Stewart v. KHD Deutz of America Corp.

United States Court of Appeals,
Eleventh Circuit.
No. 94-8547.
Ronald STEWART, David Kirchoff, Darrell L. Howard, Louis
Kubitschek, John Tuckness, Ronald Keltner, on behalf of themselves
and other persons similarly situated, Plaintiffs-Appellants,
v.
KHD DEUTZ OF AMERICA CORPORATION, Defendant-Appellee.
Feb. 28, 1996.
Appeal from the United States District Court for the Northern
District of Georgia. (No. 1:91-CV-1534), Marvin H. Shoob, Judge.
Before HATCHETT, DUBINA and BLACK, Circuit Judges.
HATCHETT, Circuit Judge:
As a matter of first impression in this circuit, the court
holds that a jury trial is available to plaintiffs in a breach of
contract lawsuit brought under section 301 of the Labor Management
Relations Act (LMRA), 29 U.S.C. § 185(a), and when a hybrid LMRA
and Employee Retirement Income Security Act (ERISA) (29 U.S.C. §
1104(a), 1132(a)(1)(B), and § 1132(a)(3)), lawsuit is brought.
FACTS
In May 1985, appellee, KHD Deutz of America Corporation (KHD
Deutz), purchased a combine manufacturing plant in Independence,
Missouri, from Allis-Chalmers Manufacturing Company (Allis-
Chalmers). KHD Deutz, through its wholly-owned subsidiary Deutz-
Allis Corporation (Deutz-Allis), assumed the 1984 collective
bargaining agreement (CBA) between Allis-Chalmers and Local 1958 of
the United Steelworkers of America (Local 1958). In 1986, KHD
Deutz and Local 1958 negotiated a new CBA almost identical to the
1984 CBA. Both CBAs provided health benefits to employees retiring
on or after May 25, 1985.
In June 1990, KHD Deutz sold Deutz-Allis and its Independence
plant. Pursuant to the terms of the sales agreement, KHD Deutz
retained responsibility for all health benefit programs for
employees who retired between May 25, 1985, and December 31, 1989.
On June 1, 1991, KHD Deutz unilaterally modified its retirees'
health benefit program to provide for monthly premiums, increased
deductibles, and reduced maximum lifetime benefits.
PROCEDURAL HISTORY
On July 3, 1991, retired employees Ronald Stewart, David
Kirchoff, Darrell L. Howard, Lewis Kubitschek, John Tuckness, and
Ronald Keltner (the retirees) brought a class action lawsuit in the
Northern District of Georgia alleging that KHD Deutz breached the
1984 and 1986 CBAs in failing to provide the health benefit
coverage specified in the CBAs for the duration of their
retirement. In their complaint, the retirees presented a legal
claim for breach of contract and sought legal and equitable relief
under section 301 of the Labor Management Relations Act (LMRA), 29
U.S.C. § 185(a), and sections 404(a), 502(a)(1)(B), and 502(a)(3)
of the Employee Retirement Income Security Act (ERISA), 29 U.S.C.
§§ 1104(a), 1132(a)(1)(B), and 1132(a)(3). In the alternative, the
retirees alleged that KHD Deutz should be equitably estopped from
reducing their benefits because the company intentionally induced,
directed, and caused the fiduciary to engage in breaches of
fiduciary duty.
On July 5, 1991, the retirees filed a motion for a preliminary
injunction to prevent KHD Deutz from modifying their health
benefits. On December 16, 1991, the district court denied the
preliminary injunction finding that the language of the CBAs
unambiguously established KHD Deutz's right to modify the health
benefits, and thus precluded the court from considering extrinsic
evidence on the issue. The retirees appealed the denial of their
preliminary injunction motion to this court. On January 5, 1993,
this court reversed the district court and directed it to consider
the extrinsic evidence the parties offered. Stewart v. KHD Deutz
of America Corp., 980 F.2d 698, 704 (11th Cir.1993). On remand,
the retirees renewed their motion for preliminary injunction, and
KHD Deutz filed a motion to strike the jury demand.
On January 13, 1994, the district court denied the retirees'
renewed motion for preliminary injunction and granted KHD Deutz's
motion to strike the jury demand. In striking the jury demand, the
district court held that the retirees could not recover
extracontractual damages under section 301. On March 7, 1994,
after the retirees filed a motion to certify the jury trial issue
for appeal, the court granted the retirees' motion and certified
the jury issue for interlocutory review. The district court
certified the issue pursuant to 28 U.S.C. § 1292(b) as follows:
whether plaintiffs are entitled to a jury trial of their
breach of contract claims under section 301 of the Labor
Management Relations Act where those claims are joined with
claims under the Employment Retirement Income Security Act of
1974 which are not triable to a jury in an action to restore
retiree health benefits and recover damages for breach of
contract.1
1
Initially, this appeal was consolidated with the appeal
from the district court's denial of the retirees' renewed motion
for a preliminary injunction. The retirees, however, voluntarily
dismissed their appeal on the denial of the renewed motion for
preliminary injunction; therefore, that issue is not presently
CONTENTIONS
The retirees contend that the district court erred in striking
their demand for a jury trial on their breach of contract claim
under section 301 of the LMRA because that claim and the remedy
sought are both legal in nature; thus, the Seventh Amendment
entitles them to a jury trial. The retirees also contend that
their right to a jury trial on the section 301 claim remains intact
even though it is joined with ERISA claims that do not ordinarily
afford the right to a jury trial.
In response, KHD Deutz contends that the district court
properly granted its motion to strike the retirees' demand for a
jury trial because the remedies sought under section 301 of the
LMRA and section 502 of ERISA are equitable in nature; therefore,
no Seventh Amendment right to a jury trial exists on the retirees'
section 301 claim. In the alternative, KHD Deutz contends that
even if the monetary relief sought under section 301 is construed
as legal in nature, the remedy is properly characterized as
incidental to, or intertwined with, ERISA, and therefore does not
entitle the retirees to a jury trial.2
ISSUES
This interlocutory appeal presents the following issues: (1)
whether the retirees are entitled to a jury trial on their breach
of collective bargaining claim under section 301 of the LMRA; and
before this court.
2
KHD Deutz also argues that this court should dismiss this
appeal because it was initially granted in connection with the
retirees' appeal of the denial of their renewed motion for
preliminary injunction. We reject this contention.
(2) if so, whether the retirees retain their Seventh Amendment
right to a jury trial in a hybrid LMRA/ERISA action where the
amount of monetary relief sought under LMRA and ERISA is identical.
DISCUSSION
A. Right to jury trial under section 301 of LMRA
This court reviews a district court's grant of a motion to
strike a jury demand in plenary fashion. Waldrop v. Southern Co.
Services, Inc., 24 F.3d 152, 155 (11th Cir.1994). Because this
court has not specifically addressed whether the Seventh Amendment
provides a right to a jury trial in a section 301 LMRA action, we
first address this issue.
In determining whether the retirees are entitled to a jury
trial on the section 301 claim, we first interpret the statute.
Waldrop, 24 F.3d at 155. Section 301 of the LMRA provides for
lawsuits by and against labor unions, stating in pertinent part:
Suits for violation of contracts between an employer and a
labor organization representing employees in an industry
affecting commerce ... or between any such labor organization,
may be brought in any district court of the United States
having jurisdiction of the parties, without respect to the
amount in controversy or without regard to the citizenship of
the parties.
29 U.S.C.A. § 185(a) (West 1978). Because section 301 does not
provide a statutory right to a jury trial, we must now determine
whether a jury trial is required under the Seventh Amendment.
Waldrop, 24 F.3d at 155.
The Seventh Amendment secures the right to a jury trial "[i]n
suits at common law[ ] where the value in controversy shall exceed
twenty dollars." Waldrop, 24 F.3d at 156. Although at the time of
its adoption the Seventh Amendment only preserved the right of jury
trial for common law actions existing in 1791, courts have
interpreted the amendment to extend to "all suits where legal
rights are involved whether at common law or arising under federal
legislation." Waldrop, 24 F.3d at 156; see also Curtis v.
Loether, 415 U.S. 189, 193, 94 S.Ct. 1005, 1007, 39 L.Ed.2d 260(1974). We employ a two-part inquiry to determine the availability
of a jury trial under the Seventh Amendment when a federal statute
does not explicitly provide for a jury trial. Chauffeurs,
Teamsters & Helpers Local No. 391 v. Terry, 494 U.S. 558, 565, 110
S.Ct. 1339, 1344, 108 L.Ed.2d 519 (1990). First, we compare the
nature of the issues to be resolved to "[eighteenth century]
actions brought in the courts of England prior to the merger of the
courts of law and equity." Tull v. United States, 481 U.S. 412,
417-18, 107 S.Ct. 1831, 1835-36, 95 L.Ed.2d 365 (1987). Second, we
assess whether the remedy sought is legal or equitable in nature.
Tull, 481 U.S. at 418, 107 S.Ct. at 1836. The nature of the remedy
sought is the more important inquiry in our analysis. Terry, 494
U.S. at 565, 110 S.Ct. at 1344.
An action for breach of a CBA did not exist under common law.
Terry, 494 U.S. at 565-66, 110 S.Ct. at 1344-45. Therefore, to
satisfy the first inquiry we look for an analogous cause of action
that existed in eighteenth century England. The retirees contend
that their action for breach of the CBAs most resembles a breach of
contract action. In support of their characterization, the
retirees note that section 301 explicitly provides for "suits for
violation of contracts." 29 U.S.C. § 185(a). KHD Deutz argues
that this cause of action more closely mirrors a trust
beneficiary's equitable action because ERISA, like a trust, places
fiduciary duties on employers in the implementation of
ERISA-regulated plans.
We agree with the retirees' characterization of this action.
The dispositive issue is whether KHD Deutz breached the CBAs. KHD
Duetz urges this court to analyze the issues to be resolved under
the retirees' 301 claim in light of retirees' ERISA claims. The
retirees' section 301 claim, however, is actionable independent of
ERISA. See Ross v. Bernhard, 396 U.S. 531, 537, 90 S.Ct. 733, 738,
24 L.Ed.2d 729 (1970) (the Seventh Amendment question depends on
the nature of the issue to be tried rather than the character of
the overall action). Thus, for purposes of Seventh Amendment
analysis, ERISA is irrelevant. KHD Deutz also argues that the
retirees' characterization of the issues in this LMRA/ERISA action
constitutes conclusory labeling. Although the Supreme Court has
stated that for Seventh Amendment analysis the nature of the remedy
is more dispositive than the nature of the issues to be tried, the
first inquiry is nonetheless essential because the Seventh
Amendment only extends to cases in which legal rights are at
stake.3 See Grandfinancier v. Nordberg, 492 U.S. 33, 44, 109 S.Ct.
2782, 2791, 106 L.Ed.2d 26 (1989); Blake v. Unionmutual Stock Life
Ins. Co., 906 F.2d 1525, 1526 (11th Cir.1990). We hold that the
3
The Seventh Amendment right to a jury, however, may also
attach to a cause of action that encompasses both legal and
equitable issues. See Terry, 494 U.S. 558, 110 S.Ct. 1339, 108
L.Ed.2d 519 (holding that an action for breach of fair
representation under section 301 of LMRA was legal in nature
despite the fact that the issue when viewed in isolation, was
analogous to a claim against the trustee for breach of fiduciary
duty—an equitable action).
retirees' breach of CBA claim is most analogous to a claim of
breach of contract—a legal cause of action. See Terry, 494 U.S. at
570, 110 S.Ct. at 1347 (holding that a breach of a collective
bargaining agreement is most analogous to a "breach of contract
claim"). Thus, we conclude that the issues to be resolved under
the section 301 claim, when viewed in isolation of the ERISA
claims, are legal in nature.
The second inquiry requires this court to examine whether the
remedy sought is legal or equitable in nature. The only remedy the
retirees seek under section 301 of LMRA is compensatory damages
representing out-of-pocket expenditures incurred as a result of the
decreased health benefits. 4 An action for money damages was "the
traditional form of relief offered in courts of law." Curtis v.
Loether, 415 U.S. 189, 196, 94 S.Ct. 1005, 1009, 39 L.Ed.2d 260(1994); Terry, 494 U.S. at 570, 110 S.Ct. at 1347. Monetary
relief, however, is only presumed to be a legal remedy. A monetary
award may be characterized as an equitable remedy if it is found to
be "incidental to or intertwined with injunctive relief." Terry,
494 U.S. at 571, 110 S.Ct. at 1348.
KHD Deutz argues that the monetary relief the retirees seek
under section 301 is equitable in nature because the 301 action
involves an ERISA-regulated plan.5 In support of its proposition,
4
Retirees concede that the same remedy is sought under both
ERISA and LMRA; however, they argue that for purposes of Seventh
Amendment analysis, the remedy is characterized differently under
LMRA.
5
The argument KHD Deutz makes here is similar to an argument
the Supreme Court rejected in Terry. In Terry, the defendant
argued that the monetary damages plaintiffs sought were equitable
because the court characterized back pay awarded under Title VII
KHD Deutz cites Blake v. Unionmutual Stock Life Ins. Co., 906 F.2d
1525 (11th Cir.1990). In Blake this court held that monetary
relief sought under section 502 of ERISA was equitable in nature;
therefore, no Seventh Amendment right to a jury trial existed. The
plaintiffs in Blake sought monetary damages under ERISA for medical
expenses incurred and claimed that they were entitled to a jury
trial. The plaintiffs in Blake argued that the monetary damages
under ERISA was more analogous to a monetary award in a breach of
contract action than injunctive relief. The court in Blake
rejected plaintiffs' argument and held that the monetary relief
sought was equitable. In reaching its holding the court stated:
Although the plaintiffs assert that they are claiming money
damages, in effect they are claiming the benefits they are
allegedly entitled to under the plan. Although here the
medical treatment has been completed so that a money judgment
would satisfy their demands, if the claimants were still under
treatment, only an order for continuing benefits would be
sufficient.
Blake, 906 F.2d at 1526. Accordingly, the court in Blake affirmed
the district court's decision striking plaintiffs' jury demand.
In this case, KHD Deutz's reliance on Blake is misplaced.
For purposes of Seventh Amendment analysis, ERISA has been
interpreted as an equitable statute. See Chilton v. Savannah Foods
& Industries, Inc., 814 F.2d 620, 623 (11th Cir.1987); Blake, 906
of the Civil Rights Act of 1964 as equitable. Terry, 494 U.S. at
571, 110 S.Ct. at 1348. After noting that Congress specifically
characterized back pay under Title VII as a form of equitable
relief and finding no such congressional declaration under the
National Labor Relations Act (NLRA), the Court refused to find a
parallel between Title VII back pay—an equitable remedy—and back
pay sought in a section 301 LMRA action. Terry, 494 U.S. at 573,
110 S.Ct. at 1349. Similarly, this court declines to find a
parallel connection between money damages sought under ERISA, an
equitable statute, and monetary damages sought in a cause of
action under section 301 of LMRA that is legal in nature.
F.2d at 1526. Accordingly, no Seventh Amendment right to a jury
trial exists in actions brought pursuant to ERISA. Chilton, 814
F.2d at 623. Unlike ERISA, this court has not interpreted section
301 to be equitable in nature. United Steelworkers of America v.
Connors Steel Co., 855 F.2d 1499 (11th Cir.1988). Therefore, the
classification of monetary damages under ERISA is not
determinative. Because we find no reason to depart from the
general rule that monetary relief sought pursuant to section 301 of
the LMRA is legal in nature, we conclude that the retirees have a
Seventh Amendment right to a jury trial on their section 301 claim.
B. Right to jury trial under hybrid LMRA/ERISA action
The central issue in this case is whether the joinder of a
section 301 LMRA claim with ERISA claims deprives the retirees of
their constitutional right to a jury trial. The Supreme Court has
repeatedly stressed that the Seventh Amendment right to a jury
trial is not abridged when equitable and legal claims are joined in
the same action. See Ross, 396 U.S. at 537-38, 90 S.Ct. at 737-38
("where equitable and legal claims are joined in the same action,
there is a right to a jury trial on legal claims which must not be
infringed either by trying the legal issues as incidental to the
equitable ones or by a court trial of a common issue existing
between the claims"); Tull, 481 U.S. at 425, 107 S.Ct. at 1839(same); Loether, 415 U.S. at 196 n. 11, 94 S.Ct. at 1009 n. 11
(same).
Although the issue of whether plaintiffs retain their Seventh
Amendment right to a jury trial in a hybrid LMRA/ERISA action is a
matter of first impression in this circuit, other courts have
considered the question and held the right to a jury trial exists
in such cases. Senn v. United Dominion Industries, Inc., 951 F.2d
806, 813-14 (7th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct.
2992, 125 L.Ed.2d 687 (1993); Local 836, United Automobile Workers
v. Echlin, Inc., 670 F.Supp. 697 (E.D.Mich.1987); International
Union, United Automobile Workers v. Park-Ohio Industries, 661
F.Supp. 1281 (N.D.Ohio 1987), aff'd in part, rev'd in part on other
grounds, 876 F.2d 894 (6th Cir.1989); Smith v. ABS Industries,
Inc., 653 F.Supp. 94 (N.D.Ohio 1986). For example, the Seventh
Circuit in Senn held that plaintiffs were entitled to a jury trial
in a hybrid LMRA/ERISA action. Senn, 951 F.2d 806. In Senn the
plaintiffs asserted a claim for breach of contract and sought
compensatory and injunctive relief pursuant to section 301 of the
LMRA and sections 404(a)(1), 502(a)(1)(B), and 502(a)(3) of ERISA.
In that case, the plaintiffs requested a jury trial on their
section 301 claim; the trial court granted plaintiffs' request,
and the defendant appealed. The court in Senn held that the
Seventh Amendment provided plaintiffs with the right to a jury
trial because plaintiffs instituted a legal claim for breach of
contract and sought legal relief in the form of compensatory
damages pursuant to section 301 in addition to their ERISA claims.
Senn, 951 F.2d at 813-14. Accordingly, the Senn court affirmed the
district court's decision denying defendant's motion to strike jury
demand.
In an attempt to distinguish Senn from this case, KHD Deutz
argues that the retirees seek extracontractual damages. This
argument is without merit. As previously noted, the monetary
relief the retirees seek under section 301 and ERISA is identical.
Moreover, if the retirees sought extracontractual damages under
section 301 of the LMRA in a LMRA/ERISA action, their 301 claim
would be barred. See Connors, 855 F.2d 1499 (holding that
extracontractual damages under section 301 of the LMRA is not
recoverable in a hybrid LMRA/ERISA action). 6 In the alternative,
KHD Deutz argues that the comprehensive scheme of ERISA warrants
the denial of the retirees' right to a jury trial on their section
301 claim in this action. We also reject this argument. First,
section 514(d) of ERISA explicitly saves federal causes of action
including section 301 of the LMRA.7 29 U.S.C. § 1144(d). Second,
permitting the retirees to exercise their constitutional right to
a jury trial is "consistent with the spirit of the Federal Rules of
Civil Procedure, which allow liberal joinder of legal and equitable
actions, and the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202
(1982 ed.), which preserves the right to jury trial to both
parties." Terry, 494 U.S. at 589, 110 S.Ct. at 1357 (Kennedy, J.,
dissenting). Finally, and more importantly, the Seventh Amendment
6
In Connors, plaintiff sought extracontractual compensatory
damages under both section 502 of ERISA and section 301 of LMRA.
After concluding that extracontractual damages were not available
under ERISA, the court in Connors held that extracontractual
damages were also not available under LMRA. Connors, 855 F.2d at
1509. The court reasoned that to allow extracontractual damages
under section 301 would frustrate ERISA. Connors, 855 F.2d at
1509. Because retirees do not seek damages above and beyond
damages provided for under ERISA, Connors does not control the
issue of whether a jury trial is permissible on a section 301
claim in a hybrid LMRA/ERISA action.
7
Section 514(d) of ERISA provides: "[n]othing in this
[statute] shall be construed to alter, amend, modify, invalidate,
impair, or supersede any law of the United States ... or any rule
or regulation issued under any such law." 29 U.S.C.A. § 1144(d)
(West 1985).
right to a jury trial should be abridged, if at all, "only under
the most imperative circumstances"; circumstances of which do not
exist in this case. See Dairy Queen Inc. v. Wood, 369 U.S. 469,
472-73, 82 S.Ct. 894, 897-98, 8 L.Ed.2d 44 (1962) (" "only under
the most imperative circumstances, circumstances which in view of
the flexible procedures of the Federal Rules we cannot now
anticipate, can the right to a jury trial of legal issues be lost
through ... determination of equitable claims.' ") (quoting Beacon
Theatres v. Westover, 359 U.S. 500, 510-11, 79 S.Ct. 948, 956-57,
3 L.Ed.2d 988 (1959)).
For the reasons set forth above, we join the Seventh Circuit
in holding that plaintiffs are entitled to a jury trial in hybrid
LMRA/ERISA actions. Accordingly, the district court is reversed,
and the case is remanded to the district court with directions that
it proceed consistent with this opinion.
REVERSED.