Air Line Stewards and Stewardesses Ass'n, Local 550, TWU, AFL-CIO v. American Airlines, Inc.

• Citation: 763 F.2d 875
• Decision Date: 07 June 1985
• Docket Number: AFL-CIO,No. 84-1073,84-1073
• Parties: 38 Fair Empl.Prac.Cas. 29, 37 Empl. Prac. Dec. P 35,343, 6 Employee Benefits Ca 1848 AIR LINE STEWARDS AND STEWARDESSES ASSOCIATION, LOCAL 550, TWU,, et al., Plaintiffs-Appellees, v. AMERICAN AIRLINES, INC., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 875

763 F.2d 875

38 Fair Empl.Prac.Cas. 29, 37 Empl. Prac.

Dec. P 35,343,

6 Employee Benefits Ca 1848

AIR LINE STEWARDS AND STEWARDESSES ASSOCIATION, LOCAL 550 TWU, AFL-CIO, et al., Plaintiffs-Appellees, v. AMERICAN AIRLINES, INC., Defendant-Appellant.

No. 84-1073.

United States Court of Appeals Seventh Circuit.

Argued Oct. 5, 1984.

Decided June 7, 1985.

Jeffrey B. Lieberman, Schuyler, Roche & Zwirner, Chicago, Ill., for plaintiffs-appellees.

Gordon B. Nash, Jr., Gardner, Carton & Douglas, Chicago, Ill., for defendant-appellant.

Before CUMMINGS, Chief Judge, and WOOD and ESCHBACH, Circuit Judges.

ESCHBACH, Circuit Judge.

American Airlines appeals an order of the district court directing it to give retroactive retirement credit to all flight attendants who have returned to work in accordance with the provisions of a 1977 settlement agreement, and who desire to participate in its retirement plan. The district court held that the settlement agreement requires American Airlines to give such retroactive retirement credit. We must decide whether the district court's interpretation of the settlement agreement is correct. We reverse.

I

Until October 1970 it was the practice of defendant/appellant American Airlines, Inc. ("American") to terminate flight attendants who became pregnant. In 1972 plaintiff/appellee Darlene Burmeister (then Preston), one of the flight attendants terminated, commenced a class action against American, charging that the practice violated Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e. ¹ In 1976 the district court entered summary judgment against American on the issue of liability. On August 3, 1977, while American's appeal was pending, the parties entered into a written settlement agreement (the "Settlement Agreement"), which provided in essence that (1) a pro rata share of the remainder of $2,700,000, after court awards for litigation expenses, costs, and attorneys' fees were deducted, would be paid to each class member; (2) American would re-employ all class members who applied and met various requirements; and (3) all returning class members would receive the amount of company and occupational seniority and credit for length of service that they would have received if American had not terminated their employment. The district court approved the settlement in October 1977 and dismissed the class action.

On January 3, 1983, Burmeister filed a motion in the district court seeking specific performance of the Settlement Agreement. In particular, she asked the district court to direct American to provide retroactive retirement credits to class members re-employed under the Settlement Agreement. In the alternative, she asked the court to vacate its order approving the Settlement Agreement, so that the litigation might continue. On May 20, 1983, the district court granted the motion for specific performance, holding that according to the clear and unambiguous terms of the agreement, "plaintiff and the returning class members are entitled to receive any and all of the benefits they would have received had they not been discharged by American." On May 31, 1983, American moved under Rule 59(e) of the Federal Rules of Civil Procedure for reconsideration of the May 20 order. The district court denied the motion.

American appeals from the May 20 order of specific performance and the subsequent denial of its Rule 59(e) motion. Our disposition of the appeal from the May 20 order renders the second matter moot, and we do not reach the issues raised in it.

II

The issue presented to us is whether the Settlement Agreement requires American to give retroactive retirement credit to class members who returned to work in accordance with its terms. The parties agree that the answer hinges on the meaning of the following provision in section V of the Settlement Agreement, entitled "Seniority and Credit for Length of Service":

A. Each re-employed class member shall be credited with the amount of company seniority and length of service to which she was entitled at the date on which her employment was terminated plus company seniority and such length of service for the entire compensation period [the period between termination and approval of the Settlement Agreement], except for those periods of time during which she was disabled from working by reason of pregnancy or otherwise.

Thus we are presented with a question of contract interpretation. The interpretation of settlement agreements is governed by principles of state law applicable to contracts generally. See Air Line Stewards and Stewardesses Assoc., Local 550 v. Trans World Airlines, Inc., 713 F.2d 319, 321 (7th Cir.1983) (quoting Florida Education Association, Inc. v. Atkinson, 481 F.2d 662, 663 (5th Cir.1973)). The Settlement Agreement contains no choice of law clause; we thus follow the district court in looking to Illinois law for applicable principles of contract construction.

A. The Ambiguity of the Settlement Agreement

The primary object in construing a contract is to give effect to the intention of the parties. Schek v. Chicago Transit Authority, 42 Ill.2d 362, 364, 247 N.E.2d 886, 888 (1969). The starting point is the Settlement Agreement itself; if the language of the Settlement Agreement clearly and unambiguously determines an answer to the question at issue, then the inquiry is over. See J.R. Watkins Co. v. Salyers, 384 Ill. 369, 373, 51 N.E.2d 574, 576 (1943). Whether a contract is ambiguous is a conclusion of law, reviewed de novo. National Tea Co. v. American National Bank & Trust Co., 100 Ill.App.3d 1046, 1049, 56 Ill.Dec. 474, 476, 427 N.E.2d 806, 808 (1981). If the trial court holds that the contract is unambiguous, it must then go on to declare the meaning, and its declaration is likewise a conclusion of law, reviewed de novo. See Hagerty, Lockenvitz, Ginzkey & Associates v. Ginzkey, 85 Ill.App.3d 640, 641, 40 Ill.Dec. 778, 779, 406 N.E.2d 1145, 1146 (1980). But if the trial court holds that the contract is ambiguous, the meaning becomes a question of fact to be submitted to the trier of fact. Id. at 642, 40 Ill.Dec. at 779, 406 N.E.2d at 1146. The trier of fact considers not only the language of the contract but also any extrinsic or parol evidence presented by the parties. See Fox v. Inter-State Assurance Co., 84 Ill.App.3d 512, 515, 39 Ill.Dec. 894, 897, 405 N.E.2d 873, 876 (1980). Its determination is a finding of fact and is reviewed as such.

In this case the district court held that the Settlement Agreement unambiguously provides retroactive retirement credit to returning class members; under the principles just outlined, our review of this conclusion is de novo. Reading section V A in the context of the entire agreement, as we must, Martindell v. Lake Shore National Bank, 15 Ill.2d 272, 283, 154 N.E.2d 683, 689 (1958), we find that we are unable to determine solely from the language of the Settlement Agreement whether section V A is intended to grant such credits. It does not expressly mention retroactive retirement credit at all. Credit for company seniority and length of service may include retroactive retirement credit by implication, but we cannot ascertain this from section V A or any other provision of the Settlement Agreement. ² Indeed, while it is clear that the parties intended the express grant of company seniority and credit for length of service to have beneficial consequences for the re-employed class members, we cannot determine from the face of the agreement what any of those beneficial consequences might be. The terms "company seniority" and "length of service" are not defined in the Settlement Agreement, either expressly or by reference to another document. No documents are incorporated by reference into the Settlement Agreement. No clause in the Settlement Agreement identifies or defines the specific benefits that are to flow from the grant of company seniority and credit for length of service. The language of section V A is compatible with an intention to grant retroactive retirement credit and also compatible with an intention not to grant it. Neither intention is so clearly favored by the language that we can say as a matter of law that one and not the other is embodied in the Settlement Agreement. ³

We therefore hold that the district court erred in concluding as a matter of law that the Settlement Agreement unambiguously awards retroactive retirement credit to returning class members. The Settlement Agreement is ambiguous, and its meaning is a question of fact. Consequently extrinsic evidence may, and indeed must, be considered in determining its meaning. ⁴

If we were to follow the general rule, we would end our opinion at this point and remand the case for findings of fact. There are, however, strong reasons for not following the general rule in this case. The parties have thoroughly briefed the issue before us and have submitted to us all the extrinsic evidence that they have. The evidence is entirely documentary; no determinations of the credibility of witnesses are required. We are in as good a position to evaluate this evidence as the district court. Our own survey of the evidence persuades us that it compels one conclusion and that a contrary conclusion would be clearly erroneous. To remand the case would require yet a third round of argument in the district court, doubtless to be followed by a fourth round on appeal. When we know the inevitable outcome, it would be a waste of judicial resources and an undue burden on the parties for us to order a remand. Accordingly, we shall depart from the general rule and forgo a remand. ⁵

B. The Extrinsic Documentary Evidence

Because the Settlement Agreement does not define "company seniority" and "length of service," it is highly likely that the parties intended for these terms to have the significance that they have in some other document or documents governing the relationships among American, the flight attendants,...