883 F.2d 454 (6th Cir. 1989), 88-1780, Central States, Southeast and Southwest Areas Pension Fund v. Behnke, Inc.

Docket Nº:88-1780.
Citation:883 F.2d 454
Party Name:11 Employee Benefits Ca 2334 CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND; Central States, Southeast and Southwest Areas Health and Welfare Fund; Employee Benefit Plans; and Howard McDougall, Trustee, Plaintiffs-Appellees, v. BEHNKE, INC., Defendant-Appellant.
Case Date:August 21, 1989
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 454

883 F.2d 454 (6th Cir. 1989)

11 Employee Benefits Ca 2334


Central States, Southeast and Southwest Areas Health and

Welfare Fund; Employee Benefit Plans; and Howard

McDougall, Trustee, Plaintiffs-Appellees,


BEHNKE, INC., Defendant-Appellant.

No. 88-1780.

United States Court of Appeals, Sixth Circuit

August 21, 1989

Argued April 11, 1989.

Rehearing Denied Oct. 3, 1989.

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[Copyrighted Material Omitted]

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Douglas A. Firth, Charles N. Taunt, Russell N. Luplow, P.C., Bloomfield Hills, Mich., Thomas C. Nyhan, Albert M. Madden (argued), Central States Law Dept., Chicago, Ill., for plaintiffs-appellees.

Craig H. Lubben (argued), Miller, Johnson, Snell & Cummiskey, Kalamazoo, Mich., for defendant-appellant.

Before JONES, WELLFORD and GUY, Circuit Judges.

RALPH B. GUY, Jr., Circuit Judge.

Defendant, Behnke, Inc., appeals the portion of the district court's judgment ordering it to pay delinquent health and welfare contributions to plaintiffs Central States, Southeast and Southwest Areas Pension Fund; Central States, Southeast and Southwest Areas Health and Welfare Fund; Employee Benefit Plans; and Howard McDougall, Trustee (Central States). Essentially, Behnke challenges the district court's interpretation and construction of various agreements between Behnke and its employees' bargaining agent, Local 34 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers (Union). Behnke urges that proper interpretation of these agreements relieves it of any payment obligation to Central States and deprives the district court of jurisdiction over the claim for the period beyond the expiration of the 1982-85 oral collective bargaining agreement (CBA) between Behnke and the Union. We conclude that the district court's order was premised on a proper interpretation and construction of the parties' agreements and, accordingly, affirm.

The facts underlying this case are undisputed. Behnke is a trucking firm based in Battle Creek, Michigan, that transports goods in interstate commerce. Central States is a multiemployer employee benefit fund within the meaning of the Employment Retirement Income Security Act (ERISA), 29 U.S.C. Secs. 1002(1), (3), (37)A, as amended by the Multiemployer Pension Plan Amendments Act of 1980. As a multiemployer benefit fund, Central States receives contributions pursuant to collective bargaining agreements negotiated between employers and local unions affiliated with the International Brotherhood of Teamsters. Behnke contributed to Central States from 1950 to 1982 in accordance with a series of collective bargaining agreements with the Union. On March 31, 1982, the parties' then-existing three-year CBA expired and negotiations commenced for a new one. Meanwhile, Behnke and the Union agreed, on an interim basis, that Behnke would increase its contributions to Central States to maintain the same level of benefits for Behnke employees for the first year of the contemplated new CBA. Behnke also agreed to pay whatever was required to maintain the plan for the succeeding two years. 1 The parties' interim

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agreement was memorialized in a writing, styled "Fringe Benefit Interim Agreement" (Interim Agreement). By its terms, this agreement was intended to provide benefit coverage to employees while negotiations for a new CBA proceeded. It became effective on April 1, 1982, and although it had an expiration date of April 1, 1985, it also provided for its earlier termination upon the execution, in final form, of the full CBA.

During the continuing CBA negotiations, Behnke expressed concern about the spiraling costs of providing its employees with health care benefits. In late 1982, the parties orally agreed on a new CBA, which was never reduced to writing or signed by the parties. Although Behnke had committed itself to paying increased premiums to Central States in year one (1982-83), the oral CBA between Behnke and the Union contemplated further negotiations regarding the manner, means, and method of providing health benefits in years two (1983-84) and three (1984-85) and regarding an appropriate insurance carrier. It also provided for a 5% pay raise in 1983 and in 1984, applicable in whole or part, at the employee's option, to wages or to increased premiums for health and welfare benefits. 2 Behnke's initial attempts to locate a new carrier to provide comparable benefits at lower rates were unsuccessful. In June 1983, negotiations between Behnke and the Union culminated in an agreement to apply the employees' 1983 5% raise to increased premiums necessary to retain health and welfare benefit coverage with Central States from April 1983 through March 1984. Accordingly, Behnke and the Union executed a "Participation Agreement." That agreement set forth the 1982-83 and 1983-84 contribution rates. More importantly, for our purposes, the agreement also stated that the 1984-85 contribution rate would be whatever rate was necessary to maintain the plan. 3 The Participation Agreement also binds Behnke to the Central States "Trust Agreement," which obligates Behnke to continue contributions in the amounts specified by the applicable CBA while negotiations proceed for a new CBA. The Participation Agreement also provides for its full force and effect until the employer notifies the fund by certified mail that it is no longer legally obliged to contribute to the fund. Accordingly, Behnke contributed to Central States, and benefits were paid by Central States through April 1984. 4

In April 1984, Mark Behnke contacted Union representative Tom Harty regarding health benefits for 1984-85. Harty incorrectly advised Behnke that the Central States rate for health coverage would increase from $58.70 to $72.00. (The correct revised rate was $64.70, which equalled the scheduled 5% wage increase due employees under the oral CBA.) Behnke rejected this rate as too high and advised Harty of the company's intent to change health insurance carriers. Harty agreed to review a prospective new policy and to present it to Union members for consideration. Although the Union rejected the new policy in favor of Central States, Behnke changed carriers to the Travelers Insurance Company based on its reduced rates for comparable coverage. Accordingly, as of April 1984, Behnke discontinued its health and welfare contributions to Central States. On May 29, 1984, Behnke notified Central States by letter of its decision to discontinue its contributions because of prohibitively

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high rates. 5 As of July 1984, Central States suspended benefits and payments for and on behalf of Behnke's employees and their dependents. Since May 1984, Behnke has maintained a comparable health and welfare benefits policy with Travelers. 6

On July 5, 1985, the Union filed an unfair labor practice charge with the National Labor Relations Board (NLRB) against Behnke, in part because of its failure to negotiate over the change in health insurance carriers. 7 The NLRB issued a complaint on the charge but subsequently dismissed it at the Union's request after the parties adopted a new written CBA. 8

Thereafter, Central States sued Behnke to recover delinquent contributions for the period from April 1, 1984, to November 1985. It sought delinquent pension and health and welfare contributions, together with liquidated damages, costs, and attorneys' fees 9 under ERISA. Jurisdiction was based on the Labor Management Relations Act, 29 U.S.C. Sec. 185(a), and ERISA, 29 U.S.C. Sec. 1132. Following a bench trial, the district court ordered Behnke to pay, among other damages, $139,831.70 in delinquent health and welfare contributions, interest, and liquidated damages. 10 It is this order that Behnke challenges on appeal.


As noted, the factual underpinnings of this case are not in dispute. What is disputed is the legal effect created by various agreements between the parties. Our standard of review of the interpretation and construction of these contractual agreements is de novo. Carpenters Local Union No. 345 Health & Welfare Fund v. W.D. George Constr. Co., 792 F.2d 64 (6th Cir.1986) (citing Weimer v. Kurz-Kasch, Inc., 773 F.2d 669, 671 (6th Cir.1985)).

Behnke first claims that its obligation to pay health and welfare insurance premiums to Central States pursuant to the terms of the Interim Agreement ceased when it reached a subsequent oral CBA with the Union that replaced the Interim Agreement. Next, Behnke urges that its obligation to continue its contributions pursuant to the Participation Agreement terminated when Behnke, by letter to Central States, effectively cancelled its participation because of Central States' high premiums. Behnke contends that its change of insurance carriers was authorized by and consistent with the oral CBA.

Behnke's claims hinge on the effect, under ERISA, of the 1982-85 oral CBA between Behnke and the Union because the terms of the employee benefit plan under the oral CBA conflict with the explicit written terms of the plan under the Interim, Participation, and Trust Agreements. That is, the oral CBA gave Behnke the option...

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