Dumac Forestry Services v. INTERN. BROTH. OF ELEC. WKRS.

• Decision Date: 19 May 1986
• Docket Number: No. 83-CV-1627.,83-CV-1627.
• Citation: 637 F. Supp. 529
• Parties: DUMAC FORESTRY SERVICES, INC., Plaintiff, v. INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, National Electrical Benefit Fund, Ralph A. Leigon and Robert L. Higgins, Individually and as Trustees of N.E.B.F., Defendants.
• Court: U.S. District Court — Northern District of New York

637 F. Supp. 529

DUMAC FORESTRY SERVICES, INC., Plaintiff, v. INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, National Electrical Benefit Fund, Ralph A. Leigon and Robert L. Higgins, Individually and as Trustees of N.E.B.F., Defendants.

No. 83-CV-1627.

United States District Court, N.D. New York.

May 19, 1986.

Willis D. Birch, Binghamton, N.Y., for plaintiff.

Blitman & King, Syracuse, N.Y. (Jules L. Smith, of counsel), for defendants.

MEMORANDUM-DECISION AND ORDER

McCURN, District Judge.

1. Background

The plaintiff Dumac Forestry Services, Inc. (Dumac) has brought this action seeking overpayments mistakenly made to the defendant National Electrical Benefit Fund (NEBF).¹ Under the terms of successive collective bargaining agreements executed by the New York State Tree Trimming and Line Clearance Contractors and Local Union No. 1249, International Brotherhood of Electrical Workers (IBEW), Dumac was required to make contributions on behalf of its employees to the NEBF in an amount equal to one percent of Dumac's gross monthly labor payroll.² From October 1977 through June 1982, Dumac erroneously made payments in an amount equal to three percent of its gross monthly payroll. By letter dated July 28, 1982, Dumac notified the NEBF that it had regularly paid at the higher rate during the aforementioned period. The NEBF subsequently refunded excess contributions made from July 1979 through June 1982 in compliance with the trustees' policy which limited refunds to a thirty-six month period. The NEBF refused to refund those contributions made from October 1977 through July 1979. These payments form the basis of this controversy.³

The court has before it plaintiff's motion for summary judgment seeking a refund of the disputed overpayments or, in the alternative, seeking an offset of monthly contributions due now and in the future with the overpayments already made. The defendants cross move for summary judgment on the grounds that plaintiff's cause of action under the Employee Retirement Security Act of 1974, 29 U.S.C. § 1001 et seq. (1985) (ERISA) must fail because the trustees' policy restricting refunds was promulgated through the reasonable exercise of their discretion and that plaintiff's common law claims based on the alleged fraud and negligence of the trustees are pre-empted by ERISA.

2. Discussion

This case is ripe for summary judgment. No disputed issues of fact exist.⁴ The sole issue before the court is whether Dumac, as a matter of law, is entitled to a full refund of its mistaken overpayments under either federal common law principles of restitution or under section 403(c)(2)(A), 29 U.S.C. § 1103(c)(2)(A) (1985).⁵

A. General Equitable Principles

ERISA provides that plan assets shall never inure to the benefit of the employer and shall be held for the exclusive benefit of the plan participants and their beneficiaries. ERISA, section 403(c)(1), 29 U.S.C. § 1103(c)(1). The Multiemployer Pension Plan Amendments Act (MPPAA) amended the foregoing section and created a limited exception to the general rule.⁶ Section 403(c)(2)(A)(ii) provides, in relevant part:

In the case of contribution ... made by an employer to a multiemployer pension plan by a mistake of fact or law section 403(c)(1) shall not prohibit the return of such a contribution or payment to the employer within six months after the plan administrator determines that the contribution was made by such a mistake.

29 U.S.C. § 1103(c)(2)(A)(ii).

The court must determine whether section 403(c)(2)(A)(ii) necessarily entitles the plaintiff to all of its erroneous payments or whether the statute is permissive, only requiring the NEBF to act in a reasonable manner in determining refund eligibility.

In the case at bar, the trustees have promulgated a policy which restricts refunds to the thirty-six months preceding the determination that payments were incorrectly made by an employer.

General principles of equity govern the return of contributions made by mistake. See, e.g., Award Service Inc. v. N. Cal. Retail Clerk's Unions, 763 F.2d 1066 (9th Cir.1985). This is so whether the cause of action derives from federal common law or is implied by statute. An examination of the circumstances which led to the employer's mistake here is, therefore, in order.

It is undisputed that the collective bargaining agreement governing fund contributions required Dumac to make monthly deposits at a rate of one percent of its gross labor payroll. A payroll report was to be submitted along with the contributions. The NEBF provided Dumac with the appropriate forms. It is the contents of these forms which constitute the basis of Dumac's argument that equity demands the refund of all overpayments. The front side of the form stated that payments were to be calculated at a rate of three percent of the monthly payroll whereas the reverse side directed that a rate of one percent be applied. The front of the form specifically indicates that all checks are to be made payable "to the NEBF for 3% of gross earnings." In contrast, the reverse side contains instructions for calculating contributions which provide, in relevant part:

"Computation of Contribution — One Percent of the Grand Total of column five, page one should be entered in the space immediately below column five and a check drawn to the order of the NEBF for the amount and forwarded with the report to the Local Board indicated." (emphasis added)

The form provided by the NEBF clearly contained contradictory instructions. However, it does not necessarily follow that the NEBF "knowingly" furnished Dumac with incorrect information.

The NEBF counters Dumac's assertions that it was intentionally misled by noting that the form it provided Dumac was identical to those it sent to all outside electrical contractors contributing to the NEBF. In fact, as of December 1982, three hundred and thirty-three (333) of three hundred and thirty-eight (338) outside electrical contractors contributing to the NEBF were required to pay three percent of their gross payroll per month. See Defendant NEBF's Answer to Plaintiff's Interrogatories Nos. 9-11. Consequently, the NEBF may well have provided the incorrect information through mere inadvertence. Moreover, Dumac, in its brief, asserts that "the sole cause of error" lay with the company's new bookkeeper who started in 1977 and was unaware that the terms of the collective bargaining agreement differed from the payroll report forms. Construing the facts most favorably to the NEBF, as opponent to Dumac's motion for summary judgment, the court finds that Dumac has failed to establish that NEBF wilfully misrepresented Dumac's obligations.

In the absence of any showing of intentional misrepresentation by the NEBF, the court must determine whether Dumac justifiably relied on the payroll report form for instructions on how to compute the contribution due each month. Dumac is chargeable with the knowledge of the terms of the collective bargaining agreement governing its contributions to the NEBF. It also appears that Dumac actually knew that only one percent was mandated. In March of 1978, the IBEW local union asked Dumac to increase its contribution rate to three percent. Dumac, however, refused to reopen the bargaining agreement. Given the foregoing, the court finds that both the plaintiff and defendant contributed to the error in payments. In the instant circumstances, however, the balance of equities tips in the plaintiff's favor. The NEBF's payroll report forms were indeed misleading. The court finds that this form was the chief source of the error committed by Dumac. Because the NEBF has failed to demonstrate that a refund of the payments would endanger the fund's integrity, the court holds that general equitable principles establish Dumac's right to receive excess contributions. The amount of contributions it is entitled to, however is another matter.

B. Trustees' Discretion

The existing case law has addressed, for the most part, only whether an aggrieved employer may sue for excess contributions. The overwhelming consensus is that general equitable principles determine an employer's right to a refund. The extent of that refund has seldom been addressed.

In the instant action, the NEBF urges this court to extend its analysis and consider the trustees' policy limiting refunds to thirty-six months. Ordinarily, the court may review trustees' actions only under an "arbitrary and capricious" standard. See Miles v. New York State Teamsters Conference Pension and Retirement Fund, 698 F.2d 593 (2d Cir.1983), cert. denied, 464 U.S. 829, 104 S.Ct. 105, 78 L.Ed.2d 108 (1984). At least one court has applied a refund policy in this context. In Fuller Cinder Co. v. Central States Pension Fund, 2 E.B.C. 2458 (E.D.Mich.1982), an employer mistakenly made contributions to a pension fund for a fourteen year period. The district court upheld the trustees' rule limiting recovery to one year and, in so doing, noted that the exception created by § 403(c)(2)(A) is discretionary and as long as the trustees act in a reasonable manner and are not arbitrary and capricious, their decision will not be disturbed. Id. at 2460; see Peckham v. Board of Trustees, 719 F.2d 1063, 1066 (10th Cir.), modified and reaffirmed, 724 F.2d 100 (1983). In the case at bar, any determination concerning the amount of overpayments to be returned from the fund would necessarily entail a review of the trustees' exercise of discretion in adopting the three-year policy. Therefore, the court holds that general equitable principles determine whether an employer is entitled to any refund, but that a policy adopted by the trustees of a pension fund will be reviewed under the "arbitrary and capricious" standard.

The NEBF argues that its policy furthers several legitimate interests. The NEBF, in its brief, states that the rule protects the fiscal integrity of the fund and protects the fund from discrepancies which might arise from...