Argument preview: Justices to consider vesting of health-care benefits
on Nov 7, 2014 at 12:00 pm
So how is the Supreme Court like a used-car dealer? They both are constantly having problems with their vehicles. The Justices already had to dump Indy Mac from the October session and there’s a good chance that Dart Cherokee will face the same fate. So if the Court’s new relist policy is going to have any positive effect on the stability of the argument calendar this year, the dubious grants should stop coming down the pipe soon.
From that perspective, the briefs in M&G Polymers USA, LLC v. Tackett are not going to give the Justices a lot of comfort. As granted, the case is supposed to present the question whether the Sixth Circuit’s Yard-Man presumption (no typo, that’s really what it’s called) correctly imposes a strong presumption that any grant of health-care benefits in a collective bargaining agreement “vests” those benefits so that they continue, not subject to change, indefinitely after retirement.
I suppose, after last year’s decision in Fifth Third v. Dudenhoeffer, also from the Sixth Circuit, that the question almost answers itself: no presumption in the statute presumably will mean (in the view of the Court) no presumption in the courts. So I guess I shouldn’t be surprised, now that the case has been taken, that the respondents (Hobart Tackett and other affected retirees, along with the union that represented them) decline to defend that presumption. Rather, they argue that collective-bargaining agreements, like all other contracts, should be interpreted in accordance with their plain meaning.
That seems sensible enough, and the kind of thing likely to appeal to the Justices. The difficulty is that a “plain-meaning” standard is almost the same standard as the one that the the petitioners (M&G Polymers, along with several medical benefits programs that it sponsors) propose. So that leaves us with a case a lot like the Nautilus case last year, in which both of the parties, as well as the Solicitor General, advocated standards for assessing the “definiteness” of patent claims that were well nigh indistinguishable. The result in that case was an opinion in which the Justices criticized some phrases commonly found in Federal Circuit opinions and sent the case back with instructions to produce an opinion omitting the offensive phrases.
To the extent that the parties disagree about anything that could be characterized as having general significance, it is about what the plain meaning of these kinds of agreements is. M&G suggests that it is so remarkable that an employer would commit for a functionally unlimited time in the future to provide health benefits with no possibility of agreement that a court should not lightly infer an intent for such a grant. Thus, M&G contends, a rule requiring a clear statement of vesting would reflect the best application of ordinary principles of contract interpretation. Tackett, of course, disagrees, pointing out the many reasons why employers, in the give and take of collective bargaining, well might agree to vested health benefits even for retirees. In the end, though, what the parties really argue about is the meaning of the language in this particular agreement, which hardly seems an issue worth a spot on the Court’s argument calendar.
By far the most interesting thing about the briefing is a pair of noteworthy amicus briefs, neither of which really says anything about the standards for interpretation that the parties debate. The first is from a group of law professors and situates the health-benefits vesting problem in context. What the professors show is that in the 1960s and 1970s, in the days of defined-benefit plans rather than defined-contribution plans, the cost of retiree health benefits was so trivial that firms commonly granted vested health benefits. It was only with the sharp upward spike in health-care costs of the last few decades that this issue came to the fore, making it so rare for employers to grant those benefits now. From my perspective, that brief almost completely rebuts the suggestion of M&G Polymers that the parties’ most likely joint intent would be that the benefits not vest (because it is so unusual that they would vest). That might be true for agreements negotiated today, but it certainly wasn’t true for agreements negotiated decades ago (like the ones before the Court next week).
The second notable brief is from the law firm of Goldstein & Russell, whose managing partner serves as the publisher of this blog. [I suppose it doesn’t go without saying that I have no affiliation with that firm.] The firm wraps itself in the mantle of a “true” amicus, offering a filing that says nothing whatsoever about the proper standard of interpretation or the most likely meaning of the terms of the M&G agreement. Rather, what Goldstein & Russell offers is an empirical assessment of the types of language that commonly appear in these agreements. The premise of the brief is that it would help the Court to know how these agreements ordinarily are written if the Court is going to set down a rule for deciding how to read them.
And I, at least, wholeheartedly agree. It is my guess that the Justices will find the brief particularly useful, although it is not clear whether it cuts in favor of the employer or the employee. What the brief shows, persuasively, is that some agreements (very rarely) explicitly state that health benefits vest, some agreements (though not many) explicitly state that health benefits do not vest, and some agreements (quite a few it turns out) say nothing at all about the duration of benefits. By far the great bulk of the agreements (like the one before the Court) have some level of ambiguity; the brief divides those agreements into five different types based on the language that the agreements use to describe the duration of the benefits. The type presented here (benefits last “for the duration of” the agreement) apparently represents about twenty-five percent of all agreements.
Among other things, this suggests that if the Court wants to be done with this issue, it needs to adopt a rule that will give guidance for more of the drafting choices than the one before the Court. Most obviously, if it doesn’t indicate some preference for any kind of “thumb on the scale” one way or the other, lower courts will be completely at sea when they face the agreements that say nothing at all about whether the benefits vest.
[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, filed an amicus brief in support of neither party in this case. The author of this post represented the respondents in Fifth Third Bankcorp v. Dudenheoffer, but is not involved with this case.]
