Michigan Court of Appeals Rules That Retirees Are Not Entitled to Lifetime Retiree Healthcare Benefits

Keller Thoma is pleased to report that it had a significant victory in the Michigan Court of Appeals on behalf of one of our municipal clients. On October 15, 2019, the Michigan Court of Appeals issued its unpublished opinion in City of Wayne Retiree Ass’n et al., v. City of Wayne, ruling that the retirees of our municipal client did not have vested rights to lifetime healthcare benefits. Following the city’s proposal to replace the current retiree healthcare program with a stipend plan through individual Health Reimbursement Accounts in 2017, the plaintiffs, a group of retirees, filed a lawsuit against the city. The plaintiffs argued that the collective bargaining agreements (CBAs) they retired under provided them a vested right to receive lifetime healthcare benefits, and any modification or reduction to their benefits without their consent was a breach of contract.

Although the plaintiffs conceded that the applicable CBAs or other agreements did not expressly make retiree healthcare benefits a vested benefit, they argued that the CBAs were ambiguous as to whether the retiree healthcare benefits were intended to extend beyond the term or duration of each CBA. The plaintiffs also argued that since the CBAs were ambiguous, extrinsic evidence to the contract and the parties’ past practices should be considered by the Court.

The Court, however, rejected these arguments. The Court first held that, based on the language in the applicable CBAs, the contracts unambiguously and clearly provided that retiree healthcare benefits were only guaranteed for the lifetime or duration of each CBA. The Court also found that the plaintiffs had not established that the CBAs could be interpreted to extend retiree healthcare benefits beyond the expiration of the contracts.  Finally, the Court rejected the plaintiffs’ argument that the parties’ past practices including treating retiree healthcare benefits as lifetime benefits.

This case represents a major victory for municipalities related to retiree healthcare benefits. Please contact a Keller Thoma attorney if you wish to discuss this case.

Categories: Case Alerts, KT

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