Tuesday, January 27, 2015

SCOTUS Kills Yard-Man

When you were growing up, did you ever have a teacher return an assignment and tell you everything you did wrong... but not give you the right answer? Instead, you were just supposed to try again and figure it out for yourself? That's pretty much what Justice Thomas just did to the 6th Circuit.

On Monday, the Supreme Court issued its opinion in M&G Polymers USA LLC v. Tackett. Sometimes, employers and unions enter into collective bargaining agreements (CBAs) that provide health care benefits for retirees. The CBA usually has a set lifespan (three years is common). The issue here is whether the retiree health care benefits continue only until the CBA dies, or until the retirees die. Put another, did the CBA create a vested right to a lifetime of health care benefits?

Justice Thomas,
official portrait public domain.
Of course, the parties could have just specified the answer in the CBA - but what fun would that be? The Sixth Circuit, through a series of cases (Yard-Man and its progeny) created a presumption in favor of the retiree benefits vesting (and therefore continuing indefinitely) if a CBA was silent on the issue. Cue Justice Thomas for a unanimous court:
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. That rule has no basis in ordinary principles of contract law.
In other words, "You know that Yard-Man presumption you've been applying? STOP IT!" But the Court never actually gives us the answer (i.e. whether the benefits vested or not in this case).

Justice Thomas just tells the lower courts to apply "ordinary contract principles," and then reminds us of some of them. For example, "the traditional principle that courts should not construe ambiguous writings to create lifetime promises" and "the traditional principle that 'contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.'"

Justice Ginsburg (joined by the rest of the liberal bloc) wrote a concurring opinion, noting some other principles. Like, "[C]onstraints upon the employer after the expiration date of a collective-bargaining agreement . . . may arise [from] implied terms of the expired agreement." And, if the CBA is ambiguous, the Court "may turn to extrinsic evidence—for example, the parties’ bargaining history" to determine if the parties intended the health benefits to vest.

Now go back and try again, 6th Circuit, and remember what Justice Thomas told you.

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