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Stone v. Signode Industrial Group LLC

United States Court of Appeals, Seventh Circuit

November 20, 2019

Harold Stone, et al., Plaintiffs-Appellees,
v.
Signode Industrial Group LLC and Illinois Tool Works Inc., Defendants-Appellants.

          Argued September 19, 2019

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. l:17-cv-05360 - Thomas M. Durkin, Judge.

          Before Sykes, Hamilton, and Brennan, Circuit Judges.

          HAMILTON, CIRCUIT JUDGE.

         Defendant Signode Industrial Group LLC assumed an obligation to pay health-care benefits to a group of retired steelworkers and their families. Signode then exercised its right to terminate the underlying benefits agreement. When it terminated the agreement, Signode also stopped providing the promised benefits to the retired steel-workers and their families, despite contractual language providing that benefits would not be "terminated ... notwithstanding the expiration" of the underlying agreement. This appeal presents a single question of contract interpretation: whether the agreement in question provided for vested benefits that would survive the agreement's termination. We hold that the contract provided for vested lifetime benefits and affirm the district court's permanent injunction ordering Sig-node to reinstate the retirees' benefits.

         I. Factual and Procedural Background

         The key language relevant to this dispute comes from a 1994 agreement and its 2002 successor. First, we describe the two agreements and their contexts, focusing on the disputed "Continuation of Coverage" and "Term of this Agreement" provisions. We then describe the events that followed the execution of the 2002 agreement and led to this lawsuit.

         A. The Riverdale Plant and the Pensioners' Agreements

         Plaintiffs Harold Stone and John Woestman worked for decades at the Acme Packaging Corporation plant in Riverdale, Illinois. While they worked at the Riverdale plant, they were represented by the union-plaintiff-United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC.

         On January 1, 1994, Acme and the union entered into a "Pensioners' and Surviving Spouses' Health Insurance Agreement." The 1994 Pensioners' Agreement provided health insurance benefits to retirees with at least fifteen years of continuous service and to their families. The Agreement's "Continuation of Coverage" provision said:

Any Pensioner or individual receiving a Surviving Spouse's benefit who shall become covered by the Program established by this Agreement shall not have such coverage terminated or reduced (except as provided in this Program) so long as the individual remains retired from the Company or receives a Surviving Spouse's benefit, notwithstanding the expiration of this Agreement, except as the Company and the Union may agree otherwise.

         The next provision was titled "Term of this Agreement." It read: "This Agreement shall become effective as of January 1, 1994 and shall remain in effect until December 31, 1999 and thereafter subject to the right of either party on 120 days written notice served on or after September 1, 1999 to terminate this Agreement."

         The 1994 Pensioners' Agreement remained in effect until 2002, when Acme Packaging was going through bankruptcy. Acme negotiated a settlement agreement with the union to ease some of its financial obligations. As a part of the settlement, Acme and the union replaced the 1994 Pensioners' Agreement with a nearly identical successor called the 2002 Pensioners' Agreement. It left the Coverage Provision intact and modified the Term Provision only to move the earliest termination date back to February 29, 2004, providing that the agreement "shall remain in effect until February 29, 2004, thereafter subject to the right of either party on one hundred and twenty (120) days written notice served on or after November 1, 2003 to terminate the 'Pensioners' and Surviving Spouses' Health Insurance Agreement.'" The 2002 Pensioners' Agreement and the larger settlement of which it was a part were approved by the bankruptcy court in February 2002, and Acme Packaging emerged from bankruptcy in November 2002.

         In October 2003, defendant-appellant Illinois Tool Works (ITW) acquired the Riverdale plant from Acme and assumed its obligations under the 2002 Pensioners' Agreement. In April 2004, ITW decided to close the plant permanently and entered into an agreement with the union establishing the terms of the closure. Operations ceased completely in August 2004. For over a decade after the plant closed, ITW continued to administer the health insurance program pursuant to the 2002 Agreement, providing health-care coverage for Stone, Woestman, other Riverdale retirees, and their families.

         B. This Lawsuit

         In 2014, ITW created a new entity, Signode Industrial Group LLC, and transferred its obligations under the 2002 Pensioners' Agreement to Signode. It then sold Signode to The Carlyle Group L.P. Signode continued to provide benefits under the Agreement until August 2015, when it notified the union that "effective January 1, 2016, the [health-care program] and the Agreement will terminate and participants will no longer be eligible for benefits thereunder." It notified the beneficiaries the next day. The union protested Signode's unilateral termination of benefits, citing the "notwithstanding expiration" language of the 2002 Agreement. Signode ...


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