CNH Industrial N.V. v. Jack Reese

A contract is not ambiguous unless it is subject to more than one reasonable interpretation, and the Yard-Man inferences cannot generate a reasonable interpretation because they are not “ordinary principles of contract law.”

Not long ago, the court issued an opinion in M&G Polymers USA v. Tackett, 135 S.Ct. 926 (2015), overruling the Sixth Circuit case International Union, United Auto, Aerospace, & Agricultural Implement Workers of Am. v. Yard-Man, Inc., 716 F.2d 1476 (1983).  Under Yard-Man, the Sixth Circuit could infer certain rules in contractual provisions. Specifically, in collective-bargaining agreements, these inferences presumed that retiree benefits vested for life.  However, in the present case, the Sixth Circuit used the same presumption-based-reasoning to render certain provisions of collective bargaining agreements ambiguous. In 2004, a duly executed bargaining agreement terminated according to the terms of the contract. Despite the Supreme Court’s holding in Tackett, the Sixth Circuit consulted extrinsic evidence and affirmed in relevant part a summary judgment declaration for Respondents, a group of retirees who believed some retirement benefits had a life tenure. In the context of contract interpretation, a court can consult extrinsic evidence to resolve ambiguities. The Supreme Court held that presumptions like those made under Yard-Man are improper, because they go beyond the bounds of established rules of contract interpretation. Accordingly, the court reaffirmed Tackett by emphasizing the judiciary’s role to interpret ambiguities, not to create them. REVERSED and REMANDED.