The opinion of the court was delivered by: McDADE, District Judge.
Plaintiffs William R. Murphy, W. Darrel McCabe, and Richard
L. Adkins (the "Retirees") are retired, former employees of
Defendant Keystone Steel & Wire Company, a Division of
Keystone Consolidated Industries, Inc. ("Keystone"). Plaintiff
Independent Steel Workers Alliance ("Union") is and has been
the collective bargaining agent for Keystone's active
employees during and since the Retiree's employment at
Keystone. Defendant Keystone Steel & Wire Company Health Care
Benefit Plan ("the Plan") is a self-insured plan which
provides health care benefits for certain of Keystone's
retirees and their dependents. The Retirees and Union have
brought suit against Keystone and the Plan for breach of
contract under Section 301 of the Labor-Management Relations
Act ("LMRA"), 29 U.S.C. § 185 and for clarification and
enforcement of their rights to future health care benefits
under Keystone's employee welfare benefit plan including
injunctive and other relief under § 502(a)(1)(B) and (a)(3) of
the Employee Retirement Income Security Act ("ERISN"),
29 U.S.C. § 1132(a)(1)(B) and (a)(3). This action was given class
certification by District Court Chief Judge Michael M. Mihm on
September 27, 1993, to include as Plaintiffs all former
bargaining unit employees of Keystone who
retired from Keystone prior to May 3, 1993, and who had not
attained the age of 65 before July 1, 1993, a class consisting
of approximately 900 retired workers (hereinafter the
"Retirees" include the named Plaintiffs and the class they
This case concerns the obligation of Keystone to provide
health care benefits for the Retirees under a series of
Collective Bargaining Agreements ("CBAs" or "CBA" when
referring to a specific agreement) entered into between
Keystone and the Union during the period from February 4,
1960,*fn1 to May 3, 1993.*fn2
The controversy stems from unilateral action taken by
Keystone on February 24, 1993, when it announced prospective
changes effective July 1, 1993, in its then-current health
care benefit plan for those retirees under 65 years of age as
of July 1, 1993, namely, the Retirees in this lawsuit.
Essentially, this announced new plan provided for a larger
annual deductible in varying amounts depending upon age and a
larger co-payment percentage for retirees. The Amended
Complaint alleges that Keystone was obligated to continue to
provide the Retirees with the same health care benefits being
provided active employees and other retirees (not included in
the class) under the health care benefit plan established and
maintained pursuant to the then-current CBA. The Plaintiffs
brought this action on June 30, 1993, a day before the new
health care benefit plan was to become effective.
The health care benefit plan in effect at the time of
Keystone's announced changes was embraced by the CBA dated May
3, 1990 ("1990 CBA"), for a three-year term expiring May 3,
1993.*fn3 The "Insurance and Health Care" agreement
referenced in the 1990 CBA was "Keystone Steel & Wire Company
Welfare Company Benefit Plan for Bargaining Unit Employees"
dated July 1, 1986 ("1986 Plan"). (Ziegele Affidavit, Exh. S).
This is the health care benefit plan which was in effect at
the time Keystone announced the prospective changes in the
health care benefit plan for the Retirees to take effect July
1, 1993. It provided identical health care benefits for active
employees and all retirees. Section IV covered hospital,
medical, and surgical benefits. Under the terms of this plan,
active employees had to contribute $15.00 per month for
coverage, and in connection with major medical benefits, there
was an annual deductible of $100 per individual and $150 per
family, a co-payment requirement of 20%, and a lifetime maximum
benefit amount of $50,000 per enrollee. There is no language in
the plan requiring Retirees to contribute any money for
coverage under the plan, nor is there language specifically
applying the limitations on major medical benefits to Retirees.
On February 1, 1993,*fn4 Keystone terminated*fn5 (effective
June 30, 1993) the health care benefit coverage for the
Retirees under this plan. (Supplemental Affidavit of Ziegele,
para. 4(a)). On that same date, Keystone adopted a new plan
for the Retirees, Keystone Steel & Wire Company Health Care
Plan for Bargaining Unit Current Retirees ("Retirees' New
Plan"), effective as of July 1, 1993. (Ziegele Supp.
Affidavit, para. 4(b), Exh. B).
A new CBA dated May 3, 1993, with a term expiring on May 3,
1996, ("1993 CBA") was negotiated to replace the 1990 CBA.
(Ziegele Affidavit, Exh. V). This is the current CBA and, like
its predecessors, contains the same language in Article XXIII,
Section 23.0 referencing certain agreements which are to
remain in force during the term of the CBA, one of which is
the "Insurance and Health Care" agreement.*fn6 According to
Keystone, the "Insurance and Health Care" agreement referenced
did not include the "Retirees' New Plan" but was meant to
refer only to the health care plan covering active employees
and certain retirees other than the Plaintiff Retirees.
(Ziegele Supp. Affidavit, para. 12-15). The Plaintiffs do not
dispute this assertion.*fn7 As far as the Court can tell,
this would be the 1986 Plan previously mentioned.
The Retirees' New Plan differs from the 1986 Plan in several
major respects. The dichotomy of "basic" and "major medical"
coverage in the 1986 Plan is replaced by "comprehensive
medical benefits" in the Retirees' New Plan. The deductible in
the Retirees' New Plan is increased and varies depending upon
the age of the retiree. The co-payment percentage is increased
to 25%. The lifetime maximum benefit is increased to $750,000.
(Ziegele Supp. Affidavit, Exh. B).
Counts I and III are brought under § 301(a) of LMRA. In Count
I, Plaintiffs allege that each of the CBAs negotiated over the
years constituted a binding contract obligating Keystone to
provide "certain medical, surgical, hospital, and other health
care benefits to retired employees, their spouses, and eligible
dependents," and to continue these health care benefits
"throughout the lifetime of each retired employee and each
surviving spouse of a retired employee" ("the Retirees").
(Amended Complaint, para. 18). By terminating the health care
program established and maintained pursuant to each of the CBAs
and unilaterally creating a new health care plan for the
Retirees, which shifts a larger portion of the cost of health
care benefits to the Retirees, Plaintiffs claim that Keystone
has breached the CBAs. The theory of Count III appears to be
that the various health care plans in effect over the years,
pursuant to the various CBAs, acquired the mantle of a CBA, and
they themselves constitute binding contracts between Keystone
and the Union, enforceable under § 301(a) of LMRA. According to
this theory, these health care plans were breached by Keystone
when it separated the Retirees out of the 1986 Plan and created
the Retirees' New Plan which shifted a larger portion of
insurance benefit costs away from Keystone to the Retirees.
Count II is an ERISA action. The claim is that the CBAs and
health care plans maintained pursuant thereto were "employee
welfare benefit plans" within the meaning of ERISA. Based upon
the same allegations underlying Counts I and III, Plaintiffs
claim that they are entitled to lifetime health care benefits
as negotiated between Keystone and the Union. They seek
enforcement and clarification of their rights under the ERISA
protected employee welfare benefit plans.
Before the Court are cross-motions for summary judgment on
Counts II and III of the Amended Complaint. Although not
briefed by either of the parties, the Court will also include
Count I in its consideration of the cross-motions for summary
judgment since the CBAs are an integral part of any analysis.
Each of the parties argues that no genuine issues of material
fact exist since the question is one of contract
Rule 56(c) of the Federal Rules of Civil Procedure provides
that summary judgment "shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of
law." By its very terms, this standard provides that the mere
existence of some alleged factual dispute between the parties
will not defeat an otherwise properly supported motion for
summary judgment; the requirement is that there is no genuine
issue of material fact.
As to materiality, the substantive law will identify which
facts are material. Only disputes over facts that might affect
the outcome of the suit under the governing law will properly
preclude the entry of summary judgment. Factual disputes that
are irrelevant or unnecessary will not be counted.
As to genuine issue, summary judgment will not lie if the
dispute about a material fact is "genuine," that is, if the
evidence is such that a reasonable jury could return a verdict
for the non-moving party. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp.
v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265
(1986), Matsushita Electric Industrial Co. v. Zenith Radio
Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). As
stated in Anderson, "at the summary judgment stage the judge's
function is not himself to weigh the evidence and determine the
truth of the matter but to determine whether there is a genuine
issue for trial." When a properly supported motion for summary
judgment is made, the adverse party must set forth specific
facts showing that there is a genuine issue for trial. There is
no issue for trial unless there is sufficient evidence favoring
the non-moving party for a jury to return a verdict for that
party. If the evidence is merely colorable, or is not
significantly probative, or is no more than a scintilla, a
summary judgment may be granted.
The Seventh Circuit Court of Appeals has recognized that
summary judgment is particularly appropriate in cases
involving the interpretation of contractual documents.
Ryan v. Chromalloy American Corp., 877 F.2d 598 (7th Cir.
1989). In that context, the Ryan opinion stated:
". . . summary judgment should be entered only if
the pertinent provisions of the contractual
documents are unambiguous: it is the lack of
ambiguity within the express terms of the
contract that forecloses any genuine issues of
material fact. Id. If a district court determines
that the pertinent provisions of the contract are
unambiguous, it need not consider extrinsic
evidence. At that point, the district court should
proceed to declare the meaning of those
Pursuant to the controlling legal standards, the threshold
matters to resolve are ascertainment of the relevant
contractual documents in connection with each claim and
whether their pertinent provisions are ambiguous or not. If
they are ambiguous, extrinsic evidence submitted by the
parties may be considered in interpreting their
meaning, and summary judgment would probably not be
appropriate. Hickey v. A.E. Staley Mfg., 995 F.2d 1385 (7th
Cir. 1993) (after a court rules that a contract is ambiguous,
it may consider extrinsic evidence to resolve an ambiguity).
What are the relevant contractual documents between Keystone
and the Union? The various CBAs, standing alone, clearly are
not meant to be the complete and final expression of the
parties' agreement with respect to Keystone's obligation to
provide health care benefits to its employees and retirees.
The health care plan document referenced in the CBAs must
necessarily be included in order to have a complete and fully
integrated contract since they are the documents which set
forth and govern the provision of health care benefits.*fn8
Therefore, the relevant contract documents for purposes of
Counts I and III are the CBAs and related health care plans
maintained pursuant thereto.
A related task is to identify the specific CBA and health
care plan controlling the issues involved in this case. One
approach, apparently pled in the Amended Complaint, but
neither argued nor briefed by the parties, would be to analyze
for each member of the Retiree class the particular CBA and
related health care plan in force at the time he or she
retired, thereby requiring the Court to interpret all such
contracted documents since 1960. The approach taken by the
parties in their briefs and argument (which also has some
presence in the Amended Complaint) assumes that the last CBA
in force prior to the changes establishing the Retirees' New
Plan, namely the 1990 CBA and related health care plan (the
1986 Plan), are the pertinent contractual documents which
apply to all members of the Retirees' class. This latter
approach has been accepted by the Court in deciding the issues
in this case.
The issues for determination have already been considered by
the Seventh Circuit Court of Appeals, albeit in context of
varying factual nuances, in a recent trilogy of cases.
Ryan v. Chromalloy American Corporation, 877 F.2d 598 (7th Cir.
1989); Senn v. United Dominion Industries, Inc., 951 F.2d 806
(7th Cir. 1992); and Bidlack v. Wheelabrator Corporation,
993 F.2d 603 (7th Cir. 1992).
ERISA provides a private right of action to any beneficiary
or participant to enforce the terms of either a pension or a
welfare benefit plan. See 29 U.S.C. § 1132(a)(1) and (3). The
plan in this case is a welfare benefit plan; however, unlike
pension plans, ". . . ERISA does not require the vesting of
health or other 'welfare' benefits (citations omitted), . . .
but equally it does not forbid their vesting by a written
contract, . . . which could be part of a collective bargaining
agreement." Bidlack v. Wheelabrator, 993 F.2d at 604.
Therefore, the efficacy of the Retirees' claim under ERISA in
Count II turns solely upon the terms of the written instruments
governing the 1986 Plan. As stated in Ryan:
. . ERISA requires that '[e]very employee
benefit plan . . . be established and maintained
pursuant to a written instrument.'
29 U.S.C. § 1102(a)(1). Through those instruments, the
parties are free to subject such welfare benefits
to vesting requirements not provided by ERISA, or
they may reserve the power to terminate such plans.
As the Sixth Circuit has stated in Hansen v. White
Farm Equipment Co., 788 F.2d 1186 (6th Cir. 1986),
'the parties may themselves set out by agreement or
by private design, as set out in plan documents,
whether retiree welfare benefits vest, or whether
they may be terminated.' (citations omitted.)
Ryan v. Chromalloy, 877 F.2d at 603.
Senn v. United Dominion teaches that: (1) silence of the
contractual documents concerning vestment of welfare benefits
does not give rise to ambiguity warranting admission of
extrinsic evidence but, rather, silence and explicit
repudiation of vesting demonstrates that the parties did not
intend vestment of lifetime right to benefits; and (2) the
default rule in this circuit is that entitlements established
by collective bargaining agreements do not survive the
agreements' expiration or modification and, thus, it requires
more than a statement in a bargaining agreement that welfare
benefits "will continue" to create ambiguity about vesting, as
the logical interpretation under the default rule is that
benefits "will continue" for the duration of agreement.*fn9
Bidlack v. Wheelabrator teaches that the default rule is not
an "irrebuttable presumption," and where the collective
bargaining agreement is vague, rather than silent on the
subject of vesting, resort to extrinsic evidence is proper.
However, if a preponderance of the evidence does not show that
the parties intended the benefits to vest, the presumption is
that they did not.
Article XXIII, Section 23.0 of the 1990 CBA plainly and
unambiguously states that the "Insurance and Health Care"
agreement referenced therein "will remain in effect during the
term of this agreement all as heretofore agreed upon and as
revised." The plain meaning of this language is obvious: the
parties were agreeing that during the term of the CBA, the
health care plan would remain in effect. The use of the word
"remain" implies a prior existence. The CBA says nothing about
the status of the plan after the CBA expired. Applying the
default rule in this circuit (as stated in Senn), entitlement
to health care benefits pursuant to the CBA did not survive the
expiration of the term of the 1990 CBA which was May 30, 1993.
Therefore, the 1986 Plan was no longer binding on Keystone
after that date. The other language in Section 23.0 that "the
language of such agreements is separate from and not a part of
this agreement" arguably suggests that the 1986 plan preserved
its separate identity, but did this language give the 1986 Plan
an independent legal existence, binding upon Keystone, without
regard to the 1990 CBA?
The 1986 Plan does not reference or mention any CBA. The
1986 Plan provides that a retiree's coverage terminates upon
the date the Plan is terminated or amended to terminate the
retiree's coverage. This language clearly and unambiguously
indicates that the Plan can be terminated or amended to
terminate a retiree's coverage, but the Plan is silent as to
how such action is to be done, and who has the right to act in
this regard. If the Plan itself can be terminated or amended
to eliminate a retiree's coverage, then it logically follows
that the provision of health care benefits for retirees cannot
be a lifetime proposition. This conclusion is compelled by the
plain reading of the language of the Plan.
In opposition, the Retirees point to other provisions of the
1986 Plan which, they argue, strongly suggest lifetime benefit
language. They emphasize Section IV dealing with the effective
dates of retirees' coverage and language that the coverage of
a retiree continues until death.
HOSPITAL, MEDICAL, AND SURGICAL BENEFITS
Medical benefits set out in this booklet are available to
Company Employees who are employed by Keystone on or before
May 2, 1984.
EFFECTIVE — ACTIVE EMPLOYEES
Basic and Major Medical Expenses coverage is effective on
the first day after an Employee has worked 520 hours of
full-time employment, provided he is working on that date and
has applied for the coverage and agreed to make the required
contribution, if any. If not, coverage is effective on the day
he returns to active work.
Dependents of Active Employees
When a Retiree who retired after May 1, 1972, with thirty
(30) years or more of accumulated services dies, his spouse
shall be eligible to receive continued Basic and Major Medical
Benefits (for which the spouse is eligible as though the
Retiree had survived) at no cost. Coverage shall cease when
the spouse remarries.
When a Retiree who retired after August 1, 1975, with twenty
(20) years or more of accumulated service dies, his spouse
shall be eligible to receive continued Basic and Major Medical
Benefits (for which the spouse is eligible as though the
Retiree had survived) at no cost. Coverage shall cease when
the spouse remarries.
EFFECTIVE DATE — RETIREES
Coverage is effective on the date an Employee retires under
the Company's retirement plan. Provided, however, that an
Employee who leaves the Company with a deferred vested pension
and later retires under the Company's retirement plan shall
not be eligible for Basic and Major Medical Benefits.
Dependents of Retired Employees
Coverage for Dependents of retired Employees become
effective on the date the Employee's coverage is effective.
However, the 1986 Plan must be read as an integrated whole
so that all of the provisions, if possible, will be given
effect. See Ryan v. Chromalloy, 877 F.2d at 604. In doing so,
the distinction must be kept in mind between a non-terminable
plan, which may or may not provide lifetime health care
benefits to retirees and their surviving spouses and eligible
dependents, and a terminable plan which may or may not provide
such lifetime health care benefits. Due to the fact that the
1986 Plan has a termination clause, it falls into the latter
category. In that context, the question remains whether the
language proffered by the Retirees indicates that (while the
1986 Plan is in effect) the benefits provided are lifetime in
duration. In the Court's judgment, the proffered language is
unambiguous: a retiree is provided lifetime coverage and
coverage continues after his death for his spouse and eligible
dependents so long as the 1986 Plan has not been terminated or
amended prior to the occurrence of his death. Because the 1986
Plan is terminable, the Retirees are not entitled to have
health care benefits continue after the proper termination or
amendment of the 1986 Plan.
Having decided that the Retirees' benefits under the health
insurance plan are not guaranteed for life, in the sense that
they survive the termination of the 1986 Plan, (and before
getting to the question of whether the 1986 Plan was properly
terminated or amended for the Retirees), I am left with the
suspicion that this issue of lifetime benefits is not and was
not the crux of Plaintiffs' real complaint. In fact,
Plaintiffs' counsel admitted during argument that their legal
theory allowed them to accept the benefits of any favorable
changes in the health care plan over the years since 1960 from
collective bargaining but not unfavorable changes, a position
made easier by the fact that he could not recall any
unfavorable changes prior to the action by Keystone giving
rise to the controversy at issue. It appears to the Court that
this candor on behalf of Plaintiffs' counsel reveals their
true complaint. The new Retirees' Plan treated them
differently from active employees and other retirees over 65
years old to their financial detriment. As previously,
mentioned, the 1986 Plan provided the
same health care benefits for active employees and
Whether Keystone's unilateral acts constituted a breach of
the contract documents requires the Court to identify who has
the right to terminate or amend the 1986 Plan. If Keystone had
the right, the ball game is over for the Retirees. The 1986
Plan document is silent on this issue, or in other words, does
not expressly say. Keystone argues that the aforesaid 1986
Plan's provision for termination implicitly allows them to
terminate or amend the Plan unilaterally. This is consistent
with their theory that the plans are similar to a revocable
trust wherein the settlor reserves the right to terminate or
amend the trust. In counterpoint, Plaintiffs point to other
Plan provisions dealing with the effective dates of retiree
coverage and language that the coverage of a retiree continues
until death as suggesting that the benefits are lifetime and
therefore cannot be terminated unilaterally by Keystone. The
Court fails to see the logic of this reasoning on the issue of
right to terminate or amend.
The strongest case Plaintiffs make for a requirement of
bilateral action is the argument that the various plans since
1966 have all been the product of an agreement between
Keystone and the Union negotiated by the Joint Insurance
Committee which was created by the 1966 CBA. Therefore, argues
the Union, since the plans are agreements, they cannot be
terminated or amended without the consent of the Union. In
support of this theory, Plaintiffs point to the language in
Article XXIII of the current CBA dated May 3, 1993 ("1993
CBA"), that the "company agrees that the . . . [insurance and
health care] agreement (s) will remain in effect during the
term of this agreement all as heretofore agreed upon and as
revised." (emphasis added). This underlined language first
appeared in the CBA dated February 4, 1966,*fn11 and the plain
meaning suggests that the parties considered that the insurance
and health care plan was an agreement and was the product of
previous agreements between Keystone and the Union.
Also in the 1966 CBA a Joint Insurance Committee ("JIC") was
first created which Plaintiffs claim was responsible for
negotiating the health insurance plan with Keystone in
succeeding years. Although there is no specific language in
the 1966 CBA explicitly authorizing the JIC to "negotiate" the
health care plan, the affidavits of John W. Gay and Art Hannon
submitted in support of Plaintiffs' Motions for Summary
Judgment state that this was one of the actual functions of
the JIC. This is disputed by Keystone, but Keystone has failed
to submit counter affidavits; instead Keystone has moved to
strike the affidavits as irrelevant. That motion is hereby
denied. The language creating the JIC follows:
23.214 IT IS HEREBY AGREED that a Joint Insurance
Committee will be established as of the date of the
signing of this Agreement in the following form and
for the following purposes:
23.2141 The Joint Insurance Committee shall be
composed of three members from Management and
three members from the Union, said members to
serve five-year terms and to have the
qualification of having knowledge and
understanding of insurance benefit programs.
23.2142 The Joint Insurance Committee will meet
in regular scheduled meetings and at such time
and place as is agreed among its members, but in
no event will the meetings be less often than
23.2143 The basic purposes and responsibilities
of the Joint Insurance Committee will be
23.21431 to consider ways to help Keystone
employees better understand the insurance
benefits available to them under the Keystone
Insurance Plan; the rules and regulations
enumerated thereunder; the methods of claim
filing; and where insurance carriers are
providing benefits, the rules and restrictions of
the insurance contracts thereunder.
23.21432 to review and make an earnest effort
to resolve the problems arising under the
administration of the Keystone Insurance Plan
which lead to excessive cost factors to the
Company and/or to complaints from the employees
relative to the services rendered by the
23.21433 to review and make an earnest effort
to resolve the specific claim problems relating
to the individual status of claims when the
following procedure has been first followed:
23.214331 All claim problems and the individual
status of claims must first be referred to the
Company's Personnel Department who will
investigate and attempt to resolve said problem.
23.214332 If no solution is arrived at by the
Personnel Department and the employee involved, a
complaint embodying the facts of the case in
writing can be referred to the Joint Insurance
Committee at least 48 hours prior to a scheduled
meeting of the Committee who will then review
23.21434 Insurance claim problems, except life
insurance claims, that are not resolved by the
Joint Insurance Committee may be filed as a
written grievance directly into Step III of the
grievance procedure and into arbitration if
required as defined in Article XVI.
As proof of the involvement of the JIC in negotiating the
health care benefit plans with Keystone, the Union points to
a language change in the CBA dated May 3, 1966, when
referencing the health insurance plan. The word "the" was
substituted for the possessive pronoun "its" in recognition
that the health insurance plan had been transformed from
Keystone's unilateral largess into a negotiated agreement.
The pertinent relevant language in the May 3, 1966, CBA and
the preceding ones dated February 4, 1960, and February 4,
February 4, 1960, Agreement (Ziegele Affidavit, Exh. A).
Article XVI at page 67 provided:
PROFIT SHARING, RETIREMENT, INSURANCE AND SECURITY
The Company agrees to continue its present Profit
Sharing Plan, its Pension and Retirement Plan, its
Group Insurance Plan, and its present Security
Benefit Plan during the term of this Agreement.
February 4, 1963, Agreement (Ziegele Affidavit, Exh. B).
Article XXIII, Section 23.0 at page 78 provided:
PROFIT SHARING, RETIREMENT, INSURANCE,
AND SECURITY BENEFIT PLANS
23.0 The Company agrees to continue its present
Profit Sharing Plan, its revised Pension Plan, its
Group Insurance Plan, and its Security Benefit Plan
during the term of this Agreement. (emphasis
May 3, 1966, Agreement (Ziegele Affidavit, Exh. C).
Article XXIII, Section 23.0 at page 77 provided:
PROFIT SHARING, RETIREMENT, INSURANCE, SECURITY
BENEFIT PLANS AND ...