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Murphy v. Keystone Steel & Wire Co.

July 28, 1995

WILLIAM R. MURPHY, W. DARREL MCCABE, RICHARD L. ADKINS, ET AL., PLAINTIFFS-APPELLANTS,

v.

KEYSTONE STEEL & WIRE COMPANY, A DIVISION OF KEYSTONE CONSOLIDATED INDUSTRIES, INCORPORATED, A DELAWARE CORPORATION, AND KEYSTONE STEEL & WIRE COMPANY HEALTH CARE BENEFIT PLAN, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Central District of Illinois. No. 93 C 1247 -- Joe B. McDade, Judge.

Before MANION and ROVNER, Circuit Judges, and NORGLE, District Judge. *fn1

MANION, Circuit Judge.

ARGUED FEBRUARY 6, 1995

DECIDED JULY 28, 1995

In February of 1993, Keystone Steel & Wire Company ("Keystone") announced its intent to modify the retiree benefits portion of its employee welfare benefits plan. William Murphy and others brought a class action, alleging that Keystone's unilateral changes to its welfare benefits plan violated various collective bargaining agreements, the plan itself, and ERISA. The district court certified the class and ultimately granted summary judgment for Keystone finding no breach of the relevant bargaining agreement or benefits plan, and no actionable violation of ERISA. We affirm.

I. Background

Keystone is a manufacturer of steel products. The International Steelworkers Alliance ("ISWA" or the "Union") represents Keystone's employees, including the named plaintiffs and other members of the certified class. Keystone and the Union have worked together since at least 1960. Early on, Keystone developed an employee benefits plan to provide certain health and insurance benefits for its employees and retirees. Later, Keystone and the Union formed the Joint Insurance Commission ("JIC"), which was composed of company and union representatives. The JIC negotiated changes to the Plan. These negotiated changes were approved by the parties in connection with their collective bargaining agreements. These bargained-for modifications of the benefits plan were often set forth in memoranda attached to the collective bargaining agreements. Later, benefit changes were incorporated directly into the benefits plan.

Murphy and the other named plaintiffs are members of a certified class of employees who retired from Keystone before May 3, 1993, but who had not yet reached age 65. *fn2 They were members of the Union while employed at Keystone, and after retirement they received benefits under Keystone's welfare benefits plan. In February 1993, Keystone announced its intent to make certain unilateral changes to its welfare benefits plan when the existing collective bargaining agreement expired in May of 1993. Keystone's changes, which would take effect on July 1, 1993, increased various deductibles and co-payments that Murphy would have to satisfy in order to receive benefits under the plan. Murphy filed a class action complaint alleging that these unilateral changes violated ERISA, the benefits plan and the CBA between the parties. The collective bargaining agreement ("CBA") at issue covered the period May 3, 1990-1993; and that CBA incorporated by reference Keystone's 1986 employee welfare benefits plan (the "Plan"). *fn3

Murphy's complaint had three counts. In Count I Murphy alleged that the CBA entitled him, his spouse and eligible dependents to continued benefits through the lifetime of each retired employee and their surviving spouses. In Count III Murphy made the same claim but rested it directly on the terms of the Plan and certain documents distributed to Keystone employees upon their retirement. Taken together, these counts alleged that the retirees were entitled to vested benefits under the CBA or the Plan and related documents. In contrast, Count II had a statutory basis. In this count Murphy argued that Keystone's unilateral changes to the plan violated ERISA, because the Plan did not include procedures to identify who had authority to amend the Plan or procedures defining how the Plan could be amended. According to Murphy, Keystone's failure to comply with this statutory requirement rendered the Plan unamendable and rendered Keystone's amendments null and void.

In a comprehensive opinion, the district court found that when the CBA and Plan were read together they were unambiguous and they clearly indicated that Murphy's benefits did not vest. The district court also rejected Murphy's ERISA claim. Here the court held that Keystone had an inherent authority to amend the Plan as its administrator, and that Keystone's amendments were valid because Murphy had not shown bad faith, active concealment, or detrimental reliance. Murphy appeals.

II. Analysis

We review the district court's grant of summary judgment de novo, viewing all the evidence in the light most favorable to the plaintiff and according him the benefit of all the reasonable inferences. Krawczyk v. Harnischfeger Corp., 41 F.3d 276, 278 (7th Cir. 1994). Summary judgment is appropriate if the record reveals that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. Murphy's claim rests on Keystone's employee benefits plan which is a welfare benefits plan as defined in 29 U.S.C. sec. 1002(1). As such, his claim presents an issue of contractual interpretation, because ERISA does not require the vesting of welfare benefits. See Curtiss-Wright Corporation v. Schoonejongen, 115 S.Ct. 1223, 1228 (1995); Land v. Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Health and Welfare Fund, 25 F.3d 509, 514 (7th Cir. 1994).

Summary judgment is particularly appropriate in cases involving the interpretation of contracts. Ryan v. Chromalloy American Corp., 877 F.2d 598, 602 (7th Cir. 1989). Where the contract is unambiguous, a court must determine the meaning of the contract as a matter of law. Id. The document should be read as a whole so that all its parts will be given effect. Preze v. Board of Trustees, 5 F.3d 272, 274 (7th Cir. 1993); and related documents must be read together. Lippo v. Mobil Oil Corp., 776 F.2d 706, 713 n. 13 (7th Cir. 1985). We examine the language and logic of the contractual documents. Bidlack v. Wheelabrator Corp., 993 F.2d 603, 607-609 (7th Cir. 1993).

Murphy's claims rest almost entirely on extrinsic evidence so we must consider its proper place in our inquiry. First, we interpret the contract in light of the concrete circumstances in which it was written. See, e.g., Matter of Envirodyne Industries, Inc., 29 F.3d 301, 305-06 (7th Cir. 1994). If, after placing the document in context, the court finds that a contract is unambiguous, it should interpret the contract as a matter of law. Ryan, 877 F.2d at 602. A contract is unambiguous if it is susceptible to only one reasonable interpretation, Illinois Conference of Teamsters and Employers Welfare Fund v. Mrowicki, 44 F.3d 451, 459 (7th Cir. 1994), or put another way, a contract is ambiguous only if both parties were reasonable in adopting their different interpretations of the contract. See Miller, 39 F.3d at 760. And although extrinsic evidence can be used to show that a contract is ambiguous, see, e.g., AM International, Inc. v. Graphic Management Associates, Inc., 44 F.3d 572, 576-77 (7th Cir. 1995), Colfax Envelope Corp. v. Local No. 458-3M Chicago Graphic Communications Intern. Union, AFL-CIO, 20 F.3d 750, 752-53 (7th Cir. 1994), extrinsic evidence cannot be used to create an ambiguity. Central States, S.E. & S.W. v. Joe McClelland, Inc., 23 F.3d 1256, 1259 (7th Cir. 1994); Johnson v. Georgia-Pacific Corp., 19 F.3d 1184, 1187 (7th Cir. 1994). There is no contradiction here. The party claiming that a contract is ambiguous must first convince the judge that this is the case, AM International, 44 F.3d at 576-77, and must produce objective facts, not subjective and self-serving testimony, to show that a contract which looks clear on its face is actually ambiguous. See AM International, 44 F.3d at 575-76; Bristow v. Drake Street Inc., 41 F.3d 345, 351-52 (7th Cir. 1994). Just as the court must determine whether a contract is ambiguous, so too the court must determine whether the extrinsic evidence offered in a given case interprets or contradicts the contract. See AM International, supra.

We have already applied these principles to disputes concerning the contractual vesting of welfare benefits and those cases have produced holdings relevant here. If a contract provides that benefits can be terminated, then those benefits do not vest. Ryan, supra. Where a contract of set duration is silent on the issue of vesting, we presume that benefits were not intended to vest. Senn v. United Dominion Industries, Inc., 951 F.2d 806, 816 (7th Cir. 1992); Bidlack, 993 F.2d at 607. But that presumption can be rebutted by extrinsic evidence. Id.; see also AM ...


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