Idaho Plumbers and Pipefitters Health and Welfare Fund v. United Mechanical Contractors, Inc.

• Decision Date: 09 May 1989
• Docket Number: Nos. 87-4159,87-4162,s. 87-4159
• Parties: 131 L.R.R.M. (BNA) 2401, 57 USLW 2724, 111 Lab.Cas. P 11,199, 10 Employee Benefits Ca 2606 IDAHO PLUMBERS AND PIPEFITTERS HEALTH AND WELFARE FUND; Idaho Plumbers and Pipefitters Pension Fund; Idaho Plumbers and Pipefitters Apprenticeship and Journeyman's Training Fund and Idaho Plumbers and Pipefitters Savings Trust Fund, Plaintiffs-Appellants, Cross-Appellees, v. UNITED MECHANICAL CONTRACTORS, INC., Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 212

875 F.2d 212

131 L.R.R.M. (BNA) 2401, 57 USLW 2724,

111 Lab.Cas. P 11,199,

10 Employee Benefits Ca 2606

IDAHO PLUMBERS AND PIPEFITTERS HEALTH AND WELFARE FUND;

Idaho Plumbers and Pipefitters Pension Fund; Idaho Plumbers

and Pipefitters Apprenticeship and Journeyman's Training

Fund and Idaho Plumbers and Pipefitters Savings Trust Fund, Plaintiffs-Appellants, Cross-Appellees, v. UNITED MECHANICAL CONTRACTORS, INC., Defendant-Appellee,

Cross-Appellant.

Nos. 87-4159, 87-4162.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 10, 1989.

Decided May 9, 1989.

Andrew M. Chasan, Boise, Idaho, for plaintiffs-appellants, cross-appellees.

Wayne V. Meuleman, Boise, Idaho, for defendant-appellee, cross-appellant.

Appeal from the United States District Court for the District of Idaho.

Before WRIGHT, TANG and WIGGINS, Circuit Judges.

OPINION

EUGENE A. WRIGHT, Circuit Judge:

We determine whether a provision of a Multi-Employer Pension Plan imposing liquidated damages for delinquent contributions is void as a penalty.

FACTS

The plaintiffs are four trust funds. They administer jointly a Master Labor-Management Agreement (MLA) between the Union Contracts Group of APHC of Idaho, Inc. and the Idaho State Pipe Trades Association. The trust funds are the Idaho Plumbers and Pipefitters Pension Fund, the Idaho Plumbers and Pipefitters Health and Welfare Fund, the Idaho Plumbers and Pipefitters Apprenticeship and Journeymen's Training Fund, and the Idaho Plumbers and Pipefitters Savings Trust Fund. The defendant, United Mechanical Contractors, Inc., (UMC) is an employer covered by the MLA collective bargaining agreement.

The MLA authorizes the trustees of the respective funds to establish a schedule of liquidated damages for failure to make timely payments in accordance with the provisions of that agreement. In addition to the MLA, the parties have trust agreements creating the jointly administered funds. Each trust agreement grants authority to the trustees to establish a due date for the contributions. If the trustees must initiate action, the MLA obligates the employer to pay all expenses incurred, including reasonable attorney's fees. The trust agreements also provide that the delinquent employer shall be liable for reasonable attorney's fees and costs incurred in the collection process.

The original trust agreements specifying a schedule of payments and due date have been amended. Under an amendment, liquidated damages apply to remittances and reports postmarked later than the 15th of the month or received later than the 20th of the month. Liquidated damages were originally the larger of $25 or 10% of the amount of contributions owed. An amendment increased them to the greater of $50 or 20%. The amendment also increased the interest rate on delinquent contributions to 12% per year.

Prior to May and June of 1985, UMC had made late payments on occasion. The trust funds took no legal action on these delinquencies.

On June 21, 1985, UMC placed in the mail the report for the month of May, together with a check for the amount of contributions due. The trust office received these on June 24, 1985, four days late. Although $46,612.65 was due, the trust funds accepted a check from UMC exceeding this amount by over $200.

On June 25, 1985, the trust administrator notified UMC that it would impose liquidated damages for the late May contributions. It assessed 20% of the amount due, $9,245.23. In response to a formal demand for the liquidated damages plus interest and attorney's fees, UMC tendered a check for $61.30 representing 12% effective interest over the four-day period of delinquency. The trust funds did not cash the check.

The trust funds brought suit on November 12, 1985, to enforce their contractual rights under the MLA and trust agreements pursuant to Sec. 301(a) of the Labor Management Relations Act (LMRA), 29 U.S.C. Sec. 185(a) (1982). The trust funds have not asserted any rights under ERISA, including 29 U.S.C. Sec. 1132(g)(2) (1982).

The district court compared the damage claim of over $9,000 with the four-day delinquency and held the liquidated damages provision void as a penalty. In an alternative holding, it held that the trust agreements adopt the damages remedy authorized by ERISA 29 U.S.C. Sec. 1132(g)(2), and offer no greater basis for recovery. It also denied the trust funds request for attorney's fees.

DISCUSSION

I. Liquidated Damages

A. Waiver of Affirmative Defense

The trust funds sued to enforce the liquidated damages provision and the court held it void as a penalty. The funds now argue that UMC waived the "void as a penalty" defense. Although UMC did not mention the defense in its answer as required, the funds raised no objection, discussed it at trial and offered evidence on actual damages.

We treat issues tried by the express or implied consent of the parties as raised in the pleadings, even if the parties made no formal amendment. E.g., Fed.R.Civ.P. 15(b); Davis & Cox v. Summa Corp., 751 F.2d 1507, 1522 (9th Cir.1985); Dale Benz, Inc. Contractors v. American Casualty Co., 303 F.2d 80, 84 n. 5 (9th Cir.1962); Kemart Corp. v. Printing Arts Research Laboratories, Inc., 269 F.2d 375, 391 (9th Cir.) (failure to plead defense affirmatively shall not affect the decision of those issues when tried "by express or implied consent of the parties."), cert. denied, 361 U.S. 893, 80 S.Ct. 197, 4 L.Ed.2d 151 (1959); Kollsman v. City of Los Angeles, 565 F.Supp. 1081, 1088-89 (C.D.Ca.1983), vacated on other grounds, 737 F.2d 830 (9th Cir.1984), cert. denied, 469 U.S. 1211, 105 S.Ct. 1179, 84 L.Ed.2d 327 (1985).

At trial, UMC and the trust funds addressed whether the provision was void as a penalty. The funds failed to allege prejudice in their ability to respond and we find none. Because they did not argue waiver during the trial nor attempt reconsideration on these grounds, we shall consider the defense.

B. ERISA Liquidated Damages Remedy

The trust funds argue that we should enforce the damages provision because other courts have enforced similar pension plan provisions. Their argument ignores the unique facts of this case. The cases cited by the funds involve 29 U.S.C. Sec. 1132(g)(2)(C)(ii), which is not applicable here.

In 1980 Congress amended the Employment Retirement Income Security Act of 1974 (ERISA) with the Multi-employer Pension Plan Amendments Act (MPPAA). The amendments, which include 29 U.S.C. Sec. 1132(g)(2) [after codification], provide a statutory remedy for a trust fund fiduciary suing to collect unpaid plan contributions. ¹

Subsection 1132(g)(2)(C)(ii) is the liquidated damages provision. It applies when (1) the fiduciary obtains a judgment in favor of the plan, (2) unpaid contributions exist at the time of suit, and (3) the plan provides for liquidated damages. See Carpenters & Joiners Welfare Fund v. Gittleman Corp., 857 F.2d 476, 478 (8th Cir.1988) (requiring "unpaid contributions" at the time suit is filed); Teamsters Local No. 429 Health and Welfare Fund v. Chain Bike Corp., 643 F.Supp. 1337, 1343-44 (E.D.Pa.1986) (requiring liquidated damages provision in the plan); Trustees of the Glaziers Local 963 Pension, Welfare & Apprentice Funds v. Walker & Laberge Co., 619 F.Supp. 1402, 1405 (D.Md.1985); Bennett v. Machined Metals Co., 591 F.Supp. 600, 605-06 (E.D.Pa.1984) (requiring award of unpaid contributions). Once the provision applies, liquidated damages are mandatory. E.g., Operating Engineers Pension Trust v. A-C Co., 859 F.2d 1336, 1342 (9th Cir.1988); see Operating Engineers Pension Trust v. Reed, 726 F.2d 513, 514 (9th Cir.1984).

Because no contributions were "unpaid" at the time of this suit, Sec. 1132(g)(2) does not apply. In contrast, the provision at issue provides for liquidated damages when contributions are late rather than unpaid. ²

The trust funds cite only inapplicable cases where unpaid contributions existed at the time of suit or even after judgment. See, e.g., Operating Engineers Pension Trust v. A-C Co., 859 F.2d at 1342; Central States, Southeast and Southwest Areas Pension Fund v. Gerber Truck Serv., Inc., 854 F.2d 1074, 1080 (7th Cir.1988), vacated on other grounds, 864 F.2d 561 (7th Cir.1989), rehearing en banc, 870 F.2d 1148 (7th Cir.1989); Vernau v. Bowen Enter., Inc., 648 F.Supp. 721, 724-25 (W.D.Pa.1986); LaJiness v. Reactor Controls, Inc., 642 F.Supp. 27, 32 (E.D.Mich.1985); Thelin v. Mitchell, 576 F.Supp. 1404, 1408-09 (N.D.Ill.1983). Here, UMC paid the contributions before suit was filed.

C. Enforceability of the MLA Provision

The parties disagree about the effect of the MPPAA on prior federal substantive law. The trust funds argue that Sec. 1132(g)(2) did not change the common law regarding contractual remedies, such as liquidated damages, and that the court misapplied that law by holding the provision void as a penalty. UMC argues that Sec. 1132(g)(2) provides the only basis to recover liquidated damages for delinquent contributions. This amounts to an argument that Sec. 1132(g)(2) preempts alternative contractual remedies formerly available under federal common law. UMC argues that if the MPPAA does not preempt alternative remedies, then the court correctly held the provision void.

We must consider whether Sec. 1132(g)(2) preempts contractual remedies available before the MPPAA. The language of Sec. 1132(g)(2) ³ does not necessarily suggest that Congress intended it to provide the only basis for recovering liquidated damages. We nonetheless investigate legislative history to resolve ambiguities about the effect of Sec. 1132(g)(2) on the common law of liquidated damages. See, e.g., Escobar Ruiz v. INS, 838 F.2d 1020, 1023 (9th Cir.1988) (en banc). This seems particularly important because we have uncovered only three cases reported after the MPPAA with analogous facts and each applies a different approach. See Carpenters & Joiners Welfare Fund v. Gittleman Corp., 857 F.2d 476 (8th Cir.1988); Trustees of The...