Opinion

Hobert Tackett v. M&G Polymers USA, LLC

Court: Court of Appeals for the Sixth Circuit
Filed: Apr 3, 2009
Status: Published
Cited by: 0 cases
Authority: More cited than 39.3%

explaining that there are three distinct remedies available under § 502(a)(1)(B

How later courts described this case

explaining that there are three distinct remedies available under § 502(a)(1)(B
“State courts have concurrent jurisdiction over § 301 claims, but must of course apply federal law.”

Written by the judges who cited it.

The opinion

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 09a0135p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

Plaintiffs-Appellants, -

HOBERT TACKETT, et al.,

Nos. 07-4515/4516

Defendants-Appellees. -

M&G POLYMERS, USA, LLC, et al.,

Appeal from the United States District Court

for the Southern District of Ohio at Columbus.

No. 07-00126—Gregory L. Frost, District Judge.

Argued: January 22, 2009

Decided and Filed: April 3, 2009

Before: MARTIN and MOORE, Circuit Judges; GWIN, District Judge.

_________________

COUNSEL

ARGUED: Renate Klass, MARTENS, ICE, KLASS, LEGGHIO & ISRAEL, Royal

Oak, Michigan, Robert E. Rickey, COOK, PORTUNE & LOGOTHETIS, Cincinnati,

Ohio, for Appellants. Deborah Shannon Davidson, MORGAN, LEWIS & BOCKIUS,

Chicago, Illinois, for Appellees. ON BRIEF: Renate Klass, Stuart M. Israel,

MARTENS, ICE, KLASS, LEGGHIO & ISRAEL, Royal Oak, Michigan, Robert E.

Rickey, David M. Cook, COOK, PORTUNE & LOGOTHETIS, Cincinnati, Ohio, for

Appellants. Deborah Shannon Davidson, Philip A. Miscimarra, MORGAN, LEWIS &

BOCKIUS, Chicago, Illinois, for Appellees.

The Honorable James S. Gwin, United States District Judge for the Northern District of Ohio,

sitting by designation.

Nos. 07-4515/4516 Tackett, et al. v. M&G Polymers, et al. Page 2

_________________

OPINION

_________________

PER CURIAM.

The Plaintiffs United Steel, Paper and Forestry, Rubber, Manufacturing, Energy,

Allied Industrial and Service Workers International Union, AFL-CIO-CLC (“USW”)

and Hobert Tackett, Woodrow W. Piles, and Harland B. Conley (“Retiree Plaintiffs”)

separately appeal the district court’s dismissal of their case under Federal Rule of Civil

Procedure 12(b)(1) and (b)(6).

The Plaintiffs alleged that, under their collective bargaining agreement (“CBA”),

the Defendant M&G Polymers, USA (“M&G”) promised them vested health-care

benefits. When Defendant M&G announced it would begin requiring retiree

contributions to health-care costs, the Plaintiffs sued. In addition to suing M&G, the

Plaintiffs also sued the M&G-sponsored health plans that Retiree Plaintiffs receive their

benefits from: the M&G Comprehensive Medical Benefits Program for Employees and

Their Dependents, the M&G Catastrophic Medical Plan, the M&G Medical Necessity

Benefits Program of Hospital, Surgical, Medical, and Prescription Drug Benefits for

Employees and Their Dependents, and the M&G Major Medical Benefits Plan

(collectively, with Defendant M&G, “Defendants”).

In resolving this appeal, we must decide two main issues: (1) whether, under

§ 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185(a), a district

court must find that a violation of a collective bargaining agreement has occurred before

it can exercise jurisdiction; and (2) whether, under this Circuit’s Yard-Man analysis,

UAW v. Yard-Man, 716 F.3d 1476, 1479 (6th Cir. 1983), the Plaintiffs have sufficiently

established a right to vested health-care benefits to survive a motion to dismiss under

Rule 12(b)(6) by relying on CBA language promising a “full Company contribution” to

these benefits.

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Because we hold that (1) a violation is not a prerequisite to jurisdiction under

§ 301 and because (2) the Plaintiffs have sufficiently shown an intention to vest health-

care benefits to survive a motion to dismiss, we REVERSE and REMAND.

I. Standard of Review

We generally review a district court’s ruling under Rule 12(b)(1) and 12(b)(6)

de novo. Nichols v. Muskingum College, 318 F.3d 674, 677 (6th Cir. 2003) (citations

omitted); Ass’n of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548

(6th Cir. 2007). Courts have, however, observed an exception to this de novo standard

of review under Rule 12(b)(1). When Congress statutorily confers subject-matter

jurisdiction, it can require that certain prerequisites be met before a federal district court

can exercise jurisdiction. See, e.g., 28 U.S.C. § 1332 (establishing jurisdiction over

cases between “citizens of different States”). When Congress establishes a jurisdictional

prerequisite, a district court may admit extrinsic evidence and resolve disputed facts to

decide if the asserted claim satisfies the jurisdictional prerequisite. Arbaugh v. Y&H

Corp., 546 U.S. 500, 516 (2006). If a district court considers and resolves facts in

deciding a Rule 12(b)(1) motion, we review those findings for clear error. Nichols, 318

F.3d at 677. Aside from the resolution of jurisdictional prerequisites, a district court

must generally confine its Rule 12(b)(1) or 12(b)(6) ruling to matters contained within

the pleadings and accept all well-pleaded allegations as true. Gentek Building Products,

Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007).

II. Background and Procedural Posture

Before their retirement, the Retiree Plaintiffs worked at the Point Pleasant

Polyester Plant (the “Plant”) in Apple Grove, West Virginia. At that location, Plaintiff

USW, or its predecessor union, bargained on behalf of the Plant’s employees. The Plant

has changed ownership several times, and M&G now owns the plant.

In December 2006, M&G announced that it would begin requiring retirees to

contribute to the cost of their health-care benefits. After Defendant M&G’s

announcement, Retiree Plaintiffs, as putative class representatives, and USW sued under

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§ 301 of the LMRA and under the Employee Retirement Income Security Act

(“ERISA”) §§ 502(a)(3) and 502 (a)(1)(B), 29 U.S.C. § 1132. Following the district

court’s dismissal, the Plaintiffs appealed separately, with USW challenging the district

court’s ruling on § 301 and the Retiree Plaintiffs challenging the ruling on both § 301

and ERISA §§ 502(a)(3) and 502(a)(1)(B). The appeals were consolidated for

submission to this Court.

In their Complaint, the Plaintiffs pointed to language in the November 6, 2000

CBA between M&G and USW that governed retirees’ entitlement to health-care

benefits:

Employees who retire on or after January 1, 1996 and who are eligible

for and receiving a monthly pension under the 1993 Pension Plan . . .

whose full years of attained age and full years of attained continuous

service . . . at the time of retirement equals 95 or more points will receive

a full Company contribution towards the cost of [health-care]

benefits. . . . Employees who have less than 95 points at the time of

retirement will receive a reduced Company contribution. The Company

contribution will be reduced by 2% for every point less than 95.

Employees will be required to pay the balance of the health care

contribution, as estimated by the Company annually in advance, for the

[health care] benefits . . . . Failure to pay the required medical

contribution will result in cancellation of coverage.

(emphasis added). According to the Plaintiffs, this “full Company contribution”

language shows a vested right to health-care benefits: those employees meeting the age

and term-of-service qualifications are entitled to fully-covered health care benefits and

those falling below these qualifications would receive reductions from full coverage as

set out in the plan. The Retiree Plaintiffs also sought to represent surviving spouses

whose benefits were affected by Defendants’ alleged breach. The Plaintiffs said that the

Defendants unilaterally set the “contribution” at a level below full coverage violating the

above-quoted language.

The Defendants moved to dismiss the Complaint under Rule 12(b)(1) and

12(b)(6). The Defendants argued that, § 301, which confers subject-matter jurisdiction

in federal district courts in “[s]uits for violation of contracts,” 29 U.S.C. § 185(a),

required that a plaintiff show a “violation” before a district court could exercise subject-

Nos. 07-4515/4516 Tackett, et al. v. M&G Polymers, et al. Page 5

matter jurisdiction. In the alternative, the Defendants moved to dismiss saying that the

language quoted by the Plaintiffs did not establish a vested right to health-care benefits.

In moving to dismiss, the Defendants submitted evidence of several side letter

agreements. Defendants said that these side letters were incorporated by reference into

the CBA that the Plaintiffs sued under and that the side letters cap the amount of the

employer’s contribution to the cost of health-care benefits. Responding, the Plaintiffs

said that these side cap letters were not part of the collective bargaining agreement that

the Plaintiffs sued under. Resolution of this disputed issue, however, required

consideration of materials extrinsic to the pleadings.1 The Defendants said that the

district court could consider this extrinsic material under Rule 12(b)(1) because the court

found a lack of a violation, which was a jurisdictional prerequisite.

The district court agreed with the Defendants and held that the showing of a

collective bargaining agreement violation was a prerequisite to jurisdiction: “Absent a

breach by Defendants, this Court lacks jurisdiction over the § 301 claim.” Tackett v.

M&G Polymers USA, LLC., 523 F. Supp. 2d 684, 691 (S.D. Ohio 2007). The court then

admitted and weighed the extrinsic evidence on the side letters to decide whether M&G

breached the collective bargaining agreement.2 Id. at 690. Ultimately, the district court

concluded that the Defendants did not breach the CBA, and that it lacked jurisdiction.

In support of the contention that the side letters were incorporated into the CBA, the Defendants

submitted evidence of the collective bargaining history at the Plant dating back to 1991. A series of

collective bargaining agreements has been in force at the Plant, with each typically lasting around three

years before renegotiation. The first letter agreement, signed contemporaneously with the 1991 - 1994

collective bargaining agreement, was adopted “for purposes of conforming with the new Financial

Accounting Standard Board (FASB) accounting requirement” that required accrual accounting of health-

care benefits. This new requirement hurt a company’s balance sheet performance if the company had no

cap on its health-care costs. While signed in 1991, the caps were not to take effect until July 1, 1997.

Concurrent with the 1994 - 1997 collective bargaining agreement, another cap letter postponed the

effective date of the caps to 2004. The import of this perpetual postponement and the applicability of these

cap letters to the current parties are fact issues that must be resolved by the district court outside of the

Rule 12(b)(1) determination.

For example, the Plaintiffs submitted to the district court a letter written by David Dick, an

attorney who represented M&G in labor negotiations in 2000. The letter said that the applicability of one

of the cap letters to “M&G is less than clear. In fact, the Company believes it does not apply to M&G.”

During this litigation, however, Dick submitted a declaration saying he “was not familiar with details or

history concerning any side letters.” In resolving the Defendants’ Rule 12(b)(1) motion, the district court

accepted Dick’s characterization of the letter and found that this letter “was the result of a lack of

understanding on [Dick’s] part of the history of cap incorporation.” Tackett, 523 F. Supp. 2d at 690.

Nos. 07-4515/4516 Tackett, et al. v. M&G Polymers, et al. Page 6

As an alternative to its dismissal for lack of jurisdiction, the district court then

assumed for argument purposes that it had jurisdiction over the Plaintiffs’ claims for

relief and addressed the Defendants’ 12(b)(6) motion to dismiss. Because the LRMA

§ 301 and the ERISA § 502(a)(1)(B) claims both turned on whether the Plaintiffs’

benefits were vested, the district court considered these claims together and held that the

“full Company contribution” language did not plausibly state a claim for vested health-

care benefits.

The district court additionally granted the Defendants’ 12(b)(6) motion directed

at the Plaintiffs’ ERISA fiduciary claim, holding that Plaintiffs “failed to plead facts”

supporting this claim. Id. at 696.

III. Rule 12(b)

III.A. Rule 12(b)(1)

Our review of the district court’s dismissal under Rule 12(b)(1) turns on whether

a plaintiff must establish the breach of a collective bargaining agreement as a

prerequisite to jurisdiction under § 301 of the LMRA.3 The LMRA confers subject-

matter jurisdiction in federal district courts in “[s]uits for violation of contracts.” 29

U.S.C. § 185(a).4 Whether the language in a statute like § 301 is a jurisdictional

prerequisite or merely an “‘essential ingredient[] of a federal claim for relief’” is

sometimes a “‘close question.’” Arbaugh, 546 U.S. at 503, 516 (quoting Da Silva v.

Kinsho Intern Corp., 229 F.3d 358, 361 (2nd Cir. 2000)).

The Plaintiffs also claimed that the district court had federal-question subject-matter jurisdiction

under 28 U.S.C. § 1331. Here, the district court dismissed the claim because it failed to meet the

requirements of § 301. We, however, ultimately conclude that the court had jurisdiction under § 301.

Accordingly, we need not address whether 28 U.S.C. § 1331 could support jurisdiction over the Plaintiffs’

claims if the claims had failed to meet a jurisdictional requirement of § 301.

In full,§ 301 says,

Suits for violation of contracts between an employer and a labor organization

representing employees in an industry affecting commerce as defined in this chapter, or

between any such labor organizations, may be brought in any district court of the United

States having jurisdiction of the parties, without respect to the amount in controversy

or without regard to the citizenship of the parties.

29 U.S.C. § 185(a).

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If a violation is not a prerequisite to jurisdiction, then, to survive a Rule 12(b)(1)

motion, the Plaintiffs need not show a violation but merely that their violation claim is

“colorable.” Id. at 513 (citing Bell v. Hood, 327 U.S. 678, 681-85 (1946)). Additionally,

if a violation is not a prerequisite to jurisdiction, the district court erred in admitting and

weighing evidence extrinsic to the pleadings in resolving the Rule 12(b)(1) motion.

III.A.1. The Distinction between a Jurisdictional Prerequisite and an

Essential Ingredient of a Federal Claim to Relief

In finding that it did not have jurisdiction over Plaintiffs breach of contract claim,

the district court relied upon Bauer v. RBX Industries, Inc., 368 F.3d 569 (6th Cir. 2004).

Giving Bauer an exceedingly broad reading, the district court held that plaintiffs in a

§ 301 action must demonstrate a contractual violation to establish jurisdiction. Tackett,

523 F. Supp. 2d at 691-92. The district court’s interpretation of Bauer was over-broad.

More importantly, the Supreme Court and this Court have both subsequently rejected the

district court’s requirement.

After the Bauer decision, the Supreme Court clarified the distinction between a

jurisdictional prerequisite and an essential ingredient of a federal claim to relief and

provided a test that courts must use to determine what showing is required to establish

jurisdiction and what showing is required to establish the merits of their claims. In

Arbaugh, the plaintiff sued for alleged violations of Title VII. Id. at 503-04. Title VII

says that “[e]ach . . . United States district court . . . shall have jurisdiction of actions

brought under this subchapter.” Id. at 505-06 (citing 42 U.S.C. § 2000e-5(f)(3)). Title

VII “makes it unlawful ‘for an employer . . . to discriminate,’ . . . on the basis of sex.”

Id. at 503 (citing 42 U.S.C. § 2000e-2(a)(1)). Separately, Title VII defines “employer”

to only include those employers with “fifteen or more employees.” Id. at 504 (citing 42

U.S.C. § 2000e(b)). The central issue in Arbaugh was whether this statutory “employee-

numerosity requirement” was a “jurisdictional” prerequisite, or merely an “essential

ingredient[]” of the plaintiff’s claim. Arbaugh, 546 U.S. at 513.

In resolving this central issue, the Arbaugh Court first criticized the frequent

sloppiness in courts’ treatment of motions to dismiss, noting that courts too often

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“conflated” Rule 12(b)(6) merits motions with Rule 12(b)(1) jurisdictional motions. Id.

at 511. To remedy this, the Supreme Court established a bright line rule:

If the Legislature clearly states that a threshold limitation on a statute’s

scope shall count as jurisdictional, then courts and litigants will be duly

instructed and will not be left to wrestle with the issue. . . . But when

Congress does not rank a statutory limitation on coverage as

jurisdictional, courts should treat the restriction as non-jurisdictional in

character.

Id. at 515-16 (citations omitted) (emphasis added).

In determining whether Congress intended courts to treat the employee-

numerosity requirement as jurisdictional, the Supreme Court noted that Title VII gave

no indication that a district court should raise and resolve the employee-numerosity

requirement on its own. Id. at 514.

In concluding that Congress did not intend to rank the employee-numerosity

requirement as jurisdictional, the Court identified two additional practical considerations

that supported its holding: the discretion that district courts enjoy when their fact-finding

overlaps with the merits of the claims and judicial efficiency. Id. A district court can

resolve disputed facts that underlie a jurisdictional prerequisite in a 12(b)(1) motion, but

when the prerequisite is intertwined with the merits, this fact-finding undercuts the jury’s

role as the “proper trier of contested facts.” Id. Additionally, because subject-matter

jurisdiction defects can be raised at any stage of litigation, and because a lack of subject-

matter jurisdiction requires dismissal of pendent state-law claims, a district court may

be required to dismiss state claims after expending considerable judicial resources. Id.

III.A.2. Application of Arbaugh in the Sixth Circuit

After oral argument in this case, this Court reexamined Bauer and its § 301

jurisprudence in light of the Arbaugh decision. Winnett v. Caterpillar, Inc., 553 F.3d

1000, 1004-07 (6th Cir. 2009). In Winnett, this Court overruled the Bauer decision and

held that “the existence of a union contract is an element of Plaintiffs’ merits claim, not

a limit on federal subject-matter jurisdiction.” Id. at 1007.

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In reaching this decision, the Winnett Court started with an examination of

Congressional intent. Id. at 1005-06 (“Arbaugh now tells us to ask: Did Congress

‘clearly state[],’ 546 U.S. at 515, that the existence of a union contract is a jurisdictional

prerequisite for a Section 301(a) claim?”). In determining whether Congress intended

a contract to be a jurisdictional prerequisite, the Court noted that the only reference to

jurisdiction in § 301 was to personal jurisdiction and in that reference the statute had not

“impose[d] new barriers” to federal courts, but had “ease[d] access.” Id. at 1006.

Additionally, § 301 includes all of the prima facie elements of the cause of action in the

jurisdiction-conferring provision. The Court reasoned that, if a contract is a

jurisdictional prerequisite, then likely each other prima facie requirement in § 301

functions as a jurisdictional prerequisite. The Winnett Court was “reluctant to conclude

that Congress intended to create a cause of action that has no non-jurisdictional

elements.” Id.

After finding no indication that Congress “clearly state[d]” that courts should

treat a contract as jurisdictional, the Court went on to address the “real-world

considerations” associated with treating a contract as jurisdictional. Id. This additional

analysis after examining Congressional intent was drawn from the Arbaugh decision:

“Arbaugh also tells us not to just look at labels but also pragmatically to consider the

consequences of giving a jurisdictional label to an element of a cause of action.” Id.

The Winnett Court then pointed out that, when a district court finds a jurisdictional

defect, the court must dismiss even meritorious pendent state-law claims, despite the

time and resources the court and parties have expended on the case. Id. at 1007 (noting

the “wasteful inefficiencies on the parties or the courts”).

As directed by the Supreme Court in Arbaugh and the Winnett Court, we

conclude that Congress did not “clearly state[]” an intent to treat the violation language

as jurisdictional. See id. at 1005-06. Additionally, after examining the “real-world

considerations” of labeling the violation language as jurisdictional, we find the district

court’s interpretation would wreak havoc. See id. at 1006.

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The Winnett Court has already determined that Congress did not intend the

“contract” language in § 301 as jurisdictional. We agree and hold that Congress did not

“clearly state[]” that courts should treat the violation language as jurisdictional for the

same reasons identified by the Winnett Court. The language of § 301 suggests that a

violation is not a prerequisite to jurisdiction: “Suits for violation of contracts . . . may be

brought in any district court of the United States having jurisdiction of the parties . . . .”

29 U.S.C.§ 185(a) (emphasis added.) If we were to consider a violation a jurisdictional

prerequisite, Congress would be requiring a district court to determine whether a

violation had occurred before it could decide at the merits stage whether a violation had

occurred. This cannot be the result intended by Congress with the use of the violation

language.

This conclusion is bolstered here, even more so than in Winnett, by the “real-

world considerations” associated with labeling a violation as a jurisdictional prerequisite.

Winnett, 533 F.3d at 1006. First, the LMRA gives the district court jurisdiction over

“[s]uits for violation of contracts.” Section 301 does not limit jurisdiction to “suits

where a violation of contract has been established.” The district court will consider the

same set of underlying facts when deciding if there was a violation to support

jurisdiction and when deciding if the Plaintiffs should ultimately succeed on the merits

of their claim. Any merits-related fact-finding by a district court during a jurisdictional

determination undercuts the jury’s traditional role as “the proper trier of contested facts.”

See Arbaugh, 545 U.S. at 514 (citations omitted).

Second, as both Winnett and Arbaugh noted, “when a court lacks subject matter

jurisdiction over a claim, it must immediately dismiss not just that claim but any pendent

state-law claims as well–no matter how late in the case the district or appellate court

identifies the jurisdictional defect.” Winnett, 553 F.3d at 1007 (citing Arbaugh, 546 U.S.

at 514). For example, a case may go all the way to a jury trial on a § 301 claim and

pendent state-law claims. If the jury finds that the state-law claims are meritorious but

also that a plaintiff did not establish a violation of a labor contract, the court would be

required to dismiss these meritorious state-law claims after expending considerable

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judicial resources on their adjudication. This required dismissal may “impose . . .

wasteful inefficiencies on the parties or the courts.” Id.

These inefficiencies become exacerbated in the context of a § 301 action. In

Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 502 (1962), the Supreme Court

addressed concurrent federal and state court jurisdiction over claims for a violation of

a collective bargaining agreement. The Court held that state courts have concurrent

jurisdiction over § 301 claims. Id. at 521-22 (“We agree with the Supreme Judicial

Court of Massachusetts that the courts of that Commonwealth had jurisdiction in this

case, and we accordingly affirm the judgment before us.”); see also, Valinski v. Detroit

Edison, 197 Fed. Appx. 403, 407 (6th Cir. 2006) (“State courts have concurrent

jurisdiction over § 301 claims, but must of course apply federal law.”). If Plaintiffs’

claim for breach of contract is dismissed for lack of jurisdiction, res judicata does not

prevent re-litigation of the breach of contract claim in a state court with plenary

jurisdiction. See 18A CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL

PRACTICE AND PROCEDURE § 4436 (“The basic rule that dismissal for lack of

subject-matter jurisdiction does not preclude a second action on the same claim is well

settled.”).

Accordingly, we hold that the district court erred in dismissing the Plaintiffs’

claims for lack of subject-matter jurisdiction.5

III.B. Rule 12(b)(6)

After dismissing the Plaintiffs’ LMRA claim for lack of jurisdiction, the district

court then assumed that it had jurisdiction and dismissed the Plaintiffs’ complaint for

failure to state a claim. We now address the district court’s grant of the Defendants’

12(b)(6) motion. The district court “decline[d] to consider material extrinsic to the

pleadings in regard to the motion to dismiss,” and therefore did not convert the 12(b)(6)

The Defendants ask this Court to affirm the district court’s holding under Rule 12(b)(1) because

the Plaintiffs have failed to present a colorable claim. We need not address this argument because below

we conclude that the Plaintiffs have sufficiently stated a claim under the more rigorous Rule 12(b)(6)

standard.

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motion into a motion for summary judgment. Tackett, 523 F. Supp. 2d at 693.6 The

Defendants say that we should affirm that district court’s 12(b)(6) ruling, or,

alternatively, convert this into a Rule 56 motion and consider materials outside the

pleadings. The Defendants say that conversion is appropriate because both parties

submitted, and the district court considered, extrinsic materials in the Rule 12(b)(1)

analysis.

Under our 12(b)(1) analysis above, we did not consider matters outside the

pleadings. Rule 12(b)(6), besides some minor exceptions, does not permit courts to

consider evidence extrinsic to the pleadings. See Tellabs, Inc. v. Makor Issues & Rights,

Ltd., 127 S.Ct. 2499, 2509 (2007) (citing 5B WRIGHT & MILLER § 1357). If, however,

as the Defendants urge, we convert the 12(b)(6) motion into a Rule 56 motion, we would

need to examine all of the extrinsic materials the parties submitted. Accordingly, we

will first address whether such an examination is necessary, and decide if the

Defendants’ Rule 12(b)(6) motion should be converted into a Rule 56 motion on appeal.

III.B.1. Rule 12(d) Conversion

When a court considers matters outside the pleadings in a Rule 12(b)(6) motion,

Rule 12(d) requires that “the motion must be treated as one for summary judgment under

Rule 56.” FED. R. CIV. P. 12(d). A district court may convert the motion sua sponte.

This conversion, however, “should be exercised with great caution and attention to the

parties’ procedural rights.” 5C WRIGHT & MILLER § 1366.

In the Sixth Circuit, before a district court may convert the motion sua sponte,

the “district court must afford the party against whom sua sponte summary judgment is

to be entered ten-days notice and an adequate opportunity to respond.” Yashon v.

Gregory, 737 F.2d 547, 552 (6th Cir. 1984). Despite this “clearly established rule,” an

appeals court will reverse for failure to notify only if the losing party can “demonstrate

prejudice.” Id.; Harrington v. Vandalia-Butler Bd. of Educ., 649 F.2d 434, 436 (6th Cir.

The district court noted the “unusual” procedural posture of the case, which allowed the court

to consider the Letter Agreements in a 12(b)(1) motion, but not in the 12(b)(6) motion. Tackett, 523 F.

Supp. 2d at 692.

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1981) (“A District Court’s failure to comply with the ten-day requirement of Rule 56(c)

is subject to the harmless error rule.”).

Yashon states that the notice requirement is flexible and that a failure to give

notice will result in reversal only if there was sufficient prejudice to the non-moving

party. See 5C WRIGHT & MILLER § 1366 (“[T]he absence of formal notice will be

excused when it is harmless or when the parties were otherwise apprised of the

conversion . . . and, in fact, had a sufficient opportunity to present the materials relevant

to a summary judgment motion.”).

In asking this court to convert the 12(b)(6) motion sua sponte, the Defendants

point to Cunningham v. Osram Sylvania, Inc., 221 Fed. Appx. 420, 423 (6th Cir. 2007),

an unreported Sixth Circuit opinion where the district court granted the defendant’s

12(b)(6) motion to dismiss, but considered materials extrinsic to the pleadings. On

appeal, the parties conceded that, although the district court decided the motion under

Rule 12(b)(6), “a decision under Rule 56 was appropriate.” Id. This Court did not

reverse because the district court committed a “technical error” and merely mislabeled

its analysis: the district court’s decision was the “functional equivalent” of a Rule 56

determination. Id.

Cunningham involved the review of a district court opinion that was the

“functional equivalent” of a ruling under Rule 56. The merits analysis presented here

under Rule 12(b)(1), however, was not at all the functional equivalent of a Rule 56

determination. Here, the district court weighed and resolved the claim without viewing

“the facts, and all inferences to be drawn from them, in the light most favorable to the

nonmoving party.” Abercrombie & Fitch Stores, Inc. v. Am. Eagle Outfitters, Inc., 280

F.3d 619, 629 (6th Cir. 2002) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

475 U.S. 574, 587 (1986)). Additionally, the district court made no conclusions

regarding whether the claim presented any “genuine issue as to any material fact.” FED.

R. CIV. P. 56(c).

Because the district court’s ruling was not the functional equivalent of a Rule 56

ruling, we decline the Defendants’ invitation to base our ruling on Rule 56. Therefore,

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we will not consider matters extrinsic to the pleadings and we will proceed to review the

district court’s Rule 12(b)(6) analysis.

III.B.2. Rule 12(b)(6) Standard

In deciding a Rule 12(b)(6) motion, a district court must (1) view the complaint

in the light most favorable to the plaintiff and (2) take all well-pleaded factual

allegations as true. Gunasekera v. Irwin, 551 F.3d 461, 466 (6th Cir. 2009) (citations

omitted). But the district court need not accept a “bare assertion of legal conclusions.”

Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir.1995).

In Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 127 S.Ct. 1955, 1974, 1965

(2007), the Supreme Court said that, when viewing the complaint under the above

standards, to survive a motion to dismiss a complaint must contain (1) “enough facts to

state a claim to relief that is plausible,” (2) more than “a formulaic recitation of a cause

of action’s elements,” and (3) allegations that suggest a “right to relief above a

speculative level.”

Just weeks after the Twombly decision, however, the Supreme Court cited

Twombly to reaffirm the liberal pleading standard in Rule 8(a)(2): “Rule . . . 8(a)(2)

requires only a ‘short and plain statement of the claim showing that the pleader is

entitled to relief.’ Specific facts are not necessary; the statement need only ‘give the

defendant fair notice of what the . . . claim is and the grounds upon which it rests.’”

Erickson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197, 2200 (2007) (quoting Twombly, 127

S. Ct. at 1964). On several occasions, the Sixth Circuit has identified “uncertainty

regarding the scope of Twombly,” and noted that Twombly may be “limited to expensive,

complicated litigation.” Gunasekera, 551 F.3d at 466. In reviewing a motion to dismiss,

“[w]e read Twombly and Erickson in conjunction with one another.” Sensations, Inc. v.

City of Grand Rapids, 526 F.3d 291, 295-96 (6th Cir. 2008).

We will now address whether the Plaintiffs have sufficiently pleaded their

LMRA and ERISA claims to survive a Rule 12(b)(6) motion.

Nos. 07-4515/4516 Tackett, et al. v. M&G Polymers, et al. Page 15

III.B.2.a. Section 301 Pleading Sufficiency

The parties dispute whether the Plaintiffs have plausibly alleged a violation of

the CBA. The Plaintiffs allege that Defendants unilaterally modified the Plaintiffs’

vested health-care benefits. Health-care benefits vest only if the parties so intend. Noe

v. Polyone Corp., 520 F.3d 548, 552 (6th Cir. 2008). If the parties do not intend to vest

the benefits, the former employer can modify the retiree benefits without breaching a

collective bargaining agreement.

In determining whether the parties intended health care benefits to vest, this

Court applies the principles first described in UAW v. Yard-Man, 716 F.3d 1476, 1479

(6th Cir. 1983). In Yard-Man, we held that, when interpreting a collective bargaining

agreement, a court must start with the “explicit language.” Id. General principles of

contract interpretation should guide a district court’s interpretation of the explicit

language.7 “When a contractual provision is ambiguous, the court may turn to extrinsic

evidence.” UAW v. BVR Liquidating, Inc., 190 F.3d 768, 774 (6th Cir. 1999). Language

in a collective bargaining agreement that “equate[es] eligibility for retiree health benefits

with eligibility for a pension” suggests an intent to vest. McCoy v. Meridian Auto. Sys.,

Inc., 390 F.3d 417, 421 (6th Cir. 2004) (citing Golden v. Kelsey-Hayes Co., 73 F.3d 648

(6th Cir. 1996)).

Courts reviewing a collective bargaining agreement must also keep in mind the

context of labor-management negotiations on retiree health-care benefits: “because

retirement health care benefits are not mandatory or required to be included in an

agreement, and because they are ‘typically understood as a form of delayed

compensation or reward for past services’ it is unlikely that they would be ‘left to the

contingencies of future negotiations.’” Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d

571, 580 (6th Cir. 2006) (quoting Yard-Man, 716 F.2d at 1481-82).

In interpreting a CBA, courts must (1) “look to the explicit language,” (2) evaluate that language

“in light of the context” that led to its use, (3) “interpret each provision . . . as part of the integrated whole,”

(4) construe each provision “consistently with the entire document and the relative positions and purposes

of the parties,” (5) construe the terms “so as to render none nugatory” and to “avoid illusory promises,”

(6) look to other words and phrases in the document to resolve ambiguities, and (7) “review the

interpretation . . . for consistency with federal labor policy.” Yard-Man, 716 F.2d at 1479-80.

Nos. 07-4515/4516 Tackett, et al. v. M&G Polymers, et al. Page 16

Here, the Plaintiffs have pointed to language in the collective bargaining

agreement sufficient to survive a 12(b)(6) motion. In their Complaint, the Plaintiffs

pointed to language in the November 6, 2000 CBA between M&G and the USW: