Court Opinion

ID: 769278
Source: CourtListenerOpinion
Date Created: 2012-04-18 09:55:46+00
Date Added: 2024-06-11T17:55:41.880692
License: Public Domain

217 F.3d 539 (7th Cir. 2000)
Frank M. Rosetto, et al., individually  and as representatives of a class of similarly  situated persons,    Plaintiffs-Appellants,v.Pabst Brewing Company, Inc.,    Defendant-Appellee.
No. 99-4076
In the  United States Court of Appeals  For the Seventh Circuit
Argued May 18, 2000Decided June 29, 2000

Appeal from the United States District Court  for the Eastern District of Wisconsin.  No. 96-C-1086--William E. Callahan, Jr., Magistrate Judge. [Copyrighted Material Omitted]
Matthew R. Robbins (argued), Previant, Goldberg, Uelmen, Gratz, Miller & Bruegeman, Milwaukee, WI, for Plaintiffs- Appellants.
James A. Bowles, Dean E. Dennis (argued), Arnold D. Woo, Hill, Farrer & Burrill, Los Angeles, CA, Charles P. Stevens, Michael Best & Friedrich, Milwaukee, WI, for Defendant-Appellee.
Before Posner, Chief Judge, and Diane P. Wood and  Williams, Circuit Judges.
Posner, Chief Judge.

1
This appeal from the grant  of summary judgment in favor of the defendant  requires us to reconsider the much-litigated  issue of when a right to health benefits that is  granted to retired workers by a collective  bargaining agreement (or an ERISA plan, but that  is not this case) survives the termination of the  agreement. See, e.g., Bidlack v. Wheelabrator  Corp., 993 F.2d 603 (7th Cir. 1993) (en banc);  Pabst Brewing Co. v. Corrao, 161 F.3d 434 (7th  Cir. 1998); Frahm v. Equitable Life Assurance  Society, 137 F.3d 955 (7th Cir. 1998); Diehl v.  Twin Disc, Inc., 102 F.3d 301 (7th Cir. 1996);  Murphy v. Keystone Steel & Wire Co., 61 F.3d 560  (7th Cir. 1995); Maurer v. Joy Technologies,  Inc., 212 (6th Cir. 2000); Int'l Union, United Automobile,  Aerospace & Agricultural Implement Workers v.  Skinner Engine Co., 188 F.3d 130 (3d Cir. 1999);  Joyce v. Curtiss-Wright Corp., 171 F.3d 130 (2d  Cir. 1999); Int'l Ass'n of Machinists & Aerospace  Workers v. Masonite Corp., 122 F.3d 228 (5th Cir.  1997). The issue must be decided as a matter of  federal common law developed under the authority  of section 301 of the Taft-Hartley Act, 29 U.S.C.  sec. 185, as interpreted in Textile Workers Union  v. Lincoln Mills, 353 U.S. 448, 456-57 (1957);  see also United Steelworkers of America v.  Rawson, 495 U.S. 362, 368 (1990); In re Bluffton Casting Corp., 186 F.3d 857, 862 (7th Cir. 1999),  or, in the case of an ERISA plan, under the  authority of ERISA. E.g., Pilot Life Ins. Co. v.  Dedeaux, 481 U.S. 41, 55-56 (1987); Fox Valley &  Vicinity Construction Workers Pension Fund v.  Brown, 897 F.2d 275, 281 (7th Cir. 1990) (en  banc); Trustmark Life Ins. Co. v. University of  Chicago Hospitals, 207 F.3d 876, 881 (7th Cir.  2000).

2
The plaintiffs complain not only about the grant  of summary judgment in favor of the defendant but  also about the district court's denial of their  discovery motion. The latter complaint has no  possible merit. The motion was filed two months  after the date set by the court for the  completion of discovery. The plaintiffs gave (and  give) no excuse for their tardiness, and so have  no grounds for complaining about the district  court's welcome effort to expedite the litigation  and spare the parties the expense of protracted  discovery, the bane of modern litigation.

3
The plaintiff class consists of some 45 retired  machinists formerly employed at Pabst's brewery  in Milwaukee, plus their spouses and dependents.  The members of the class received health benefits  under successive collective bargaining agreements  between Pabst and the machinists' union until  1995, when the last such agreement expired (Pabst  closed the brewery the following year). They  claim that the agreements gave them a vested  right to such benefits. The agreements contain  three provisions, essentially unchanged from  agreement to agreement, conferring benefits on  retired employees and their dependents, that bear  on this case: (a) Blue Cross and Blue Shield  medigap insurance for retirees enrolled in  Medicare, plus a Blue Cross-Blue Shield  prescription drug program except insofar as the  retiree "may become eligible [for a similar  benefit] as a result of any future hospital-  surgical legislation"; (b) for those retirees not  enrolled in Medicare, the same coverage as for  active employees; (c) "the coverage described in  subsections (a) and (b) shall continue for the  covered dependents of a deceased retired employee  to the end of the sixth month following the month  in which death occurs."

4
Pabst argues that it is clear from these  provisions that they are effective only during  the term of the collective bargaining agreement  that contains them. If this is right--if someone  who read these provisions without knowing  anything about their background or real-world  context would say, "Yes, it sure looks as if the  provisions are in effect only for the term of the  agreement in which they appear"--then Pabst is  off the hook as a matter of law (that is, the  case would not reach the jury) unless the  plaintiffs can adduce (1) objective evidence of  (2) a latent, or, as it is sometimes called, an  extrinsic, ambiguity. E.g., PMC, Inc. v. Sherwin-  Williams Co., 151 F.3d 610, 614-15 (7th Cir.  1998); Mathews v. Sears Pension Plan, 144 F.3d  461, 466-67 (7th Cir. 1998); Pierce v. Atchison,  Topeka & Santa Fe Ry. Co., 65 F.3d 562, 568 (7th  Cir. 1995); Int'l Union, United Automobile,  Aerospace & Agricultural Implement Workers v.  Skinner Engine Co., supra, 188 F.3d at 145. A  latent ambiguity is an ambiguity (that is,  something that makes it possible to interpret a  document reasonably in more than one way, e.g.,  Anstett v. Eagle-Picher Industries, Inc., 203  F.3d 501, 503 (7th Cir. 2000); Bourke v. Dun &  Bradstreet Corp., 159 F.3d 1032, 1037 (7th Cir.  1998); Computrol, Inc. v. Newtrend, L.P., 203  F.3d 1064, 1070 (8th Cir. 2000)) that is  recognized as such only when a contract clear on  its face--clear, that is, to the uninformed  reader--is applied to a particular dispute. Stone  Container Corp. v. Hartford Steam Boiler  Inspection & Ins. Co., 165 F.3d 1157, 1162 (7th  Cir. 1999); PMC, Inc. v. Sherwin-Williams Co.,  supra, 151 F.3d at 614; AM Int'l, Inc. v. Graphic  Management Associates, Inc., 44 F.3d 572, 575  (7th Cir. 1995); GenCorp, Inc. v. American Int'l  Underwriters, 178 F.3d 804, 818 (6th Cir. 1999);  Charter Oil Co. v. American Employers' Ins. Co.,  69 F.3d 1160, 1167 (D.C. Cir. 1995). The contract  in Raffles v. Wichelhaus, 2 H. & C. 906, 159 Eng.  Rep. 375 (Ex. 1864), for example, called for the  shipment of cotton on the ship Peerless, which  seemed clear enough; only it turned out that more  than one ship of that name would be sailing from  the same port--a fact that once revealed showed  that the contract actually was ambiguous, because  it was uncertain to which ship the contract  referred. And the existence of the two ships was  an "objective" fact in the sense, necessary to  keep the latent-ambiguity doctrine from  destroying reliance on written contracts, that  establishing the fact did not require determining  the credibility of a party's self-serving  testimony.

5
The doctrine of latent ambiguity comes into  play, as we have said, only if someone who read  the contract without knowledge of its real-world  context of application would think it clear. If  even this innocent reader would find the contract  unclear--if, that is, an ambiguity is apparent  just from reading the contract without having to  know anything about how it interacts with the  world--then the contract has what is called a  patent, or intrinsic, ambiguity, and evidence is  admissible to cure it. E.g., Stone Container  Corp. v. Hartford Steam Boiler Inspection & Ins.  Co., supra, 165 F.3d at 1161-62; Home Ins. Co. v.  Chicago & Northwestern Transportation Co., 56  F.3d 763, 767-68 (7th Cir. 1995).

6
So far we have been describing general contract  law, rather than anything special to the issue of  "vested" employee health benefits (that is,  benefits that continue beyond the expiration of  the contract creating them). Our en banc decision  in Bidlack established a presumption that an  employee's entitlement to such benefits expires  with the agreement creating the entitlement,  rather than vesting, but that the presumption can  be knocked out by a showing of genuine ambiguity,  either patent or latent, beyond silence. Bidlack  v. Wheelabrator Corp., supra, 993 F.2d at 606-07;  see also Pabst Brewing Co. v. Corrao, supra, 161  F.3d at 440; Diehl v. Twin Disc, Inc., supra, 102  F.3d at 306; Murphy v. Keystone Steel & Wire Co.,  supra, 61 F.3d at 565.

7
Cases in other circuits are all over the lot.  Some presume vesting. E.g., Maurer v. Joy  Technologies, Inc., supra, 212.  Some insist that there be express language to  that effect. E.g., Int'l Union, United  Automobile, Aerospace & Agricultural Implement  Workers v. Skinner Engine Co., supra, 188 F.3d at  139-47; Gable v. Sweetheart Cup Co., 35 F.3d 851,  855 (4th Cir. 1994). Some presume nothing. E.g.,  Deboard v. Sunshine Mining & Refining Co., 208  F.3d 1228, 1240-41 (10th Cir. 2000); Chiles v.  Ceridian Corp., 95 F.3d 1505, 1511-14 (10th Cir.  1996); Joyce v. Curtiss-Wright Corp., supra, 171  F.3d at 134-35; Barker v. Ceridian Corp., 122  F.3d 628, 634-38 (8th Cir. 1997); Int'l Ass'n of  Machinists & Aerospace Workers v. Masonite Corp.,  supra, 122 F.3d at 231-32.

8
One case holds that benefits are presumed to  vest if they are conferred by a collective  bargaining agreement rather than an unbargained-  for ERISA plan, on the theory that employee  interests are more likely to be reflected in a  negotiated agreement than in one presented to  employees as a condition of their employment.  Int'l Union, United Automobile, Aerospace &  Agricultural Implement Workers v. Yard-Man, Inc.,  716 F.2d 1476 (6th Cir. 1983); contra, Int'l  Union, United Automobile, Aerospace &  Agricultural Implement Workers v. Skinner Engine  Co., supra, 188 F.3d at 139. Several cases adopt  the opposite presumption when (but only when) the  benefits are conferred in an ERISA plan. E.g.,  Sprague v. General Motors Corp., 133 F.3d 388,  400 (6th Cir. 1998) (en banc); Maurer v. Joy  Technologies, Inc., supra, at *6. It can be  argued that a reversal of these presumptions  would make better sense--that if the union  negotiated for such rights, they would surely  appear in the collective bargaining agreement,  whereas an employee ought to get the benefit of  vague language in his ERISA plan. The distinction  between collective bargaining agreements and  ERISA plans is not recognized in our cases, and  we are not minded to embrace it now and make the  law even more complicated than it is. What is  clear and worth remarking, however, is that the  interpretive problem will diminish, at least in  this circuit, in the collective bargaining  setting. For as word of the Bidlack presumption  spreads and collective bargaining agreements are  renegotiated, it will become obvious to unions  that if they want to assure that employer-paid  health benefits for the workers they represent  are vested they will have to insist on explicit  language to this effect.

9
Our presumption against vesting, it is important  to emphasize, kicks in only if all the court has  to go on is silence. If there is some positive  indication of ambiguity, something to make you  scratch your head (but the "something" must be  either language in the plan or contract itself or  the kind of objective evidence that can create a  latent ambiguity under principles of contract  law, Murphy v. Keystone Steel & Wire Co., supra,  61 F.3d at 565), the presumption falls out. The  presumption is thus a default rule, that is, a  rule to be applied when there is no other  evidence, Bidlack v. Wheelabrator Corp., supra,  993 F.2d at 607, 609; E. Allan Farnsworth,  Contracts sec. 7.16, p. 498 (3d ed. 1999), or  what in earlier parlance was called an exploding  presumption--one that disappeared once evidence  was introduced, as distinct from an evidentiary  presumption, which might continue to weigh in the  decision maker's balance after other evidence  came in. Language in American Federation of Grain  Millers v. Int'l Multifoods Corp., 116 F.3d 976,  980 n. 3 (2d Cir. 1997), might lead a reader to  think that Bidlack created an evidentiary  presumption; it did not.

10
Bidlack enables the employer to fend off a trial  without having thought to have included in the  contract an express provision limiting the  duration of the benefits. The presumption plugs  the interpretive hole that would otherwise be  left by silence about duration. But it remains  open to a plaintiff to show that the relevant  contractual provisions contain either patent or  latent ambiguities.

11
Begin with patent ambiguity and recall the three  provisions that bear on the issue of post-  termination rights: (a) Blue Cross and Blue  Shield medigap insurance for retirees enrolled in  Medicare, plus a Blue Cross-Blue Shield  prescription drug program except insofar as the  retiree "may become eligible [for a similar  benefit] as a result of any future hospital-  surgical legislation"; (b) for those retirees not  enrolled in Medicare, the same coverage as for  active employees; and (c) "the coverage described  in subsections (a) and (b) shall continue for the  covered dependents of a deceased retired employee  to the end of the sixth month following the month  in which death occurs." That the coverage in (c)  is to continue for a specified time after the  retiree dies sets at least an outer limit. But  with regard to the duration of the benefits  granted by (a) and (b), benefits sought in this  case along with dependents' benefits, the  contract is silent except insofar as the  reference to future legislation in (a) might be  thought to point beyond the expiration of the  contract, which seems to us a weak inference.  While there is no qualification explicitly  negating such an inference--no "unless the  collective bargaining agreement has expired" or  "during the term of this agreement," the latter  being the formula that we held in Pabst Brewing  Co. v. Corrao eliminated any patent ambiguity--  neither is there any language to suggest that  these benefits survive the expiration of the  agreement.

12
It is unclear whether the reference to coverage  in clause (b) refers only to the scope of the  benefits or also to how long they are to last,  though the former seems the more natural meaning  to impress on the words, which means that (b) is  silent on duration. As is clause (a)--a silence that Pabst argues is pregnant in light of (c),  which does mention duration, though not vesting.  But the contrary inference to what Pabst seeks to  draw from the comparison is as plausible.  Dependent coverage, the subject of clause (c),  would often continue for a very long time were it  not truncated by the six-month provision.  Retirees' dependents will generally be younger  than retirees, as they may include children. And  either because they are younger or because they  are women--and retirees' spouses will generally  be both, since most of Pabst's maintenance  workers we may assume were men, and wives are on  average younger than husbands--they will tend to  have a longer life expectancy. True, the children  will no longer be entitled to medical benefits  once they reach adulthood and so cease to be  dependents; nevertheless dependent coverage is  more open-ended from a durational standpoint than  coverage limited to retirees. And true too, the  younger the dependents are, the lower their  expected health costs are expected to be in the  near term; but by the same token, if they are  under 65 they are ineligible for Medicare and so  may cost the employer more in health benefits  than retirees do, since the benefits granted by  the collective bargaining agreement are  supplementary to Medicare. For these reasons an  employer might want to specify a time limit short  of death for dependent benefits yet feel no  similar need to limit the duration of retirees'  benefits.

13
A search for patent ambiguity must canvass the  entire agreement. A provision that seems  ambiguous might be disambiguated elsewhere in the  agreement. E.g., St. Paul Fire and Marine Ins.  Co. v. Warwick Dyeing Corp., 26 F.3d 1195, 1199  (1st Cir. 1994); Kass v. Kass, 696 N.E.2d 174,  180-81 (N.Y. 1998). Pabst points us to the  provision concerning active (as opposed to  retired) employees and notes that the benefits  conferred on them include "dependent children  from age twenty-five (25) for life if totally and  permanently disabled." But in arguing that this  shows that the agreement is explicit when it  means to confer lifetime benefits, Pabst  overlooks the fact that obviously the benefits of  active employees are only for as long as the  collective bargaining agreement is in effect,  since otherwise the employer's potential  liabilities would be staggering. That is so  obvious that if there is to be an exception (this  fortunately tiny exception for permanently  disabled children), we expect it to be explicit,  not implicit.

14
But while Pabst has not proved that the contract  clearly excludes vesting, we doubt that the  plaintiffs have rebutted the Bidlack presumption  by demonstrating a patent ambiguity. For when all  the toing-and-froing is done, the fact remains  that the clauses on which the plaintiffs mainly  rely, clauses (a) and (b), are completely silent  on duration, in contrast to Bidlack, where the  collective bargaining said that "those employees  who have retired since September 22, 1959 will  have the full cost of their Blue Cross-Blue  Shield coverage paid by the Company after they  attain sixty-five (65) years of age" and that  those benefits "shall be continued for the spouse  after the death of the retiree." 933 F.2d at 605-  606 (emphasis added); and see id. at 608. But we  need not pursue the issue, as there is latent  ambiguity here. The bulk of the workers at  Pabst's Milwaukee brewery belonged to the brewery  workers' union rather than, as the plaintiffs  here did, to the machinists' union. Although  these are separate unions, they negotiated  essentially identical collective bargaining  agreements, concerning health and welfare  benefits at any rate, with Pabst--with a pregnant  exception: In 1984 the collective bargaining  agreement between Pabst and the brewery workers'  union was amended to limit health and welfare  benefits for the "term of this agreement." Pabst  Brewing Co. v. Corrao, supra, 161 F.3d at 435-36.  No similar amendment was ever made to the  agreement with the machinists, and the reason may  be that there were so many more retired brewers  than retired machinists--700 plus, versus only  45. It would be natural for Pabst to be more  concerned about the cost of lifetime benefits for  the former than for the latter. Another bit of  evidence favoring the plaintiffs is that Schlitz  Brewing Company, which had a collective  bargaining agreement with the machinists' union  that was identical to the agreement at issue in  this case, continues to this day to provide  health insurance to the retired machinists of its  Milwaukee facilities, which it closed in 1981,  Jos. Schlitz Brewing Co. v. Milwaukee Brewery  Workers' Pension Plan, 3 F.3d 994, 997 (7th Cir.  1993), after the expiration of the agreement. The  point we made earlier, about the possible  inference from (c) and the different average ages  of retirees and their spouses and dependents,  reappears as another bit of extrinsic evidence  (extrinsic because the ages of the retirees,  their spouses and dependents, do not appear in  the contract) in support of the plaintiffs'  interpretation.

15
Such evidence does not prove that that  interpretation is correct, but it shows that the  silence of the collective bargaining agreement  with respect to vesting makes the agreement  genuinely ambiguous and not merely incomplete. If  it were merely incomplete, the Bidlack  presumption would complete it and defeat the  plaintiffs' case.

16
These items of evidence are "objective" in the  sense (the relevant sense) that either they can  be established by disinterested witnesses, or  they are uncontested, or, as here, they are both.  PMC, Inc. v. Sherwin-Williams Co., supra, 151  F.3d at 614; Mathews v. Sears Pension Plan,  supra, 144 F.3d at 467; AM Int'l, Inc. v. Graphic  Management Associates, Inc., supra, 44 F.3d at  575. Evidence is not objective when it is the  self-serving testimony of one party to the  contract as to what the contract, clear on its  face, "really" means, contrary to what it seems  to mean. Id.; PMC, Inc. v. Sherwin-Williams Co.,  supra, 151 F.3d at 614-15; Bank v. Truck Ins.  Exchange, 51 F.3d 736, 737 (7th Cir. 1995); Int'l  Union, United Automobile, Aerospace &  Agricultural Implement Workers v. Skinner Engine  Co., supra, 188 F.3d at 146. The plaintiffs want  us to consider such testimony as well--testimony  that a Pabst official, now conveniently dead,  told the union that retirees had lifetime  coverage. That testimony is self-serving,  unverifiable, and therefore inadmissible to  create a latent ambiguity.

17
But it is important to note that once a contract  is found by the court to be patently or latently  ambiguous, then (in most jurisdictions, in any  event, and in the federal courts) any evidence  that would normally be admissible in a trial  becomes admissible to show what the contract  meant. Dawn Equipment Co. v. Micro-Trak Systems,  Inc., 186 F.3d 981, 987 (7th Cir. 1999); In re  Modern Dairy of Champaign, Inc., 171 F.3d 1106,  1109 (7th Cir. 1999); Town of Norwood v. New  England Power Co., 202 F.3d 408, 417 (1st Cir.  2000); Charter Oil Co. v. American Employers'  Ins. Co., supra, 69 F.3d at 1168. This is more  often assumed than articulated, but Charter Oil  is a square holding, and we think it makes sense  and therefore retract our contrary, and  unreasoned, dictum in Stone Container Corp. v.  Hartford Steam Boiler Inspection & Ins. Co.,  supra, 165 F.3d at 1162. For, with the exception  of the parol evidence rule (usually regarded,  however, as a substantive rule of contract law  rather than a rule of evidence, AM Int'l, Inc. v.  Graphic Management Associates, Inc., supra, 44  F.3d at 576; Mohr v. Metro East Mfg. Co., 711  F.2d 69, 72 (7th Cir. 1983); Johnson Enterprises  of Jacksonville, Inc. v. FPL Group, Inc., 162  F.3d 1290, 1309 n. 47 (11th Cir. 1998);  Farnsworth, supra, sec. 7.2, pp. 428-30), there  are no special evidentiary rules for the trial of  a breach of contract case. The rules concerning  ambiguity are applied before trial, to see  whether there is a triable issue. E.g., AM Int'l,  Inc. v. Graphic Management Associates, Inc.,  supra, 44 F.3d at 575; GenCorp, Inc. v. American  Int'l Underwriters, supra, 178 F.3d at 818. The  rules function as gatekeepers, to prevent a  disappointed contract party from ginning up a  fishy story about what the contract really meant  but didn't say. They are not rules of evidence  governing the admissibility of evidence offered  at trial, once ambiguity is found. For example, a  union officer's testimony to what a company  official once said the contract (which he had  participated in negotiating) meant, although not  usable to establish a latent ambiguity, would  presumably be admissible at trial as the  admission of a party opponent. Fed. R. Evid.  801(d)(2)(D).

18
To summarize the rule of law that we apply, and  that requires reversal and a trial:

19
1.  If a collective bargaining agreement is  completely silent on the duration of health  benefits, the entitlement to them expires with  the agreement, as a matter of law (that is,  without going beyond the pleadings), unless the  plaintiff can show by objective evidence that the  agreement is latently ambiguous, that is, that  anyone knowledgeable about the real-world context  of the agreement would realize that it might not  mean what it says. This is the Bidlack  presumption and its latent-ambiguity rebuttal.

20
2.  If the agreement makes clear that the  entitlement expires with the agreement, as by  including such a phrase as "during the term of  this agreement," then, once again, the plaintiff  loses as a matter of law unless he can show a  latent ambiguity by means of objective evidence.  This is a general rule of contract law,  independent of but consistent with Bidlack.

21
3.  If there is language in the agreement to  suggest a grant of lifetime benefits, and the  suggestion is not negated by the agreement read  as a whole, the plaintiff is entitled to a trial.  Of course, if the agreement expressly grants such  benefits, the plaintiff is entitled, not to a  trial, but to a judgment in his favor. We are  speaking of a case in which merely suggestive  language creates a patent ambiguity.

22
4.  If the plaintiff is entitled to a trial by  reason of either a patent or a latent ambiguity,  the normal rules of evidence will govern the  trial, and so the parties will not be limited at  trial to presenting objective evidence of  meaning.

23
We trust that these simple rules will guide, and  perhaps reduce (by facilitating settlement),  further litigation over lifetime benefits in  collective bargaining agreements and ERISA plans,  and maybe litigation over other types of contract  as well.

REVERSED AND REMANDED