retiree health benefits claims after m&g polymers usa v....
TRANSCRIPT
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Presenting a live 90-minute webinar with interactive Q&A
Retiree Health Benefits Claims
After M&G Polymers USA v. Tackett Navigating Differing Court Applications of Tackett, Minimizing
Liability for Modification or Termination of Retiree Benefits
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
TUESDAY, APRIL 5, 2016
Russell L. Hirschhorn, Partner, Proskauer Rose, New York
Brian D. Netter, Partner, Mayer Brown, Washington, D.C.
Nancy G. Ross, Partner, Mayer Brown, Chicago
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Retiree Health Benefits Claims After
M&G Polymers USA v. Tackett
Russell L. Hirschhorn
Proskauer Rose LLP
Eleven Times Square
New York, NY 10036
P: 212.969.3286
Nancy G. Ross
Mayer Brown LLP
71 S. Wacker Drive
Chicago, IL 60606
P: 312.701.8788
Brian D. Netter
Mayer Brown LLP
1999 K Street, N.W.
Washington, D.C. 20006
P: 202.263.3339
6
Russell L Hirschhorn Partner, Proskauer Rose LLP
Russell Hirschhorn is a partner in the ERISA Practice Center and the Labor & Employment Law Department, where
he focuses on complex ERISA litigation and advises and represents employers, fiduciaries, trustees and plan
service providers on ERISA benefit and fiduciary issues.
For more than a dozen years, Russell has represented clients in all phases of litigation, arbitration and mediation.
His representations run the gamut from complex class action litigation to single plaintiff claims relating to:
• ERISA “stock-drop” suits
• ERISA’s fiduciary duty and prohibited
transaction provisions
• Participant and beneficiary claims for benefits
• Interference with the receipt of benefits
and discrimination in benefits
• Plan investment losses
When he is not in the courtroom, Russell is active in counseling benefit plan clients on a host of compliance and
federal and state government agency enforcement matters, including complex and lengthy investigations and
audits by the U.S. Departments of Justice and Labor.
Russell serves as legal counsel to the boards of trustees of several multiemployer pension and welfare benefit
plans. He also represents a wide variety of clients across various industries, including aerospace, biotechnology,
financial services, oil and gas, automotive, and publishing.
Russell is a prolific writer on cutting-edge ERISA litigation issues, and often speaks on topics related to his
publications at conferences sponsored by the American Bar Association, International Foundation of Employee
Benefit Plans, the New York State and City Bar Associations, and others. He is the co-editor of Proskauer’s ERISA
Practice Center Blog and ERISA Litigation Newsletter, as well as a Chapter Editor of the Cumulative Supplements
to Employee Benefits Law (BNA Second Edition 2000).
Russell has been recognized on several occasions for his commitment to pro bono work, and has been the
recipient of several honors.
In addition, Russell has served as a Special Professor of Law at Hofstra University School of Law where he taught
an introductory class to employee benefits law.
Russell L Hirschhorn
Partner
t: 212.969.3286
• ERISA preemption of state law claims
• Cash balance plan conversions
• Plan amendments or terminations
• Retiree benefits
• Withdrawal liability
• Employer contributions to multiemployer funds
7
Nancy Ross Partner, Mayer Brown LLP
NANCY G. ROSS is a Partner in the Chicago office of Mayer Brown
LLP where she is a member of the Employment Law and ERISA
Litigation practice group. She focuses her practice primarily on
employee benefits class action litigation and counseling under ERISA.
Her experience includes representation of pension plans, fiduciaries,
ESOPs, trustees and employers concerning administration of plan
assets and fiduciary responsibilities. She has extensive experience in
counseling employers in matters concerning defined benefit and
defined contribution plan administration, as well as assisting employers
in reducing their retiree health benefits liabilities. Nancy is a member of
the Policy Board of Directors Advisory Council for the American
Benefits Council, where she assists in promoting employers’ issues
regarding employee benefits, and is a Board Member of the Chicago
Bar Foundation and Vice-Chair of the Grants Committee. She has
been recognized by numerous organizations including Chambers,
Legal 500 and Illinois Super Lawyers as one of the nation’s top ERISA
lawyers, and was named ERISA Litigator of the Year among Chicago
attorneys in 2014 by U.S. News & World Report.
Nancy G. Ross
Partner
t: 312.701.8788
8
Brian Netter Partner, Mayer Brown LLP
Brian Netter is a partner in the Washington DC office of Mayer Brown’s Litigation
& Dispute Resolution practice, and a co-leader of the firm’s Supreme Court &
Appellate group.
Brian’s innovative work has been recognized in The National Law Journal’s
“Appellate Hot List” on four separate occasions, and he has been recognized by
The National Law Journal and by Washington DC Super Lawyers as an emerging
star in appellate litigation.
Brian’s practice consists of briefing and arguing high profile and legally complex
cases, in trial and appellate courts. His experience covers a broad range of
substantive areas, and he frequently litigates cases involving administrative law,
constitutional law, and ERISA. Earlier in his career, Brian served as a law clerk to
Associate Justice Stephen Breyer on the US Supreme Court and to Judge Judith
W. Rogers on the US Court of Appeals for the DC Circuit.
On ERISA questions, Brian litigates class-action disputes and advises clients on
issues prompting such litigation, particularly as relates to ERISA's fiduciary
standards. He is a frequent commentator on the Supreme Court’s ERISA docket.
Prior to his career as a lawyer, Brian earned undergraduate and graduate degrees
in Industrial & Operations Engineering.
Brian D. Netter
Partner
t: 202.263.3339
Today’s Agenda
• Yard-Man
• Supreme Court’s decision in M&G Polymers v. Tackett
• Tackett on remand in the Sixth Circuit
• Post-Tackett Decisions
• Managing Changes to Retiree Health Benefits
9
Yard-Man
• Unique among the circuits, for thirty years the Sixth Circuit
had applied what is called the Yard-Man presumption to
collectively bargained retiree health benefits.
• Yard-Man presumed that retiree health benefits were vested
absent clear contractual language to the contrary.
• Sixth Circuit has been the forum of choice for plaintiffs.
• Led to battles over venue and attempts by employers to file
declaratory actions in other forums.
10
11
M&G Polymers v. Tackett
Background
• M&G and USW bargained to modify H&W plans, with post-
agreement participants to contribute to costs of coverage.
• M&G applied the cost-sharing agreement to existing retirees.
• Retirees and USW brought suit, asserting that earlier,
expired CBAs entitled existing retirees at the Apple Grove
plant to lifetime, contribution-free benefits.
• Expired CBAs did not contain provisions that specifically
addressed the duration of the provisions governing retiree
benefits.
12
M&G Polymers v. Tackett
District Court & Sixth Circuit
• District court initially dismissed the claims, finding that the
CBA unambiguously did not create a vested right to retiree
benefits.
• Sixth Circuit reversed and applied Yard-Man.
Found that the CBA suggested an intent to vest and it was
“unlikely” that the union would agree to language that provides
for a full company contribution if the company could unilaterally
change the level of contribution.
• District court held a bench trial and ruled largely in plaintiffs’
favor.
• Sixth Circuit affirmed.
13
M&G Polymers v. Tackett
Supreme Court
• Supreme Court granted certiorari for the purpose of
addressing whether, when construing CBAs, courts should
presume that silence concerning the duration of retiree
health care benefits means the parties intended those
benefits to vest and therefore continue indefinitely.
• No party defended Yard-Man.
• Court
Majority opinion: Thomas, J. (unanimous)
Concurring opinion: Ginsburg, J. (for four justices)
All said construe labor agreements according to “ordinary
principles of contract law,” with no thumb on the scale favoring
vesting.
M&G Polymers v. Tackett
Supreme Court
• Sixth Circuit failed to apply two “traditional principles” that
should govern the construction of ambiguous contracts
“Courts should not construe ambiguous writings to create
lifetime promises.”
“Contractual obligations will cease, in the ordinary course, upon
termination of the bargaining agreement.”
• Thus, “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.”
14
15
M&G Polymers v. Tackett
Supreme Court
• While courts may look to known customs/usages to
determine the meaning of a contract, the parties must prove
those customs/usages using evidentiary support.
• Because Yard-Man inferences affected the outcome below,
the Court vacated and remanded to review the agreements
at issue under ordinary principles of contract law.
• Is there a “clear statement” rule?
“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 v. General Motors Corp., 133 F.3d 388 (6th Cir. 1998).
16
M&G Polymers v. Tackett
Supreme Court
• Justice Ginsburg’s concurrence:
No rule requires clear and express language to show vesting.
Examine entire agreement and industry practices to determine
whether there was an intent to vest.
Provision tying to receipt of healthcare benefits to receipt of
pension benefits.
Survivor clauses instructing survivor to receive benefits.
If the contract is determined to be ambiguous, then consider
extrinsic evidence, including parties’ bargaining history.
M&G Polymers v. Tackett
Take-Aways
• Yard-Man’s thumb on the scale is clearly over.
• Tension between majority and concurrence on how to apply
“ordinary principles of contract law.”
Is there a “clear statement rule”?
Justice Thomas’s citation to Sprague.
Justice Ginsburg says no.
• Employers are not guaranteed victory, but the decision
should lessen employers’ concerns about:
Litigating retiree benefit claims in the Sixth Circuit; and
Inconsistency multi-jurisdictional employers faced by having
different outcomes in different circuits.
17
M&G Polymers v. Tackett
Take-Aways
• Hopefully less forum shopping.
• Given skyrocketing costs of healthcare, post-Tackett contractual
vesting claims may continue to pose a substantial risk to
employers seeking to cut back on retiree benefits.
• Risk is heightened by the fact that the Court did not provide clear
guidance as to the role of extrinsic evidence in adjudicating these
cases, particularly given that four justices – but not a majority –
opined that such evidence must always be considered.
• Employers should do their best when negotiating CBAs to draft
contractual language that will clearly protect their rights to reduce
or eliminate retiree welfare benefits.
18
19
Tackett on Remand to the Sixth Circuit
• Tackett v. M&G Polymers USA, LLC, 821 F.3d 204 (6th
Cir. 2016)
No clear statement rule applies
Remanded case to district court
What documents comprise the agreements?
Is reference to extrinsic evidence appropriate?
Do the documents and, if necessary, extrinsic evidence, vest
retirees?
20
Post-Tackett Sixth Circuit Decisions
• Gallo v. Moen Inc., 813 F.3d 265 (6th Cir. Feb. 8, 2016)
Closing agreement stated healthcare coverage “shall continue”
for retirees/spouses “as indicated under the [final CBA].”
District court granted class certification and plaintiffs’ motion of
summary judgment.
Majority held that CBA did not promise lifetime benefits:
Rejected “clear-statement rule”
Nothing says that Moen committed to unalterable benefits
Discussion of benefits contained within a three year agreement
Expressly vested for life pension benefits for qualifying retirees
Agreement has a reservation of rights clause
Rejected “tying” argument
Dissent found the agreements ambiguous and thus would have
applied extrinsic evidence in favor of vesting.
21
Post-Tackett Sixth Circuit Decisions
• Int’l Union v. Kelsey-Hayes Co., 2015 WL 5460631 (E.D.
Mich. Sept. 17, 2015)
CBA promised that the healthcare coverages an employee/spouse
has “at the time of retirement shall be continued.”
Contrast with employees on layoff, disability, fired or quit – in all
cases the parties specifically limited duration of benefits.
Plant Closing Agreement provided that employees eligible to retiree
as of the closing would “participate in” and “be eligible to receive
retiree medical” benefits.
Company must restore lifetime benefits based on “clear” language
of the CBA and PCA.
“Post-Tackett, the law makes clear that in order for benefits
provided in a CBA to survive the expiration of the agreement, the
parties’ intent must be clearly stated.”
22
Post-Tackett Sixth Circuit Decisions
• Zino v. Whirlpool Corp., 2015 WL 6559579 (N.D. Ohio Oct. 30,
2015)
Reconsidered previous ruling that several groups were entitled
to lifetime benefits.
Held one group was not entitled to lifetime benefits, but three
other groups were entitled to lifetime benefits.
Rejected company’s argument that vesting must be established
by unequivocal, explicit language within the CBA.
23
Post-Tackett Sixth Circuit Decisions
• Reese v. CNH Am., LLC, 2015 WL 6865964 (E.D. Mich. Nov. 9,
2015)
Concluded that there was ambiguity with respect to whether the
parties intended benefits to vest.
Court relied on extrinsic evidence to conclude that the company
could not make modifications to benefits.
The “absence of clear and express language vesting Plaintiffs’
health insurance benefits in the relevant agreements does not
necessarily compel the conclusion that the parties lacked the
intent for those benefits to vest.”
24
Post-Tackett Sixth Circuit Decisions
• United Steel v. Kelsey-Hayes Co., 2016 WL 337467 (E.D. Mich.
Jan. 28, 2016)
Parties’ negotiated language provides that healthcare benefits
will be continued at the time of retirement, and that those
coverages “shall be continued thereafter.”
Where the parties intended to limit the duration of healthcare
benefits, they included specific language to do so.
Employees eligible for retirement at the time of the Shutdown
Agreement were offered opportunity to take a “lump sum cash
benefit” in the place of the medical plan benefits they would
receive during retirement.
Unambiguous language provides vested lifetime benefits.
Rejected company’s argument that vesting must be established
by unequivocal, explicit language within the CBA.
25
Post-Tackett Sixth Circuit Decisions
• Sims v. Pfizer, Inc., 2016 WL 772545 (E.D. Mich. Feb. 24, 2016)
Parties’ negotiated language provides that healthcare benefits
will be continued at the time of retirement, and that those
coverages “shall be continued thereafter.”
Where the parties intended to limit the duration of healthcare
benefits, they included specific language to do so.
Employees eligible for retirement at the time of the Shutdown
Agreement were offered opportunity to take a “lump sum cash
benefit” in the place of the medical plan benefits they would
receive during retirement.
Unambiguous language provides vested lifetime benefits
Rejected company’s argument that vesting must be established
by unequivocal, explicit language within the CBA.
26
Post-Tackett Sixth Circuit Decisions
• Serafino v. City of Hamtramck, 2016 WL 1128084 (E.D. Mich.
Mar. 23, 2016)
Given potential disparities among participants with respect to
CBAs and Medicare eligibility, court ruled that it could not find
that named plaintiffs were adequate representatives of all class
members
Denied class certification, without prejudice, to plaintiffs who
retired under different CBAs.
Class certification deferred until resolution of summary judgment
motions
27
Other Post-Tackett Decisions
• Grove v. Johnson Controls, Inc., 2016 U.S. Dist. LEXIS
43221 (M.D. Pa. Mar. 31, 2016)
Third Circuit’s prior ruling in IUUAAIWA v. Skinner, 188 F.3d
130 (3d Cir. 1999)
Here, district court concluded that none of the three plaintiff
groups was entitled to lifetime retiree health benefits
“shall have the following benefits . . . continued” meant only those
benefits carried over from employment to retirement and not to an
unalterable benefit
“until death” does not overcome explicit durational clauses
Reservation of rights clauses
“contrary to Justice Ginsburg’s assertion that ‘no rule requires
clear and express language’ in order to vest benefits, the
unanimous Tackett Court issued no specific holding on this
point”
28
Other Post-Tackett Decisions
• Fulghum v. Embarq Corp., 2015 WL 3632490 (D. Kan.
June 10, 2015)
Contained a broad ROR provision, which indicated no vesting.
SPDs state coverage ends upon death.
SPDs state insurance “will be continued” at retirement.
SPDs as a whole do not affirmatively promise lifetime benefits.
No clear and express language establishing vested benefits.
29
Other Post-Tackett Circuit Court Decisions
• Dewhurst v. Century Aluminum Co., 2015 WL 5304616 (S.D.
W.Va. Sept. 9, 2015)
• Barton v. Constellium Rolled Products-Ravenswood, LLC,
2016 WL 51262 (S.D. W.Va. Jan. 1, 2016)
Cases had same CBA language – that retiree benefits “shall remain in
effect for the term of this Labor Agreement” which was carried forward
in successive CBAs.
Applying Tackett, court held clear durational language controlled.
Extrinsic evidence suggesting an intent to vest did not trump the clear
contractual language.
Practical Considerations for Managing
Changes to Retiree Health Benefits
• Restructure or Eliminate?
• Assessing what has, or has not, been promised
Plan documents and summary plan description
Collective bargaining agreement
Open enrollment materials
Employee communications
Retiree communications
Newsletters
30
Practical Considerations for Managing
Changes to Retiree Health Benefits
• Terminating Retiree Medical
In non-union context, company decision to terminate followed by
employee/retiree communication
In union context, more complicated
In bankruptcy restructuring
Bankruptcy substantive and procedural rules
COBRA issues
31
Practical Considerations for Managing
Changes to Retiree Health Benefits
• Decision points on how to restructure retiree health benefits
• Identifying populations
Pre-65 (not Medicare eligible) retirees
Need full coverage
Active plan or separate plan
Post-65 (Medicare eligible) retirees
Disabled on Medicare
Dependents of Medicare eligible retirees
Supplemental coverage (“Medigap”)
32
Practical Tips for Managing Changes to
Retiree Health Benefits
• Engage a consultant to devise alternatives
Health Reimbursement Arrangements (HRAs)
Cash Stipends
Pension Supplements
• Assist retirees in navigating healthcare exchanges
• Consider a Voluntary Employee Benefit Association
33
Retiree Health Benefits Claims After
M&G Polymers USA v. Tackett
Russell L. Hirschhorn
Proskauer Rose LLP
Eleven Times Square
New York, NY 10036
P: 212.969.3286
Nancy G. Ross
Mayer Brown LLP
71 S. Wacker Drive
Chicago, IL 60606
P: 312.701.8788
Brian D. Netter
Mayer Brown LLP
1999 K Street, N.W.
Washington, D.C. 20006
P: 202.263.3339