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Friday, July 19, 2024 | Back issues
Courthouse News Service Courthouse News Service

Benefits Windfall Tossed by Supreme Court

WASHINGTON (CN) - Retirees failed to persuade the Supreme Court on Monday that they and their families deserve permanent contribution-free health care benefits.

Hobert Freel Tackett led the class action in Columbus, Ohio, against M&G Polymers USA after its December 2006 announcement that M&G retirees would need to start making health care contributions.

After a bench trial, a federal judge said the retirees should get health care for life without contributions and ordered them reinstated to the post-2007 benefits plans.

The 6th Circuit affirmed the permanent injunction in 2013, but the Supreme Court vacated that ruling Monday after taking up the case last year.

"We interpret collective-bargaining agreements, including those establishing ERISA plans, according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy," Justice Clarence Thomas wrote for the unanimous court, abbreviating the name of the Employee Retirement Income Security Act.

The 6th Circuit's ruling for the retirees had relied on the 1983 decision from a union's case against Yard-Man Inc., "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," Thomas noted.

But the high court now clarified that "those inferences conflict with ordinary principles of contract law."

"As an initial matter, Yard-Man violates ordinary contract principles by placing a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements," Thomas wrote. "That rule has no basis in ordinary principles of contract law. And it distorts the attempt 'to ascertain the intention of the parties.' Yard-Man's assessment of likely behavior in collective bargaining is too speculative and too far removed from the context of any particular contract to be useful in discerning the parties' intention."

Thomas also slammed the lower court for misapplying "other traditional principles of contract law, including the illusory promises doctrine."

In a concurring opinion, Justice Ruth Bader Ginsburg clarified what directions the lower court should take on remand, telling it to "examine the entire agreement to determine whether the parties intended retiree health-care benefits to vest."

"Because the retirees have a vested, lifetime right to a monthly pension, a provision stating that retirees 'will receive' health-care benefits if they are 'receiving a monthly pension' is relevant to this examination," the opinion continues. "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.' If, after considering 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 example, the parties' bargaining history. The Court of Appeals, however, must conduct the foregoing inspection without Yard-Man's 'thumb on the scale in favor of vested retiree benefits.'"

Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan joined Ginsburg.

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