258 F.3d 645 (7th Cir. 2001), 00-3648, Operating Engineers Local 139 v Gustafson Construction Co.

Docket Nº:00-3648 and 00-3870
Citation:258 F.3d 645
Party Name:Operating Engineers Local 139 Health Benefit Fund, et al., Plaintiffs-Appellants, Cross-Appellees, v. Gustafson Construction Corporation, Defendant-Appellee, Cross-Appellant.
Case Date:July 20, 2001
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 645

258 F.3d 645 (7th Cir. 2001)

Operating Engineers Local 139 Health Benefit Fund, et al., Plaintiffs-Appellants, Cross-Appellees,


Gustafson Construction Corporation, Defendant-Appellee, Cross-Appellant.

Nos. 00-3648 and 00-3870

In the United States Court of Appeals, For the Seventh Circuit

July 20, 2001

Argued June 6, 2001

Appeals from the United States District Court for the Eastern District of Wisconsin. No. 96 C 956--Thomas J. Curran, Judge.

Page 646

[Copyrighted Material Omitted]

Page 647

[Copyrighted Material Omitted]

Page 648

Before Fairchild, Bauer, and Posner, Circuit Judges.

Posner, Circuit Judge.

The plaintiffs in this suit under ERISA and section 301 of the Taft-Hartley Act are nine multiemployer pension and welfare funds established pursuant to collective bargaining agreements. The funds are com plaining about delinquent contributions by a small Wisconsin construction company, between 1993 and 1998, and they appeal from a grant of summary judgment largely in the defendant's favor. The cross-appeal, which complains that the attorneys' fees awarded by the district court were excessive in view of the plaintiffs' lack of success on the merits, is premature on the view we take of the plaintiffs' appeal. There are some differences in the issues raised by the different funds, but for the sake of simplicity, and without affecting the legal analysis, we'll be able with one exception to confine our discussion to the fund related to the laborers' union.

The defendant failed to make contributions during the four-year period covered

Page 649

by the complaint on the schedule set forth in its collective bargaining agreement with the union. This much is conceded, but the district court permitted the defendant to offset against the fund's claim the amount by which the contributions sought by the fund exceeded the level of employer contributions specified in the 1991 collective bargaining contract. Although that contract expired in 1993, it contained an "evergreen" clause: if neither party terminated the contract, it would be renewed automatically. The union negotiated with other employers a successor contract increasing the amount of the required employer contributions, and submitted the new contract to the defendant too, but for unexplained reasons the defendant never signed it. Nevertheless the union billed the defendant for contributions at the new, higher rates specified in the successor contract--and the defendant paid, without a murmur (albeit often late), throughout the period embraced by the suit. It claims to have paid by mistake, having, it argues, by virtue of the evergreen clause no contractual obligation to contribute to the fund at any rate higher than that specified in the 1991 contract; and therefore it was entitled to the offset that the district court allowed it.

This is wrong on two grounds. The first is that the defendant's conduct in paying the higher rates uncomplainingly shows that it acquiesced in a modification of the 1991 contract, accepting at least so much of the successor contract that the union had tendered to it as established a new schedule of employer contributions to the fund. Nothing in the law of contracts requires that a contract, whether original or modified, must be signed to be enforceable. The contract needn't be in writing; if it is in writing, it needn't be signed, provided there's other evidence of acceptance, for example (a very pertinent example) by performance, In re Vic Supply Co., Inc., 227 F.3d 928, 932 (7th Cir. 2000); and if the contract is within the statute of frauds, a memorandum of the essential terms, signed by the party sought to be held to the contract, will suffice to make it enforceable. E.g., Consolidation Services, Inc. v. KeyBank National Ass'n, 185 F.3d 817, 819-20 (7th Cir. 1999). No statute of frauds defense is raised here- -doubtless because the fund's partial performance, in paying benefits in accordance with the new schedule, took any contractual modification pursuant to which they were paid out of the scope of the statute of frauds. E.g., C.L. Maddox, Inc. v. Coalfield Services, Inc., 51 F.3d 76, 79 (7th Cir. 1995); compare Connor v. Commissioner, 218 F.3d 733, 741 (7th Cir. 2000). And this would mean, under general common law principles, that all that was required to make a modification of the defendant's obligations enforceable was that it be supported by consideration, Contempo Design, Inc. v. Chicago & N.E. Ill. District Council of Carpenters, 226 F.3d 535, 550 (7th Cir. 2000) (en banc); United States v. Stump Home Specialties Mfg., Inc., 905 F.2d 1117, 1121-22 (7th Cir. 1990), and that acceptance of the modification be manifested with sufficient definiteness to enable a judge or jury to conclude with reasonable confidence that, yes, it was accepted. Autotrol Corp. v. Continental Water Systems Corp., 918 F.2d 689, 692 (7th Cir. 1990).

These are general common law principles that we've been reciting, however, and the common law that the federal courts have devised to govern disputes arising out of collective bargaining contracts and ERISA plans does not coincide at every point with the general law. For example, the rule whose vitality we questioned in Autotrol, id. that makes contractual clauses forbidding modification other than by a signed writing unenforceable is inapplicable to collective bargaining contracts for the reasons explained in Martinsville

Page 650

Nylon Employees Council Corp. v. NLRB, 969 F.2d 1263, 1267-68 (D.C. Cir. 1992), and even more clearly to ERISA plans. For while the plan itself doesn't have to be in writing, James v. National Business Systems, Inc., 924 F.2d 718, 720 (7th Cir. 1991); Jay Conison, Employee Benefit Plans in a Nutshell 199 (2d ed. 1998); but cf. Sandstrom v. Cultor Food Science, Inc., 214 F.3d 795, 797 (7th Cir. 2000) (though if it is established by a collective bargaining agreement the employer's required contributions must be specified in a written agreement, 29 U.S.C. sec. 186(c)(5)(B), in order to prevent diversion of pension fund moneys to union officials, Arroyo v. United States, 359 U.S. 419, 425-26 (1959)), modifications have to be in writing in order to protect the plan's financial integrity. Downs v. World Color Press, 214 F.3d 802, 805 (7th Cir. 2000); Plumb v. Fluid Pump Service, Inc., 124 F.3d 849, 856 (7th Cir. 1997); Pohl v. National Benefits Consultants, Inc., 956 F.2d 126, 128 (7th Cir. 1992).

This purpose implies, it is true, a limitation to cases in which plan participants or beneficiaries are seeking larger benefits than the plan authorizes. See Doe v. Blue Cross & Blue Shield United of Wisconsin, 112 F.3d...

To continue reading