United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 96-2429

___________

Kent P. Barker; Carla J. *

McAndrews; *

Martin J. Timmons, on behalf of *

themselves and all others *

similarly *

situated, *

 Plaintiffs - * District Court for the

Appellants, * District of Minnesota.

 v. *

Ceridian Corporation, a Delaware *

corporation, individually and as *

successor in interest to Control *

Data Corporation,

 Defendant -

Appellee.

* Appeal from the United States

*

*

*

*

___________

Submitted: February 13, 1997

 Filed: August 26, 1997

___________

Before McMILLIAN, JOHN R. GIBSON, and FAGG, Circuit Judges.

___________

JOHN R. GIBSON, Circuit Judge.

Appellants, a certified class of disabled employees who receive

disability benefits under a long-term disability plan, appeal the district

court's grant of summary 
 Ceridian is the successor-in-interest to Control Data Corporation. Therefore, we 1

will refer to the appellee as Ceridian. 

 The class specifically excluded those individuals who were members of the class 2

in Chiles v. Ceridian Corporation, Inc., a suit filed in the United States District Court

for the Western District of Oklahoma. An opinion regarding this class action is

recorded at 95 F.3d 1505 (10th Cir. 1996). 

-2-

judgment for their employer, Ceridian Corporation, that allowed Ceridian

to stop paying the employees' health, dental, and life insurance premiums.

The employees bring their claim under the Employee Retirement Income

Security Act of 1974, 29 U.S.C. §§ 1001-1461 (1994). They argue that the

district court's grant of summary judgment was erroneous because Ceridian

provided vested disability benefits and did not unambiguously reserve the

right to retroactively change the level of disability benefits that

employees would receive in the future. They further argue that the

extrinsic evidence they submitted created a genuine issue of material fact

concerning Ceridian's right to change disability benefits retroactively.

Because the long-term disability plan does not unambiguously reserve to

Ceridian the right to change the disability benefits retroactively, a

genuine issue of material fact exists. Accordingly, we reverse the

district court's judgment and remand for additional discovery and a trial.

Appellants Kent P. Barker, Carla J. McAndrews, and Martin J. Timmons

represent a class of disabled employees of Ceridian Corporation. The class

includes all employees of Ceridian, formerly known as Control Data

Corporation, who were disabled before January 1, 1991 for whom Ceridian

1

paid health, life, and dental insurance premiums on or before December 31,

1993. Until December 31, 1993, Ceridian paid each class member's premiums 2

for the life, health, and dental insurance in which they were enrolled at

the time they became disabled. Ceridian also paid the disabled employees

60% of their pre-disability wage. Beginning January 1, 1994, Ceridian

stopped paying the premiums and required the employees to pay their own

premiums to continue their insurance coverage. 
The quoted language is from the 1986 Disability Income Protection summary 3

plan description. The language of the 1983 summary plan description is slightly

different, though substantively the same.

-3-

Appellants brought this action alleging that Ceridian's refusal to

continue paying their insurance premiums violates ERISA. The parties'

arguments revolve around the ERISA plans offered by Ceridian. Years ago,

Ceridian adopted several benefit plans for its employees, including a

health care plan, dental assistance plan, life insurance plan, and

disability plan. Formal plan documents described each plan. In addition,

as required by ERISA, 29 U.S.C. § 1022 (1994), Ceridian provided its

employees with a summary plan description for each plan that described the

various benefits offered by the plans and claim procedures. For several

years the company issued summary plan descriptions to employees in separate

booklets for each type of benefit, but starting in 1989 Ceridian combined

the summary plan descriptions for all of the various plans into a single

benefits manual. 

Before 1989 the Disability Income Protection summary plan

descriptions summarized three disability plans: sick leave, short-term

disability, and long-term disability. Under the long-term disability

plans, disabled employees were eligible for long-term disability status

beginning after their fifth consecutive month of disability. Employees who

qualified under this plan were entitled to up to 60% of their predisability salary. The summary plan descriptions also provided: "While

on Long-Term Disability Status the company will pay the premiums for all

the company-sponsored benefits (medical, life, and dental) for which you

and your dependents were enrolled before your disability began. The

company will continue paying all premiums until you and your dependents are

no longer eligible for the plans." A chart in the summary plan

3

descriptions reiterated Ceridian's promise to pay the disabled employees'

insurance premiums. The formal document for the long-term disability plan,

however, did not contain any reference to the terms, conditions, or

descriptions of health, dental, or life 
-4-

insurance benefits. During the period before 1989 the individual plan

documents for the dental, life, and health insurance plans also stated that

Ceridian would pay the insurance premiums during the employee's disability.

The plans in effect before 1989 also contained provisions discussing

plan amendment and termination. The Disability Income Protection summary

plan descriptions provided: "Control Data expects to continue the LongTerm Disability Plan indefinitely, but must reserve the right to change or

discontinue it if it becomes necessary. This would be done only after

careful consideration." The amendment and termination language in the

formal plan document differed slightly from the language in the summary

plan descriptions. The formal plan allowed plan amendments if deemed

advisable by Ceridian and reserved Ceridian's right to terminate the plan

at any time. 

The Long-Term Disability Plan's reservation of rights provision

included additional language relevant to this action. Before 1989 the

disability summary plan descriptions expressly provided: "If the group

Long-Term Disability Plan terminates, and if on the date of such

termination you are totally disabled, your Long-Term Disability benefits

and your claim for such benefits will continue as long as you remain

totally disabled as defined by the plan." The formal long-term disability

plan made the same promise. This language was not found in the documents

for the dental, health, or life insurance benefit plans. Instead, the termination

provision in the 1984 summary plan description of the dental and life insurance plan, and the 1983 summary plan

description of the health care plan provided: "If, while you or your dependents are covered under this plan, the

plan terminates or the class of employees of which you are a member has its coverage terminated, then no benefits

(including extended benefits) will be payable to you for any charges, fees, or expenses incurred on or after that

date of termination of the policy or termination of the class." The 1984 life insurance summary plan description

included the same provision. 
-5-

Effective January 1, 1989, Ceridian issued an employee benefits

manual that combined the summary plan descriptions for its employee benefit

plans. The disability section of the 1989 Benefits Manual repeated

Ceridian's agreement to pay the health, life, and dental insurance premiums

of disabled employees. However, the 1989 Benefits Manual contained a

different reservation of rights provision: "While [Ceridian] plans to

continue these plans and programs, it reserves the right to change or

cancel them at any time." The manual made no mention of Ceridian's promise

to continue paying disability benefits if Ceridian terminated the plan, as

promised in previous Long-Term Disability summary plan descriptions. The

formal Long-Term Disability Plan in effect at that time, however, continued

to contain this agreement: "Notwithstanding termination of the Plan, a

Participant who is Totally Disabled on the effective date of the Plan

termination and is otherwise entitled to benefits hereunder, shall continue

to receive benefits in accordance with the terms of the Plan."

In 1991, Ceridian issued a new employee benefits manual that stated

that Ceridian would no longer pay the health, dental, and life insurance

premiums for employees who became disabled on or after January 1, 1991.

Ceridian told Barker, a class representative, that this change only applied

to employees who became disabled on or after January 1, 1991. This change

did not affect the benefits Ceridian paid to the class members, which

included 60% of their pre-disability wage and 100% of their life, health,

and dental insurance premiums.

In 1992, Ceridian changed its long-term disability plan again.

Effective January 1, 1992, Ceridian allowed active, non-disabled employees

to choose to pay a higher disability premium in return for an increase in

their long-term disability income benefit to 70% of their pre-disability

earnings. Ceridian again explained to Barker that this change only applied

prospectively. 

In the fall of 1993, Ceridian notified the disabled employees that

it would stop paying 100% of their health, life, and dental insurance

premiums beginning January 1, 
-6-

1994. The disabled employees then brought this action. The district court

held that the employees had no vested interest in company-paid premiums

because the plan documents showed that Ceridian had no specific intent to

be unconditionally bound in the future. Further, the district court

concluded that the termination and amendment clauses included in the plan

documents defeated the employees' claim for vested insurance premium

benefits. Even if the language in the plans was ambiguous and could be

interpreted as expression of an intent to provide vested company-paid

premiums to disabled employees, the district court concluded that the only

extrinsic evidence in the record reflected Ceridian's intent to reserve its

right to change all aspects of the plan. Accordingly, the district court

granted summary judgment for Ceridian. 

On appeal, the disabled employees argue that the district court's

grant of summary judgment was erroneous because Ceridian provided vested

disability benefits and did not unambiguously reserve the right to change

the level of disability benefits retroactively. The employees also contend

that the extrinsic evidence they submitted creates a genuine issue of

material fact concerning Ceridian's right to change disability benefits

retroactively. Ceridian argues that the plan documents did not provide a

vested right to 100% payment of the insurance premiums and that Ceridian

unambiguously reserved its right to change or terminate the welfare

benefits paid to the disabled employees. 

We review de novo a grant of summary judgment. See McKee v. Federal

Kemper Life Assurance Co., 927 F.2d 326, 328 (8th Cir. 1991). Summary

judgment is appropriate if "there is no genuine issue as to any material

fact and . . . the moving party is entitled to judgment as a matter of

law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323

(1986). We construe the factual record and all reasonable inferences from

the record in the light most favorable to the party opposing summary

judgment. See Schrader v. Royal Caribbean Cruise Line, Inc., 952 F.2d

1008, 1013 (8th Cir. 1991). In interpreting the terms of this ERISA Plan,

it is appropriate to apply 
-7-

a de novo standard of review, see Firestone Tire & Rubber Co. v. Bruch, 489

U.S. 101, 115 (1989), "giving the language its common and ordinary meaning

as a reasonable person in the position of the [plan] participant, not the

actual participant, would have understood the words." Chiles v. Ceridian

Corp., 95 F.3d 1505, 1511 (10th Cir. 1996) (quotations omitted). 

I.

ERISA distinguishes between two kinds of employment benefits--welfare

benefits and pension benefits. See 29 U.S.C. § 1002(1)-(2) (1994). The

employees concede that the plans at issue before us are employee welfare

benefit plans. Though pension plans are subject to mandatory vesting

requirements, see 29 U.S.C. § 1053 (1994), welfare plans are not subject

to such standards, and employers generally are free to amend or terminate

these plans unilaterally. See Curtiss-Wright Corp. v. Schoonejongen, 514

U.S. 73, 78 (1995); Jensen v. SIPCO, Inc., 38 F.3d 945, 949 (8th Cir.

1994), cert. denied, 514 U.S. 1050 (1995). However, the simple fact that

ERISA does not require vesting of welfare benefit plans does not mean that

a welfare benefit plan will never vest. An employer and employee may

contract for post-employment welfare benefits that vest. See In re White

Farm Equip. Co., 788 F.2d 1186, 1193 (6th Cir. 1986).

ERISA requires that employee benefit plans be established by a

written instrument. See 29 U.S.C. § 1102(a)(1). Therefore, any promise

to provide vested benefits must be "incorporated, in some fashion, into the

formal written ERISA plan." Jensen, 38 F.3d at 949 (quotation omitted).

Summary plan descriptions are considered part of ERISA plan documents.

See id. Adequate disclosure to employees is one of ERISA's major purposes.

See id. at 952. Because of the importance of disclosure, in the event of

a conflict between formal plan provisions and summary plan provisions, the

summary plan description provisions prevail. See id.
-8-

When interpreting ERISA plan documents, we look to the law of trusts:

"The terms of trusts created by written instruments are 'determined by the

provisions of the instrument as interpreted in light of all the

circumstances and such other evidence of the intention of the settlor with

respect to the trust as is not inadmissable.'" Id. at 950 (quoting Bruch,

489 U.S. at 112). In determining if other evidence is admissible we look

to the language of the plan provision at issue and consider whether the

provision is ambiguous:

that intent [of the settlor] is first sought by careful

examination of the trust clause in question, giving the words

in that clause their ordinary meanings. If the construction

question cannot be resolved by reference to the clause alone,

the court will examine the entire trust instrument to determine

the creator's intent and purposes. . . . [T]he third step

becomes necessary when the intent or meaning of the settlor.

. . . cannot be determined by reference to the provisions of

the trust instrument itself. Extrinsic evidence will be

admitted by the court to assist it in determining the meaning

and effect of the particular clause. 

Id. (quotation omitted). 

II.

As described above, the reservation of rights clauses in the longterm disability plans provided that if the plans terminated Ceridian would

continue paying disability benefits to those totally disabled at the time

of the plan termination. This differed from the reservation of rights

clauses in the health, dental, and life insurance plans, which simply

provided that Ceridian might change or discontinue the plans if it became

necessary. Therefore, to determine which reservation of rights provisions

apply to the disabled employees' claims, we must determine the source of

Ceridian's promise to pay the insurance premiums. 
-9-

The employees contend that the promise to pay the insurance premiums

stems from the long-term disability plan itself. The 1983 and 1986 plans

made several references to the health, dental, and life insurance premiums.

For example, the plans provided that while an employee is on long-term

disability status Ceridian will pay all the medical, life, and dental

benefits for which the employee and dependents were enrolled before the

disability began. The plans also provided a chart summarizing benefits

available during disability. Each of these charts expressly provided that

Ceridian would pay premiums for health, dental, and life insurance programs

for employees on long-term disability status. 

Ceridian points to the plan documents for the health, dental, and

life insurance plans that discuss how the respective benefits will be

handled during a period of disability. In light of this language, Ceridian

argues that its liability for payment of insurance premiums comes from the

separate insurance coverage plans. Ceridian contends the disability plan

is simply for income protection, and does not in its own afford a right

to the insurance premiums.

In considering the conflicting arguments, we reiterate that we apply

a de novo standard of review to interpret the terms of a plan and give the

plan’s language the "common and ordinary meaning . . . a reasonable person

in the position of the [plan] participant, not the actual participant,

would have understood the words." See Chiles, 95 F.3d at 1511.

We hold that a reasonable person in the position of a plan

participant would believe the language of the disability summary plan

descriptions assured payment of the various insurance premiums. "A

[summary plan description] is intended to be a document easily interpreted

by a layman; an employee should not be required to adopt the skills of a

lawyer and parse specific undefined words throughout the entire document

to determine whether they are consistently used in the same context." Id.

at 1517-18. The long-term disability summary plan descriptions repeatedly

promise that 
-10-

Ceridian will pay company-sponsored insurance premiums. In 1989 only the

long-term disability summary plan description contained the promise to pay

the insurance premiums. The individual life, health, and dental insurance

plans did not promise that Ceridian would continue to pay insurance

premiums for employees who become disabled. 

Finally, in response to Ceridian's argument that the disability plan

benefits only include income protection, in a real sense requiring disabled

employees to pay their insurance premiums out of their 60% salary

replacement benefit increases their income loss. See Chiles, 95 F.3d at

1517. Indeed, Ceridian's prospective plan amendment in 1992 that allowed

disabled employees to receive 70%, rather than 60%, of their pre-disability

earnings, may well have been intended to help compensate for Ceridian's

1991 plan change that required employees who became disabled after January

1, 1991 to pay part of their own insurance premiums. A reasonable person

in the position of a plan participant would conclude upon reading the plans

that the long-term disability plan, and not the individual health, life,

and dental insurance plans, provide payment of the insurance premiums. Cf.

id. at 1516-19 (not possible to determine from the language of the longterm disability plan what benefits the plan includes, and therefore issue

is not appropriate for summary judgment). 

III.

Now that we have determined which plans control our analysis, we turn

to the employees' argument that Ceridian's promise to pay insurance

benefits until they were no longer disabled vested at the time the

employees became disabled, and that Ceridian did not unambiguously reserve

the right to change the level of disability benefits retroactively.

Because welfare benefits do not statutorily vest under ERISA, the employees

carry the burden of showing an agreement or other demonstration of employer

intent to vest benefits. See Houghton v. SIPCO, Inc., 38 F.3d 953, 957

(8th Cir. 1994). 
-11-

In support of their argument the employees cite Local Union No. 150-

A, United Food & Commercial Workers International Union v. Dubuque Packing

Co, 756 F.2d 66 (8th Cir. 1985). They argue that this case provides that

benefits are vested when receipt of benefits depends on an employee's

status. In Dubuque Packing, the court first looked at the language in the

plan documents and determined that the language was ambiguous. After

examining the extrinsic evidence, the court concluded that the plaintiffs

had proved that the parties intended the benefits to vest when the parties

retired. Id. at 70. Dubuque Packing thus stands for the proposition that

parties can intend to provide vested benefits. We therefore look to see

whether there was an intent to provide vested benefits in this case.

Because welfare benefits do not automatically vest as a matter of law, the

issue is "simply one of contract interpretation," Anderson v. Alpha

Portland Indus., Inc., 836 F.2d 1512, 1516 (8th Cir. 1988), cert. denied,

489 U.S. 1051 (1989), which is a question of law. See Dubuque Packing, 756

F.2d at 69. Where a contract is ambiguous, a court may weigh extrinsic

evidence to assist in construing the language. See id.

The language of the 1986 disability income protection summary plan

description provides: "While on Long-Term Disability Status the company

will pay the premiums for all the company-sponsored benefits (medical,

life, and dental) for which you and your defendants were enrolled before

your disability began. The company will continue paying all premiums until

you and your dependents are no longer eligible for the plans." The

language of the 1983 summary plan description and the 1985 formal plan make

the same promise. The 1983 and 1986 disability summary plan descriptions,

however, state: "[Ceridian] expects to continue the Long-Term Disability

Plan indefinitely, but must reserve the right to change or discontinue it

if it becomes necessary. This would be done only after careful

consideration." The 1989 disability summary plan description contains a

similar reservation of rights provision. 
-12-

In short, we are faced with a clause that provides that Ceridian will

pay insurance premiums until an employee is no longer disabled or no longer

eligible for the plan and a reservation of rights clause that allows

Ceridian to change or discontinue the plan. The conflict between these

clauses brings us face to face with difficult contract interpretation

questions. Several courts have considered similarly conflicting clauses

and have not answered this puzzling question uniformly. See, e.g., Diehl

v. Twin Disc, Inc., 102 F.3d 301, 306-09 (7th Cir. 1996); Chiles, 95 F.3d

at 1511-14; In re Unisys Corp. Retiree Med. Benefit ERISA Litig., 58 F.3d

896, 902-905 (3rd Cir. 1995); Gable v. Sweetheart Cup Co., Inc., 35 F.3d

851, 855-58 (4th Cir. 1994), cert. denied, 514 U.S. 1057 (1995); Bidlack

v. Wheelabrator Corp., 993 F.2d 603, 605-10 (7th Cir.), cert. denied, 510

U.S. 909 (1993). This court recently has addressed this question in

Jensen. 

In Jensen, a class of retired employees brought suit against SIPCO,

their employer, after SIPCO changed its medical benefit plan for retirees.

The plan at issue provided that SIPCO would pay medical benefits until a

retiree died, or a spouse divorced, or a child married or reached age

nineteen. 38 F.3d at 950. Observing that this promise was "at most an ambiguous expression

of an intent to vest retiree benefits," id., we then considered the plan's reservation of rights clauses, which

provided, "[T]he Company shall have the right and power to alter, amend, or annul any of the provisions of this

. . . Plan . . . . Unless otherwise expressly provided therein, amendments shall not be applicable to persons who

are receiving pensions hereunder prior to the effective date of such amendment." Id. at 948-49. Focusing on the

language which allowed SIPCO to amend or terminate "any of the provisions of th[e] . . . Plan," we held that the

reservation of rights provisions at issue were not free from ambiguity. Id. at 950. We observed that "the question

at this stage of the analysis is whether these provisions are so unambiguous as to make unnecessary any reference

to other Plan provisions and extrinsic evidence." Id. We held that the reservation of rights clauses were "not

facially unambiguous--they leave at least some doubt as to whether SIPCO intended to reserve the right to change

or terminate benefits to already retired pensioners, or only 
-13-

the right to make prospective changes for those covered by the Plan but not yet retired." Id. Because of the

ambiguity in the plan, we held that the district court properly considered the extrinsic evidence. Id. 

The reservation of rights clauses in Jensen and in the plans before us today are materially

indistinguishable. Both plans provided a welfare benefit until a person was no longer eligible for the plan, yet

retained the right to amend or terminate the plan. Jensen thus controls our analysis, and we hold that Ceridian's

plans are ambiguous concerning whether Ceridian can retroactively change benefits to disabled employees. See

also American Fed'n of Grain Millers v. International Multifoods Corp., 116 F.3d 976, 980 (2d Cir. 1997) (to

reach a trier of fact it is enough to point to written language that could be interpreted as a promise to vest the

recipient's benefits). 

 Ceridian attempts to distinguish Jensen, arguing that the reservation of rights clauses in the two cases

differ. Specifically, Ceridian contends that the language in SIPCO's plan states that plan amendments would not

apply to persons who are receiving pensions before the date of the amendment unless the amendment said so

expressly. Ceridian says this clause made the reservation of rights clauses in Jensen more ambiguous than the

clause before us. Jensen, however, did not mention this part of the termination clause in its discussion of the

plan's ambiguity. 38 F.3d at 950. In fact, we believe this phrase makes SIPCO's plan even less ambiguous than

Ceridian's plan because SIPCO implicitly reserved the right to make retroactive changes to its plan so long as it

expressly provided that the amendments would apply to already retired employees. SIPCO expressly sent those

employees that already had retired a new summary plan description which contained a new clause. This clause

informed the recipients that SIPCO reserved the right to change or amend the plan. Id. at 948. Therefore, the

employees in this case have a stronger argument than those who prevailed in Jensen.
 The 1989 summary plan description did not include, nor contradict, this promise. 4

Nonetheless, the promise was included in the formal plan document that was in effect

in 1989. We conclude, therefore, that the 1989 Long-Term Disability Plan included

this promise.

 This quoted language is from the 1984 summary plan description for the dental and 5

life insurance plans. The language for the 1983 health care plan differs slightly, though

it is substantively the same.

-14-

In contrast to Jensen's termination of rights clause, nothing in Ceridian's plan documents imply that

Ceridian reserved the right to change the benefits to already disabled employees. To the contrary, Ceridian's plan

language provided assurances that previously disabled employees would continue to receive benefits. The

reservation of rights clause was tempered by the promise: "If the group Long-Term Disability Plan terminates,

and if on the date of such termination you are totally disabled, your Long-Term Disability benefits and your

claims for such benefits will continue as long as you remain totally disabled as defined by the plan." This

4

termination clause is in stark contrast to the termination clause included in the individual health, life, and dental

plans. The 1984 summary plan description of the dental and life insurance plan, and the 1983 summary plan

description of the health plan provided: "If, while you or your dependents are covered under these plans, the plans

terminate or the class of employees of which you are a member has its coverage terminated, then no benefits

(including extended benefits) will be payable to you for any charges, fees, or expenses incurred on or after that

date of termination of the policy or termination of the class."5

The differences in the wording of the termination clauses in the disability plan and the individual health,

dental, and life insurance plans indicate Ceridian was more interested in providing continuing payment of

insurance premiums to disabled employees than to other employees. The question we are faced with is the

amount of greater protection. Ceridian cites Chiles, and argues that Ceridian did not terminate the plan, but

simply changed the benefits provided by the plan. Therefore, it concludes that 
The Tenth Circuit concluded that a genuine issue of material fact existed

6

concerning what benefits were covered by the termination clause and remanded the

case to the district court. 95 F.3d at 1516-19. 

-15-

the termination clause providing for continuation of benefits when the plan is terminated was not triggered. In

Chiles, a class of disabled employees filed suit against their employer, Ceridian, arguing that Ceridian violated

ERISA when Ceridian changed the benefits it paid to the disabled employees. The Tenth Circuit determined that

only termination of the plan would vest disability benefits, rejecting the employees' arguments that the benefits

vested once an employee became disabled. 95 F.3d at 1513. The Tenth Circuit held that the long-term disability

plan had indeed terminated. Id. at 1516. Accordingly, whatever benefits the termination clause referred to were

vested under the language of the plan.6

We are satisfied we should not apply Chiles's reasoning to the case before us. Chiles involved former

employees of Imprimis, a division of Control Data. See id. at 1508. Unlike the class in Chiles, members of the

class before us were not employees of Control Data's Imprimis Division. See id. at 1509-10 n.1. In fact, Chiles

points out that a separate class of employees had been formed for the action before us. See id. 

Chiles also indicates that Control Data sold Imprimis to Seagate Technology in 1989. See id. at 1508.

Before the sale, Chiles's class of employees had been deemed disabled and were receiving disability benefits under

a Control Data long-term disability plan. See id. The plan seemed to contain the same provisions as the plan

before us as described above, which provided that the Company would pay the premiums for the life, medical,

and dental insurance programs in which an employee was enrolled before disability began. As part of the sale,

Seagate agreed to administer the Imprimis Division employees' rights according to the terms of the Control Data

Plan. See id. Thereafter, Seagate created a new long-term disability plan. See id. All aspects of the

administration of the long-term disability plan thus transferred to 
-16-

Seagate, but Control Data continued to administer the health, life, and dental insurance plans. See id. at 1508-09.

Chiles went on to hold that Control Data's long-term disability plan terminated after the sale of Imprimis

Division, as none of the Control Data disability plan operation and administrative procedures remained in effect.

Id. at 1516.

Nothing in the record before us indicates that a similar course of transactions occurred with respect to

the plans applicable to the parties in this case. 

We also observe that other circuits have criticized the reasoning upon which Chiles is based. For

example, in evaluating an ERISA plan in Diehl, the Seventh Circuit specifically concluded that it "need not

undertake such interpretive gymnastics" as used in Chiles. See 102 F.3d at 307. In Grain Millers, the Second

Circuit observed that Chiles required that the right to receive lifetime coverage must be found in plan documents

and stated in clear and express language. 116 F.3d at 980. Grain Millers, however, emphasized that this was

not the law of the Second Circuit. Id. The Second Circuit required only that an employee point to written

language capable of reasonably being interpreted as creating a promise of vested benefits in order to reach a trier

of fact. Id. 

Further, Chiles itself pointed out that recent cases from other circuits were not uniform in determining

whether a general reservation of rights clause unambiguously controls a separate promise of benefits upon

retirement. Chiles, 95 F.3d at 1511-12. It specifically contrasted the difference in the Third Circuit's decision

on this issue as demonstrated in In re Unisys, 58 F.3d at 904 (a general reservation of rights clause

unambiguously controls a separate promise of benefits upon retirement), with the approach of this circuit as

demonstrated in Jensen, 38 F.3d at 950 (two general reservation of rights clauses not facially unambiguous).

Id. at 1512. Though in Chiles the Tenth Circuit followed the In re Unisys approach, Jensen is a recent wellreasoned 
The Supreme Court's remand of DeGeare was based on its decision in Bruch.

7

In DeGeare, we held that a plan's fiduciary's interpretation of plan terms was entitled

to deference on review. 837 F.2d at 814-15. Our discussion, however, did not end

there, and we went on to hold that the administrator correctly construed the plan

documents. Id. at 815. We then applied basic contract interpretation law established

in our circuit. Id. at 815-16. Bruch's holding does not affect the contract interpretation

principles discussed in the central part of DeGeare and thus, the basic contract

interpretation principles of DeGeare still apply. See Howe v. Varity Corp., 896 F.2d

1107, 1109 n.4 (8th Cir. 1990). 

-17-

opinion of this circuit that we are bound to follow. Therefore, Jensen provides a roadmap for our analysis in the

case before us today. 

 The disability plan provides that Ceridian will pay the health, life, and dental premiums for disabled

employees until they are no longer disabled. In support of this promise, the plan assured that if the plan was

terminated, benefits would continue for any employee totally disabled when the plan terminated. Courts have a

duty to interpret different clauses of a contract in a harmonious fashion, giving meaning to all clauses where

possible. 

[A]n elementary rule of contract interpretation is that a contract should be construed so as to

give effect to all the contract's provisions. Similarly, if two clauses of a contract appear to be

in conflict, the preferred interpretation is the one that gives a harmonious interpretation to the

clauses in order to avoid rendering either one nugatory. 

Johnson Controls, Inc. v. City of Cedar Rapids, 713 F.2d 370, 374 (8th Cir. 1983) (citation and quotation

omitted). When reading plans "[e]ach provision should be read consistently with the others and as part of an

integrated whole. Further, the terms must be construed so as to render none of them nugatory and to avoid

illusory promises." DeGeare v. Alpha Portland Indus., Inc., 837 F.2d 812, 816 (8th Cir. 1988), vacated and

remanded, 489 U.S. 1049 (1989). Here, if Ceridian faced no limit on its ability to change the level of benefits 7

paid to disabled employees the coverage could become all 
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but nominal and make the promise of lifetime benefits illusory. Thus, the employees would be entitled to few

or no benefits, but the termination clause still would not be applicable to protect the benefits received by those

already disabled at the time of termination. See Diehl, 102 F.3d at 309-10 (determining that if a company was

allowed to modify coverage until it became all but nominal, the promise of lifetime benefits would look rather

illusory, and therefore reading the plans to require the company to expend reasonable efforts to keep benefits at

a level commensurate with benefits provided under the original agreement). 

In short, we hold that the reservation of rights clauses at issue here and in Jensen are materially

indistinguishable. The reservation of rights clauses, read with the language promising that Ceridian will pay

insurance benefits until an employee is no longer eligible for the plan, and with the language promising that

Ceridian will continue paying benefits to disabled employees at the time of the plan termination, is ambiguous.

 

IV. 

Where a contract is ambiguous, a court may weigh extrinsic evidence. The district court, after concluding

that the termination and amendment clauses defeated the employees' claim for vested premium payments, also

considered the extrinsic evidence. The district court concluded that the extrinsic evidence did not help the

employees, because the only extrinsic evidence before the court indicated Ceridian's intent to reserve its right to

change all aspects of the disability benefit plans. 

Some of the more significant extrinsic evidence offered by the employees included the fact that before

1994 Ceridian had made only prospective changes to the disability benefits provided under the long-term

disability plan. Second, the employees offered the affidavit of Barker, one of the class representatives. Barker

spent his entire career working in the area of employee benefits. He worked for Ceridian as the Manager of its

Corporate Employee Benefits Department from 1968 to 1975. In this 
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position Barker was responsible for many aspects of the individual domestic corporate employee benefits,

including the design, administration, communication, and funding of Ceridian's health, life, dental, disability, and

retirement plans. In 1986, Ceridian rehired Barker as its principal consultant for international employee benefits.

At this time he also provided support for Ceridian's domestic personnel relations, primarily in the health, life, and

disability benefit areas. In his affidavit Barker stated that he went on long-term disability status in 1988, relying

on Ceridian's promises, that for as long as he was disabled, he would receive 60% of his wages and 100% of

welfare benefits premiums. Though Barker knew that the benefits could be changed, Barker never believed that

Ceridian could retroactively change its obligation to pay the insurance premiums. 

We observe that the extrinsic evidence presented by the employees is similar to the extrinsic evidence

offered in Jensen. In Jensen, the extrinsic evidence offered at trial included evidence that the company's former

employee relations manager had considered medical benefits to be a vested benefit and that the company

previously had made only prospective changes to retiree medical benefits. 38 F.3d at 951. The evidence offered

by the employees here is more than enough to show that a genuine issue of material fact exists concerning whether

Ceridian could change its long-term disability plan retroactively and refuse to pay the insurance premiums for

the disabled employees. 

Accordingly, we remand to the district court for proceedings consistent with this opinion. 

A true copy.

 Attest:

 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.