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Sloan v. BorgWarner, Inc.

United States District Court, E.D. Michigan, Southern Division

December 5, 2016

WILLARD L. SLOAN, EUGENE J. WINNINGHAM, and JAMES L. KELLEY, on behalf of themselves and a similarly situated class, Plaintiffs,
v.
BORGWARNER, INC. BORGWARNER FLEXIBLE BENEFITS PLANS and BORGWARNER DIVERSIFIED TRANSMISSION PRODUCTS, INC., Defendants.

          OPINION AND ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (ECF NO. 147)

          PAUL D. BORMAN, UNITED STATES DISTRICT JUDGE

         This action involves a contractual claim to lifetime inalterable healthcare benefits by a certified class of BorgWarner[1] retirees and their spouses. On August 7, 2015, in light of the Supreme Court's ruling in M&G Polymers USA v. Tackett, 135 S.Ct. 926 (2015), which abrogated longstanding Sixth Circuit precedent of central importance to the Plaintiffs' claims for vested lifetime healthcare benefits, this Court issued an Order vacating its February 27, 2014 Opinion and Order denying the parties' cross-motions for summary judgment in this vesting dispute.[2] (ECF No. 145, Order Vacating 2/27/14 Summary Judgment Order.) The Court gave the parties the option to file new summary judgment motions under the new interpretive standards decreed in Tackett or, alternatively, to agree to revisit the possibility of a settlement of the matter in light of the Tackett ruling.

         The parties declined the Court's invitation to return to the settlement table and BorgWarner, but not Plaintiffs, did file a motion seeking summary judgment under the mandate of Tackett and relevant Sixth Circuit precedent interpreting the Tackett decision. The Court held a hearing on Borg Warner's motion on February 12, 2016 and received post-hearing supplemental materials from Borg Warner on March 2, 2016, responding to an issue raised by the Court at the February 12, 2016 summary judgment hearing. (ECF No. 157, Supplemental Memorandum.)

         Because a petition for certiorari to the United States Supreme Court remained pending in a potentially outcome-determinative Sixth Circuit opinion on the issue of vesting post-Tackett, see, e.g. Gallo v. Moen, Inc., 813 F.3d 265 (6th Cir. 2016), this Court withheld issuing an opinion in this matter until the Sixth Circuit issued its mandate in Gallo. The Sixth Circuit issued its mandate on November 3, 2016, following the Supreme Court's denial of the plaintiffs' petition for certiorari. For the reasons that follow, the Court now GRANTS Borg Warner's motion for summary judgment.

         I. BACKGROUND

         A. Factual Background

         Borg Warner manufactured transfer cases for four wheel drive vehicles for the automotive industry at its plant in Muncie, Indiana beginning as early as 1908. (ECF No. 100, Ex. 24, Deposition of Richard Nuerge, October 25, 2011, 9-10.)[3] The Muncie Plant hourly workers were represented by the International Union of the United Auto Workers and Local 287 ("UAW"). Id. As relevant to this litigation, BorgWarner provided health care benefits to its employees through a series of Collective Bargaining Agreements ("CBAs") and Health Insurance Agreements ("HIAs") for the years 1989-2009. The health benefits program consists of the CBAs (ECF No. 97, Ex. 15, May 4, 2012 Declaration of Anthony Behrman, Exs. 1-5) and the HIAs that supplement the CBAs (ECF No. 96, Exs. 1, 4, 5.) In addition, on September 27, 1990, Borg Warner and the UAW executed an Agreement to modify and extend the 1989 CBA, and on November 30, 1992, Borg Warner and the UAW executed an Agreement to modify and extend the 1989 HIA and the 1990 extension. (ECF No. 96, Exs. 2, 3.)

         Although the Plaintiffs retired under different CBAs and HIAs, the parties appear to agree that the relevant language concerning health care coverage was consistent among each of the CBAs and HIAs. The parties also do not appear to contest the applicability of the provisions of any of the HIAs at any point in time, despite the fact that some of the HIAs were in fact executed long after the parties began to perform according to their terms.

         The instant dispute began with the negotiation of the 1989 CBA, which brought an end to a seven-week strike, a labor dispute that the parties agree was driven largely by disagreements related to rising health care costs. A significant factor driving BorgWarner's desire to reduce its retiree benefit liabilities was a new set of accounting standards promulgated by the Financial Accounting Standards Board ("FASB") that required for the first time that publicly traded companies, like BorgWarner, report their unfunded contractual benefit commitments as a liability. (ECF No. 98, Ex. 19, Deposition of Laura Champagne, January 13, 2012, 29-31.) These new FASB regulations created an enormous balance sheet liability for Borg Warner, and for the majority of publicly traded companies, threatening their ability to attract new business and to obtain financing. During the relevant time frame, 1989-2009, the parties operated under a series of collective bargaining agreements which varied to some degree but each of which contained similar language relevant to the vesting issue. Article Sixteen of the 1989 CBA, in language that continued unchanged (except as to the relevant termination date) through each of the successive agreements, dictates the duration of the CBA and provides as follows:

This agreement shall remain in full force and effent [sic] until September 12, 1992 and thereafter from year to year, unless either party shall give notice in writing at least sixty (60) days in advance of September 12, 1992, or any anniversary thereafter of its desire to terminate the Agreement.

ECF No. 97, Ex. 15, Ex. 1, 1989 CBA, Article Sixteen, p. 142.

         Similarly, in language that remained unchanged in pertinent part, Article VIII of the 1989 HIA, executed by Borg Warner and the UAW in conjunction with the 1989 CBA, defines eligibility for retiree health care benefits and provides in pertinent part that:

Section 1. Presently retired employees and an employee who retires under the Retirement Income Program Agreement on or after December 1, 1989, ... shall be entitled to the life insurance, Managed Care, basic hospitalization/surgical/medical, prescription drug, major medical, substance abuse, vision, human organ/tissue transplant, and Medical Case Management coverages and procedures, as set forth in Exhibits A, C, D, E, F and H. Art. VIII, Sec. 1(A).
Section 2. An employee who terminates employment with the Company on or after January 1, 1991 while participating in the Muncie Retirement Savings Plan shall be entitled to the ... coverages and procedures as set forth in Exhibits A, C, D, E, F and H. Art. VIII, Sec. 1(B).
Employees presently or hereafter retired under the Total and Permanent Disability provisions of the Retirement Income Program Agreement... shall be entitled to the coverages and procedures set forth in Exhibits A, C, D, E, F and H. Art. VIII, Sec. 2.
Section 3. The Company will provide the medical coverages and procedures set forth under the provisions of Exhibits A, C, D, E, F and H and will pay the monthly premium for such coverage for:
A. A surviving spouse and the eligible dependent(s) of a retired employee ... who is receiving a monthly retirement benefits under Article Eight, Section 3, of the Retirement Income Program Agreement, and B. An eligible surviving spouse ... and the eligible dependents of an employee who terminated employment with the Company while participating in the Muncie Retirement Savings Plan ...
C. The surviving spouse and the eligible dependents of an employee who was eligible to retire at the time of death under... the Retirement Income Program Agreement or ... the Muncie Retirement Savings Plan...
The medical coverages and procedures provided under this Article VIII, Section 3 shall terminate if the surviving spouse or Eligible surviving spouse remarries.

(ECF No. 96, Ex. 1, 1989 HIA, pp. 7-9.)

         Also surviving through each iteration of the parties' health care agreements (with modified relevant dates), Article XII of the 1989 HIA contains the following language:

This Agreement and the Plan embodied herein shall become effective as of October 27, 1989, and continue in full force and effect until September 12, 1992. During the term of this Agreement neither the Company nor the Union shall demand any change in this Agreement nor shall either party be required to bargain with respect to this Agreement.... On September 12, 1992 this Agreement may be terminated, modified, changed or continued in the same manner as provided in Article Sixteen of the aforesaid Collective Bargaining Agreement between the parties hereto dated October 27, 1989.

ECF No. 96, Ex. 1, October 27, 1989 HIA 15.

         In Exhibit A to the 1989 HIA, in language that remained unchanged through each iteration of the HIAs from 1989 through 2009, the "Schedule of Benefits, " Section II setting forth "Basic Hospital, Surgical and Medical Benefits, " the parties agreed, specifically with reference to retiree health care benefits, as follows:

Termination of Coverages Provided Under Exhibit A: The coverages provided under this Exhibit A terminate on the date that:
(a) the eligible active employee leaves the employment of the Company (see the Agreement and Appendix for the applicable continuation provisions regarding layoff, disability, retirement, or COBRA);
(b) the eligible active employee/dependent or the eligible retiree/dependent is no longer eligible for coverage;
(c) the required monthly premium contribution, if applicable is not made;
(d) the eligible active employee or eligible retiree dies (see the Agreement or Appendix A for the applicable continuation provisions, if any); or
(e) the Agreement is terminated.

(ECF No. 96, Ex. 1, 1989 HIA, Appendix A, Ex. A, § 2(M)(2), pp. 65-66.)

         The Summary Description of the Plan of Insurance, included within the consecutively-paginated 1989 HIA and before the signature page on that document, and remaining in each successive version of the HIA, states as follows:

FUTURE OF THE PLAN
Although Borg-Warner Automotive Diversified Transmission Products Corporation, Muncie Plant expects and intends to continue the Plan indefinitely, it reserves the right to modify, amend, suspend or terminate the Plan or the Group Policies therein in ...

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