Jack Reese v. CNH America LLC , 694 F.3d 681 ( 2012 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0331p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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JACK REESE, FRANCES ELAINE PIDDE, JAMES
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CICHANOPSKY, ROGER MILLER and GEORGE
NOWLIN, -
Plaintiffs-Appellees (11-1359), -
Nos. 11-1359/1857/1969
Plaintiffs-Appellees/Cross-Appellants ,>
(11-1857 & 11-1969), -
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RONALD HITT,
Plaintiff, -
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CNH AMERICA LLC, fka Case Corporation
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and CNH GLOBAL NV,
Defendants-Appellants (11-1359), -
Defendants-Appellants/Cross-Appellees -
(11-1857 & 11-1969). -
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N
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 2:04-CV-70592—Patrick J. Duggan, District Judge.
Argued: June 5, 2012
Decided and Filed: September 13, 2012
Before: GIBBONS, SUTTON and DONALD, Circuit Judges.
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COUNSEL
ARGUED: Bobby R. Burchfield, McDERMOTT, WILL & EMERY LLP, Washington,
D.C., for Appellants and Appellants/Cross-Appellees. Roger J. McClow, McKNIGHT,
McCLOW & CANZANO, P.C., Southfield, Michigan, for Appellees and
Appellees/Cross-Appellants. ON BRIEF: Bobby R. Burchfield, Joshua David
Rogaczewski, McDERMOTT, WILL & EMERY LLP, Washington, D.C., for Appellants
and Appellants/Cross-Appellees. Roger J. McClow, McKNIGHT, McCLOW &
CANZANO, P.C., Southfield, Michigan, for Appellees and Appellees/Cross-Appellants.
SUTTON, J., delivered the opinion of the court in which GIBBONS, J., joined.
DONALD, J. (pp. 9–15), delivered a separate dissenting opinion.
1
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 2
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OPINION
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SUTTON, Circuit Judge. In litigation, as in film, sequels rarely satisfy. This
case is no exception. Three years ago, we remanded this dispute to the district court for
factfinding necessary to determine whether CNH America’s proposed modifications to
its retiree healthcare benefits are reasonable. The district court did not reach the
reasonableness question and did not create a factual record that would permit us to
answer the question on our own. As a result, we reverse and remand for further
proceedings.
I.
Our previous opinion makes it unnecessary to recount the protracted history of
this litigation. See Reese v. CNH America LLC, 574 F.3d 315, 318–20 (6th Cir. 2009).
There, we considered two questions: “Did [CNH] in the 1998 CBA agree to provide
health-care benefits to retirees and their spouses for life? And, if so, does the scope of
this promise permit CNH to alter these benefits in the future?” Id. at 321. In answering
the first question, we rejected CNH’s claim that the CBA permitted the company to
terminate the benefits, holding that eligibility for lifetime healthcare benefits had
“vested.” Id. at 322; see Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 580
(6th Cir. 2006); UAW v. Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir. 1983).
In answering the second question (“What does vesting mean in this setting?”),
we rejected the suggestion that the scope of this commitment in the context of healthcare
benefits, as opposed to pension benefits, meant that CNH could make no changes to the
healthcare benefits provided to retirees. Unlike pension obligations, we explained,
healthcare benefits cannot readily be monetized at retirement or for that matter
practically fixed. See Reese, 574 F.3d at 324. Doctors and medical-insurance providers
come and go. Medical plans change from year to year. And fixed, unalterable medical
benefits at all events are not what retirees want. Nothing, indeed, would make
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 3
employers happier than to know that vesting in the healthcare-benefits context meant the
same thing as vesting in the pension context. For then, a company faced with the
obligation could account for what it had spent on each employee for healthcare benefits
on the day of retirement, then commit to spend no less through the end of the retiree’s
(and spouse’s) life. Nor would most employers be troubled if this commitment, like
most defined-benefit pension plans, increased based on inflation as measured by the
consumer-price index. The reality is that, even though we have relied on language tying
healthcare benefits to pension benefits as a basis for determining that healthcare benefits
have vested, vesting in the context of healthcare benefits provides an evolving, not a
fixed, benefit. See Yolton, 435 F.3d at 583 (relying on language in the summary plan
descriptions saying that “continued coverages will be the same as those that were in
effect on the day preceding your retirement”); see also Noe v. PolyOne Corp., 520 F.3d
548, 558 (6th Cir. 2008); McCoy v. Meridian Auto. Sys., Inc., 390 F.3 417, 422 (6th Cir.
2004); Golden v. Kelsey-Hayes Co., 73 F.3d 648, 656 (6th Cir. 1996).
The rub for retirees and employers alike is that healthcare benefits—what is
provided and what it costs—have not been remotely static in modern memory. The
reason has little to do with traditional causes of inflation and more to do with the
expansion of the benefit: the remarkable growth in modern life-saving and comfort-
improving medical procedures, devices and drugs. New and better medical procedures
arise while others become obsolete. And it is the rare medical innovation that costs less
than the one it replaces. Retirees, quite understandably, do not want lifetime eligibility
for the medical-insurance plan in place on the day of retirement, even if that means they
would pay no premiums for it. They want eligibility for up-to-date medical-insurance
plans, all with access to up-to-date medical procedures and drugs. Whatever else vesting
in the healthcare context means, all appear to agree that it does not mean that
beneficiaries receive a bundle of services fixed once and for all. Companies want the
freedom to change health-insurance plans. And beneficiaries want something more than
a fixed, unalterable bundle of services; they want coverage to account for new and better,
yet likely more expensive, procedures and medications than the ones in existence at
retirement.
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 4
All of this was borne out by the parties’ implementation of the relevant collective
bargaining agreements—in at least two respects. As explained in our prior opinion, the
1998 CBA “created a Managed Health Care Network Plan for past and future retirees.
In other words, it imposed managed care on all of them, which represented a reduction
in the effective choices of coverage available for all retirees and the coverage actually
provided to many, if not most, of them.” Reese, 574 F.3d at 325. “Pre-1998 retirees thus
saw their coverage downgraded in at least one respect: Unlike the prior plan, under
which they could choose any doctor without suffering a financial penalty, they generally
had to pay more for choosing an out-of-plan doctor.” Id. Other cases reach the same
conclusion. Winnett v. Caterpillar, Inc., 609 F.3d 404, 412–13 (6th Cir. 2010)
(explaining that a change to managed care is a “significant change” representing a
“reduction” in benefits); cf. UAW v. Aluminum Co. of Am., 932 F. Supp. 997, 1011 (N.D.
Ohio 1996) (challenging employer’s adoption of a managed-care plan as a reduction in
benefits).
Also confirming that the parties did not perceive the relevant CBAs as
establishing fixed, unalterable benefits was the passage of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat.
2066. No one batted an eye when the healthcare plans for which retirees were eligible
were modified to account for the creation of Medicare Part D, the prescription-drug
benefit for seniors.
In view of the distinction between the vesting of eligibility for a benefit and the
scope of that commitment and in view of the parties’ practice under the 1998 CBA of
altering healthcare benefits under CBAs with materially identical language, we
concluded that CNH could make “reasonable” changes to the healthcare plan covering
eligible retirees. Reese, 574 F.3d at 325–27; see also Zielinski v. Pabst Brewing Co.,
463 F.3d 615, 619 (7th Cir. 2006) (distinguishing the vesting of healthcare benefits from
the scope of that commitment and holding that the employer was obligated to provide
benefits “reasonably commensurate” with pre-retirement plans). We listed three
considerations: Does the modified plan provide benefits “reasonably commensurate”
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 5
with the old plan? Are the proposed changes “reasonable in light of changes in health
care”? And are the benefits “roughly consistent with the kinds of benefits provided to
current employees”? Reese, 574 F.3d at 326. We remanded the case to the district court
to take evidence and to decide in the first instance the legal question whether CNH’s
proposed modifications were reasonable. Id. at 327.
Back in the district court, CNH moved for approval of its proposed modifications
to the benefits, introducing evidence (including affidavits from its employee-benefits
director and an employee-benefits consultant and attorney) that the changes were
reasonable. The plaintiffs introduced little new evidence on the issue of reasonableness.
They instead relitigated several questions our court had already decided, moving for
summary judgment on the ground that CNH lacks the ability to modify any benefits,
save at the approval of the union that once represented them. The district court agreed
and granted their motion.
II.
The plaintiffs and the district court misread the panel opinion. In holding that
“CNH . . . may reasonably alter” the plaintiffs’ benefits, we recognized that CNH could
alter them on its own, not as part of a new collective-bargaining process. Reese,
574 F.3d at 327. Past changes to retiree healthcare benefits, we noted, had not been
collectively bargained, which comes as no surprise since “a union does not represent
retired employees when it bargains a new contract for its employees.” Id. at 324; see
Allied Chem. & Alkali Workers of Am., Local Union No. 1 v. Pittsburgh Plate Glass Co.,
404 U.S. 157, 172 (1971). The district court, in short, erred when it disregarded our
holding that the company may make reasonable modifications to the plaintiffs’
healthcare benefits.
That leaves two options: remand the case to the district court yet again or resolve
the reasonableness question as a matter of law based on the evidence in the record. It
is tempting to resolve the case now. This long-running dispute needs to come to an end,
and it is particularly unfair to prolong the dispute when the status quo—a preliminary
injunction in favor of the plaintiffs—not only favors just one party but also risks mooting
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 6
the economic stakes of the case for the other party. Yet this sticky reality remains. The
case turns in part on facts not in the record: How much did retirees pay for their health
care under the old plan? How much did CNH pay? How much will the retirees and
CNH each pay under the new plan, and how quickly are each side’s costs likely to grow?
How does the quality of care provided under the old plan compare to the quality of care
under the new plan? Do the retirees’ benefits differ in material respects from those
offered to current employees and people retiring today? How do the benefits compare
to benefits offered by other companies in similar industries? In the absence of a record
on these points, the answer to the reasonableness question is a shot in the dark.
To gauge whether CNH has proposed reasonable modifications to its healthcare
benefits for retirees, the district court should consider whether the new plan provides
benefits “reasonably commensurate” with the old plan, whether the changes are
“reasonable in light of changes in health care” (including access to new medical
procedures and prescriptions) and whether the benefits are “roughly consistent with the
kinds of benefits provided to current employees.” Reese, 574 F.3d at 326. In doing so,
the district court should take evidence on the following questions (and others it considers
relevant to the reasonableness question):
• What is the average annual total out-of-pocket cost to retirees for their healthcare
under the old plan (the 1998 Group Benefit Plan)? What is the equivalent figure
for the new plan (the 2005 Group Benefit Plan)?
• What is the average per-beneficiary cost to CNH under the old plan? What is the
equivalent figure for the new plan?
• What premiums, deductibles and copayments must retirees pay under the old
plan? What about under the new plan?
• How fast are the retirees’ out-of-pocket costs likely to grow under the old plan?
What about under the new plan? How fast are CNH’s per-beneficiary costs
likely to grow under each?
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 7
• What difference (if any) is there between the quality of care available under the
old and new plans?
• What difference (if any) is there between the new plan and the plans CNH makes
available to current employees and people retiring today?
• How does the new plan compare to plans available to retirees and workers at
companies similar to CNH and with demographically similar employees?
It is not lost on us that the reasonableness inquiry is a vexing one. But the
difficulty of the inquiry flows at least in part from the vagueness of the commitment
underlying this litigation. It is well to remember the language of the relevant
commitment: “Employees who retire under the Case Corporation Pension Plan for
Hourly Paid Employees after 7/1/94, or their surviving spouses eligible to receive a
spouse’s pension under the provisions of that Plan, shall be eligible for the Group
benefits as described in the following paragraphs.” Id. at 318. What that means in the
context of ever-changing medical-care developments, and ever-changing healthcare
plans, is not easy. But if the parties cannot resolve the point on their own, we (and the
district court) will do our best to resolve it for them.
One other thing on this score: the district court concluded that the East Moline
Shutdown Agreement created “unalterable and irreducible” healthcare benefits for those
who retired under it. R.304 at 22. The Moline Agreement, however, governs only the
“economic closedown benefits and the eligibility rules established and set forth in” that
agreement. R.290-2 at 19. Nothing in the agreement speaks to healthcare. It neither
establishes nor sets forth healthcare benefits, which are instead found in the 1998 CBA,
which are vested, and which remain subject to reasonable modification.
In view of this disposition of the appeal, we think it premature to address the
parties’ attorney-fees arguments. For one, this case is not over. For another, the district
court may wish to revisit its attorney-fee decision based on its resolution of the questions
identified above.
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 8
The dissent proposes a different path—that we reconsider our decision in Reese
I and go back to square one. Unlike Judge Gibbons and me, Judge Donald did not sit on
Reese I, so it would not be fair to call this an about-face or buyer’s remorse. At the same
time, the law-of-the-case doctrine presents a serious impediment to this approach. And
the reality that neither party to this dispute has invoked an exception to the law-of-the-
case doctrine presents a conclusive impediment to it.
III.
For these reasons, we reverse and remand for proceedings consistent with this
opinion.
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 9
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DISSENT
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BERNICE B. DONALD, Circuit Judge, dissenting. My review of the issues
presented here leads me to the conclusion that the majority’s approach to modifying the
scope of the retirees’ vested health care benefits, both past and present, involves a
misapprehension of the relevant law. While reasonableness is a common standard in the
law, I cannot agree that resorting to what is reasonable provides the proper analytical
framework in the instant case. When faced with contract terms that result in
unanticipated consequences for the parties, courts are naturally tempted to play the role
of arbiter and seek to resolve the case equitably. This Court, however, is one of law and
not equity. Because the resolution of this case, as well as the prior appeal, represents a
departure from current law, I respectfully dissent.
When affirming in part the district court’s first grant of summary judgment to
Plaintiffs in the instant dispute, this Court held that the retirees “have a vested right to
receive health care benefits for life.” Reese I, 574 F.3d at 327. On this issue, Reese I
was consistent with prior decisions of this Court holding that when an employer ties
eligibility for welfare benefits to eligibility for pension benefits those welfare benefits
vest for life. Noe v. PolyOne Corp., 520 F.3d 548, 558 (6th Cir. 2008); Yolton v. El Paso
Tenn. Pipeline Co., 435 F.3d 571, 582-83 (6th Cir. 2006); McCoy v. Meridian Auto.
Sys., Inc., 390 F.3d 417, 422 (6th Cir. 2004); Golden v. Kelsey-Hayes Co., 73 F.3d 648,
656 (6th Cir. 1996).
At the same time, the Court reversed the district court’s holding that “these
[vested health care] benefits must be maintained precisely at the level provided for in the
1998 CBA.” Reese, 574 F.3d at 327. The Court remanded to the district court to
determine “how and in what circumstances CNH may alter such benefits.” Id. Upon
close reexamination, I have determined that our holding that CNH may unilaterally alter
Appellees’ vested health care benefits was in error, and the majority’s resolution of the
case fails to correct this error.
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 10
While the “law of the case” doctrine typically prevents an appellate court from
reconsidering a prior decision on a subsequent appeal, that doctrine is “salutary” and
designed to support a specific policy rationale: bringing an end to litigation. General
Am. Life Ins. Co. v. Anderson, 156 F.2d 618-19 (6th Cir. 1946). Accordingly, our
holding in Reese I is not immutable. This Court’s precedent recognizes that there is “no
occasion to doubt the abstract power of an appellate court, upon a second review, to
reach a result inconsistent with its decision on the first review of the same case.”
Chesapeake and Ohio R.R. Co. v. McKell, 209 F. 514, 516 (6th Cir. 1913) (citing
Messinger v. Anderson, 225 U.S. 436, 444 (1912)). Furthermore, revisiting Reese I’s
holding on the scope of retirees’ vested health care benefits and affirming the district
court’s grant of summary judgment to Plaintiffs would bring an end to this protracted
litigation. I would, therefore, take the unusual step of correcting our past error with the
aim of deciding the case in a manner more firmly grounded in the law.
Several decisions of this Court, as well as Supreme Court precedent, express the
principle that, once a retiree’s health care benefits have vested for life, an employer’s
unilateral modification of the scope of those benefits is a violation of the Labor
Management Relations Act. Yolton, 435 F.3d at 578 (“If a welfare benefit has vested,
the employer’s unilateral modification or reduction of those benefits constitutes a LMRA
violation.”); see also Allied Chemical & Alkali Workers of America, Local Union No.
1 v. Pittsburgh Plate Glass Co., Chemical Division, 404 U.S. 157, 181 n.20 (1971)
(“Under established contract principles, vested retirement rights may not be altered
without the pensioner’s consent. The retiree, moreover, would have a federal remedy
under § 301 of the Labor Management Relations Act for breach of contract if his benefits
were unilaterally changed.” (citation omitted)); Schreiber v.Philips Display Components
Co., 580 F.3d 355, 364 (6th Cir. 2009); Winnett v. Caterpillar, Inc., 553 F.3d 1000, 1009
n.5 (6th Cir. 2009); Maurer v. Joy Techs., Inc., 212 F.3d 907, 914 (6th Cir. 2000); UAW
v. Loral Corp., 107 F.3d 11, 1997 WL 49077 at *3 (6th Cir. 1997) (“It might well be
sensible for the parties to agree to allow the employer to retain some flexibility to deal
with future vicissitudes, but such an arrangement must be agreed to in the contract. It
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 11
cannot be imposed unilaterally by the employer or the courts.”); UAW v. Yard-Man, Inc.,
716 F.2d 1476, 1482 n.8 (6th Cir. 1983).
The Maurer case is especially relevant to this discussion because the Maurer
court confronted the same issues, in the same procedural posture, that this Court dealt
with in Reese I: whether unclear language in a CBA indicated that “the parties intended
the retirement benefits either to vest as lifetime benefits or to terminate at the end of the
. . . term of the CBA granting the benefits.” Maurer, 212 F.3d at 911. After setting out
the relevant contractual language, the Maurer court elucidated the principles applicable
to interpretation of CBAs. One of those principles squarely applies to the instant case:
“If the parties intended to vest benefits and the agreement establishing this is breached,
there is . . . a LMRA violation.” Id. at 914.
Thus, clearly established precedent in this Circuit leads to the conclusion that,
because retirees’ health care benefits vested for life, the level of those benefits must be
deemed vested in scope and not subject to unilateral modification by CNH.
Accordingly, the district court correctly applied the law of this Circuit when it held on
remand that “even if changes can be made to retiree vested health care benefits, those
changes must be reached through negotiation and agreement between the union and the
employer.” Reese v. CNH Global N.V., No. 04-70592, 2011 WL 824585, at *10 (E.D.
Mich. March 3, 2011).
The district court’s conclusion is also consistent with this Circuit’s principle that
“basic rules of contract interpretation apply” when federal courts fashion a body of
federal common law for interpretation of collective bargaining agreements. Noe,
520 F.3d at 552. As a general rule, contracts containing continued performance
obligations cannot be modified unless “the modification is fair and equitable in view of
circumstances not anticipated by the parties when the contract was made . . . .”
RESTATEMENT (SECOND) OF CONTRACTS § 89(a) (1981). Such a modification,
furthermore, must comply with the general rules of contract formation, including mutual
assent: “Obligations under a collective bargaining agreement, like those under contracts
in general, rest ultimately on the principle of mutual assent . . . .” Operating Eng’rs
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 12
Pension Trust v. Gilliam, 737 F.2d 1501, 1503 (9th Cir. 1984). Because the retirees have
not consented to the modifications proposed by CNH, I would hold under traditional
principles of contract law that CNH cannot unilaterally modify the retirees’ vested health
care benefits.
I recognize that the terms of the 1998 CBA, as interpreted according to Sixth
Circuit precedent, pose a fundamental problem for the employer: how to fulfill its open-
ended obligation to provide the health care benefits described in the CBA in spite of the
rapid change and growth in the health care and health insurance industries. While this
case presents a difficult choice between diametrically opposed interpretations of the
1998 CBA, it is the parties to the contract–not the court–who bear the burden of solving
this dilemma. Presumably the parties have a shared interest in reaching an
accommodation which ensures the retirees the continuity of health care coverage to
which they are contractually entitled without bankrupting the employer or obligating it
to provide services which are no longer appropriate. The Court’s role in this context is
to underscore that such an accommodation cannot be imposed by one party on the other,
or by the court. Loral Corp., 1997 WL 49077 at *3. The majority’s thoughtful analysis
of the policy issues thoroughly addresses the concerns of the parties, especially the
employer. However, while those issues are important, it is the law that should determine
the outcome of this case.
As mentioned above, the majority relies on our conclusion in Yolton v. El Paso
Tennessee Pipeline Co. and other cases to support Reese I’s conclusion that the retirees’
health care benefits vested for life. The majority, however, does not apply Yolton’s
plain statement of the law regarding unilateral modification of vested welfare benefits:
“If a welfare benefit has vested, the employer’s unilateral modification or reduction of
those benefits constitutes a LMRA violation.” 435 F.3d at 578. Additionally, the other
cases the majority cites to support its statement that “the vesting conclusion in the
context of healthcare benefits provides an evolving, not a fixed, benefit” say nothing
about the scope of welfare benefits. Those cases deal only with this Court’s rule that
tying eligibility for welfare benefits to eligibility for pension benefits evidences an intent
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 13
to vest those welfare benefits for life. Id. at 583; see also Noe, 520 F.3d at 558; McCoy,
390 F.3d at 422; Golden, 73 F.3d at 656.
The majority also errs in its choice of standard for determining whether CNH’s
modifications to the scope of the retirees’ health care benefits are reasonable. The
majority relies on the United States Court of Appeals for the Seventh Circuit’s opinion
in Zielinksi v. Pabst Brewing Co., 463 F.3d 615 (7th Cir. 2006). The standard articulated
in Zielinski, however, is not applicable to this case for two reasons. First, as discussed
above, this Circuit’s case law prohibits CNH from unilaterally modifying the retirees’
vested health care benefits. Second, as the district court set forth in its opinion, Zielinski
is factually distinguishable from the instant dispute. Reese, 2011 WL 824585, at *7 n.9.
In Zielinski, the Seventh Circuit confronted a situation where the only evidence of the
retiree benefits package was an old brochure describing the retirees’ prescription drug
coverage in very general terms; neither party could provide the court with a copy of the
contract alluded to in the brochure. 463 F.3d at 619. Accordingly, the Seventh Circuit
had to step in and fill the gaps related to coverage in the shutdown agreement that
granted vested health care benefits to the retirees. Id. at 619-20. In order to fill the gap,
Judge Posner relied on the Seventh Circuit’s “reasonably commensurate” test. Id. at
619-21.
Unlike the Seventh Circuit in Zielinski, however, this Court has no gap filling
role to play in the instant case. We know exactly what the parties agreed to in 1998:
“The Group [Benefit] Plan over forty-one pages sets forth in extensive detail the types
of benefits and levels of coverage that the [retirees’] and [CNH] agreed to through
collective bargaining.” Reese, 2011 WL 824585, at *7. Accordingly, Zielinski does not
provide the appropriate lens for our review of this case.
In addition to the above legal errors, the majority also mischaracterizes the nature
of the shift from the indemnity plan to managed care under the 1998 Group Benefit Plan,
as well as how the parties previously modified the retirees’ benefits. The majority
claims that the negotiated and collectively bargained shift from an indemnity plan to a
managed care plan in 1998 supports its conclusion that “the parties did not perceive the
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 14
relevant CBAs as establishing fixed, unalterable benefits.” Both Reese I and the
majority opinion, however, are incorrect in their assertion that “managed care . . .
represented a reduction in the effective choices of coverage available for all retirees and
the coverage actually provided to many, if not most, of them.” Reese I, 574 F.3d at 325.
This erroneous conclusion is central to the majority’s reasoning: retirees’ benefits can
be unilaterally modified now because they did not previously object to a “reduction” in
those benefits. The district court, however, embarked on a thorough analysis of both the
indemnity and managed care plans and reached the opposite conclusion as to both
effective choices and coverage.
On the issue of choice, the district court found, based on evidence submitted by
the retirees, that, under the managed care plan, “close to 100% of the providers who had
treated [CNH] employees were participants in the network and 100% of the hospitals in
the area were within the network. Promises also were made that doctors not in the
network would be approached to join.” Reese, 2011 WL 824585, at *9. Virtually all of
the same doctors, in the same facilities, were available to the retirees after shifting from
the indemnity plan to managed care. This evidence does not support the majority’s
conclusion that the managed care plan “represented a reduction in the effective choices
of coverage available for all retirees.” Reese I, 574 F.3d at 325. The same is true of the
coverage actually provided to retirees.
On the issue of coverage, the district court found that while the indemnity plan
covered 100% of the “reasonable and customary charges” for Type A (hospital
expenses) and Type B (surgery and in-patient procedures) benefits, it only covered 80%
of the more common Type C benefits (out-of-hospital doctor visits). Reese, 2011 WL
824585, at *9. The indemnity plan also included a $50,000 per person lifetime
maximum cap on benefits. Id. The managed care plan, conversely, required no retiree
contributions, contained no “reasonable and customary” limitation, and had no lifetime
maximum: “Thus Plaintiffs obtaining care ‘in-network’ under the managed care plan
received better coverage than they did under the indemnity plan; those obtaining care for
routine services ‘out-of-network’ were responsible for the same 20% of the costs that
Nos. 11-1359/1857/1969 Reese et al. v. CNH et al. Page 15
they were paying under the indemnity plan.” Id. The evidence thus bears out CNH’s
contemporaneous claim that the negotiated shift to managed care in 1998 actually
provided “improvements” for the retirees. Id. So, while I agree with Reese I’s assertion
that “the resetting of health-care benefits for previously retired employees might not
concern anyone if each change upgraded the existing package of benefits,” Reese I, 574
F.3d at 325, I cannot join the majority’s conclusion that the 1998 shift from the
indemnity plan to managed care resulted in a reduction of the retirees’ benefits.
Finally, the majority also reasoned that “[p]ast changes to retiree healthcare
benefits . . . had not been collectively bargained,” and this fact supports its conclusion
that CNH may unilaterally modify retirees’ benefits now. This statement, however, is
not followed by factual support; the assertion is followed by a citation to the legal
proposition that a union is not required to negotiate on behalf of its retirees in collective
bargaining. Even accepting Reese I’s claim that those CNH employees who retired
between 1994 and 1998 did not consent to shifting from the indemnity plan to managed
care, Reese I, 574 F.3d at 324, the agreement which led to the change was collectively
bargained between the union and current employees, a far cry from CNH’s attempt to
unilaterally modify those benefits.
Because Plaintiffs have demonstrated they are entitled to judgment as a matter
of law, I would affirm the district court’s grant of summary judgment to Plaintiffs and
overrule our previous holding that CNH may unilaterally modify the scope of Plaintiffs’
retirement health benefits under the 1998 CBA. Because the majority adheres to its
original decision regarding the scope of the retirees’ benefits, I respectfully dissent.