Smart v. Gillette Co. Long-Term Disability Plan

• Decision Date: 07 November 1995
• Docket Number: LONG-TERM,No. 95-1705,95-1705
• Parties: 19 Employee Benefits Cas. 2530 Sharon M. SMART, Plaintiff, Appellant, v. The GILLETTE COMPANYDISABILITY PLAN, Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 173

70 F.3d 173

19 Employee Benefits Cas. 2530

Sharon M. SMART, Plaintiff, Appellant, v. The GILLETTE COMPANY LONG-TERM DISABILITY PLAN, Defendant, Appellee.

No. 95-1705.

United States Court of Appeals, First Circuit.

Heard Nov. 7, 1995.

Decided Nov. 22, 1995.

Richard L. Burpee, with whom Burpee & DeMoura was on brief, Boston, MS, for appellant.

John H. Mason, with whom Richard P. Ward, David T. Lyons, and Ropes & Gray, were on brief, Boston, MS, for appellee.

Before SELYA, Circuit Judge, ALDRICH, Senior Circuit Judge, and CYR, Circuit Judge.

SELYA, Circuit Judge.

Plaintiff-appellant Sharon Smart sued The Gillette Company Long-Term Disability Plan (Plan or LTD Plan) for benefits she asserts were wrongfully denied her. The district court ruled that Smart had waived her claim. See Smart v. The Gillette Co. Long-Term Disability Plan, 887 F.Supp. 383 (D.Mass.1995). We affirm.

I. BACKGROUND

We take the underlying facts principally from the parties' pretrial stipulations. The Gillette Company (Gillette) hired appellant in 1976. In time, she became a senior product analyst. Her job involved travel in connection with the testing of Gillette products. In 1986, appellant injured her left knee in a work-connected automobile accident. Between 1986 and 1990, she underwent four surgical procedures in hopes of repairing the damage to her knee. She worked sporadically during the first half of this period, but not at all after September 8, 1988.

On September 7, 1988, Gillette, bent on terminating appellant's at-will employment at year's end as part of a reduction in force, sent her a letter that outlined a proposed severance arrangement. Under it, appellant for a time would receive severance pay and assorted benefits to which she would not otherwise be entitled, but would go quietly into unemployment's dark night, releasing any and all federal and state claims she might have against Gillette. The September 7 letter listed the LTD Plan among the extended benefits that appellant would enjoy if she accepted the proposal.

Apparently concerned about her injured knee, appellant did not immediately embrace the suggested severance terms, but, rather, began a negotiation aimed at excluding workers' compensation claims from the sweep of the requested release. Gillette eventually acquiesced and, on December 16, 1988, sent appellant a new letter that differed from the September 7 letter in two important respects. First, it expressly excluded workers' compensation claims from the general release. Second, it did not mention the LTD Plan (an omission that had the effect of dropping the Plan from the list of benefits that would continue during the severance period).

Appellant reviewed the December 16 letter with her lawyer and signed it on December 29. Gillette terminated her employment effective December 31. As per the agreement, appellant collected severance pay until November 4, 1989, and received the other benefits listed in the December 16 letter throughout the severance period (i.e., January 1 through November 4, 1989). During that same time frame, she settled her workers' compensation claim for $43,750 and began collecting $887 per month in social security disability payments.

On October 2, 1991, appellant filed an application for benefits under the Plan, alleging that she had become "permanently and totally disabled" during the severance period. Gillette's corporate counsel denied the application out of hand. After a series of fruitless requests for reconsideration, appellant sued.

The district court did not reach any of the variegated issues associated with whether appellant did (or did not) display a total and permanent disability as defined by the LTD Plan while still a participant in it. The court instead found in effect, after an evidentiary hearing replete with stipulated facts, that appellant's Plan participation ended when her employment ended (December 31, 1988), and that, therefore, she had no cognizable claim in respect to a disability that did not materialize until sometime in 1989 at the earliest.

II. DISCUSSION

After careful examination of the record, the briefs, and the applicable law, we hold that the severance agreement made no provision for extended participation in the LTD Plan. Consequently, Smart's appeal fails. For ease in explanation, we divide our analysis into moieties.

A. The Severance Agreement.

Appellant argues that the terms of the severance agreement did not include a surrender of Plan benefits, but that, to the exact contrary, the parties intended to permit appellant to enjoy such benefits as part of the consideration tendered by Gillette for the release. We approach this contention mindful that the December 16 letter agreement, signed by both parties, represents a contract between Smart and Gillette that potentially affects rights protected by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Secs. 1001-1461 (1988), and, thus, is likely subject to interpretation in accordance with tenets of federal common law. ¹ See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56, 107 S.Ct. 1549, 1557, 95 L.Ed.2d 39 (1987).

In construing the terms of contracts that are governed by federal common law, we are guided by "common-sense canons of contract interpretation." Burnham v. Guardian Life Ins. Co., 873 F.2d 486, 489 (1st Cir.1989). One such canon teaches that contracts containing unambiguous language must be construed according to their plain and natural meaning. See id. "Contract language is usually considered ambiguous where an agreement's terms are inconsistent on their face or where the phraseology can support reasonable differences of opinion as to the meaning of the words employed and obligations undertaken." Fashion House, Inc. v. K mart Corp., 892 F.2d 1076, 1083 (1st Cir.1989). Interpreting unambiguous terms is an activity that requires judges to expound the law rather than to find the facts, and, therefore, a trial court's interpretive determinations are subject to plenary review. See, e.g., Allen v. Adage, Inc., 967 F.2d 695, 698 (1st Cir.1992). In most cases, the question of whether a contract term is ambiguous also presents a question of law subject to plenary review. See id.; see also RCI Northeast Servs. Div. v. Boston Edison Co., 822 F.2d 199, 202 (1st Cir.1987).

If an inquiring court concludes that an ambiguity exists in a contract, the ultimate resolution of it typically will turn on the parties' intent. Exploring the intent of contracting parties often (but not always) involves marshalling facts extrinsic to the language of the contract documents. When this need arises, these facts, together with the reasonable inferences extractable therefrom, are together superimposed on the ambiguous words to reveal the parties' discerned intent. This construct ordinarily requires the judge in a non-jury case to resolve questions of fact rather than questions of law. See In re Newport Plaza Assocs., 985 F.2d 640, 645 (1st Cir.1993) (stating that "the interpretation of [ambiguous] contract language, itself acknowledged, becomes a question of fact for the jury rather than a question of law for the judge"); RCI Northeast, 822 F.2d at 202 (explaining that when "the plain meaning of a contract phrase does not spring unambiguously from the page or from the context, its proper direction becomes one for the factfinder, who must ferret out the intent of the parties"). In such circumstances, a reviewing court will uphold the factfinder's resolution of the question unless it is clearly erroneous. See Fed.R.Civ.P. 52(a); see also In re Navigation Technology Corp., 880 F.2d 1491, 1495 (1st Cir.1989).

In this case, appellant's assault focuses on the following language in the severance agreement:

In consideration of the severance pay and other benefits to be provided you as part of The Gillette Company's Restructuring Program, you do hereby ... release and agree to indemnify and hold harmless [Gillette] ... from any and all claims, charges, complaints, or causes of action, now existing, both known and unknown or arising in the future, including but not limited to, all claims of breach of contract ..., or [claims] arising from alleged violations of ... any ... local, state, or federal law, regulation or policy or any other claim relating to or arising out of your employment with [Gillette] or termination thereof.... (Emphasis supplied.)

According to appellant, the underscored phrase is ambiguous because the agreement makes no reference to the LTD Plan, leaving up in the air whether Smart will retain coverage during the severance period as a part of the consideration ("severance pay and other benefits") for the general release. Thus, appellant's thesis runs, the trial court should have mulled extrinsic evidence--including the September 7 letter--to resolve the uncertainty, and, had it done so, would perforce have concluded that the phrase "other benefits" in the December 16 letter encompassed extended coverage under the LTD Plan.

Appellant's mental gymnastics are nimble, but they score low marks for substance. Accepted canons of construction forbid the balkanization of contracts for interpretive purposes. See Fashion House, 892 F.2d at 1084 (examining agreement as a whole to interpret one part); see also Restatement (Second) of Contracts Sec. 202 cmt. d (1981) (explaining that "[w]here the whole can be read to give significance to each part, that reading is preferred"). Here, when the phrase "other benefits" is read in the full context of the document, the language is not ambiguous at all. The preceding paragraphs of the letter agreement spell out precisely which benefits, in addition to severance pay, appellant will receive in exchange for the release. They include, with various qualifications, extended participation in employee health and dental plans, life insurance, a savings plan, and an employee stock ownership plan. Viewed against this backdrop, it is pellucid that the later...