Opinion ID: 778463
Heading Depth: 1
Heading Rank: 3

Heading: The District Court's Breach of Contract Ruling.

Text: 15 In ruling on the cross motions for summary judgment, the district court first rejected plaintiffs' ERISA plan enforcement claim, concluding that the Program was an amendment to the Group Benefits Plan, not a separate free-standing ERISA plan, and that the Reservation of Rights provision in the Group Benefits Plan applies to NCR retirees in general. 97 F.Supp.2d at 961. However, the court then ruled in plaintiffs's favor on their breach of contract claims, concluding that the Releases signed by Program participants formed independent bilateral contracts with NCR that must be construed according to basic principles of contract interpretation. As the Releases failed to reserve expressly the unilateral right to amend or cancel the Program's retirement health care benefits, and did not unambiguously refer to another document containing such a reservation of rights, the Releases must be construed against the party that drafted them, NCR, as impliedly promising vested retirement health care benefits. 97 F.Supp.2d at 961-67. 16 In our view, by resolving the ERISA claims before analyzing the breach-of-contract issues, the district court put the cart before the horse. Without question, there was a bilateral contract between NCR and each Program participant defining the terms upon which those parties agreed to terminate their employment relationship. The district court mistakenly treated the Releases themselves as the bilateral contracts. They were only part of the contracts, the part signifying an employee's acceptance of NCR's offer of enhanced early retirement benefits. The Releases contained some contract terms, but most of the terms were set forth in the documents which offered the Program to eligible employees. Those documents and the Releases collectively formed the bilateral contracts. However, the critical error in the district court's breach-of-contract analysis was more fundamental than simply misconstruing the nature of the bilateral contracts. 17 In general, an employment contract between an employer and a non-union employee is governed by state law, not by ERISA or by the federal labor laws. However, to the extent an employment contract provides pension or welfare benefits through a plan or program covered by ERISA, that statute and its remedial provisions completely preempt state law remedies for breach of contract. See, e.g., Lyons v. Philip Morris, Inc., 225 F.3d 909, 912-13 (8th Cir.2000). Thus, in dealing with a multi-faceted employment contract such as NCR's early retirement Program, some facets may be governed by ERISA (such as the Program's promise of enhanced pension benefits), while others may be governed by state law (such as NCR's promises to pay $30,000 in additional salary in 1993 and vacation pay in 1994). If a facet is governed by ERISA, any dispute over the terms of that benefit must be resolved by looking to ERISA's statutory provisions and relevant case law. Claims for ERISA benefits are determined by construing the plan in toto, not a single document such as the Releases in isolation. To be sure, basic principles of contract interpretation are often relevant in construing an ERISA plan. But if the plan, properly construed, does not afford the benefits at issue, they may not be added to the plan by implication from an independent bilateral contract. 18 In this case, we are concerned with enhanced retirement health care benefits. All parties agree that this facet of the Program is an employee welfare benefit plan. Therefore, plaintiffs' claim that those benefits were vested is governed by ERISA. The claim is of course contractual in nature, but the district court erred in looking beyond ERISA plan interpretation principles by splitting plaintiffs' single ERISA claim into distinct ERISA and breach-of-contract components. 2 19