Supreme Court quashes CBA lifetime benefits


What is it the 6th Circuit does not understand about using "ordinary principles of contract law" to interpret collective bargaining agreements? In MGM Polymers USA v. Tackett (US Supreme Court 2014) [PDF] the US Supreme Court (unanimously) told the 6th Circuit to use "ordinary principles of contract law" to interpret collective bargaining agreements. A collective agreement had expired, and the issue was whether the agreement's retiree benefits provision had vested for life. The 6th Circuit had found the contract provision ambiguous, and then used the so-called "Yard-Man inference" to presume that the benefits had vested for life. The Supreme Court reversed, saying "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." (And the Court cited Textile Workers v. Lincoln Mills – a 1957 case.) The Court then declared that Yard-Man inferences do not represent ordinary principles of contract law.

Lifetime vesting again became an issue in CNH Industrial v. Reese (US Supreme Court 02/20/2018) [PDF]. The 6th Circuit again used the Yard-Man inference – but this time the inference was used as a means of finding that the contract was ambiguous in the first place. Having found ambiguity via application of a Yard-Man inference, the 6th Circuit then allowed extrinsic evidence to be introduced.

The Supreme Court slapped down the 6th Circuit in a per curiam decision – without first getting briefs on the merits or hearing oral argument.

My favorite line from the decision (quoting a 6th Circuit dissenter):

"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."

So, Dear 6th Circuit: You can't use a Yard-Man inference to resolve an ambiguity, and you can't use a Yard-Man inference to create an ambiguity. Forget Yard-Man and just use ordinary principles of contract interpretation.