Rosetto v. Pabst Brewing Co.

• Decision Date: 29 June 2000
• Docket Number: No. 99-4076,99-4076
• Parties: (7th Cir. 2000) Frank M. Rosetto, et al., individually and as representatives of a class of similarly situated persons, Plaintiffs-Appellants, v. Pabst Brewing Company, Inc., Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 539

217 F.3d 539 (7th Cir. 2000)

Frank M. Rosetto, et al., individually and as representatives of a class of similarly situated persons, Plaintiffs-Appellants, v. Pabst Brewing Company, Inc., Defendant-Appellee.

No. 99-4076

In the United States Court of Appeals For the Seventh Circuit

Argued May 18, 2000

Decided June 29, 2000

Appeal from the United States District Court for the Eastern District of Wisconsin. No. 96-C-1086--William E. Callahan, Jr., Magistrate Judge. [Copyrighted Material Omitted] Matthew R. Robbins (argued), Previant, Goldberg, Uelmen, Gratz, Miller & Bruegeman, Milwaukee, WI, for Plaintiffs- Appellants.

James A. Bowles, Dean E. Dennis (argued), Arnold D. Woo, Hill, Farrer & Burrill, Los Angeles, CA, Charles P. Stevens, Michael Best & Friedrich, Milwaukee, WI, for Defendant-Appellee.

Before Posner, Chief Judge, and Diane P. Wood and Williams, Circuit Judges.

Posner, Chief Judge.

This appeal from the grant of summary judgment in favor of the defendant requires us to reconsider the much-litigated issue of when a right to health benefits that is granted to retired workers by a collective bargaining agreement (or an ERISA plan, but that is not this case) survives the termination of the agreement. See, e.g., Bidlack v. Wheelabrator Corp., 993 F.2d 603 (7th Cir. 1993) (en banc); Pabst Brewing Co. v. Corrao, 161 F.3d 434 (7th Cir. 1998); Frahm v. Equitable Life Assurance Society, 137 F.3d 955 (7th Cir. 1998); Diehl v. Twin Disc, Inc., 102 F.3d 301 (7th Cir. 1996); Murphy v. Keystone Steel & Wire Co., 61 F.3d 560 (7th Cir. 1995); Maurer v. Joy Technologies, Inc., 212 (6th Cir. 2000); Int'l Union, United Automobile, Aerospace & Agricultural Implement Workers v. Skinner Engine Co., 188 F.3d 130 (3d Cir. 1999); Joyce v. Curtiss-Wright Corp., 171 F.3d 130 (2d Cir. 1999); Int'l Ass'n of Machinists & Aerospace Workers v. Masonite Corp., 122 F.3d 228 (5th Cir. 1997). The issue must be decided as a matter of federal common law developed under the authority of section 301 of the Taft-Hartley Act, 29 U.S.C. sec. 185, as interpreted in Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456-57 (1957); see also United Steelworkers of America v. Rawson, 495 U.S. 362, 368 (1990); In re Bluffton Casting Corp., 186 F.3d 857, 862 (7th Cir. 1999), or, in the case of an ERISA plan, under the authority of ERISA. E.g., Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 55-56 (1987); Fox Valley & Vicinity Construction Workers Pension Fund v. Brown, 897 F.2d 275, 281 (7th Cir. 1990) (en banc); Trustmark Life Ins. Co. v. University of Chicago Hospitals, 207 F.3d 876, 881 (7th Cir. 2000).

The plaintiffs complain not only about the grant of summary judgment in favor of the defendant but also about the district court's denial of their discovery motion. The latter complaint has no possible merit. The motion was filed two months after the date set by the court for the completion of discovery. The plaintiffs gave (and give) no excuse for their tardiness, and so have no grounds for complaining about the district court's welcome effort to expedite the litigation and spare the parties the expense of protracted discovery, the bane of modern litigation.

The plaintiff class consists of some 45 retired machinists formerly employed at Pabst's brewery in Milwaukee, plus their spouses and dependents. The members of the class received health benefits under successive collective bargaining agreements between Pabst and the machinists' union until 1995, when the last such agreement expired (Pabst closed the brewery the following year). They claim that the agreements gave them a vested right to such benefits. The agreements contain three provisions, essentially unchanged from agreement to agreement, conferring benefits on retired employees and their dependents, that bear on this case: (a) Blue Cross and Blue Shield medigap insurance for retirees enrolled in Medicare, plus a Blue Cross-Blue Shield prescription drug program except insofar as the retiree "may become eligible [for a similar benefit] as a result of any future hospital- surgical legislation"; (b) for those retirees not enrolled in Medicare, the same coverage as for active employees; (c) "the coverage described in subsections (a) and (b) shall continue for the covered dependents of a deceased retired employee to the end of the sixth month following the month in which death occurs."

Pabst argues that it is clear from these provisions that they are effective only during the term of the collective bargaining agreement that contains them. If this is right--if someone who read these provisions without knowing anything about their background or real-world context would say, "Yes, it sure looks as if the provisions are in effect only for the term of the agreement in which they appear"--then Pabst is off the hook as a matter of law (that is, the case would not reach the jury) unless the plaintiffs can adduce (1) objective evidence of (2) a latent, or, as it is sometimes called, an extrinsic, ambiguity. E.g., PMC, Inc. v. Sherwin- Williams Co., 151 F.3d 610, 614-15 (7th Cir. 1998); Mathews v. Sears Pension Plan, 144 F.3d 461, 466-67 (7th Cir. 1998); Pierce v. Atchison, Topeka & Santa Fe Ry. Co., 65 F.3d 562, 568 (7th Cir. 1995); Int'l Union, United Automobile, Aerospace & Agricultural Implement Workers v. Skinner Engine Co., supra, 188 F.3d at 145. A latent ambiguity is an ambiguity (that is, something that makes it possible to interpret a document reasonably in more than one way, e.g., Anstett v. Eagle-Picher Industries, Inc., 203 F.3d 501, 503 (7th Cir. 2000); Bourke v. Dun & Bradstreet Corp., 159 F.3d 1032, 1037 (7th Cir. 1998); Computrol, Inc. v. Newtrend, L.P., 203 F.3d 1064, 1070 (8th Cir. 2000)) that is recognized as such only when a contract clear on its face--clear, that is, to the uninformed reader--is applied to a particular dispute. Stone Container Corp. v. Hartford Steam Boiler Inspection & Ins. Co., 165 F.3d 1157, 1162 (7th Cir. 1999); PMC, Inc. v. Sherwin-Williams Co., supra, 151 F.3d at 614; AM Int'l, Inc. v. Graphic Management Associates, Inc., 44 F.3d 572, 575 (7th Cir. 1995); GenCorp, Inc. v. American Int'l Underwriters, 178 F.3d 804, 818 (6th Cir. 1999); Charter Oil Co. v. American Employers' Ins. Co., 69 F.3d 1160, 1167 (D.C. Cir. 1995). The contract in Raffles v. Wichelhaus, 2 H. & C. 906, 159 Eng. Rep. 375 (Ex. 1864), for example, called for the shipment of cotton on the ship Peerless, which seemed clear enough; only it turned out that more than one ship of that name would be sailing from the same port--a fact that once revealed showed that the contract actually was ambiguous, because it was uncertain to which ship the contract referred. And the existence of the two ships was an "objective" fact in the sense, necessary to keep the latent-ambiguity doctrine from destroying reliance on written contracts, that establishing the fact did not require determining the credibility of a party's self-serving testimony.

The doctrine of latent ambiguity comes into play, as we have said, only if someone who read the contract without knowledge of its real-world context of application would think it clear. If even this innocent reader would find the contract unclear--if, that is, an ambiguity is apparent just from reading the contract without having to know anything about how it interacts with the world--then the contract has what is called a patent, or intrinsic, ambiguity, and evidence is admissible to cure it. E.g., Stone Container Corp. v. Hartford Steam Boiler Inspection & Ins. Co., supra, 165 F.3d at 1161-62; Home Ins. Co. v. Chicago & Northwestern Transportation Co., 56 F.3d 763, 767-68 (7th Cir. 1995).

So far we have been describing general contract law, rather than anything special to the issue of "vested" employee health benefits (that is, benefits that continue beyond the expiration of the contract creating them). Our en banc decision in Bidlack established a presumption that an employee's entitlement to such benefits expires with the agreement creating the entitlement, rather than vesting, but that the presumption can be knocked out by a showing of genuine ambiguity, either patent or latent, beyond silence. Bidlack v. Wheelabrator Corp., supra, 993 F.2d at 606-07; see also Pabst Brewing Co. v. Corrao, supra, 161 F.3d at 440; Diehl v. Twin Disc, Inc., supra, 102 F.3d at 306; Murphy v. Keystone Steel & Wire Co., supra, 61 F.3d at 565.

Cases in other circuits are all over the lot. Some presume vesting. E.g., Maurer v. Joy Technologies, Inc., supra, 212. Some insist that there be express language to that effect. E.g., Int'l Union, United Automobile, Aerospace & Agricultural Implement Workers v. Skinner Engine Co., supra, 188 F.3d at 139-47; Gable v. Sweetheart Cup Co., 35 F.3d 851, 855 (4th Cir. 1994). Some presume nothing. E.g., Deboard v. Sunshine Mining & Refining Co., 208 F.3d 1228, 1240-41 (10th Cir. 2000); Chiles v. Ceridian Corp., 95 F.3d 1505, 1511-14 (10th Cir. 1996); Joyce v. Curtiss-Wright Corp., supra, 171 F.3d at 134-35; Barker v. Ceridian Corp., 122 F.3d 628, 634-38 (8th Cir. 1997); Int'l Ass'n of Machinists & Aerospace Workers v. Masonite Corp., supra, 122 F.3d at 231-32.

One case holds that benefits are presumed to vest if they are conferred by a collective bargaining agreement rather than an unbargained- for ERISA plan, on the theory that employee interests are more likely to be reflected in a negotiated agreement than in one presented to employees as a condition of their employment. Int'l Union, United Automobile, Aerospace & Agricultural Implement Workers v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983); contra, Int'l Union, United Automobile, Aerospace & Agricultural Implement Workers v. Skinner Engine Co., supra, 188 F.3d at 139. Several cases adopt the opposite presumption when (but only when) the benefits are conferred in an ERISA plan. E.g., Sprague v. General Motors Corp., 133 F.3d 388, 400 (6th Cir. 1998) (en banc); Maurer v....