United States Court of Appeals
For the First Circuit
Nos. 06-1964, 06-2101
ARTEMIS COFFIN; JAMES MINGO; TERRENCE LYON; HAROLD SMITH;
ROBERT DEWITT; DUANE HANSCOM; JOSEPH GAGLIARDI, JR.;
TRINA VAZNIS; RAYMOND MACDONALD; ROBERT P. HEALEY;
BARRY BRYANT; LEE WHEATON; GEORGE BAKER; GALEN LANDER,
Individually and as Representatives of a Class of Persons
Similarly Situated,
Plaintiffs-Appellants/Cross-Appellees,
v.
BOWATER INCORPORATED; BOWATER LIFE INSURANCE PLAN; GROUP
PROTECTION FOR EMPLOYEES OF BOWATER INCORPORATED
GREAT NORTHERN INC. DIVISION; BOWATER INCORPORATED
POINT OF SERVICE MEDICAL BENEFITS PLAN;
BOWATER INCORPORATED BENEFIT PLAN,
Defendants-Appellees/Cross-Appellants.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, Senior U.S. District Judge]
Before
Torruella, Circuit Judge,
Tashima,* Senior Circuit Judge,
and Lipez, Circuit Judge.
Leon Dayan, with whom Douglas L. Greenfield, Abigail V.
Carter, Diane A. Khiel and Jonathan Beal were on brief, for
plaintiffs-appellants/cross-appellees.
*
Of the Ninth Circuit, sitting by designation.
Andrew Pincus, with whom Reginald R. Goeke, Andrew E.
Tauber, Mayer, Brown, Row & Maw LLP, and Richard G. Moon were on
brief, for defendants-appellees/cross-appellants.
September 7, 2007
LIPEZ, Circuit Judge. This case concerns the continuing
liability of Bowater, Inc. for the health benefits of some of the
retired workers of its subsidiary, Great Northern Paper, Inc.
("GNP"), after Bowater sold GNP to Inexcon in 1999. Bowater claims
that its responsibility for these benefits terminated either at the
time of GNP's sale or in 2003, when Bowater consolidated its
benefit plans under an umbrella plan whose coverage did not extend
to GNP retirees. A putative class of GNP retirees, whose claims
for benefits Bowater denied, assert that neither the 1999 sale nor
the 2003 plan consolidation met the procedural requirements for
terminating a benefit plan under the Employee Retirement Income
Security Act, 29 U.S.C. §§ 1001-1461 ("ERISA"), which governs these
benefit plans. They claim that plan coverage did not end until
April 2004.1
In addition, GNP retirees who belonged to various unions
raise a claim under the Labor Management Relations Act, 29 U.S.C.
§ 141 ("LMRA"), arguing that Bowater's denial of benefits breached
collective bargaining agreements ("CBA"s) entitling them to
lifetime health coverage. These plaintiffs argue that Bowater's
2004 termination of its responsibilities under ERISA had no effect
on its continuing responsibility under the CBAs.
1
All parties agree that Bowater terminated its responsibility
for these benefit plans under ERISA on April 19, 2004, when its
Board of Directors amended its benefit plan through a written
document stating that GNP retirees were not eligible for benefits.
-3-
On cross-motions for summary judgment, the district court
granted summary judgment to Bowater on the LMRA claim. It granted
partial summary judgment to Bowater and partial summary judgment to
plaintiffs on the ERISA claim, concluding that Bowater retained
responsibility for the ERISA plans beyond GNP's sale, but only
until its consolidated plan took effect on January 1, 2003. We
agree with the district court and affirm.
I.
We provide here only the most basic facts, reserving
details for the particular discussions of each issue below. In
1992, Bowater acquired GNP from Georgia-Pacific Corp.2 Following
the acquisition, both unionized and non-unionized GNP employees
received health benefits under ERISA plans. At the time of the
acquisition, the CBAs between Georgia-Pacific and GNP's unionized
workers were in the middle of their terms. Bowater expressly
adopted these CBAs and it negotiated new contracts in 1995. As
part of the contract negotiations, the parties agreed to substitute
a managed health care plan for the previous health plan. Bowater
was named as plan sponsor and plan administrator under both the
original health plans and the managed care plan. In addition, each
of these plans, described by a "summary plan description" as
required by ERISA, allowed the plan sponsor to modify, amend or
2
As part of the acquisition agreement, Georgia-Pacific
retained responsibility for retiree benefits for pre-1992 retirees.
-4-
terminate the plan at any time. Because the plans are identical on
these relevant characteristics, we do not distinguish between them
in our analysis.3
In August 1999, Bowater sold GNP to Inexcon. Bowater
explicitly retained responsibility for the pensions of GNP workers
who had retired between 1992 and the date of sale, as reflected in
section 2.05 of the Stock Purchase Agreement ("SPA"), which stated:
"Seller shall retain . . . any and all liabilities arising under
the GNP Pension Plans." As we discuss in detail below, there is no
equally clear language allocating responsibility for the health
benefits of GNP's retired workers. GNP paid these benefits after
the sale and until about the time it declared bankruptcy in 2003.
When plaintiffs sought benefits from Bowater thereafter, Bowater –
as plan administrator – denied all claims, citing multiple grounds:
(1) that GNP (and not Bowater) was responsible for those benefits
even before GNP's sale to Inexcon; (2) that the terms of GNP's 1999
sale clearly stated that GNP (and not Bowater) retained
responsibility for its retirees' health benefits; and (3) that a
2003 consolidation of Bowater's benefit plans effectively
terminated any residual responsibility Bowater retained under the
plans.
3
Workers who retired after 1995 were covered by the Bowater
Point of Service Medical Benefits Plan; certain workers who retired
between 1992 and 1995 were covered under the Indemnity Retiree
Basic Program or the Indemnity Retiree Comprehensive Program.
-5-
On December 31, 2003 fifteen GNP retirees filed this
action in federal court on behalf of themselves, their
beneficiaries and a class of 638 similarly situated retirees,
seeking health benefits from Bowater. Plaintiffs raise claims
under both ERISA and the LMRA.4 Under the ERISA claim, workers who
retired from both salaried and hourly positions seek health
benefits from the date in 2003 when GNP refused to continue paying
health benefits through April 19, 2004. See 29 U.S.C. § 1132(a).
In addition, retired hourly workers have asserted a claim under
§ 301 of the LMRA, 29 U.S.C. § 185, alleging that Bowater failed to
honor its obligations under various CBAs to provide them lifetime
health benefits. Because some of these workers retired under pre-
1999 CBAs and others retired under a CBA adopted in 1999 – which
contained substantially different language regarding health
benefits – the LMRA claims are split into two counts.5
On June 21, 2005, the court certified three classes: a
single class representing all retired workers seeking relief under
the ERISA claim and two classes representing former unionized
4
The complaint also included a count alleging breach of
fiduciary duty. The district court granted plaintiffs' unopposed
motion to dismiss that claim.
5
GNP employees were represented by six different unions and
are thus governed by a variety of individual CBAs. However, the
parties have proceeded as if the terms of the individual unions'
pre-1999 CBAs are identical and the terms of their 1999 CBAs are
identical. Therefore, aside from noting the distinction between
pre-1999 and 1999 CBAs – we do not further distinguish between
them.
-6-
hourly workers who retired before and after the adoption of the
1999 CBA, respectively.
Shortly after class certification, Bowater filed a motion
for summary judgment on all claims and plaintiffs filed a cross-
motion for summary judgment on the ERISA claim. In a thorough
opinion, the district court granted Bowater's motion on the LMRA
claims, having found that neither the pre-1999 CBAs nor the 1999
CBAs provided for lifetime benefits. It granted plaintiffs' cross-
motion on the ERISA claim through January 2003, but granted summary
judgment to Bowater for the period thereafter, finding that: (1)
Bowater remained the sponsor of the health plans after GNP's sale;
(2) steps taken by Bowater during the sale did not divest it of
responsibility for these benefits; and (3) Bowater's January 2003
consolidation of benefits could reasonably have been viewed by the
benefits program administrator as having terminated Bowater's
responsibility to GNP's retirees. The district court then approved
a joint stipulation that the amount owed for the period prior to
January 1, 2003 amounted to $62,000 and entered its final judgment.
Both sides appealed.6
II.
Bowater and plaintiffs find fault with the district
court's determination that Bowater's responsibility under ERISA
6
On appeal, Bowater did not renew its argument that it had
never been responsible for benefits to GNP employees under the
ERISA plans.
-7-
ended when it consolidated its benefit plans in 2003. Bowater
insists that its responsibility ended in 1999, when it sold GNP to
Inexcon. Plaintiffs argue that Bowater's responsibility did not
end until 2004.
We review a district court's grant of summary judgment de
novo, construing the facts in the light most favorable to the party
opposing the motion. Int'l Strategies Group, Ltd. v. Greenberg
Traurig, LLP, 482 F.3d 1, 6 (1st Cir. 2007). Summary judgment is
appropriate where "there is no genuine issue as to any material
fact and [] the moving party is entitled to judgment as a matter of
law." Fed. R. Civ. P. 56(c). For the reasons we describe in
section II.C.1, we apply de novo review to the benefit plan
administrator's determination of eligibility for benefits under the
terms of the plan, even though the plan documents themselves afford
the administrator substantial deference. See Firestone Tire &
Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Where the
administrator's determination of eligibility depends upon an
interpretation of non-plan documents (in this case, the SPA), our
review is also de novo. Firestone, 489 U.S. at 112.7
It is well-established that ERISA does not prevent
employers from adopting, modifying or terminating welfare plans at
any time and for any reason. Curtiss-Wright Corp. v.
7
Bowater concedes that we owe no deference to its
interpretation of the documents related to GNP's sale to Inexcon as
plan administrator.
-8-
Schoonejongen, 514 U.S. 73, 78 (1995).8 However, it requires that
employers meet certain procedural standards when they do so. Id.
at 82-83. In particular, ERISA requires that qualifying benefit
plans "provide a procedure for amending such plan, and for
identifying the persons who have authority to amend the plan," 29
U.S.C. § 1102(b)(3). In addition, such plans must be "maintained
pursuant to a written instrument" that provides "for one or more
named fiduciaries" who have "authority to control and manage the
operation and administration of the plan," id., § 1102(a)(1), and
the fiduciary must act "in accordance with the documents and
instruments governing the plan," id., § 1104(a)(1)(D). We have
interpreted this language to require that the amendment or
termination of written ERISA plans be accomplished through a
written document, Bellino v. Schlumberger Techs., Inc., 944 F.2d
26, 33 (1st Cir. 1991) (citing Frank v. Cold Indust. Inc., 910 F.2d
90, 98 (3d Cir. 1990)), and executed by a party authorized to
effect such amendment or termination, cf. Law v. Ernst & Young, 956
F.2d 364, 370 n.9 (1st Cir. 1992).
8
This latitude contrasts with ERISA's tighter regulation of
pension plans. See, e.g., Balestracci v. NSTAR Elec. & Gas Corp.,
449 F.3d 224, 229-30 (1st Cir. 2006) (discussing the distinction
under ERISA between welfare benefit plans and pension plans, which
are "subject to strict vesting requirements").
-9-
Each of Bowater's benefit plans includes language
allowing Bowater to terminate or amend the plans at any time.9
Through various board resolutions, Bowater authorized its Chief
Executive Officer, the Vice President for Human Resources, and its
Chief Financial Officer to take such action.10 These provisions do
not specify any particular steps that must be taken to effectuate
a termination or amendment. The Supreme Court has held that such
general clauses meet the requirements of 29 U.S.C. § 1102(b)(3).
Curtiss-Wright, 514 U.S. at 75. In so concluding, the Court made
several observations about the important goals served by ERISA's
9
The indemnity plan states:
[Bowater] reserves the right to terminate, suspend,
withdraw, amend or modify the Plan at any time. Any such
change or termination in benefits (a) will be based
solely on the decision of the Director of Employee
Benefits and (b) may apply to active Employees, future
retirees and current retirees as either separate groups
or as one group.
The managed care plan states:
[Bowater], in its sole discretion, may at any time modify
or amend the provisions, terms and conditions of the Plan
or may at any time terminate the Plan without the consent
of any Participant or any other beneficiary under the
Plan.
It further specifies that these terms and conditions "may not be
modified by any oral statement."
10
A 1997 board resolution authorized Bowater's Chief Executive
Officer and its Vice President for Human Resources to amend or
terminate the Plans. A 1999 board resolution extended authority to
the Chief Financial Officer to amend or terminate "any and all
retirement, compensatory or welfare benefits plans" in order to
further the consummation of the transaction selling GNP to Inexcon.
-10-
procedural requirements. In particular, they "increase[] the
likelihood that proposed plan amendments, which are fairly serious
events, are recognized as such and given the special consideration
they deserve." Id. at 82-83. They also "enable[] plan
administrators . . . to have a mechanism for sorting out, from
among the occasional corporate communications that pass through
their offices and that conflict with the existing plan terms, the
bona fide amendments from those that are not." Id. Finally,
requiring that every benefit plan be maintained pursuant to a
written instrument "enable[s] beneficiaries to learn their rights
and obligations under the plan at any time." Id. at 83.
In light of these goals, several circuit courts have held
that only those written documents that clearly indicate that a plan
is being changed or terminated meet ERISA's procedural
requirements. The Fifth Circuit was the first court to articulate
this principle in Borst v. Chevron Corp., 36 F.3d 1308, 1323 (5th
Cir. 1994), where it explained that – for the same reasons that an
"oral agreement cannot sustain a cause of action under ERISA" –
neither can "written modifications or promises which are not, and
do not purport to be, formal amendments of a plan." See also Kalda
v. Sioux Valley Physician Partners, Inc., 481 F.3d 639, 648 (8th
Cir. 2007); Sprague v. General Motors Corp., 133 F.3d 388, 403 (6th
Cir. 1998). Our precedent also recognizes that "Congress intended
ERISA insurers to speak clearly, in plain language, to plan
-11-
recipients." Glista v. UNUM Life Ins. Co. of Am., 378 F.3d 113,
132 (1st Cir. 2004).
The question before us is whether Bowater's actions in
its 1999 sale of GNP or in its 2003 plan consolidation complied
with ERISA's requirements and terminated its responsibilities for
these ERISA plans. The principles outlined above guide our review.
A. The Effect of GNP's Sale to Inexcon
Bowater advances two related arguments to support its
position that its responsibility for benefits under ERISA
terminated when it sold GNP to Inexcon in 1999. First, it argues
that the act of selling a subsidiary – in and of itself –
terminates a parent company's responsibilities for such benefits.
Second, it argues that even if we reject such an "automatic
termination" rule, the particular documents and actions through
which Bowater sold GNP ended its obligations. Plaintiffs counter
that the case law does not support a per se rule automatically
terminating a parent company's benefit responsibilities upon sale
of a subsidiary and that such a rule would undermine the procedural
protections afforded by ERISA. In addition, they argue that
neither the terms of the SPA nor any other documents or actions
related to the sale of GNP to Inexcon fulfilled these procedural
requirements. The district court adopted plaintiffs' position on
both contentions. We review these conclusions de novo. Having
conducted such review, we agree with plaintiffs and the district
-12-
court that the 1999 sale did not terminate Bowater's
responsibilities under its ERISA health and benefit plans.
Bowater begins its argument for an "automatic
termination" rule by noting that ERISA does not prescribe
particular steps that must be taken to terminate a welfare plan.
In this absence, Bowater continues, courts have found that, when an
employer's action eliminates any of the features required by ERISA
– e.g., mechanisms for administering and funding the plan – that
action also terminates the plan. Bowater concludes that because
the sale of a subsidiary typically eliminates one or more
"requisite features" of a welfare plan sponsored by the
subsidiary's former parent, the sale of the subsidiary generally
terminates any such plan. Bowater also invokes case law for the
proposition that a parent company's welfare plan is "terminated by
operation of law with respect to the employees of a subsidiary when
the parent sells the subsidiary by means of a duly authorized
written instrument," citing in particular Chiles v. Ceridian Corp.,
95 F.3d 1505, 1516 (10th Cir. 1996). See also Sejman v. Warner-
Lambert Co., 889 F.2d 1346 (4th Cir. 1989); Conkin v. CNF Transp.,
Inc., No. 03-CV-1058-J, 2004 U.S. Dist. LEXIS 15434 (D. Wyo. May 4,
2004). Finally, Bowater argues that an automatic termination rule
is consistent with ERISA's ultimate goal of encouraging employers
to establish and maintain welfare plans. Bowater contends that
allowing employees of a former subsidiary to claim benefits under
-13-
the former parent's welfare plan might cause parent corporations to
avoid offering such benefits in the first instance.
We disagree with each link in this logical chain.
Although Bowater is correct that parent companies tend to terminate
ERISA plans when selling a subsidiary, there is nothing automatic
about this correlation. Indeed, the three cases Bowater cites in
support of an automatic termination rule are factually
distinguishable from the instant case because each case involved
the sale of a subsidiary with attendant circumstances that met
ERISA's procedural requirements.
In Chiles, the Tenth Circuit found that a parent
company's long-term disability plan was terminated by sale of the
subsidiary where the buyer instituted a replacement benefit plan,
appointed new trustees to oversee the new plan, the buyer became
the new plan's administrator, the seller transferred money to fund
the new plan and, after the transfer, the buyer assumed all of the
seller's obligations with respect to the plan beneficiaries. 95
F.3d at 1515-16. In addition, the court noted that the original
plan's master document clearly stated that the plan terminated for
each participant "on the date he or she ceases to be an employee of
[the parent] or one of its wholly-owned subsidiaries." Id. at 1516
n.11.
In Sejman, the Fourth Circuit found that a parent company
did not retain responsibility for severance benefits to its former
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employees after selling its subsidiary where: (1) the parent
specifically amended its plan to clarify that severance benefits
would not be available to employees who had the opportunity to
continue working for the acquiring company; and (2) the severance
policy's text specified that, in order to be eligible for benefits,
"the claimant had to be both an employee of [the parent] and
'terminated by [the parent] as a result of job elimination, work
performance, or other reasons of [the parent's] convenience.'" 889
F.2d at 1349 (emphasis omitted). Because the acquirer – not the
parent – had terminated the workers' employment, this specific
language established that the employees were not covered by the
parent's plan. Id. at 1350.
Finally, in Conkin, the district court found that the
sale of a subsidiary terminated the parent's welfare benefit
responsibilities where: (1) an Employee Benefit Matters Agreement
announced that the subsidiary's employees immediately ceased
participation in the seller's benefit plans, (2) the buyer set up
new welfare benefits for its employees and the retirees of its new
acquisition, and (3) the seller transferred sufficient assets from
its own retirement plan to the newly created retirement plan of the
buyer to cover the accrued benefits of its plan's participants.
2004 U.S. Dist. LEXIS 15434, at *18-20.
In none of these cases did the mere fact of a sale
automatically terminate a parent company's responsibility for its
-15-
subsidiary's employee welfare benefit plan. To the contrary, they
illustrate that companies tend explicitly to terminate benefit
plans in the process of selling a subsidiary. In each of these
cases, the language of the agreements and the corresponding changes
to plan documents were sufficiently clear to alert employees that
the parent was terminating responsibility for its welfare benefits
upon the sale of the subsidiary. Thus, they met ERISA's minimal
procedural requirements. As we will explain below, Bowater did not
meet these requirements when it sold GNP.
Bowater's argument that an automatic termination rule
best serves ERISA's goals is also unpersuasive. While it is true,
as Bowater emphasizes, that "[o]ne of Congress's intentions in
enacting ERISA . . . was to encourage the growth of private
employee benefit plans," Wolf v. Reliance Std. Life Ins. Co., 71
F.3d 444, 447 (1st Cir. 1995), we have also held that Congress
intended that ERISA plan beneficiaries receive clear information
about their plans, see Glista, 378 F.3d at 132. Bowater
overreaches with its argument that requiring such clear information
might discourage employers from adopting ERISA plans for fear of
unexpected outcomes. In our view, requiring parent companies to
clarify their responsibility for welfare benefits upon the sale of
a subsidiary is a modest requirement, fully compatible with ERISA's
substantive and procedural aims.
-16-
B. GNP's Sale Documents
Bowater next argues that, even if the sale itself did not
end its benefit responsibilities, the SPA governing Bowater's sale
of GNP to Inexcon clearly did so. Because the SPA was both written
and signed by a party duly authorized to amend or terminate its
benefit plan (i.e., Bowater's Chief Financial Officer), Bowater
contends that it satisfies ERISA's procedural requirements. While
plaintiffs agree that the SPA was written and signed by a properly
identified designee, they argue that the SPA did not effectuate
either a termination or amendment of Bowater's responsibility under
the plans because it did not purport to do so. We agree.
Bowater argues that the SPA transfers the obligation to
fund the ERISA plans from Bowater to GNP, thereby amending the
plans. It relies on language in section 4.12 of the SPA, which
reads:
No Undisclosed Liabilities. Except as set
forth in Section 4.12 of the Disclosure
Schedule, and except for the Retained
Liabilities, GNP has no known liabilities or
obligations of any nature . . . other than (i)
the liabilities and obligations to the extent
reflected in the Base Balance Sheet or the Net
Working Capital Certificate . . . (iv) the
liabilities and obligations in any of the
documents specifically identified in any
Section of the Disclosure Schedule, except to
the extent within the Knowledge of Seller
(after no inquiry by Seller) and not disclosed
by Seller herein or in the Disclosure Schedule
(collectively, with the exception of Retained
Liabilities, the "Assumed Liabilities").
-17-
Section 4.20(a) of the Disclosure Schedule lists the benefit plans
under which plaintiffs make their claims. Taken together, Bowater
argues, these documents effectively transfer responsibility for
GNP's employees' health benefits from Bowater to GNP. Bowater
further argues that plaintiffs are wrong to suggest that a document
must invoke the "magic words" "amend" or "terminate" in order to
effectuate a change to a welfare benefit plan.
We agree with this principle; however, irrespective of
the failure to use the words "amend" or "terminate," we find this
SPA language insufficient to meet ERISA's requirements because the
SPA fails to convey that the agreement is amending or terminating
the plans. Therefore, it does not enable the parties to "sort[]
out . . . the bona fide amendments from those that are not," or
allow them to "learn their rights and obligations under the plan at
any time," as the Supreme Court envisioned in Curtiss-Wright, 514
U.S. at 82-83. See also Borst, 36 F.3d at 1323.
Section 4.12 of the SPA reflects Bowater's understanding
that Inexcon was purchasing a subsidiary – GNP – with "liabilities
and obligations . . . specifically identified in any Section of the
Disclosure Schedule." The benefit plans at issue here are listed
in Section 4.20(a) of the Disclosure Schedule. However, the SPA
itself does not explicitly transfer those liabilities from Bowater
to GNP. It also does not expressly terminate Bowater's
responsibility for those benefits. Finally, even if this language
-18-
more clearly terminated Bowater's responsibility for health
benefits, the language is embedded in a disclosure provision, where
one would not normally look for such a termination. Upon reading
this SPA language, one might expect to find a separate document in
which such a transfer or termination took place; however, Bowater
points to no such document.11 Indeed, Bowater concedes that it did
not execute any document – other than the SPA – that amended or
terminated its responsibility for the benefit plans in connection
with the 1999 sale.
Bowater argues that a document claiming to amend or
terminate an ERISA plan need not be labeled as such, citing a
string of cases in support. See Halliburton Co. Benefits Comm. v.
Graves, 463 F.3d 360, 372 (5th Cir. 2006) ("[A] provision in a
merger agreement could amend a welfare plan, even if it is not
labeled as a plan amendment."); Allison v. Bank One-Denver, 289
F.3d 1223, 1235 (10th Cir. 2002) (holding that a Plan Advisory
Committee's memorandum could serve as a plan amendment if it met
the criteria of the plan's amendment procedure); Aldridge v. Lily-
11
Interestingly, the "Closing Document Checklist" provided by
the parties in their joint appendix lists a "GNP Benefit Plan Side
Letter Agreement," but that document is not provided. The "Closing
Memorandum," listing actions taken and the documents delivered in
connection with the sale of GNP, also notes that, "[o]n July 28,
1999, the Board of Directors of Seller took all corporate action
necessary to authorize the Purchase Agreement and the transactions
contemplated thereby." The record before us contains no evidence
that a termination or amendment to the plan was a part of such
"corporate action."
-19-
Tulip, Inc., 40 F.3d 1202, 1210 (11th Cir. 1994) (finding that
adoption of a resolution by a corporation's board of directors may
terminate a plan); Horn v. Berdon, Inc. Defined Benefit Pension
Plan, 938 F.2d 125, 127 (9th Cir. 1991) (holding that a resolution
by the Corporation's Board of Directors can serve to amend a plan).
While these cases support the proposition that a welfare benefit
plan may be amended or terminated through a document not itself
labeled as an amendment or termination, the pertinent language in
each case clearly conveyed that such a change was occurring. That
is not true here.
In Aldridge and Horn, the board resolutions met the ERISA
procedural criteria: they were written documents, signed by parties
with authority to amend or terminate the plans; they followed the
amendment or termination procedures laid out in the plans
themselves; and, most importantly, each resolution indicated
exactly how it would alter the plan. See Aldridge, 40 F.3d at 1205
n.2 ("The resolution reads as follows: 'II. Termination of the
Retirement Plan [] WHEREAS, The Corporation deems it desirable to
terminate the Retirement Plan . . . NOW THEREFORE BE IT RESOLVED,
That the Retirement Plan be and hereby is terminated . . . .'");
Horn, 938 F.2d at 127 ("[The 'Board'] adopted two resolutions in
anticipation of the sale . . . . The first declared the Plan would
terminate . . . . The second amended the Plan to provide each
-20-
beneficiary with all benefits accrued as of [a certain date], and
to eliminate any additional benefits accruing thereafter.").
More tellingly, Halliburton and Allison – while they
found that a merger or plan advisory committee memorandum could
amend a plan – ultimately determined that the particular actions
taken in those cases failed to qualify as plan amendments. In
Halliburton, the Fifth Circuit found that Halliburton did not,
through the merger agreement, assume all rights and
responsibilities for the employee benefit plans of the corporation
that had merged into its subsidiary. Instead, the court concluded
that the obligation arose three months later when Halliburton
entered a separate agreement through which it explicitly agreed to
assume, adopt and amend the company's employee benefit plans. 463
F.3d at 371 & n.7. In Allison, the court determined that a
unanimously approved Advisory Committee memorandum was insufficient
to amend the plan to turn it into a participant-directed plan where
the plan contained specific procedures for such a conversion.
Instead, the court characterized the resolution as an "insufficient
step in performing the requirements" laid out in the plan for
converting to a participant-directed plan. 289 F.3d at 1234. The
court went on to say: "Resort to a plan's terms in the event of a
dispute should not require the prescience of a clairvoyant as to
whether an amendment has occurred. We have repeatedly rejected
-21-
efforts to stray from the express terms of a plan, regardless of
whom those express terms may benefit." Id. at 1236.
We also note that in Bellino, 944 F.2d at 33 n.8, we
refused to consider a letter the company sent to workers that
purported to explain its severance policy and that included new
terms as an amendment to the company's severance plan. There was
no explicit statement that the letter itself was intended to change
those terms. We thus drew a distinction between written documents
that suggest an amendment or termination has occurred and documents
that clearly purport to and actually succeed in amending or
terminating an ERISA plan.
While Bowater is thus correct that it could have amended
or terminated its plan in its SPA with Inexcon, the language of
that document did not clearly do so. See also Kalda, 481 F.3d at
647-48 (rejecting the argument that the amendment of balance sheets
reflecting the company's plan constituted a plan amendment despite
the fact that they were written and approved by an authorized
party); Sprague, 133 F.3d at 403 (rejecting plaintiffs' written
statements of acceptance that contained changed plan terms as plan
amendments because the documents did not purport to amend the
plan). Moreover, the original plan documents – which named Bowater
as plan administrator and plan sponsor – remained in place and no
new responsible parties were identified by Bowater. Where the plan
continued to list Bowater as plan sponsor and administrator and the
-22-
language of the SPA did not expressly terminate Bowater's
responsibility, the fact that Bowater presumed in the SPA a
transfer of responsibility to GNP did not meet ERISA requirements
and therefore failed to accomplish such a transfer.
Finally, we note that this outcome does not create an
onerous burden on plan sponsors under ERISA. As all parties here
concede, Bowater finally terminated its responsibility under these
benefit plans on April 19, 2004, when Bowater's Board of Directors
amended its benefit plan to clarify that
no individual who is an employee or former
employee of [GNP] . . . shall be eligible to
participate in the Plan or any separate
Benefit Program under the Plan . . . such
Plan, Benefit Program, predecessor and other
programs and arrangements, as applied to
GNP . . . being terminated as of the date of
the sale of GNP to Inexcon.
Thus, while ERISA does not require employers to meet difficult
standards in order to amend a welfare benefit plan, it does provide
for minimal procedures that must be followed. That is, an ERISA
plan amendment must be in writing; it must be executed by a party
authorized to amend the plan; the language of the amendment must
clearly alert the parties that the plan is being amended; and the
amendment must meet any other requirements laid out for such
amendments in the plan's governing documents. This insistence on
specificity ensures that disputes between employees and their
employers may be resolved by reference to the documents that govern
the plan.
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C. The 2003 Consolidation of Bowater's Benefit Plans
Bowater is a large corporate conglomerate that employs
roughly 7,000 people and operates pulp and paper mills and related
operations at several locations in five different states (as well
as internationally). Effective January 1, 2003, Bowater
established the Bowater Incorporated Benefit Plan ("BIBP") as a
unified plan to replace the various plans under which its employees
received health and welfare benefits. At least in part, this
consolidated plan was adopted to ease the administrative burden of
filing separate tax returns and ERISA-mandated forms for each of
Bowater's benefit plans.12 Bowater, as plan administrator,
determined that BIBP's adoption effectively terminated its
liability under its previous health and benefit plans. The
district court, reviewing this decision under the traditional abuse
of discretion standard, affirmed that decision. Plaintiffs argue
that BIBP's language cannot reasonably be construed to effectuate
such a termination. Before delving into this debate, we must
determine the correct standard under which we review Bowater's
decision in light of recent developments in this circuit relating
to the standard of review in ERISA cases such as this one.
12
This intention is clear from the language of the BIBP
itself, which states: "All Benefit Programs offered under the Plan
shall constitute a single plan for purposes of the annual reporting
requirements of the [Internal Revenue] Code and ERISA."
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1. Standard of Review
We have traditionally reviewed a denial of benefits under
an ERISA plan for abuse of discretion where the plan document
itself grants the plan administrator discretion to determine
eligibility or to construe the terms of the plan. Firestone, 489
U.S. at 115. Where the plan administrator operates under a
conflict of interest, i.e., where the plan administrator is also
the plan sponsor and therefore stands to gain from each dollar of
benefits it denies to claimants, we have reviewed the
administrator's interpretation of plan terms and eligibility for
abuse of discretion, but with "more bite," placing "special
emphasis on reasonableness." Doyle v. Paul Revere Life Ins. Co.,
144 F.3d 181, 184 (1st Cir. 1998).
However, since the district court issued its decision in
this case, we have issued a decision, Denmark v. Liberty Life
Assur. Co., 481 F.3d 16, 19 (1st Cir. 2007), which calls into
question the appropriate standard of review for ERISA cases
involving structural conflicts such as those that exist in this
case. In Denmark, two members of the court expressed their unease
with the traditional standard of review in these cases and urged
the court to reconsider this issue in an en banc proceeding. A
petition for rehearing en banc that asks the court to reconsider
the standard of review in ERISA cases involving structural
conflicts of interest is currently pending before this court. As
-25-
we stated in a similarly situated case: "If we thought any change
in the applicable standard of review (and we are not intimating in
any way that there will necessarily be such a change) might affect
the outcome of this appeal, we would defer a decision on this
appeal until the en banc petition in Denmark was resolved."
Kansky v. Coca-Cola Bottling Co., ___ F.3d ___, No. 06-2042, 2007
U.S. App. LEXIS 15514 at * 7 (1st Cir. June 29, 2007). However, as
we describe below, we find that plaintiffs' claim fails even under
de novo review and so we need not delay our review of this issue.
2. Reviewing the BIBP
Plaintiffs and Bowater agree that the key language with
respect to plaintiffs' claims is set forth in Article I, Section
1.03 of the BIBP, labeled "Benefit Programs":
The separate Benefit Programs that are
consolidated into the Plan are listed in
Appendix A. Separate Program Documents which
describe the specific benefits provided by
each Benefit Program, the individuals covered
by each Benefit Program and the other terms
and conditions of each Benefit Program,
including any contract with an Insurance
Company maintained in connection with a
Benefit Program, as amended from time to time,
shall be incorporated herein by this
reference. The Plan supersedes and replaces
any program document defining the terms of or
describing a Benefit Program that is not
incorporated and made part of the Plan. If
there is a conflict between the specific terms
of a Program Document and the terms of the
Plan, the Program Document shall control
(unless contrary to applicable law), except
that any terms exclusively set forth in the
Plan document shall control.
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(Emphasis added).
Both sides agree that plaintiffs are not covered under
the terms of the BIBP. Bowater contends that Section 1.03,
particularly the third (underlined) sentence, consolidates all of
Bowater's benefit plans into a single plan and supersedes any plans
not listed in Appendix A (plaintiffs' plans are not listed in
Appendix A). Plaintiffs disagree and argue that the only thing
being "superseded or replaced" are informal documents describing
benefit plans listed in Appendix A. According to this reading, the
excerpted language does not refer to, and thus has no effect on,
plaintiffs' benefit plans.
The BIBP itself specifies that "[w]henever capitalized
and used in the Plan, [particular] words and phrases shall have the
respective meanings specified in this Section . . . unless the
context plainly requires a different meaning." Because two of
these terms play an important role in plaintiffs' interpretation of
the BIBP, we include their defined meanings here:
Benefit Program means a separate welfare
program that is sponsored by an Employer and
which forms part of the Plan and is
incorporated herein by reference.
Program Document means the written summary of
the terms of each separate Benefit Program,
that may consist of a summary plan
description, separate plan document and/or
Insurance Company contract or certificate.
The heart of the debate concerns the third sentence of
Section 1.03 and, in particular, what is being "superseded or
-27-
replaced" by its third sentence.13 This question, as posed by
plaintiffs, turns on whether the phrase "that is not incorporated
and made part of the Plan" modifies "program document" or "Benefit
Program."
a. Plaintiffs' Interpretation
Plaintiffs argue that the phrase "that is not
incorporated and made part of the Plan" modifies the term "program
document" and that what is being superseded are informal program
documents that are not incorporated into the BIBP. In making their
case, they distinguish between the capitalized term, "Program
Documents," which they describe as "formal" program documents, and
the uncapitalized term, "program documents," which they
characterize as "informal" program documents. They interpret the
second sentence of Section 1.03 – which uses the capitalized term
– as incorporating into the BIBP the formal Program Documents
associated with the benefit programs listed in Appendix A. They
interpret the third sentence – which purposefully employs the
uncapitalized term – as requiring that informal documents
13
Plaintiffs also contend that the first and second sentences
limit the scope of the subsequent sentences to the benefit programs
specifically listed in Appendix A. Neither of the benefit programs
under which plaintiffs seek recovery appear in the Appendix.
Plaintiffs specifically argue that the second sentence clarifies
that only formal Program Documents that describe a Benefit Program
listed in Appendix A are to be incorporated. Bowater argues that
while these sentences specify that the benefit programs listed in
Appendix A are incorporated into the BIBP, they do not restrict the
scope of the subsequent sentences to programs listed in that
appendix.
-28-
associated with the benefits programs listed in Appendix A be
superseded or replaced by the terms of the BIBP. On this reading,
the superseded materials are informal documents – such as
information brochures and handouts describing plan benefits – as
distinguished from official "Program Documents." Thus, the overall
effect of these three sentences is to incorporate into the BIBP the
formal program documents of all benefit programs listed in Appendix
A and to supersede any inconsistent terms and conditions contained
in informal documents describing those same programs. According to
plaintiffs, this language has no effect on any benefit programs -
like those at issue in this case - that are not listed in Appendix
A.
Plaintiffs also argue that their interpretation of the
BIBP preserves the defined meaning of the capitalized term "Benefit
Program." This is so because "Benefit Program" refers only to
benefit programs listed in Appendix A. If the phrase, "that is not
incorporated and made part of the Plan" modifies "Benefit Program"
– as Bowater contends – then it strips the capitalized term of its
contractually provided meaning because a benefit program cannot be
both incorporated under the BIBP (as the term's capitalization
suggests) and "not incorporated and made part of the Plan" (as the
modifying clause suggests).
Plaintiffs' construction of Section 1.03 reflects the
proposition that it would be reasonable for a company to attempt to
-29-
eliminate possibly inconsistent references to its plans, or
imprecise use of plan terms, by limiting the relevant documents to
those formally generated. See, e.g., Health Cost Controls of Ill.,
Inc. v. Washington, 187 F.3d 703, 712 (7th Cir. 1999) (noting that
"in ERISA land[] often the terms of an ERISA plan must be inferred
from a series of documents none clearly labeled as 'the plan'").
However, such informal documents generally contain language
clarifying that they contain merely a "summary" of the plan terms
and that the actual agreement contains the operative terms. Id.
Thus, the need expressly to exclude such documents from being
considered part of the consolidated plan is not compelling.
Moreover, plaintiffs' argument that the critical phrase
("that is not incorporated and made part of the Plan") modifies
"program document" is weakened considerably by the fact that the
modifying phrase comes after the intervening phrase "defining the
terms of or describing a Benefit Program." The grammatical "rule
of the last antecedent" – which was used by the Supreme Court in
Barnhart v. Thomas, 540 U.S. 20, 26 (2003), and which provides that
a modifying phrase "should ordinarily be read as modifying only the
noun or phrase that it immediately follows," id. – suggests that
the phrase modifies "Benefit Program" rather than "program
document." Thus the sole virtue of plaintiffs' interpretation is
that it preserves the defined meaning of the capitalized term
"Benefit Program" in the third sentence of this section.
-30-
b. Bowater's Interpretation
Bowater reads the third sentence as providing that any
benefit program not incorporated into the consolidated plan is
superseded and replaced by the BIBP. This reading has the effect
of consolidating all outstanding Bowater plans into a single plan
under the terms and conditions of the BIBP. Thus, according to
Bowater, the superseded program documents are those describing
unincorporated benefit programs, not informal documents describing
incorporated benefit programs. Because the plan supersedes and
replaces the program documents describing unincorporated benefit
programs, it effectively terminates those programs as well.
Bowater emphasizes that this interpretation squares with the
intention stated on the first page of the BIBP – titled
"Establishment and Purpose" – that "[a]ll Benefit Programs offered
under the Plan shall constitute a single plan for purposes of the
annual reporting requirements of the [Internal Revenue] Code and
ERISA." Its interpretation is also grammatically superior to
plaintiffs' because the modifying phrase ("that is not incorporated
and made part of the Plan") directly follows "Benefit Plan" rather
than "program document," suggesting that the phrase is referring to
benefit plans that are not being incorporated into the Plan.
As plaintiffs point out, however, Bowater's
interpretation seems to conflict with the BIBP's own definition of
"Benefit Program," which "means a separate welfare program that is
-31-
sponsored by an Employer and which forms part of the [BIBP]."
Nonetheless, as the plan itself explains, such capitalized terms
"shall have the respective meanings" defined in the contract
"unless the context plainly requires a different meaning." Here,
Bowater argues that we must read the term "Benefit Program" in the
context of the modifying phrase "that is not incorporated and made
part of the Plan."
Finally, Bowater casts doubt on the sharp distinction
plaintiffs draw between formal "Program Documents" and informal
"program documents." This distinction is at the heart of
plaintiffs' argument that the contested sentence of the BIBP
intends the BIBP to supersede and replace informal program
documents of benefit programs incorporated in Appendix A. This
distinction is not borne out by the definition of "Program
Documents," which includes any "written summary of the terms of
each separate Benefit Program," and specifies that such a summary
"may consist of a summary plan description, separate plan document
and/or Insurance Company contract or certificate." While the
second sentence of this definition refers to an array of formal
documents, the definition contemplates a mix of formal and informal
documents. Thus, while plaintiffs' interpretation may preserve the
proper usage of the defined term "Benefit Program" in the third
sentence of Section 1.03, its reliance on a sharp distinction that
seems inconsistent with the definition of "Program Document"
-32-
significantly weakens its appeal. Bowater also offers a plausible
alternative account for its use of the uncapitalized term "program
documents" in the contested sentence. Rather than signaling that
"informal" documents were being superseded and replaced, Bowater
explains that "program documents" remains uncapitalized because the
capitalized term refers only to the program documents associated
with benefit plans listed in Appendix A. Because the third
sentence refers to program documents associated with benefit
programs that are not incorporated into the BIBP, the more
inclusive, uncapitalized term was necessary.
c. The More Persuasive Interpretation
We find Bowater's arguments significantly more persuasive
than plaintiffs' for the following reasons:
(1) Given that the modifying phrase directly follows
"Benefit Program" rather than "program document," Bowater's
argument is consistent with the "rule of the last antecedent;"
(2) Plaintiffs' textual argument relies on the shaky
foundation of a strict dichotomy between "formal" and "informal"
program documents that is not supported by the BIBP's own
definitions of Program Document;
(3) Plaintiffs' argument based on the Plan's
capitalization scheme ignores the important language in the Plan
-33-
itself explaining that the defined terms should not be given effect
where context requires otherwise;
(4) Plaintiffs' account of what the third sentence of
Section 1.03 accomplishes – superseding and replacing informal
documents – is unpersuasive, given that such informal documents
tend explicitly to state that, where their terms conflict with the
terms in the actual Program Documents, the latter are controlling;
(5) Bowater's explanation – that any program documents
related to plans not incorporated in the BIBP were superseded and
replaced by the terms of the BIBP – is more logically consistent
with the purpose behind the BIBP's adoption: to consolidate
Bowater's many benefit plans into a single plan; and
(6) Focusing on the plain language of the disputed
provision and putting aside for the moment the technical arguments
of the parties, that provision expressly states that it "supersedes
and replaces" program documents associated with unincorporated
benefit programs – that is, any benefit program that is not listed
in Appendix A to the BIBP – thereby terminating those
unincorporated benefit programs. The benefit programs at issue
here are not listed in Appendix A. Hence, by the plain language of
the disputed provision, the benefit programs at issue have been
superseded and replaced. Without intending or implying any
criticism of the skillful advocacy of plaintiffs, the fact that
advocacy can muster arguments that seem to impugn the clarity of
-34-
such plan language does not mean that the document's language is
insufficiently clear for ERISA purposes. See Foisy v. Royal
Maccabees Life Ins. Co., 356 F.3d 141, 147 (1st Cir. 2004)
(explaining, in the context of contract interpretation, that "a
mere controversy over interpretation is not, by itself, enough to
create ambiguity."). The plan at issue here conveys with the
clarity required by ERISA that program documents related to
unincorporated benefit plans (like plaintiffs' health plans) – and
those plans as well – were superseded and replaced by the BIBP.
For all of these reasons, we affirm the district court's ruling
that Bowater's 2003 plan consolidation effectively terminated its
responsibility for plaintiffs' health benefits.14
III.
In addition to the ERISA claim applicable to all class
members, retirees who were employed on an hourly basis under union
contracts also seek lifetime health benefits that they claim were
promised to them under the terms of their CBAs with Bowater. Our
conclusion that the BIBP ended Bowater's responsibility for the
benefit plans on January 1, 2003 under ERISA has no effect on these
14
Plaintiffs also seek reversal of two district court rulings
that they contend erroneously reduced the number of retirees
permitted to recover for lost benefits on the ERISA claim from 653
to 400 retirees. However, because the parties entered into a
stipulation before the district court specifying the amount of
damages to be awarded if we affirmed the district court's
determination that Bowater's responsibility under the ERISA plans
ended on January 1, 2003, that issue does not arise here.
-35-
claims, which arise under the LMRA. We consider each subclass's
claims in turn. As this issue requires us to interpret a labor
contract under the LMRA, our review is de novo, Bath Marine
Draftsmen's Ass'n v. NLRB, 475 F.3d 14, 27 (1st Cir. 2007), and it
is governed by substantive federal law, Textile Workers Union v.
Lincoln Mills, 353 U.S. 448, 456 (1957).
A. Pre-1999 CBAs
A provision in each of the pre-1999 CBAs states that
health and welfare benefits will be provided "[d]uring the term of
this labor agreement." This provision applies equally to active
employees during the term of the CBA and to employees who retire
during the term of the CBA.15 Despite this clear durational
language, plaintiffs contend that all parties understood these CBAs
to provide lifetime health benefits to GNP's employees. Plaintiffs
argue that Bowater's statements and actions support this shared
understanding and create a latent ambiguity that requires us to
look beyond the clear language of the contracts to construe the
CBAs. Plaintiffs remind us that, because we are reviewing the
district court's grant of summary judgment, we must reverse if we
find that plaintiffs have established a genuine issue of material
15
A retired worker's labor rights are governed by the CBA
under which she retired and the terms of any ERISA plans
incorporated therein. See Senior v. NSTAR Elec. & Gas Corp., 449
F.3d 206, 219-22 (1st Cir. 2006).
-36-
fact that a reasonable jury could resolve in their favor. See
Vélez-Rivera v. Agosto-Alicea, 437 F.3d 145, 150 (1st Cir. 2006).
Even under this standard, we agree with the district court that
plaintiffs have failed to identify any such ambiguity.
We have stated that "[a]n unambiguous contract must be
enforced according to its terms, under both the common law and
labor law." Senior v. NSTAR Elec. & Gas Corp., 449 F.3d 206, 219
(1st Cir. 2006). However, in the exceptional case, a latent
ambiguity in seemingly clear contract language may require us to
consider extrinsic evidence to determine the actual object of the
parties' agreement. See RCI Ne. Servs. Div. v. Boston Edison Co.,
822 F.2d 199, 202 (1st Cir. 1987). "An ambiguity is latent when
the language employed is clear and intelligible and suggests but a
single meaning, but some extrinsic fact or extraneous evidence
creates a necessity for interpretation or a choice among two or
more possible meanings." Moore v. Pa. Castle Energy Corp., 89 F.3d
791, 796 (11th Cir. 1996). For example, a contract may refer to an
object by a name that denotes more than one actual thing or the
parties may use a term that, while signifying one thing in common
parlance, designates something particular within the industry's
jargon. See AM Int'l, Inc. v. Graphic Mgmt. Assocs., 44 F.3d 572,
575 (7th Cir. 1995) (giving examples of both scenarios). The
classic case of latent ambiguity is Raffles v. Wichelhaus, 2
Hurlstone & Coltman 906, 159 Eng. Rep. 375 (Ex. 1864), in which a
-37-
contract respecting a shipment of cotton to arrive from a certain
port on the ship "Peerless" was found ambiguous when the parties
discovered that two ships named "Peerless" had departed from the
same port. We review de novo whether a contract is ambiguous.
Senior, 449 F.3d at 219.
Mindful that a court may not deprive the contracting
parties of the protection they sought when they embodied their
agreement in writing, courts have generally allowed only
"objective" evidence to establish such a latent ambiguity. That
includes "evidence of ambiguity that can be supplied by
disinterested third parties," AM Int'l, 44 F.3d at 575, and
evidence that is uncontested between the parties, Rossetto v. Pabst
Brewing Co., 217 F.3d 539, 546 (7th Cir. 2000); it excludes "the
self-serving testimony of one party to the contract as to what the
contract . . . 'really' means," id.
Here, plaintiffs seek to introduce extrinsic evidence of
Bowater's statements and actions indicating that both parties
understood that the CBAs provided lifetime benefits. In doing so,
plaintiffs do not provide a plausible alternative meaning for the
durational language in the contracts. Instead, they argue that the
language does not mean what it says.16 This argument goes well
16
Plaintiffs acknowledge in their brief that: "A stranger to
the parties, reading only the bare text of the provisions in the
pre-1999 [CBAs] requiring the company to 'pay the full cost of
comprehensive Medical Expense Coverage for retirees' and to do so
-38-
beyond the parameters of latent ambiguity jurisprudence, which
recognizes that "there must be either contractual language on which
to hang the label of ambiguous or some yawning void . . . that
cries out for an implied term. Extrinsic evidence should not be
used to add terms to a contract that is plausibly complete without
them." Bidlack v. Wheelabrator Corp., 993 F.2d 603, 608 (7th Cir.
1993) (en banc); see also AM Int'l, 44 F.3d at 575 ("[T]he
ambiguity is in the reference, that is, the connection between the
word and the object that it denotes."). Plaintiffs reject this
text-bound approach as "unduly narrow," arguing that Rossetto
teaches that a contract is latently ambiguous not only in the
multiple-reference cases like Raffles, but whenever "anyone
knowledgeable about the real-world context of the agreement would
realize that it might not mean what it says." Rossetto, 217 F.3d
at 547.
We do not agree that Rossetto authorizes such a broad
approach.17 In that case, the Seventh Circuit found a latent
ambiguity in a labor contract, due to its silence on the duration
of the employer's commitment to provide welfare benefits. Id.
While the lack of a durational term would ordinarily carry no
'[d]uring the term of this labor agreement,' would understand the
provisions as stating, by implication, that the requirement runs
'only during the term of this agreement.'"
17
Because our court has rarely addressed latent ambiguity in
contracts, this discussion relies heavily on cases from the Seventh
Circuit, which has the most developed case law on the subject.
-39-
special meaning, the Seventh Circuit found that an ambiguity arose
when the contract was compared to a labor contract between the same
employer and a second union that was identical to the first labor
contract except that it included a clear limitation on the duration
of the employer's obligation. Id. at 545-46. Thus Rossetto seems
to fall into the category of cases in which extrinsic evidence is
allowed to fill a "yawning void . . . that cries out for an implied
term." It provides no support for using extrinsic evidence to
ignore a clear term stated in the contract. Indeed, the Seventh
Circuit refused to consider broad-ranging extrinsic evidence to
establish a latent ambiguity in a labor contract with clear
durational language in the subsequent case of Cherry v. Auburn
Gear, Inc., 441 F.3d 476, 484-85 (7th Cir. 2006). Focusing on the
language of the contract, the court explained that: (1) "[i]solated
comments by company officials . . . 'do not allow us to look beyond
the written contracts agreed to by the parties,'" id. at 485; (2)
statements in letters sent to employees "signifie[d] nothing
concerning the meaning of the contract itself," id.; and (3)
statements made by the employer during an arbitration action "are
limited by the clear language of the contract, in which 'lifetime
benefits' are only operable so long as they are provided for in the
current [CBA]," id. at 486.
Indeed, the Seventh Circuit rejected a similar argument
that a clear durational term was latently ambiguous where
-40-
plaintiffs could provide no plausible alternative meaning for the
phrase:
[Plaintiff] strives mightily to persuade us
that the phrase "for the term of this
Agreement" is one of those contractual terms
that may seem clear on its face but in reality
is ambiguous, rather like the ship Peerless or
the use of specialized trade jargon.
Examination of [Defendant's] own negotiators'
notes would prove, according to [Plaintiff],
that neither party intended to destroy the
retirees' right to lifetime medical benefits
when they introduced that phrase for the first
time into the 1984 contract. Instead, it had a
private, specialized meaning. But
[Plaintiff's] argument breaks down at that
point. Neither in his brief, in the
[Department of Labor's amicus] brief, or at
oral argument, was anyone able clearly and
succinctly to tell us definitively what that
specialized meaning might be.
Pabst Brewing Co. v. Corrao, 161 F.3d 434, 441 (7th Cir. 1998).
See also Am. Fed'n of Grain Millers v. Int'l Multifoods Corp., 116
F.3d 976, 981 (2d Cir. 1997) (refusing to consider extrinsic
evidence purporting to show that the employer had intended to
provide lifetime medical benefits where the CBA contained clear
durational language); District 29, United Mine Workers v. Royal
Coal Co., 768 F.2d 588, 591-92 (4th Cir. 1985) (same).
Accordingly, we find no ambiguity in this contract. In the face of
clear durational language, we therefore conclude that plaintiffs
have raised no genuine issue of material fact requiring us to
overturn the district court's grant of summary judgment on the LMRA
claim related to the pre-1999 CBAs.
-41-
B. The 1999 CBAs
The 1999 CBAs were negotiated in anticipation of GNP's
sale to Inexcon. Accordingly, they provided that, "[u]pon the date
of sale, all Bowater contractual obligations except those referred
to in the Inexcon offer under 'pensions' shall cease." In the
section on pensions, the agreements stated: "Bowater will retain
liability for retirement benefits earned and accrued through the
day of sale." They also provided that, unless modified by the 1999
agreements themselves, the terms of the 1995 CBAs would "remain in
full force and effect." Thus, since we have already determined
that the pre-1999 CBAs provided no lifetime health benefits,
plaintiffs must show that the 1999 CBA provided such benefits for
the first time.
Plaintiffs rely on two sources in arguing that the 1999
CBAs entitle workers to lifetime health coverage from Bowater.
They begin with language from the section of the CBAs discussing
Bowater's responsibility for pension benefits, arguing that a fact
finder could reasonably determine that "retirement benefits" in the
sentence "Bowater will retain the liability for retirement benefits
earned and accrued through the day of sale" encompasses both
pensions and health benefits. Given that the context of that
sentence clearly indicates that the retirement benefits discussed
relate only to pensions and that health benefits are discussed in
a separate section of the agreement, we do not agree.
-42-
Plaintiffs also argue that a triable issue of fact is
raised by an August 1999 side-letter agreement from Lambert Bedard,
President of Inexcon, allowing retirees to "preserve their lifetime
company-paid retiree health care." This agreement was drafted in
response to questions raised at an August 1999 meeting between
Inexcon executives and the unions regarding retirement benefits for
employees eligible to retire on the date of sale – August 17, 1999
– who actually retired between August 17, 1999 and October 1, 1999.
The side letter agreement extended particular retirement benefits
to this narrow class of individuals, specifying that "[t]hey will
also be included with current Bowater retirees, and those who are
eligible on the date of closing, to preserve their lifetime
company-paid retiree health care."
The parties dispute whether this document is part of the
CBAs; however, we treat the document as part of the CBAs in
reviewing a grant of summary judgment opposed by plaintiffs.18 The
language of this side agreement is the only possible modification
of the 1995 CBAs that could give rise to an entitlement to lifetime
health coverage. However, plaintiffs do not argue that this
language modified the 1995 CBAs, providing lifetime coverage to
retirees for the first time. Indeed, they conceded below that "the
18
Plaintiffs note that Bowater itself included the page that
contained the language "preserv[ing] . . . lifetime company-paid
retiree health care" for retirees as part of the 1999 CBAs it
submitted to the district court as part of its motion to dismiss.
-43-
[1999 CBA] does not purport to make any 'change' to the
understanding as to the duration of retiree health benefits.
Rather its purpose was to confirm an existing understanding, as its
use of the word 'preserve' makes clear." However, as we have
already determined, the pre-1999 CBAs contained no lifetime health
benefit for retirees that could be "preserved" in the 1999 CBAs.
Plaintiffs thus fail to provide any language in the 1999 CBAs
through which Bowater modified the terms of the 1995 CBAs to
provide lifetime health coverage to GNP's retirees.
IV.
For the reasons elaborated above, we affirm the district
court's grant of summary judgment to Bowater on the LMRA claims.
We find the language of the CBAs to be clear, and plaintiffs have
failed to establish a latent ambiguity that requires consideration
of extrinsic evidence. We also affirm the district court's partial
grant of summary judgment to plaintiffs on the ERISA claim because
we find that Bowater did not terminate its responsibility for ERISA
plans according to the procedural requirements of the statute when
it sold GNP to Inexcon in 1999. Finally, we affirm the district
court's partial grant of summary judgment to Bowater on the ERISA
claim because we agree with Bowater that its 2003 plan
consolidation effectively ended its financial responsibility for
plaintiffs' health benefits.
Affirmed.
-44-
Coffin v. Bowater Inc.
Court: Court of Appeals for the First Circuit
Date filed: 2007-09-07
Citations: 501 F.3d 80
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