Ryan v. Chromalloy American Corp.

• Decision Date: 20 June 1989
• Docket Number: No. 87-2669,87-2669
• Citation: 877 F.2d 598
• Parties: 131 L.R.R.M. (BNA) 2887, 58 USLW 2055, 112 Lab.Cas. P 11,268, 13 Fed.R.Serv.3d 1401, 11 Employee Benefits Ca 1137 John RYAN, et al., on behalf of himself and a class of others similarly situated, Plaintiffs-Appellants, v. CHROMALLOY AMERICAN CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 598

877 F.2d 598

131 L.R.R.M. (BNA) 2887, 58 USLW 2055,

112 Lab.Cas. P 11,268,

13 Fed.R.Serv.3d 1401,

11 Employee Benefits Ca 1137

John RYAN, et al., on behalf of himself and a class of

others similarly situated, Plaintiffs-Appellants, v. CHROMALLOY AMERICAN CORPORATION, Defendant-Appellee.

No. 87-2669.

United States Court of Appeals,

Seventh Circuit.

Argued April 7, 1988.

Decided June 20, 1989.

Don J. McRae, Don J. McRae & Associates, Kewanee, Ill., Barry Barash, Barash Stoerzbach & Henson, Galesburg, Ill., for plaintiffs-appellants.

Richard Martin Lyon, Seyfarth Shaw Fairweather & Geraldson, Raymond J. Kelly, Mark A. Casciari, Chicago, Ill., for defendant-appellee.

Before BAUER, Chief Judge, and COFFEY and MANION, Circuit Judges.

MANION, Circuit Judge.

Plaintiffs, retired hourly employees of Chromalloy American Corporation ("Chromalloy"), appeal from the district court's order granting summary judgment for the defendants in this class action involving claims under the Employee Retirement Income Security Act of 1974, 29 U.S.C. Sec. 1001 et seq., and Section 301(a) of the Labor Management Relations Act of 1947, 29 U.S.C. Sec. 185(a). The plaintiffs seek reinstatement of their retiree welfare benefits, which were terminated by Chromalloy after it sold its Kewanee Division where plaintiffs were employed. For the reasons outlined below, we affirm.

I. Background

In 1972, Chromalloy purchased Kewanee Machinery & Conveyor Co., which consisted of manufacturing plants located in both Kewanee, Illinois and Kirksville, Missouri ("Kewanee Machinery Division" or "Division"). Chromalloy maintained the predecessor company's existing Group Benefit Program according to the governing trust, program, and plan documents. In 1978, Chromalloy bought a third manufacturing plant located in Evansville, Indiana, and merged it into the Division. It amended the Group Benefit Program documents to extend coverage to the employees of the new facility.

The Group Benefit Program ("Program") provided for "death, accident and sickness, hospital, surgical, medical expense and extended compensation benefits for [the Divisions'] employees and retired employees and their eligible dependents." More specifically, eligible retired hourly employees and their dependents were covered for basic hospital, surgical, and medical expenses up to the age of 65. After the age of 65, the retiree's hospital, surgical, and medical coverage was not only limited in its scope, but also to an overall lifetime total of $5000 in coverage per person.

Each of the documents governing the Program contained either an express termination clause or a reference to the Division's right to terminate the entire program or plan. Article IX-3 of the Trust document, for example, stated that if, among other things, the company were to sell "all or substantially all of the assets of an employer, then this trust shall be deemed terminated as respects the employees of such employer, unless provision is made whereby this trust will be continued by ... [the] purchaser of all or substantially all of such assets." Section 7.10 of the Program document entitled "No Vested Interest " stated that:

Except as otherwise expressly provided in subsection 8.3 and except with respect to his rights to receive any benefits that shall have accrued under the contract, no person shall have any right, title, or interest in or to the assets of the fund, or in or to any company contributions thereto, such contributions being made to and held under the trust fund for the sole purpose of providing benefits under the program in accordance with its terms.

In turn, Section 8 of the Program document authorized the Division to amend or terminate the Program. Specifically, Section 8.1 entitled "Termination " expressly provided that the "program, the trust agreement and any portion of the contract providing non-insured benefits may be terminated by the division at any time ..." The only limitation on this right was contained in Section 8.3, which prescribed the manner in which any excess assets of the Program were to be disposed of upon termination. Similarly, the Plan document provided that:

The Plan Administrator reserves the right to amend, modify or terminate this Plan at any time, provided, however, no amendment, modification, or termination shall adversely affect the right of a Covered Person to receive reimbursement for medical expenses incurred by reason of an illness or injury for which he was receiving medical treatment at the time of such amendment, modification or termination.

Finally, the Summary Plan Descriptions distributed to the hourly employees of each of the three Kewanee Division plants set forth the respective schedule of benefits for eligible employees and their dependents, and made clear that:

This booklet is a Summary Plan Description. It is intended to explain the benefits provided by the Kewanee Machinery Division of Chromalloy American Corporation Group Benefit Program. It does not constitute the Plan. Your rights and benefits are determined in accordance with the provisions of the Plan.

* * *

* * *

Individual Termination of Coverage. The coverage of any covered person under the plan shall terminate on the earliest of the following dates:

1) the date of termination of the Plan;

2) the date employment terminates for reasons other than leave of absence, disability, retirement or death of employee;

* * *

* * *

4) the date all coverage or certain benefits are terminated in a particular class by modification of the Plan;

* * *

* * *

Collective Bargaining Agreement. This plan is referred to in the Collective Bargaining Agreement between Kewanee Machinery Division and Local 21, International Brotherhood of Teamsters and in the Collective Bargaining Agreement between Kewanee Machinery Division and Local 208, International Brotherhood of Boilermakers. Copies are available upon written request to the Plan Administrator. ¹

The collective bargaining agreements between both the Kewanee and Evansville plants and their respective unions made the following reference to the plan:

SECTION 3--Retiring employees who are eligible for pension benefits as established in the Hourly Employees' Pension Trust and their dependents, if insured at the time of retirement, will be provided life insurance [employee only], sickness and accident and hospitalization insurance at no cost to the employee. Benefits will be similar to those provided active employees except they will be less and more limited in certain coverages as recommended by the insurance company and will not duplicate the Medicare Program.

* * *

* * *

SECTION 5--The Company will provide and distribute to employees a booklet describing the insurance plan and benefits.

The collective bargaining agreement at the Kirksville, Missouri plant did not contain any references to coverage for retired employees.

On October 7, 1983, Chromalloy sold the assets of the Kewanee Machinery Division to the Allied Products Corporation ("Allied"). Although Allied chose not to maintain the Division's Group Benefits Program, Chromalloy continued to pay welfare benefits under the plan up to June 30, 1984, because approximately $100,000 remained in the Trust, and in accordance with paragraph 8.3 of the Program, had to be distributed to covered employees until the funds were exhausted. On May 10, 1984, Chromalloy notified all of the plan participants that it was terminating their benefit coverage as of June 30, 1984.

John Ryan, a retired hourly employee of the Division, brought suit and subsequently became the named plaintiff representing a class certified by the district court on May 14, 1986, and defined in a supplemental order as follows:

All former hourly employees of the Kewanee Machinery Division of Chromalloy American Corporation including its Kewanee, Illinois, Evansville, Indiana and Kirksville, Missouri plants, eligible for pension benefits under the Kewanee Division hourly pension plan on or before October 7, 1983, and their dependents, all of whom would be eligible for benefits under the Chromalloy American Corporation Group Benefit Trust, Program, and Plan (together constituting an "employee welfare benefit plan" as defined in 29 U.S.C. Sec. 1002(1), (3)), but for its termination on October 7, 1983.

Plaintiffs' third amended complaint consisted of one count under Section 502 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Sec. 1132, ² and a second count under Section 301(a) of the Labor Management Relations Act (LMRA), 29 U.S.C. Sec. 185(a). ³ Plaintiffs allege that their retirement benefits, which constituted a welfare benefit plan under ERISA, vested upon their retirement. Defendant moved for summary judgment, arguing that no genuine issues of material fact existed since plaintiffs' benefits did not vest under the applicable provisions of ERISA, the governing plan documents, or the collective bargaining agreements between Chromalloy and the respective unions representing the hourly employees at each of the three plants within the Division. The plaintiffs filed their own motion for summary judgment, and the district court, after reviewing the submissions of the parties, concluded in a thorough opinion that the governing plan documents unambiguously provided for the right to terminate the plan. Accordingly, the court rejected the plaintiffs' motion for summary judgment and granted the defendant's. On appeal, the plaintiffs-appellants contend that the district court erred because certain extrinsic evidence and inferences to be drawn from the record preclude the grant of summary judgment. Appellants also argue that they are entitled to summary judgment on their claim under the LMRA since the welfare benefits vested under the terms of the collective bargaining agreements.

II. Analysis

This court has recognized that summary judgment is particularly appropriate in cases involving the interpretation of contractual...