M&G Polymers USA, LLC v. Tackett

Case Updates

The Court vacated the judgment of the Sixth Circuit and remanded the case holding that the Sixth Circuit’s decision rested on principles that are incompatible with ordinary principles of contract law.

The Sixth Circuit held that the parties’ collective bargaining agreements granted M&G Polymers USA’s retirees a vested right to lifetime, contribution free healthcare benefits. It reached this conclusion even though the agreements included no promise of vested benefits, contained a durational clause expressly denoting each agreement’s expiration date, with no carve-out or separate durational provision addressed to retiree benefits; and were accompanied by “cap letters” that limited the employer’s annual contribution to retiree healthcare costs. The Sixth Circuit was able to reach this outcome only by relying on its so-called Yard-Man presumption, which infers that an employer agreed to provide perpetual, unalterable benefits to retirees and their dependents based not on what an agreement says, but rather on the supposed meaning of its silence.

In its brief the U.S. Chamber argued, that the Sixth Circuit’s interpretive approach misreads silence as reflecting an affirmative agreement by the parties. By rejecting Yard-Man in no uncertain terms, the court would make clear that every provision in a collective bargaining agreement—including those concerning retiree welfare benefits—should be interpreted consistent with established federal labor policy and traditional methods of contract interpretation. The Chamber also argued that the Sixth Circuit’s presumption of vesting should also be rejected because it harms all of the parties involved, and that a judicially created obligation to provide retirees with irreducible lifelong benefits forces employers to bear substantial, retroactive, and unbargained-for costs.