UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

__________________

No. 96-60571

__________________

INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS,

WOODWORKERS DIVISION, AFL-CIO; WOODWORKERS LOCAL LODGE W443,

INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, AFLCIO; W.R. RISER, on behalf of himself and all others similarly

situated; LESTER MCCULLUM, on behalf of himself and all others

similarly situated; LEWIS H. TINER, on behalf of himself and all

others similarly situated; EMMETT M. NAPIER, on behalf of himself

and all others similarly situated; J .C. WALDRUP, on behalf of

himself and all others similarly situated; EARNEST WEEMS, JR., on

behalf of himself and all others similarly situated; ROBERT J.

MYERS, on behalf of himself and all others similarly situated; KING

G. MCMILLAN, on behalf of h imself and all others similarly

situated; ALBERT JAMES PARKER, SR., on behalf of himself and all

others similarly situated; JAMES W. JONES, on behalf of himself and

all others similarly situated; ROBERT J. POLSON, on behalf of

himself and all others similarly si tuated; MILFORD L. GRAHAM, on

behalf of himself and all others similarly situated; J.W. LEWIS, on

behalf of himself and all others similarly situated; E.U. SIMS, on behalf of himself and all others similarly situated,

Plaintiffs-Appellants,

versus

MASONITE CORPORATION, a division of International Paper

Company,

Defendant-Appellee.

______________________________________________

Appeal from the United States District Court for the

Southern District of Mississippi

______________________________________________

September 4, 1997

Before GARWOOD, BENAVIDES, and STEWART, Circuit Judges.

BENAVIDES, Circuit Judge:2

In this appeal, certain retired employees of Masonite

Corporation (“Masonite”) challenge the district court’s

determination that the collective bargaining agreements (“CBAs”) in

effect at the time they retired did not confer vested lifetime

health insurance benefits. The district court concluded that the

retired employees’ entitlement to health insurance benefits expired

when the CBAs under which they retired did.

Because we conclude that the CBAs at issue are ambiguous, we

reverse and remand for further proceedings.

I.

Before 1993, appellants, Masonite employees who retired after

1972, had received uninterrupted health insurance coverage at the

compan y’s expense at or above the level provided by the CBAs in

effect at the time they retired. On May 1, 1993, however, Masonite

announced unilateral changes to the health insura nce benefits of

its retired employees, decreasing the percentage of medical costs

reimbursed from 80% to 65%, increasing the yearly deductible from

$100 to $300, making some services reimbursable on a scheduled

rather than an actual cost basis, and requiring pre-certification

for all hospitalization. The changes apply to those employees who

retired before January 16, 1993. The benefits of already-retired

employees were not on the table d uring contract negotiations

between the union and Masonite in 1992, which resulted in a new CBA

effective January 16, 1993.

Masonite also announced that it might in the future require

r etired employees to pay premiums to maintain their health3

insurance coverage. In fact, the re-enrollment form Masonite sent

to retired em ployees with the announced changes contained an

authorization clause, which, if signed, would authorize the company

to deduct medical insurance premiums from retiree pension payments,

“if applicable.” Only a handful of retired employees complied.

Masonite has not terminated the benefits of any retired employees

for failure to sign the authorization form, and it continues to pay

the retired employees’ health insurance premiums.

In response to these actions, retired Masonite employees filed

this suit in federal district court under Section 301(a) of the

Labor Management Relations Act (“ LMRA”), 29 U.S.C. § 185(a), and

under the Employee Retirement In come Security Act (“ERISA”), 29

U.S.C. §§ 1132, 1140. The district court certified a plaintiff

class consist ing of all hourly employees of Masonite who retired

between December 1, 1973, and January 15, 1993, and who, under the

CBAs in effect at the time of their retirement, were eligible for

the continuation of their he alth insurance benefits. The class

so ught declaratory and injunctive relief, monetary damages, and

attorneys’ fees.

In the district court, the parties clashed over three aspects

of the retired employees’ hea lth insurance benefits: duration,

cost, and level of benefits. The retired employees argued that

their benefits we re vested for each retired employee’s lifetime,

the cost to be borne by the company, and the level of benefits to

be at least that provided in 1987. The company argued that the

retired employees’ benefits were guaranteed only for the duration4

of the CBA in effect when they retired, with no guarantee that the

company would pay for those benefits, and with no minimum level of

benefits ensured. The parties filed cross-motions for summary

judgment based on stipulated facts and exhibits, and other summary

judgment evidence. In its order granting defendant’s motion for

summary judgment, the district court addressed only whether the

retirees’ benefits were vested and concluded that any entitlement

to retirement benefits expired when the relevant CBA did. Under

the district court’s broa d holding, not only can Masonite reduce

the retired employees’ benefits, which it has done, it could also

require retirees to contribute premiums, which it has threatened to

do, and could eliminate their health insurance benefits altogether.

Plaintiffs timely filed a notice of appeal.

D ISCUSSION

We review the district court’s grant of summary judgment d e

novo

. G unaca v. State of Texas

, 65 F.3d 467, 469 (5th Cir. 1995).

Likewise, the district court’s interpre tation of a contract is

subject to de novo review. L&A Contracting Co. v. Southern

Concrete Servs., Inc.

, 17 F.3d 106, 1 09 (5th Cir. 1994)(citation

omitted).

ERISA divides employee benefit plans into two categories:

welfare benefit plans and pension plans. C ompare 29 U.S.C. §

1002(1) with id. § 1002(2)(A). U nlike pension benefits, which are

subject to stringent vesting requirements under ERISA, welfare

benefits, such as health care insurance, are vested only if so5

provided by contract. 29 U.S.C. § 1051(1) (providing that ERISA’s

vesting provisions do not apply to employee welfare benefit plans);

see Wise v. El Paso Natural Gas Co.

, 986 F.2d 929, 934-35 (5th Cir.

1993); Anderson v. Alpha Portland Indus., Inc.

, 836 F.2d 1512, 1516

(8th Cir. 1988); s ee also Curtiss-Wright Corp. v. Schoonejongen

,

1 15 S. Ct. 1223, 1228 (1995) (“Nor does ERISA establish any

minimum participation, vesting, or funding requirements for welfare

plans as it does for pension plans.”) (citation omitted). Thus,

whether a CBA vests health insurance benefits in retired employees

is a question of contractual interpretation. United Paperworkers

Int’l Union v. Champion Int’l Corp.

, 908 F.2d 1252, 1261 (5th Cir.

1990); Anderson , 836 F.2d at 1516. In making this determination,

the core issue is whether the parties intended to vest retiree

health insurance benefits or whether they i ntended to tie those

benefits to the CBA in effect at the time the cla imants retired.

See Keffer v. H.K. Porter Co.

, 872 F.2d 60, 62 (4th Cir. 1989);

Anderson , 836 F.2d at 1516 ( UFCW Local Union No. 150-A v. Dubuque

Packing Co. , 756 F.2d 66, 69 (8th Cir. 1985)). Retired employees

bear the burden of proving that their health insurance benefits are

vested. Anderson , 836 F.2d at 1517; Dubuque , 756 F.2d at 70.

The interpretation of collective bargaining agreements is

governed by federal law. Paperworkers

, 908 F.2d at 12 56.

Nonetheless, the court may draw upon state rules of contractual

interpretation to the extent that those rules are “consistent with

federal labor policies.” I d. (quoting International Union, AUW v.

Yard-Man, Inc.

, 716 F.2d 1476, 1479 (6th Cir. 1983)) (other1 This court noted in P aperworkers that “the fact that retirees

have no voice in negotiating a new collective bargaining agreement”

may be considered by the district court as “some evidence of

intent” to vest retirement benefits. P aperworke rs , 908 F.2d at

1261 n.12. Retired employees “have no voice” because even if the

union wanted to force Masonite into negotiations on beh alf of

already-retired employees, it would be powerless to do so under the

Supreme Court’s holding in Allied Chemical & Alkali Workers Local

Union No. 1 v. Pittsburg Plate Glass Co., Chem. Div.

, 404 U.S. 157,

92 S. Ct. 383 (1971).

6 citations omitted). Even when no identifiable federal labor policy

favors or disfavors a particular interpretation, the rules of

contractual interpretation are still applied with “flexibility

. .

. in the context of labor contracts.” Id.

In Yard-Man

, the Sixth Circuit suggested an inf erence that

r etiree benefits are vested benefits. 716 F.2d at 1482. In

concluding that the parties intended to vest retiree benefits, the

court explained:

[R]et i ree benefits are in a sense “status” benefits

which, as suc h, carry with them an inference that they

continue so long as the pre requisite status is

maintained. Thus, when the parties contract for benefits

which accrue on the achievement of retiree status, there

is an inference that the parties likely intended those

benefits to continue so long as the beneficiary remains

a retiree.

Id. In P aperworkers

, howev er, this circuit questioned the

inference. P aperworkers

, 908 F.2d at 1261 n.12. Nevertheless, we

recognized that there is also no pr esumption that retiree health

insurance benefits conferred by a CBA are coterminous with that

CBA. S ee id

. at 1261. 1 As the Supreme Court explained in L itton

Financial Printing v. NLRB :

[C]ontractual obligations will cease, in the ordinary

course, upon termination of the bargaining agreement.

Exceptions are determined by contract interpretation.7

Rights which accrued or vested under the agreement will,

as a general rule, survive termination of the agreement.

501 U.S. 190, 207, 111 S. Ct. 2215, 2226 (1991).

The retired employees argue that this court’s decision in NLRB

v. Pinkston-Hollar Construction Services, Inc.

, requires that this

court find that their benefits were vested. 954 F.2d 306, 310 (5th

Cir. 1992). In particular, they rely on the court’s conclusion

tha t “pension, health and welfare plans are considered terms and

conditions of employment that survive expiration of the agreement.”

954 F.2d at 310 (citing H inson d/b/a Hen House Mkt. No. 3 , 175

N.L.R.B. 596 (1969), enforced sub nom. Hinson v. NLRB

, 428 F.2d

133, 136-37 (8th Cir. 1970)). This sentence, however, must not be

read in a vacuum. Pinkston-Hollar involved whether a company’s

unilateral withdrawal of welfare benefits from active em ployees

after the expiration of the CBA violated the company’s bargaining

obli gation under the National Labor Relations Act, 29 U.S.C. §§

158(a)(1), (5). Pinkston-Hollar

, therefore, sheds little light on

the duration of retir ee benefits, which are not subject to

mandatory colle ctive bargaining. S ee Pittsburg Plate Glass

, 404

U.S . 157, 92 S. Ct. 383

. M oreover, literal application of the

Pinkston-Hollar language would be especially questionable in light

of the skepticism expressed in Paperworkers about an inference that

retiree benefits are vested. 908 F.2d at 1261 n.12.

Without the benefit of this inference, but bearing in mind the

flexibility accorded in the interpretation of labor contracts, we

turn to the CBAs and other documents at issue in this case. During

the relevant period (1973-1993), Masonite, the union, and its local8

entered into five CBAs. Each CBA incorporated an Insurance

Benefits Agreement (“IBA”). The retired employees argue that the

followi ng provision of each IBA guaranteed health insurance

benefits until their deaths for them and their dependents:

Employees ret iring at age 62 or later . . . will be

entitled to comprehensive medical expense insurance

benefits for themselves and their covered dependents

until the death of the retired employee. (emphasis added)

According to the retired employees, the phrase “until the death of

the retired employee” manifests the parties’ intent to create

vested lifetime health insurance benefits for those retiring under

each CBA.

The company argues that this phra se serves to limit the

company’s obligation to covered dependents within the duration of

the CBA. In the company’s view, this phrase simply ensures that if

a retired employee dies during the duration of the CBA, the covered

dependents’ benefits will cease upon the retired employee’s death.

In support of its position, the company relies on the Eighth

Circuit’s decision in Anderson v. Alpha Portland Industries, Inc.

,

in which the court construe d a similar phrase to be a limiting

rather than a vesting phrase. 836 F.2d at 1518. In A nderson

, the

CBA at issue contained a clause stating that “[f]or future

retirees, Company will pay full costs of all group insurance for

them and their dependents until death of retiree.” I d. The court

noted that although the phrase “until death of retiree” alone was

“highly probative of intent to vest benefits,” extrinsic evidence

demonstrated that this phrase memorialized the company’s specific

rejection of a union proposal to continue the benefits of the9

retiree’s dependents after the death of the retired employee rather

than demonstrating an intent to vest the retirees benefits. I d.

M asonite does not point to similar extrinsic evidence indicating

that the phrase was intended to be a limiting factor, although the

contract language, like t hat in A nderson

, appears to be “highly

probative of an intent to vest benefits.”

Another provision of the IBAs supports the construction of the

“until death” clause proffered by the retired employ ees. The

agreements make the death of an active em ployee a temporal

milestone for cessation of dependents’ benefits, but do so in a

grammatical configuration quite different from the retiree benefits

clause:

(h) The spouse and dependent chil dren of an active

employee who dies while insured und er this program and

benefits will be insured under the plan until the end of

the month fol lowing the month in which the employee’s

death occurred.

This provision suggests that when the union and Masonite intended

to make an employee’s death a temporal milestone, they did so

unambiguously.

On the other hand, each IBA provides that “its term is

coincident with that of the [CBA].” According to Masonite, the use

of “coincident” in the IBAs makes clear that the retired employees’

right to health insurance benefits expired when the CBA under which

they retired did. The clause making the term of the IBAs

coincident with the term of the CBAs, however, is not specific to

retiree benefits. Compare Murphy v. Keystone Steel & Wire Co.

, 61

F.3d 560, 566 (7th Cir. 1995) (“The Plan states that retiree2 A clause in the Insurance Benefits Schedule, which is also

incorporate d into the CBA, provides that the Insurance Benefits

Schedule is “subject to the terms and provisions of the Insurance

Policy issued by the Insurance Company . . . .” Because the Plan

was self-insured, the company argues, the Plan docume nts are the

“insurance policy.” The retired employees dispute that “insurance

policy” can be construed to mean “self-insured Plan.” Also, as the

retired employees point out, the company’s representative conceded

in his deposition that this clause did not giv e the company the

right to eliminate bargained-for benefits.

10 benefits terminate ‘upon the date the Plan is terminated or amended

to terminate the Retiree’s [or his dependent’s] coverage.’”); see

also Yard-Man

, 716 F. 2d 1481-82 (noting the absence of any

durational provision specific to retired employees). Instead, the

IBAs detail the benefits of both active and retired employees.

While the duration of any benefits that are subject to

renegotiation may be tied to the duration of the CBAs, if the

“until death” clause reflects t he parties’ intent that retiree

benefits are vested, then the termination of the IBAs would not

affect those vested benefits. See Litton Fin. Printing Div. , 501

U.S. at 207, 111 S. Ct. at 2226.

Masonite further relies on the reservation-of-rights clause in

its ERISA Plan document in support of its argument that the

retirees’ b enefits were not vested. The reservation-of-rights

clause provides that “Masonite Corporation shall have the right to

terminate, suspend, withdraw, amend or modify this Plan in whole or

in part at any time.” The company claims that this Plan provision

empowers it to terminate retiree benefi ts altogether. 2 In the

absence of the CBAs, the Plan’s r eservation-of-rights clause

granting the company the right to amend or terminate the Plan might3 The retired employees also complain of the district court’s

“heavy re liance” on a provision of the Summary Plan Description

(SPD), which defines “plan.” As the company points out, however,

in the final analysis, the distri ct court did not rely on this

provision.

11 well end the inquiry in the company’s favor. S ee, e.g.

, Wise

, 986

F.2d at 934-35; In re Unisys Corp. Retiree Med. Ben. “ERISA”

Litig.

, 58 F.3d 896, 902-05 (3d Cir. 1995); Gable v. Sweetheart Cup

Co.

, 35 F.3d 851, 856 (4th Cir. 1994) ; Alday v. Container Corp.

,

906 F.2d 660, 665 (11th Cir. 1990). A reservation-of-rights clause

in a plan document, however, cannot vitiate contractually vested or

bargained-for rights. To conclude otherwise would allow the

company to take away bargained-for rights unilaterally. 3 A rmistead

v. Vernitron Corp.

, 944 F.2d 1287, 1297 (6th Cir. 1991); cf.

Paperworkers , 908 F.2d at 1261.

In sum, we find that the phrase “until death” can be construed

either as a limiting or a right-granting provision. S ee Stewart v.

KHD Deutz Corp.

, 980 F.2d 698, 703-04 (11 th Cir. 1993). Because

the agreement s are ambiguous, the district court should have

considered extrinsic evidence of intent. P aperworkers

, 908 F.2d at

1256. If the agreements grant vested retiree benefits, then

neither the fact that the IBA is coincident with the CBA nor the

reservation-of- r ights clause in the Plan would divest retired

e mployees of those benefits. The district court’s decision that

the retired employees’ rights to benefits expired with the CBAs in

effect at the time they retired pretermitted its analysis of any

extrinsic evidence of the parties’ intent as well as any

consideration of cost-of-benefits and level-of-benefits issues.4 Masonite cites two cases which suggest that whether an

employer, which also acts as plan sponsor, has breached its

fiduciary duty depends on whether the benefits with w hich it

interfered were vested. S ee Izzarelli v. Rexene Prods. Co.

, 24

F.3d 1506, 1524 (5th Cir. 1994) (holding that an employer does not

act as a fiduciary in amending or terminating a plan, “ provided

that the benefits reduced or eliminated are not accrued or vested

at the time

, and that the amendment does not otherwise violate

ERISA or the express terms of the plan.”)(citation

omitted)(emphasis added); John Morrell & Co. v. UFCW Int’l Union

, 37 F.3d 1302, 1308 (8th Cir. 1994)(“ERISA does not bar an employer

that is also a fiduciary from exercising its business judgment to

modify non-vested welfare benefits.”)(citation omitted)(empha sis

added).

12 Accordingly, we remand to allow the district court an opportunity

to consider extrinsic evidence of the parties’ intent. S ee

Paperworkers , 908 F.2d at 1257-61; Stewart , 980 F.2d at 704.

Breach of Fiduciary Duty

The retirees also appeal the district court’s grant of summary

judgment to the company on the plaintiffs’ claim that Masonite

breached its fiduciary duty as an ERISA plan administrator. In the

district court, Masonite argued summary judgment was proper as to

all claims based on its contention that that there was no summary

judgment evidence that the retirees had a lifetime vested right to

health insurance benefits. Apparently assuming that it will

prevail on the vesting issue, Masonite argues on appeal that it is

entitled to summary judgment on the fiduciary duty claims because

the retirees’ benefits were not vested

. 4 Because the vesting issue

is to be reconsidered on remand, we reverse and remand the

retirees’ breach of fiduciary duty claims as well.5 The retirees argue at length that irrespective of the vesting

issue, their breach of fiduciary duty claims should be allowed

under the Supreme Court’s analysis in Varity Corp. v. Howe

, 116 S.

Ct. 1065 (1996). In V arity

, the Court held that an employer, which

also served as an ERISA plan administrator, breached its fiduciary

duty when it induced plan beneficiaries by “deliberate deception”

to “switch employers and thereby voluntarily release [the company]

from its obligation to provide them benefits

. . . .” I d. at 1069.

On the summary judgment record in this case, there is no genuine issue of material fact as to a Varity -type breach of

fiduciary duty. The retirees attempt to create an issue of fact by

pointing to Masonite’s statement that its new Plan was “an effort

to reduce ‘the sky rocketing cost of quality health care.’” This

statement, far from being deceptive, is lit erally true. The

retirees also point to the re-enrollment form sent to retirees for

their signatures, which contained language authorizing the company

to deduct health insurance premiums from the retirees ’ pension

checks, “if applicable.” They argue that the Hobson’s choice posed

by the re-enrollment forms evidences Masonite’s attempt to improve

its own financial position at the retirees’ expense. Even if true,

that fact does not create a fact issue under Varity absent

deception. S ee Curtiss-Wright

, 115 S. Ct. at 1228. Whether the

company is in fact entitled to require retiree premium contribution

is a separate matter that may be resolved by the district court on

remand. In sum, the retirees’ reliance on Varity is misplaced.

The retirees also compla in that the company did not present

the retiree benefits issue for collective bargaining. The simple

a nswer is that the company was not required to do so. S ee Pittsburg Plate Glass , 404 U.S. at 176-82, 92 S. Ct. at 396-99.

13 Given Masonite’s argument on appeal, we take no position as to

whether the Supreme Court’s c onclusion that an employer does not

act as a fiduciary when amending or terminating a benefits plan,

see Curtiss-Wright

, 115 S. Ct. at 1228, applies where vested

benefits are terminated or amended unilaterally by an employer. 514 II.

For these reasons, we reverse and remand to allow the district

court an opportunity to consider extrins i c evidence regarding

whether the parties intended to vest retiree health insurance

benefits, and if so, at what level and at whose expense. Should

the district court determine that there is an issue of fact on the

vesting issue, it should also reconsider whether summary judgment

on the fiduciary duty claims is appropriate.