Mason Tenders Dist. Council Welfare Fund v. Dalton

• Decision Date: 27 February 1987
• Docket Number: No. 86 Civ. 3849 (LBS).,86 Civ. 3849 (LBS).
• Citation: 648 F. Supp. 1309
• Parties: MASON TENDERS DISTRICT COUNCIL WELFARE FUND, and Annuity Fund, and Anthony P. Lanza, in his fiduciary capacity as Administrator of the Mason Tenders District Council Welfare Fund, Pension Fund and Annuity Fund, Plaintiffs, v. Charles F. DALTON and John Lowry, Defendants.
• Court: U.S. District Court — Southern District of New York

648 F. Supp. 1309

MASON TENDERS DISTRICT COUNCIL WELFARE FUND, and Annuity Fund, and Anthony P. Lanza, in his fiduciary capacity as Administrator of the Mason Tenders District Council Welfare Fund, Pension Fund and Annuity Fund, Plaintiffs, v. Charles F. DALTON and John Lowry, Defendants.

No. 86 Civ. 3849 (LBS).

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

November 24, 1986.

Opinion vacated at parties' request, February 27, 1987.

Levin & Weissman, P.C., for plaintiffs; Sara L. Chenetz, Damien E. Mysak, New York City, of counsel.

Platzer & Fineberg, for defendant Dalton; Steven D. Karlin, New York City, of counsel.

Davidson, Dawson & Clark, for defendant Lowry; David S. Elkins, New York City, of counsel.

Opinion vacated at parties' request, February 27, 1987, see infra at 1318.

SAND, District Judge.

This is an action commenced by the Mason Tenders District Council Welfare Fund and Pension Fund and Annuity Fund (referred to collectively as the "Funds"), and Anthony Lanza, in his fiduciary capacity as Administrator of the Funds, against defendant Charles F. Dalton ("Dalton") and John Lowry, Jr. ("Lowry") to collect fringe benefit contributions allegedly past due to the Funds.

This suit has been brought pursuant to sections 502(a)(3) and 515 of the Employment Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. §§ 1132(a)(3) and 1145, and section 301 of the Labor-Management Relations Act of 1947 ("LMRA"), 29 U.S.C. § 185. Presently pending before the Court are the defendants' motions to dismiss the complaint as failing to state a claim. These motions present the issue whether individual corporate officers with authority and control over the payment of fringe benefit contributions to employee benefit plans are personally liable under ERISA for their corporation's breach of a contractual obligation to make benefit plan contributions. For the reasons discussed below, we conclude that under the undisputed facts of this case, individual corporate officers such as Dalton and Lowry are not personally liable for delinquent contributions owing to the employee benefit plan.¹ We assume, for purposes of deciding these motions to dismiss, the truth of the relevant facts set forth in plaintiffs' complaint.

BACKGROUND

The Funds are jointly administered multi-employer trust funds established and maintained pursuant to a collective bargaining agreement. They qualify as employee benefit plans within the meaning of ERISA, sections 3(2), 3(3), and 502(d)(1), 29 U.S.C. §§ 1002(2), 1002(3), and 1132(d)(1), and multi-employer plans under ERISA sections 3(37) and 515, 29 U.S.C. §§ 1002(37) and 1145. The purpose of the Funds is to provide fringe benefits to eligible employees on whose behalf employers contribute to the Funds in accordance with the terms of a collective bargaining agreement between the employers and the employees' union, non-party Mason Tenders District Council of Greater New York ("Union").

At all times relevant hereto, defendant Dalton was the president and defendant Lowry was the vice-president of John Lowry, Inc. ("Corporation"), an entity which is not a party to this action. The Corporation, which was an employer in the construction industry, held membership in an employers association, the Building Contractors Association, Inc. ("Association"), which is the exclusive bargaining agent for its members. Pursuant to a collective bargaining agreement (the "Collective Bargaining Agreement") between the Association and the Union, the Corporation of which Dalton and Lowry were officers was obligated to remit fringe benefit contributions to the Funds in connection with the work performed by the Corporation's employees within the Union's jurisdiction. See Collective Bargaining Agreement, Article IV, section 1. We assume, as plaintiffs allege, that both Dalton and Lowry were "vested with authority and control over the ... payment of the required monetary contributions" to the Funds owed by the Corporation under the Collective Bargaining Agreement.² See Complaint at paragraphs 8 and 9.

Pursuant to the terms of the Collective Bargaining Agreement, representatives of the Funds conducted an audit of the books of the Corporation. The auditors determined that the Corporation had failed to remit $81,554.34 of fringe benefit contributions to the Funds during the period from June 25, 1981 to September 30, 1983. Plaintiffs now seek to recover payment from Dalton and Lowry individually of the delinquent benefit contributions, plus interest, statutory damages, costs and attorneys' fees in accordance with ERISA section 502(g)(2), 29 U.S.C. § 1132(g)(2). The legal foundation of plaintiffs' claim for the imposition of personal liability on Dalton and Lowry is the contention that the defendants, as principal corporate officers of the Corporation vested with the authority and control over the payment of benefit contributions, fall within the definition of an "employer" under Title I of ERISA and are therefore liable for unpaid benefits under sections 515 and 502(g)(2).

DISCUSSION

We begin our analysis with the relevant provisions of ERISA. According to section 515:

Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.

As a mechanism to enforce this statutory obligation, ERISA provides plan fiduciaries such as plaintiff Lanza with the right to maintain a civil lawsuit under section 502(a)(3) to recover section 515 delinquent contributions. The present suit is based on these provisions.

The plain language of section 515 indicates that the statutory obligation to make timely contributions to an employee benefit plan rests on "every employer who is obligated" to make such contributions "under the terms of a collectively bargained agreement." 29 U.S.C. § 1145. The legislative history of section 515, which was added to ERISA by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA") confirms Congress' intent in enacting this statutory provision. According to a report issued by the Senate Committee on Labor and Human Resources, section 515 "imposes a statutory duty to contribute on employers that are already obligated to make contributions to multiemployer plans" (emphasis supplied). Senate Committee on Labor and Human Resources (Staff), 96th Congress, 2d Sess. S.1076, The Multiemployer Pension Plan Amendments of 1980: Summary and Analysis at 44 (Comm. Print 1980). The legislative purpose underlying section 515 was not, as plaintiffs claim, to impose personal liability on corporate officers for delinquent contributions.

Congress' imposition of a statutory obligation to make benefit contributions, specifically tied to the employer's contractual obligation to contribute, was designed "to discourage delinquencies and simplify delinquency collection." 126 CONG.REC. 23288 (daily ed., August 26, 1980) (statement of Sen. Williams and Sen. Javits). Prior to the enactment in 1980 of ERISA section 515, there was no ERISA cause of action for the collection of overdue benefit contributions. It appeared to the principal sponsors of the 1980 amendments, Senators Williams and Javits, that the "recourse available for collecting delinquent contributions" had become "unnecessarily costly and cumbersome." Id.

In particular, employers had managed to transform "some simple collection actions brought by plan trustees ... into lengthy, costly, and complex litigation concerning claims and defenses unrelated to the employer's promise and the plan's entitlement to contributions." Id. Section 515 was designed to rectify the problems that had arisen in these pre-1980 collection suits and to implement the principles enunciated in three judicial decisions which the sponsors expressly endorsed: (i) Huge v. Long's Hauling Company, Inc., 590 F.2d 457 (3d Cir.1978), (ii) Lewis v. Benedict Coal Corp., 361 U.S. 459, 80 S.Ct. 489, 4 L.Ed.2d 442 (1960), and (iii) Lewis v. Mill Ridge Coals, Inc., 298 F.2d 552 (6th Cir.1962).

In Long's Hauling, the only one of the endorsed cases that arose after passage of ERISA, benefit plan trustees brought suit under section 301 of the LMRA to enforce an alleged contractual obligation to make payment to employee retirement funds. The defendant corporation sought to interpose antitrust violations and unfair labor practices allegedly committed by the employees' union as defenses to the corporation's contractual obligation to contribute to the retirement funds. The district court rejected these defenses and granted the plaintiff trustees' request for a preliminary injunction to enforce the corporation's commitments. On appeal, the Third Circuit affirmed, holding that the two proffered defenses were unrelated to the contractual promise to pay benefits and therefore were insufficient to enable the employer to bar recovery. Long's Hauling, 590 F.2d at 460-61.

Prior to Long's Hauling, the United States Supreme Court had reached a similar outcome in Benedict Coal, a pre-ERISA suit by trustees to collect certain royalty payments for the benefit of eligible coal miners. In Benedict Coal, the Court held that damages occasioned by breach of contract committed by the coal miners' union could not be used as a setoff against the trustees' recovery. Benedict Coal, 361 U.S. at 471, 80 S.Ct. at 496. In essence, the Court thereby rejected a defense to payment that was unrelated to the defendant's underlying contractual obligation to make royalty contributions.

A similar defense was at issue in Mill Ridge, another of the cases cited with approval by Senators Williams and Javits. In that case, the defendant sought to avoid liability by converting the collection litigation into an examination of alleged misconduct on the part of the trustees in the administration of...