Kwatcher v. Massachusetts Service Employees Pension Fund

• Citation: 879 F.2d 957
• Decision Date: 07 April 1989
• Docket Number: No. 88-1930,88-1930
• Parties: 11 Employee Benefits Ca 1682 George KWATCHER, Plaintiff, Appellant, v. MASSACHUSETTS SERVICE EMPLOYEES PENSION FUND, Defendant, Appellee. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 957

879 F.2d 957

11 Employee Benefits Ca 1682

George KWATCHER, Plaintiff, Appellant, v. MASSACHUSETTS SERVICE EMPLOYEES PENSION FUND, Defendant, Appellee.

No. 88-1930.

United States Court of Appeals First Circuit.

Heard April 7, 1989.

Decided July 5, 1989.

Jack J. Mikels with whom Rochelle S. Nelson and Jack Mikels & Associates, Boston, Mass., were on brief, for plaintiff, appellant.

Michael J. Muse, Boston, Mass., for defendant, appellee.

Before BOWNES and SELYA, Circuit Judges, and CAFFREY, ^* Senior District Judge.

SELYA, Circuit Judge.

This dispute requires us to construe certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001-1461, which, over time, have proven less than transparently clear. Immersion in the ammonia of appellate analysis dispels much of the fog, however, and makes the interplay of these provisions, and their import, easier to visualize. Reflecting what we believe to be Congress's manifest intent, we affirm the principal holding below. At the same time, we remand so that the district court may undertake certain further proceedings.

I. THROUGH A GLASS, DARKLY

The pertinent facts are largely uncontested. Plaintiff-appellant George Kwatcher began working as a window-washer in 1934. Some fourteen years later, Kwatcher took over a small corporation, Astor Window Cleaning Co. ¹ As sole shareholder and chief officer, plaintiff oversaw hiring, firing, and employee discipline; executed contracts on Astor's behalf; and represented the company in collective bargaining. Astor's work force varied according to need, usually including five to fifteen window-washers. Throughout, Kwatcher belonged to the Service Employees International Union (Local 254) and Astor was a member of an employers' organization, the Maintenance Contractors of New England (MCNE).

In 1973, the Union and MCNE executed a trust declaration creating the defendant-appellee Massachusetts Service Employees Pension Fund (Fund). Beginning in 1973 (or perhaps thereafter), Astor apparently made contributions to the Fund on Kwatcher's account. Under a pension plan agreement (Plan) signed in 1981, presumably a successor to an earlier contract, certain subscribing employers (including Astor) agreed to contribute to the Fund on behalf of their eligible employees in amounts set from time to time by collective bargaining. In July 1982, Kwatcher retired and requested his pension. Initially, the Fund gave its approval and commenced monthly pension payments. In 1983, the Fund changed course and discontinued the stipend. Plaintiff, believing himself unfairly disadvantaged by this tergiversation, brought the instant suit.

After certain preliminary skirmishing, the parties filed cross-motions for summary judgment. The district court granted the Fund's motion, reasoning that Kwatcher, as a business owner, was not eligible for inclusion in an ERISA-regulated retirement plan. Plaintiff moved for reconsideration, asserting that he was at least entitled to benefits based upon the fourteen years he had worked in the industry before acquiring Astor. When that motion was summarily denied, plaintiff brought the matter to this court.

The appeal rests upon a scaffolding composed of three segments. First and foremost, Kwatcher argues that he was not an "employer" as that term is used in ERISA. ² Second, Kwatcher contends that, even if he became an "employer" upon assuming control of Astor, benefits should still have accrued for the period 1934-49. Third, if not entitled to benefits at all, Kwatcher maintains that appellee must refund the contributions it received on his behalf. We address these points seriatim.

II. WINDOWS ON THE ACT

The crux of this case is whether ERISA permits a sole shareholder who is employed by the corporation he owns to participate in an ERISA-regulated pension plan. The majority of courts to address the issue, like the court below, have concluded that such "dual status" individuals are barred from participation. See, e.g., Peckham v. Board of Trustees, Etc., 653 F.2d 424, 427 (10th Cir.1981) (Peckham I ); McHugh v. Teamsters Pension Trust Fund, 638 F.Supp. 1036, 1043-44 (E.D.Pa.1986); but see Dodd v. John Hancock Mutual Life Ins. Co., 688 F.Supp. 564, 571 (E.D.Cal.1988) (contra). Numerous windows offer insight into the matter, including the statute itself, its legislative history, and the applicable regulations. After peering through them, we are convinced that Congress meant to divorce owner-employees from plan participation.

A. Statutory Text.

It is apodictic that statutory interpretation must start with the statute itself. United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 2527, 69 L.Ed.2d 246 (1981). "So long as the statutory language is reasonably definite, [it] must ordinarily be regarded as conclusive (at least in the absence of an unmistakable legislative intent to the contrary)." United States v. Charles George Trucking Co., 823 F.2d 685, 688 (1st Cir.1987). We feel confident that the words of ERISA, and the casement in which they are set, go a long way toward resolving the central question before us.

In enacting ERISA, Congress designed a comprehensive system of federal law to regulate the operations of employee benefit plans. This legislative initiative was a "massive undertaking," Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44, 107 S.Ct. 1549, 1551, 95 L.Ed.2d 39 (1987). Its mainframe components are codified in two subchapters. Part I, 29 U.S.C. Secs. 1001-1168, includes all of ERISA's provisions anent reporting and disclosure, participation and funding, and fiduciary responsibility. Part III, 29 U.S.C. Secs. 1301-1461, establishes a multifaceted system to protect workers against employers' attempts to terminate, or withdraw from, employee benefit plans. This case requires that we train our focus on Part I.

Part I contains a lengthy laundry list of definitions developed expressly for use within the subchapter. See 29 U.S.C. Sec. 1002; see generally DeBreceni v. Graf Bros. Leasing, Inc., 828 F.2d 877, 879-80 (1st Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 1024, 98 L.Ed.2d 988 (1988). To recover benefits, Kwatcher must be a "participant" in the Plan. See 29 U.S.C. Sec. 1132(a)(1)(B). The "participant" category is restricted:

The term "participant" means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit.

29 U.S.C. Sec. 1002(7). ³

"Employee" and "employer" are plainly meant to be separate animals; under Part I, the twain shall never meet. An "employee" is "any individual employed by an employer." 29 U.S.C. Sec. 1002(6). Congress intended this definition to encompass those persons "who ha[ve] the status of an 'employee' under a collective bargaining agreement." H.R.Rep. No. 533, 93d Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. & Admin.News at 4639, 4648; S.Rep. No. 127, 93d Cong., 2d Sess., reprinted in 1974 U.S.Code, Cong. & Admin.News at 4838 4851. Given conventional labor-law principles, that refinement of the "employee" rubric seemingly excludes management figures. See generally NLRB v. Bell Aerospace Co., 416 U.S. 267, 275, 94 S.Ct. 1757, 1762, 40 L.Ed.2d 134 (1974).

The dichotomy becomes even clearer when we examine the flip side of the coin. In contradistinction to its relatively narrow definition of "employee," the statute defines the term "employer" broadly:

The term "employer" means any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan....

29 U.S.C. Sec. 1002(5); see also 29 U.S.C. Sec. 1002(9) (defining "person"). That ERISA expands the concept of "employer" beyond common-law or corporate-law notions is not much in doubt. See Darden v. Nationwide Mutual Ins. Co., 796 F.2d 701, 706 (4th Cir.1986) (in ERISA case, common-law test for master-servant relationship inappropriate for "employee" definition); cf. Donovan v. Agnew, 712 F.2d 1509, 1513 (1st Cir.1983) (construing analogous language in Fair Labor Standards Act, 29 U.S.C. Sec. 203(d) similarly). Appellant, we think, fits comfortably within this definitional window. That Kwatcher acted "in the interest of an employer, in relation to an employee benefit plan" when he represented his company in matters concerning the Fund, e.g., negotiations affecting employer contributions, oversight of Astor's payments to the Fund, can hardly be gainsaid.

Moreover, in the Part I context, there are cogent reasons why a sole shareholder should be considered an employer as a matter of "economic reality." We have previously said as much in dicta, Mass. Laborers' Health & Welfare Fund v. Starrett Paving Corp., 845 F.2d 23, 24 (1st Cir.1988), and now so hold. When an individual dominates the actions of a corporate entity--and who rules the corporate roost more singlehandedly than a sole shareholder doubling in brass as the firm's chief executive and principal operating officer?--it seems fair to acknowledge the actuality of the situation: such an individual assuredly acts "in the interest of" the corporation. He is thus subject to classification as an "employer." ⁴ See Alman v. George Mfg. Corp., 680 F.Supp. 56, 57 n. 3 (D.Mass.1988) (listing other cases to like effect).

The rest follows inexorably. Once a person has been found to fit within the "employer" integument, ERISA prohibits payments to him from a qualified plan. Under the statute's "anti-inurement" provision (with exceptions not here material):

[T]he assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of...