Smith v. ABS Industries, Inc.

• Decision Date: 22 January 1990
• Docket Number: No. 88-3796,88-3796
• Citation: 890 F.2d 841
• Parties: 133 L.R.R.M. (BNA) 2001, 58 USLW 2376, 113 Lab.Cas. P 11,685, 11 Employee Benefits Ca 2242 William L. SMITH, et al., Plaintiffs-Appellants, v. ABS INDUSTRIES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 841

890 F.2d 841

133 L.R.R.M. (BNA) 2001, 58 USLW 2376,

113 Lab.Cas. P 11,685,

11 Employee Benefits Ca 2242

William L. SMITH, et al., Plaintiffs-Appellants, v. ABS INDUSTRIES, INC., Defendant-Appellee.

No. 88-3796.

United States Court of Appeals, Sixth Circuit.

Argued June 15, 1989.

Decided Dec. 1, 1989.

Rehearing and Rehearing En Banc Denied Jan. 22, 1990.

William J. Payne (argued), United Steelworkers of America, Pittsburg, Pa.; Melvin S. Schwarzwald, Kathleen M. Kordeleski, Schwarzwald, Robiner, Levin & Rock, Cleveland, Ohio, for plaintiffs-appellants.

Paul J. Corrado, Cleveland, Ohio, Gregory L. Hammond (argued), Hammond & Associates, Akron, Ohio, for defendant-appellee.

Before KEITH and WELLFORD, Circuit Judges; and GILMORE, District Judge ^*.

KEITH, Circuit Judge.

Plaintiffs, nine former employees of the Ashtabula Forge Division of ABS Industries, Inc. or of Ashtabula Forge, Inc. (hereinafter collectively referred to as "ABS") who had retired or otherwise left ABS prior to the closing of its Ashtabula Forge plant where they had been employed, appeal from the granting of summary judgment in favor of ABS in this action filed pursuant to Sec. 301 of the Labor Management Relations Act, 29 U.S.C. Sec. 185, and Sec. 502 of the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. Sec. 1132. Plaintiffs argue that the collective bargaining agreement granted vested health and welfare retirement benefits to plaintiffs, and that these benefits were improperly terminated by ABS. The district court concluded that these benefits were not vested and were properly terminated pursuant to the provisions of the plan. We REVERSE.

I.

At the time of the closing of the Ashtabula Forge plant, relations between employees and management were severed by a collective bargaining agreement in force between 1981 and 1984. Section 21 of the The following definitions are set forth in the booklet:

                collective bargaining agreement is entitled "Social Insurance;" Sec. 21.01 provides, in pertinent part, that "[t]he program of insurance benefits for all employees is attached hereto as Appendix B."    Paragraph 8 of Appendix B states that "[a]ll eligible, retired employees shall be included for benefits as described in the program Insurance Benefits for Pensioners, dated September 16, 1975."    However, the document referred to in Paragraph 8 appears to be missing;  therefore, the only description of the plan is a booklet entitled "Hospital-Medical Plan."
                

ELIGIBLE EMPLOYEES

All full-time employees of the company who have completed the probationary period of forty-two (42) days worked.

COVERED PERSON

An employee of the company who meets the requirements of an eligible employee, and his eligible dependents.

In the section titled "Eligibility and Effective Date of Coverage," under the subheading "Retirement," the booklet provides that:

Benefits will continue for retirees who are eligible for Pension Benefits and their eligible dependents except that no benefits are payable for:

1) Accidental Death & Dismemberment;

2) Optional Life Insurance; or

3) Weekly Disability.

In addition,

1) life insurance benefits shall be reduced 1/2 the amount listed on page 13;

2) there is no provision for continuation of coverage as the result of disability; and

3) all benefits are subject to Coordination of Benefits with Medicare as described on page 37.

The next major section of the booklet, entitled "Individual Termination of Coverage," provides that:

The coverage of any Covered Person under the Plan shall terminate on the earliest of the following dates:

1) the date of termination of the Plan;

2) the date employment terminates for reasons other than layoff, leave of absence, disability, retirement or death of the employee;

3) with respect to an Eligible Dependent, the date coverage terminates for the Eligible Employee or the date such dependent no longer meets the qualifications of a [sic] Eligible Dependent;

4) the date all coverage or certain benefits are terminated on a particular class by modification of the Plan; or

5) the date a Covered Person becomes a full-time member of the Armed Forces of any country.

Several of the retirees testified that company officials represented to them at the time of their exit interviews that their benefits would last throughout their lifetime. Typical of this testimony was that of John Mooney, who told of his interview with then President Poster McKinnon:

[Mr. Mooney]: [President McKinnon] said, "You know, John, once you go out that door, you got nothing to worry about, you are not retired until you get out that door." He said, "And you'll carry your life insurance up until you are 65. Then it will be cut in half at the age of 65."

"Your hospitalization," he said, "You got nothing to worry about as long as you live," ... and "You will enjoy your pension," and that was it.

[Question]: Then you walked out the door?

[Answer]: Shook hand[s] with him, walked out the door.

[Question]: With nothing to worry about?

[Answer]: Yes. And I believed him. He was the president of that Company.

Read strictly, the Definitions section appears to exclude retirees as Covered Persons because one must be an Eligible Employee, and one must be an Eligible Employee to be a Covered Person. However, upon evaluating the above provisions in conjunction with each other and with other sections of the booklet, the district court noted what it perceived as inconsistencies if retirees were not either Eligible Employees or Covered Persons, and therefore concluded that retirees were Covered Persons with terminable benefits:

The first inconsistency occurs in the section entitled "ELIGIBILITY AND EFFECTIVE DATE OF COVERAGE." The first sentence states that "[A]ll eligible employees who are enrolled on the effective date of the Plan will be covered on that date, provided they are actively working." Looking back to the definition of eligible employee, it is clear that to be an eligible employee one must be a full-time employee. Full-time employees are normally actively working, so in order for that sentence to not be redundant, eligible employees must include those employees not actively working. In and of itself, this proviso makes logical sense. In fact, two paragraphs later, the plan states "Any employee who is not actively working on his effective date because of medical disability ..." Thus, eligible employees must also include at least those employees who are not working because of disability.

This "eligibility" section has a subsection entitled "COVERAGE IN THE EVENT OF:," which then has various sub-sub-sections. The first of these is a paragraph titled "Rehired or Reinstated Employee," in which the plan states that the waiting period (the Court assumes that this is the 42 day probationary period) is waived if "the Eligible Employee had been employed for at least forty-two (42) days." To be consistent with the definition of eligible employee quoted above, this paragraph should read "otherwise Eligible Employee." Because it does not, the language implies that an eligible employee, at least for some purposes, includes an employee who had been laid off. The very next paragraph speaks to employees on lay-off, and states that the benefits of the plan may continue for six months after lay-off if the employee makes some contribution to the plan. Thus, under this second paragraph, it is clear that a laid-off employee is not entirely an eligible employee, or perhaps, more accurately, a covered employee; i.e., he is not eligible for all of the benefits of a full-time employee.

The next paragraph states that "Coverage shall terminate immediately in the event of a strike." The language of this is absolute; it does not even state that coverage shall terminate in the event the employee strikes. A strict reading of this paragraph, then, would have it apply to all persons covered by the plan. Although ABS has not argued for this interpretation, it further evinces the rather loose way in which this booklet was written.

The following paragraph is titled "Disability," and states "If an Eligible Employee is totally disabled ..." Again, using the definition of eligible employee set forth above, an eligible employee cannot be totally disabled, for then he is not working full-time; an eligible employee can only become disabled. Again, the Court reads this paragraph as evidence that eligible employees may include those not currently working. The paragraph goes on to state that coverage will continue for two years, and then "may be continued, subject to the payment of appropriate contributions by the employee," until the employee retires or recovers from his disability. This last line thus contemplates the continuation of benefits until retirement, at which time different rules go into effect. The Court admits that this is some evidence that retiree benefits may be vested; in the context of the other language in this contract, however, the Court finds that this implication is slight indeed.

The next paragraph is one of those directly at issue. Titled Retirement, it states that "Benefits will continue for retirees who are eligible for Pension Benefits and their eligible dependents...." It then states certain limitations on the benefits available. The Court notes yet another inconsistency. An eligible dependent is defined as a dependent of an eligible employee; thus, a retired employee cannot have eligible dependents unless he or she is an eligible employee.

The Court concludes from a reading of the section "ELIGIBILITY AND EFFECTIVE DATE OF COVERAGE," that although the term "Eligible Employee" is defined as a full-time employee who has completed the probationary period, for some purposes it also includes those employees who were full-time workers but who are now disabled, on lay-off or retired. Again, however, this is not the end of the discussion.

The next major section is entitled "INDIVIDUAL TERMINATION OF COVERAGE," and...