CNH Industrial N. V. et al. v. Reese et al.

on petition for writ of certiorari to the united

states court of appeals for the sixth circuit

No. 17–515. Decided February 20, 2018 In M&G Polymers USA, LLC v. Tackett, 574 U. S. 427, the Court directed the Sixth Circuit to interpret collective-bargaining agreements according to “ordinary principles of contract law” and rejected as inconsistent with those principles the Sixth Circuit's application of “Yard-Man inferences”—derived from the Sixth Circuit's decision in International Union, United Auto, Aerospace, & Agricultural Implement Workers of America v. Yard-Man, Inc., 716 F. 2d 1476. Tackett held that Yard- Man incorrectly inferred lifetime vesting of retiree benefits whenever “a contract is silent as to the[ir] duration,” instead of following the “traditional principle” that “ `contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.' ” 574 U. S., at 441–442. Here, CNH Industrial N. V . and CNH Industrial America LLC (collectively, CNH) agreed to a collective-bargaining agreement in 1998 that provided healthcare benefits to certain retiring employees. When the agreement expired in 2004, a class of CNH retirees and surviving spouses (collectively, retirees) sued, seeking a declaration that their healthcare benefits vested for life. The Sixth Circuit agreed with the retirees. The court described the 1988 agreement as “silent” on whether healthcare benefits vested for life notwithstanding the agreement's general durational clause, which the court deemed inconclusive on the question in light of Yard-Man inferences. Finding the 1998 agreement ambiguous allowed the Sixth Circuit to consult extrinsic evidence, which it said supported lifetime vesting. Held: The Sixth Circuit's decision does not comply with Tackett's direction to apply ordinary contract principles. A contract is not ambiguous unless, “after applying established rules of interpretation, [it] remains reasonably susceptible to at least two reasonable but conflicting meanings.” 11 R. Lord, Williston on Contracts § 30:4, pp. 53–54. Only by employing the inferences rejected in Tackett did the Sixth Circuit find ambiguity in the contract's terms. Because the Yard-Man inferences are not a valid way to read a contract, those inferences cannot supply a conflicting reasonable contract interpretation. The 1998 agreement contained a general durational clause applicable to all benefits unless specified otherwise, and no provision specified that the healthcare benefits were subject to a different durational clause. The agreement

also stated that the health benefit plan ran concurrently with the collective-bargaining agreement. Had the parties intended to vest health benefits for life, they could have said so in the agreement. They did not do so, and the only reasonable interpretation of the agreement is that the healthcare benefits expired when the agreement expired in 2004. Certiorari granted; 854 F. 3d 877, reversed and remanded.

Per Curiam.

Three Terms ago, this Court's decision in M&G Polymers USA, LLC v. Tackett, 574 U. S. 427 (2015), held that the Court of Appeals for the Sixth Circuit was required to interpret collective-bargaining agreements according to “ordinary principles of contract law.” Id., at 430. Before Tackett, the Sixth Circuit applied a series of “Yard-Man inferences,” stemming from its decision in International Union, United Auto, Aerospace, & Agricultural Implement Workers of Am. v. Yard-Man, Inc., 716 F. 2d 1476 (1983). In accord with the Yard-Man inferences, courts presumed, in a variety of circumstances, that collective-bargaining agreements vested retiree benefits for life. See Tackett, 574 U. S., at 436–438. But Tackett “reject[ed]” these inferences “as inconsistent with ordinary principles of contract law.” Id., at 442.

In this case, the Sixth Circuit held that the same Yard- Man inferences it once used to presume lifetime vesting can now be used to render a collective-bargaining agreement ambiguous as a matter of law, thus allowing courts to consult extrinsic evidence about lifetime vesting. 854 F. 3d 877, 882–883 (2017). This analysis cannot be squared with Tack-ett. A contract is not ambiguous unless it is subject to more than one reasonable interpretation, and the Yard-Man inferences cannot generate a reasonable interpretation because they are not “ordinary principles of contract law,” Tackett, supra, at 442. Because the Sixth Circuit's analysis is “Yard- Man re-born, re-built, and re-purposed for new adventures,” 854 F. 3d, at 891 (Sutton, J., dissenting), we reverse.

A

This Court has long held that collective-bargaining agreements must be interpreted “according to ordinary principles of contract law.” Tackett, supra, at 435 (citing Textile Workers v. Lincoln Mills of Ala., 353 U. S. 448, 456–457 (1957)). Prior to Tackett, the Sixth Circuit purported to follow this rule, but it used a unique series of “Yard-Man inferences” that no other circuit applied. 574 U. S., at 435. For example, the Sixth Circuit presumed that “ `a general durational clause' ” in a collective-bargaining agreement “ `says nothing about the vesting of retiree benefits' ” in that agreement. Id., at 438 (quoting Noe v. PolyOne Corp., 520 F. 3d 548, 555 (CA6 2008)). If the collective-bargaining agreement lacked “a termination provision specifically addressing retiree bene-fits” but contained specific termination provisions for other benefits, the Sixth Circuit presumed that the retiree benefits vested for life. Tackett, supra, at 436 (citing Yard-Man, supra, at 1480). The Sixth Circuit also presumed vesting if “a provision . . . `tie[d] eligibility for retirement-health bene-fits to eligibility for a pension.' ” 574 U. S., at 438 (quoting Noe , supra, at 558).

This Court's decision in Tackett “reject[ed] the Yard-Man inferences as inconsistent with ordinary principles of contract law.” 574 U. S., at 442. Most obviously, the Yard- Man inferences erroneously “refused to apply general durational clauses to provisions governing retiree benefits.” 574 U. S., at 440. This refusal “distort[ed] the text of the agreement and conflict[ed] with the principle of contract law that the written agreement is presumed to encompass the whole agreement of the parties.” Ibid.

The Yard-Man inferences also incorrectly inferred lifetime vesting whenever “a contract is silent as to the duration of retiree benefits.” 574 U. S., at 442. The “traditional principle,” Tackett explained, is that “ `contractual obligations will

As for the tying of retiree benefits to pensioner status, Tackett rejected this Yard-Man inference as “contrary to Congress' determination” in the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 891. 574 U. S., at 440. The Sixth Circuit adopted this inference on the assumption that retiree health benefits are “ `a form of delayed compensation or reward for past services,' ” like a pension. Id., at 433 (quoting Yard-Man, supra, at 1482). But ERISA distinguishes between plans that “resul[t] in a deferral of income,” 29 U. S. C. § 1002(2)(A)(ii), and plans that offer medical benefits, § 1002(1)(A). See Tackett, 574 U. S., at 440. Tackett thus concluded that this and the other “inferences applied in Yard-Man and its progeny” do not “represent ordinary principles of contract law.” Id., at 438.

B

Like Tackett, this case involves a dispute between retirees and their former employer about whether an expired collective-bargaining agreement created a vested right to lifetime healthcare benefits. In 1998, CNH Industrial N. V . and CNH Industrial America LLC (collectively, CNH) agreed to a collective-bargaining agreement. The 1998

When the 1998 agreement expired in 2004, a class of CNH retirees and surviving spouses (collectively, the retirees) filed this lawsuit, seeking a declaration that their healthcare bene-fits vested for life and an injunction preventing CNH from changing them. While their lawsuit was pending, this Court decided Tackett. Based on Tackett, the District Court initially awarded summary judgment to CNH. But after reconsideration, it awarded summary judgment to the retirees. 143 F. Supp. 3d 609 (ED Mich. 2015).

The Sixth Circuit affirmed in relevant part. 854 F. 3d, at 879. The court began by noting that the 1998 agreement was “silent” on whether healthcare benefits vested for life. Id., at 882. Although the agreement contained a general durational clause, the Sixth Circuit found that clause inconclusive for two reasons. First, the 1998 agreement “carved out certain benefits” like life insurance “and stated that those coverages ceased at a time different than other provisions.” Ibid.; see App. to Pet. for Cert. A–116. Second, the 1998 agreement “tied” healthcare benefits to pension eligibility. 854 F. 3d, at 882; see App. to Pet. for Cert. A–116. These conditions rendered the 1998 agreement ambiguous, according to the Sixth Circuit, which allowed it to consult extrinsic evidence. 854 F. 3d, at 883. And that evidence supported lifetime vesting. Ibid. The Sixth Circuit acknowledged

Judge Sutton dissented. See id., at 887–893. He concluded that the 1998 agreement was unambiguous because “the company never promised to provide healthcare benefits for life, and the agreement contained a durational clause that limited all of the benefits.” Id., at 888. Judge Sutton noted that, in finding ambiguity, the panel majority relied on the same inferences that this Court proscribed in Tackett. See 854 F. 3d, at 890–891. But ambiguity, he explained, requires “two competing interpretations, both of which are fairly plausible,” id., at 890, and “[a] forbidden inference cannot generate a plausible reading,” id., at 891. The panel majority's contrary decision, Judge Sutton concluded, “abrad[ed] an inter-circuit split (and an intra-circuit split) that the Supreme Court just sutured shut.” Id., at 890.2

The Sixth Circuit read it that way only by employing the inferences that this Court rejected in Tackett. The Sixth Circuit did not point to any explicit terms, implied terms, or industry practice suggesting that the 1998 agreement vested healthcare benefits for life. Cf. 574 U. S., at 443–444 (Gins-burg , J., concurring). Instead, it found ambiguity in the 1998 agreement by applying several of the Yard-Man inferences: It declined to apply the general durational clause to the healthcare benefits, and then it inferred vesting from the presence of specific termination provisions for other benefits and the tying of healthcare benefits to pensioner status.

Tackett rejected those inferences precisely because they are not “established rules of interpretation,” 11 Williston § 30:4, at 53–54. The Yard-Man inferences “distort the text of the agreement,” fail “to apply general durational clauses,” erroneously presume lifetime vesting from silence, and contradict how “Congress specifically defined” key terms in ERISA. Tackett, 574 U. S., at 439–442. Tackett thus rejected these inferences not because of the consequences that the Sixth Circuit attached to them—presuming vesting versus finding ambiguity—but because they are not a valid way to read a contract. They cannot be used to create a reason-

Tellingly, no other Court of Appeals would find ambiguity in these circumstances. When a collective-bargaining agreement is merely silent on the question of vesting, other courts would conclude that it does not vest benefits for life. 3 Similarly, when an agreement does not specify a duration for healthcare benefits in particular, other courts would simply apply the general durational clause. 4 And other courts would not find ambiguity from the tying of retiree benefits to pensioner status. 5 The approach taken in these other decisions “only underscores” how the decision below “deviat[ed] from ordinary principles of contract law.” Tackett, supra, at 441.

Shorn of Yard-Man inferences, this case is straightforward. The 1998 agreement contained a general durational clause that applied to all benefits, unless the agreement spec-ifed otherwise. No provision specified that the healthcare benefits were subject to a different durational clause. The agreement stated that the health benefits plan “r[an] concurrently” with the collective-bargaining agreement, tying the healthcare benefits to the duration of the rest of the agreement. App. to Pet. for Cert. A–114. If the parties meant to vest healthcare benefits for life, they easily could have said so in the text. But they did not. And they specified that their agreement “dispose[d] of any and all bargaining issues” between them. Id., at A–115. Thus, the only

* * *

Because the decision below is not consistent with Tackett, the petition for a writ of certiorari and the motions for leave to file briefs amici curiae are granted. We reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.

It is so ordered.