Stewart v. KHD Deutz of America, Corp.
| Decision Date | 05 January 1993 |
| Docket Number | No. 92-8034,92-8034 |
| Citation | 980 F.2d 698 |
| Parties | 142 L.R.R.M. (BNA) 2371, 124 Lab.Cas. P 10,513, 16 Employee Benefits Cas. 1452 Ronald STEWART; David Kirchoff; Darrell L. Howard; Louis Kubitschek; John Tuckness and Ronald Keltner, On Behalf of Themselves and Other Persons Similarly Situated, Plaintiffs-Appellants, v. KHD DEUTZ OF AMERICA, CORPORATION, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Jolley, Walsh & Hager, Kansas City, Mo., James T. Langford, Jacobs & Langford, Atlanta, Ga., Jeremiah A. Collins, and Roger L. Pollak, Bredhoff & Kaiser, Washington, D.C., for plaintiffs-appellants.
Dan T. Carter, Smith, Currie & Hancock, Atlanta, Ga., Julia S. Mandala, Howard Shapiro, and Steven Russell Cupp, McCalla, Thompson, Pyburn & Ridley, New Orleans, La., for defendant-appellee.
Appeal from the United States District Court for the Northern District of Georgia.
Before KRAVITCH, Circuit Judge, GODBOLD and OAKES *, Senior Circuit Judges.
Appellants are retired employees of defendant KHD Deutz of America Corp. They appeal from the district court's denial of their motion for a preliminary injunction to prevent KHD Deutz from modifying their health insurance benefits. The trial court concluded that the retirees were not entitled to a preliminary injunction because the language of the collective bargaining agreement (CBA) between their union and KHD Deutz unambiguously established KHD Deutz's right to modify their health benefits, thus preventing the retirees from demonstrating a substantial likelihood of success on the merits of their claim. We reverse and remand.
From May 26, 1985 to June 21, 1990 KHD Deutz owned the plant where the appellants worked. KHD Deutz adopted the 1984 CBA between Local 1958 of the United Steelworkers of America and the prior employer. A health benefit agreement was attached to and incorporated by the 1984 CBA. In 1986 KHD Deutz and the Union negotiated a new CBA that also incorporated a health benefit agreement identical in all relevant respects to the 1984 agreement. The 1986 CBA expired on May 19, 1989, but was extended through May 1990 without any relevant changes. After it sold the plant in June 1990, KHD Deutz retained responsibility for the health benefits of employees who retired between May 25, 1985 and January 1, 1990.
All the appellants are employees who retired between May 26, 1985 and December 31, 1989. By letter dated March 21, 1991 KHD Deutz informed the retirees that effective June 1, 1991 it would modify their coverage, including a reduction in maximum benefits, an increase in deductibles, and the introduction of a monthly premium. The plaintiffs, alleging that KHD Deutz did not have the right to modify their health benefits under the 1984 and 1986 agreements, brought suit under § 301 of the Labor-Management Relations Act (LMRA), 29 U.S.C. § 185(a) (1988), and § 502 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132, for declaratory, injunctive, and monetary relief. They also alleged that KHD Deutz is equitably estopped from reducing their benefits, and they sought to be certified as a class representing all those who retired between May 24, 1985 and January 1, 1990 under the terms of the 1984 or 1986 agreements.
The retirees based their claim on the extended coverage clause of the 1984 and 1986 health benefit agreements which provides:
Extended Coverage
Extended coverage for employees and for employees with dependents shall be provided at the following levels with monthly partial premium payments of $5.00 for employee-only coverage and $10.00 for employee/dependent coverage. Provided, however, the employees who are on disability leave of absence or retired under the provisions of the retirement plan and are receiving extended coverage will not be required to make the foregoing partial premium payments.
Continuous Continuous Continuous Continuous
coverage of coverage of coverage of coverage of
less than 2 to 7 7 to 10 10 years
2 years years years and over
----------- ----------- ----------- -----------
Terminated None None None None
Laid Off End of 6 months 9 months 12 months
next month
Retired None None None During
Retirement
Disability 6 months 12 months 18 months 24 months
Leave of
Absence
----------
The language in the extended coverage clause of the 1984 and 1986 agreements was identical in all relevant respects. The retirees argued that the language "Extended coverage ... shall be provided at the following levels" followed by, in the line styled "Retired," the phrase "During Retirement" required KHD Deutz to provide health benefits throughout their retirement. KHD Deutz argued that the following language from the health benefit agreements' duration clause gave it the right to modify the retirees' benefits:
Upon the expiration or termination of this Agreement, the Company shall have the right to continue the Plans covered herein or to amend, modify, suspend or discontinue the Plans.
The relevant language of the duration clause in the 1984 and 1986 agreements is identical. The parties offered alternative explanations of the relationship between the extended coverage clause and the duration clause. The retirees contended that the phrase "During Retirement" was meant to be unqualified and that the duration clause should be interpreted to give KHD Deutz the right only to modify active employees' benefits. KHD Deutz urged that the duration clause was meant to be unqualified and that the extended coverage clause should be construed as giving retirees the right to health benefits only while they were retired and only until expiration of the CBA. The contract did not address the relationship between the clauses, and both parties submitted extrinsic evidence supporting their respective interpretations. 1
The court denied plaintiffs' motion for a preliminary injunction to prevent KHD Deutz from modifying their benefits. It concluded that the 1984 and 1986 agreements unambiguously established KHD Deutz's right to modify retirees' health benefits and thus refused to consider extrinsic evidence of the parties' intent. That conclusion also prevented the plaintiffs from demonstrating the first factor necessary for injunctive relief: a substantial likelihood of success on the merits. See U.S. v. Jefferson County, 720 F.2d 1511, 1519 (11th Cir.1983). Accordingly, the trial court did not address the other factors. The retirees appealed from the denial pursuant to 28 U.S.C. § 1292(a)(1) (1988), 2 contending that the 1984 and 1986 agreements are ambiguous, that the trial court should have considered extrinsic evidence, and thus that the trial court's denial of their motion for a preliminary injunction should be reversed and remanded. We agree.
We review the denial of a preliminary injunction for abuse of discretion. Tally-Ho, Inc. v. Coast Community College Dist., 889 F.2d 1018, 1022 (11th Cir.1989). The court's application of law, however, is not entitled to deference. Id. Henry J. Friendly, Indiscretion about Discretion, 31 Emory L.J. 747, 773-78 (1982). Because the issue whether a contract is ambiguous is a question of law, International Bhd. of Boilermakers v. Local Lodge D111, 858 F.2d 1559, 1561 (11th Cir.1988), cert. denied, 490 U.S. 1047, 109 S.Ct. 1955, 104 L.Ed.2d 424 (1989), the court's conclusions that the 1984 and 1986 agreements were unambiguous and that it should not consider extrinsic evidence of the parties' intent are reviewed de novo.
Federal substantive law governs the interpretation and enforcement of contracts covered by § 301(a) of the LMRA, 29 U.S.C. § 185(a) (1988). D.E.W., Inc. v. Local 93, 957 F.2d 196, 199 (5th Cir.1992) (citing Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 455, 77 S.Ct. 912, 917, 1 L.Ed.2d 972 (1957)). Federal courts apply "traditional rules for contractual interpretation ... as long as their application is consistent with federal labor policy." International Union, UAW v. Yard-Man, Inc., 716 F.2d 1476, 1479 (6th Cir.1983), cert. denied, 465 U.S. 1007, 104 S.Ct. 1002, 79 L.Ed.2d 234 (1984); see also United Paperworkers Int'l Union v. Champion Int'l Corp., 908 F.2d 1252 (5th Cir.1990); Anderson v. Alpha Portland Industries, Inc., 836 F.2d 1512, 1517 (8th Cir.1988), cert. denied, 489 U.S. 1051, 109 S.Ct. 1310, 103 L.Ed.2d 579 (1989). Because federal labor policy neither favors nor disfavors the vesting of retirees' health benefits, United Paperworkers, 908 F.2d at 1256; Anderson, 836 F.2d at 1517, we apply traditional rules of contractual interpretation.
Under the decisions of this court and the laws of Georgia, extrinsic evidence is not admissible to contradict the terms of an unambiguous contract. Peterson v. Lexington Ins. Co., 753 F.2d 1016, 1018 (11th Cir.1985) (applying Georgia law); see also Ga.Code Ann. § 24-6-1 (Michie 1982). Moreover, it is not even admissible to establish ambiguity; any ambiguities must be created by the language of the contract itself. Orkin Exterminating Co. v. FTC, 849 F.2d 1354, 1362-63 (11th Cir.1988), cert. denied, 488 U.S. 1041, 109 S.Ct. 865, 102 L.Ed.2d 989 (1989); Southern Stone Co. v. Singer, 665 F.2d 698 (5th Cir. Unit B 1982). Once it is established that the contract is ambiguous, however, extrinsic evidence is admissible to explain that ambiguity. See Orkin Exterminating Co., 849 F.2d at 1362; Ga.Code Ann. § 24-6-3(b) (Michie 1982). A contract is ambiguous when it is reasonably susceptible to more than one interpretation. International Bhd., 858 F.2d at 1561; accord Contractors Management Corp. v. McDowell-Kelley, Inc., 136 Ga.App....
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