Court Opinion

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Opinions of the United
2001 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

11-1-2001

Bethlehem Steel Corp v. USA
Precedential or Non-Precedential:

Docket 00-2901

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Recommended Citation
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http://digitalcommons.law.villanova.edu/thirdcircuit_2001/253

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Filed November 1, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 00-2901

BETHLEHEM STEEL CORPORATION
AND AFFILIATED SUBSIDIARY COMPANIES,
       Appellant

v.

UNITED STATES OF AMERICA

On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 98-cv-03417)
District Judge: Hon. J. Curtis Joyner

Argued May 31, 2001

Before: SLOVITER, FUENTES and COWEN, Circuit   Judges

(Filed: November 1, 2001)

       Melvin E. Lefkowitz (Argued)
       Hogan & Hartson
       Washington, D.C. 20004-1109

        Attorney for Appellant

       Charles Bricken (Argued)
       Richard Farber
       United States Department of Justice
       Washington, D.C. 20044

        Attorneys for Appellee
OPINION OF THE COURT

SLOVITER, Circuit Judge.

I.

At issue in this case is the interpretation of a Closing
Agreement between the Internal Revenue Service ("IRS")
and appellant Bethlehem Steel Corporation ("Bethlehem" or
"taxpayer") that preceded the payout by the IRS to
Bethlehem of a refund of an anticipated overpayment of
taxes, subject to later audit. Resolution of the issue
depends on whether an anti-retroactivity clause in the
agreement prevents the IRS from applying retroactive
legislation, enacted after the parties' execution of the
Closing Agreement, in determining Bethlehem's tax liability.
The District Court held that the language of the clause
limits its protection to "terms" of the agreement, and that
the amount of the cash-out and the method by which it
would be calculated were not "terms" of the agreement. The
District Court therefore granted summary judgment to the
IRS. Bethlehem appeals.

II.

Under the law applicable from 1976 to 1986, domestic
manufacturers could claim tax credits based on certain
modernization investments. If not fully used in the year
earned, these credits could be "carried forward" for use in
future years. The Tax Reform Act of 1986 ("TRA")1 repealed
the investment credit for property placed in service after
December 31, 1985, and reduced the value of unused
credits. One of various transition rules enacted in
conjunction with the repeal provided a tax benefit for
qualified domestic steel manufacturers, such as Bethlehem,
which were in dire financial straits and unlikely to generate
sufficient income to use their remaining tax credits.
_________________________________________________________________

1. Pub. L. No. 99-514, 100 Stat. 2085 (codified as amended in scattered
sections of 26 U.S.C.).

                               2
Under TRA S 212, the steel manufacturers could elect to
treat 50% of their unused credits ("existing carryforwards")
as an income tax payment for the first taxable year after
December 31, 1986, thereby enabling them to "cash out"
the credits through a "refund" for overpayment of taxes.
Because this benefit was intended to enable the qualified
companies to modernize their operations, S 212(f) required
the companies to reinvest their refunds into their
businesses, although the TRA did not set a reinvestment
deadline. Moreover, while the statute's definition of
"existing carryforwards" included 1986 credits, see TRA
S 212(g)(2), the Conference Report on the statute clearly
stated Congress' intent to include credits only through
1985, see 2 H.R. Conf. Rep. No. 99-841, at 65 (1986). The
House of Representatives passed a bill in 1987 that would
have retroactively amended S 212 to exclude 1986 credits,
but the Senate never addressed that bill.

Meanwhile, Bethlehem and other eligible steel companies
(collectively, the "Steel Companies") anticipated large 1987
refunds as a result of S 212. In February and March, 1988,
a committee of the Steel Companies (including Bethlehem)
met with the IRS to discuss how to obtain the refunds prior
to the actual filing (and auditing) of their 1987 returns. It
was not unusual for steel companies to obtain extensions
for filing their tax returns because of the complexity of their
business affairs. The Steel Companies wanted the IRS to
issue the refunds on March 15, 1988, the statutory date of
their "overpayments," and there is legislative history that
Senators interested in the bill intended that the cash-outs
be quickly released. See 132 Cong. Rec. S8269 (1986)
(statements of Sens. Heinz and Packwood). The Steel
Companies initially proposed that the agency process the
refunds using an expedited procedure designed to adjust
overpayment of estimated income taxes. The IRS rejected
this proposal, negotiating to ensure that it had time to
audit the refunds and that the Steel Companies complied
with S 212's reinvestment mandate. In return for
concessions in these areas, the IRS agreed to issue the
refunds promptly upon receipt of the Steel Companies'
claims. To memorialize the parties' agreement, the IRS
drafted a "Closing Agreement on Final Determination

                               3
Covering Specific Matters" ("Closing Agreement") without
significant input from the Steel Companies.

On March 9 and 11, 1988, respectively, Bethlehem and
the IRS signed the Closing Agreement. It provided:

        WHEREAS, [Bethlehem ] anticipates an overpayment
       of its federal income tax liability for its [1987] taxable
       year . . . resulting from the application of [S] 212 of the
       [TRA] and desires a quick release by the [IRS] of any
       such overpayment; and

        WHEREAS, [Bethlehem ] may be unable to file its
       federal income tax return for [1987] . . . by its due date
       determined without regard to any time to file extension.

        NOW IT IS HEREBY DETERMINED AND AGREED for
       federal income tax purposes that:

       1) [Bethlehem ] agrees that the period of limitations
       for the [IRS] to bring suit to recover any amount
       of such overpayment claimed by [Bethlehem ]
       that is determined to be erroneous or excessive
       shall not expire prior to the expiration of the
       period of limitations on assessment of tax . . .
       with respect to [Bethlehem's] federal income tax
       return for [1987] . . . .

       2) [Bethlehem ] agrees that the amount determined
       under [S] 212 of the [TRA] will be spent within 3
       years of the date of the refund for reinvestment
       in and modernization of its steel operations
       through investment in modern plant and
       equipment, research and development, and other
       appropriate projects . . ., as required by [S] 212(f)
       of the [TRA].

       3) The [IRS] agrees to effect a prompt release of any
       refund due upon the filing by [Bethlehem ] of the
       election and claim for the quick release of
       refund.

        WHEREAS, the determinations set forth above are
       hereby agreed to by the [IRS], and by [Bethlehem ],
       including its successors and assigns.

                               4
        NOW THIS CLOSING AGREEMENT WITNESSETH,
       that [Bethlehem ] and [the IRS] hereby mutually agree
       that the determinations set forth above shall be final
       and conclusive, subject, however, to reopening in the
       event of fraud, malfeasance, or misrepresentation of
       material fact; furthermore, no change or modification of
       applicable statutes will render this agreement ineffective
       with respect to the terms agreed to herein.

App. at 30-31 (emphasis added). It is conceded that the
"anti-retroactivity" clause, underlined above,"was never an
issue" in the IRS-Steel Companies meetings. App. at 126.

The IRS also drafted, again without significant input from
the Steel Companies, an "Election and Claim for Quick
Release of Overpayment Resulting from the Application of
Section 212 of the Tax Reform Act" of 1986 ("Claim Form"),
which the Steel Companies were to use to request their
refunds. App. at 36. The Claim Form referred to"the
election required under [TRA S] 212," allowed the electing
company to specify the percentage of "existing
carryforwards as defined in [TRA S] 212(g)(2)" to which its
election would apply, and required the company to list the
carryforwards supporting its refund calculation. App. at 36-
37. On March 15, 1988, Bethlehem filed its Claim Form,
electing the S 212 cash-out, and claiming a $140,428,024
refund based on $280,856,047 of existing carryforwards. It
explicitly included its 1986 credits in its refund calculations
which it attached to the form, as required. The IRS paid the
claimed refund on March 25, 1988.

Bethlehem filed its consolidated 1987 income tax return
on August 8, 1988. On November 10, Congress enacted the
Technical and Miscellaneous Revenue Act of 1988
("TAMRA").2 TAMRA S 1002(f)(5) amended TRA S 212 to
exclude 1986 credits from the definition of "existing
carryforwards" used to calculate S 212 refunds, and
S 1019(a) provided that this "amendment . .. shall take
effect as if included in the provision of the Reform Act to
which [it] relates." Consequently, upon its audit of
Bethlehem's 1987 tax return, the IRS determined that the
_________________________________________________________________

2. Pub. L. No. 100-647, 102 Stat. 3342 (codified as amended in scattered
sections of 26 U.S.C.).

                               5
company's 1986 credits, worth $11,381,450, should not
have been included in calculating the company'sS 212
refund. The IRS and Bethlehem entered into an agreement
whereby the company agreed to pay the resulting deficiency
of $5,690,725 plus interest, for a total of $13,397,164, but
reserved its right to claim a refund based on its purported
right to include 1986 credits in its S 212 refund
calculations. Bethlehem paid the assessment and sought
the refund, which the IRS disallowed on April 9, 1998.

III.

On July 2, 1998, Bethlehem sued the IRS to recover the
refund, arguing that the Agreement's anti-retroactivity
clause barred the application of TAMRA to exclude 1986
credits from the calculation of its S 212 refund. After
submitting a stipulated record, the parties cross-moved for
summary judgment. The District Court denied both
motions, finding the Agreement ambiguous. After discovery,
the parties again cross-moved for summary judgment.

On August 7, 2000, the court granted the IRS's motion
and denied Bethlehem's motion. See Bethlehem Steel Corp.
v. United States, 108 F. Supp. 2d 449 (E.D. Pa. 2000). After
considering extrinsic evidence, it found that the
Agreement's overriding purpose was to expedite
Bethlehem's receipt of its refund, and that the parties
negotiated and agreed to provisions providing for: (1)
prompt release of the refund, (2) an extension of the IRS's
statute of limitations for challenging the refund, and (3) a
deadline for Bethlehem's reinvestment of the refund.
Finding that neither the amount nor the method of
calculating the refund were negotiated terms of the
Agreement, the court held that they were not protected by
the Agreement's narrow anti-retroactivity clause. Bethlehem
timely filed its notice of appeal.

The District Court had jurisdiction pursuant to 28 U.S.C.
SS 1331, 1346(a)(1). This court has jurisdiction pursuant to
28 U.S.C. S 1291, and conducts a plenary review of the
District Court's summary judgment rulings. See Wheeler v.
Towanda Area Sch. Dist., 950 F.2d 128, 129 (3d Cir. 1991).

                               6
IV.

The IRS is authorized to enter into closing agreements
which are "final and conclusive . . . except upon a showing
of fraud or malfeasance, or misrepresentation of a material
fact." 26 U.S.C. S 7121(b). Courts interpret closing
agreements according to general federal contract law
principles. See United States v. Nat'l Steel Corp., 75 F.3d
1146, 1150 (7th Cir. 1996); Rink v. Comm'r, 47 F.3d 168,
171 (6th Cir. 1995).

We determine a contract's meaning as a matter of law
when its language is clear and unambiguous, see Int'l
Union v. Skinner Engine Co., 188 F.3d 130, 138 (3d Cir.
1999), but may use extrinsic evidence to clarify the
meaning of an ambiguous contract. See In re New Valley
Corp., 89 F.3d 143, 150 (3d Cir. 1996). We have stated that
"[t]o decide whether a contract is ambiguous, we do not
simply determine whether, from our point of view, the
language is clear. . . . [W]e consider the contract language,
the meanings suggested by counsel, and the extrinsic
evidence offered in support of each interpretation. Extrinsic
evidence may include the structure of the contract, the
bargaining history, and the conduct of the parties that
reflects their understanding of the contract's meaning."
Teamsters Indus. Employees Welfare Fund v. Rolls-Royce
Motor Cars, Inc., 989 F.2d 132, 135 (3d Cir. 1993) (citations
omitted); see also In re New Valley Corp., 89 F.3d at 150.

In its discussion of the Agreement, the District Court
cited the Seventh Circuit's interpretation of an identical
closing agreement between the IRS and another of the Steel
Companies. See Bethlehem Steel Corp., 108 F. Supp.2d at
453; Nat'l Steel, 75 F.3d at 1152. In National Steel, the
court held that the purpose of the closing agreement was to
expedite National Steel's receipt of its refund while
protecting the IRS's interests. It further held that the anti-
retroactivity clause protects only those terms decided in the
agreement. Nat'l Steel, 75 F.3d at 1151. The court
concluded that despite the document's references toS 212
the agreement did not specify the use of the section's then-
current refund-calculation criteria, noting that"[h]ad
National Steel wanted to avoid the risk of a retroactive
change in law, it could have negotiated for a determination

                               7
that its tax liability would be calculated in accordance with
existing law." Id. at 1152.

In this case, the parties do not dispute that the anti-
retroactivity clause applies only to "terms" of the Agreement.3
However, the IRS claims that because, as both the District
Court and the Seventh Circuit found, the S 212 refund
calculation is not a term of the Agreement, the clause does
not bar application of TAMRA's retroactive exclusion of
1986 credits from the calculation of Bethlehem's refund.4
Bethlehem, on the other hand, contends that because this
court considers extrinsic evidence in determining whether a
contract is ambiguous, we should not follow the National
Steel decision which was made without the benefit of such
evidence. The company asserts that the evidence in this
case proves that the parties intended that Bethlehem's
refund be calculated under the existing S 212, thereby
making the method of calculation a term of the Agreement.
Any other interpretation, the company contends, renders
the Agreement's anti-retroactivity clause meaningless.
_________________________________________________________________

3. Bethlehem does urge this court to give the anti-retroactivity clause
special significance, asserting that the clause, which the IRS drafted
unilaterally, varies from the agency's standard retroactivity language.
See App. at 34 (Form 906, January 1987) ("This agreement is final and
conclusive except: . . . if it relates to a tax period ending after the
date
of this agreement, it is subject to any law, enacted after the agreement
date, that applies to that tax period."); see also 26 C.F.R. S 301.7121-
1(c)(2) (2001) ("[A] closing agreement with respect to a taxable period
ending subsequent to the date of the agreement is subject to any change
in, or modification of, the law enacted subsequent to the date of the
agreement and made applicable to such taxable period."); Rev. Proc. 68-
16, 1968-1 C.B. 770, 796 (same).

4. National Steel also found that the requirement that closing agreements
have high-level IRS approval would be undermined if courts considered
the testimony of IRS negotiators to alter the agreements' language, and
thus held that courts "must strive more mightily than would otherwise
be the case to make sense of [such] contract[s] without ordering a[n
evidentiary] hearing." Nat'l Steel, 75 F.3d at 1150. The IRS urges this
court to adopt the Seventh Circuit's determination that excessive
consideration of extrinsic evidence in interpreting closing agreements
may undermine the statutory requirement that closing agreements be
approved by a high-level IRS authority. We need not reach this issue in
light of our disposition.

                               8
We agree with the court in National Steel that the method
of refund calculation is unambiguously not a term of the
Agreement and is therefore not protected by the anti-
retroactivity clause. Although we agree with the IRS that
there is no ambiguity, even if we were to hold that there
was, we would conclude that the extrinsic evidence of
record reinforces this interpretation of the Agreement's
plain language.

A. The Refund-Calculation Method Is Not a Term
       of the Agreement

The Closing Agreement, which by its title is expressly
limited to "[s]pecific [m]atters," App. at 30, contains only
three substantive paragraphs describing terms agreed upon
by the parties. Each of these provisions deals with
procedures pertaining to Bethlehem's receipt and
investment of its S 212 refund, and the IRS's release and
auditing of the refund. None of the three purports to set an
amount, or describe a calculation formula, for the refund,
and these matters plainly do not constitute terms of the
Agreement. Bethlehem cites the two references toS 212 in
the Agreement as evidence that the section's then-current
method of refund calculation, which included 1986 credits,
is a term of the Agreement. However, neither of the
references purports to describe the method to be used in
calculating the refund.5

One reference, in the Agreement's first recital, states that
Bethlehem anticipates a tax overpayment in 1987 as a
result of S 212 and desires a quick release of such
overpayment. This recital explains the purpose of the
agreement, rather than defining a term agreed upon by the
parties. It focuses on the promptness of the IRS's response
to Bethlehem's anticipated refund claim rather than the
size or manner of calculating the refund. The reference to
_________________________________________________________________

5. The grammatical structure of the Closing Agreement certainly suggests
that the IRS took no position in that Agreement as to the applicability of
the method of calculation of the refund in S 212. Throughout the Closing
Agreement it is Bethlehem, not the IRS, which is the subject of the
clauses which reference S 212. The IRS retains a neutral position toward
the availability of any recovery, let alone a specific amount or means of
calculation.

                               9
S 212 merely acknowledges the statute precipitating the
agreement and cannot reasonably be understood to provide
for a particular method of calculating the refund.

The IRS's guideline describing the proper form for closing
agreements relating to specific matters states, in relevant
part:

       The identification of the parties is followed by one or
       more WHEREAS clauses which serve to introduce the
       subject matter of the agreement and state premises
       upon which it is based. . . .

       It is important to distinguish between matters which
       are merely informative and explanatory and matters
       which are being agreed upon. The former should be
       segregated from the latter and should ordinarily be
       reflected in the introductory recitals contained in the
       WHEREAS clauses.

Rev. Proc. 68-16, 1968-1 C.B. 770, 779.6 This guideline
further supports our conclusion that the Agreement's first
reference to S 212 does not incorporate the section's refund-
calculation method into the contract as a matter"agreed
upon" by the parties.

The second reference is in the second substantive
provision of the Agreement, which provides that Bethlehem
must reinvest "the amount determined under"S 212 within
three years of receiving the money. The company argues
that this phrase specifies the method for calculating the
reinvestment amount and, therefore, the refund amount.
However, the phrase is situated in a provision describing
the time and manner, rather than the amount, of
reinvestment, belying this interpretation. Nonetheless,
Bethlehem contends that the actual effect of the
reinvestment deadline in this case supports its position,
stating that because it respected the three-year deadline, it
reinvested its entire refund before the IRS disallowed the
portion of the refund based on 1986 credits, with the result
that it reinvested more than the amount of its ultimate
refund.
_________________________________________________________________

6. The three substantive paragraphs of the Agreement are structured as
described in this guideline.

                               10
Bethlehem argues that by imposing the three-year
reinvestment deadline, the IRS bound itself to use the same
method to calculate the refund as the company had used to
calculate the reinvestment obligation. This "overinvestment"
claim is not supported in the record and does not compel
Bethlehem's interpretation of the Agreement. Bethlehem
points to no evidence that it reinvested more under the
Agreement than it otherwise planned to invest, or that it
did so before TAMRA was enacted, less than one year into
the reinvestment period. Moreover, Bethlehem undertook
the risk of overinvestment when it agreed to extend the
IRS's period of limitations for challenging the refund past
the reinvestment deadline rather than negotiating for a
different timeline.

In fact, Bethlehem's overinvestment argument highlights
the fact that the Agreement's first substantive provision
expressly reserves the IRS's right to challenge the
company's claimed refund should it be "determined to be
erroneous or excessive" and extends the agency's statute of
limitations for such challenges. App. at 30. Along with the
final substantive provision, requiring prompt release of the
claimed refund, this provision further demonstrates that
the parties intended that the Agreement would facilitate
Bethlehem's quick receipt of the funds while allowing the
IRS ample time to audit the company's claim. It follows that
there was no reason why the Agreement would contain any
term detailing the anticipated refund's size or calculation.
We therefore agree with the IRS that the Closing Agreement
was not ambiguous and that it was entitled to summary
judgment on its first motion.

B. Extrinsic Evidence Reinforces the Agreement's
       Unambiguous Meaning

Even assuming, arguendo, that either the Agreement's
references to S 212 or the extrinsic evidence create an
ambiguity as to whether the parties meant to incorporate a
refund-calculation formula into the Agreement,
consideration of the extrinsic evidence submitted with the
renewed motions for summary judgment supports our
reading of the document's plain language. The record
demonstrates clearly that the parties never discussed,
much less negotiated, the method to be used for calculating

                               11
the refund. In fact, there is evidence that the Steel
Companies, although aware of the discrepancy between the
language of the existing statute regarding 1986 credits and
the intent of Congress reflected in the Conference Report,
anticipated that a second technical corrections bill would
be introduced in 1988. However, as part of a deliberate
strategy, they did not raise the issue of whether the 1986
credits would be included in calculating their refunds
during their negotiations with the IRS leading to the
Closing Agreement. Donald McCambridge, Bethlehem's lead
representative in the IRS-Steel Companies negotiations,
later wrote:

       As background material for the negotiations, we
       provided the IRS with copies of both the statute and
       the Conference Report. The IRS never raised a question
       about the difference [regarding 1986 credits] and we
       did not feel compelled to make a special effort to call it
       to their attention. To this day I could not positively say
       that the failure to raise the issue was due to ignorance
       or acceptance of the fact that the statute is controlling.

App. at 161 (Letter from McCambridge to Harshman of
5/2/91).

Bethlehem points out that the Steel Companies
referenced their intent to include 1986 credits in their
calculations in documents they gave the IRS, and notes
that the IRS did not challenge their definition of"existing
carryforwards." However, this does not show that the
parties reached an accord on the method of refund
calculation and agreed to make it a term of their limited
Agreement. In fact, the references to the 1986 credits do
not even demonstrate that the Steel Companies subjectively
understood their method of refund calculation to be a term
of the Agreement, particularly in light of their deliberate
failure to address this issue during the negotiations leading
up to the Agreement. As the court noted in National Steel,
75 F.3d at 1152, had the Steel Companies wanted to avoid
the risk that an amendment would exclude 1986 credits,
they could have negotiated for an explicit term fixing the
refund-calculation formula.7 Bethlehem cites authority for
_________________________________________________________________

7. During such negotiations, the Steel Companies could also have
bargained for an anti-retroactivity clause protecting the method-of-

                               12
the proposition that one contracting party is bound by the
other's intent if the first party knows or should know of this
intent. See, e.g., Sunbury Textile Mills, Inc. v. Comm'r, 585
F.2d 1190, 1195 (3d Cir. 1978) (citing 3 A. Corbin, Corbin
on Contracts S 543, at 140 (1960), and Emor, Inc. v. Cyprus
Mines Corp., 467 F.2d 770, 775 (3d Cir. 1972)). But in this
case, Bethlehem is not merely requesting that this court,
like the courts in Sunbury and Emor, interpret an existing
contract term according to the parties' subjective
understanding of that term. Instead, it asks us to infer that
the parties subjectively intended (or that the IRS knew that
Bethlehem intended) the Agreement to include an
additional term not discussed in the document's
substantive provisions. There is no basis for us to conclude
that the IRS knew that Bethlehem so intended. As for the
Steel Companies, the evidence shows that at the time of
their negotiations with the IRS, they were aware of the
possibility of retroactive amendment in light of the
discrepancy between the statutory language and the
legislative intent regarding treatment of 1986 credits, but
chose not to discuss it.

Bethlehem contends that in addition to alerting the IRS
to its intention to include the 1986 credits, the Claim Form
prepared by the IRS incorporated this refund-calculation
method into the Closing Agreement. The Claim Form was
drafted by the IRS and signed and submitted by Bethlehem
as part of the same series of negotiations between the IRS
and the Steel Companies as the Agreement. Pursuant to the
Agreement, Bethlehem's submission of the Claim Form
triggered the IRS's prompt release of Bethlehem's refund.
Therefore, Bethlehem contends that we must consider the
_________________________________________________________________

calculation term. Bethlehem makes much of the fact that the Steel
Companies did not negotiate for the anti-retroactivity clause, and that
the IRS added it to the Closing Agreement unilaterally. Perhaps the
companies' failure to bargain for an anti-retroactivity clause was part of
their strategy not to call to the agency's attention the 1986-credit
discrepancy and the possibility of future technical corrections bills.
However, this failure now undermines Bethlehem's argument that the
parties understood the Agreement to fix permanently a particular refund-
calculation method.

                               13
Claim Form in interpreting the Agreement. See Williams v.
Metzler, 132 F.3d 937, 947 (3d Cir. 1997) (" `A writing is
interpreted as a whole, and all writings that are part of the
same transaction are interpreted together.' ") (quoting
Restatement (Second) of Contracts S 202(2) (1981)). Because
the Claim Form refers to "existing carryforwards as defined
in [TRA S] 212(g)(2)," App. at 36, the company asserts that
consideration of the form demonstrates that the refund-
calculation method was a term of the Agreement.

Consideration of the Claim Form does not, however, alter
our agreement with the District Court's finding that the
Closing Agreement's overriding purpose was to delineate the
timing and procedures for distributing the Steel Companies'
claimed S 212 refunds promptly and did not address the
substance of the refunds' amount or calculation. The
Closing Agreement's requirement that the companies
submit Claim Forms to trigger distribution of their claimed
refunds comports with TRA S 212(a)'s requirement that
each company affirmatively elect to cash out its
carryforwards in order to receive such a refund. Moreover,
the Claim Form was not signed by the IRS. The parties'
decision to exclude the refund calculations from the body of
their Agreement reinforces our understanding of this
document as limited to the three enumerated terms
expressly described therein.

Bethlehem's remaining arguments, that the District
Court's interpretation of the Agreement is inappropriate
because it deprives Bethlehem of any benefit of the
Agreement and renders the anti-retroactivity clause
meaningless, see Arnold M. Diamond, Inc., 180 F.3d at 522
(" `[A]n interpretation which gives a[n] . . . effective meaning
to all the terms is preferred to [one] which leaves a part . . .
of no effect.' ") (quoting Restatement (Second) of Contracts
S 203 (1981)), are unavailing. The Agreement expedited
Bethlehem's receipt of over $140 million.8 Although
Bethlehem argues that this does not constitute a benefit
_________________________________________________________________

8. McCambridge testified at his deposition that the Steel Companies'
primary objective in their negotiations with the IRS was to accelerate the
release of their claimed refunds, due to the time value of money. See
App. at 93-94.

                               14
because Congress intended the IRS to effectuate a quick
release of the S 212 refunds, the TRA did not specify a
procedure or timeline for the refund. The Agreement did
both, and there was no guarantee that the IRS would
otherwise have released the money as promptly as it did in
the absence of more specific legislative guidance. 9 The
clause prevents the application of retroactive amendments
affecting the express terms of the agreement, such as the
statute of limitations for challenging the refund and the
reinvestment deadline. The lack of such amendments in
this case does not obviate the effect of the clause.

V.

In conclusion, the Closing Agreement's substantive
provisions discuss only the timeline for issuing, reinvesting,
and challenging Bethlehem's S 212 refund, and the manner
of reinvestment of the refund. The document never
mentions the amount of the refund or the method for
refund calculation. In light of the Agreement's self-
consciously limited scope, its silence regarding these
matters unambiguously demonstrates that they were
simply not terms agreed upon by the parties. An
examination of the extrinsic evidence of record confirms
this interpretation of the Agreement's plain language.

Therefore, we find as a matter of law that the
Agreement's limited anti-retroactivity clause does not
protect Bethlehem from the retroactive TAMRA exclusion of
1986 credits from the S 212 refund calculation and we will
affirm the District Court's summary judgment rulings to
this effect.10
_________________________________________________________________

9. For example, McCambridge's letter summarizing the Steel Companies'
February 1988 meeting with the IRS stated that "[t]he first issue [the
IRS] raised was that [it] did not think[it] had the authority to disburse
funds without passage of the technical corrections bill because the
specific refund procedure is contained only in the technical corrections
bill, not in the original statute." App. at 77 (Letter from McCambridge to
Arnett of 2/5/88); see also App. at 104 (McCambridge Deposition).

10. In response to inquiry by this court, both parties agree that the
recent filing by Bethlehem Steel for bankruptcy has no effect on this
matter.

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A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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