Nat'l Auto. Sprinkler v. Fairfield Sprinkler

• Citation: 243 F.3d 112
• Decision Date: 13 October 2000
• Docket Number: Docket Nos. 99-9392
• Parties: (2nd Cir. 2001) TRUSTEES OF THE NATIONAL AUTOMATIC SPRINKLER INDUSTRY PENSION FUND, TRUSTEES OF NATIONAL AUTOMATIC SPRINKLER INDUSTRY WELFARE FUND, AND TRUSTEES OF THE SPRINKLER INDUSTRY SUPPLEMENTAL PENSION FUND, Plaintiffs-Appellees-Cross-Appellants, v. FAIRFIELD COUNTY SPRINKLER COMPANY, INC., Defendant-Appellant-Cross-Appellee. (L); 99-9394(XAP) August Term 2000 Argued:
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 112

243 F.3d 112 (2nd Cir. 2001)

TRUSTEES OF THE NATIONAL AUTOMATIC SPRINKLER INDUSTRY PENSION FUND, TRUSTEES OF NATIONAL AUTOMATIC SPRINKLER INDUSTRY WELFARE FUND, AND TRUSTEES OF THE SPRINKLER INDUSTRY SUPPLEMENTAL PENSION FUND, Plaintiffs-Appellees-Cross-Appellants, v. FAIRFIELD COUNTY SPRINKLER COMPANY, INC., Defendant-Appellant-Cross-Appellee.

Docket Nos. 99-9392(L); 99-9394(XAP)

August Term 2000

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: October 13, 2000

Decided: March 12, 2001

Defendant-appellant appeals from a judgment entered against it by the United States District Court for the District of Connecticut (Alfred V. Covello, Chief Judge) in a contribution action brought by the trustees (the "Trustees") of ERISA multi-employer benefit plans (the "Funds") for delinquent contributions. See 29 U.S.C. §§ 1132(a)(3), 1145. On appeal, defendant challenges the district court's grant of summary judgment to the Funds, contending (1) that § 302(a) of the Labor Management Relations Act, 29 U.S.C. § 186(a), precludes contribution for the period from August 1, 1994 through March 31, 1997, and (2) that material questions of fact exist as to whether any delinquency exists for the period from August 1, 1992 to July 31, 1994. Plaintiffs cross-appeal for attorneys' fees. See 29 U.S.C. § 1132(g).

We agree with the defendant-appellant and accordingly vacate the entry of summary judgment. The case is remanded with instructions that the district court (1) enter summary judgment in favor of defendant with respect to contribution sought for the period from August 1, 1994 through March 31, 1997, and (2) proceed to trial with respect to the purported delinquency for the period from August 1, 1992 to July 31, 1994. Plaintiffs' cross-appeal for attorneys' fees is denied.

GEORGE J. KELLY, JR., Siegel, O'Connor, Schiff & Zangari, P.C., New Haven, CT, for Defendant-Appellant.

CHARLES W. GILLIGAN, Sally M. Tedrow, Keith R. Bolek, O'Donoghue & O'Donoghue, Washington, D.C., and THOMAS BROCKETT, Robert A. Cheverie & Assocs., East Hartford, CT, for Plaintiffs-Appellees.

Before: WALKER, Chief Judge, VAN GRAAFEILAND, Circuit Judge, and MARRERO, District Judge.^*

Vacated in part; reversed in part.

Judge Van Graafeiland dissents in a separate opinion.

JOHN M. WALKER, JR., Chief Judge:

This appeal follows an October 7, 1999 entry of summary judgment by the United States District Court for the District of Connecticut (Alfred V. Covello, Chief Judge) in favor of plaintiffs-appellees, various trustees (the "Trustees") of the National Automatic Sprinkler Industry Pension Fund, the National Automatic Sprinkler Industry Welfare Fund, and the Sprinkler Industry Supplemental Pension Fund (the "Funds"), against defendant-appellant Fairfield County Sprinkler Co. ("Fairfield"). The Funds were awarded $669,387.82 in delinquent contributions pursuant to §§ 502(a)(3) and 515 of the Employee Retirement Income Security Act ("ERISA"). See 29 U.S.C. §§ 1132(a)(3), 1145.

Defendant-appellant appeals from the summary judgment order on the grounds that (1) its contribution for the period from August 1, 1994 through March 31, 1997 is prohibited by § 302(a) of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186(a), and (2) disputed material factual questions exist regarding the purported delinquency for the period from August 1, 1992 through July 31, 1994. Plaintiffs have cross-appealed for attorneys' fees.

BACKGROUND

The Funds are union-established multi-employer ERISA benefit plans that provide health and pension benefits to union employees working in the fire protection industry. The benefits are financed by employer contributions pursuant to collective bargaining agreements with various local unions representing industry employees.

Fairfield is a Connecticut company that sells and installs fire sprinkler systems. It employs on average between twenty and twenty-five people. Until May 1994, Fairfield was a member of the National Fire Sprinkler Association ("NFSA"), an association of employers in the fire protection industry, and granted the NFSA authority to enter into multi-employer collective bargaining agreements with local unions on its behalf.

For much of the period in question, NFSA entered into pre-hire agreements with various local unions of the United Association of Journeyman and Apprentices of the Plumbing and Pipe Fitting Industry of the United States of America. Such agreements are permitted under § 8(f) of the National Labor Relations Act, 29 U.S.C. § 158(f), and are commonly utilized in the construction industry to accommodate its ever-changing workforce in multiple states. Under the NFSA-negotiated agreements, a member-employer such as Fairfield agrees with local unions operating in assigned geographic areas that it will hire a given local's workers and will honor the terms of that local's NFSA-negotiated agreement whenever it engages in a project within the local's territorial jurisdiction. NFSA's Director of Labor Relations Cornelius Cahill explained the effect of these NFSA-negotiated agreements during his deposition:

Q: (Funds' Counsel): When [NFSA] entered into [] bargaining with... [for example] a local union in California, and subsequently signed a contract on behalf of its members, was Fairfield... bound by that contract?

A: (Mr. Cahill): Yes, it would be.

Q: Can you explain how that would be if they weren't working in California?

A: Well, they would be bound to that agreement if they went into that particular geographical location. There were advantages to that to contractors. The contractor would call up the local that they were going into and would say: I'm a member of [NFSA], they have my bargaining rights. I need x number of people to work, I'm signatory by virtue of my membership. And they would not have to go in and negotiate with the local. They would just be able to ask for manpower.

Beginning in 1973, NFSA entered multi-employer bargaining agreements on behalf of its member-employers, including Fairfield, with Locals 669 and 676, which cover New York and Connecticut, respectively.

In 1993, NFSA and Local 669 negotiated a collective bargaining agreement ("the 669 Agreement"), that was in effect from April 10, 1994 until March 31, 1997. As a member of NFSA at the time the 669 Agreement took effect, Fairfield was bound by it.¹ On May 9, 1994, shortly after the 669 Agreement took effect, Fairfield withdrew its membership in NFSA, thereby terminating NFSA's authority to enter into future agreements on Fairfield's behalf.

Following Fairfield's withdrawal, NFSA and Fairfield independently entered into negotiations with Local 676 for separate collective bargaining agreements covering Connecticut. The existing agreement with Local 676 (the "First 676 Agreement"), which had been negotiated by NFSA and under which Fairfield remained obligated, was set to expire on July 31, 1994. In short order, NFSA's negotiations with Local 676 yielded a new collective bargaining agreement (the "Second 676 Agreement") between its member-employers and Local 676.

However, the negotiations between Fairfield and Local 676 failed to produce an agreement. As a result, with the expiration of the First Local 676 Agreement on July 31, 1994, Local 676 called a strike against Fairfield. Fairfield immediately responded by hiring permanent non-union replacements. Fairfield ceased making the payments to the Funds that had been required by the First 676 Agreement. Fairfield instead established its own health insurance coverage and pension benefit programs for its Connecticut employees, making contributions to these programs on behalf of its new non-union replacement work force.

On March 6, 1995, the Trustees of the Funds filed suit pursuant to ERISA § 515, 29 U.S.C. § 1145, to recover payments they alleged were owed the Funds on behalf of Fairfield's Connecticut employees for two separate periods of delinquency: July 31, 1994 through March 31, 1997, and from August 1, 1992 through July 31, 1994. After the close of discovery, the Trustees moved for summary judgment. In opposition, Fairfield claimed for the period after July 31, 1994 that it was not obligated to contribute because it was not a party to the NFSA-negotiated Second 676 Agreement. As for the payments sought for the period through July 31, 1994, Fairfield argued that there were disputed material facts as to whether it was actually in arrears.

The district court disagreed with Fairfield on both issues and granted summary judgment in favor of the Trustees, from which Fairfield now appeals.

DISCUSSION

Section 515 provides in relevant part:

Every employer who is obligated to make contributions to a multiemployer plan 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 agreement.

This provision establishes "an independent federal right of action distinct from the contract on which the duty to contribute is based," through which ERISA funds may seek to compel employer contribution. James F. Jorden, Waldemar J. Pflepsen, Jr., & Stephen H. Goldberg, Handbook on ERISA Litigation § 7.01[A][1], at 7-5 (2d ed. 2000).

A. July 31, 1994 to March 31, 1997

The Trustees' theory of recovery for the period from July 31, 1994 to March 31, 1997 is based on a provision--termed by the parties "the Traveling Clause"--in the 669 Agreement, the NFSA-negotiated agreement with Local 669 of New York which was entered into while Fairfield was still a NFSA member. The Traveling Clause provides in pertinent part:

[Art. 6]: This Agreement applies to the United States... except in the present territory covered by the local agreement[] in... Connecticut-676. It is agreed that the contractor members who are subscribers to this Agreement shall, when performing work within the jurisdiction of any other Sprinkler Fitters Local Union, adhere to and be...