Policy v. Powell Pressed Steel Co.
| Decision Date | 20 August 1985 |
| Docket Number | No. 84-3301,84-3301 |
| Citation | 770 F.2d 609 |
| Parties | 120 L.R.R.M. (BNA) 2113, 103 Lab.Cas. P 11,665, 6 Employee Benefits Ca 2249 Joseph POLICY; William Driscoll; John Chufo; et al., Plaintiffs-Appellants, v. The POWELL PRESSED STEEL COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Mark A. Rock, Schwarzwald, Robiner, Wolf & Rock, Cleveland, Ohio, William T. Payne (Policy), Lead Counsel, Daniel McIntyre, argued, Pittsburgh, Pa., for plaintiffs-appellants.
Christopher J. Newman, argued, Henderson, Covington, Stein, Donchess & Messenger, Youngstown, Ohio, for defendant-appellee.
Before MERRITT and CONTIE, Circuit Judges, and BROWN, Senior Circuit Judge.
This is a class action, brought pursuant to section 502(a) of ERISA, 29 U.S.C. Sec. 1132(a), and section 301 of the Labor Management Relations Act, 29 U.S.C. Sec. 185, in which plaintiffs, three retired employees of defendant Powell Pressed Steel Company (the Company), seek to compel the Company to resume providing health insurance benefits for certain groups of Company retirees.
Plaintiffs contend that, under the collective bargaining agreement between the Company and the United Steelworkers of America, the Company is obligated to provide health insurance benefits to pensioners and their spouses "during the life of the pensioner." Plaintiffs contend the Company has ceased providing these benefits. Defendant Powell Pressed Steel Co. admits that it has terminated retirees' health insurance benefits, but contends that its obligation to provide health insurance coverage to retirees ended with the August 31, 1982, expiration of the collective bargaining agreement.
In the district court, plaintiffs moved for a preliminary injunction reinstating their benefits. The district court held a hearing and denied plaintiffs' motion on the ground that plaintiffs were not likely to succeed on the merits. The parties agreed to forego a trial; consequently, the district court decided the merits of the case based on the testimony elicited at the preliminary injunction hearing plus supplementary briefs and a deposition. The trial court found that the Company's duty to provide health insurance benefits to retirees had ended with the expiration of the collective bargaining agreement. Therefore, the court entered judgment for the defendant Company without addressing the class certification issue. Because, as a matter of law, we interpret the collective bargaining agreement to unambiguously grant lifetime health insurance benefits to certain retirees, we reverse.
The record establishes that beginning in 1964 the collective bargaining agreement between the Company and the union provided that the Company would pay 50% of the cost of its pensioners' benefits supplemental to Medicare. Payment of the remaining 50% was the responsibility of the individual pensioner. In 1966, a new collective bargaining agreement provided that the Company would pay 100% of the cost of the benefits supplemental to Medicare for pensioners over the age of 65. The 1976 collective bargaining agreement expanded the Company's commitment to include payment of hospitalization and surgical benefits for pensioners between the ages of 62 and 65. Under this agreement, when pensioners reached age 65, the Company became obligated to pay 100% of the cost of their benefits supplemental to Medicare. The 1979 collective bargaining agreement continued both payment of hospitalization and surgical benefits for pensioners between ages 62 and 65 and payment of the cost of benefits supplemental to Medicare for pensioners age 65 and older.
The 1979 collective bargaining agreement was the last ever negotiated between the Company and the union. The Company closed the plant on April 30, 1982, and the collective bargaining agreement between the Company and the union expired on August 31, 1982. Subsequent to August 31, 1982, the Company and the union failed to negotiate a new contract, and the plant has remained closed.
The collective bargaining agreement between the Company and the union consisted of four documents: (1) a basic labor agreement; (2) an insurance agreement; (3) a pension agreement; and (4) a supplemental employment agreement. Here we are concerned only with the Insurance Agreement and the Pension Agreement, and passages in both granted certain health insurance benefits to pensioners.
The Insurance Agreement provided in relevant part:
Section 3. Despite anything to the contrary herein contained, present pensioners who have, prior to August 31, 1976, elected and maintained hospitalization and surgical coverage and those who retire subsequent to that date will, subject to the conditions hereinafter set forth, receive medicare complementary coverage on their hospitalization and surgical benefits for the pensioner and his spouse, if any, during the life of the pensioner at no cost to the pensioner.
In order to be eligible for the above coverage, employees who reach age sixty-five (65) during the term of this contract, or any extension hereof, and become eligible for pension must decide, on or before three (3) months after said employee's sixty-fifth (65th) birthday, whether to retire or continue to work. If the employee continues to work beyond the three (3) month period, he will be deemed to have waived the provisions of this Section 3 and will not thereafter, during the term of this Agreement, receive insurance coverage as herein set forth in this Section 3.
App. 232 (emphasis added). The Insurance Agreement included a general termination clause providing that the Insurance Agreement remained in effect until August 31, 1982. The Insurance Agreement did not require the Company to set up a fund out of which insurance costs were paid. Rather, the health and welfare benefits of both active employees and pensioners were paid by the Company out of its current income. App. 148.
The Pension Agreement provided in relevant part:
Article III, Section 1. Any Employee who, at the time of his retirement on or after February 10, 1979, shall have had at least 10 years continuous service and shall have attained the age of 62 years shall be entitled to receive a pension upon his retirement. The Company will provide and pay for the regular hospitalization and surgical benefits provided by it for any Employee who retires after September 1, 1979, prior to reaching age 65. When said Pensioner reaches age 65, the Company will provide such Pensioner, at the Company's expense, supplemental medicare and major medical benefits. The Company will continue to provide, at its expense, supplemental medicare and major medical benefits for Pensioners aged 65 and over.
App. 236 (emphasis added). Unlike the Insurance Agreement, the Pension Agreement provided that the Company would set up and maintain a pension fund to provide the pensions. App. 257. The Pension Agreement further provided that "[a]ny pension properly payable pursuant to this Agreement shall continue to be payable, notwithstanding the termination or expiration of this Agreement." App. 259 (emphasis added).
The district court found, based on its interpretation of the Insurance and Pension Agreements, that plaintiff-retirees were not entitled to insurance benefits beyond the August 31, 1982, expiration of the collective bargaining agreement. Finding ambiguous section 3 of the Insurance Agreement and Article III, section 1 of the Pension Agreement, the district court looked at the agreements in their entirety and interpreted them as providing for termination of the retirees' health insurance benefits simultaneous with the termination of the collective bargaining agreement. Accordingly, the trial court entered judgment for the Company.
Contract interpretation is a question of law, not subject to the clearly erroneous standard. Chevron, U.S.A. v. Belco Petroleum Corp., 755 F.2d 1151, 1153-54 (5th Cir.1985). Thus, when reviewing the trial court's interpretation of a contract, an appellate court is not limited to the clearly erroneous rule, since a district judge's conclusions of law are freely reviewable by the court of appeals. 1 Washington Metropolitan Area Transit Authority v. Mergentime Corp., 626 F.2d 959, 961 (D.C.Cir.1980).
This court dealt with whether retirees' health insurance benefits continued past the expiration of the collective bargaining agreement in International Union, United Automobile, Aerospace, and Agricultural Implement Workers (UAW), and Local 134 UAW v. Yard-Man Inc., 716 F.2d 1476 (6th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 1002, 79 L.Ed.2d 234 (1984). In Yard-Man, this court laid out the manner in which a court should proceed when examining the duration of retiree benefits:
[W]hether retiree insurance benefits continue beyond the expiration of the collective bargaining agreement depends upon the intent of the parties. Clearly the parties to a collective bargaining agreement may provide for rights which will survive termination of their collective bargaining relationship.... Any such surviving benefit must necessarily find its genesis in the collective bargaining agreement.
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[T]he court should first look to the explicit language of the collective bargaining agreement for clear manifestations of intent. 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. The court should also interpret each provision in question as part of the integrated whole. If possible, each provision should be construed consistently with the entire document and the relative positions and purposes of the parties. As in all contracts, the collective bargaining agreement's terms must be construed so as to render none nugatory and avoid illusory promises. Where ambiguities exist, the court...
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