Massachusetts Laborers' Health and Welfare Fund v. Starrett Paving Corp.

• Decision Date: 04 January 1988
• Docket Number: No. 87-1806,87-1806
• Citation: 845 F.2d 23
• Parties: , 9 Employee Benefits Ca 2105 The MASSACHUSETTS LABORERS' HEALTH AND WELFARE FUND, et al., Plaintiffs, Appellees, v. STARRETT PAVING CORP., et al., Defendants, Appellees. Peter Starrett, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 23

845 F.2d 23

56 USLW 2623, 9 Employee Benefits Ca 2105

The MASSACHUSETTS LABORERS' HEALTH AND WELFARE FUND, et al., Plaintiffs, Appellees, v. STARRETT PAVING CORP., et al., Defendants, Appellees.

Peter Starrett, Defendant, Appellant.

No. 87-1806.

United States Court of Appeals, First Circuit.

Heard Jan. 4, 1988.

Decided April 25, 1988.

Memorandum and Order on Denial of Rehearing May 26, 1988.

Robert Weihrauch, Worcester, for defendant, appellant.

John Andrew Thompson, Randolph, for plaintiffs, appellees.

Before CAMPBELL, Chief Judge, BREYER and SELYA, Circuit Judges.

BREYER, Circuit Judge.

Four multiemployer pension plans ("the Plans"), invoking the legal authority of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Secs. 1001-1461 (1982), sued the Starrett Paving Corporation and its owner, Peter Starrett, seeking contributions the corporation had promised, but failed, to make. 29 U.S.C. Sec. 1145. The corporation went bankrupt; the district court said that Peter Starrett, the corporation's president and sole shareholder, must himself make the payments. Peter Starrett now appeals, claiming (among other things) that, even assuming ERISA requires his company to make the pension payments, it does not require him to do so. We agree with Starrett that the relevant language of ERISA does not impose an obligation upon him to make the payments his company owed.

I

Among other things, ERISA imposes upon employers who promise to contribute to an employee pension plan, a federal obligation to make those contributions. It thereby offers federal court remedies, along with court costs, attorney's fees, and liquidated damages or interest, to those who seek to collect delinquent contributions. 29 U.S.C. Sec. 1132(g)(2). The ERISA language that creates the federal obligation reads as follows:

Every employer who is obligated to make contributions to a multiemployer plan ... shall ... make such contributions in accordance with the terms and conditions of such plan or such agreement.

29 U.S.C. Sec. 1145. For purposes of this appeal, we shall assume that the Starrett Paving Corporation owed the money (though this is in fact disputed). It is conceded, however, that Peter Starrett, the appellant, had not himself promised to make the relevant pension contributions. We also assume (and it is virtually conceded) that this is not a corporate-veil piercing case. We cannot say, under state or other relevant federal law, that Peter Starrett simply is the corporation or is its alter ego; we therefore cannot say that the corporation's promise to pay "is" Starrett's promise. Cf., e.g., Alman v. Danin, 801 F.2d 1 (1st Cir.1986) (piercing corporate veil to establish ERISA liability).

Thus, the issue before us is whether the statutory language quoted makes Peter Starrett personally liable for his corporation's promised contributions solely in virtue of his position as chief officer/shareholder of the corporation. To answer that question, we must decide if he is (1) an "employer," (2) "who is obligated to make contributions to a multiemployer plan."

II

When this case was initially argued, the parties and this court believed that appellant's liability turned on the meaning of ERISA's definition of the word "employer." The Act says:

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; and includes a group or association of employers acting for an employer in such capacity.

29 U.S.C. Sec. 1002(5). Courts have found the phrase "act ... indirectly in the interest of an employer" difficult to interpret. Some courts, in contexts like this one, have limited Sec. 1002(5)'s definition to corporate-veil piercing cases, perhaps due to fears that a broad interpretation of this language might too readily impose personal liability on shareholders or corporate officers or even ordinary corporate employees, for obligations of the corporation. Solomon v. Klein, 770 F.2d 352 (3d Cir.1985); Audit Services, Inc. v. Rolfson, 641 F.2d 757 (9th Cir.1981). Other courts have noted the similarity of Sec. 1002(5)'s language to that of Sec. 3(d) of the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. Sec. 203(d) (1982), which this circuit (and others) have interpreted more broadly to impose personal liability for minimum wage payments upon a corporation's "chief executive officer/major shareholder" where the "economic reality" was that this owner/shareholder might be viewed, if not as a "corporate alter ego," at least as one personally responsible for making (or not making) the legally required wage payments. See Falk v. Brennan, 414 U.S. 190, 195, 94 S.Ct. 427, 431, 38 L.Ed.2d 406 (1973) (apartment managing company is "employer" of apartment workers under FLSA); Goldberg v. Whitaker, 366 U.S. 28, 33, 81 S.Ct. 933, 936, 6 L.Ed.2d 100 (1961) (knitted goods cooperative is, according to "economic reality," an "employer" under FLSA); Donovan v. Agnew, 712 F.2d 1509, 1510-11 (1st Cir.1983) (corporate officers with significant ownership interests are personally liable for bankrupt corporation's FLSA liability) (citing Hodgson v. Royal Crown Bottling Co., 324 F.Supp. 342, 347 (D.Miss.1970) (president of corporation who owns 50 percent of its stock is proper defendant to FLSA injunction), aff'd, 465 F.2d 473 (5th Cir.1972)); Shultz v. Chalk-Fitzgerald Construction Co., 309 F.Supp. 1255 (D.Mass.1970) (president/dominant shareholder of closed corporation personally liable as FLSA "employer"); Chambers Construction Co. v. Mitchell, 233 F.2d 717, 724-25 (8th Cir.1956) (president/incorporator of company is proper defendant in regard to FLSA injunction). In the view of many courts, the similarity in FLSA and ERISA's language dictates a similar result in at least some ERISA cases. See Trustees of the Amalgamated Insurance Fund v. Danin, 648 F.Supp. 1142, 1144-46 (D.Mass.1986) and cases cited therein.

We previously left open the question of how to interpret ERISA's definition of "employer" in Sec. 1002(5). See DeBrecini v. Graf Brothers Leasing, Inc., 828 F.2d 877, 880 n. 2 (1st Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 1024, 98 L.Ed.2d 988 (Feb. 23, 1988). Were we to decide that question now, we should likely side with the Plans, accepting the interpretation of our district courts. The legislative history of ERISA shows that when Congress enacted ERISA in 1974, it copied the definition of "employer" from ERISA's 1958 predecessor, the Welfare and Pension Plans Disclosure Act, Pub.L. No. 85-836, Sec. 3(a)(4), 72 Stat. 997, 998 (1958), amended by Pub.L. No. 87-420, 76 Stat. 35 (1962), repealed by ERISA, Pub.L. No. 93-406 Sec. 111(a)(1), 88 Stat. 829, 851 (1974); and, as far as we can tell, the drafters of the 1958 Act copied FLSA. Before Congress enacted ERISA in 1974, several courts had adopted a "broader-than-common-law" interpretation of the definition, and two Supreme Court opinions used "economic reality" language. See Agnew, 712 F.2d at 1510-11, and cases cited therein. In addition, the two statutes, FLSA and ERISA, have a broadly similar objective, the one seeking to guarantee the worker a reasonable present wage payment and the other looking to a guarantee of his future economic security. These factors seem sufficient to warrant similar interpretations of the language defining "employer" in the two statutes. Thus, we shall assume (but we need not definitively decide) that for purposes of Sec. 1145, appellant Starrett is an "employer" under Sec. 1002(5).

III

After we heard argument in this case, the Massachusetts district court decided in a very similar case that an owner/manager of a corporation, even if an "employer" under ERISA's definition, was not an employer "obligated to make ... contributions to an employee welfare plan." Alman v. George Manufacturing Corporation, 680 F.Supp. 56, 57 (D.Mass.1988); see also Mason Tenders District Council Welfare Fund v. Dalton, 648 F.Supp. 1309 (S.D.N.Y.1986); Solomon v. Laranne Sportswear Corporation, 648 F.Supp. 407 (E.D.N.Y.1986). The parties at our request then presented to us their views of George, and the employer and the pension plans in the George case ("the amicus plans") filed amicus briefs in this case. Having considered their arguments, we have concluded that the district court's view of the statute in George is correct. Starrett is not an "employer ... obligated to make contributions to an employee welfare plan." Consequently, ERISA does not impose upon him the federal duty to "make such contributions."

For one thing, the statute's language quite clearly states that the duty in Sec. 1145 arises only in respect to employers "obligated " to make the contributions. Although Starrett's corporation may have been "obligated" to make the contributions, Starrett personally was not. For another thing, the legislative history of Sec. 1145 indicates that the language means what it says. When Congress enacted the provisions in 1980, the Senate Committee on Labor described it as follows:

The public policy of this legislation ... mandates that provision be made to discourage delinquencies and simplify delinquency collection. The bill imposes a Federal statutory duty to contribute on employers that are already contractually obligated to make contributions to multiemployer plans.

Staff of Senate Committee on Labor and Human Resources, 96th Cong., 2d Sess., The Multiemployer Pension Plan Amendments Act of 1980: Summary and Analysis of Consideration 44 (Comm.Print 1980) (emphasis added). Similarly, one of the provision's chief sponsors in the House of Representatives said that "[t]he bill imposes a Federal statutory duty to contribute on employers that are already obligated to make contributions to multiemployer plans." Remarks of Rep. Frank Thompson, Jr., House Debate on the Multiemployer Pension Plan Amendments Act of 1980, 126 Cong.Rec. 23039 (August 25, 1980) (emphasis added), reprinted...