Retiree Health Benefits Claims After M&G Polymers USA v. Tackett - - PowerPoint PPT Presentation

The audio portion of the conference may be accessed via the telephone or by using your computer's

• speakers. Please refer to the instructions emailed to registrants for additional information. If you

have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

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

Tips for Optimal Quality

Sound Quality If you are listening via your computer speakers, please note that the quality

• f your sound will vary depending on the speed and quality of your internet

connection. If the sound quality is not satisfactory, you may listen via the phone: dial 1-866-258-2056 and enter your PIN when prompted. Otherwise, please send us a chat or e-mail sound@straffordpub.com immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance. Viewing Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again.

FOR LIVE EVENT ONLY

Continuing Education Credits

In order for us to process your continuing education credit, you must confirm your participation in this webinar by completing and submitting the Attendance Affirmation/Evaluation after the webinar. A link to the Attendance Affirmation/Evaluation will be in the thank you email that you will receive immediately following the program. For additional information about continuing education, call us at 1-800-926-7926

• ext. 35.

FOR LIVE EVENT ONLY

Program Materials

If you have not printed the conference materials for this program, please complete the following steps:

• Click on the ^ symbol next to “Conference Materials” in the middle of the left-

hand column on your screen.

• Click on the tab labeled “Handouts” that appears, and there you will see a

PDF of the slides for today's program.

• Double click on the PDF and a separate page will open.
• Print the slides by clicking on the printer icon.

FOR LIVE EVENT ONLY

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 rhirschhorn@proskauer.com Nancy G. Ross Mayer Brown LLP 71 S. Wacker Drive Chicago, IL 60606 P: 312.701.8788 nross@mayerbrown.com Brian D. Netter Mayer Brown LLP 1999 K Street, N.W. Washington, D.C. 20006 P: 202.263.3339 bnetter@mayerbrown.com

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 rhirschhorn@proskauer.com

• 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 nross@mayerbrown.com

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 bnetter@mayerbrown.com

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 –

• pined 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

• r 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
• f 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
• ther 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 rhirschhorn@proskauer.com Nancy G. Ross Mayer Brown LLP 71 S. Wacker Drive Chicago, IL 60606 P: 312.701.8788 nross@mayerbrown.com Brian D. Netter Mayer Brown LLP 1999 K Street, N.W. Washington, D.C. 20006 P: 202.263.3339 bnetter@mayerbrown.com