579–80.
In applying these principles here, we face one question that is relatively
straightforward under our case law (did the benefits “vest”?) and one that is not (what does
vesting mean in this context?).
B.
Did the employees’ right to lifetime health-care benefits vest upon retirement? Past
is prologue in answering this question, because one of our cases—Yolton—arose from a
nearly identical CBA. The Yolton CBA said that “[e]mployees who retire under the Case
Corporation Pension Plan for Hourly Paid Employees, or their surviving spouses eligible to
receive a spouse’s pension under the provisions of that Plan, shall be eligible” to receive
health-care benefits, JA 813, and added that “the Company shall pay the full premium cost
of the above coverages,” JA 815. The 1998 CBA in today’s case provided that
“[e]mployees who retire under the Case Corporation Pension Plan for Hourly Paid
Employees after 7/1/94, or their surviving spouses eligible to receive a spouse’s pension
under the provisions of that Plan, shall be eligible for” health-care benefits, JA 1288, and
added that “[n]o contributions are required for the Health Care Plans,” JA 1291.
Promise for promise, the two sets of commitments are effectively identical. That is
not surprising: The Yolton CBA involved retirees who worked at the same plant as today’s
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retirees and concerned an employer that was different in name—Case’s former parent
company, Tenneco—but in few other meaningful ways. We start, then, by considering how
Yolton dealt with a similar plan.
At issue in Yolton was whether this court should affirm a preliminary injunction
preventing the employer from terminating or significantly modifying health-care benefits for
previously retired employees. The employees all took retirement before 1994 and were
covered by the 1990 CBA with Tenneco. When El Paso (Tenneco’s new parent company)
threatened to terminate or significantly modify the health benefits of the retirees, they sought
a preliminary injunction to prevent the change.
In gauging the parties’ prospects on the merits, the court construed the language of
the CBA as likely creating a right to lifetime health-care benefits upon retirement. See
Yolton, 435 F.3d at 583. It first relied on the fact that the company’s benefits plans tied
eligibility for pension benefits to eligibility for health-care benefits. Noting that this “tying”
consideration had played a “key” role in a vesting-of-health-benefits determination in an
earlier case, the court reasoned that it “demonstrate[s] an intent to provide lifetime benefits.”
435 F.3d at 580, 584–85; see Golden v. Kelsey-Hayes Co., 73 F.3d 648, 656–57 (6th Cir.
1996) (affirming a preliminary injunction based in part on a district court’s conclusion that
“[CBA] provisions . . . which tie retiree and surviving spouse eligibility for health insurance
coverage to eligibility for vested pension benefits” demonstrate an intent to vest health
benefits); see also Noe, 520 F.3d at 558–59; McCoy v. Meridian Auto. Sys., Inc., 390 F.3d
417, 422 (6th Cir. 2004).
Other aspects of the 1990 CBA, Yolton determined, also suggested an intent to create
lifetime benefits. For example, some benefits were subject to express durational limitations
while retiree health benefits were not, prompting the court to conclude that “the inclusion
of specific durational limitations in other provisions . . . suggests that retiree benefits, not so
specifically limited, were intended to survive.” Yolton, 435 F.3d at 582 (quoting Yard-Man,
716 F.2d at 1481–82). And the Yolton court also pointed to language in the summary plan
descriptions saying that “continued coverages will be the same as those that were in effect
on the day preceding your retirement.” Id. at 583.
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Yolton supports the district court’s conclusion that the 1998 agreement granted
retirees a right to lifetime health benefits. Like Yolton: this case involves a CBA; it involves
a health-care benefits plan with identical language concerning entitlement to benefits upon
retirement; it ties eligibility for health benefits to eligibility for a pension; it does not contain
a specific durational clause while other benefits provisions in the CBA contain such clauses,
see JA 1285-86; and above all it concerns employees who worked in virtually identical
circumstances (apparently making the same products in the same plant) to the Yolton
employees before each group retired.
Yes, Yolton was a preliminary injunction decision, and, yes, that means only the
retirees’ likelihood of success on the merits was at issue, not their actual success on the
merits as in the case of a decision granting summary judgment in their favor. But in view
of the common language between the plans and the centrality of the tying rationale in
Yolton’s merits determination and in cases before and since, it seems appropriate to treat
these two groups of like-situated employees in like ways.
In arguing that the two cases should be treated differently, CNH relies on a 2000
Summary Plan Description (SPD) of the health plan, which warned that “[a]n amendment
or termination of the . . . benefit plans may affect . . . the coverage[]” of retirees. JA 1438
(emphasis added). A 1999 SPD was to the same effect. As CNH sees it, even if the 1998
CBA created a right to lifetime benefits, the retirees are estopped from seeking any such
relief by their acceptance of the 1999 and 2000 SPDs, which described the benefits as
terminable at CNH’s will. There is some case law in support of this notion. If an employer
includes “unqualified reservation-of-rights language” in an SPD to the effect that the
employer has a “unilateral right . . . to terminate coverage,” and if a union fails to grieve or
object to such language, then such reservation-of-rights language “prevent[s] retiree benefits
from vesting” even if the SPD was distributed after the effective date of the CBA. Prater
v. Ohio Educ. Ass’n, 505 F.3d 437, 444 (6th Cir. 2007); see Maurer, 212 F.3d at 919. But
there is an exception. No divesting occurs when the SPD contains language reminding
readers that “the contracts represent the full commitments between the parties” because a
union cannot fairly be expected to protest when the SPD makes it clear that the CBA, not the
SPD, controls a conflict. See Prater, 505 F.3d at 444–45.
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The exception applies. The 2000 SPD reminded readers that, “[i]f there is any
variance between the contents of this handbook and the official plan documents and labor
agreements, those documents or agreements will govern.” JA 1438. And the 1999 SPD
contains a similar warning: “Our responsibilities to you,” warned the company, “as well as
the conditions of your coverage with us, are defined in the documents that make up your
contract.” JA 1383. This qualifying language precludes CNH from maintaining that it had
the unilateral right to terminate benefits.
CNH next focuses on an historical feature of this case that, as best as we and the
parties can tell, has no parallel in Yolton. The 1998 CBA purported to cover future retirees
as well as retirees who had previously left the company during the 1990 and 1995 CBAs, and
it made material alterations to the health benefits of these prior retirees. Why should we treat
the 1998 CBA as creating vested rights, CNH points out, if the company had the right to alter
the health benefits of employees who had retired under the similarly worded 1990 and 1995
CBAs and if indeed the 1998 made material alterations to their benefits? This is a good
question. But it does not go to vesting—at least as our cases, including Yolton, have used
the term. It instead goes to a related, more difficult question—what does vesting mean in
this setting?—a question to which we now turn.
C.
What does vesting mean in this context? Much of our case law in this area draws
heavily on an analogy between pension and health-care benefits. It is a useful analogy in one
sense because both settings deal with retirement benefits, both benefits often are for life and
retirees legitimately depend heavily on both benefits in view of the reality that many
employees, upon retirement, will not be able to supplement their retirement income in
meaningful ways and will not be able to obtain other employer-related health benefits.
But it is not a perfect analogy. The value of a pension benefit, whether defined or
undefined, is clear cut—a matter of concrete dollars and cents, fairly measurable as a matter
of principal or income stream before retirement, at retirement or after retirement. Vested
health-care benefits are another matter. Employers do not send their active or retired
employees a monthly account itemizing the value of their health-care benefits. And with
good reason: What would it say? What could it say?
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The language of health-care provisions, as the 1998 CBA illustrates, generally does
not contain the kind of precision that characterizes a pension plan. “Employees,” it says,
“who retire under the Case Corporation Pension Plan for Hourly Paid Employees after
7/1/94, or their surviving spouses eligible to receive a spouse’s pension under the provisions
of that Plan, shall be eligible for” health-care benefits. JA 1288. It is one thing to say that
this kind of language, when tied to eligibility for a pension plan, prevents an employer from
terminating the benefits—which we have held here. It is quite another to say that an
employer may not alter the benefits in any way, particularly when the parties have a history
of doing just that and when common experience suggests that health-care plans invariably
change over time, if not from year to year. See Diehl v. Twin Disc, Inc., 102 F.3d 301, 309
(7th Cir. 1996) (distinguishing a promise to provide “lifetime insurance benefits” from
“decid[ing] precisely what those benefits are”).
Which takes us to the nub of this case: Whatever these words mean, the parties’
actions and a common understanding of welfare benefits confirm that the company’s health-
care benefits are not akin to black-and-white pension benefits that cannot be diminished by
one cent once they have vested. As CNH points out, no party to this case—the union, the
employer, the retirees—viewed the benefits in this way. The 1998 CBA not only set the
rules for employees who retired during the next six years of that CBA; it also reset the rules
for employees who retired after July 1, 1994, which is inconsistent with the notion that the
1990 and 1995 CBAs (using the same language as the 1998 CBA, compare JA 813, 1040
with JA 1288) created unalterable, irreducible health benefits. The 1994–1998 retirees were
not asked to consent to this change, and they did not consent to it. And as Yard-Man makes
clear and as later cases confirm, a union does not represent retired employees when it
bargains a new contract for its employees. UAW v. Gen. Motors Corp., 497 F.3d 615,
626–27 (6th Cir. 2007); see Yard-Man, 716 F.2d at 1482. Notably, Yolton did not deal with
any of these issues when it determined that the retirees had a likelihood of success on their
claimed entitlement to lifetime health benefits. See 435 F.3d at 578–85.
No doubt, the resetting of health-care benefits for previously retired employees might
not concern anyone if each change upgraded the existing package of benefits. That sort of
change would not break any promises to provide irreducible benefits for life. But that is not
what happened here. The 1998 CBA, among other changes, created a Managed Health Care
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Network Plan for past and future retirees. In other words, it imposed managed care on all
of them, which represented a reduction in the effective choices of coverage available for all
retirees and the coverage actually provided to many, if not most, of them. Managed care
plans were not popular when they were introduced because they often restricted the
availability of “discretionary or elective” services. See Robert F. Rich & Christopher T. Erb,
The Two Faces of Managed Care Regulation & Policymaking, 16 Stan. L. & Pol’y Rev. 233,
234–35, 237–39 (2005). Such plans usually control costs by covering only a limited network
of providers, id. at 262, a type of limitation against which covered insureds often rebel, see
id. at 267–68 (describing the broad adoption of state legislative reforms designed to curb
restrictions on provider access), and against which the UAW had rebelled when negotiating
earlier CBAs, see, e.g., JA 2197.
Preferred provider organization (PPO) plans—such as the ones made applicable to
retirees under the 1998 CBA, see JA 1167—allow insureds to use out-of-network providers,
but they provide lowered coverage for such care. See Amy B. Monahan, The Promise and
Peril of Ownership Society Health Care Policy, 80 Tul. L. Rev. 777, 789–90 (2006). Pre-
1998 retirees thus saw their coverage downgraded in at least one respect: Unlike the prior
plan, under which they could choose any doctor without suffering a financial penalty, see
Anne Maltz, Health Insurance Fundamentals, 774 PLI Litig. 213, 235 (2008), they generally
had to pay more for choosing an out-of-plan doctor. It may be possible, to be sure, that this
reduction in the end benefitted some retirees in view of other improvements to the plan. See
JA 1167 (describing “improvements sought by the Union” that were included in the new
plans, including “full coverage (after modest co-pays)” for listed services such as “MRI and
CAT scans” and “[h]ospice care in approved facility”). But no evidence shows that the
change favored all retirees.
Other clues support this interpretation. Consistent with the parties’ practices, nothing
in the text of the 1998 CBA said that health-care coverage would be fixed and irreducible
into perpetuity for all employees who retired under it. At best, under our cases, it established
a right to lifetime health-care benefits, but not benefits that could not change from CBA to
CBA. A letter of understanding, signed by the contracting parties, points in the same
direction. Addressing the “Cost of Healthcare Coverage,” it said that, “over the term of the
1998 labor agreement,” retirees “who enrolled in a Company offered HMO, PPO or other
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plan” would not be required to pay “any additional employee contributions above those
which may be required for enrollment in the Case Network Plan.” JA 1304 (emphasis
added). Why ensure that no “additional” contributions would be required if the retirees’
benefits were locked in by the 1998 CBA or an earlier CBA? And why limit the promise to
“the term of the 1998 labor agreement” if the parties intended to create “fully paid lifetime
retiree health care benefits” that could never be “reduce[d]”? JA 33.
The letter of understanding also shows that the parties, quite understandably,
contemplated replacing some managed care providers with others at some point in the future.
Given the realities of managed care, in which a new plan may fail to cover providers or
services that an old plan had covered, the retirees had no basis for assuming that each
replacement plan would at best improve, or at worst precisely maintain, the level of care
provided to each individual retiree. A plan that permits the substitution of managed care
providers is one that envisions making tradeoffs in the future that may negatively impact
some retirees, if not all retirees, and one that is inconsistent with unalterable and irreducible
health benefits—particularly those analogized to vested pension benefits. That is why the
CBA—unless it says otherwise—should be construed to permit modifications to benefits
plans that are “reasonably commensurate” with the benefits provided in the 1998 CBA,
“reasonable in light of changes in health care” and roughly consistent with the kinds of
benefits provided to current employees. Zielinski v. Pabst Brewing Co., 463 F.3d 615, 619,
620 (7th Cir. 2006); see also Diehl, 102 F.3d at 310 (examining a CBA creating vested
benefits and concluding that “we see nothing to indicate that the Shutdown Agreement
established a right to a particular insurance carrier, or even to a particular plan”).
Nor do the statements of company representatives to retirees show that these benefits
were unalterable as a matter of law. One retiree, indeed, was told that his health benefits
may be “change[d] in a future UAW contract.” JA 1450. And the statements made to other
retirees do not support an unbending construction of the CBA—and certainly do not do so
as a matter of law. A 1992 retiree was told that his “insurance benefits [would] remain in
effect as long as [he was] living,” JA 891, and a retiree’s wife reports that, in 1997, a Case
representative told her that if her husband were to die she “would continue to get . . . health
insurance for the rest of [her] life” and that the coverage “wouldn’t cost [her] anything,” JA
1463. But all of this is consistent with lifetime benefits subject to reasonable changes. That
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the benefits “wouldn’t cost anything” was true through the end of the CBA, and the
representation at any rate was made during the term of the 1995 CBA. We know that the
contracting parties viewed the 1995 CBA’s benefits as subject to some changes because they
changed them. The retirees point us to no other extrinsic evidence that is contemporaneous
with the 1998 CBA and that clearly establishes a promise of lifetime benefits that can never
vary.
This conclusion makes sense not only in the narrow circumstances of this case but
also within the broader context of ERISA, which contemplated just this sort of flexibility.
Congress chose not to impose a one-size-fits-all concept of welfare-benefit vesting, unlike
the specific rules applicable to pension benefits:
With regard to an employer’s right to change medical plans, Congress
evidenced its recognition of the need for flexibility in rejecting the automatic
vesting of welfare plans. Automatic vesting was rejected because the costs
of such plans are subject to fluctuating and unpredictable variables.
Actuarial decisions concerning fixed annuities are based on fairly stable
data, and vesting is appropriate. In contrast, medical insurance must take
account of inflation, changes in medical practice and technology, and
increases in the costs of treatment independent of inflation. These unstable
variables prevent accurate predictions of future needs and costs.
Moore v. Metro. Life Ins. Co., 856 F.2d 488, 492 (2d Cir. 1998). For these reasons,
Congress concluded that “[t]o require the vesting of these ancillary benefits would seriously
complicate the administration and increase the cost of plans whose primary function is to
provide retirement income.” H.R. Rep. No. 93-807 (1974), reprinted in 1974 U.S.C.C.A.N.
4639, 4670, 4726; S. Rep. No. 93-383 (1973), reprinted in 1974 U.S.C.C.A.N. 4639, 4890,
4935. The matter, then, was left to employers, employees and unions to handle by contract.
All of this requires us to modify the district court’s judgment. “Plaintiffs are entitled
to vested lifetime retiree health care benefits,” it concluded, “as provided for in the labor
agreements in effect at the time of their or their deceased spouses’ retirement.” JA 111. To
the extent this ruling indicates that the retirees have a vested right to receive health care
benefits for life, it is consistent with Yolton and our other cases. But to the extent it suggests
that these benefits must be maintained precisely at the level provided for in the 1998 CBA,
it is not supported by the 1998 CBA, extrinsic evidence provided by the parties or common
sense. CNH, in short, cannot terminate all health-care benefits for retirees, but it may
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reasonably alter them. With this guidance, we leave it to the district court to decide how and
in what circumstances CNH may alter such benefits—and to decide whether it is a matter
amenable to judgment as a matter of law or not.
IV.
The retirees cross-appeal the district court’s determination that they do not have the
constitutional right to a jury trial on their claims for declaratory and injunctive relief. As
they acknowledge, we have held that the Seventh Amendment does not guarantee a jury trial
in ERISA and LMRA cases because the relief is equitable rather than legal, and we did so
in the context of nearly identical claims to the ones filed here. See Bittinger v. Tecumseh
Prods. Co., 123 F.3d 877, 882–83 (6th Cir. 1997); Golden, 73 F.3d at 660–63.
Great-West Life & Annuity Co. v. Knudson, 534 U.S. 204 (2002), the retirees
respond, represents intervening authority that allows us to reconsider these decisions. But
Knudson, first and foremost, is not a Seventh Amendment case. It dealt with whether an
action “seek[ing] . . . to impose personal liability . . . for a contractual obligation to pay
money-relief” falls within § 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), which authorizes
suits for “appropriate equitable relief.” See Knudson, 534 U.S. at 209–10. The Court’s
conclusion—that such claims were not covered by § 502(a)(3) because they were legal in
nature, not equitable, see id. at 210, 220–21—does not undermine our prior decisions.
Golden, for example, acknowledged that “a monetary award, generally, is a form of legal
relief,” 73 F.3d at 661, before concluding that in health-care benefits cases like this one, any
backward-looking relief is at best “incidental” in comparison to the primary goal of ensuring
injunctive access to health-care benefits in the future, id. Knudson, by contrast, did not
involve forward-looking relief but only “reimbursement . . . for past medical treatment,” 534
U.S. at 208–09, leaving the Court no opportunity to say, much less hold, anything that would
lead us to second guess Golden. What is more, the retirees offer no tenable response to
CNH’s argument that, because CNH continued to fund their benefits pending this lawsuit,
they have no right to seek any damages based on its past conduct, further undermining the
analogy to Knudson. Golden and Bittinger remain the law of this circuit and require us to
reject the retirees’ jury-trial argument.
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V.
CNH challenges the district court’s award of $1,426,948.75 in attorney’s fees and
$55,430.09 in costs to the retirees, Reese, 2008 WL 2546936, at *5, a matter that receives
abuse-of-discretion review, Gaeth v. Hartford Life Ins. Co., 538 F.3d 524, 528 (6th Cir.
2008). In CNH’s view, the retirees may not reap the benefits of ERISA’s fee-shifting
provision, 29 U.S.C. § 1132(g)(1), because they “litigated (and won) this case purely on
LMRA grounds,” Appellant Fee Br. at 11. But, as the district court noted, the retirees have
pursued their rights under the LMRA and ERISA. Reese, 2008 WL 2546936, at *2. And
that is appropriate because, “[i]f the parties intended to vest benefits” and there is a breach
of the agreement, “there is an ERISA violation as well as an LMRA violation.” Maurer, 212
F.3d at 914.
CNH insists that, if the retirees had filed this action solely under ERISA, the Sprague
standard would have applied, and the retirees would have lost because they would not have
been able to point to “clear and express language” in the 1998 CBA granting lifetime
benefits. Sprague, 133 F.3d at 400. This argument begins from a false premise, however.
The Yard-Man test applies to claims for benefits that arise out of a CBA, and Sprague is
limited to cases in which an employer “unilaterally instituted a retiree benefit program.”
Maurer, 212 F.3d at 917. We have never suggested that we would apply Sprague if a
plaintiff had proceeded only under an ERISA theory in claiming benefits under a CBA; nor
have we ever upheld an LMRA claim while denying a parallel ERISA claim. In light of our
longstanding practice of treating LMRA and ERISA claims involving CBAs in an identical
manner, CNH’s argument—supported only by precedents that do not involve a CBA, see,
e.g., Sengpiel v. B.F. Goodrich Co., 156 F.3d 660, 668 (6th Cir. 1998)—does not show that
Sprague would apply had the retirees filed a stand-alone LMRA claim.
One point, however, does deserve attention on remand. The district court’s award
of fees relied in part on its conclusion that the retirees “prevailed on the dispositive issue in
this case,” see Reese, 2008 WL 2546939, at *3, which meant that one of the factors in the
fee-shifting analysis, “the relative merits of the parties’ positions,” see Gaeth, 538 F.3d at
534, favored their fee claim. That is no longer so. While the plaintiffs have succeeded in
showing that they are entitled to lifetime benefits, they have not shown that they are entitled
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to unchangeable benefits. See JA 33 (suggesting that the retirees viewed any
“modif[ication]” of their benefits as a breach of the CBA). At least part of the rationale for
the fee award, then, may no longer be sound. Because the decision to award fees is placed
in the sound discretion of the district court, not our court, see 29 U.S.C. § 1132(g); Moon v.
Unum Provident Corp., 461 F.3d 639, 642 (6th Cir. 2006), and because it remains to be seen
how the court will handle the merits issues on remand, we vacate the fee award and will
allow the district court to decide in the first instance what award is appropriate in the context
of its final decision.
VI.
For these reasons, we affirm in part and reverse in part and remand for further
proceedings.