Summary
holding that the CBAs in that case did not grant a vested right to lifetime and unalterable retirement healthcare benefits
Summary of this case from Halstead v. City of FlintOpinion
Docket No. 156086
05-30-2019
Rita KENDZIERSKI, Bonnie Haines, Greg Dennis, Louise Bertolini, John Barker, James Cowan, Vincent Powierski, Robert Stanley, Alan Moroschan, and Gaer Guerber, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs-Appellees, v. MACOMB COUNTY, Defendant-Appellant.
The issue here is whether plaintiffs' collective-bargaining agreements (CBAs) with defendant, Macomb County, granted plaintiffs a vested right to lifetime and unalterable retirement healthcare benefits. The trial court held that while plaintiffs are entitled to lifetime healthcare benefits, defendant can make reasonable modifications to those benefits. On appeal, the Court of Appeals held that plaintiffs are entitled to lifetime and unalterable healthcare benefits and that such benefits cannot be modified absent plaintiffs' consent. Because we conclude that the CBAs did not grant plaintiffs a vested right to lifetime and unalterable benefits, we reverse the judgment of the Court of Appeals and remand to the Macomb Circuit Court for entry of an order granting summary disposition to defendant consistent with this opinion. I. BACKGROUND
This is a class action brought on behalf of approximately 1600 unionized Macomb County employee retirees who worked for defendant under various CBAs dating back to 1989. Plaintiffs claim that in 2009 and 2010 defendant breached these agreements by reducing and altering their healthcare benefits; plaintiffs now seek both monetary damages and injunctive relief. It is undisputed that each CBA contained an express three-year durational provision and that none of the CBAs contained a provision expressly granting a vested right to lifetime and unalterable retirement healthcare benefits. The trial court granted defendant’s motion for summary disposition, concluding that while plaintiffs are entitled to lifetime healthcare benefits under the agreements, defendant is permitted to make reasonable modifications to those benefits. The Court of Appeals affirmed in part and reversed in part, concluding that while plaintiffs are entitled to lifetime healthcare benefits, those benefits cannot be modified absent plaintiffs' consent. Kendzierski v. Macomb Co. , 319 Mich. App. 278, 286-289, 901 N.W.2d 111 (2017). We ordered and heard oral argument on whether to grant defendant’s application for leave to appeal. Kendzierski v. Macomb Co. , 501 Mich. 966, 905 N.W.2d 602 (2018).
II. STANDARDS OF REVIEW
"This Court reviews de novo a trial court’s decision on a motion for summary disposition." Bazzi v. Sentinel Ins. Co. , 502 Mich. 390, 398, 919 N.W.2d 20 (2018). "This Court also reviews de novo questions of ... the proper interpretation of a contract." Id. III. ANALYSIS
It is undisputed that all of the CBAs contain the following provisions or provisions that are "materially similar":
At oral argument before this Court, defense counsel indicated that all of the pertinent CBAs contain "similar provisions" and that there is no "dispute as to the nature of the provisions in this case"; plaintiffs' counsel also stated that the CBAs are "materially similar."
Retirees: The Employer will provide fully paid Blue Cross/Blue Shield Hospital-Medical coverage to the employee and the employee’s spouse, after eight (8) years of service with the Employer, for the employee who leaves employment because of retirement and is eligible for and receives benefits under the Macomb County Employees' Retirement Ordinance ....
* * *
Coverage shall be limited to the current spouse of the retiree, at the time of retirement, provided such employee shall retire on or after January 1, 1974. Coverage for the eligible spouse will terminate upon the death of the retiree unless the retiree elects to exercise a retirement option whereby the eligible current spouse receives applicable retirement benefits following the death of the retiree.
Coverage shall be limited to Blue Cross/Blue Shield MVF1 Master Medical with ML Rider, or its substantial equivalence.
* * *
Retired employees and/or their current spouse, upon reaching age 65, shall apply if eligible, and participate in the Medicare Program at their expense as required by the Federal Insurance Contribution Act, a part of the Social Security Program, at which time the Employer’s obligation shall be only to provide "over 65 supplemental" hospital-medical benefit coverage. Failure to participate
in the aforementioned Medicare Program, shall be cause for termination of Employer paid coverage of applicable hospital-medical benefits, as outlined herein for employees who retire and/or their current spouse.
Employees who retire under the provisions of the Macomb County Employees' Retirement Ordinance, and/or their current spouse, who subsequently are gainfully employed, shall not be eligible for hospital-medical benefits, during such period of gainful employment ....
* * *
The parties acknowledge that during the negotiations which resulted in this Agreement each had the unlimited right and opportunity to make demands and proposals with respect to all subjects of collective bargaining and that all agreements and understandings, expressed, implied, written or oral, are set forth in this Agreement. This Agreement expresses the complete understanding of the Parties on the subject of wages, working conditions, hours of work, benefits and conditions of employment.
* * *
This Agreement shall continue in full force and effect until December 31, 2007. [Paragraph lettering omitted.]
The issue is whether the CBAs granted plaintiffs vested rights to lifetime and unalterable retirement healthcare benefits. In Int'l Union, United Auto., Aerospace & Agricultural Implement Workers of America (UAW) v. Yard-Man, Inc. , 716 F.2d 1476, 1478 (C.A. 6, 1983), the United States Court of Appeals for the Sixth Circuit held that the CBAs at issue in that case granted the plaintiffs vested rights to lifetime and unalterable retirement healthcare benefits. However, as recognized by Arbuckle v. Gen. Motors LLC , 499 Mich. 521, 885 N.W.2d 232 (2016), the United States Supreme Court in M & G Polymers USA, LLC v. Tackett , 574 U.S. 427, 135 S.Ct. 926, 190 L.Ed. 2d 809 (2015), overruled Yard-Man (and its progeny) in an opinion that
characterized [ Yard-Man and its progeny] as "placing a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements." Those decisions, the Supreme Court explained, "distort the text of [a collective-bargaining] agreement and conflict with the principle of contract law that the written agreement is presumed to encompass the whole agreement of the parties." Indeed, basic principles of contract interpretation instruct that "courts should not construe ambiguous writings to create lifetime promises" and, absent a contrary intent, that "contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement." For "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." [ Arbuckle , 499 Mich. at 540, 885 N.W.2d 232, quoting Tackett , 574 U.S. at ––––, 135 S.Ct. at 935-937 (quotation marks omitted; second alteration in Arbuckle ).][ ]
In Arbuckle , 499 Mich. at 525, 885 N.W.2d 232, this Court, applying federal law, held that the defendant was allowed to "coordinate plaintiff’s disability pension benefits because the parties' collective-bargaining agreements and the subsequent modifications thereto did not vest plaintiff’s right to uncoordinated benefits." That is, pursuant to express durational clauses within the agreements, we held that provisions that prohibited coordination of benefits terminated when the agreements expired. Id. at 541-543, 885 N.W.2d 232.
Tackett specifically rejected many of the same arguments raised by plaintiffs in the instant case. For example, Tackett rejected Yard-Man ’s presumption that a general durational clause, which specifies when a contract will expire, states nothing about the vesting of retiree benefits. Tackett , 574 U.S. at ––––, 135 S.Ct. at 937. It also rejected the presumption of vesting based on provisions that: (a) tie eligibility for retirement health benefits to eligibility for a pension, (b) enable continuation of a surviving spouse’s healthcare coverage following the death of the retiree, and (c) specify that the employer will pay a retiree’s insurance once he or she reaches age 65 when employees could retire at age 55. Id. at ––––, 135 S.Ct. at 937.
Yard-Man , 716 F.2d at 1482-1483, held that given that a general durational clause does not specifically pertain to the duration of retiree benefits, it is outweighed by other considerations. Subsequently, Noe v. PolyOne Corp. , 520 F.3d 548, 555 (C.A. 6, 2008), abrogated by Tackett , 574 U.S. ––––, 135 S.Ct. 926, held that "[a]bsent specific durational language referring to retiree benefits themselves, a general durational clause says nothing about the vesting of retiree benefits." (Quotation marks and citation omitted; alteration in Noe .)
Tackett also rejected the argument that retiree healthcare benefits constitute a form of "deferred compensation." Tackett , 574 U.S. at ––––, 135 S.Ct. at 936.
Yard-Man , 716 F.2d at 1482, held that "if [employees] forego wages now in expectation of retiree benefits, they would want assurance that once they retire they will continue to receive such benefits"; "[a]s such, it is unlikely that such benefits ... would be left to the contingencies of future negotiations." It further held that "when ... parties contract for benefits which accrue upon achievement of retiree status, there is an inference that the parties likely intended those benefits to continue as long as the beneficiary remains a retiree." Id. Tackett , 574 U.S. at ––––, 135 S.Ct. at 935, 937, rejected these inferences as "inconsistent with ordinary principles of contract law," explaining that " Yard-Man ’s assessment of likely behavior in collective bargaining is too speculative and too far removed from the context of any particular contract to be useful in discerning the parties' intention" and that the Yard-Man Court "derived its assessment of likely behavior not from record evidence, but instead from its own suppositions about the intentions of employees, unions, and employers negotiating retiree benefits." Furthermore, Tackett held that Yard-Man failed to recognize the traditional principle that "contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement" and that while "a collective-bargaining agreement may provide in explicit terms that certain benefits continue after the agreement’s expiration[,] ... 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." Id. at ––––, 135 S.Ct. at 937 (quotation marks, citation, and brackets omitted).
See Litton Fin. Printing Div. v. Nat'l Labor Relations Bd. , 501 U.S. 190, 206, 111 S.Ct. 2215, 115 L.Ed. 2d 177 (1991) ("[A]n expired contract has by its own terms released all its parties from their respective contractual obligations ....").
Post- Tackett , "the Sixth Circuit [in Reese v. CNH Indus. N.V. , 854 F.3d 877, 882-883 (C.A. 6, 2017),] 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." CNH Indus. N.V. v. Reese , 583 U.S. ––––, ––––, 138 S.Ct. 761, 763, 200 L.Ed. 2d 1 (2018). The United States Supreme Court characterized this new analysis as " Yard-Man re-born, re-built, and re-purposed for new adventures" and again reversed. Id. at ––––, 138 S.Ct. at 763 (quotation marks and citation omitted). It held that the Yard-Man inferences could not be used to render a CBA ambiguous. Id. at ––––, 138 S.Ct. at 763. Finally, the Supreme Court held that the CBA at issue was unambiguous and that it did not create lifetime healthcare benefits for retirees. Id. at ––––, 138 S.Ct. at 766. It observed:
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. Similarly, when an agreement does not specify a duration for health care benefits in particular, other courts would simply apply the general durational clause. And other courts would not find ambiguity from the tying of retiree benefits to pensioner status....
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 specified otherwise. No provision specified that the health care benefits were subject to a different durational clause.... If the parties meant to vest health care 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. Thus, the only reasonable interpretation of the 1998 agreement is that the health care benefits expired when the collective-bargaining agreement expired in May 2004. "When the intent of the parties is unambiguously expressed in the contract, that expression controls, and the court’s inquiry should proceed no further." [ Id. at ––––, 138 S.Ct. at 766 (citations omitted; alteration in Reese ).][ ]
In Int'l Union, United Auto., Aerospace & Agricultural Implement Workers of America v. Kelsey-Hayes Co. , 854 F.3d 862, 868-871 (C.A. 6, 2017), the Sixth Circuit held that the CBA at issue in that case was also "ambiguous" regarding retiree healthcare benefits and that the extrinsic evidence indicated that the parties intended the CBA to provide lifetime healthcare benefits. However, the United States Supreme Court vacated the Sixth Circuit’s decision and remanded the case for reconsideration in light of its decision in Reese . Kelsey-Hayes Co. v. Int'l Union, United Auto., Aerospace & Agricultural Implement Workers of America , 583 U.S. ––––, 138 S.Ct. 1166, 200 L.Ed. 2d 313 (2018).
The Court of Appeals in the instant case did exactly what the Sixth Circuit did in Reese , i.e., it relied on the Yard-Man inferences to find the CBAs ambiguous and then resorted to extrinsic evidence to find in favor of lifetime healthcare benefits. Although this Court is not bound to follow the United States Supreme Court’s opinion in Reese , we choose to follow it because it is fully consistent with Michigan’s own principles of contract law.
The dissent distinguishes Tackett on the ground that Tackett "did not address whether there was ambiguity in the parties' CBA ...." However, Reese , 583 U.S. at ––––, 138 S.Ct. at 763, expressly held that "the same Yard-Man inferences ... once used to presume lifetime vesting [until rejected by Tackett cannot] now be used to render a collective-bargaining agreement ambiguous ... about lifetime vesting." That is, Reese very clearly held that the reasoning in Tackett applies equally when the question is whether a CBA is ambiguous about lifetime vesting.
The dissent also asserts that Reese is distinguishable because the "CBA [in Reese ] differed from those here in one important respect that mattered to the Court’s analysis: it included language that specifically tied the promise of retiree healthcare to the agreement’s general durational clause." We respectfully disagree. In Reese , a group benefit plan was incorporated into the CBA by language providing that the group benefit plan " ‘will run concurrently with this Agreement and is hereby made a part of this Agreement.’ " Reese v. CNH Indus. N.V. , 854 F.3d 877, 889 (C.A. 6, 2017) (emphasis omitted), rev'd 583 U.S. ––––, 138 S.Ct. 761, 200 L.Ed.2d 1 (2018). Because the group benefit plan was a separate agreement from the CBA, this language was necessary to incorporate the group benefit plan into the CBA and to indicate that it would be subject to the same durational provision of the CBA. Furthermore, although Reese referred to this provision, it was by no means viewed by the Court as dispositive as evidenced by its single reference to this language in its analysis (as compared to the dissent’s five references to such language or the lack of such language in its analysis). Instead, Reese held that the CBA "contained a general durational clause that applied to all benefits, unless the agreement specified otherwise," which it did not. Reese , 583 U.S. at ––––, 138 S.Ct. at 766. As both Tackett and Reese held, " ‘contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.’ " Id. at ––––, 138 S.Ct. at 763, quoting Tackett , 574 U.S. at ––––, 135 S.Ct. at 937 (quotation marks and citation omitted). Accordingly, "when an agreement does not specify a duration for health care benefits in particular, ... courts [should] simply apply the general durational clause." Reese , 583 U.S. at ––––, 138 S.Ct. at 766. This is true regardless of whether there is a provision specifically tying the contractual obligation to the general durational clause because "[a]bsent a longer time limit in the context of a specific provision, the general durational clause supplies a final phrase to every term in the CBA: ‘until this agreement ends.’ " Gallo v. Moen Inc. , 813 F.3d 265, 269 (C.A. 6, 2016), cert. den. 580 U.S. ––––, 137 S.Ct. 375, 196 L.Ed.2d 293 (2016) (emphasis added). See also Cooper v. Honeywell Int'l, Inc. , 884 F.3d 612, 618 (C.A. 6, 2018) ("[A] general durational clause should be ‘applied to all benefits, unless the agreement specified otherwise.’ ") (emphasis added), quoting Reese , 583 U.S. at ––––, 138 S.Ct. at 766 ; Cole v. Meritor, Inc. , 855 F.3d 695, 701 (C.A. 6, 2017) (" ‘In the absence of specific language in the retiree healthcare provisions, the general durational clause controls.’ "), quoting Gallo , 813 F.3d at 272.
Indeed, Tackett , 574 U.S. at ––––, 135 S.Ct. at 936, criticized Sixth Circuit decisions that, as with the dissent here, "refused to apply general durational clauses to provisions governing retiree benefits" and instead "requir[ed] a contract to include a specific durational clause for retiree health care benefits to prevent vesting," i.e., to counter the inference that "retiree benefits generally last as long as the recipient remains a retiree ...." Similarly, the dissent here chooses not to apply general durational clauses to provisions governing retiree benefits and instead would obligate the CBAs to include affirmative "language explicitly linking the providing of retiree healthcare benefits to the CBA’s durational clause" in order to prevent vesting, i.e., in order to counter the inference that "retirement healthcare was a promise that they would have healthcare for the period of their retirement. " The Sixth Circuit in Yard-Man , 716 F.2d at 1482, relied on that same inference: "when ... parties contract for benefits which accrue upon achievement of retiree status, there is an inference that the parties likely intended those benefits to continue as long as the beneficiary remains a retiree," and Tackett rejected this reasoning. As Tackett explained, such an analysis "distort[s] the text of the agreement and conflict[s] with the principle of contract law that the written agreement is presumed to encompass the whole agreement of the parties." Tackett , 574 U.S. at ––––, 135 S.Ct. at 936.
The parties do not dispute that, unlike in Arbuckle , 499 Mich. at 532-536, 885 N.W.2d 232, state law controls here, presumably because while Arbuckle involved the interpretation of CBAs with a private employer, the instant case involves the interpretation of CBAs with a public employer, i.e., a political subdivision of the state. See 29 USC 185(a) (providing that "[s]uits for violation of contracts between an employer and a labor organization" may be brought in federal court); 29 USC 152(2) (excluding from the definition of "employer" in 29 USC 185(a) "any State or political subdivision thereof"); Jackson Transit Auth. v. Local Div. 1285, Amalgamated Transit Union, AFL-CIO-CLC , 457 U.S. 15, 23, 102 S.Ct. 2202, 72 L.Ed. 2d 639 (1982) ("[L]abor relations between local governments and their employees are the subject of a longstanding statutory exemption from the National Labor Relations Act.").
"Our goal in contract interpretation is to give effect to the intent of the parties, to be determined first and foremost by the plain and unambiguous language of the contract itself." Wyandotte Electric Supply Co. v. Electrical Technology Sys., Inc. , 499 Mich. 127, 143-144, 881 N.W.2d 95 (2016). "If the contractual language is unambiguous, courts must interpret and enforce the contract as written, because an unambiguous contract reflects the parties' intent as a matter of law." In re Smith Trust , 480 Mich. 19, 24, 745 N.W.2d 754 (2008). "However, if the contractual language is ambiguous, extrinsic evidence can be presented to determine the intent of the parties." Id.
"A contractual term is ambiguous on its face only if it is equally susceptible to more than a single meaning." Barton-Spencer v. Farm Bureau Life Ins. Co. of Mich. , 500 Mich. 32, 40, 892 N.W.2d 794 (2017). In addition, "if two provisions of the same contract irreconcilably conflict with each other, the language of the contract is ambiguous." Klapp v. United Ins. Group Agency, Inc. , 468 Mich. 459, 467, 663 N.W.2d 447 (2003). However, "ambiguity is a finding of last resort ...." Mayor of the City of Lansing v. Pub. Serv. Comm. , 470 Mich. 154, 165 n. 6, 680 N.W.2d 840 (2004). That is, "a finding of ambiguity is to be reached only after all other conventional means of interpretation have been applied and found wanting." Id. at 165, 680 N.W.2d 840 (quotation marks, citation, and brackets omitted). "[W]e will not create ambiguity where the terms of the contract are clear." Frankenmuth Mut. Ins. Co. v. Masters , 460 Mich. 105, 111, 595 N.W.2d 832 (1999). "[C]ourts cannot simply ignore portions of a contract ... in order to declare an ambiguity." Klapp , 468 Mich. at 467, 663 N.W.2d 447.
See Mayor of the City of Lansing v. Pub. Serv. Comm. , 470 Mich. 154, 166, 680 N.W.2d 840 (2004) ("[A] provision of the law is ambiguous only if it irreconcilably conflicts with another provision or when it is equally susceptible to more than a single meaning.") (quotation marks, citation, and brackets omitted).
"A fundamental tenet of our jurisprudence is that unambiguous contracts are not open to judicial construction and must be enforced as written. " Rory v. Continental Ins. Co. , 473 Mich. 457, 468, 703 N.W.2d 23 (2005). "Courts enforce contracts according to their unambiguous terms because doing so respects the freedom of individuals freely to arrange their affairs via contract." Id. "The general rule of contracts is that competent persons shall have the utmost liberty of contracting and that their agreements voluntarily and fairly made shall be held valid and enforced in courts." Terrien v. Zwit , 467 Mich. 56, 71, 648 N.W.2d 602 (2002) (quotation marks, citation, and brackets omitted). "When a court abrogates unambiguous contractual provisions based on its own independent assessment of ‘reasonableness,’ the court undermines the parties' freedom of contract." Rory , 473 Mich. at 468-469, 703 N.W.2d 23. "This approach, where judges divine the parties' reasonable expectations and then rewrite the contract accordingly, is contrary to the bedrock principle of American contract law that parties are free to contract as they see fit, and the courts are to enforce the agreement as written absent some highly unusual circumstance, such as a contract in violation of law or public policy." Wilkie v. Auto-Owners Ins. Co. , 469 Mich. 41, 51, 664 N.W.2d 776 (2003). "[T]he rule of reasonable expectations clearly has no application when interpreting an unambiguous contract because a policyholder cannot be said to have reasonably expected something different from the clear language of the contract." Id. at 62, 664 N.W.2d 776. These contract principles apply to CBAs just as they do with regard to any other contract. As this Court has explained:
The dissent appears to be relying on the rule of reasonable expectations to discern an ambiguity in the CBAs when it states in several places that plaintiffs "believe[d]," "underst[ood]," and "thought" that they would have healthcare benefits for the rest of their lives. However, what plaintiffs believed, understood, and thought about their healthcare benefits is only relevant to the extent that it is supported by the actual language of the pertinent CBAs. Wilkie , 469 Mich. at 60, 664 N.W.2d 776 ("[O]ne’s alleged ‘reasonable expectations’ cannot supersede the clear language of a contract.").
The foundational principle of our contract jurisprudence is that parties must be able to rely on their agreements. This principle applies no less strongly to collective bargaining agreements: when parties to a collective bargaining agreement bargain about a subject and memorialize the results of their negotiation in a collective bargaining agreement, they create a set of enforceable rules—a new code of conduct for themselves—on that subject. A party to the collective bargaining agreement has a right to rely on the agreement as the statement of its obligations on any topic covered by the agreement. [ Macomb Co. v. AFSCME Council 25 , 494 Mich. 65, 80, 833 N.W.2d 225 (2013) (quotation marks and citations omitted).]
In Harper Woods Retirees Ass'n v. City of Harper Woods , 312 Mich. App. 500, 512-513, 879 N.W.2d 897 (2015), the Court of Appeals "conclude[d] that the [United States] Supreme Court’s reasoning in Tackett is consistent with Michigan’s contract jurisprudence regarding CBAs, which applies with equal force in both the public and private sectors." The Court of Appeals rejected the plaintiffs' argument that "their right to the specific healthcare benefits included in their CBAs and contracts continued indefinitely after retirement, regardless of whether the explicit terms of the contracts indicated that the parties intended those benefits to continue after the agreements expired." Id. at 511, 879 N.W.2d 897. Instead, "the language governing retiree healthcare benefits [must] indicate[ ] that the parties intended the same benefits to continue after expiration of the agreements ...." Id. at 513, 879 N.W.2d 897. If the language does not so indicate, "the benefits terminated after expiration of the agreements, so that defendant was permitted to alter the benefits under future contracts." Id.
Post- Tackett , the Sixth Circuit addressed this same issue in Gallo v. Moen Inc. , 813 F.3d 265 (C.A. 6, 2016), cert. den. 580 U.S. ––––, 137 S.Ct. 375, 196 L.Ed.2d 293 (2016), and concluded that the CBAs did not provide lifetime and unalterable healthcare benefits to retirees and dependents. The court observed:
This Court approvingly cited Gallo in Arbuckle , 499 Mich. at 540 n. 56, 885 N.W.2d 232.
First and foremost , nothing in this or any of the other CBAs says that Moen committed to provide unalterable healthcare benefits to retirees and their spouses for life. That is what matters, and that is where the plaintiffs fall short. Tackett directs us to apply ordinary contract principles and not to tilt the inquiry in favor of vesting—a frame of reference that prompts two questions. What
is the contract right that the plaintiffs seek to vindicate? And does the contract contain that right? The plaintiffs claim a right to healthcare benefits for life. But the contracts never make that commitment. Yes, Moen offered retirees healthcare benefits. And yes Moen, like many employers, may have wished that business conditions and stable healthcare costs (hope springs eternal) would permit it to provide similar healthcare benefits to retirees throughout retirement. But the question is whether the two parties signed a contract to that effect. Nothing of the sort appears in the collective bargaining agreements.
Second , not only do the CBAs fail to say that Moen committed to provide unalterable healthcare benefits for life to retirees, everything they say about the topic was contained in a three-year agreement. If we do not expect to find "elephants in mouseholes" in construing statutes, we should not expect to find lifetime commitments in time-limited
agreements. Each of the CBAs made commitments for approximately three-year terms—well short of commitments for life. Present in each CBA, the general durational clause supplied a concrete date of expiration after which either party could terminate the agreement. When a specific provision of the CBA does not include an end date, we refer to the general durational clause to determine that provision’s termination. Absent a longer time limit in the context of a specific provision, the general durational clause supplies a final phrase to every term in the CBA: "until this agreement ends." Reading the healthcare provisions in conjunction with the general durational clause gives meaning to the phrases "[c]ontinued," "will be provided," "will be covered," and the like. These terms guarantee benefits until the agreement expires, nothing more. [ Id. at 269 (citations omitted).]
The Gallo analysis applies equally to the instant case. It is undisputed that none of the CBAs at issue specifies that defendant committed itself to provide lifetime and unalterable healthcare benefits. It is also undisputed that the CBAs contain three-year durational provisions. Therefore, the CBAs guarantee benefits only until the agreements expire and no longer. In other words, because the CBAs do not specify an alternative ending date for healthcare benefits, their general durational clauses control.
The trial court here found that the CBAs are not ambiguous and that "[d]efendant did not promise or otherwise obligate itself under the clear language to provide a certain duration or level of retiree healthcare coverage beyond the term of each CBA." Indeed, it held that "plaintiffs have not pointed to any specific CBA language explicitly conferring lifetime or unalterable healthcare benefits on retirees." Nevertheless, the court held that plaintiffs are entitled to lifetime healthcare benefits because "plaintiffs have proffered unrefuted evidence that defendant has acknowledged that retiree healthcare coverage is a lifetime benefit." Finally, the trial court held that these lifetime benefits are not unalterable because "plaintiffs have not established [that] defendant has unequivocally acknowledged that it is obligated to provide[ ] unalterable retiree healthcare coverage." The court concluded that while "retirees have lifetime healthcare benefits," defendant "may reasonably modify the scope and level of benefits from those that existed when the retirees retired."
While the trial court correctly held that the CBAs are not ambiguous and that they do not provide for unalterable lifetime healthcare benefits, it nonetheless relied on extrinsic evidence to conclude that plaintiffs are entitled to lifetime benefits that can be reasonably modified. However, since the CBAs are not ambiguous, the trial court should not have considered extrinsic evidence because the "parol evidence rule ... prohibits the use of extrinsic evidence to interpret unambiguous language within a document." Shay v. Aldrich , 487 Mich. 648, 667, 790 N.W.2d 629 (2010) ; see also In re Smith Trust , 480 Mich. at 24, 745 N.W.2d 754.
Although the Court of Appeals recognized that the "CBAs do not expressly state whether the benefits were promised indefinitely or only for the duration of the CBA," it concluded that "other contract language creates a latent ambiguity regarding whether the healthcare benefits are vested." Kendzierski , 319 Mich. App. at 286, 901 N.W.2d 111. Given this "latent ambiguity," the Court held that the "trial court properly examined extrinsic evidence to determine the meaning of the CBAs" and properly concluded on this basis that the retirees are entitled to lifetime healthcare benefits. Id. at 286-287, 901 N.W.2d 111. However, the appellate court held that the trial court erred by holding that these benefits could be modified absent plaintiffs' consent because a party may not unilaterally alter vested rights. Id. at 288-289, 901 N.W.2d 111.
Respectfully, the Court of Appeals erred by finding a latent ambiguity. "A latent ambiguity ... is one that does not readily appear in the language of a document, but instead arises from a collateral matter when the document’s terms are applied or executed." Shay , 487 Mich. at 668, 790 N.W.2d 629 (quotation marks and citation omitted). In other words, "[a] latent ambiguity exists when the language in a contract appears to be clear and intelligible and suggests a single meaning, but other facts create the necessity for interpretation or a choice among two or more possible meanings." Id. (quotation marks and citations omitted). Here, the Court of Appeals relied on language within the contract itself to find an ambiguity. Therefore, the Court of Appeals actually found a patent ambiguity, not a latent ambiguity, because the former arises "from the face of the document." Id. at 667, 790 N.W.2d 629. Nevertheless, the Court of Appeals erred by finding even a patent ambiguity. As the trial court correctly held, the CBAs here are unambiguous.
Both defendant’s counsel and plaintiffs' counsel acknowledged at oral argument before this Court that the Court of Appeals misused the term "latent ambiguity." The classic example of a latent ambiguity is found in Raffles v. Wichelhaus , 2 Hurl & C. 906; 159 Eng. Rep. 375 (1864), in which the parties contracted for a shipment "to arrive ex Peerless" from Bombay, but, unbeknownst to the parties, there were two ships named "Peerless" sailing from Bombay on that day, which created a latent ambiguity with regard to the ship to which the contract referred. Nothing similar occurred in the instant case. In other words, nothing outside the four corners of the CBAs calls into question the meaning of the language used within the four corners of the CBAs. Indeed, that a Macomb County Executive once stated that defendant "provides retiree health benefits to eligible County retirees (and their eligible beneficiaries) for their lifetimes" is not even inconsistent with our conclusion that the CBAs do not require defendant to provide benefits to eligible retirees (and beneficiaries) for their lifetimes. Defendant, of course, remains free to provide greater benefits to retirees (and beneficiaries) than those required under the CBAs.
The Court of Appeals rested its ambiguity conclusion on three provisions of the CBAs: (a) "the CBAs contain a ‘survivor’ option permitting continuation of a surviving spouse’s healthcare coverage following the death of the retiree," (b) "the CBAs provide that the agreement may be terminated if the retiree fails to enroll in Medicare at age 65," and (c) "the CBAs provide that healthcare coverage is suspended while the retiree has coverage through another employer but then states that coverage through the CBA recommences once the coverage through the other employer ends." Kendzierski , 319 Mich. App. at 286, 901 N.W.2d 111. On the basis of these provisions, the Court of Appeals concluded that the CBAs were ambiguous as to "whether the parties intended for the retiree benefits to vest ...." Id.
We do not agree that these provisions render the CBAs ambiguous. The first provision relied on by the Court of the Appeals—the surviving-spouse provision—reads:
Coverage shall be limited to the current spouse of the retiree, at the time of retirement, provided such employee shall retire on or after January 1, 1974. Coverage for the eligible spouse will terminate upon the death of the retiree unless the retiree elects to exercise a retirement option whereby the eligible current spouse receives applicable retirement benefits following the death of the retiree.
The Court of Appeals concluded that because the provision "contemplates that coverage will continue until, and even after, the death of the retiree," it "indicates that the parties intended that the healthcare coverage would last beyond the three-year term of the individual CBAs." Kendzierski , 319 Mich. App. at 286, 901 N.W.2d 111. In our judgment, however, the text of the provision does not warrant this conclusion because it only speaks to the disposition of retiree benefits upon the death of the retiree, which could occur within the three-year duration of the CBAs.
The United States Court of Appeals for the Seventh Circuit, in considering a similar surviving-spouse provision, stated as follows:
The retirees argue that the [collective-bargaining insurance agreement] is implicitly extended beyond its three-year term by a clause that provides benefits for surviving spouses until their death or remarriage. This provision, however, refers to the eligibility of individuals to receive benefits under the agreement, not to the duration of the agreement. Surviving spouses were eligible to receive benefits only so long as the [collective-bargaining insurance agreement] was in place. [ Cherry v. Auburn Gear, Inc. , 441 F.3d 476, 483 (C.A. 7, 2006).][ ]
Other federal circuits have interpreted surviving-spouse provisions in a similar fashion. See, e.g., Barton v. Constellium Rolled Prod.-Ravenswood, LLC , 851 F.3d 349, 357 (C.A. 4, 2017) ("The pensioned surviving spouses [summary plan description] provision similarly offers the Retirees little help.... This language simply defines a category of people eligible to receive benefits; it says nothing about the duration for which those benefits will last."); Crown Cork & Seal Co. v. Int'l Ass'n of Machinists and Aerospace Workers, AFL-CIO , 501 F.3d 912, 918 (C.A. 8, 2007) (concluding that a surviving-spouse provision did not contain "explicit vesting language"); IUE-CWA v. Gen. Electric Co. , 745 F. Appx. 583, 598 (C.A. 6, 2018) (declining to infer vesting from a surviving-spouse provision). See also Little Chute Area Sch. Dist. v. Wisconsin Ed. Ass'n Council , 2017 WI App 11, 373 Wis. 2d 668, 686-687, 892 N.W.2d 312 (2017) ("[T]he provision is fully compatible with non-vesting, as survivorship benefits would be available if, for example, an individual retiree died during the term of the relevant CBA, or during a longer period if the parties chose to carry over the survivorship benefit in subsequent CBAs.") (citation omitted).
Similarly, the surviving-spouse provision of the CBAs in this case governs the eligibility of the spouse upon the death of the retiree; it does not set the duration of either the retiree’s or the spouse’s benefits. Therefore, the provision does not evidence an intention that the benefits continue beyond the term provided in the durational clause of the CBAs.
Plaintiffs direct our attention to Bidlack v. Wheelabrator Corp. , 993 F.2d 603 (C.A. 7, 1993), which relied upon a surviving-spouse provision in finding a contract ambiguous as to whether the parties intended retiree benefits to vest. We are not persuaded by plaintiffs' reliance on Bidlack for two reasons. First, the provision at issue in Bidlack , at least arguably, contained durational language—providing that benefits " ‘shall be continued for the spouse after the death of the retiree’ "—while the provision at issue in our case does not. Id. at 605. Second, Bidlack was decided before Tackett and Reese , and its ambiguity analysis stands in tension with Reese . Compare Bidlack , 993 F.2d at 608 ("[T]he agreements are not silent on the issue [of vesting]; they are merely vague."), with Reese , 583 U.S. at ––––, 138 S.Ct. at 766 ("No provision specified that the health care benefits were subject to a different durational clause.").
The Court of Appeals' reliance on the provision requiring enrollment in Medicare at age 65 is also unavailing. That provision states:
Retired employees and/or their current spouse, upon reaching age 65, shall apply if eligible, and participate in the Medicare Program ... at which time the Employer’s obligation shall be only to provide "over 65 supplemental" hospital-medical benefit coverage. Failure to participate in the aforementioned Medicare Program, shall be cause for termination of Employer paid coverage of applicable hospital-medical benefits, as outlined herein for employees who retire and/or their current spouse.
The Court of Appeals reasoned that "[t]his provision again contemplates that the coverage outlasts the three-year period of the CBA given that a retiree may retire years before turning 65." Kendzierski , 319 Mich. App. at 286, 901 N.W.2d 111. But the Sixth Circuit in Serafino v. City of Hamtramck , 707 F. Appx. 345 (C.A. 6, 2017), considered and rejected a similar argument. The provision at issue in that case stated that the employer would pay retirees' medical expenses " ‘until that retired employee attains the age of sixty-five (65) or is eligible for Medicare or Medicaid.’ " Id. at 348. The Sixth Circuit concluded that rather than indicating any intention that the retiree benefits vest, the provision served only to " ‘guarantee[ ] benefits until the agreement expires, nothing more.’ " Id. at 352 (emphasis omitted), quoting Gallo , 813 F.3d at 269. The provision at issue here, by contrast, does not contain even a guarantee of benefits for the duration of the agreement but, rather, conditions continued benefits upon enrollment in Medicare if a retiree reaches age 65 within the duration of the CBA. We are not persuaded that this provision demonstrates that benefits will necessarily outlast the expiration of the CBA itself.
While Serafino is unpublished, the Sixth Circuit later reaffirmed its analysis in Cooper , 884 F.3d at 618-619, recognizing that Reese confirmed that the Sixth Circuit’s reasoning in Serafino was correct.
For this reason, Matthews v. Chicago Transit Auth. , 2016 IL 117638, ¶¶ 83-84, 402 Ill.Dec. 1, 51 N.E.3d 753 (2016), upon which plaintiffs rely, is also distinguishable. The Illinois Supreme Court in that case determined that a provision of the CBA stating that the " ‘benefit terminates when the retiree attains age 65’ " was a "durational provision" and demonstrated the parties' intent that retiree benefits not be "limited by the durational term of the CBA." Id. In the instant case, by contrast, the provision at issue indicates that failure to enroll in Medicare "shall be cause for termination" of benefits. Thus, unlike the provision at issue in Matthews , the relevant provision here does not supplant the general durational term of the CBA but, instead, sets forth a circumstance wherein retiree benefits will terminate before the expiration of the CBA.
Finally, we also do not find that the subsequent-employment provision creates an ambiguity as to whether the parties intended that retiree benefits would vest. It states:
Employees who retire under the provisions of the Macomb County Employees' Retirement Ordinance, and/or their current spouse, who subsequently are gainfully employed, shall not be eligible for hospital-medical benefits, during such period of gainful employment ....
The Court of Appeals identified in this provision an implication "that the retirees will receive healthcare benefits far beyond the three-year term of the CBAs." Kendzierski , 319 Mich. App. at 286, 901 N.W.2d 111. This is not a necessary implication, however, because a retiree might alternatively obtain coverage through another employer before the three-year term of the CBA expires. Moreover, as explained in Reese , we are not engaged here in a search for any implication that benefits continue past the expiration of the CBA itself but, rather, are seeking provisions that, taken as a whole, reasonably and clearly indicate that the retiree benefits are to continue beyond the duration of the CBAs. Reese , 583 U.S. at ––––, 138 S.Ct. at 766 ("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 specified otherwise. No provision specified that the health care benefits were subject to a different durational clause.").
Contrary to the Court of Appeals' analysis, none of these provisions gives rise to an ambiguity. Each of the events addressed in these provisions could occur during the three-year duration of the CBAs. That each of these events could occur beyond that period does not indicate that the parties intended coverage to last beyond the term of the CBAs. Moreover, reading these provisions as encompassing events beyond the duration of the CBAs would obviously give rise to what we view as an altogether unnecessary conflict between these provisions and the general durational provision of the CBAs, when both a more reasonable and a more harmonious understanding can be achieved using the interpretive analysis previously set forth in this opinion. See, e.g., Singer v. Goff , 334 Mich. 163, 168, 54 N.W.2d 290 (1952) (recognizing "the cardinal principle which requires us to construe this contract as a whole and give harmonious effect, if possible, to each word and phrase"). See also Barton v. Constellium Rolled Prod.-Ravenswood, LLC , 851 F.3d 349, 357 (C.A. 4, 2017) ("One can reconcile the dependent coverage provision with the durational language by reading the former to terminate benefits for a retiree’s dependents at the time of the retiree’s death, while the benefits for dependents of surviving retirees terminate at the end of the CBA. This reading seems the likelier manifestation of the parties' intent, both because it harmonizes the purportedly conflicting provisions and because the dependent coverage sections of the [summary plan description] contain nothing explicit about vesting."). Therefore, simply because these events could occur beyond the duration of the CBAs does not lead us to conclude that the parties intended such coverage to last in perpetuity. Accordingly, these provisions do not render the CBAs ambiguous. The CBAs contain a general three-year durational clause, and no provision specifies that the benefits in dispute are subject to any different duration. If the parties meant to vest healthcare benefits for life, they easily could have said so in the CBAs, but they did not. The CBAs specify that "all agreements and understandings, expressed, implied, written or oral, are set forth in this Agreement" and that "[t]his Agreement expresses the complete understanding of the Parties on the subject of ... benefits ...." Therefore, the only reasonable interpretation of the CBAs is that the contractual right to healthcare benefits expired when the CBAs expired. This holding is consistent with our holding in Arbuckle that given the durational clauses at issue, the provisions that prohibited the coordination of benefits terminated when the agreements expired. Arbuckle , 499 Mich. at 541-543, 885 N.W.2d 232. It is also consistent with Tackett , which held that "contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement" and that while "a collective-bargaining agreement may provide in explicit terms that certain benefits continue after the agreement’s expiration[,] ... 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." Tackett , 574 U.S. at ––––, 135 S.Ct. at 937 (quotation marks, citation, and brackets omitted). Because the CBAs at issue here do not indicate that the provided benefits are to continue after the agreement’s expiration, this Court will not infer that the parties intended those benefits to vest for life. Instead, we hold that the contractual obligations provided therein expired when the CBAs expired.
The dissent relies on the same three provisions and concludes that these "imply that the County and the unions intended that healthcare benefits specific to retirees would last for those retirees' entire retirements. " For the reasons explained earlier in this opinion, we disagree. The dissent also contends that these provisions "differentiate these contracts from those at issue in Reese ." However, the dissent fails to recognize that these provisions are similar to provisions at issue in Tackett ; that Tackett rejected the Sixth Circuit’s conclusion that these provisions "indicate[ ] an intent to vest retirees with lifetime benefits," Tackett , 574 U.S. at ––––, 135 S.Ct. at 933 ; and that Reese , 583 U.S. at ––––, 138 S.Ct. at 765, 763, held that "the inferences that this Court rejected in Tackett " cannot be "used to render a collective-bargaining agreement ambiguous ...." The dissent also relies on Alday v. Raytheon Co. , 693 F.3d 772, 785 (C.A. 9, 2012), and Quesenberry v. Volvo Trucks North America Retiree Healthcare Benefit Plan , 651 F.3d 437, 441 (C.A. 4, 2011), for the proposition that an "ambiguity can arise ‘where a CBA links eligibility for a particular right "to an event that would almost certainly occur after the expiration of the agreement" ... [because] such linkage "signals the parties' intent to continue retirement benefits notwithstanding expiration." ’ " (Alteration in minority opinion.) However, those cases are significantly distinguishable. The provision at issue in Alday , 693 F.3d at 783, at least arguably, contained durational language—" ‘the Employer agrees to continue to provide the Comprehensive Medical Plan coverages for which they were covered while active employees, until the retired employee attains age 65’ "—while the provisions at issue in our case do not. Furthermore, the provision at issue in Quesenberry tied benefits to an event that was practically certain to occur after the expiration of the CBA—"[i]t is almost inconceivable ... that this negotiated mechanism would be triggered during the scope of the 2005 CBA," Quesenberry , 651 F.3d at 441 —while it is by no means inconceivable that the events addressed in the provisions at issue in our case could take place during the three-year duration of the CBAs. Further, Alday and Quesenberry were decided before both Tackett and Reese , and as noted by the Tackett Court, "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." Tackett , 574 U.S. at ––––, 135 S.Ct. at 937 (emphasis added). Finally, contrary to the dissent’s contention, we do "leave[ ] open [the] possibility of ambiguity[.]" For example, if a CBA contained a general durational clause and also a provision, as with the one in Quesenberry , that tied benefits to an event that could only occur or would almost certainly not occur until after the expiration of the CBA, that CBA would be ambiguous (at least in the absence of any other provision that might resolve the ambiguity). Accordingly, contrary to the dissent’s suggestion, we do not "condition a finding of ambiguity on whether the agreement contained language expressly disclaiming application of the general durational clause to the promise of retiree healthcare," nor do we require "express language in the CBAs providing a different duration for retiree healthcare ...." But we do require something more than a provision that ties benefits to an event that could conceivably occur after the expiration of the CBA in order to counter a general durational clause, and we simply disagree with the dissent’s conclusion that the CBAs at issue here contain provisions that tie benefits to events that could only occur or would almost certainly not occur until after the expiration of the CBAs.
The dissent finds it "odd" that we "interpret[ ] the agreement as giving benefits for only a short time to any employee who retires near the end of a term, whereas an employee who retires near the beginning of the same CBA would be entitled to nearly three years of those very same benefits." However, that is simply how CBAs with a three-year duration operate. In other words, CBAs, by their nature, regularly expire and are replaced with new CBAs, meaning that both employees who retire and new employees who are hired near the end of the CBA will only be covered by the terms of that CBA until that CBA expires.
That the parties have modified the retiree-benefits provisions of the CBAs over time—see Defendant’s Supplemental Brief, p. 16 ("[R]etiree healthcare benefits have been modified with nearly every CBA since 1987"); Exhibit 1 to Plaintiffs' Motion for Summary Disposition (tracking modifications to retiree-benefit provisions since 1989)—further evidences that the parties did not intend the benefits to be permanent or unalterable. See Cherry , 441 F.3d at 483 ("[T]he parties' practice of changing the contractual terms in succeeding agreements lends support to [the defendant’s] claim that neither party understood the benefits to be permanent or inalterable.").
This Court has already held that there is no constitutional right to retiree healthcare benefits, i.e., that such benefits are not " ‘accrued financial benefits’ " subject to protection from diminishment or impairment by Const 1963, art 9, § 24, and the parties here do not argue to the contrary. See Studier v. Mich. Pub. Sch. Employees' Retirement Bd. , 472 Mich. 642, 645, 698 N.W.2d 350 (2005).
We recognize that Arbuckle is somewhat distinguishable because in that case the agreements specifically provided that the prohibition against benefit coordination was to continue until the termination or amendment of the agreements, whereas in the instant case the specific provisions pertaining to retiree healthcare benefits are silent regarding their duration. However, as Gallo , 813 F.3d at 269, correctly recognized, "[w]hen a specific provision of the CBA does not include an end date, we refer to the general durational clause to determine that provision’s termination." In other words, "[a]bsent a longer time limit in the context of a specific provision, the general durational clause supplies a final phrase to every term in the CBA: ‘until this agreement ends.’ " Id. See also Gibraltar Sch. Dist. v. Gibraltar MESPA-Transp. , 443 Mich. 326, 328, 505 N.W.2d 214 (1993) ("[A]n agreement to arbitrate does not survive expiration of a collective bargaining contract ...."); Ottawa Co. v. Jaklinski , 423 Mich. 1, 29, 377 N.W.2d 668 (1985) (opinion by Williams , C.J.) ("Jaklinski’s right to arbitrate her claim that the Sheriff’s failure to reappoint her was not for just cause did not survive the expiration of the collective bargaining agreement.").
IV. CONCLUSION
Because we conclude that the CBAs did not grant plaintiffs a vested right to lifetime and unalterable retirement healthcare benefits, in lieu of granting leave to appeal, we reverse the judgment of the Court of Appeals and remand to the Macomb Circuit Court for entry of an order granting summary disposition to defendant consistent with this opinion.
Zahra, Viviano, and Clement, JJ., concurred with Markman, J.
McCormack, C.J. (dissenting).
The majority holds that the defendant, Macomb County (the County), is entitled to summary disposition because the County’s contractual promise to provide retiree healthcare benefits does not extend beyond the duration of the County’s collective-bargaining agreements (CBAs) with its employee unions. It reasons that the general durational clauses in the CBAs unambiguously govern that promise because the agreements neither include language exempting retiree healthcare benefits from that general period nor explicitly promise healthcare benefits for the retirees' lifetimes.
The plaintiffs, retired County employees, believe the specific promise of retirement healthcare extended beyond the general contract period. Their understanding has commonsense appeal: they thought retirement healthcare was a promise that they would have healthcare for the period of their retirement. They cite specific language in the agreements governing retiree healthcare to support their view.
I agree with the majority’s understanding of the principles that guide our review of this dispute. But I disagree with its application of those principles to these agreements. Because the CBAs are ambiguous about whether the County promised retiree healthcare benefits for not more than three years, or instead for the full period of plaintiffs' retirements, I would send the question to the fact-finder, who may properly consider extrinsic evidence to resolve it. I respectfully dissent. I. BACKGROUND
For nearly three decades, the County has provided healthcare benefits to its retired employees. Those benefits are described in the CBAs that the County entered into with the unions that represented various groups of County employees. To qualify for the benefits, the CBAs require three things: a retiree must (1) satisfy a years-of-service requirement, (2) be separated from employment with the County because of retirement, and (3) be eligible to receive benefits under the County’s retirement ordinance. See Part III of the majority opinion.
The County entered into a different CBA with each bargaining unit, but the parties agree that the relevant language in each CBA is "materially similar."
Each CBA also contained a general, three-year durational provision. The final article of the 2008–2010 CBAs, for example, provided, "This Agreement shall continue in full force and effect until December 31, 2010." The parties agree that earlier CBAs contained either this same durational clause (varying only in end date) or a substantially similar one. The historical practice was that at the end of every three-year period, the County and the unions would enter into a successive CBA for another three-year term.
The first round of CBAs expired on December 31, 1989.
Beginning in 2009, in the middle of the 2008–2010 CBAs, the County unilaterally implemented changes in the retirees' healthcare benefits. According to the plaintiffs, these changes resulted in some retirees paying more for prescription copays, changed deductibles, and reduced plan options. The plaintiffs filed this class action on behalf of themselves and a class of about 1,600 retirees, all of whom retired under these CBAs and received retiree healthcare benefits from the County. The plaintiffs believe that the County violated the 2008–2010 CBAs by making the changes unilaterally, without the retirees' consent. The County responded that the benefit changes were consistent with and allowed by the CBAs.
But a more fundamental dispute arose. The plaintiffs sought a permanent injunction requiring the County to continue providing prechange healthcare benefits for the plaintiffs' lifetimes and to prevent the County from changing those benefits. According to the County, however, at no time did any of the CBAs (the 2008–2010 CBAs and their predecessors) provide a retiring employee with healthcare benefits for the retiree’s lifetime. Instead, the County contends that the plaintiffs' right to receive healthcare benefits was subject to each CBA’s three-year durational clause. Thus, the County argues, none of these plaintiffs had a right to continued healthcare benefits beyond any three-year term, absent a new contractual promise in a successive CBA. Or, put differently, each CBA only guaranteed retirement healthcare for the three-year period it governed. After that, the retirees had—and have—no right to future healthcare benefits, absent a new contractual promise from the County.
The plaintiffs, on the other hand, believe that the County promised to provide union members who retired during the term of a CBA with specified healthcare benefits for their retirements; that is, for the rest of their lives. They believe the CBAs, and three provisions in them in particular, support their view. Each provision specifically governs retiree healthcare.
One clause provided that coverage would end upon the death of the retiree or, if the retiree made a spousal election, continue for the retiree’s spouse after the retiree’s death (the survivor clause):
Coverage shall be limited to the current spouse of the retiree, at the time of retirement, provided such employee shall retire on or after January 1, 1974. Coverage for the eligible spouse will terminate upon the death of the retiree unless the retiree elects to exercise a retirement option whereby the eligible current spouse receives applicable retirement benefits following the death of the retiree.
Another clause required retirees to enroll in federally funded healthcare upon reaching age 65, after which the County’s obligation was to provide only supplemental coverage (the supplemental-care clause):
Retired employees and/or their current spouse, upon reaching age 65, shall apply if eligible, and participate in the Medicare Program at their expense as required by the Federal Insurance Contribution Act, a part of the Social Security Program, at which time the Employer’s obligation shall be only to provide "over 65 supplemental" hospital-medical benefit coverage. Failure to participate in the aforementioned Medicare Program, shall be cause for termination of Employer paid coverage of applicable hospital-medical benefits, as outlined herein for employees who retire and/or their current spouse.
Finally, the CBAs addressed temporarily suspending the coverage of any retiree who becomes gainfully employed (the subsequent-employment clause):
Employees who retire under the provisions of the Macomb County Employees' Retirement Ordinance, and/or their current spouse, who subsequently are gainfully employed, shall not be eligible for hospital medical benefits, during such period of gainful employment, as hereinafter defined: Gainful employment is defined as applying to retiree and/or spouse of retiree who are employed subsequent to the employee retirement. If such
employment provides hospital-medical coverage for both retiree and spouse, the County is not obligated to provide said coverage unless and until the coverage of either person is terminated. If the coverage is not provided to retiree and spouse, the County will provide hospital-medical coverage for the person not covered. [Paragraph structure omitted.]
II. AMBIGUITY
The majority agrees with the County. The majority holds that because the CBAs do not expressly provide a separate end date for retiree healthcare benefits, the CBAs' general, three-year durational clauses unambiguously govern these benefits. The majority does not believe that the survivor clause, the supplemental-care clause, or the subsequent-employment clause create ambiguity because those events might occur during the three-year term of the agreement. And seeing no ambiguity, the majority (correctly) disregards the extrinsic evidence, such as the County’s issuing of bonds to fund its retiree healthcare obligation and the many statements by County officials and representatives that support the plaintiffs' contention that the County’s promise to provide retiree healthcare benefits extends far beyond 2010.
I agree with the majority’s understanding of recent federal jurisprudence governing agreements between employers and their retired employees about healthcare benefits. See M&G Polymers USA, LLC v. Tackett , 574 U.S. 427, 135 S.Ct. 926, 933, 190 L.Ed. 2d 809 (2015) ; CNH Indus. N.V. v. Reese , 583 U.S. ––––, 138 S.Ct. 761, 766, 200 L.Ed. 2d 1 (2018). I also agree that this jurisprudence brings the United States Court of Appeals for the Sixth Circuit in line with the principles which govern this Court’s contract interpretation. But I am not convinced that any of those principles compel the result reached by the majority. The question is whether these CBAs are ambiguous. The Tackett Court did not address whether there was ambiguity in the parties' CBA; instead, the Court rejected the Sixth Circuit’s unique approach to this particular contractual question and remanded the case for the Court "to apply ordinary principles of contract law in the first instance." Tackett , 574 U.S. at ––––, 135 S.Ct. at 937. And while the Reese Court held that the particular agreement was unambiguous and did not provide for lifetime benefits, that CBA differed from those here in one important respect that mattered to the Court’s analysis: it included language that specifically tied the promise of retiree healthcare to the agreement’s general durational clause. Reese , 583 U.S. at ––––, 138 S.Ct. at 766 (explaining that the CBA provided that "the health benefits plan ‘ran concurrently’ with the collective-bargaining agreement, tying the health care benefits to the duration of the rest of the agreement") (citation and brackets omitted).
CBAs must be interpreted "according to ordinary principles of contract law ...." Tackett , 574 U.S. at ––––, 135 S.Ct. at 933 ; see also Port Huron Ed. Ass'n v. Port Huron Area Sch. Dist. , 452 Mich. 309, 327, 550 N.W.2d 228 (1996) ("A collective bargaining agreement, like any other contract, is the product of informed understanding and mutual assent."). The guiding principle is that "as with any other contract, the parties' intentions control." Tackett , 574 U.S. at ––––, 135 S.Ct. at 933 (quotation marks and citation omitted); see also McIntosh v. Groomes , 227 Mich. 215, 218, 198 N.W. 954 (1924) ("The cardinal rule in the interpretation of contracts is to ascertain the intention of the parties. To this rule all others are subordinate."). When a contract lacks explicit terms on the duration of retiree benefits, "implied terms" or "industry practice" may show the parties intended those benefits to extend beyond the contract’s general durational period. Tackett , 574 U.S. at ––––, 135 S.Ct. at 937-938 (Ginsburg, J., concurring); see also Reese , 583 U.S. at ––––, 138 S.Ct. at 765 (noting that "[t]he Sixth Circuit did not point to any explicit terms, implied terms, or industry practice suggesting that the 1998 agreement vested health care benefits for life") (citation omitted); Tackett v. M&G Polymers USA, LLC , 811 F.3d 204, 209 (C.A. 6, 2016) ("Thus, while the Supreme Court’s decision prevents us from presuming that ‘absent specific durational language referring to retiree benefits themselves, a general durational clause says nothing about the vesting of retiree benefits,’ we also cannot presume that the absence of such specific language, by itself, evidences an intent not to vest benefits or that a general durational clause says everything about the intent to vest.") (citation omitted); Morley v. Auto. Club of Mich. , 458 Mich. 459, 466, 581 N.W.2d 237 (1998) ("[W]hat is plainly implied from the language used in a written instrument is as much a part thereof as if it was expressed therein.") (quotation marks and citation omitted). For example, ambiguity can arise "where a CBA links eligibility for a particular right ‘to an event that would almost certainly occur after the expiration of the agreement’ ... [because] such linkage ‘signals the parties' intent to continue retirement health benefits notwithstanding expiration.’ " Alday v. Raytheon Co. , 693 F.3d 772, 785 (C.A. 9, 2012) (brackets omitted), quoting Quesenberry v. Volvo Trucks North America Retiree Healthcare Benefit Plan , 651 F.3d 437, 441 (C.A. 4, 2011).
All of that is to say that a court should not engage in presumptions that favor either the plaintiffs or the County. But the implied terms make this a hard case. Unlike in the CBA at issue in Reese , these CBAs did not tie retirement healthcare benefits to the general durational clause. And specific clauses in these CBAs governing eligibility for retirement healthcare imply that the County and the unions intended that healthcare benefits specific to retirees would last for those retirees' entire retirements.
General principles of contract law lead me to conclude that these contracts are ambiguous, because they are equally susceptible to more than one meaning. Barton-Spencer v. Farm Bureau Life Ins. Co. of Mich. , 500 Mich. 32, 40, 892 N.W.2d 794 (2017) ; see also Hall v. Equitable Life Assurance Society of the United States , 295 Mich. 404, 409, 295 N.W. 204 (1940) (" ‘A patent ambiguity is one apparent upon the face of the instrument, arising by reason of inconsistency, obscurity or an inherent uncertainty of the language adopted, such that the effect of the words in the connection used is either to convey no definite meaning or a double one.’ "), quoting Zilwaukee Twp. v. Saginaw Bay City R. Co. , 213 Mich. 61, 69, 181 N.W. 37 (1921). And because these CBAs are equally susceptible to being read as promising retirement healthcare for retirement, I believe a jury should resolve this question.
I agree with the majority that the ambiguity identified by the Court of Appeals is a patent ambiguity, not a latent ambiguity. See Shay v. Aldrich , 487 Mich. 648, 667-668, 790 N.W.2d 629 (2010). Because I see patent ambiguity on the face of the CBAs, I don't address latent ambiguity.
In my view, the general durational clause is doing more work for the majority than it should. These CBAs contain no provision that connects the promise of retiree healthcare benefits to the duration of any CBA. Cf. Reese , 583 U.S. at ––––, 138 S.Ct. at 766 (explaining that the CBA at issue provided that "the health benefits plan ‘ran concurrently’ with the collective-bargaining agreement, tying the health care benefits to the duration of the rest of the agreement") (citation and brackets omitted); Cherry v. Auburn Gear, Inc. , 441 F.3d 476, 482-483 (C.A. 7, 2006) (concluding that there was no ambiguity because the CBA provided that the employer’s obligation to provide benefits continued " ‘during the period of this agreement’ "); Barton v. Constellium Rolled Prod.-Ravenswood, LLC , 851 F.3d 349, 352-354 (C.A. 4, 2017) (finding that there was no ambiguity because the CBA provided that retiree health benefits " ‘shall remain in effect for the term of this ... Labor Agreement’ "); Crown Cork & Seal Co., Inc. v. Int'l Ass'n of Machinists and Aerospace Workers, AFL-CIO , 501 F.3d 912, 917-918 (C.A. 8, 2007) (finding that there was no ambiguity because the CBAs provided that the employer would continue to provide benefits " ‘without modification for the life of’ " the CBAs).
But the CBAs in this case contain provisions that imply the opposite conclusion. The CBAs' survivor clause, the supplemental-care clause, and the subsequent-employment clause each imply that retirement healthcare is a benefit that generally runs with retirement for life. In my view, these more specific provisions, the nature of the benefit, and the lack of a provision tying the benefits to the general durational clause (unlike in Reese ) creates ambiguity.
Yes, a retiree can die, become Medicare-eligible, or become re-employed within any given three-year term of a CBA. And, therefore, I agree with the majority that these provisions do not irreconcilably conflict with the three-year durational clause. But an irreconcilable conflict is not the only way a contract can be ambiguous. As this Court stated in Hall , 295 Mich. at 409, 295 N.W. 204, a contract may be ambiguous "by reason of inconsistency, obscurity or an inherent uncertainty of the language adopted, such that the effect of the words in the connection used is either to convey no definite meaning or a double one." (Quotation marks and citation omitted.) See also Reese , 583 U.S. at ––––, 138 S.Ct. at 765 (explaining that a CBA is ambiguous if it is "reasonably susceptible to at least two reasonable but conflicting meanings") (citation and quotation marks omitted).
Each of these provisions supports a reading that the CBAs promise retiree healthcare benefits for retirement (that is, for life) for those employees who become eligible for them during the term of the contract. For example, the survivor clause says that healthcare benefits for an eligible spouse "will terminate upon the death of the retiree unless the retiree elects to exercise a retirement option, whereby the eligible current spouse receives applicable retirement benefits following the death of the retiree." (Emphasis added.) This promise continues spousal coverage until the death of the retiree , and even beyond that for an indefinite period, if the retiree makes a spousal election. That is, even if the retiree-spouse dies before the CBA expires, the contractual language implies that the spousal benefits continue beyond any three-year term.
The supplemental-care clause and the subsequent-employment clause similarly support plaintiffs' reading of the CBAs. While it is possible for the triggering events to happen within the three-year term of a CBA, that durational limitation isn't the most commonsense reading of the language. The context is retirement , after all—that portion of life following work and extending to death. The parties to the CBAs might have intended the natural reading of the supplemental-care clause: that it offers supplemental coverage once a retiree becomes eligible for Medicare, which, for many employees who retire during a CBA, will be some time beyond that three-year period. See Consol. Rail Corp. v. R. Labor Executives' Ass'n , 491 U.S. 299, 311, 109 S.Ct. 2477, 105 L.Ed. 2d 250 (1989) (stating that practice, usage, and American custom must be considered when interpreting a CBA); United Steelworkers of America v. American Mfg. Co. , 363 U.S. 564, 567, 80 S.Ct. 1343, 4 L.Ed. 2d 1403 (1960) ("[S]pecial heed should be given to the context in which collective bargaining agreements are negotiated and the purpose which they are intended to serve."). It is at least equally reasonable to conclude that, by "link[ing] eligibility for a particular right ‘to an event that would almost certainly occur after the expiration of the agreement’—e.g., turning 65 or becoming eligible for Medicare—such linkage ‘signals the parties' intent to continue retirement health benefits notwithstanding expiration.’ " Alday , 693 F.3d at 785, quoting Quesenberry , 651 F.3d at 441 (brackets omitted).
Understanding the retiree healthcare benefits to apply to retirement for those employees who enter that status during the term of the CBA is at least equally reasonable given the context. In my view, the majority’s conclusion that the parties must have intended the opposite result—that the general durational clause limits retirement healthcare benefits to three years (or less, depending on when an employee retires)—doesn't account for the CBAs' implied terms, which differentiate these contracts from those at issue in Reese .
If these retiree healthcare benefits are guaranteed for no more than three years, then for any single retiring employee the length of the retirement benefit will depend solely on when that employee retires within the three-year period of the CBA. That is, the majority interprets the agreement as giving benefits for only a short time to any employee who retires near the end of a term, whereas an employee who retires near the beginning of the same CBA would be entitled to nearly three years of those very same benefits. It is an odd reading that results in the value of the retirement benefit varying with the arbitrary date of the employee’s retirement, rather than years of service or any other factor.
Finally, I respectfully disagree with the majority that my approach to these CBAs is the same approach that the Supreme Court of the United States implicitly rejected in Tackett and Reese . Neither Tackett nor Reese —nor our own jurisprudence—compels the result the majority reaches. Tackett and Reese left open the possibility that a CBA’s promise of retiree healthcare might be ambiguous notwithstanding the presence of a general durational clause. Nor did either case condition a finding of ambiguity on whether the agreement contained language expressly disclaiming application of the general durational clause to the promise of retiree healthcare. I assume the Supreme Court left these possibilities open for a reason: there are cases in which, despite a general durational clause, the contractual language is equally susceptible to more than one meaning. I am not convinced that the majority’s decision leaves open that possibility of ambiguity; under its framework, it is difficult to imagine under what circumstances a general durational clause will not control. While it is true that the parties could have included express language in the CBAs providing a different duration for retiree healthcare, that is simply another way of saying that the parties could have written an unambiguous contract.
The majority concludes that an important difference between these CBAs and the agreement in Reese —the existence of language explicitly linking the providing of retiree healthcare benefits to the CBA’s durational clause—was not "dispositive" to the Reese Court’s analysis. Maybe not—the opinion doesn't say either way. But it was one of several provisions that the Court cited in concluding that the CBA was not ambiguous, none of which the Court proclaimed to be dispositive alone. See Reese , 583 U.S. at ––––, 138 S.Ct. at 766. And the CBAs in this case do not include any similar language explicitly linking retiree healthcare benefits to the durational clause. That makes these CBAs different, and importantly so.
The majority acknowledges that ambiguity might be found (notwithstanding a general durational clause) if the CBA "tied benefits to an event that could only occur or would almost certainly not occur until after the expiration of the CBA[.]" Again, I acknowledge that there is no irreconcilable conflict here; events triggering the CBAs' survivor clause, supplemental-care clause, or subsequent-employment clause could occur before expiration of the CBA. But unlike the majority, I don't believe it is only "conceivabl [e ]" that these triggering events would occur beyond the expiration of the CBA. These CBAs permit an employee to retire at age 50 and receive both a pension and retiree healthcare benefits. For most employees who retire during a CBA’s three-year-term, the triggering events (death or reaching age 65) are almost certain to occur beyond the expiration of that term.
Given the patent ambiguity, I would reverse that part of the Court of Appeals' judgment remanding the case to the trial court for entry of summary disposition in favor of the plaintiffs, because the meaning of an ambiguous contract is a question that generally must be decided by the trier of fact. Klapp v. United Ins. Group Agency, Inc. , 468 Mich. 459, 469, 663 N.W.2d 447 (2003) ("It is well settled that the meaning of an ambiguous contract is a question of fact that must be decided by the jury.").
III. RELIEF
The plaintiffs have identified extrinsic evidence that they believe suggests that the County promised retiree healthcare for retirement. The County’s actuaries issued regular reports, beginning as early as 1993, describing the benefits as an "IOU" (I owe you) to the County’s future retirees. The County created a trust specifically for retiree healthcare, which it funded with tens of millions of dollars to satisfy its future obligations. The County issued bonds to fund that trust when it determined that current funding levels would not be enough to meet its future obligations "for the next 50 years." During labor negotiations, the County’s representatives described the retiree healthcare as a "lifetime" benefit. Many retirees tell the same story: that representatives from the County assured them that their healthcare benefits would last their lifetimes. And the County’s bargaining history might support the plaintiffs' view: while its position here is that retirement healthcare is only promised for the three years of each CBA, the County has continuously provided it to retirees in every CBA since 1986.
The County says that every time it negotiated a CBA, both it and the union understood that the unions only represented the interests of active employees, not retirees. See Defendant’s Supplemental Brief, p 16 (stating that "[t]he CBAs since 1986 have been negotiated with the County of Macomb by 23 Unions on behalf ‘of regular employees,’ generally effective every three years."). This approach is consistent with federal labor law, under which a union does not have to bargain on behalf of retired employees because they are no longer members of the bargaining unit. See Allied Chem. & Alkali Workers v. Pittsburgh Plate Glass Co. , 404 U.S. 157, 180, 92 S.Ct. 383, 30 L.Ed. 2d 341 (1971) (concluding that the future retirement benefits of active workers were subject to mandatory bargaining because those benefits were part of their overall compensation). The Court of Appeals has held the same. See West Ottawa Ed. Ass'n v. West Ottawa Pub. Sch. Bd. of Ed. , 126 Mich. App. 306, 328-330, 337 N.W.2d 533 (1983).
This leads to an interesting question relating to the County’s bargaining history with these unions. If the unions did not have to bargain on behalf of retired employees and the County did not have to continue providing healthcare to them, what are we to make of the fact that the parties continued to negotiate about the terms of retiree healthcare in successive CBAs and that those changes were applied to employees who retired under earlier agreements? On the one hand, the consistent practice of agreeing to new terms for retiree healthcare and applying those new terms to all retired employees (not just those who retired under the current agreement) might suggest that the parties did not believe the benefits lasted beyond the term of the contract. On the other hand, the continued coverage since 1989, even if the County did not have to provide healthcare for the already-retired employees, might be evidence that the County and the unions all believed that retiree healthcare was promised for retirement.
But the County has an explanation for all this evidence: it intends to continue providing such benefits to its retirees, even if it is not contractually obligated to do so. And the County’s historical practice of renegotiating retiree healthcare and applying the new terms to past retirees might be evidence that supports its position.
The contracting parties' intent is a disputed question of fact; I believe the Court of Appeals and trial court both erred by determining that, on this record, summary disposition was appropriate. See Klapp , 468 Mich. at 469, 663 N.W.2d 447. I would remand to the trial court for further proceedings.
IV. CONCLUSION
I disagree with the majority’s conclusion that these CBAs unambiguously limit retiree healthcare to the CBAs' general three-year durational clause. It is just as likely that the parties to these CBAs intended the promised retirement benefits to apply to an employees' entire retirement. I would conclude that there is ambiguity about the parties' intent, and I would let the fact-finder resolve it with the benefit of the extrinsic evidence from both sides.
I respectfully dissent.
Bernstein, J., concurred with McCormack, C.J. Cavanagh, J., did not participate in the disposition of this case because the Court considered it before she assumed office.