Court Opinion

ID: 9484266
Source: CourtListenerOpinion
Date Created: 2023-08-05 09:46:20.151952+00
Date Added: 2024-06-11T17:50:07.679004
License: Public Domain

EASTERBROOK, Circuit Judge,
with whom BAUER, Chief Judge, and COFFEY and MANION, Circuit Judges, join, dissenting.
For more than two decades Wheelabrator and the unions representing its employees in Mishawaka, Indiana, maintained collective bargaining agreements providing retired workers with health benefits. Starting in 1980 these benefits matched those of active workers. Whatever current workers received, the retirees received. Even though Wheelabrator has closed the Mishawaka plant and the last agreement has expired, retirees continue to receive the health benefits available to active workers at the firm’s other plants, at levels to which other unions have assented. Wheelabrator introduced a copayment system under which covered persons pay 20% of the cost of their care, with a maximum copayment of $1,200 per person or $2,400 per family. The maximum benefit rose from $150,000 to $500,000. The firm eliminated dental, vision, and hearing benefits. These changes help some retirees (those facing major medical expenses) while requiring others to pay more for routine care. Copayments induce employees and retirees alike to shop for lower prices and produce savings that permit the higher maximum benefit.
Mishawaka’s retirees want more. They demand free health care for life; they welcome the higher maximum benefit but want to escape the copayments and receive reimbursement for vision, dental, and hearing expenses. Plaintiffs think it dandy that their benefits rose with active workers’ and contend that they have a contractual ratchet: their benefits cannot follow active workers’ into decline — if the restructuring of the benefit package can be called a “decline.”
Until the 1985 contract, none contained language implying that the level of benefits vests on retirement or at any other time— and that contract established a special rule for persons who retired at age 65 in 1986 or later. Wheelabrator has not instituted co-payments for these retirees. Nothing in the contracts provides that the scope of coverage for other retirees will never change. Their schedule of benefits, which the collective bargaining agreement establishes only by reference to the insurance, is all today’s case is about. Duration is not in dispute. Yet the lead opinion devotes almost all of its attention to duration, relegating the level of benefits to an afterthought, and the concurring opinion discusses duration exclusively, disdaining this case in order to address questions that might be important in other cases.
The result is a disposition that is largely advisory. Litigation began after Wheelabrator instituted a system of copayments. Retirees contended that they possess a contractual entitlement to unreduced benefits for life. That the retirees stressed “for life” rather than “unreduced” is no surprise: all of their parol evidence is about “lifetime” benefits, so they sought to divert the court’s attention from the weak link in their claim. Wheelabrator denied that the contracts promise any particular level of benefits and, adopting the common belt-and-suspenders strategy, added that any guarantees expired in 1988. Like the retirees, Wheelabrator would like victory on a rationale that produces the most favorable implications for tomorrow’s case. The parties’ understandable druthers do not authorize us to address a hypothetical dispute, however. The only controversy between these parties is whether the retirees are entitled to medical benefits exceeding those of active workers. What would happen if Wheelabrator were to cut off the retirees, which it has never threatened to do, is a question for another day. Los Angeles v. Lyons, 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983); Foster v. Center Township, 798 F.2d 237 (7th Cir.1986). If Wheelabrator had sent its retirees letters saying: “We believe that we need not continue your benefits, but we have no plans to terminate them”, the retirees would not have a justicia-ble controversy with their old employer about the meaning of the collective bargaining agreements. The retirees have not even *615received such letters. Parties cannot require (or authorize) adjudication of an issue that could arise in the future just by demanding a declaratory judgment. The retirees’ only live grievance concerns the details of an ongoing medical plan.
What do the collective bargaining agreements say about the level of benefits to which the retirees are entitled? In a word: Nothing. The first agreement (from 1965) provides that “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 65 years of age (subject to the provisions of the supplemental insurance plan listed in Paragraph (b) below). Employees retiring prior to age 65 years will be required to pay one-half of their Blue Cross-Blue Shield plan until such time as they reach age 65.” 1 Similar provisions appear in later contracts, which add other health benefits.2 The agreements say what portion of the cost retirees will pay, but they do not specify what the “Blue Cross-Blue Shield plan” entails. That was left to the agreement Wheelabrator struck with its carrier. Only the insurance policies specify the extent of coverage, and each policy reserves Wheelabrator’s right to alter things. These contracts use language tracking the agreements in Boyer v. Douglas Components Corp., 986 F.2d 999 (6th Cir.1993), and Gill v. Moco Thermal Industries, Inc., 981 F.2d 858 (6th Cir.1992). Boyer and Gill hold that the insurance policy is the “plan” under ERISA and outranks oral promises. So the shouting should be over. Retirees receive the same “Blue Cross-Blue Shield plan” as active employees, and by virtue of express language Wheelabrator controls the scope of the plan’s coverage.3
Plaintiffs’ entire submission rests on a confusion between free “coverage” and free “care.” Medical insurance can be free without being comprehensive. To see the difference, consider a common medical plan: full payment for the costs of hospitalization, but a maximum of 365 days of continuous care. Starting on day 366 the sick or injured person pays the tab himself. An insurance policy with these benefits might cost $2,000 per year in the market. Providing such a policy to retirees at no cost gives them a free “Blue Cross-Blue Shield plan” but not free medical care. In 1965, when the contract first provided some health coverage after retirement, the duration was limited. Major medical coverage did not come until 1974, and even then there was a cap on total benefits payable for a single illness. Just as a medical plan may be limited in scope or duration, so it may be limited in the percentage of costs paid. Consider an alternative plan, which pays 80% of all hospital costs without a maximum number of days. An insurer might charge $2,000 per year for this policy, too; providing such insurance to employees would give them a free “Blue Cross-Blue Shield plan” without giving them free medical care. And this is what happened. Wheelabrator’s current medical package includes .benefits of greater duration and maximum payment than the 1965 (or, for that matter, 1985) plan but requires copayments that encourage shopping among providers and discourage demands for unnecessary medical care. The labor agreements do not promise the retirees free medical care, as opposed to medical coverage commensurate with active workers.
The only thing in any of the agreements that could be understood as a promise of particular care appears in the 1980 contract: “Effective 7/1/81 these benefits include Den*616tal, Vision and Hearing for all retirees.” This sentence appears immediately after the statement that Wheelabrator “will pay the full cost of .Blue Cross/Blue Shield” for retirees who meet age and years-of-service requirements. Active workers already enjoyed dental, vision, and hearing benefits. The 1980 contract brought the retirees to parity. Read favorably to Wheelabrator, this sentence means that as of July 1981 the Blue Cross/Blue Shield plan does include particular benefits; it does not promise continuation of these benefits. Read favorably to the retirees, the sentence means that the Blue Cross/Blue Shield plan must include particular benefits. As the dental, vision, and hearing benefits were abolished in 1989 (for active workers as well as retirees), this sentence provides the plaintiffs with their best shot.4
Curiously, the lead opinion makes little of this sentence, and the concurring opinion does not mention it. It comes up at page 610 of the lead opinion. But the court then equates all questions about level and duration, even though the sentence in question, if read most favorably to the retirees, puts dental, vision, and hearing benefits on a plane different from other categories of benefits. By my colleagues’ lights, the question for trial ought to be whether the agreement assured these three kinds of benefits to persons who remained on the payroll after July 1,1981. (Those who retired earlier furnished no consideration for any promise in the 1980 contract.) Debate about the copayment system should end forthwith. There is no textual ambiguity on that subject — at least none the majority deigns to mention. And as I have stressed, there is no case or controversy about whether “the retired employees were receiving those benefits as a matter of grace or of right.” Op. at 610. Advisory opinions rendered by juries are no more palatable than those rendered by judges.
I do not think that even the sentence “Effective 7/1/81 these benefits include Dental, Vision and Hearing for all retirees” creates a jury question. I start from the premise that when a labor agreement is not ambiguous, the court should declare its meaning without ado. Ooley v. Schwitzer Division, Household Manufacturing, Inc., 961 F,2d 1293, 1298-99 (7th Cir.1992); Senn v. United Dominion Industries, Inc., 951 F.2d 806, 814-16 (7th Cir.1992). A majority of this court (the three judges subscribing to the lead opinion plus the four joining this one) reaffirms Senn — not only its holding that extrinsic evidence cannot create an ambiguity in otherwise clear documents, but also its holding that health and welfare benefits promised in collective bargaining agreements presumptively expire with those agreements. See also Merk v. Jevuel Companies, Inc., 848 F.2d 761, 763 (7th Cir.1988). These principles should lead us to affirm. Put in context, the single sentence in a single agreement means no more than the surrounding sentences: as of 1981, the retirees at last get the same plan as the active workers.
Pensions vest by law; ERISA establishes elaborate schedules and tables. 29 U.S.C. § 1053. Health and other welfare benefits are left to contract. That leaves in place the venerable rule that parties may agree to as much or as little as they please. Wheelabrator and its unions did not agree on a perpetual schedule of health benefits. They incorporated an insurance contract by reference. See Boyer and Gill. Ever since, Wheelabrator has furnished its retirees at Mishawaka with the same benefits to which active workers at other plants have assented.
Is there any reason to read into the agreements a ratchet that their language does not express? Labor law has modified contractual freedom in light of the statutory duty to bargain. An employer may not walk away from workers the same way a supplier of oil may walk away from customers. Instead the employer must bargain collectively with its employees. Once an existing agreement has ended and the bargaining obligation has been fulfilled, however, the employer may put its proposals into force, modifying or abandoning the terms that formerly applied. NLRB *617v. Katz, 369 U.S. 736, 82 S.Ct. 1107, 8 L.Ed.2d 230 (1962); Lapham-Hickey Steel Corp. v. NLRB, 904 F.2d 1180, 1185 (7th Cir.1990). Parties may agree on immutable benefits, which continue by force of contract. But the presumption is and always has been that benefits mentioned in a collective bargaining agreement do not vest. “As with the obligation to make pension contributions in [Laborers Health and Welfare Trust Fund v.] Advanced Lightweight Concrete Co.[, 484 U.S. 539, 108 S.Ct. 830, 98 L.Ed.2d 936 (1988) ], other contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement. Exceptions are determined by contract interpretation. Rights which accrued or vested under the agreement will, as a general rule, survive termination of the agreement. And of course, if a collective bargaining agreement provides in explicit terms that certain benefits continue after the agreement’s expiration, disputes as to such continuing benefits may be found to arise under the agreement”. Litton Financial Printing Division v. NLRB, - U.S. -, -, 111 S.Ct. 2215, 2226, 115 L.Ed.2d 177 (1991) (emphasis added). In Litton the Court looked for the “explicit terms” requiring the employer to honor seniority after the terminal date of the contract and, finding none, rebuffed the union’s claim. It did not search outside the terms of the agreement.
Provisions in a collective bargaining agreement establishing benefits for retirees turn out to be a weak sort of promise. For retirees’ health benefits are not a mandatory subject of collective bargaining. As a result, the employer may change levels of benefits without dickering with the union. So much is the holding of Chemical Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157, 92 S.Ct. 383, 30 L.Ed.2d 341 (1971), where the employer made a mid-term alteration without, the Court held, shirking any duty of bargaining. Health and welfare benefits after retirement turn out to be unilateral rather than bilateral contracts. An employer may bind itself by making a sufficiently strong promise, id. at 181 n. 20, 92 S.Ct. at 399 n. 20; cf. Nolde Brothers, Inc. v. Bakery & Confectionery Workers, 430 U.S. 243, 97 S.Ct. 1067, 51 L.Ed.2d 300 (1977), but the extent of this promise depends on the employer’s words and deeds, not what the union’s negotiators think or say. Many courts have concluded that in unilateral promise cases employers may reduce or even discontinue post-retirement health benefits despite language stronger than that in the Wheelabrator pacts, and without regard to extrinsic evidence of the employees’ beliefs. E.g., Boyer and Gill (both holding that the terms of the insurance policies are dispositive); Meester v. IASD Health Services Corp., 963 F.2d 194, 197 (8th Cir.1992) (“welfare benefit plans ... may be terminated at any time in the absence of a specific expression of contrary intent by the employer.”); Alday v. Container Corp. of America, 906 F.2d 660, 665 (11th Cir.1990); Howe v. Varity Corp., 896 F.2d 1107, 1110 (8th Cir.1990); Musto v. American General Corp., 861 F.2d 897, 907 (6th Cir.1988); Moore v. Metropolitan Life Insurance Co., 856 F.2d 488, 491-92 & n. 1 (2d Cir.1988). Although these opinions do not deal with collective bargaining agreements, after Pittsburgh Plate Glass the “collective” part is so much window dressing. We must treat the retirement-benefits aspect of the document as terms unilaterally announced by the employer.
Let us suppose, nonetheless, that the document is a bilateral contract. What sort of language causes duties to extend past an expiration date? The lead opinion rejects as “extreme” the view that “the contract must either use the word ‘vest’ or must state unequivocally that it is creating rights that will not expire when the contract expires.” Op. at 607. In the discussion that follows, the lead opinion does not discuss Litton, which said that it takes “explicit terms” to create benefits surviving the expiration of a collective bargaining agreement. The concurring opinion invites us to look past the text of the agreement to the “intent of the parties” but does not explain how this can be squared with Litton’s emphasis on words rather than mental states. Op. at 612 n. 2. Looking for “explicit terms,” and preferring the actual content of the parties’ agreement to the supposed content of the parties’ heads, serve vital functions.
*618One appears in William B. Tanner Co. v. SpartaToniah Broadcasting Co., 716 F.2d 1155, 1159 (7th Cir.1983): as the duration and cost of the supposed promise increase, so does the level of formality required to conclude that a promise exists. Even that staunch supporter of subjectivism, Professor Corbin, concluded that courts should not interpret ambiguous writings to create lifetime promises. Arthur Linton Corbin, 3 Contracts § 553 (1960). Instead, he believed, courts should look for terms such as “lifetime” — -language these parties used in the 1985 agreement but no earlier one. It unsettles and in the end disserves the institution of voluntary agreement to permit straws in the wind to become shackles. “People write things down in order to assign duties and allocate risks — functions vital to economic life yet defeated if courts ... use the ambiguities present in all language to frustrate the achievement of certainty.” Continental Bank, N.A. v. Everett, 964 F.2d 701, 705 (7th Cir.1992).
Another reason why we should search for “explicit terms” lies in the nature of labor relations. Unlike one-shot contracts for the sale of goods, labor agreements endure and evolve. Relational contracting over long periods requires flexibility. What worked yesterday may be counterproductive today. Labor and management need freedom to adapt their arrangement as circumstances change. E.g., Consolidated Rail Corp. v. Railway Labor Executives’ Association, 491 U.S. 299, 308-09, 109 S.Ct. 2477, 2483, 105 L.Ed.2d 250 (1989); Transportation-Communication Employees v. Union Pacific R.R., 385 U.S. 157, 160-61, 87 S.Ct. 369, 371-72, 17 L.Ed.2d 264 (1966); United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 578-81, 80 S.Ct. 1347, 1350-52, 4 L.Ed.2d 1409 (1960); McKinney v. Missouri-Kansas-Texas R.R., 357 U.S. 265, 272-74, 78 S.Ct. 1222, 1226-27, 2 L.Ed.2d 1305 (1958). Usually parol evidence facilitates flexible arrangements. People may choose the written or oral word according to their needs. When we use extrinsic evidence to create long term promises, however, we defeat accommodation to changed circumstances. Vesting means that however much labor and management believe that a new approach is called for, they are forbidden to achieve it: the employees, as third party beneficiaries, may enforce the old agreements no matter what union and management now prefer. In using extrinsic evidence to carry out what may have been the parties’ intent yesterday, we defeat their plans today. Labor and management may tie their hands if they want, but, because eliminating the ability to bargain today is so at variance with the norm, we should be sure (by insisting on express provision) that this was indeed the agreement.
Especially when the sort of evidence that could be understood to support lifetime benefits will be present almost all of the time. Because collective bargaining arrangements last decades and govern the affairs of so many, it will be possible to come up with evidence that someone thought that arrangements under the existing agreement would last forever. Notice how distant the evidence in this case is from the usual parol evidence of meaning. Courts seeking to learn the objectives of the parties turn to the negotiations — what the negotiators said to each other, the documents they exchanged. If the negotiators used “benefits will continue after retirement” to mean “the levels of benefits will never fall,” that will show up in the signs they exchange at the table. Plaintiffs have no evidence of that kind. Instead they offer statements to show how particular persons understood the contracts after they had been signed. Readings by third parties do. not show what the negotiators were trying to achieve and do not imply that they selected phrase X to achieve objective Y. By turning to understandings rather than to the negotiations, we decrease the importance of the document the parties actually sign, making it hard for the negotiators to achieve their goals.
Extended dealings, producing multiple understandings, pose a special problem when the supposedly illuminating information is oral. Someone asked in 1990 what he “understood” about the meaning of an agreement reached in 1965 may remember and report not what he actually thought in 1965 but what occurs to him today. And what he remembers today may turn out to be whatever serves his interests today. Even for wit*619nesses who seek to report accurately, cognitive dissonance produces a remarkable consonance between events as they recall them and their contemporary interests. Juries may be good at nosing out liars, but the problem in using memories and understandings is that there will be disagreement even when no one plays false to his recollections. We will have only conflicting understandings, memories, and hopes. Divergence in reported beliefs increases as the events retreat and as the parties no longer need accommodate. These collective bargaining agreements were written for unions, managers, and arbitrators in living relations, not for juries in dead ones. Once the plant has closed, it is all too easy for jurors to award a bundle to their neighbors at the expense of a distant corporation. After a week-long trial in Senn it took the jury exactly 20 minutes to conclude that the agreements had established vested benefits, 951 F.2d at 812, although this court thought that there was no evidence at all to that effect.
Risk of a “gotcha!” at the end of a collective bargaining relation affects conduct during its course. Adaptations run from a bald declaration that nothing vests, as in Ryan v. Chromalloy American Corp., 877 F.2d 598, 600 (7th Cir.1989), to formal vesting coupled with lower levels of benefits, and everything in between. So long as the rule of law is clear, the parties can arrange their own affairs. A presumption so weak that everything is up for grabs after the fact — and this is the upshot of the majority’s approach — lacks that virtue. Exposed to irreducible risk of surprise awards or inability to adapt to changing conditions, employers respond by curtailing the categories of events they are willing to cover. Third parties, too, are affected. Many employers obtain insurance for their health and welfare plans. Sometimes the plans are defined by reference to the insurance, as Wheelabrator’s was; sometimes the insurance is defined by reference to the plan. E.g., Chicago Pacific Corp. v. Canada Life Assurance Co., 850 F.2d 334 (7th Cir.1988). Insurers do not know what managers say to workers considering retirement and cannot be bound by this extrinsic evidence. So we face the possibility of a disjunction between the benefits and their funding, or perhaps we shall end up surprising the insurers too. Either way, both employers and insurers rationally reduce their promises to take account of increased risk. Uncertainty never promotes efficient production and may hinder it.
A word about the evidence the retirees want to offer against Wheelabrator. Statements describing “lifetime” benefits sound impressive until you recognize that there are at least three distinct issues: (1) what will happen to the retirees while the current rules remain in force?; (2) must the employer continue to provide some health benefits to former workers after the current agreement has expired?; and (3) must the employer maintain an unchanged level of benefits for retirees? All of the statements concern the first or second question, while our case is about the third. Between 1965 and 1980, retirees’ benefits were less than those of active workers. Under the agreements in force from 1981 through 1988, retirees received free medical benefits tracking those enjoyed by current workers. What the plaintiffs must show in order to prevail is that Wheelabrator promised that this would never change — that the “Blue Cross-Blue Shield coverage” of which the agreements speak could expand but not shrink. None of the statements establishes such a promise. In particular, not a scrap of the extrinsic evidence concerns the meaning of: “Effective 7/1/81 these benefits include Dental, Vision and Hearing for all retirees.” Yet this sentence is the only support the lead opinion offers for its assertion that ambiguity about the level of benefits requires a trial — a trial about everything, including the copayment system. What question do my colleagues think the jury must answer? What is the ambiguous text? What are the alternative readings of that text? How should the jury be told to resolve this ambiguity? The lack of answers speaks volumes about the advisory quality of the court’s opinion. Alas, the district judge cannot escape so easily on remand.
I accept the force of the lead opinion’s observation that employers who promised health benefits to their employees without “anticipating the recent rise in health costs *620... should not expect the courts to bail them out by undoing the contractually determined allocation of risk on the question. Courts do not sit to relieve contract parties of their improvident commitments”. Op. at 609. Health care after retirement is deferred compensation. An increase in the cost of carrying out a promise does not justify abandoning the covenant. A firm that has promised too much to too many people may write down . its commitments in bankruptcy, shaving a little off each rather than tossing one group of promisees to the wolves. Still, it is necessary to ascertain the “contractually determined allocation of risk on the question.” Employers drafting in the wake of Pittsburgh Plate Glass would have supposed that unless they said otherwise explicitly, they may alter retirees’ health benefits. The understanding that at the end of a collective bargaining agreement employers may implement their last offer, unless “explicit terms” curtail this power, would have strengthened this supposition. What the majority of our court requires is that employers reiterate these rules of law in the body of the agreement or lose their protection. Although it misleads to say that rules of law are “incorporated into” contracts, see General Motors Corp. v. Romein, — U.S. -, -, 112 S.Ct. 1105, 1110-12, 117 L.Ed.2d 328 (1992), law provides the background against which the parties’ words carry meaning. Labor law supplies a benchmark: employers may change terms on the expiration of an agreement (and sometimes during its course) unless they explicitly surrender that entitlement. To say that the norm vanishes as soon as someone disputes the meaning of the agreement is to dishonor a “contractually determined allocation of risk” that depends on or incorporates that norm. Judges may say that employers “have only themselves to blame” if the employers drafted carelessly; but if courts create ambiguity by pulling the rug out from under firms that relied on the principles reflected in Pittsburgh Plate Glass and Litton, then it is we who are responsible.
Uncertainty now reigns. In at least one circuit health and welfare benefits mentioned in collective bargaining agreements presumptively vest on retirement. UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir.1983). In this circuit such benefits presumptively do not vest, but the presumption is weak. Other circuits have still other formulae. E.g., Anderson v. Alpha Portland Industries, Inc., 836 F.2d 1512 (8th Cir.1988). And in most circuits employers retain complete freedom to alter retirees’ health benefits in the absence of collective bargaining agreements, see eases cited at p. 617 although after Pittsburgh Plate Glass it is impossible to understand why the existence of a collective bargaining agreement augments the force of the employer’s promise. Employers with national operations are subject to multiple and inconsistent rules, compounded by the uncertainty inherent in sending big-stakes questions to the constantly-changing panels that are juries. See Michael S. Melbinger & Marianne W. Culver, The Battle of the Rust Belt: Employers’ Rights to Modify the Medical Benefits of Retirees, 5 DePaul Bus.L.J. 139, 145-60 (1992) (cataloging six distinct approaches). Uncertainty never promotes industry. Risk is an uncompensated, and substantial, cost of operations, and in this respect the fortunes of labor, capital, and consumers — that is, of us all — are linked.

. Paragraph (b) provides that Wheelabrator will establish a supplemental plan that, "when combined with Medicare, will provide a level of benefits equal to the Wheelabrator Blue Cross-Blue Shield plan for active and retired employees 65 years of age or over. The Company will pay the cost of such supplemental plan." Thus Wheelab-rator promised to give its employees a package of Medicare and private insurance equal to the private insurance provided to active employees.

. For example, a provision of the 1971 agreement reads: "Effective April, 1972, the retirees will be covered by the same drug program as the active employees.” The 1974 agreement adds: "Effective October 15, 1974, retirees and spouse [sic] will be covered by major medical coverage.” By 1980 the retirees had obtained the same dental and eye care as active employees.

.In 1985 Wheelabrator added four new medical plans. Persons who retired at age 65 and elected fully vested benefits were not entitled to choose the most generous of the five plans. Nothing turns on this complication, however.

. The sentence in the 1980 contract about the $2 copayment for drugs does not assist the retirees. The drug program is subject to this provision: "Effective April, 1972, the retirees will be covered by the same drug program as the active employees.” An entitlement to "the same drug program as the active employees” is the antithesis of a ratchet.