Title: Rita Roth v. City of Glendale

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2000 WI 100 
 
SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
97-3467 
 
 
Complete Title 
of Case: 
 
Rita Roth, Delores Adair, Gary Budzinski,  
John Chelig, June LoCoco, George Farkus,  
Daryl R. Grober, Vera Gross, Andrew  
Huppert, Donald L. Jackson, Ronald  
Jackson, Harry Kalupa, DuWayne Kasal,  
Nona Koellner, Al Ohrmund, Edward Paul,  
Cliff Peak, Allen Reininger, Mildred  
Sievers, Fred Skerpea, Elain Stechauner,  
Tony Stechauner, Caroline Stelzel, Morene  
Tomasello, Robert Yourich and John  
Verhulst,  
 
Plaintiffs-Appellants-Petitioners, 
 
v. 
City of Glendale,  
 
Defendant-Respondent.  
 
 
ON REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at: 
224 Wis. 2d 800, 593 N.W.2d 62 
 
 
(Ct. App. 1999, Published) 
 
 
Opinion Filed: 
July 13, 2000 
Submitted on Briefs: 
      
Oral Argument: 
November 30, 1999 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Milwaukee 
 
JUDGE: 
Jacqueline D. Schellinger 
 
 
JUSTICES: 
 
Concurred: 
SYKES, J., concurs (opinion filed). 
 
 
WILCOX and PROSSER, J.J., join concurrence. 
 
Dissented: 
      
 
Not Participating:       
 
 
ATTORNEYS: 
For the plaintiffs-appellants-petitioners, there 
were briefs by Alvin R. Ugent and Podell, Ugent, Haney & 
Miszewski, S.C., Milwaukee, and oral argument by Alvin R. Ugent. 
 
 
For the defendant-respondent there was a brief by 
Kathy L. Nusslock, Gregory B. Ladewski, and Davis & Kuelthau, 
S.C., Milwaukee, and oral argument by Kathy L. Nusslock. 
 
 
Amicus Curiae brief was filed by Jeffrey P. 
Sweetland, Bruce F. Ehlke, Timothy E. Hawks, and Schneidman, 
Myers, Dowling, Blumenfield, Ehlke, Hawks & Domer, Milwaukee, and 
oral argument by Timothy E. Hawks for District Council 40, 
AFSCME, AFL-CIO, Wisconsin Federation of Teachers, AFT, AFL-CIO, 
Wisconsin Education Association Council, Professional Fire 
Fighters of Wisconsin, IAFF, AFL-CIO, Wisconsin Federation of 
Nurses and Health Professionals, AFT, AFL-CIO, and Association of 
Law Enforcement Allied Services Personnel, Local 218, IUPA, AFL-
CIO. 
 
 
Amicus Curiae brief was filed by John J. 
Prentice, Evan N. Claditis, and Prentice & Phillips, Milwaukee, 
for Wisconsin Counties Association. 
 
 
Amicus Curiae brief was filed by Matthew R. 
Robbins, Andrea F. Hoeschen and Previant, Goldberg, Uelmen, 
Gratz, Miller & Brueggeman, S.C., Milwaukee, for Wisconsin State 
AFL-CIO. 
 
 
2000 WI 100 
 
NOTICE 
This opinion is subject to further editing and 
modification.  The final version will appear 
in the bound volume of the official reports. 
 
 
No. 97-3467 
 
STATE OF WISCONSIN                    :  
  IN SUPREME COURT 
 
 
Rita Roth, Delores Adair, Gary Budzinski,  
John Chelig, June LoCoco, George Farkus,  
Daryl R. Grober, Vera Gross, Andrew  
Huppert, Donald L. Jackson, Ronald  
Jackson, Harry Kalupa, DuWayne Kasal,  
Nona Koellner, Al Ohrmund, Edward Paul,  
Cliff Peak, Allen Reininger, Mildred  
Sievers, Fred Skerpea, Elain Stechauner,  
Tony Stechauner, Caroline Stelzel, Morene  
Tomasello, Robert Yourich and John  
Verhulst,  
 
          Plaintiffs-Appellants- 
          Petitioners, 
 
     v. 
 
City of Glendale,  
 
          Defendant-Respondent. 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed and 
cause remanded. 
 
¶1 
ANN WALSH BRADLEY, J.   Petitioners, retired employees 
of the City of Glendale, seek review of a published decision of 
the court of appeals that affirmed the circuit court order of 
FILED 
 
JUL 13, 2000 
 
Cornelia G. Clark 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
No. 
97-3467 
 
 
2 
summary judgment in favor of the City.1  The retirees contend 
that the court of appeals erred in determining that they did not 
have a vested right to fully-paid health insurance benefits 
under a series of limited-term collective bargaining agreements. 
 We conclude that a vesting presumption applies to these 
agreements in the absence of contractual language or extrinsic 
evidence indicating otherwise.  Because the record here is 
undeveloped, we reverse and remand to the circuit court to 
determine whether health benefits vested under the retirees’ 
collective bargaining agreements. 
¶2 
Petitioners are 26 former employees of the City of 
Glendale who retired at different times between 1972 and 1996.  
All but four of the retirees had been members of a collective 
bargaining unit represented by Local 1261, affiliated with 
District Council 48, AFSCME, AFL-CIO.  The parties agree that 
the four retirees who did not belong to the union received the 
same benefits and were treated no differently than the retirees 
who had been union members. 
¶3 
The terms of the employment relationship were embodied 
in a series of collective bargaining agreements.  As customary 
in this context, each agreement had a specified term of one to 
three years, expired, and then was re-negotiated by the parties. 
                     
1 Roth v. City of Glendale, 224 Wis. 2d 800, 807-809, 593 
N.W.2d 62 (Ct. App. 1999) (affirming order of summary judgment 
of the circuit court for Milwaukee County, Jacqueline D. 
Schellinger, J.). 
No. 
97-3467 
 
 
3 
¶4 
Between 1972 and 1996, there were 12 successive 
collective bargaining agreements.  Initially, the agreements 
provided health insurance benefits at no cost to City employees 
and retirees.  From 1972 until 1995, the agreements stated the 
following regarding retiree health insurance benefits: 
 
Any employee who retires from the City, shall be 
eligible 
for 
Blue 
Cross-Blue 
Shield 
Medicare 
Extended365 days, when such retiree attains age 
sixty-five (65), with the City paying the entire 
premium 
for 
single 
or 
family 
coverage 
where 
applicable.2 
¶5 
Over the years, the City and the Union negotiated a 
number of changes to the health insurance provisions of the 
collective bargaining agreements.  Beginning in 1977 the 
agreements included a provision that stated that the health 
insurance provisions could be changed by mutual consent of the 
parties.  The 1979-80 agreement added a clause stating that 
"[t]he employee contribution remains a negotiable item upon the 
expiration of this two-year agreement."   
¶6 
In the 1981-82 agreement, the parties eliminated the 
need 
for 
mutual 
consent 
to 
change 
insurance 
providers.  
According to this new provision, the City could unilaterally 
change the insurance provider as long as the change did not 
                     
2 In the 1973-74 agreement, the wording of this clause was 
slightly different, although its substance was the same: 
Any employee who retires at age sixty-five (65) shall 
be covered under Blue Cross-Blue Shield Medicare 
Extended365 days, with the City paying the entire 
premium 
for 
single 
or 
family 
coverage 
where 
applicable. 
No. 
97-3467 
 
 
4 
increase the cost to the individual group member and the 
coverages and benefits of the new program were equal to or 
greater than the coverages and benefits provided by Blue Cross-
Blue Shield. 
¶7 
The 1989-91 agreement modified the length of service 
requirement regarding retirees' eligibility for health insurance 
benefits.  Under previous agreements, retirees qualified for 
health insurance benefits after ten years of service to the 
City.  Under the new terms, employees needed 15 years of service 
to qualify for retirement health insurance benefits.  It is 
undisputed that all the retirees in this case had at least 15 
years of creditable service to the City. 
¶8 
Another 
change 
in 
retiree 
health 
benefits 
was 
instituted in the 1992-94 collective bargaining agreement. 
Although under the earlier agreements the City paid the entire 
cost of the retirees' health insurance premiums, the new 
agreement required certain retirees to pay a portion of the 
premium themselves: 
 
Upon retirement, the City agrees to pay up to 105% of 
the lowest cost health insurance plan available in the 
City's service area (Milwaukee County) under the State 
Health Plan for family or single coverage, whichever 
is applicable until the employee reaches age 65.  The 
retired employee shall pay the difference, if any, 
between the actual cost of the insurance coverage and 
the amount paid by the City. 
The 1992-94 agreement, however, maintained the fully-paid health 
insurance premiums for retirees 65 years and older.  Finally, in 
the 1995-97 agreement, the City and the Union negotiated a 
No. 
97-3467 
 
 
5 
requirement that all retirees (not just those who retire before 
age 65) pay a portion of their health insurance premiums: 
 
Upon retirement, the City agrees to pay up to 105% of 
the lowest cost health insurance plan available in the 
City's service area (Milwaukee County) under the State 
Health Plan for family or single coverage, whichever 
is applicable.  The retired employee shall pay the 
difference, if any, between the actual cost of the 
insurance coverage and the amount paid by the City. 
The retirees were notified of the new terms by letter. 
¶9 
The retirees sued the City for breach of contract.  
They claimed a vested right to fully-paid health insurance 
benefits pursuant to the terms of the collective bargaining 
agreements in force at the time of their respective retirements. 
 They sought an order that the City pay their entire health 
insurance premiums as provided by the earlier collective 
bargaining 
agreements. 
 
Additionally, 
the 
retirees 
sought 
damages for the contributions they paid toward their premiums in 
the interim. 
¶10 Subsequently, the retirees moved for summary judgment. 
The circuit court denied their motion and instead awarded 
summary judgment to the City.3  The court distinguished Schlosser 
v. Allis-Chalmers Corp., 86 Wis. 2d 226, 271 N.W.2d 879 (1978), 
the lynchpin of the retirees' argument.  Schlosser held that 
retirement benefitsin that case, company-paid life insurance 
                     
3 Wisconsin Stat. § 802.08(6) (1995-96) states: "If it shall 
appear to the court that the party against whom a motion for 
summary judgment is asserted is entitled to summary judgment, 
the summary judgment may be awarded to such party even though 
the party has not moved therefor."  
No. 
97-3467 
 
 
6 
premiumsvest as to those employees who retire while the 
agreement providing the benefits is in effect, even when the 
agreement reserves to the employer the right to modify or 
terminate the benefits.  The circuit court noted a key factual 
difference that it believed made Schlosser inapplicable to the 
Glendale retirees' claims: the benefits in Schlosser were 
conferred in connection with an open-ended employment agreement 
that never expired and was never modified.  The Glendale 
agreements, by contrast, were of limited duration, expired, and 
were then renegotiated with different terms. 
¶11 The circuit court instead applied Senn v. United 
Dominion Industries, 951 F.2d 806, 814-16 (7th Cir. 1992), 
because, as in this case, Senn addressed the question of whether 
retirement health benefits contained in a series of limited-term 
collective bargaining agreements vested upon retirement.  The 
court found that, similar to the agreements in Senn, the 
Glendale collective bargaining agreements were silent about the 
vesting of retirement health benefits.  The circuit court also 
concluded that other provisions in some of the agreements, 
including the language permitting the parties to change the 
insurance carrier by mutual consent and the section stating that 
the employee's contribution remained a negotiable item upon 
expiration of the agreement, demonstrated unambiguously that the 
parties did not intend the benefits to vest. 
¶12 The court of appeals affirmed, agreeing with the 
circuit court that because the case involved a limited-term 
collective bargaining agreement, Schlosser was distinguishable 
No. 
97-3467 
 
 
7 
and Senn should be applied.  Roth v. City of Glendale, 224 
Wis. 2d 800, 807-09, 593 N.W.2d 62 (Ct. App. 1999).  Since the 
agreements did not specifically mention vesting or explicitly 
state that the benefits were granted for life, the court of 
appeals held that the retirees had no vested right to fully-paid 
health insurance.  Id.  The dissent rejected Senn's precedential 
value4 and concluded instead that Schlosser was the proper 
precedent for this case.  Id. at 811 n.1 (Fine, J., dissenting). 
 The retirees sought review. 
¶13 On a review of a grant of summary judgment we apply 
the same standard as does the circuit court.  Green Spring Farms 
v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987).  
Summary judgment is appropriate if the record reveals no genuine 
issue of material fact and the moving party is entitled to 
judgment as a matter of law.  Id.; Wis. Stat. § 802.08(2) (1995-
96). 
¶14 Although this case was not before the circuit court on 
cross-motions for summary judgment, neither the retirees nor the 
City raise any factual dispute.  In addition, both parties argue 
that the contracts are unambiguous, and each claims entitlement 
to judgment as a matter of law.   
¶15 This dispute centers on the proper interpretation of 
the collective bargaining agreements and whether they vest a 
                     
4 The majority of the court of appeals recognized it was not 
bound by federal case law on this issue but found Senn v. United 
Dominion Industries, Inc., 951 F.2d 806 (7th Cir. 1992), to be 
persuasive and adopted its reasoning.  Roth v. City of Glendale, 
224 Wis. 2d 800, 809, 593 N.W.2d 62 (Ct. App. 1999).   
No. 
97-3467 
 
 
8 
legal right of the retirees to fully-paid lifetime health 
benefits.5  Interpretation of a collective bargaining agreement, 
as with other contracts, presents a question of law that we 
review independently of the determinations rendered by the 
circuit court and the court of appeals.  See Wisconsin Label 
Corp. v. Northbrook Property & Cas. Ins. Co., 2000 WI 26, ¶22, 
233 Wis. 2d 314, 327, 607 N.W.2d 276.  In interpreting a 
contract, the objective is to ascertain the intent of the 
contracting parties.  Maas by Grant v. Ziegler, 172 Wis. 2d 70, 
79, 492 N.W.2d 621 (1992). 
¶16 The retirees assert that the collective bargaining 
agreements unambiguously express the intent to vest fully-paid 
lifetime health benefits.  A finding to the contrary unfairly 
dismisses the employees' compliance with their "end of the 
bargain," at least 15 years of service to the City of Glendale. 
 According to the retirees, a determination that their benefits 
vested upon retirement enforces their legitimate expectations as 
employees and most accurately reflects the bargaining process 
for retirement benefits.  Criticizing both the circuit court and 
the majority of the court of appeals for relying on the Seventh 
                     
5 ERISA requires vesting of pension benefits; it does not 
require 
vesting 
of 
health 
or 
other 
retirement 
"welfare" 
benefits. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 
724, 732 (1985); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91 
(1983); Ryan v. Chromalloy American Corp., 877 F.2d 598, 603 
(7th Cir. 1989).  Retirement welfare benefits, and the question 
of whether they vest, are matters left to contract.   
No. 
97-3467 
 
 
9 
Circuit's decision in Senn, the retirees maintain that this 
court's decision in Schlosser controls the outcome of this case. 
¶17  In Senn, a class of retirees sued their employer 
after the employer terminated life and health insurance benefits 
arising under a series of limited-term collective bargaining 
agreements in effect when the employees retired.  The district 
court found the contracts ambiguous and admitted extrinsic 
evidence, eventually upholding the jury verdict that the parties 
intended the vesting of lifetime benefits.  Reversing the 
district 
court, 
the 
Seventh 
Circuit 
concluded 
that 
the 
agreements were unambiguous and thus a resort to extrinsic 
evidence was unwarranted.  Senn, 951 F.2d at 807, 816. 
¶18 The court adopted a "default rule" that "entitlements 
established by collective bargaining agreements do not survive 
their expiration or modification."  Id. at 816 (quoting Merk v. 
Jewel Cos., 848 F.2d 761, 763 (1988)).  Applying this rule, it 
determined that the silence of the contracts as to the vesting 
of benefits did not render the agreements ambiguous, but rather 
demonstrated that the parties did not intend these benefits to 
survive the term of the agreements.  Id.  Thus, Senn required 
explicit language or other affirmative indication in the 
contract to rebut the default rule that benefits generally do 
not continue beyond the life of the agreement. 
¶19 In this case, neither the circuit court nor the court 
of appeals noted that the Seventh Circuit revisted Senn the 
following year in Bidlack v. Wheelabrator Corp., 993 F.2d 603 
(7th Cir. 1993) (en banc).  Bidlack presented similar facts to 
No. 
97-3467 
 
 
10
this case and also involved the issue of whether retirement 
benefits 
vested under 
the 
retirees' 
collective 
bargaining 
agreements. 
¶20 These collective bargaining agreements provided fully-
paid health benefits for employees after they attained 65 years 
of age.  Id. at 605.  In addition, the agreements stated that 
the benefits would continue for spouses after the retirees' 
death.  Id.  Because the agreements lacked explicit language 
vesting benefits, the circuit court granted summary judgment to 
the employer.  
¶21 The Seventh Circuit reversed and remanded.  The 
Bidlack 
majority 
maintained 
adherence 
to 
the 
general 
presumption, or default rule, set forth in Senn that employee 
welfare benefits established by collective bargaining agreements 
lapse with the expiration of those agreements.  Id. at 607.  
However, the majority recognized that the presumption was 
rebuttable and discussed how the presumption could be overcome. 
 Id.   
¶22 Employing a general contract analysis, the court noted 
that the words of the contract form the initial focus of the 
vesting analysis.  Only if the language is ambiguous may 
extrinsic evidence be considered. In the absence of contract 
language or extrinsic evidence indicating an intent to vest 
benefits, 
thereby 
rebutting 
the presumption, 
the majority 
concluded that the no-vest presumption governs. 
¶23 Thus, the Bidlack majority rejected as formalistic the 
rigid Senn approach to contractual language because that 
No. 
97-3467 
 
 
11
approach required explicit vesting language to be set forth in 
the contract.  Id. at 607.  Likewise, it rejected the other 
extreme approach that parties may freely consult extrinsic 
evidence to demonstrate the intent to vest benefits.  Id.   
¶24 The Bidlack concurrence agreed with the majority that 
the first step in any vesting analysis centers on the language 
of the collective bargaining agreement.  See id. at 611 (Cudahy, 
J., 
concurring). 
 
If 
the 
language 
is 
ambiguous, 
then 
consideration of extrinsic evidence is permitted.  Id.  However, 
the concurrence advocated a presumption in favor of vesting.    
¶25 The vesting presumption articulated by the concurrence 
differs from the majority's approach to the language of the 
agreement and to the extrinsic evidence.  It presumes that 
benefits will vest unless the language of the agreement suggests 
otherwise.  Id.  When the agreement is ambiguous, extrinsic 
evidence may be consulted to rebut the presumption and to 
demonstrate that the parties did not intend the benefits to 
vest.  Id.   
¶26 We 
adopt 
the 
vesting 
presumption, 
alternatively 
characterized as a default rule, advocated by the Bidlack 
concurrence.  This presumption comports with "a more far-
reaching understanding of the context in which retiree benefits 
arise" and serves to fulfill the legitimate expectations of 
employees who have bargained for these benefits.  Keffer v. H.K. 
Porter Co., Inc., 872 F.2d 60, 64 (4th Cir. 1989).   
¶27 Employment benefits represent a critical bargaining 
tool for employers in attracting and maintaining personnel.  The 
No. 
97-3467 
 
 
12
employer's promise of such benefits is an inducement to provide 
services for that particular employer to the exclusion of other 
employment opportunities.  See Lovett v. Mt. Senario College, 
Inc., 154 Wis. 2d 831, 837, 454 N.W.2d 356 (Ct. App. 1990) 
("[T]he inducement of a retirement program provides a reciprocal 
benefit to employer in terms of employee retention.").  
¶28 Bargained for benefits are not gratuities handed to 
the employee, but rather deferred compensation for past services 
rendered.  If employees trade off present wages for benefits 
upon retirement, they expect assurance that these benefits will 
continue into the future.  International Union, United Auto., 
Aerospace & Agric. Implement Workers v. Yard-Man, Inc., 716 F.2d 
1476, 1482 (6th Cir. 1983).  They do not expect their earned 
benefits to be whittled away, subject to the contingencies of 
future negotiations.  Id.   Indeed, a no-vest presumption 
carries the danger of transforming services into a gratuity for 
the employer. 
¶29 Retirement benefits are essentially "status" benefits 
that carry with them an inference that they continue as long as 
the prerequisite status is maintained and the beneficiary 
remains a retiree.  Maurer v. Joy Technologies, Inc., 2000 WL 
572453 *6 (6th Cir.) (quotations omitted).  The right to receive 
health and welfare benefits arises from the retiree's status as 
a past employee and is not dependent on a continued or current 
relationship with the employer.  Local Union No. 150-A v. 
Dubuque Packing Co., 756 F.2d 66, 70 (8th Cir. 1985).    
No. 
97-3467 
 
 
13
¶30 In Schlosser v. Allis-Chalmers Corp., this court 
recognized the inequity underlying any subsequent chipping away 
of retirement benefits:  
 
Clearly, 
under 
our 
present 
economic 
system, 
an 
employer cannot offer a retirement system as an 
inducement to employment and, after an employee has 
accepted employment under such circumstances, withdraw 
or terminate the program after an employee has 
complied with all the conditions entitling him to 
retirement rights thereunder. 
86 Wis. 2d 226, 247, 271 N.W.2d 879 (1978) (quoting Cantor v. 
Berkshire Life Ins. Co., 171 N.E.2d 518, 522 (1960)). 
¶31 Although Schlosser presents slightly varied facts, we 
disagree with the circuit court and the court of appeals that 
the case provides no guidance in our analysis.  The type of 
contracts at issue in both cases may differ in form but the 
employers' actions had the same legal effect of denying the 
employees retirement benefits.  Schlosser was not decided on the 
singularity of the facts but rather on general equitable 
principles underlying the employer-employee bargaining process. 
¶32 Thus, the principles espoused by the Schlosser court 
do not ring hollow in this particular context of retiree health 
benefits.  Allowing employers to modify past contractual 
obligations, when there is no indication that benefits are for a 
fixed term only, renders the promise of retirement benefits 
illusory and defies these equitable principles.  
¶33 An economic consideration that cannot be swept under 
the rug is that many retirees live solely on their retirement 
benefits.  Retirees with fixed incomes are generally ill-
No. 
97-3467 
 
 
14
prepared to meet additional financial obligations that were 
unanticipated and that may be incrementally modified without 
notice. 
¶34 A presumption in favor of vesting that may be rebutted 
only by contrary indication in the language of the agreement or 
extrinsic evidence safeguards retirees from potential economic 
devastation.  Other jurisdictions have recognized this inference 
of vesting.  See, e.g., International Union, United Auto., 
Aerospace, 
and 
Agric. 
Implement 
Workers 
of 
Am. 
v. 
BVR 
Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999); Jansen v. 
Greyhound Corp., 692 F. Supp. 1029, 1034 (N.D. Iowa 1987);  
Schultz v. Teledyne, Inc., 657 F. Supp. 289, 292-93 (W.D.Pa. 
1987); United Steelworkers of Am. v. Newman-Crosby Steel, Inc., 
822 F. Supp. 862, 866 (D.R.I. 1993).  Any other presumption 
fails to afford commensurate protection to retirees and does not 
recognize the import of the bargaining process for retirement 
benefits. 
¶35  Indeed, retirees are presumably aware that the union 
is not obligated to represent their interests for the purposes 
of bargaining for continued benefits.  See Allied Chem. & Alkali 
Workers of Am. v. Pittsburgh Plate Glass Co., 404 U.S. 157, 181 
n.20 (1971); Dubuque Packing Co., 756 F.2d at 70; Bence v. City 
of Milwaukee, 107 Wis. 2d 469, 490, 320 N.W.2d 199 (1982). This 
bargaining may create conflicts of interests between the 
retirees and the current union employees.  As recognized by the 
United States Supreme Court in Allied Chemical, 404 U.S. at 173: 
 
No. 
97-3467 
 
 
15
Pensioners' 
interests 
extend 
only 
to 
retirement 
benefits, to the exclusion of wage rates, hours, 
working conditions, and all other terms of active 
employment.  Incorporation of such a limited-purpose 
constituency in the bargaining unit would create the 
potential for severe internal conflicts that would 
impair the unit's ability to function and would 
disrupt 
the 
processes 
of 
collective 
bargaining.  
Moreover, the risk cannot be overlooked that union 
representatives on occasion might see fit to bargain 
for improved wages or other conditions favoring active 
employees at the expense of retirees' benefits. 
¶36 A presumption in favor of vesting retirement benefits 
absent contrary indication serves to protect the voiceless in 
the subsequent negotiating process.  Otherwise, unions that are 
negotiating on behalf of current employees may unilaterally 
bargain away contractual promises made to retirees, thereby 
frustrating the expectations of employees who have earned 
retirement benefits by providing past services. 
¶37 We reject the court of appeals' adoption of an implied 
consent theory that allows unions to bargain away retirement 
benefits without an affirmative consent to representation by the 
retirees.  The court offered no authority for this leap away 
from precedent to promote a theory that all of the parties—the 
retirees, the union, and the City—disavowed at oral argument.   
¶38 The notion of implied consent is also inconsistent 
with 
precedent recognizing 
the conflict in 
simultaneously 
representing retirees and current employees for collective 
bargaining purposes.  Allied Chemical, 404 U.S. at 173.  
Finally, this theory is at odds with the legal effect of 
vesting.  If the retirement benefits vest under the collective 
No. 
97-3467 
 
 
16
bargaining agreements, they cannot be whittled away by future 
negotiations, regardless of express or implied consent. 
¶39 Because the court of appeals erroneously relied on 
Senn's rigid no-vest presumption, we reverse its decision.  
However, the record before this court is sparse and undeveloped. 
 It 
does 
not 
contain 
the 
complete 
collective 
bargaining 
agreements and thereby precludes us from applying a vesting 
presumption to the language of the contracts and to related 
provisions.  Therefore, we remand the cause to the circuit court 
for a determination of whether the collective bargaining 
agreements vested health benefits for the retirees. 
¶40 In sum, we determine that a vesting presumption 
applies under the collective bargaining agreements in the 
absence of contract language or extrinsic evidence indicating an 
intent against the vesting of retiree health benefits.  A 
vesting 
presumption 
comports 
with 
the 
realities 
of 
the 
bargaining process for retirement benefits and the equitable 
principles underlying that process.  Because the record before 
us is incomplete and precludes an application of the vesting 
presumption, we reverse and remand the cause to the circuit 
court.  
By the Court.-The decision of the court of appeals is 
reversed and the cause is remanded to the circuit court. 
 
 
No. 97-3467.dss 
 
1 
¶41 DIANE S. SYKES, J. (concurring). The majority adopts 
the 
approach 
of 
the 
concurring 
opinion 
in 
Bidlack 
v. 
Wheelabrator Corp., 993 F.2d 603, 611 (7th Cir. 1993)(en 
banc)(Cudahy, J., concurring) as the analytical framework for 
determining whether retirement welfare benefits in collective 
bargaining agreements are vested.  I would adopt the approach of 
the lead opinion in Bidlack, and therefore concur. 
¶42 As the majority notes, the lead opinion in Bidlack 
retreated from Senn's6 bright-line approach regarding vesting 
language 
in 
collective 
bargaining 
agreements, 
establishing 
instead an analytical approach to the question that focuses on 
traditional rules of contract interpretation while maintaining 
an initial presumption that rights and obligations cease upon 
the expiration of the contract.  Id. at 607.  The concurrence 
applauded the retreat, but would have gone further to apply a 
different initial presumption: that benefits vest and therefore 
continue beyond the expiration of the contract, unless otherwise 
specifically stated.  Id. at 613 (Cudahy, J., concurring).  
Apparently, the concurrence would have overruled Senn, and in 
fact went so far as to say that "Senn and its default rule now 
do seem . . . to be a dead letter."  Id. at 610 (Cudahy, J., 
concurring). 
¶43 Bidlack involved a class action suit filed by retired 
employees of the Wheelabrator Corporation.  The lead opinion, by 
                     
6 Senn v. United Dominion Industries, 951 F.2d 806, 814-16 
(7th Cir. 1992). 
No. 97-3467.dss 
 
2 
Chief Judge Richard Posner, framed the question presented by the 
case in this way: 
 
[W]hether the absence from the collective bargaining 
agreements of any provision that explicitly vests the 
health benefits of retired employees defeats those 
employees' 
claims 
even 
though 
some 
contractual 
language 
and 
a 
great 
deal 
of 
'extrinsic' 
evidenceevidence apart from the language of the 
agreementssuggest that the parties may have intended 
to confer vested rights on the retired employees, that 
is, rights that would outlast the expiration of the 
last collective bargaining agreement. 
Id. at 605. 
¶44 The 
Wheelabrator 
collective 
bargaining 
agreements 
stated that "those employees who have retired since September 
22, 1959, will have the full cost of their Blue Cross-Blue 
Shield coverage paid by the Company after they attain sixty-five 
(65) years of age," and that the benefits "shall be continued 
for the spouse after the death of the retiree."  Id. at 605.  As 
in this case, the district court in Bidlack concluded that the 
employer was entitled to summary judgment because the language 
of the agreements did not explicitly state that the benefits 
vested at retirement.  Arndt v. Wheelabrator Corp., 763 F. Supp. 
396, 404, 406 (N.D. Ind. 1991).  The en banc Seventh Circuit 
reversed. 
¶45 Judge Posner began his analysis with the following 
general observation: "[O]rdinarily when a contract expires, 
itexpires.  It is at an end.  The parties have no more rights 
or duties under it.  Sometimes, however, a contract creates 
entitlements that outlast it."  Bidlack, 993 F.2d at 606.  The 
No. 97-3467.dss 
 
3 
trick, of course, is determining which are the determinate 
rights or obligations and which are the indeterminate ones. 
¶46 The starting point is the presumption, deriving from 
the foregoing basic principle, that because it has a fixed term, 
"a collective bargaining agreement ceases to obligate the 
employer when the agreement's term . . . is up."  Id. at 607.  
The lead opinion in Bidlack, therefore, left Senn's basic 
presumption in place.  But the court went on to note that "it is 
not an irrebuttable presumption. 'Rights which accrued or vested 
under the [collective bargaining] agreement will, as a general 
rule, survive termination of the agreement.'  The question is 
what it takes to rebut the presumption."  Id. (citation 
omitted). 
¶47 The Bidlack court then rejected two interpretive 
extremes: 1) that to rebut the presumption that benefits expire 
when the agreement expires (in other words, do not vest), the 
contract must either use the word "vest" or other similarly 
unequivocal language; and 2) that to rebut the presumption the 
parties can freely substitute testimony regarding the parties' 
intentions for contractual language indicative of intent.  Id.  
The court said the former approach would institute excessive 
formalism and the latter would deprive parties of the protection 
of a written contract.  Id.  
¶48 The Bidlack court concluded, and I agree, that in this 
context, as in all contract cases, the court should look first 
to the four corners of the contract itself for evidence to rebut 
the initial presumption that the obligation expires when the 
No. 97-3467.dss 
 
4 
contract does.  If the contract language unambiguously confirms 
the presumptionor overcomes itthe analysis is over, and the 
court must apply the contract as written.  To overcome the 
presumption, however, the word "vest" (or similar equivalent) 
need not necessarily appear, if the intent to establish a right 
which survives the expiration of the agreement is otherwise 
clear from the language used and the overall language and logic 
of the contract.  Id. ("[W]e do not think that a court should 
refuse to enforce a contract merely because the parties have 
failed to use a prescribed formula"). 
¶49 If, however, the contract is ambiguous, the court may 
look to extrinsic evidence to attempt to determine the parties' 
intent.  The Bidlack court cautioned, and I would too, that 
ambiguity cannot be created by extrinsic evidence: 
 
[T]he use of extrinsic evidence to create such 
obligations [to pay lifetime medical benefits] nowhere 
alluded to in the contract would unjustifiably deprive 
the parties of the limitation of liabilities that is 
implicit in the negotiation of a written contract 
having a definite expiration date.  Subject only to 
the 
limited 
protection 
against 
unforeseeable 
contractual obligations that is conferred by the 
doctrine of impossibility, a party might find itself 
saddled with obligations for the next twenty or thirty 
years (or even more, in the case of a surviving 
spouse's benefits) even though it had reasonably 
believed that all its obligations would end in three 
years, when the contract expired by its own terms.  
Although extrinsic evidence is admissible to show that 
a written contract which looks clear is actually 
ambiguous, perhaps because the parties were using 
words in a special sense, 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 
No. 97-3467.dss 
 
5 
used to add terms to a contract that is plausibly 
complete without them." 
Id. at 608 (citations omitted)(emphasis supplied).  The parol 
evidence rule also provides a limitation on the use of extrinsic 
evidence. 
Id. 
 (["T]he 
parol 
evidence rule . . . enforces 
integration clauses by barring evidence of side agreements, 
[although it] does not bar the use of extrinsic evidence to 
clarify the meaning of an ambiguous text").  Finally, if the 
agreement is completely silent about the duration of the 
benefits, and there is nothing in the logic, structure or other 
provisions of the contract that suggests that the benefits were 
meant to survive the expiration date, resort to extrinsic 
evidence is improper.  Id. 
¶50 Ultimately, 
if 
an 
examination 
of 
relevant 
and 
admissible extrinsic evidence fails to clarify the contractual 
ambiguity, the court may resort to the application of a default 
rule of contract interpretation.  Id. at 609.  Judge Posner 
clarified what is meant by "default rule," and when it is 
appropriate to invoke one: 
 
The contract, even when its logic and its other 
provisions as well as just the provision in issue are 
considered, is inconclusive on the question whether it 
confers 
an 
entitlement 
to 
health 
benefits 
that 
outlasts the contract's expiration date.  A completely 
intractable issue of contract interpretation can be 
resolved only by the application of some default 
rulea burden of persuasion, a clear-meaning rule, a 
presumption based on the authorship of the contract.  
But the time to throw up one's hands and apply such a 
rule is after extrinsic evidence has been considered. 
 For until then, we do not know whether we have an 
intractable interpretive issue or merely an issue that 
No. 97-3467.dss 
 
6 
cannot be resolved without testimony or other evidence 
besides the language and logic . . . of the contract. 
 
Only a posture, not easy to reconcile with the 
Seventh Amendment, of extreme mistrust of juries would 
entitle us to pretermit a factual inquiry and apply an 
interpretive canon or other tie-breaker before we know 
that the sides are actually tied. 
Id.   
¶51 Senn and the concurrence in Bidlack had referred to 
the initial presumption as a "default rule," which, as this 
passage of the lead opinion in Bidlack makes clear, is 
technically incorrect.  The initial "no-vest" presumption is a 
creature of the contract itself, because it has a limited term, 
and applies at the beginning of the interpretive process.  It 
may be overcome by other contract language indicative of an 
intent to grant a lifetime benefit, or extrinsic evidence (if 
the contract language is vague) or both.  A "default rule," 
properly 
understood, 
is 
a 
judicial 
canon 
of 
contract 
construction (such as the rule that we construe contracts 
against the drafter) that applies only in the event of an 
unresolvable ambiguitya tieand only at the end of the process 
after extrinsic evidence has failed to clear up the question. 
¶52 The initial presumption of vesting proposed by the 
Bidlack concurrence and adopted by the majority in this case 
represents a policy preference that I share but am constrained 
by the law of contracts from imposing upon the parties to a 
written, limited-term collective bargaining agreement.  The 
contract sets the rights and liabilities of the parties, not the 
policy preferences of this court. 
No. 97-3467.dss 
 
7 
The majority relies in part on the policy articulated in 
Schlosser v. Allis-Chalmers Corp., 86 Wis. 2d 226, 271 N.W.2d 
879 (1978).  However, as both lower courts concluded, Schlosser 
is fundamentally factually distinguishable.  There, the retirees 
had 
been 
salaried, 
nonunion 
employees 
whose 
employment 
arrangement with Allis-Chalmers was ongoing, open-ended and had 
no fixed expiration date.  The court essentially construed the 
insurance benefits at issue in that case as a part of the open-
ended employment agreement when it held that the benefit level 
at the time of retirement vested and could not be unilaterally 
modified later.  Here we have a series of fixed-term collective 
bargaining agreements that were continually renegotiated upon 
expiration. 
¶53 It is one thing to find that a continuing obligation 
of indefinite duration (free life insurance for life in 
Schlosser) vests upon retirement under a continuing, open-ended 
contract which is itself of indefinite duration.  It is another 
thing to find that an indefinite, continuing obligation (free 
health insurance for life in this case) vests upon retirement 
and therefore survives the expiration of a fixed-term collective 
bargaining 
agreement, 
the 
obligations 
of 
which 
otherwise 
terminated when the contract did.  Schlosser’s rationale of 
retirement 
welfare 
benefit 
vesting 
cannot 
be 
readily 
transplanted into the collective bargaining context. 
No. 97-3467.dss 
 
8 
¶54 Accordingly, I would adopt the analysis of the lead 
opinion in Bidlack and remand to the circuit court to apply it.7 
 Therefore, I respectfully concur. 
¶55 I am authorized to state that Justices JON P. WILCOX 
and DAVID T. PROSSER join this concurring opinion.   
 
 
 
 
 
 
 
 
 
 
 
 
 
                     
7 For examples of post-Bidlack cases applying its analysis, 
see Pabst Brewing Company, Inc. v. Corrao, 161 F.3d 434 (7th 
Cir. 1998); Diehl v. Twin Disc, Inc., 102 F.3d 301 (7th Cir. 
1996); Murphy v. Keystone Steel & Wire Co., 61 F.3d 560 (7th 
Cir. 1995); Rossetto v. Pabst Brewing Company, Inc., 71 
F.Supp.2d 913 (E.D. Wis. 1999).  
No. 97-3467.dss 
 
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