United Mine Workers v. Brushy Creek Coal Co ( 2007 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-2324
UNITED MINE WORKERS, et al.,
Plaintiffs-Appellants,
v.
BRUSHY CREEK COAL COMPANY, et al.,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Southern District of Illinois.
No. 04-cv-4249-JPG—J. Phil Gilbert, Judge.
____________
ARGUED SEPTEMBER 28, 2007—DECIDED OCTOBER 18, 2007
____________
Before POSNER, FLAUM, and SYKES, Circuit Judges.
POSNER, Circuit Judge. The United Mine Workers union,
along with 63 retired coal mine workers, appeals from the
grant of summary judgment to the Brushy Creek Coal
Company, the workers’ former employer. The plaintiffs
argue that they are entitled by the Taft-Hartley Act and
ERISA to a trial to try to prove that a health plan negoti-
ated by the parties in 1998 guaranteed the company’s
workers lifetime health benefits that the company could
not unilaterally reduce even after the collective bargain-
ing agreement that had created the plan expired. If the
2 No. 06-2324
district judge was correct that the plan unambiguously
does not grant the plaintiffs any entitlements after the
agreement expired, the union is not entitled to a trial. E.g.,
Rossetto v. Pabst Brewing Co., 217 F.3d 539, 547 (7th Cir.
2000); Chiles v. Ceridian Corp., 95 F.3d 1505, 1511 (10th Cir.
1996).
The defendant overargues its case by contending that
for the plaintiffs to prevail the plan must “clearly” demon-
strate an entitlement to lifetime benefits. A plan that does
not specify the duration of benefits is presumed not to
grant benefits beyond the end of the agreement creating
the plan. Vallone v. CNA Financial Corp., 375 F.3d 623, 632
(7th Cir. 2004); Rossetto v. Pabst Brewing Co., supra, 217 F.3d
at 543; see also Gable v. Sweetheart Cup Co., 35 F.3d 851, 855
(4th Cir. 1994). But in this case benefits “for life” were
promised and the question is whether the promise was
withdrawn elsewhere in the documentation constituting
the parties’ overall agreement. As to that question no
presumption is warranted. Bland v. Fiatallis North America,
Inc., 401 F.3d 779, 784 (7th Cir. 2005).
Brushy bought a coal mine in Galena, Illinois, in 1991. At
first it adopted the nationwide collective bargaining
agreement with the UMW to which the company that sold
the mine to Brushy had been a party. Later it negotiated
two successive individual collective bargaining agree-
ments with the union. But in 1998, upon the expiration
of the second agreement, Brushy and the union executed
a “memorandum of understanding” that brought Brushy
back under the nationwide collective bargaining agree-
ment for the next three years. The memorandum also
created the ERISA welfare plan that promised the mine’s
employees the health benefits at issue in this case. At the
end of 1999, however, Brushy closed the mine, and after
the three years during which it had agreed to be bound by
No. 06-2324 3
the nationwide collective bargaining agreement were up
in 2001 it made changes in the health plan to which the
union objected. This suit challenging the changes is on
behalf of employees who retired while Brushy was bound
by the nationwide agreement. So there are three key
documents to interpret: the nationwide collective bargain-
ing agreement, the memorandum of understanding, and
the health plan.
The collective bargaining agreement entitles employees
who retire during its term, such as the 63 individual
plaintiffs, to health benefits “for life.” The memorandum of
understanding creates the health plan that lists the bene-
fits to which the employees are entitled for life. But the
plan, in turn, expressly entitles Brushy to terminate it or
alter its terms, “subject to the Collective Bargaining
Agreement,” that is, the nationwide collective bargaining
agreement. That would make a quick end to the plaintiffs’
claim were it not for a provision of that agreement which
states (as it has since 1993) that “the benefits and benefit
levels provided by an Employer under its Employer
plan are established for the term of this Agreement only,
and may be jointly amended or modified in any manner
at any time after the expiration or termination of this
agreement.”
The first clause of the provision, ending in the word
“only,” reinforces the right of termination or alteration that
the health plan confers on Brushy; it makes the benefits
terminate when the agreement expires. But the union
argues that the second clause, and in particular the
words “after the expiration or termination of this agree-
ment,” imply that the benefits persist beyond the end date
of the collective bargaining agreement, that is, beyond
2001. For if the benefits did not outlive the agreement, why
4 No. 06-2324
would the parties have to agree to modify or amend
them after that date? There would be nothing to modify or
amend.
As the district judge noted, however, another provision
of the nationwide collective bargaining agreement states
that “the specific provisions of the plans will govern in
the event of any inconsistencies between the general
description and the plans.” The health plan is one of the
“plans” to which this provision refers and the “jointly
amended” clause quoted above on which the plaintiffs
found their claim appears in the part of the nationwide
agreement captioned “general description of the health and
retirement benefits.” Were there no “jointly amended”
clause there would be no inconsistency between the
termination provision in the health plan and the nation-
wide agreement; and since it is only in the general descrip-
tion that the clause appears, the clause must be disre-
garded to eliminate the inconsistency.
This point can be grasped more clearly by supposing
that the benefits provision in the collective bargaining
agreement stated flatly that “retirees are entitled to benefits
for their lifetime even if they outlive this and any successor
collective bargaining agreement.” The provision would
then be clear. But it would be inconsistent with the pro-
vision in the health plan itself entitling the coal company
to terminate or alter the plan at any time; and so, being
at once inconsistent with the plan and contained in the
general-description part of the collective bargaining
agreement, it would have no force. The fact that the
provision does not clearly confer lifetime benefits, but is
ambiguous, cannot bolster the union’s position. And it
makes sense that the detailed provisions of the health
plan would prevail over inconsistent language in a col-
No. 06-2324 5
lective bargaining agreement that deals with a variety of
other subjects, such as notice or change of ownership,
that might pertain to Brushy’s right to change the plan.
In short, the “subject to” clause in the health plan takes
us to the collective bargaining agreement, where we find
that a conflict between the general description in the
agreement and the health plan is to be resolved in favor of
the plan, and so we go back to the plan and find that the
plan administrator is explicitly authorized to terminate,
modify, etc., the plan.
This interpretation might seem to make the grant of
lifetime benefits in the collective bargaining agreement and
the health plan illusory. But that is not true. Vallone v. CNA
Financial Corp., supra, 375 F.3d at 633; UAW v. Rockford
Powertrain, Inc., 350 F.3d 698, 703-04 (7th Cir. 2003);
Abbruscato v. Empire Blue Cross & Blue Shield, 274 F.3d 90,
99-100 (2d Cir. 2001); Sprague v. General Motors Corp., 133
F.3d 388, 401 (6th Cir. 1998). As long as the health plan is
in effect, the retirees are entitled to benefits until they
die. Indeed, as far as we know, they are still receiving
benefits, albeit at a reduced level. If the plan did not
create benefits “for life,” it would be unclear when the
benefits ended. Terminable benefits for life are benefits that
go on regardless of the age of the worker or how long ago
he retired, but that cease if the plan conferring those
benefits ends.
That is not quite the end of the case, because a con-
tract that is clear on its face can be shown by objective
evidence to be ambiguous (to contain, in the language of
contract law, a “latent” as distinct from a “patent” ambigu-
ity), e.g., ConFold Pacific, Inc. v. Polaris Industries, Inc., 433
F.3d 952, 955-56 (7th Cir. 2006); Connect Communications
Corp. v. Southwestern Bell Telephone, L.P., 467 F.3d 703, 709-
6 No. 06-2324
10 (8th Cir. 2006), as in the much-cited case of Raffles v.
Wichelhaus, 2 H. & C. 906, 159 Eng. Rep. 375 (Ex. 1864). The
defendant agreed to ship cotton to the plaintiff on the
ship Peerless. But there were two ships of that name and
it was unclear to which one the contract referred. The
contract was clear on its face; it was the fact that there
were more than one ship of the same name, a fact not
apparent from reading the contract yet established by
objective evidence rather than by the self-serving testimony
of an interested party, that made the contract ambiguous.
And once a contract is shown to be ambiguous, evidence
outside the language of the contract itself becomes ad-
missible to disambiguate the language. Rossetto v. Pabst
Brewing Co., supra, 217 F.3d at 546-47; Charter Oil Co. v.
American Employers’ Ins. Co., 69 F.3d 1160, 1168-69 (D.C.
Cir. 1995).
The plaintiff’s 50-page brief devotes only three and a
half pages to trying to establish the existence of a latent
ambiguity. The evidence consists of cash offers that
Brushy made to its employees after the mine closed in
1999 but before the company modified the health plan. The
cash was offered “in lieu of the lifetime benefits provided
pursuant to the collective bargaining agreement.” (Some of
the offers use a different but equivalent wording.) The
timing is critical. When the offers were made, the plain-
tiffs were entitled to lifetime benefits, and at the level
fixed in the health plan, because the company had not
yet exercised its right to modify the plan. Having closed the
mine, the company was unlikely to want to continue
providing health benefits at the same level as when the
mine was operating and generating revenue. But it knew
that if it terminated or modified the health plan, it
would be inviting a lawsuit—this lawsuit. Naturally it
wanted to settle with as many of the employees as possible
No. 06-2324 7
before a lawsuit was brought, and perhaps by settling
avoid being sued at all. The making of the offers was an
acknowledgment of legal jeopardy but not an acknowl-
edgment that the benefits contract formed by the nation-
wide collective bargaining agreement, the memorandum
of understanding, and the health plan was ambiguous,
for what is more common than a breach of contract suit
that ends in a ruling that the contract unambiguously
demonstrates the absence of a breach?
The offers were not, so far as appears, offers in settle-
ment of claims, within the meaning of Rule 408 of the
Federal Rules of Evidence. If they had been, they would
be inadmissible in evidence in this case, as the union
seeks to use them as a confession of liability. Alexander v.
City of Evansville, 120 F.3d 723, 728-29 (7th Cir. 1997). But
the spirit of the rule would be affronted by using offers
intended to head off litigation as evidence that the offerees
had a triable claim against the offeror, which is what the
plaintiffs are trying to do. In any event, although conduct
in the performance stage of a contract can cast light on the
parties’ understanding of what the contract required, the
cash offers by the coal company were not even arguably
required by the contract. There is nothing to suggest
that they were anything more than an attempt to head off
a dispute.
AFFIRMED.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—10-18-07