Retirees of automotive manufacturer established entitlement to lifetime health benefits

A collective bargaining agreement and plant closing agreement provided retirees of an automotive parts manufacturer and their spouses with healthcare insurance benefits that survived the expiration of a collective bargaining agreement, ruled a divided Sixth Circuit. Here, the appeals court found that during the long bargaining history between the employer and union, the parties came to rely on prior judicial decisions interpreting language included in decades of CBAs. Thus, a wealth of evidence supported finding that they shared an understanding that their 1998 CBA provided lifetime health care to its retirees. Judge Gilman filed a separate dissenting opinion.
The plaintiffs were Medicare-eligible retirees, all of whom retired from the plant prior to its closing in 2001. The UAW negotiated and signed a CBA with the employer in 1998. This was the last CBA signed between the employer and union on behalf of these retirees. The CBA incorporated two separate documents related to health-insurance benefits: Supplement H and Supplement H-1. The CBA and its supplements provided for comprehensive health care for retirees and their surviving spouses.

Plant closing agreement.

When the plant closed in 2001, the UAW negotiated a Plant Closing Agreement (PCA) that addressed benefits provided to retirees at the time of the plant’s closing, the impact of the PCA on previous CBAs, and a method for resolving any disputes that arose from the PCA. The PCA included a provision whereby the UAW and its members waived all claims against the employer. It also included an exception to the UAW waiver, which stated that the closing agreement did not extinguish pension or retiree healthcare obligations owed by the employer.
Change to HRAs. The employer continued to provide healthcare coverage for its retirees and their surviving spouses for 10 years following the PCA, consistent with the terms for coverage contained in the 1998 CBA. However, the employer explained in a September 14, 2011 letter that, effective January 1, 2012, it was replacing retirees’ current group-insurance plan with an “HRA” model. Under this model, the employer created company-funded health reimbursement accounts from which retirees could purchase individual plans for Medicare supplemental insurance.
Following the notice of changes, the retirees brought a class action alleging breach of a collective bargaining agreement under Section 301 of the LMRA and ERISA.

Motion to compel arbitration.

The employer moved to compel arbitration under the PCA, which the district court initially granted. However, on reconsideration it reversed that decision, finding that a subset of plaintiffs-those who had retired before the 2001 plant closing-could not be bound by the PCA because their rights had already vested under the 1998 CBA and that their healthcare-related disputes were thus exempt from the CBA’s arbitration clause. That decision was affirmed by the Sixth Circuit, which held that employees who retired prior to the 2001 PCA did not consent to the PCA’s terms and could not be compelled to arbitrate pursuant to it.
However, the matter was stayed pending the Supreme Court’s decision in M & G Polymers USA, LLC v. Tackett. Following the ruling in Tackett, the district court granted the retirees partial summary judgment, as well as a permanent injunction ordering the employer to reinstate the retirees’ group insurance plan. The employer timely appealed.


The primary inquiry here was “whether the retirement health care benefits vested for life” and whether they are “fully funded” by the employer. The Tackett Court held that “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.” The ultimate question, in any case interpreting the language of retiree health benefits contained in CBAs, is what the parties intended.
Turning to the 1998 CBA, the Sixth Circuit noted that the agreement contained specific provisions for healthcare benefits. The CBA also contained a general-duration provision that the agreement continued through February 1, 2002, but, absent timely written notice, continued thereafter year to year. This provision set out notice procedures for any modification or termination of the CBA beyond that date. The 1998 CBA also addressed how the Supplement H and H-1 healthcare benefits were to be modified.
Because the contract here barred unilateral modification, the applicability of the general durational clause to the duration of healthcare benefits raised some ambiguities, concluded the appeals court. Additionally, there were latent ambiguities throughout the 1998 CBA itself, as the parties incorporated exact language relating to healthcare benefits that they had used from prior agreements. In light of those ambiguities, the appeals court looked to extrinsic evidence to understand the meaning of terms within the CBA.

Bargaining history.

The parties had a long bargaining history, and in negotiating the 1998 CBA they relied on prior judicial decisions interpreting language included in decades of CBAs between them. In Golden v. Kelsey-Hayes, the district court granted retirees summary judgment, finding that the then-active CBA’s healthcare provisions “evince[d] an intention for lifetime health care benefits.” Here, the parties agreed to the language in the 1998 CBA as understood in Golden. Thus, the appeals court concluded that the wealth of evidence supported finding that the employer and union shared an understanding that the 1998 CBA provided lifetime healthcare to its retirees.
Accordingly, the appeals court affirmed the district court’s award of partial summary judgment. However, because the retirees did not allege any close historical relationship between TRW and Northrop Grumman, the appeals court modified the permanent injunction to exclude Northrop Grumman.


In a dissenting opinion, Judge Gilman argued that health care language in the 1998 CBA, when read in conjunction with the agreement’s general durational clause and the Supplement H durational clause, precluded any reference to the extrinsic evidence. According to the dissent, the decision in Gallo v. Moen Inc., determined that materially indistinguishable language was unambiguous, so that the court had no authority to weigh in on the issue of whether the retirees were entitled to lifetime healthcare benefits.
SOURCE: International Union, United Automobile, Aerospace and Agricultural Implement Workers of America v. Kelsey-Hayes Co., (CA-6), No. 15-2285, April 20, 2017.
Visit our News Library to read more news stories.