Keffer v. H.K. Porter Co., Inc.

• Decision Date: 23 March 1989
• Docket Number: No. 88-2549,88-2549
• Citation: 872 F.2d 60
• Parties: 130 L.R.R.M. (BNA) 3138, 111 Lab.Cas. P 11,054, 10 Employee Benefits Ca 2412 James D. KEFFER; Beulah E. Chapman; Paul Evert Cooper, for themselves and all persons similarly situated, Plaintiffs-Appellees, v. H.K. PORTER COMPANY, INC.; Connors Steel Company, a subsidiary of H.K. Porter Company, Inc., Defendants-Appellants, and Program of Hospital and Physicians' Services Benefits, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 60

872 F.2d 60

130 L.R.R.M. (BNA) 3138, 111 Lab.Cas. P 11,054,

10 Employee Benefits Ca 2412

James D. KEFFER; Beulah E. Chapman; Paul Evert Cooper, for

themselves and all persons similarly situated, Plaintiffs-Appellees, v. H.K. PORTER COMPANY, INC.; Connors Steel Company, a

subsidiary of H.K. Porter Company, Inc.,

Defendants-Appellants,

and

Program of Hospital and Physicians' Services Benefits, Defendant.

No. 88-2549.

United States Court of Appeals, Fourth Circuit.

Argued Dec. 8, 1988.

Decided March 23, 1989.

William David Levine (Marshall and St. Clair, on brief), for defendants-appellants.

William Thomas Payne (Duane F. Ice, John G. Adam, Miller, Cohen, Martens & Ice, P.C., Daniel P. McIntyre, James F. Wallington, Hostler and Segal, on brief), for plaintiffs-appellees.

Before ERVIN, Chief Judge, and WIDENER and PHILLIPS, Circuit Judges.

PHILLIPS, Circuit Judge:

H.K. Porter Company (Porter) appeals from a district court order granting a summary judgment which ordered Porter to reinstate all retiree medical and life insurance benefits that its wholly-owned subsidiary terminated at the expiration of the collective bargaining agreement it had with plaintiff-appellees' union. Plaintiff-appellees (Retirees), 319 former Connors Steel Company employees or their surviving spouses, brought this action for breach of the collective bargaining agreement under Sec. 301 of the Labor Management Relations Act of 1947, 29 U.S.C. Sec. 185, and for violation of the employees' Welfare Benefit Plan and fiduciary duties under the Employee Retirement Income Security Act of 1974, 29 U.S.C. Secs. 1001 et seq. (ERISA). We conclude that the district court correctly determined that Connors' obligation to provide the terminated benefits survived the expiration of the collective bargaining agreement and that Porter was financially liable for the benefits' continuation. We therefore affirm.

I

In 1950, Porter acquired a steelmaking facility in Birmingham, Alabama known as Connors Steel Company (Connors) and established it as a separate division of Porter. In 1956, Porter bought another facility in Huntington, West Virginia, operating it as a "separate works" of the Connors Division. Nearly 20 years later, in 1974, Porter incorporated Connors as a wholly-owned subsidiary and has owned all of Connors' stock since that time. Before Connors' incorporation, Porter and the United Steelworkers of America (the Union) entered into collective bargaining agreements that covered Porter's employees. After Connors' incorporation, however, Connors and the Union negotiated a separate collective bargaining agreement, specifically covering Connors' employees, which specified that it would be renegotiated every three years. The health and life insurance benefits at issue here became a part of the parties' agreement in 1974.

In 1979, Connors experienced severe financial difficulty, necessitating structural change. Between 1982 and 1983, Connors closed both the Birmingham, Alabama plant and the Huntington, West Virginia plant, selling them shortly thereafter. ¹ Connors stayed in operation as such until March of 1987 when it filed a Petition for Relief pursuant to Chapter 7 of the Bankruptcy Code.

When the Huntington plant was closing in 1982, Connors advised Retirees that their benefits would terminate on April 1, 1984, the date the parties' last collective bargaining agreement expired. Retirees sought a preliminary injunction against Connors and the company that provided the medical benefits, attempting to enjoin them from terminating the medical coverage. Retirees later amended their complaint, joining Porter as an additional defendant and alleging that, at all relevant times, Connors was operating as Porter's agent or alter ego, thus making Porter liable for Connors' obligations. After an evidentiary hearing, the district court denied Retirees' request for an injunction, holding that Connors lawfully terminated the benefits. On reconsideration, however, the district court vacated its earlier conclusions of law and entered a preliminary injunction against Connors, but held that Retirees were not entitled to comparable relief against Porter on the evidence then of record.

Approximately 18 months later, after Retirees filed their fourth amended complaint, the district court granted Retirees' motion for summary judgment, finding that both Connors and the Union intended the benefits to survive the expiration of the collective bargaining agreement and the cessation of Connors' operation. The court also held that Connors was Porter's agent or alter ego, and that Porter was therefore liable for financing the continuation of the benefits. Porter appealed.

Porter and Retirees do not dispute the nature of the benefits granted under the agreement. The only issues before us then are whether the welfare and life insurance benefits were to continue beyond the expiration of the collective bargaining agreement, and, if they were, whether Porter is liable for their financing.

II

In determining whether an employer's obligation to provide benefits to its retirees or their surviving spouses continues beyond the expiration of the collective bargaining agreement, we look to the parties' intent as expressed in their agreement. District 29, United Mine Workers v. Royal Coal Co., 768 F.2d 588, 590 (4th Cir.1985). While the question therefore is primarily one of contract interpretation, id., collective bargaining agreements are not interpreted under traditional rules of contract but under a federal common law of labor policy. Bowen v. USPS, 459 U.S. 212, 220, 103 S.Ct. 588, 592, 74 L.Ed.2d 402 (1983). Therefore, "[i]n order to interpret such an agreement it is necessary to consider the scope of other related collective bargaining agreements, as well as the practice, usage and custom pertaining to all such agreements." Transportation-Communication Employees Union v. Union Pacific Railroad Co., 385 U.S. 157, 161, 87 S.Ct. 369, 371, 17 L.Ed.2d 264 (1966). Of course, as with any contract interpretation, we begin by looking at the language of the agreement for any clear manifestation of the parties' intent. Royal Coal, 768 F.2d at 590. "The intended meaning of even the most explicit language can, of course, only be understood in light of the context which gave rise to its inclusion." International Union, United Automobile, Aerospace & Agricultural Implement Workers v. Yard-Man, Inc., 716 F.2d 1476, 1479 (6th Cir.1983).

Following these principles, the district court concluded that Connors and Retirees, as represented by the Union, intended the benefits in question to extend beyond the expiration of the collective bargaining agreement. We agree.

First, the express language of the parties' collective bargaining agreement indicates that the benefits were to survive. ² For example, the 1974 agreement--in which the benefits were first included--distinguished between benefits for "employees" and "pensioners." In relevant part, the agreement provided that

[d]uring the life of this Agreement [Connors] will continue to provide group insurance coverage for employees without cost to them. Effective October 1, 1974, the Plan will be amended to include the additional benefits provided for in the May 1, 1974 Basic Steel Company Agreements.

The amended "additional benefits"--as distinguished from the employee life insurance coverage that remained in effect only for the life of the agreement--were clearly linked to eligibility for Medicare, rather than to termination of the parties' agreements.

Effective October 1, 1975, for employees who retire on or after Sept. 30, 1974, on other than a deferred vested pension and for surviving spouses of (1) an employee who retires on or after Sept. 30, 1974 ... and (2) an employee who dies on or after [that date]; at a time when the employee is accruing continuous service and after he has completed 15 years of continuous service:

a. [Connors] will establish a group insurance program to provide hospital benefits and physicians' services benefits coverage (in accordance with the attached specifications) for pensioners (and their eligible dependents) who are not eligible for Medicare and for individuals (and their eligible dependents) who are receiving Surviving Spouse's benefits and who are not eligible for Medicare.

....

c. [Connors] will pay the cost of such program coverage.

d. Participation in such program ... shall terminate when such person becomes eligible for Medicare.

As the district court recognized, when these provisions are read together, they clearly comprehend and apply to two separate categories of persons, with two corresponding classes of benefits and two expected periods of duration. Accordingly, "employees" were to receive group insurance coverage for the duration of the agreement, whereas "retirees," notwithstanding the agreement's expiration, were to receive the described medical coverage until they were eligible for Medicare.

This interpretation is further buttressed by the parties' later collective bargaining agreements that continued to expressly limit the employee coverage to the lives of the agreements without similarly limiting the retirees' medical coverage. The literal language of the parties' agreements therefore, strongly supports the district court's conclusion that the agreements can only be rationally interpreted as contractually obligating Connors to provide the Retirees' medical coverage beyond the expiration of the collective bargaining agreement. Porter argues, however, that this literal language is disputed by the language in the Preamble to Connors' Benefits Booklet so that its meaning is not "plain." The Preamble provides that the benefits program, as defined in the Booklet, constitutes a part of the Pensioners' and Surviving Spouses' Health Agreement (Health Agreement) "which continues until February 28, 1978, and thereafter, subject to negotiations between the Company and the Union." (Emphasis...