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.
App ellants, a certified class of disabled employees who receiv e 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 Chil es 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 i s 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, an d life insurance premiums. The em ployees bring their claim under the Employee Retirement Incom e Security Act of 1974, 29 U.S.C. §§ 1001-1461 (1994). They argue that the district court's gran t of summary judgment was erroneous because Ceridian provided vested disab ility benefits and did not unambiguously reserve the right to retroactively change the level of disability benefits tha t employees would receive in the future. They further argue that th e extrinsic evidence they submitted created a genu ine issue of material fact concerning Ceridian's right to change disability benefits retroactively. Becaus e the long-term disability plan does not unambiguously reserve t o Ceridi an the right to change the disability benefits retroactively, a genuine issue of material fact exists. Accordingly, we reverse th e district court's judgment and remand for additio nal 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 clas s includ es all employees of Ceridian, formerly known as Control Dat a Corpora tion, who were disabled before January 1, 1991 for whom Ceridia n 1 paid health, life, and dental insurance premiums on or before December 31, 1993. Until December 31, 1993, Ceridian paid each class membe r'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, Ceridia n stopped paying the premiums and required the employees to pay their ow n premiums to continue their insurance coverage.

## The quoted language is from the 1986 Disability Income Protection summary 3 

## plan descr iption. The language of the 1983 summary plan description is slightl y different, though substantively the same.

-3- Ap pellants brought this action alleging that Ceridian's refusal t o contin ue paying their insurance premiums violates ERISA. The parties ' arguments revolve aro und the ERISA plans offered by Ceridian. Years ago, Ceridi an adopted several benefit plans for its employees, including a health care plan, dental assistance plan, life insurance plan, an d disability plan. Formal plan documents describe d each plan. In addition,

as r equired by ERISA, 29 U.S.C. § 1022 (1994), Ceridian provided it s employees with a summary plan description for ea ch 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 separat e booklets for each typ e of benefit, but starting in 1989 Ceridian combined the summary plan descriptions for all of the various plans into a single benefits manual.

Be fore 1989 the Disability Income Protection summary pla n desc riptions summarized three disability plans: sick leave, short-ter m disabil ity, and long-term disability. Under the long-term disabilit y plans, disabled employees were eligible for long-term disability statu s beginning after their fifth consecutive month of disability. Employees wh o qualified under this plan were entitled to up to 60% of their pre

disability 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. Th e company will continue paying all premiums until you and your dependents ar e
no lo nger eligible for the plans." A chart in the summary pla n 3 descriptions reiterat ed 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, o r descriptions of health, dental, or life

### -4-

insurance benefits. During the period before 1989 the individual pla n documents for the dental, life, and health insurance plans also stated tha t Ceridian would pay the insurance premiums during the employee's disability

.

The plans in effect before 1989 also contained provisions discussing plan amendment and te rmination. The Disability Income Protection summary plan descriptions provided: "Control Data expects to continue the LongTerm Disability Plan indefinitely, but must rese rve the right to change or discontinue it if it becomes necessary. This would be done only afte r carefu l consideration." The amendment and termination language in th e for mal plan document differed slightly from the language in the summar y plan de scriptions. The formal plan allowed plan amendments if deeme d advisable by Ceridian and reserved Ceridian's right to terminate the plan at any time.

The Long-Term Disability Plan's reservation of rights provisio n included additional language relevant to this action. Before 1989 th e disa bility summary plan descriptions expressly provided: "If the grou p Lo ng-TermDisability Plan terminates, and if on the date of suc h termination you are totally disabled, your Long-Term Disability benefits and yo ur claim for such benefits will continue as long as you remai n totally disabled as defined by the plan." The f ormal long-term disability plan made the same pr omise. This language was not found in the documents for the dental, health, or life ins urance benefit plans. Instead, the termination provision in the 1984 summary plan description of the dental an d life insurance plan, and the 1983 summary plan descript ion 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 (includi ng 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- Eff ective January 1, 1989, Ceridian issued an employee benefit s manual that combined the summary plan descriptions for its employee benefi t plans. The disability section of the 1989 Benefits Manual repeate d Ceridian's agreement to pay the health, life, and dental insurance premium s of disa bled employees. However, the 1989 Benefits Manual contained a differe nt reservation of rights provision: "While [Ceridian] plans t o continue t hese plans and programs, it reserves the right to change o r cancel them at any time." The manual made no mention of Ceridian's promis e to continue paying disability benefits if Ceridi an 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, continue d to contain this agreement: "Notwithstanding termination of the Plan, a Participan t who is Totally Disabled on the effective date of the Pla n termination and is otherwise entitled to benefits hereunder, shall continu e 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 applie d to employees who became disabled on or after Jan uary 1, 1991. This change did not af fect the benefits Ceridian paid to the class members, whic h included 60% of their pre-disability wage and 100% of their life, health, and dental insurance premiums. In 199 2, Ceridian changed its long-term disability plan again

. Effective January 1, 1992, Ceridian allowed acti ve, non-disabled employees to choose to pay a hi gher 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 applie d prospectively. In the f all of 1993, Ceridian notified the disabled employees tha t it would s top paying 100% of their health, life, and dental insuranc e premiums beginning January 1,

### -6-

1994. The disabled employees then brought this action. The district cour t hel d that the employees had no vested interest in company-paid premium s because the plan docu ments showed that Ceridian had no specific intent to be u nconditionally bound in the future. Further, the district cour t concluded that the te rmination and amendment clauses included in the plan do cuments defeated the employees' claim for vested insurance premiu m benefit s. Even if the language in the plans was ambiguous and could b e interp reted as expression of an intent to provide vested company-pai d premiums to disabled employees, the district cou rt concluded that the only extrinsic evidence in the record reflected Ceridian's intent to reserve it s right to change all a spects 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 a nd did not unambiguously reserve the right to change the level of disability benefits retroactively. The employees also conten d that th e extrinsic evidence they submitted creates a genuine issue o f material fact concerning Ceridian's right to change disability benefit s retroactively. Cerid ian argues that the plan documents did not provide a vested right to 100% payment of the insurance premiums and that Ceridian unambi guously reserved its right to change or terminate the welfar e 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). Summar y 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 o f 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 summar y judgm ent. See Schrader v. Royal Caribbean Cruise Line, Inc. , 952 F.2 d 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 , 48 9 U.S. 101, 115 (1989), "giving the language its c ommon and ordinary meaning as a reasonable perso n in the position of the [plan] participant, not the actual participant, w ould 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--w elfare 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 vestin g requirements, see 29 U.S.C. § 1053 (1994), welfare plans are not subject to such standards, an d employers generally are free to amend or terminate these plans unilaterally. See Curtiss-Wright Co rp. 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). Howe ver, the simple fact that ERISA does not require vesting of welfare benefi t plans does not mean that

a w elfare benefit plan will never vest. An employer and employee ma y contract for post-emp loyment 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 th e formal written ERISA plan." Jensen , 38 F.3d at 949 (quotation omitted). Sum mary 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. Beca use of the importance of disclosure, in the event of a conflict between formal plan provisions and su mmary plan provisions, the summary plan description provisions prevail. See id.

### -8- When interpreting ERISA plan documents, we look to the law of t rusts: "The terms of trusts created by written instrume nts are 'determined by the provision s of the instrument as interpreted in light of all th e circumstances and such other evidence of the int ention 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 la nguage of the plan provision at issue and consider whether th e provision is ambiguous:

tha t intent [of the settlor] is first sought by carefu l examination of the trust clause in question, giving the words in that clause their ordinary meanings. If the constructio n 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 ste p bec omes necessary when the intent or meaning of the settlor

.

. . . ca nnot be determined by reference to the provisions o f th e trust instrument itself. Extrinsic evidence will b e admitted by the court to assist it in determining the meaning and effect of the particular clause.

Id. (quotation omitted).

II.

As descr ibed above, the reservation of rights clauses in the long

term disability plans provided that if the plans terminated Ceridian would continue paying disab ility benefits to those totally disabled at the time of th e plan termination. This differed from the reservation of right s clauses in the health, dental, and life insurance plans, which simpl y provided that Ceridia n might change or discontinue the plans if it became necessary. Therefore, to determine which reserv ation 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 promi se to pay the insurance premiums stems from the long-t erm disability plan itself. The 1983 and 1986 plans made several references to the health, dental, and life insurance premiums

. For e xample, the plans provided that while an employee is on long-ter m disabil ity status Ceridian will pay all the medical, life, and denta l ben efits for which the employee and dependents were enrolled before th e dis ability began. The plans also provided a chart summarizing benefit s available during disability. Each of these char ts expressly provided that Ceridian would pay premiums for health, dental, and life insurance program s for employees on long-term disability status.

Cerid ian points to the plan documents for the health, dental, an d life in surance plans that discuss how the respective benefits will b e handled during a period of disability. In light of this language, Ceridia n argues that its liability for payment of insuran ce premiums comes from the separate insurance co verage 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 argum ents, we reiterate that we apply a de novo standard of review to interpret the te rms 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 pla n partic ipant would believe the language of the disability summary pla n descri ptions assured payment of the various insurance premiums. " A [summary plan description] is intended to be a d ocument 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 pl an descriptions repeatedly promise that

### -10-

Ceridian will pay com pany-sponsored insurance premiums. In 1989 only the long-term disability summary plan description co ntained the promise to pay the insurance premiums. The individual life, he alth, and dental insurance plans did not promise that Ceridian would continue to pay insuranc e premiums for employees who become disabled.

Finally, in response to Ceridian's a rgument that the disability plan benefits only include income protection, in a real sense requiring disable d emplo yees to pay their insurance premiums out of their 60% salar y replacement benefit increases their income loss. See Chiles , 95 F.3d at 1517. Indeed, Ceridi an's prospective plan amendment in 1992 that allowed disabled employees to receive 70%, rather than 60%, of their pre-disabilit y
ear nings, may well have been intended to help compensate for Ceridian' s 1991 plan change that required employees who bec ame disabled after January 1, 1991 to pay part o f their own insurance premiums. A reasonable person in the position of a plan participant would conclude upon reading the plan s 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, w e turn to the employees' argument that Ceridian's promise to pay insuranc e ben efits until they were no longer disabled vested at the time th e employees became disabled, and that Ceridian did not unambiguously reserve the ri ght to change the level of disability benefits retroactively

. Because welfare benefits do not statutorily vest under ERISA, the employee s carry the burden of showing an agreement or other demonstration of employe r intent to vest benefits. See Houghton v. SIPCO, Inc. , 38 F.3d 953, 95 7 (8th Cir. 1994).

### -11- In support of their argument the emp loyees cite Local Union No. 150- A, United Food & Commercial Workers Internationa l Union v. Dubuque Packing Co , 756 F.2d 66 (8th Cir. 1985). They argue that this case provides that benefit s are vested when receipt of benefits depends on an employee' s status. In Dubuque Packing , the court first loo ked at the language in the plan do cuments and determined that the language was ambiguous. Afte r examining the extrins ic evidence, the court concluded that the plaintiffs had proved that the parties intended the benefit s to vest when the parties retired. Id. at 70. Dubuque Packing thus stand s for the proposition that parties can intend to provide vested benefits. We therefore look to see whet her there was an intent to provide vested benefits in this case

. Because welfare benefits do not automatically ve st as a matter of law, the issue is "simply one of contract interpretation," Anderson v. Alph a 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 , 75 6 F.2d at 69. Where a contract is ambiguous, a court may weigh extrinsi c evidence to assist in construing the language. See id.

The language of the 1986 disability income protection summary pla n description provides: "While on Long-Term Disability Status the compan y will p ay 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 unti l you and y our dependents are no longer eligible for the plans." Th e language of the 1983 summary plan description and the 1985 formal plan mak e the same promise. The 1983 and 1986 disability summary plan descriptions, however, state: "[Ceridian] expects to continue the Long-Term Disability Plan indefinitely, bu t must reserve the right to change or discontinue it if it b ecomes necessary. This would be done only after carefu l 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 Ceridia n will pay insurance premiums until an employee is no longer disabled or no longe r elig ible for the plan and a reservation of rights clause that allow s Ceridian to change or discontinue the plan. The conflict between thes e clause s brings us face to face with difficult contract interpretatio n questions. Several courts have considered similarly conflicting clauses and have not answered this puzzling question uni formly. See , e.g. , Diehl v. Twin Disc, Inc. , 1 02 F.3d 301, 306-09 (7th Cir. 1996); Chiles , 95 F.3d at 1511-14; In re Uni sys 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 i n 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 ret iree died, or a spouse divorced, or a child married or reached ag e ni neteen. 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, whic h provided, "[T]he Company shall have the right and power to alter, amend, or annul any of the provisions of this . . . Plan . . . . Unl ess 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 am end 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 "no t facially unambiguous--they leave at least some doubt as to whethe r 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 th e ambiguity in the plan, we held that the district court properly considered the extrinsic evidence. Id.

The reserv ation of rights clauses in Jensen and in the plans before us today are materiall y indistinguishable. Both plans provided a welfare benefit until a person was no longer eligible for the plan, yet retained the right to am

end or terminate the plan. Jensen thus controls our analysis, and we hold that Ceridian's plans are ambigu ous concerning whether Ceridian can retroactively change benefits to disabled employees. See also Amer ican Fed'n of Grain Millers v. International Multifoods Corp. , 116 F.3d 976, 980 (2d Cir. 1997) (to

re ach a trier of fact it is enough to point to written language that could be interpreted as a promise to vest th e recipient's benefits).

Ceridian attempts to distingu ish Jensen , arguing that the reservation of rights clauses in the two cases differ. Specifically, Ceridian contends tha t 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 s o
e x pressly. 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 th e 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 ame ndments 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 pr omise was included in the formal plan document that was in effect in 19 89. We conclude, therefore, that the 1989 Long-Term Disability Plan include d 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 c are 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 tha t Ceridian reserved the right to change the benefits to alr eady disabled employees. To the contrary, Ceridian's plan langu age provided assurances that previously disabled employees would continue to receive benefits. Th e

reserv ation 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 you r claims for such benefits will continue as long as you remain totally disabled as defined by the plan." Thi s 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 pla n description of the health plan provided: "If, while you or your dependent s 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 benefit s (includi ng 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 term ination clauses in the disability plan and the individual health, de ntal, and life insurance plans indicate Ceridian was more interested in providing continuing payment o f insurance prem iums to disabled employees than to other employees. The question we are faced with is th e amount o f greater protection. Ceridian cites Chiles , and argues that Ceridian did not terminate the plan, bu t simply changed the benefits provided by the plan. Therefore, it concludes that

## Th e Tenth Circuit concluded that a genuine issue of material fact existe d 6 

## concerning what benefits were covered by the termination clause and remanded th e 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 t o the disabled employees. The Tenth Circuit determined that only termina

tion 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. a t 1516. Accordingly, whatever benefits the termination clause referred to were vested under the language of the plan. 6

W e 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 indic ates 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 we re 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 dent al 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 th e administration of the long-term disability plan thus transferred to

### -16-

Seagate, but Control Data continued to administer the health, life, and dent al 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 Imprimi s Division, as none of the Control Data disab ility 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. Fo r example, in evaluating an ERISA plan in Diehl , the Seventh Circuit specifically concluded that it "need no t 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 andstated 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 writte n language capable of reasonably being interprete d as creating a promise of vested benefits in order to reach a trier of fact. Id.

Furt her, Chiles itself pointed out that recent cases from other circuits were not uniform in determining whether a ge neral reservation of rights clause unambiguously controls a separate promise of benefits upo n

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 claus e unambigu ously controls a separate promise of benefits upon retirement), with the approach of this circuit a s 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 well

reasoned

## 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 en d there, and w e went on to hold that the administrator correctly construed the pla n documents. Id. at 815. We then applied basic contract interpretation law established in our circuit. Id. at 815-16. Bruch 's holding does n ot affect the contract interpretation principles discussed in the central part of DeGeare and thus, the basic contrac t interp retation 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 disable d employees until they are no longer disabled. In support of this promise, the plan assured that if the plan wa s 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 wher e possible.

[A]n elementary rule of contract interpretation is that a contract should be construed so as to giv e effect to all the contract's provisions. Similarly, if two clauses of a contract appear to be in co nflict, the preferred interpretation is the one that gives a harmonious interpretation to the clauses in order to avoid rendering either one nugatory.

Johns on Controls, Inc. v. City of Cedar Rapids , 713 F.2d 370, 374 (8th Cir. 1983) (citation and quotatio n omitt ed). When reading plans "[e]ach provision should be read consistently with the others and as part of a n integ rated whole. Further, the terms must be construed so as to render none of them nugatory and to avoi d illusory promises." DeGeare v. Alpha Portland Indus., Inc. , 837 F.2d 812, 816 (8th Cir. 1988), vacated an d 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

### -18-

but nominal and make the promise of lifetime benefits illusory. Thus, the employees would be entitled to few

or n o benefits, but the termination clause still would not be applicable to protect the benefits received by those already d isabled 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 ho ld that the reservation of rights clauses at issue here and in Jensen are materiall y indistinguisha ble. The reservation of rights clauses, read with the language promising that Ceridian will pa y insurance ben efits until an employee is no longer eligible for the plan, and with the language promising tha t Ceridian wi ll 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 th e extrinsic evidence. The district court concluded that the extrinsic evidence did not help th e employees, because the o nly 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-ter m disability p lan. 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 it s principal consultant for international employee benefits. At this time he also provided support for Ceridian's domesti c personnel relations, primarily in the health, life, and disability benefit areas. In his affidavit B arker stated that he went on long-term disability status in 1988, relying

on Ceridi an's promises, that for as long as he was disabled, he would receive 60% of his wages and 100% o f welfare benefits premiums. Thou gh 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 compan y 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 m aterial 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.