Today, the 6th Circuit Court of Appeals upheld a District Court ruling that dismissed a $450 million claim against General Motors.
The United Auto Workers had claimed that GM was obligated to contribute $450 million to the health care plans of Delphi retirees. The parts supplier subsidiary of GM filed for bankruptcy in 2005, at which time the UAW originally claimed Delphi was responsible for the $450 million contribution.
In 2007, as Delphi was still in bankruptcy, Delphi, GM and the UAW entered into a memorandum of understanding, wherein GM agreed to contribute the $450 million to the UAW members’ retirement. GM entered into two more subsequent agreements to contribute the $450 million.
When GM filed for its own bankruptcy protection in 2009, neither the UAW nor GM “explicitly took a position” on the $450 million contribution, according to the 6th Circuit’s decision. The UAW’s retirement settlement agreement negotiated in GM’s bankruptcy did not explicitly mention the $450 million contribution.
In October of 2009, three months after GM and the UAW had signed the union’s retirement settlement agreement, the UAW asked for payment of the $450 million. GM refused, on the grounds the contribution was not a part of the retirement settlement agreement.
In 2010, the UAW sued in U.S. District Court for the Eastern District of Michigan. In 2013, the court issued a summary judgment in GM’s favor, dismissing the claim.
The appellate court departed from the lower court, in that if found that “New” GM did assume responsibility for the $450 million contribution in the Master Sale and Purchase agreement signed in bankruptcy.
But the 6th Circuit also said the 2009 retirement settlement agreement signed by the UAW “extinguished” GM’s obligation to pay, because the agreement did not contain specific language regarding the $450 million payment.
The 2009 retirement settlement agreement superseded any “prior understandings, agreements or representations” between the UAW and GM, according to language cited in the 6th Circuit’s decision.
In finding for GM and upholding the lower court’s decision, the Circuit Court called the retirement settlement agreement “not ambiguous.”
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
