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Board of Trustees v. Four-C-Aire, Inc.

United States Court of Appeals, Fourth Circuit

July 3, 2019

BOARD OF TRUSTEES, SHEET METAL WORKERS' NATIONAL PENSION FUND, Plaintiff - Appellant,
v.
FOUR-C-AIRE, INC., Defendant-Appellee. and BOARD OF TRUSTEES, INTERNATIONAL TRAINING INSTITUTE FOR THE SHEET METAL AND AIR CONDITIONING INDUSTRY; BOARD OF TRUSTEES, NATIONAL ENERGY MANAGEMENT INSTITUTE COMMITTEE; BOARD OF TRUSTEES, SHEET METAL OCCUPATIONAL HEALTH INSTITUTE TRUST FUND; BOARD OF TRUSTEES, SHEET METAL WORKERS' INTERNATIONAL ASSOCIATION SCHOLARSHIP FUND; BOARD OF TRUSTEES, NATIONAL STABILIZATION AGREEMENT FOR THE SHEET METAL INDUSTRY TRUST FUND, Plaintiffs, BAKERY AND CONFECTIONERY UNION AND INDUSTRY INTERNATIONAL PENSION FUND, Amicus Supporting Appellant.

          Argued: January 30, 2019

          Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Liam O'Grady, District Judge. (1:16-cv-01613-LO-IDD)

         ARGUED:

          Lauren Powell McDermott, MOONEY, GREEN, SAINDON, MURPHY & WELCH, PC, Washington, D.C., for Appellant.

          Joseph Ray Pope, WILLIAMS MULLEN, Richmond, Virginia, for Appellee.

         ON BRIEF:

          John R. Mooney, Diana M. Bardes, MOONEY, GREEN, SAINDON, MURPHY & WELCH, PC, Washington, D.C., for Appellant.

          Michael E. Avakian, WIMBERLY, LAWSON & AVAKIAN, Washington, D.C., for Appellee. Julia Penny Clark, Richard F. Griffin, Jr., BREDHOFF & KAISER, PLLC, Washington, D.C., for Amicus Curiae.

          Before NIEMEYER, AGEE, and DIAZ, Circuit Judges.

          AGEE, CIRCUIT JUDGE

         The Board of Trustees of the Sheet Metal Workers' National Pension Fund (the "Fund"), a multiemployer pension plan, filed this suit claiming a delinquent exit contribution from Four-C-Aire, Inc., a former participating employer, pursuant to § 515 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1145. After the district court granted Four-C-Aire's motion to dismiss, the Fund appealed. Because the Fund's governing agreements (the "Trust Documents") and Four-C-Aire's collective bargaining agreement (the "CBA") require participating employers to pay an exit contribution when they no longer have a duty to contribute to the Fund due to the expiration of the underlying CBA, the complaint alleges a viable claim. We therefore reverse the district court's order granting the motion to dismiss, vacate the judgment as to the exit contribution claim, and remand for further proceedings consistent with this opinion.

         I.

         Before turning to the specific facts of this case, we review how multiemployer pension plans like the Fund operate and the law that governs them. As the name suggests, "[i]n a multiemployer pension plan, multiple employers [from within an industry] pool contributions into a single [trust] fund that pays benefits to covered retirees who spent a certain amount of time working for one or more of the contributing employers." Bakery & Confectionary Union & Indus. Int'l Pension Fund v. Just Born II, Inc., 888 F.3d 696, 698 n.1 (4th Cir. 2018) (internal quotation marks omitted). When an employer executes a CBA with a local union governing the terms of employment, the CBA will often require the employer to contribute to such a plan. Thus, in addition to signing on to a CBA with the union, an employer will also sign on to the terms and conditions of the plan's separate governing documents. But, as discussed further below, the plan is not a party to the CBA between the employer and union.

         Plan participation provides multiple advantages to both employees and employers. Among them, employees receive benefits that follow them throughout jobs within a particular industry, and employers are able to offer those benefits while taking advantage of cost- and risk-sharing mechanisms. See Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust Fund for S. Cal., 508 U.S. 602, 606 (1993).

         But participation by an employer in a multiemployer pension plan is not without its risks and obligations. For example, if one participating employer fails to make a contribution to the plan-whether because their CBA has expired, they have gone out of business, or otherwise-the remaining employers must then make larger contributions or employees must receive reduced benefits to cover the shortfall. These "rising costs may encourage-or force-further withdrawals, thereby increasing the inherited liabilities to be funded by an ever-decreasing contribution base." Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 722 n.2 (1984) (internal quotation marks omitted). "This vicious downward spiral may continue until it is no longer reasonable or possible for the pension plan to continue." Id.; see also Cent. States, Se. & Sw. Areas Pension Fund v. Gerber Truck Serv., Inc., 870 F.2d 1148, 1151 (7th Cir. 1989) (en banc) ("Multi-employer plans are defined-contribution in, defined-benefit out. Once they promise a level of benefits to employees, they must pay even if the contributions they expected to receive do not materialize[.]").

         To address these risks, Congress amended ERISA by enacting the Multiemployer Pension Plan Amendments Act of 1980 (the "MPPAA") with the goal of stabilizing plans that had suffered financial setbacks when participating employers ceased contributing to the plan. H.R. Rep. No. 96-869(I), at 71 (1980), as reprinted in 1980 U.S.C.C.A.N. 2918, 2939 (reporting that the MPPAA was designed to "protect the interests of participants and beneficiaries in financially distressed multiemployer plans" and ensure benefit security to plan participants). Relevant here, the MPPAA provides a separate federal cause of action permitting multiemployer plans to collect contributions from employers so long as the plan is able to establish an obligation to contribute under the terms of the plan's governing documents or the CBA: "Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a [CBA] shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement." ERISA § 515, 29 U.S.C. § 1145; see also Laborers Health & Welfare Trust Fund for N. Cal. v. Advanced Lightweight Concrete Co., 484 U.S. 539, 547 (1988) ("The liability created by § 515 may be enforced by the trustees of a plan by bringing an action in federal court pursuant to § 502."); Bakery & Confectionery Union & Indus. Int'l Pension Fund v. Ralph's Grocery Co., 118 F.3d 1018, 1021 (4th Cir. 1997) (stating that § 515 "creates a federal right of action independent of the contract on which the duty to contribute is based" (internal quotation marks omitted)).

         With the enactment of the MPPAA, Congress placed multiemployer plans in a stronger position to collect outstanding contributions "than they [would] otherwise occupy under common law contract principles." Ralph's Grocery, 118 F.3d at 1021. Ordinarily, any suit brought by a plan for contributions would be subject to common law defenses- such as the parties' intent, fraud in the inducement, or mistake of fact-that the employer could assert against the local union. Id. (noting that although third party beneficiaries to a contract-which multiemployer pension plans are similarly situated to in the context of a CBA-can enforce contract terms that inure to their benefit, they are also "subject to defenses that the promisor could assert against the original party to the contract"). But under § 515,

a multiemployer plan can enforce, as written, the contribution requirements found in the controlling documents . . . . Consequently, an employer is not permitted to raise defenses that attempt to show that the union and the employer agreed to terms different from those set forth in the agreement. Nor is an employer permitted to raise defenses that relate to claims the employer may have against the union[.]

Id. (emphasis added) (internal citations omitted).

         As Ralph's Grocery explained, this favored status arises from the interaction between § 515 and longstanding interpretative principles that federal courts apply to CBAs. Generally, we employ federal labor law to construe the terms of a CBA. See Textile Workers Union of Am. v. Lincoln Mills of Ala., 353 U.S. 448, 456 (1957). Thus, we will apply "traditional rules of contract construction" to CBAs and plan documents "only when they do not conflict with federal labor law." Ralph's Grocery, 118 F.3d at 1025; see also M & G Polymers USA, LLC v. Tackett, 135 S.Ct. 926, 933 (2015) ("We interpret [CBAs], including those establishing ERISA plans, according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy."). Consequently, § 515-as a statement of federal labor policy-bestows favored status on multiemployer plans, allowing them to collect contributions from employers by enforcing the contribution requirements "in accordance with the terms and conditions" of the plan or CBA. 29 U.S.C. § 1145. Section 515 thus "strengthens the position of multiemployer plans by holding employers and unions to the literal terms of their written commitments. [This means that] the actual intent of the contracting parties (i.e., the employer and the local union) is immaterial when the meaning of [the] language is clear."[1] Ralph's Grocery, 118 F.3d at 1021. In sum, even if an employer could assert a valid common law defense, it must give way to the plain language of the CBA or governing plan documents.[2]

         This strengthened position gives effect to the protections the MPPAA was designed to provide to plans and beneficiaries. Prior to the enactment of § 515, "collection actions by multiemployer plans often were complicated by issues that had arisen between the employer and the local union but were unrelated to the employer's obligation to the plan." Id. "Injecting these tangential issues into collection actions consumed plan resources by increasing the cost and delay involved in litigation" and, should an employer's defense be successful, resulted in decreased plan contributions. Id.

         Permitting a plan to bring an action against an individual employer in accordance with the plain language of the plan documents or CBA addresses these issues in three crucial ways. First, it streamlines the collections process and ensures plans remain funded pursuant to the plan's clear terms. Id. at 1021-22. Second, it permits plans to apply the written terms of plan participation uniformly, despite the existence of numerous individual CBAs-all with their own unique provisions-through which employers agreed to contribute to the plan. Cf. Sinai Hosp. of Balt., Inc. v. Nat'l Benefit Fund for Hosp. & Health Care Emps., 697 F.2d 562, 568 (4th Cir. 1982) (binding a multiemployer pension plan to all the terms of an individual CBA would "completely dissipate the law of trusts, leaving employee benefit funds vulnerable to the recurring whims of employer/union bargainers"). Third, it leaves for separate litigation any matters between the employer and the union arising from their individual CBA, to which the plan was not a party. This last point is particularly important given that plans necessarily do not have the same duties and interests as local labor unions or employers. See Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transport, Inc., 472 U.S. 559, 576 (1985) (noting that where a plan's "duty extends to all [national] participants and beneficiaries of [the] multiemployer plan," "a local union's duty is confined to current employees employed in the bargaining unit in which it has representational rights").

         This Court has underscored the need for plans to be able to enforce their trust agreements uniformly. In Ralph's Grocery, we concluded that where two CBA provisions conflict, the provision imposing "uniform [plan] participation requirements" governs. 118 F.3d at 1025. There, an employer had entered into a CBA requiring it to contribute to a multiemployer pension plan. One of the specific CBA provisions plainly provided that the employer would not be required to make any plan contributions based on severance pay. However, the applicable plan (a multiemployer plan) also required as a condition of participation that the CBA include a separate clause-known as a "standard clause"- providing that the employer would agree to make plan contributions based on rates established by the plan trust, and that the standard clause encompassed "the sole and total agreement between the [e]mployer and [u]nion with respect to pensions or retirement." Id. at 1022. In turn, the plan later enacted a provision requiring employers to make contributions based on severance pay. But when the employer began reducing its workforce and disbursing severance pay, it did not make plan contributions in accord with the standard clause. Instead, relying on the other CBA provision relieving it from a severance payment obligation, the employer declined to make a contribution. The fund filed suit, demanding delinquent contributions based on the severance pay.

         In resolving the conflict between these provisions, the Court recognized as an initial matter that the purpose of § 515 was to "permit multiemployer funds to rely on the representations made to it" by employers, including agreement to any uniform participation requirements. Id. at 1025. The Court then interpreted the competing provisions in accordance with that purpose and held that the standard clause controlled. Accordingly, the employer was required to make the contributions in accordance with the terms set by the trust-and thereby based on severance pay. First, the Court recognized that "by virtue of section 515," the fund was entitled to rely on the "literal meaning of the [c]ompany's representation" in the standard clause-that is, that the "the standard clause was the parties' complete agreement on pensions," rendering the other clause's exclusion of contributions based on severance pay "ineffective against the [plan]." Id. at 1023-24. Otherwise, the plan would be "required to comb through the other parts of the [CBA] searching for additional terms related to pensions," which would require plan counsel to inspect all individual CBA provisions and exacerbate the "risk of losing contributions due to overlooked or misinterpreted provisions that appear outside the standard clause and purport to alter the uniform standard of participation." Id. at 1024. Second, because the plan's "acceptance of an employer [was] based on the terms of the prescribed instruments," "the terms of the standard clause [necessarily] form[ed] the basis for the [employer's] relationship with the [plan]." Id. And third, allowing the plan to rely on the standard clause was "consistent with the congressional policies embodied in section 515," particularly the need to "reduce the cost of administering funds" and "achieve a uniform standard of participation for all participating employers." Id. Thus, where two provisions concerning plan contribution conflict, that which gives effect to the purposes of § 515 prevails. See id. at 1025.

         II.[3]

         Having established these background principles, we turn to the facts at hand. Four-C-Aire is a New York-based corporation that employs members of the Sheet Metal Workers International Association Local Union No. 58. Throughout labor negotiations with Local Union No. 58, Four-C-Aire utilized a national trade association to represent it. At the conclusion of negotiations, Four-C-Aire signed onto an existing CBA[4] that incorporated other documents, none of which the corporation had played a part in drafting. Specifically, the negotiations resulted in Four-C-Aire becoming a signatory to a CBA that was to remain in effect, per a durational clause[5] in the CBA, until April 30, 2016. In turn, the CBA required Four-C-Aire to contribute to the Fund[6] and "incorporated by reference" the Fund's Trust Documents.[7] The CBA also bound Four-C-Aire to abide by the terms and conditions of the Trust Documents, "including any amendments thereto and policies and procedures adopted by the [Fund's] Board[] of Trustees."[8] J.A. 10, 112-13. Specifically, the text of the CBA provided:

The parties agree to [be] bound by . . . the separate agreements and declarations of trusts of all other local or national programs to which it has been agreed that contributions will be made. In addition, the parties agree to be bound by any amendments to said trust agreements as may be made from time to time[.]

Bd. of Trustees, Sheet Metal Workers Nat'l Pension Fund v. Four-C-Aire, Inc., No. 1:16-cv-1613, 2017 WL 1479425, at *10 n.8. (E.D. Va. Apr. 21, 2017).

         In turn, under Article V, Section 6(a) of the Trust Documents, Four-C-Aire was required to pay an exit contribution to the Fund when three criteria were met: (1) it ceased to have an obligation to contribute to the Fund, and (2) as a result of the cessation of its obligation to contribute, it had an event of withdrawal under Title IV of ERISA, but (3) did not have to pay a statutorily-mandated withdrawal liability.[9] While the CBA was in effect, the Trust Documents were amended to state:

[B]y agreeing to contribute, continuing to contribute, or continuing to be obligated to contribute, to the Fund, each Employer agrees to pay an Exit Contribution in accordance with this [provision]. The Employer's obligation to pay an Exit Contribution under this [provision] is independent of the Employer's [CBA] and continues to apply after ...

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