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Teamsters Indus. Employees Welfare Fund v. Rolls-Royce Motor Cars

filed: March 22, 1993.


On Appeal from the United States District Court for the District of New Jersey. (D.C. Civ. No. 89-05084).

Before: Stapleton and Cowen, Circuit Judges and DuBois, District Judge*fn*

Author: Cowen


Cowen, Circuit Judge.

The Teamsters Industrial Employees Welfare Fund, the Teamsters Industrial Employees Pension Fund, and the Trustees of the Teamsters Industrial Employees Welfare Fund and Teamsters Industrial Employees Pension Fund (collectively "the Funds") filed suit against Rolls-Royce Motor Cars, Inc. ("Rolls-Royce") seeking to collect delinquent welfare and pension fund contributions for Rolls-Royce's probationary employees.

The principal question on appeal is whether the collective bargaining agreement provision requiring Rolls-Royce to contribute to the Funds on behalf of each employee mandates payments for new employees during their sixty-day trial period. We hold that the provision's scope of coverage is ambiguous. After considering the bargaining history and past practice of the parties in addition to the contractual language, we interpret the collective bargaining agreement to require that Rolls-Royce contribute to the Funds only on behalf of regular employees who have worked in excess of sixty days. We therefore will reverse the grant of summary judgment in favor of the Funds and will instruct the district court to grant summary judgment in favor of Rolls-Royce.


The underlying facts are undisputed. On April 4, 1984, Rolls-Royce and International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, AFL-CIO, Local Union #560 ("Local 560" or "Union") signed a collective bargaining agreement. Rolls-Royce and the Union subsequently negotiated and signed new collective bargaining agreements approximately every two years, but all provisions relevant to this case contained identical language from 1984 to the present. Article II(2)(b) of the collective bargaining agreement provides that new employees may be disciplined or discharged with or without cause for a trial period of sixty days. New employees must become members of Local 560 by the sixty-first day of their employment at which time they are "deemed to be regular employees covered by this Agreement." App. at 31-32. Article II(2)(b) further states that trial period employees will "sometimes [be] referred to as 'probationary employees'." App. at 31.

Article XX(a) states that Rolls-Royce will contribute to the Funds on behalf of "each employee." App. at 57. From 1984 to the present, Rolls-Royce consistently contributed to the Funds only for regular workers. In December of 1989, the Funds filed suit against Rolls-Royce, pursuant to section 515 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1145 (1988)*fn1 , seeking delinquent contributions on behalf of all probationary employees. The Funds also sought access to company records and books allegedly necessary to ascertain Rolls-Royce's liability. The Funds argued that "each employee," as used in Article XX(a), unambiguously includes probationary employees because other articles in the collective bargaining agreement use the narrower terms "regular" or "probationary" employees when the provision applies to only a subclass of all workers.

Rolls-Royce asserted that the scope of coverage of Article XX(a) is ambiguous because the agreement utilizes the broad term "employee" in provisions that necessarily apply only to regular employees. To support its contention that it is unclear whether the language of Article XX(a) includes probationary employees, Rolls-Royce submitted the affidavit of its secretary and general counsel, William Kennedy. Kennedy's uncontradicted affidavit states that Rolls-Royce never contributed to the Funds for probationary employees. Although it was aware of Rolls-Royce's failure to contribute for probationary employees, Local 560 never raised this issue at collective bargaining negotiations or at any other time before the filing of this suit, and never filed a grievance requesting that Rolls-Royce make such contributions. While receiving payments from Rolls-Royce for over five years, the Funds also never demanded contributions on behalf of probationary employees.

The parties filed cross-motions for summary judgment. The bargaining history, as set forth in the Kennedy affidavit, was undisputed. Ignoring the prior practice of the parties, the district court found that the contractual term "each employee" unambiguously encompassed both regular and probationary employees. The district court therefore granted summary judgment in favor of the Funds and ordered Rolls-Royce to produce various books and records for an audit by the Funds. Rolls-Royce appeals this order.


We have jurisdiction pursuant to 28 U.S.C. § 1291 (1988) and exercise plenary review over the district court's order granting summary judgment. Philadelphia and Reading Corp. v. United States, 944 F.2d 1063, 1070 (3d Cir. 1991). We apply the same test as the district court -- summary judgment should be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). Both parties agree that all relevant facts are undisputed. The only remaining issue involves the interpretation of the legal obligations arising out of the collective bargaining agreement. The district court found that Article XX(a) of the collective bargaining agreement unambiguously requires Rolls-Royce to make contributions on behalf of probationary employees. The determination of whether a contract term is clear or ambiguous is a pure question of law requiring plenary review. Clement v. Consolidated Rail Corp., 963 F.2d 599, 600 (3d Cir. 1992); Taylor v. Continental Group Change in Control Severance Pay Plan, 933 F.2d 1227, 1232 (3d Cir. 1991); International Union, United Auto., Aerospace and Agric. Implement Workers v. Mack Trucks, Inc., 917 F.2d 107, 111 (3d Cir. 1990), cert. denied, U.S. , 113 L. Ed. 2d 246, 111 S. Ct. 1313 (1991).*fn2

Although federal law governs the construction of collective bargaining agreements, see Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456, 77 S. Ct. 912, 918 (1957), traditional rules of contract interpretation apply when not inconsistent with federal labor law, see Sheet Metal Workers, Local 19 v. 2300 Group, Inc., 949 F.2d 1274, 1284 (3d Cir. 1991); Mack Trucks, 917 F.2d at 111. To decide whether a contract is ambiguous, we do not simply determine whether, from our point of view, the language is clear. Rather, we "hear the proffer of the parties and determine if there [are] objective indicia that, from the linguistic reference point of the parties, the terms of the contract are susceptible of different meanings." Sheet Metal Workers, 949 F.2d at 1284 (brackets in original) (quoting Mellon bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1011 (3d Cir. 1980)). Before making a finding concerning the existence or absence of ambiguity, we consider the contract language, the meanings suggested by counsel, and the extrinsic evidence offered in support of each interpretation. Id.; Mack Trucks, 917 F.2d at 111; see also Restatement (Second) of Contracts ยง 223 cmt. b (1981) ("There is no requirement that an agreement be ambiguous before evidence ...

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