Bd. of Trs. v. Four-C-Aire, Inc., 17-2295

• Decision Date: 03 July 2019
• Docket Number: No. 17-2295,17-2295
• Citation: 929 F.3d 135
• Parties: BOARD OF TRUSTEES, SHEET METAL WORKERS’ NATIONAL PENSION FUND, Plaintiff – Appellant, 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, v. FOUR-C-AIRE, INC., Defendant – Appellee. Bakery and Confectionery Union and Industry International Pension Fund, Amicus Supporting Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

929 F.3d 135

BOARD OF TRUSTEES, SHEET METAL WORKERS’ NATIONAL PENSION FUND, Plaintiff – Appellant,

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,

v.FOUR-C-AIRE, INC., Defendant – Appellee.

Bakery and Confectionery Union and Industry International Pension Fund, Amicus Supporting Appellant.

No. 17-2295

United States Court of Appeals, Fourth Circuit.

Argued: January 30, 2019

Decided: July 3, 2019

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.

Reversed, vacated, and remanded by published opinion. Judge Agee wrote the opinion, in which Judge Niemeyer and Judge Diaz joined.

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 Trust for S. Cal. , 508 U.S. 602, 606, 113 S.Ct. 2264, 124 L.Ed.2d 539 (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, 104 S.Ct. 2709, 81 L.Ed.2d 601 (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, 108 S.Ct. 830, 98 L.Ed.2d 936 (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, 77 S.Ct. 912, 1 L.Ed.2d 972 (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 , ––– U.S. ––––, 135 S. Ct. 926, 933, 190 L.Ed.2d 809 (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...