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Argument analysis: Justices dust off contracts treatises for dispute over health-benefit vesting

To read the issue in M&G Polymers USA, LLC v. Tackett – how to decide whether health-care benefits under a collective bargaining agreement have vested – you would think this was a case under the National Labor Relations Act and would expect an appearance from the National Labor Relations Board, presumably in support of the employees.

But it turns out nothing could be further from the truth. The Justices on Monday spent the argument convincing themselves that this case is nothing but a dispute about contract interpretation, with the only issue left for decision what would seem to be an unimportant detail of applying ordinary precepts of interpretation to this particular set of contracts. A closer look, however, suggests that the Justices’ discussion involves a little more than that.

As a matter of bureaucratic impetus, the case comes to the Court because of the Sixth Circuit’s Yard-Man presumption, which imposes a strong presumption that any grant of health-care benefits in a collective bargaining agreement “vests” those benefits so that they continue, not subject to change, indefinitely after retirement. Because the other circuits to look at the question have explicitly rejected Yard-Man and have adopted standards that look more like traditional contract interpretation, review by the Court is unsurprising.

What was a little surprising in the briefing (though probably well-advised) was the general unwillingness of the employees to defend Yard-Man. Rather, the employees suggested that they should win even under ordinary principles of contract interpretation, a standard not all that different from the standard sought by the employers.

Given the similarity of the doctrinal positions of the employers and the employees, it was no surprise that the Justices would go straight to that question when the argument began. So, for example, Justice Elena Kagan quickly jumped in to ask Allyson Ho (arguing for the employers M&G Polymers and related health funds) whether she agrees that the Court should apply “ordinary contract principles.” When she agreed, Justice Kagan, just to be clear, explained that she envisioned a system under which “first, we would look at the agreement, and if the agreement said something clearly either way, whether it was for vesting or against vesting, the agreement would control.”

Approaching the question from the other side, Justice Anthony Kennedy suggested that “the principal question here is whether the Yard-Man presumption should play a significant part in the interpretation of this contract, and you say ‘no.’”

For her part, Julia Clark (arguing for Hobert Tackett and the other employees) started her argument by asking for the same thing, that the Court “determine what the parties intended without applying any presumptions.” Interrupting her in mid-phrase, Justice Stephen Breyer suggested that “the other side is arguing the same thing and [Justice Scalia] says since both sides want to argue the same thing, maybe we can just agree with them.”

So the first part of the Justices’ analysis seems easy to identify: collective bargaining agreements are contracts and should be read by courts as contracts. But that discussion was far from the most interesting thing that occupied the Justices. What was most interesting was the juxtaposition between the reasons that make the “conventional contract interpretation” rule so attractive and all of the things that interested the Justices in deciding what conventional contract interpretation would mean in this context.

It is no more surprising that the Justices are drawn to a “conventional contract interpretation rule” than that they are drawn to a “plain meaning” rule of statutory interpretation. It allows them readily to shift blame for a decision to the drafters of the relevant text, avoiding responsibility for any adverse consequences that might flow from their decisions, and cloaking themselves in the time-honored mantle of neutral rules of decision-making.

To a cynic, or a legal realist, the use of such “neutral” rules is nothing but obfuscation, a cloak the Justices cast over the underlying concerns that motivate their decisions. So what was fascinating about yesterday’s argument was the juxtaposition, without any apparent self-awareness, between a unanimous love-fest centered on “conventional contract interpretation” and a series of wholly disparate views about what social policies most appropriately should be poured into the Justices’ interpretation of the contract at issue.

Several strands of thought were apparent. So, for example, Justice Antonin Scalia (apparently seconded by Justice Sonia Sotomayor) seemed to be trying out a long string of ideas that had as their common theme the capacity to justify a decision in favor of the employees. So, for example, early in the argument he suggested to Ms. Ho that it well might be that the Yard-Man presumption is normal contract interpretation. That is, the court of appeals could be saying that when you look at the totality of the contract, it is a reasonable assumption, call it a presumption if you like, that any promise to pay those benefits continues after the termination of the union contract.

After Ms. Ho responded with a forceful and lucid rebuttal that anything like Yard-Man could be characterized as ordinary contract interpretation, Justice Scalia waited a few minutes before shifting gears and returning with another suggestion. This time, he offered the view that any provision that links the existence of health benefits to pension benefits is so close to explicit vesting that it would make no sense to treat it differently as a matter of interpretation.

Apparently inexhaustible in his string of ideas about how to read contracts in this context, Justice Scalia tried out yet another idea during Ms. Clark’s presentation near the end of the argument. He started by exploring at some length with Ms. Clark the relation between union representation and the benefits afforded retirees. Having satisfied himself that it is current employees and not retirees who control the union that negotiates the benefits agreement, he suggested that “you would expect the union to give this away so it can get higher benefits for the people that are still in its bargaining unit, wouldn’t you?”

Justices Kagan and Breyer, on the other hand, seemed taken with the idea that the right answer was to (claim to) apply no presumption at all. To those Justices, the distinction ERISA draws between pension benefits and health benefits – ERISA mandates vesting of pension benefits but not health benefits – at least suggests that the courts should leave the parties where they find them. In Justice Kagan’s words, “Congress has said we don’t care. Congress has said we leave it to th[e contracting parties].”

Justice Breyer offered strong support for that view:

What I’ve listened to sort of drives me to the conclusion where you started, decide these things without any presumption, period. Ordinary contract. Go read the contract. … I started there. Maybe I’ll hear something that should change my mind. I often do change it in oral argument, but I haven’t yet.

But it wasn’t at all clear that such a “no presumption” doctrine would turn out much better for the employers than Yard-Man. Justice Breyer, for example suggested to Ms. Ho that “you say just have us decide it, and in this case, I’ve read an awful lot that [leads me to think that] you may well lose.”

Similarly, Justice Kagan thought it important that according to one of the amici “about 60 percent of [these contracts] say quite explicitly ‘unvested.’ Yours doesn’t do that.” The natural implication of the exchange was that, in her view, the absence of such a commonly used phrase suggested that the natural reading of the contract would be to treat the benefits as vested.

To be sure, not all of the discussion leaned toward the union. The Chief Justice, for example, asked Ms. Clark whether “it [is] a traditional principle of contract interpretation that if you’re dealing with something as big a deal as health benefits for life, you might expect that to be addressed more specifically?” And several of the Justices said so little that it is difficult to predict what they would think when pressed to provide an actual vote.

The only other thing that seems clear from the argument is that the Justices discern how poorly the agreements at issue were drafted. At a time when the vesting of these benefits was common, it is disappointing at best for the agreement to address the question so obliquely. I have the sense that Justice Scalia spoke for most of the Justices when he suggested:

You know, the nice thing about a contract case of this sort is you can’t feel bad about it. Whoever loses deserves to lose. I mean, this is obviously an important feature. Both sides knew it was left unaddressed, so whoever loses deserves to lose for casting this upon us when it could have been said very clearly in the contract. Such an important feature. So I hope we’ll get it right, but, you know, I can’t feel bad about it.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, filed an amicus brief in support of neither party in this case.]

Recommended Citation: Ronald Mann, Argument analysis: Justices dust off contracts treatises for dispute over health-benefit vesting, SCOTUSblog (Nov. 11, 2014, 1:02 PM),