PATRICK J. DUGGAN, UNITED STATES DISTRICT JUDGE.
On September 28, 2015, this Court issued a decision holding that the Supreme Court's decision in M&G Polymers USA, LLC v. Tackett, ___ U.S. ___, 135 S.Ct. 926, 190 L.Ed.2d 809 (2015), required the reversal of this Court's previous holding — affirmed by the Sixth Circuit Court of Appeals — that Plaintiffs are entitled to lifetime vested retiree health care benefits. Reese v. CNH Industrial N.V., No. 04-70592, 2015 WL 5679827 (E.D.Mich. Sept. 28, 2015). The Court therefore entered a Judgment on the same date, ruling in favor of Defendants and against Plaintiffs. (ECF No. 446.) Plaintiffs filed a motion for reconsideration pursuant to Eastern District of Michigan Local Rule 7.1 on October 13, 2015. (ECF No. 447.) At this Court's invitation, Defendants (hereinafter
The Court's palpable error can be summarized as follows. In its most recent motion for summary judgment on the issue of vesting, CNH correctly asserted that this Court and the Sixth Circuit previously relied on inferences repudiated in Tackett when concluding that Plaintiffs are entitled to vested retiree health care benefits. CNH incorrectly asserted, however, that the only conclusion to be reached once those inferences are removed is that the parties intended Plaintiffs' retiree health insurance benefits to terminate with the 1998 Central Agreement. According to CNH, the Supreme Court in Tackett set forth "new rules of construction that now govern, in all circuits, the determination of whether retiree health benefits are vested." (ECF No. 439 at Pg ID 11606, emphasis added.) In fact, Tackett did not create new rules for construing collective bargaining agreements. Instead, the Supreme Court in Tackett simply rejected the inferences set forth in UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir.1983), and its progeny, and reaffirmed that collective bargaining agreements are interpreted "according to ordinary principles of contract law...." Tackett, 135 S.Ct. at 933. CNH failed to apply those ordinary principles of contract law to the relevant agreements in its motion for summary judgment — a mistake this Court repeated in reaching its September 28, 2015 decision. Now applying those principles, this Court concludes that Plaintiffs are entitled to vested retiree health insurance benefits.
As the Supreme Court re-emphasized in Tackett, a court's objective when interpreting any contract, including a collective bargaining agreement, is to "give effect to the contractual rights and expectations of the parties." Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 682, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010); Tackett, 135 S.Ct. at 933 (quoting Stolt-Nielsen, 559 U.S. at 682, 130 S.Ct. 1758) ("`In this endeavor, as with any other contract, the parties' intentions control.'"). "`Where the words of a contract in writing are clear and unambiguous, its meaning is to be ascertained in accordance with its plainly expressed intent.'" Tackett, 559 U.S. at 682, 130 S.Ct. 1758 (quoting 11 R. Lord, Williston on Contracts § 30:6, p. 108 (4th ed. 2012)). The Court is confident that it may rely on Justice Ruth Bader Ginsburg's elaboration of "ordinary contract principles" in her concurrence in Tackett (despite CNH's warning otherwise), particularly as Justice Ginsburg relies on the same treatise used by the majority as the source of these principles:
135 S.Ct. at 937-38 (Ginsburg, J., concurring); see also Brooklyn Life Ins. Co of New York v. Dutcher, 95 U.S. 269, 273, 24 L.Ed. 410 (1877) ("There is no surer way to find out what parties meant than to see what they have done.").
Contrary to CNH's contention in its summary judgment motion, 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. Imposing such a requirement on collective bargaining agreements in general, or ERISA welfare benefits in particular, strays from the ordinary contract principles that Tackett instructs courts to apply in construing those agreement. As the Supreme Court has previously stated, duties in a contract may arise from its express or implied terms. See Litton Fin. Printing Div., Litton Bus. Sys., Inc. v. NLRB, 501 U.S. 190, 203, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991).
CNH overstates the significance of the Tackett Court's single reference to Sprague v. General Motors Corp., 133 F.3d 388, 400 (6th Cir.1998). The Court refers to the standard applied in Sprague only to "underscore[] Yard-Man's deviation from ordinary principles of contract law." Tackett, 135 S.Ct. at 937. It is important to remember, as well, that Sprague did not involve bargained-for benefits; instead, the benefits at issue in that case were specifically characterized as unilaterally offered benefits. Sprague, 133 F.3d at 393, 402-03. Perhaps more importantly, if the Tackett Court intended to require clear and express vesting language to find the parties' intent to vest, why would it have not simply held that the Pension, Insurance, and Service Award Agreement at issue in the case before it — which lacked such express language — did not confer vested benefits? Instead, the Supreme Court remanded the case to the court of appeals. Tackett, 135 S.Ct. at 937.
This Court indicated in its September 28, 2015 decision that it "did not find a manifestation of intent to confer lifetime benefits in this case." Reese, 2015 WL 5679827, at *10. After tossing aside the Yard-Man inferences employed earlier by this Court and the Sixth Circuit in this case and in Yolton v. El Paso Tennessee Pipeline Co., 318 F.Supp.2d 455 (E.D.Mich.2003), aff'd 435 F.3d 571 (6th Cir.2006), this Court then concluded "that its prior determination that the parties intended to confer lifetime healthcare benefits is no longer viable in light of the Supreme Court's intervening decision in Tackett." Reese, 2015 WL 5679827, at *10. The Court committed a palpable error by being too haste in reaching this conclusion. For the lack of a clear manifestation of the parties' intent in the collective bargaining agreement did not negate the possibility that there was ambiguity regarding their intent. Yet, the Court neglected to consider this possibility.
As an initial matter, the Court erred in reading Tackett as "suggest[ing] that courts should not rely on language tying eligibility for contribution-free healthcare benefits to the receipt of pension benefits." See Reese, 2015 WL 5679827, at *9. All that Tackett holds or suggests is that a court may not infer from such tying language that the parties intended retiree health insurance benefits to vest. Such language does not lose all significance, however. In other words, Tackett does not hold that courts must ignore language that under Yard-Man and its progeny inferred an intent to vest. To the contrary, Tackett advises courts to apply "ordinary principles of contract law[,]" 135 S.Ct. at 933; and under those principles, "`the intention of the parties'" is "gathered from the whole instrument...." Id. at 937 (Ginsburg, J., concurring) (emphasis added).
When the relevant agreements were negotiated, the parties were aware that pension benefits vest for the life of the retiree. See, e.g., Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 89, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) (citing 29 U.S.C. §§ 1051-1086) (explaining that ERISA "imposes participation, funding, and vesting requirements on pension plans). By tying eligibility for retiree health insurance benefits to eligibility for pension benefits, the parties may have been expressing their intent for health insurance benefits to survive for the same duration. In other words, so long as an individual is eligible to receive a pension benefit, he or she continues to be eligible for the retiree health insurance benefits promised in the agreements.
Similarly, the absence of contract language specifically setting forth the duration of retiree health insurance benefits does not dictate automatically that the agreement's general durational clause applies to those benefits. Without doubt, the Tackett Court criticized the Sixth Circuit's expansion of Yard-Man in Noe v. PolyOne Corp., 520 F.3d 548 (6th Cir.2008), where the Sixth Circuit concluded that "`[a]bsent specific durational language referring to retiree benefits themselves,' a general durational clause says nothing about the vesting of retiree benefits." Tackett, 135 S.Ct. at 934 (quoting Noe, 520 F.3d at 555) (emphasis added in Tackett). Nevertheless, the Tackett Court did not hold that in the absence of specific durational language a general durational clause says everything about the vesting of retiree benefits. If this had been the meaning of the Court's holding — where the contract at issue lacked a specific durational clause for retiree health insurance benefits — why remand the case to the Sixth Circuit with instructions to apply ordinary rules of contract law to determine whether the parties intended those benefits to survive the contract's expiration? Tackett, 135 S.Ct. at 937.
It is true that generally "`contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement." Id. (quoting Litton, 501 U.S. at 207, 111 S.Ct. 2215). It is equally true, however, that the expiration of a contract does not release the parties from obligations that are fixed under the contract, but have not been satisfied. Litton, 501 U.S. at 206, 111 S.Ct. 2215 (explaining
Whether the parties intended certain obligations to survive the agreement's expiration is, again, determined by looking at the contract as a whole. Notably, here, the 1998 Central Agreement states that the group insurance plan and the pension plan "run concurrently with this Agreement...." (ECF No. 439-4 at Pg ID 16755.) Yet no one contends that the company's obligation to provide pension benefits ceased upon the expiration of the agreement. Further, under the heading "Provisions Applicable to Employees Retired on Company Pension and Surviving Spouses Receiving Company Pension", the 1998 Group Insurance Plan provides:
(ECF No. 439-3 at Pg ID 16688, emphasis added.) Among the benefits "described in the following paragraphs" are group health insurance benefits for retirees, for which "[n]o contributions are required[.]" (Id. at Pg ID 16688-16690.) At the very least, these provisions create an ambiguity with respect to the parties' intent. The inclusion of specific durational clauses for other benefits but not pension plan and retiree health insurance benefits further raises an ambiguity with respect to the parties' intent as to the duration of the latter benefit.
Other agreements between the parties further support a finding that the parties intended retiree health insurance benefits to vest. For example, in the Group Benefit Plan made effective with the 2005 negotiations between the parties and developed through the 2005 Central Agreement, retirees and surviving spouses of retirees who retired on or after December 1, 2004, were required to contribute towards their medical plans per a contribution schedule. (See ECF No. 125-18 at Pg ID 4530, 4557.) If the parties did not intend for retiree health care benefits to vest in the agreements preceding the 2005 agreement (i.e., if they intended for coverage to expire with the prior agreements), why limit contributions to post-December 1, 2004 retirees? The agreements this Court has referred to as "the 1993 Cap Letter", "the 1995 Cap Letter", and "the 1998 Letter of Understanding" offer further proof. (See ECF No. 125-6 at Pg ID 4438; ECF No. 125-8 at Pg ID 4650; ECF No. 125-11 at Pg ID 4306.) As this Court has previously found, these agreements reflect the parties' intent to vest retiree health care benefits which were provided in the 1998 collective bargaining agreement and preceding agreements. See Reese v. CNH Global N.V., No. 04-70592, 2007 WL 2484989, at *7-9 (E.D.Mich. Aug. 29, 2007).
In short, as a result of the Supreme Court's decision in Tackett, courts may no longer rely on the inferences set forth in Yard-Man and its progeny when evaluating collective bargaining agreement to discern the intent of the parties with respect to the vesting of retiree health insurance benefits. This Court and the Sixth Circuit in fact relied on many — although not all — of those inferences when evaluating the agreements relevant to this case. Once those inferences are removed, however, Tackett instructs that courts still must employ "ordinary principles of contract
Having reached this conclusion, the Court now must address the issue for which the Sixth Circuit remanded the matter: a determination of whether CNH may make the changes it proposes to those vested benefits. See Reese v. CNH Am. LLC, 694 F.3d 681 (6th Cir.2012) ("Reese II").
Following Reese II, CNH submitted a new plan proposing changes to Plaintiffs' health insurance benefits and the parties engaged in discovery relating to the factors the Sixth Circuit instructed this Court to consider on remand in assessing the plan's reasonableness. In April 2014, after the conclusion of discovery, the parties filed cross-motions for summary judgment with respect to the reasonableness of CNH's proposed plan. (ECF Nos. 419, 423.) In addition, Plaintiffs filed a motion to strike the declarations of defense experts John F. Stahl and Scott J. Macey. (ECF No. 428.)
The Reese II panel instructed this Court as follows regarding its task on remand — a task that the panel described as a "vexing one," Reese II, 694 F.3d at 686:
Id. at 685-86. The first five considerations focus on whether CNH's proposed plan to change Plaintiffs' retiree health insurance benefits is "reasonably commensurate" with the current plan. The sixth consideration focuses on whether the benefits provided under the proposed plan are "roughly consistent with the kinds of benefits provided to current employees." Finally, the seventh consideration focuses on whether the proposed changes are `reasonable in light of changes in health care." The Court addresses these issues in turn.
In considering whether CNH's proposed plan is "reasonably commensurate" with the current one, the Court is cognizant of the definition of "commensurate." One dictionary defines the word as "equal in measure or extent" and "corresponding in size, extent, amount, or degree." Webster's Ninth New Collegiate Dictionary 264 (1991). Synonyms for "commensurate" are:
William Statsky, West's Legal Thesaurus Dictionary: Special Deluxe Ed. 151 (1986).
Considerations [1] and [4], above, require the Court to compare the average total out-of-pocket costs to retirees under both plans, now and in the future. The average annual out-of-pocket cost to pre-Medicare participants under the current plan is $269 in 2015, $377 in 2022, and $596 in 2032.
Current Plan Proposed Plan
Average
Average Annual Share of Annual Out-of-Pocket Share of
Out-of-Pocket Costs Paid by Cost to Costs Paid by
Cost to Retiree Retiree Retiree Retiree
2015 $269 1.5% $3,286 19.2%
2022 $377 1.5% $9,345 34.9%
2032 $596 1.5% $21,615 46.8%
The average annual out-of-pocket cost to Medicare-eligible participants under the current plan is $159 in 2015, $239 in 2022, and $417 in 2032. The average annual out-of-pocket cost to Medicare-eligible participants under the proposed plan (including annual premium contributions) is estimated at $2,512 in 2015, $3,735 in 2022, and $7,017 in 2032. Under the current plan, Medicare-eligible participants would pay
Current Plan Proposed Plan
Average Annual Share of Costs Average Share of
Out-of-Pocket Paid by Annual Out-of-Pocket Costs Paid by
Cost to Retiree Retiree Cost to Retiree
Retiree
2015 $159 2.7% $2,512 64.5%
2022 $239 2.7% $3,735 69%
2032 $417 2.6% $7,017 74.9%
Considerations [2] and [4], above, require the Court to compare the average per-beneficiary cost to CNH under the current proposed plans, now and in the future. CNH's costs under the current plan for each pre-Medicare participant are projected to be $17,935 in 2015, $25,148 in 2022, and $39,749 in 2013. Under the proposed plan, CNH's costs for each pre-Medicare participant are projected to drop
Current Plan Proposed Plan Savings Per
Participant
2015 $17,935 $13,871 $4,064
2022 $25,148 $17,407 $7,741
2032 $39,749 $24,570 $15,179
CNH's costs under the current plan for each Medicare-eligible participant are estimated to be $5,752 in 2015, $8,701 in 2022, and $15,322 in 2032. Under the proposed plan, CNH's costs for each Medicare-eligible participant drop dramatically to $1,380 in 2015, $1,681 in 2022, and $2,352 in 2032. This data is illustrated in the following chart and graph:
Current Plan Proposed Plan Savings Per
Participant
2015 $5,752 $1,380 $4,372
2022 $8,701 $1,681 $7,020
2032 $15,322 $2,352 $12,970
Consideration [3], above, requires the Court to compare the premiums, deductibles, and copayments that participants must pay under the current and proposed plans. The Court addresses the related concepts the coinsurance and out-of-pocket maxima, as well.
Current Plan Proposed Plan
Pre-Medicare Medicare-Eligible Pre-Medicare Medicare-Eligible
Retirees Retirees Retirees Retirees
2015 $0 $0 $1,410 $120
2022 $0 $0 $6,714 $572
2032 $0 $0 $17,458 $1,578
Under the proposed plan, pre-Medicare participants would pay a $200 per person, $400 per family deductible for in-network services, after which insurance would pay 85% of the reasonable and customary charges for most services, except there is no coinsurance and a $20 copayment for routine office visits and preventive care (allergy treatments, chiropractic, gynecologic exams, mammograms, primary care, mental health treatment, etc.). There is a $1,000 per person, $2,000 per family out-of-pocket maximum; copayments and deductibles do not count toward meeting the out-of-pocket maximum.
For out-of-network services for pre-Medicare participants under the proposed plan, there is a $500 per person, $1,000 per family deducible, after which insurance would pay 65% of the reasonable and customary charges for almost all services, including routine office visits and preventive care. There is a $2,000 per person out-of-pocket maximum.
Medicare-eligible participants under the proposed plan would pay a $250 per person, $500 per family deducible, after which insurance would pay for 80% of the reasonable and customary charges for almost all services, including most routine office visits (routine physicals are not covered). There is a $1,500 per person, $3,000 per family out-of-pocket maximum; deductibles count toward meeting the out-of-pocket maximum.
The following chart compares the deductibles, copayments, coinsurance, and out-of-pocket maxima under the current and proposed plans.
Current Plan — Proposed Plan — Proposed Plan —
All Retirees Pre-Medicare Medicare-Eligible
Retirees Retirees
In-network: $0 In-network: $200 $250 individual
Out-of-network: individual and and $500 family
Annual $100 individual $400 family
Deductibles and $300 family Out-of-network:
$500 individual
and $1,000 family
Post-Deductible In-network: 100% In-network: 85% 80%
Coverage Out-of-network: Out-of-network:
(Coinsurance) 80% 65%
Copayments $5 $20 (office visits) None
In-network: N/A In-network: $1,000 $1,500 individual
Out-of-network: individual and and $3,000 family
Annual Out-of-Pocket $1,000 individual $2,000 family
Maxima and $2,000 family Out-of-network:
$2,000 individual
Current Plan —All Proposed Plan —Pre-Medicare Proposed Plan —Retirees Retirees Medicare-Eligible Retirees Generic and Branded: Generic: $10 short term No Coverage $5 short term $20 long term $0 long term Branded (formulary): $40 short term $80 long term Branded (non-formulary): $60 short term $120 long term
Consideration [5], above, requires the Court to compare the quality of care available under the current and proposed plans. The parties agree that the quality of care is comparable under both plans, except that the quality of care for Medicare-eligible participants is reduced under the proposed plan due to the unavailability of prescription drug coverage for that class of participants through the plan. Aside from this, the parties agree that both plans cover services that are "medically necessary" for the care of the participant and offer the same suite of benefits.
The Court's analysis of the first five considerations above, all of which bear on whether the proposed plan is "reasonably commensurate" to the current plan, reveals that the plan proposed by CNH bears little resemblance to the current plan from a cost-sharing perspective. In sum, Plaintiffs are far worse off under the proposed plan and the cost-shift proposed by CNH is extreme. In 2015, out-of-pocket costs under the proposed plan are expected to be more than twelve times higher for pre-Medicare retirees than they would be for the same year under the current plan and almost sixteen times higher for Medicare-eligible retirees. By 2032, the numbers become even more staggering. Pre-Medicare retirees are expected to pay out-of-pocket costs under the proposed plan that are more than thirty-six times those which they would be paying in 2032 under the current plan, and Medicare-eligible retirees are expected to pay costs that are almost seventeen times higher than those they would be paying under the current plan.
In allowing "reasonable" modifications to Plaintiffs' vested healthcare benefits, this Court does not believe the Sixth Circuit had in mind anything near the magnitude of the changes proposed here. "Reasonably commensurate" changes must mean, at a minimum, changes that are not drastic. Because the cost changes proposed here are drastic, the Court does not believe
Therefore, the Court concludes that the proposed plan is far from "reasonably commensurate" — or "equal in measure or extent" — to the current plan. Because the issue is not a close one, as CNH has opted to propose a plan that drastically increases retiree costs with no meaningful mitigating benefit, the Court does not believe that this case requires it expand the meaning of "reasonably commensurate," as the parties urge, beyond the dictionary definitions articulated above.
Before proceeding to the next element of the Reese framework, the Court notes that CNH's reliance on Tackett v. M&G Polymers USA, LLC, 733 F.3d 589 (6th Cir.2013), vacated and remanded on other grounds, ___ U.S. ___, 135 S.Ct. 926, 190 L.Ed.2d 809 (2015), is misplaced. In that case, the Sixth Circuit held, with no analysis, that the district court did not clearly err in finding the following modifications to healthcare benefits reasonable under the standard set forth in Reese: An increase in the co-pay for generic drugs from $4 to $10, an increase in the annual prescription drug deductible from $175 to $250, and an increase in the out-of-pocket maximum from $500 to $4,000 per family. Id. at 601. This aspect of Tackett's holding is not helpful to CNH because the changes proposed by CNH in the present case are, considered cumulatively, more extreme than the changes approved in Tackett. Moreover, CNH's reliance on the case overlooks both the deferential standard of review employed by the Tackett court and the court's failure to offer any meaningful analysis in support of its conclusory holding.
Pursuant to consideration [6] of the framework set forth in Reese, above, this Court must compare the benefits provided to current CNH retirees with the benefits that would be provided to Plaintiffs under the proposed plan, and determine whether the latter benefits are "roughly consistent with the kinds of benefits provided to current employees."
Current CNH retirees receive their benefits under a CBA which became effective in 2010. The 2010 CBA is materially identical to the parties' prior CBA, which became effective in 2005. The parties seem to agree that the two plans — the proposed plan and the plan available to current CNH retirees — are roughly equivalent.
However, Plaintiffs argue that, although the plans themselves are similar, current CNH retirees are better off in terms of their overall healthcare situation than Plaintiffs would be under the proposed plan. Plaintiffs argue that current retirees obtained significant benefit improvements that were successfully bargained-for and
First, CNH agreed to a pension increase for post-2005 retirees. According to Plaintiffs, current retirees receive $6,000 per year in additional supplemental allowance pension payments until age sixty-two and retirees who have been employed for at least thirty years receive an annual increase in basic pension benefits of $1,746 per year starting at age sixty-two and continuing for life. CNH does not dispute this, although it points out that pension amounts are a function of pension rates and years of service and thus a current retiree who has less years of service may receive a smaller pension than a retiree in Plaintiffs' Class. Nevertheless, CNH does not dispute that pension rates are higher for current retirees than for Plaintiffs.
Second, CNH agreed to increase the monthly Medicare Part B reimbursement benefit by $34.50, from $65.50 per Medicare participant (the amount Plaintiffs now receive) to $100 (the amount current retirees receive). This benefit improvement provides current retirees with an additional $414 per year (or $818 for married couples) beginning at age sixty-five and continuing for life, in order to offset the loss of CNH-sponsored prescription drug coverage for Medicare-eligible retirees. CNH does not dispute this improvement.
Third, CNH agreed to establish and contribute to Retiree Medical Savings Accounts (RMSA). According to Plaintiffs, CNH contributed a median amount of more than $16,000 for each retiree who retired after May 1, 2005 for a period of six years (i.e., during the term of the 2005 CBA). CNH does not dispute this, but states that it is not obligated to make any future contributions to retiree RMSAs going forward. Plaintiffs do not appear to disagree.
CNH asks the Court to ignore the three improved benefits awarded to current retirees as irrelevant to the analysis required under Reese because Reese requires a comparison of only the plans, and the improved benefits are not part of the plan. The Court rejects this rigid reading of Reese. When directing this Court to compare the healthcare plan offered to current retirees with the proposed healthcare plan, the Reese panels may not have contemplated that benefits impacting retiree healthcare affordability could be awarded outside the four corners of the healthcare plans themselves. To consider only the two plans while ignoring other benefits impacting retiree healthcare affordability would result in a distortion of the full retiree healthcare picture.
Plaintiffs argue that the above three benefit improvements, which are available to current retirees but would not be available to Plaintiffs under the proposed plan, place current retirees in a better position than Plaintiffs would be under the proposed plan. However, the exact extent to which current retirees are better off by virtue of the three improvements depends on factors unique to each retiree (years of service, lifespan, etc.) and is difficult to quantify. For example, the three benefit improvements discussed above could have a value of $135,000 over the lifetime of a current retiree with over thirty years of
Another complicating factor is that, while current retirees enjoy some degree of benefit improvements that would be not offered to Plaintiffs under the proposed plan, thereby making current retirees better off than Plaintiffs would be under the proposed plan, the extent to which current retirees are better off (which is already unknown, as it depends on the unique circumstances of the retiree) is reduced by virtue of the fact that current retirees pay more for their benefits, through more expensive premiums, than would Plaintiffs under the proposed plan.
As mentioned, this Court's task is to compare the benefits provided to current CNH retirees with the benefits that would be provided to Plaintiffs under the proposed plan, and to determine whether the benefits that would be provided to Plaintiffs under the proposed plan are "roughly consistent with the kinds of benefits provided to current employees." While there is little difference between the two healthcare plans, the Court cannot ignore the fact that current retirees were awarded improved benefits outside the context of their healthcare plan — benefits that render current retirees better off than Plaintiffs would be under the proposed plan. At the same time, although current retirees are entitled to benefits that are better than those that would be awarded to Plaintiffs, current retirees also pay more for their benefits because their premiums are higher, and will always be higher, than those Plaintiffs would pay under the proposed plan.
The record does not reflect, beyond the next few years, how much less Plaintiffs would pay in premiums under the proposed plan, compared to how much current retirees pay in premiums under the 2005 and 2010 CBAs. Therefore, it is not possible to put a dollar amount on how much Plaintiffs would save in premiums and compare that amount to the value of the improved benefits awarded to current retirees, in order to determine who comes out "on top" — current retirees, who would pay more in premiums but have better overall benefits, or Plaintiffs, who would pay less in premiums but have worse overall benefits.
Assuming that the lifetime value of the improved benefits enjoyed by current retirees is in the same ballpark as the lifetime premium savings that would be enjoyed by Plaintiffs under the proposed plan, and because the healthcare plan offered to current retirees is similar to the proposed plan, the benefits available to Plaintiffs under the proposed plan are "roughly consistent with the kinds of benefits provided to current employees."
In determining whether the changes proposed by CNH are "reasonable in light of changes to health care," the Court is obligated to consider how the proposed plan compares to plans "available to retirees
CNH does not dispute that the comparator plan selected by Plaintiffs, the John Deere plan, is similar to the current plan.
Apparently conceding that the John Deere plan supports Plaintiffs' position, CNH argues that "Reese does not require CNH's proposed plan to match the one plan most favorable to retirees" and that the comparator plan on which they principally rely, the Caterpillar plan, "is consistent with the trend in the marketplace toward greater participant cost-sharing." (ECF No. 426 at Pg ID 15530). The problem with CNH's argument is that if Reese does not require that the proposed plan match a comparator plan that is favorable to retirees, it also cannot require that the proposed plan match comparator plans, such as the ones selected by CNH, that are unfavorable to retirees. Herein lies a problem with consideration [7] of the Reese framework requiring a comparison of the proposed plan with plans offered by "companies similar to CNH and with demographically similar employees": There are all kinds of healthcare plans offered by employers — plans like the current plan that are favorable to retirees, and plans like the proposed plan that are not favorable to retirees. Naturally, the proposed plan will compare favorably to some plans and not to others, and the parties will surely locate the plans that support their respective litigation-induced positions and
As mentioned, CNH relies on a healthcare plan offered by Caterpillar as its principal comparator. Plaintiffs do not dispute that Caterpillar is a company that is "similar to CNH and with demographically similar employees" and that the Caterpillar plan is less favorable to retirees than the proposed plan. However, Plaintiffs argue that the Caterpillar plan is not an appropriate comparator because the unfavorable benefit levels conferred in the Caterpillar plan stem, not from trends in the area of employer healthcare plans, but rather from the unique and contentious bargaining atmosphere and protracted negotiations between the union and Caterpillar.
Plaintiffs submit the declaration of James Atwood, an administrative assistant with UAW who participated in the negotiations between the union and Caterpillar during the relevant time period. (ECF No. 425-2 at Pg ID 15007-08, ¶¶ 7-11). Atwood states that under the union's 1988 CBA with Caterpillar (and under prior CBAs), retirees received healthcare benefits with no premium contribution requirement. (Id. at Pg ID 15008, ¶ 12.) However, beginning in 1991 when the parties began negotiating a successor CBA, the negotiations broke down, employees began to strike, and a lengthy labor dispute ensued, at the beginning of which Caterpillar unilaterally imposed a "cap" on the costs that it would pay for retiree healthcare benefits. (Id. at Pg ID 15008-15009, ¶¶ 13-18.)
In light of the turbulent and unique bargaining history between UAW and Caterpillar, Plaintiffs argue that the Caterpillar plan is not an appropriate comparator because the benefit levels offered under the plan are a function of the distinct bargaining factors and dynamics between Caterpillar and the union, and not healthcare plan trends among companies similar to CNH. Plaintiffs' argument highlights two additional problems with consideration [7] of the Reese framework calling for a
Second, examining a healthcare plan in a vacuum may not paint an accurate and complete picture of how well-off retirees are in terms of their healthcare situation. This is because benefits awarded outside the context of the plan factor into the calculus, as well, and those other benefits, assuming the Court may permissibly consider them under the nebulous Reese framework, may escape detection. For example, a healthcare plan with high participant costs may not translate into overall high participant healthcare costs if the high costs called for under the plan are mitigated through other benefits awarded outside the plan. And the opposite also is true: A healthcare plan calling for low participant costs may not mean participant healthcare costs are low if less generous benefits are awarded outside the plan.
The Caterpillar plan on which CNH relies seems to implicate all of these concerns, calling into question whether the plan reflects the reality of the present-day healthcare market. Moreover, although the principal comparator plan on which CNH relies is the Caterpillar plan, they also discuss many other comparator plans, including plans offered by AT&T, Ford, General Motors, U.S. Steel, Goodyear, and the federal judiciary. According to CNH, these entities have implemented a cost-sharing approach similar to the approach taken in the proposed plan and the benefit levels under these plans are similar to, or less generous than, the benefit levels offered in the proposed plan. In addition, CNH cites a study in which Towers Watson, CNH's benefit consultant, compared the proposed plan with data aggregated in its database of nearly 900 employers. CNH states that the proposed plan is more favorable to retirees than the plans offered by at least 75% of the nearly 900 employers surveyed from the perspective of the participants.
In their response brief, Plaintiffs vigorously attack the utility of CNH's information. Plaintiffs state that the comparator companies on which CNH relies are not companies that are "similar" to CNH and are thus not appropriate comparators. Plaintiffs also argue that the Towers Watson comparison is "devoid of meaning" for many reasons, including the following: (1) the study purposefully excludes unionized employers with collectively bargained plans, despite the availability of a database compiling information on such plans; (2) the study includes only plans that are provided to active employees and not plans that are provided to retirees; and (3) the database was not designed to find companies in the same industry as CNH. Plaintiffs are correct.
Reese instructed the parties and this Court to compare the proposed plan with plans offered at "companies similar to CNH and with demographically similar employees." Accordingly, the Court deems irrelevant plans offered by companies that are not shown to be "similar" to CNH with "demographically similar employees." CNH does not explain how entities like AT&T, Ford, General Motors, U.S. Steel,
In sum, comparing the proposed plan to plans offered by "companies similar to CNH and with demographically similar employees" does not shed light on whether the modifications proposed by CNH are "reasonable in light of changes to health care." Among the many plans offered by employers, the parties have merely selected plans that match their respective litigation positions. Plaintiffs selected a plan that is similar to the current plan and CNH selected plans similar to the proposed plan. Even putting aside the cherry-picking concern, the full participant benefit picture cannot be gleaned from an examination of the healthcare plans alone, as benefits bearing on retiree healthcare costs are sometimes conferred outside the context of the healthcare plan. Moreover, the process by which employee benefits are negotiated is a give-and-take process under which the bargaining parties may agree to forego healthcare benefits in exchange for other types of benefits, or bolster healthcare benefits in exchange for benefit reductions in other areas. Given these practical bargaining realities, the level of healthcare benefits on which the bargaining parties finally settle provides little insight on healthcare trends.
The Court has considered whether the proposed plan provides benefits that are "reasonably commensurate" with the current plan, whether the benefits are "roughly consistent with the kinds of benefits provided to current employees," and whether the proposed changes are "reasonable in light of changes in health care." Regarding the first consideration, the proposed plan imposes a massive cost-shift from CNH to the retirees and is far from "reasonably commensurate" with the current plan. If approval of CNH's plan modifications requires satisfaction of all three elements of the Reese reasonableness framework,
However, even if this Court is wrong about the conjunctive nature of the reasonableness framework and the Reese panels envisioned a balancing approach whereby failure to satisfy one element should not necessarily result in the rejection of CNH's proposed modifications, the Court still rejects CNH's proposed modifications. The first element of Reese's reasonableness framework weighs strongly in favor of rejecting the proposed changes, so much so that the Court believes a strong showing by CNH on the remaining elements of the Reese framework would be necessary to tilt the balance in favor of approving the proposed changes. CNH has failed to make such a showing.
Regarding the third element of Reese's reasonableness framework, whether the proposed changes are "reasonable in light of changes in health care," the relevant inquiry mandated by Reese — a comparison between the proposed plan and "plans available to retirees and workers at companies similar to CNH and with demographically similar employees" — is problematic as a practical matter for all the reasons explained above. This inquiry does not shed light on whether the proposed changes are "reasonable in light of changes in health care." In any event, putting aside the utility of this inquiry, CNH has not shown that the proposed modifications are consistent with plans offered by "companies similar to CNH and with demographically similar employees" any more than Plaintiffs have shown that the proposed modifications are inconsistent with plans offered by "companies similar to CNH and with demographically similar employees." This element does not weigh strongly in support of either side.
For these reasons, the Court concludes that the modifications proposed by CNH are not reasonable under Reese's reasonableness framework and rejects the modifications. CNH argues that the Court should sever the proposed modifications it finds unreasonable and approve the remainder of the modifications. Conversely, Plaintiffs argue that the Court should consider the proposed plan as a whole and not approve or reject it in parts. Nothing in the Reese decisions informs the debate on this issue.
Even if CNH is correct that this Court has authority to consider each modification separately, approving the reasonable proposed changes and rejecting the unreasonable ones, CNH does not argue that the Court must do so, and the Court declines to adopt this approach. As Plaintiffs correctly point out, the piecemeal approach urged by CNH, if adopted, would encourage employers to request modifications that are unreasonable, knowing that they can rely on a court to separately examine each proposed modification and tweak it so that it falls just within the hazy category of "reasonable." It is not the role of a court to write or rewrite a healthcare plan, and incentivizing employers to suggest reasonable modifications while believing them to be unreasonable arguably encourages bad faith conduct. In addition, courts lack the expertise necessary to fashion the specifics of a healthcare plan. The Court does not believe Reese requires, or even contemplates, judicial scrutiny into such minute, yet important, plan details.
For all of the reasons stated above, ok
