Trust. of MI Lab. Health Care Fund v. Gibbons, PLAINTIFFS-APPELLANT

• Citation: 209 F.3d 587
• Decision Date: 05 November 1999
• Docket Number: DEFENDANTS-APPELLEES,PLAINTIFFS-APPELLANT,No. 98-1975,V,98-1975
• Parties: (6th Cir. 2000) TRUSTEES OF THE MICHIGAN LABORERS' HEALTH CARE FUND; MICHIGAN LABORERS' DISTRICT COUNCIL PENSION FUND; MICHIGAN LABORERS' VACATION FUND; MICHIGAN LABORERS' TRAINING FUND; CONSTRUCTION INDUSTRY ADVANCEMENT FUND,MICHAEL GIBBONS; WILLIAM GIBBONS; GIBBONS BROTHERS MASONRY, Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 587

209 F.3d 587 (6th Cir. 2000)

TRUSTEES OF THE MICHIGAN LABORERS' HEALTH CARE FUND; MICHIGAN LABORERS' DISTRICT COUNCIL PENSION FUND; MICHIGAN LABORERS' VACATION FUND; MICHIGAN LABORERS' TRAINING FUND; CONSTRUCTION INDUSTRY ADVANCEMENT FUND, PLAINTIFFS-APPELLANTS,

V.

MICHAEL GIBBONS; WILLIAM GIBBONS; GIBBONS BROTHERS MASONRY, DEFENDANTS-APPELLEES

No. 98-1975

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: November 5, 1999

Decided and Filed: April 7, 2000

Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 97-71315--Bernard A. Friedman, District Judge. [Copyrighted Material Omitted] Christopher P. Legghio (argued), Martens, Ice, Geary, Klass, Legghio, Israel & Gorchow, Southfield, Michigan, Kenneth J. Fiott (briefed), Cameron Miller & Associates, Plymouth, MI, for Appellants.

Michael J. Olson (argued), Thomas J. Kizer (briefed), Kizer Law Firm, Howell, Michigan, for Appellees.

Before: Martin, Chief Judge; Daughtrey, Circuit Judge; KATZ,^* District Judge.

OPINION

Martha Craig Daughtrey, Circuit Judge

The plaintiffs here are trustees of various employment benefit funds established by collective bargaining agreements between construction-industry employer associations and unions representing their employees. They filed suit pursuant to § 515 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1145 (1994), against the defendants, Michael Gibbons, William Gibbons, and Gibbons Brothers Masonry, seeking recovery of unpaid contributions and other equitable relief. Following cross-motions for summary judgment, the district court denied the plaintiffs' motion and granted summary judgment to the defendants, finding that the plaintiffs were equitably estopped from recovering fringe benefits under the circumstances of this case. The plaintiffs appeal, assigning as error only the grant of summary judgment to the defendants. Because we conclude that the district court erred in its application of the five-part test developed by this court in Apponi v. Sunshine Biscuits, Inc., 809 F.2d 1210 (6th Cir. 1987), and reiterated in Armistead v. Vernitron Corp., 944 F.2d 1287 (6th Cir. 1991), we find it necessary to reverse the judgment of the district court.

FACTUAL AND PROCEDURAL BACKGROUND

Defendants Michael and William Gibbons, doing business as Gibbons Brothers Masonry, are contractors in the construction industry. Between 1986 and 1990, the defendants entered into collective bargaining agreements with various local chapters of the State of Michigan Laborers' District Council of the Laborers' International Union of North America. The agreements required the defendants to contribute specific sums of money to several employee pension and welfare benefit funds governed by ERISA. These funds, the trustees of which are plaintiffs here, included the Michigan Laborers' Health Care Fund; the Michigan Laborers' District Council Pension Fund; the Michigan Laborers' Vacation Fund; the Michigan Laborers' Training Fund; and the Construction Industry Advancement Fund. Each agreement also included an "evergreen" clause, automatically renewing the agreement each year unless a party to the agreement submitted written notice of intent to terminate or amend at least 60 days before the agreement's expiration date.

In 1990, an audit of the defendants' payroll records indicated that the defendants owed thousands of dollars in unpaid contributions to the Funds. After protracted negotiations over payment of these monies failed, in 1991 plaintiffs filed a lawsuit under ERISA's civil enforcement provisions to recover the unpaid amount.¹ The district court entered a default judgment against the defendants for approximately $70,000, covering the plaintiffs' claims through September 1990. The defendants' business and personal bank accounts were garnished to satisfy the judgment.

After the 1991 judgments, the defendants made no further payments into the Funds. In 1994, an auditor for the Funds, Dawn Aldrich, contacted the defendants by mail and by phone requesting access to payroll records in order to perform another audit. At that time defendant William Gibbons informed Aldrich of his belief that the 1991 judgment terminated the collective bargaining agreements. Aldrich, whose office had received no report confirming that the agreements had been terminated, told Gibbons that she "was sure that he had agreements" with the union requiring continued payments into the Funds.

Both Aldrich and Gibbons expressed an intent to check their files to ascertain the status of the agreements. Nevertheless, no contact occurred between the parties until September 1996, when Aldrich again attempted to schedule an audit with the defendants. They refused to permit the audit, and the trustees filed another complaint, this time seeking an order to compel the audit and to enforce the defendants' obligations to make contributions to the Funds.

In this second lawsuit, the instant case, both the plaintiffs and the defendants moved for summary judgment on the issue of the defendants' liability to the funds. Both parties argued that there were no genuine issues of material fact. The defendants, for their part, insisted that the plaintiffs should be prevented from enforcing the agreements under the equitable doctrines of laches and estoppel and that the agreements themselves were void due to fraud in the execution. At the hearing on the motions, the district court denied summary judgment to the plaintiffs and held for the defendants, referring to both laches and equitable estoppel as grounds for denying the plaintiffs' prayer for relief. In its opinion denying the plaintiffs' later motion for reconsideration, the court held that the plaintiffs should be estopped from enforcing the collective bargaining agreements because the defendants had shown all the elements of equitable estoppel required by this court. The plaintiffs appeal from this order.

DISCUSSION

We review a district court's grant of summary judgment de novo. See Tregoning v. American Community Mut. Ins. Co., 12 F.3d 79, 81 (6th Cir. 1993). We may affirm the decision below only if we determine that the pleadings, affidavits, and other submissions show "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). All inferences drawn from the submissions to the court must be viewed in the light most favorable to the non-movant. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). Summary judgment is inappropriate if "the evidence is such that a reasonable jury could return a verdict for the [non-movant]." Sowards v. London County, 203 F.3d 426, 431 (6th Cir. 2000) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242 249-50 (1986)).

Well over a century ago, the Supreme Court held that the beneficiary of a contract may be estopped from enforcing that contract when he has "by his representations or his conduct induced the other party... to give him an advantage which it would be against equity and good conscience for him to assert." Insurance Co. v. Wilkinson, 80 U.S. 222, 233 (1871). The Sixth Circuit has followed the nation's highest court in requiring that such representations must contain an element of fraud, either intended deception or "such gross negligence... as to amount to constructive fraud." Brant v. Virginia Coal and Iron Co., 93 U.S. 326, 335 (1876); see also TWM Mfg. Co., Inc. v. Dura Corp., 592 F.2d 346, 350 (6th Cir. 1979) (requiring a showing of either "misrepresentations, affirmative acts of misconduct, or intentionally misleading silence" to establish estoppel). Fraudulent conduct alone is not enough, however; the party asserting estoppel must not know the truth behind the other party's representations, see Heckler v. Community Health Servs., 467 U.S. 51, 59 n.10 (1984), must reasonably rely on the other's actions, see id. at 59, and must suffer substantial detriment as a result. See Ashwander v. Tennessee Valley Auth., 297 U.S. 288, 323 (1936); see also Teamster's Local 348 Health and Welfare Fund v. Kohn Beverage Co., 749 F.2d 315, 319 (6th Cir. 1984) ("Estoppel requires a representation, to a party without knowledge of the facts and without the means to ascertain them, upon which the party asserting the estoppel justifiably relies in good faith to his detriment.").

The plaintiffs argue that equitable estoppel should not be available as a defense in this case, because to claim that the plaintiffs' agent's oral representations and silence worked to estop enforcement of the collective bargaining agreements would contravene ERISA's mandate that benefit plans must be in writing, so that beneficiaries may determine with certainty exactly what rights and obligations the plan sets forth. See Musto v. American Gen. Corp., 861 F.2d 897, 910 (6th Cir. 1988) (citing H.R. Rep. No. 93-1280 (1974), reprinted in 1974 U.S.C.C.A.N. 5038, 5077-78). We find it unnecessary, however, to decide whether or not equitable estoppel should generally be available as a defense to contribution recovery actions, because in this case the defendants cannot establish a basis to estop recovery.

In past ERISA cases involving a claim of equitable estoppel, we have required a showing of five common-law² elements:

1) conduct or language amounting to a representation of material fact;

2) awareness of the true facts by the party to be estopped;

3) an intention on the part of the party to be estopped that the representation be acted on, or conduct toward the party asserting the estoppel such that the latter has a right to believe that the former's conduct is so intended;

4) unawareness of the true facts by the party asserting the estoppel; and

5) detrimental and justifiable reliance by the party asserting estoppel on the representation.

Armistead, 944 F.2d at 1298 (citing Apponi, 809 F.2d at 1217). All of...