Northern California Retail Clerks Unions and Food Employers Joint Pension Trust Fund v. Jumbo Markets, Inc.

• Decision Date: 27 August 1990
• Docket Number: No. 89-15039,89-15039
• Citation: 906 F.2d 1371
• Parties: 12 Employee Benefits Ca 2331 NORTHERN CALIFORNIA RETAIL CLERKS UNIONS AND FOOD EMPLOYERS JOINT PENSION TRUST FUND; Board of Trustees of the Northern California Retail Clerks Unions and Food Employers Joint Pension Trust Fund; Northern California Retail Clerks Unions--Employers Vacation Fund; Board of Trustees of the Northern California Retail Clerks Unions--Employers Vacation Fund; Valley Clerks Health and Welfare Fund; Board of Trustees of the Valley Clerks Health and Welfare Fund, Plaintiffs-Appellants, v. JUMBO MARKETS, INC., d/b/a Jumbo Market, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1371

906 F.2d 1371

12 Employee Benefits Ca 2331

NORTHERN CALIFORNIA RETAIL CLERKS UNIONS AND FOOD EMPLOYERS JOINT PENSION TRUST FUND; Board of Trustees of the Northern California Retail Clerks Unions and Food Employers Joint Pension Trust Fund; Northern California Retail Clerks Unions--Employers Vacation Fund; Board of Trustees of the Northern California Retail Clerks Unions--Employers Vacation Fund; Valley Clerks Health and Welfare Fund; Board of Trustees of the Valley Clerks Health and Welfare Fund Plaintiffs-Appellants, v. JUMBO MARKETS, INC., d/b/a Jumbo Market, Defendant-Appellee.

No. 89-15039.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 13, 1990.

Decided July 2, 1990.

As Amended Aug. 27, 1990.

Fred D. Lonsdale, Davis, Cowell & Bowe, San Francisco, Cal., for plaintiffs-appellants.

Dennis R. Murphy, and Joyce A. Vermeersch, Diepenbrock, Wulff, Plant & Hannegan, Sacramento, Cal., for defendant-appellee.

Appeal from the United States District Court for the Northern District of California.

Before BOOCHEVER, WIGGINS and NOONAN, Circuit Judges.

NOONAN, Circuit Judge:

The six plaintiffs (the Trust Funds) brought this action against the defendant (Jumbo Market) seeking the recovery of monies due the Trust Funds that Jumbo Market failed to pay. Jurisdiction for the action was conferred by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Sec. 1132 (1982). From a decision of the district court on cross-motions for summary judgment the Trust Funds appeal only the judgment as to their claim for unpaid vacation hours. We reverse.

FACTS

Jumbo Market had entered into a collective bargaining agreement with United Food and Commercial Workers Local 588 and its predecessor, Retail Clerks Union Local 588, an agreement in effect at all times relevant to this action. By the terms of the agreement Jumbo Market agreed to be bound by the terms of the trusts which The trustees of the Trust Funds are four nominees of the unions and four nominees of the employers. The trust agreements restate the employers' obligation of each employer to contribute the amount required by its collective bargaining agreement and restate the obligation to determine the hours worked by including the hours paid for but not worked, as in the case of holidays and vacations. If an employer fails or refuses to pay any of the contributions required under the trust, the trustees at their option have the right to make contributions for the employer from the Trust Fund and, if they do so, the amount is immediately due and payable from that employer to the trustees. The trustees have the right to require reports necessary to the fulfillment of the plan and the employers agree to supply such reports. The trustees also have the power to construe the provisions of the trust agreements and any construction adopted by the trustees in good faith is binding upon all persons concerned.

set up the Trust Funds. The trusts provide pension, vacation and health benefits to employees in the retail trade throughout Northern California. Jumbo Market's contributions are to be made on the basis of "all straight time hours worked, including all hours compensated such as vacations and holidays."

In September 1984 Jumbo Market discovered a mistake in the way vacation hours were computed. The mistake was corrected, and Jumbo Market began to report the hours per month correctly. Jumbo Market, however, did not inform the Trust Funds that the earlier reporting had been erroneous and Jumbo Market did not correct the past errors. In August 1986 the Trust Funds conducted a full audit of Jumbo Market for the period January 1, 1982 to December 31, 1985. The auditors reported random errors totaling 543 unreported hours; unreported hours for retired employees totaling 4,055 hours; and unreported vacation hours during the first 34 months of the audit period totaling 33,774 hours.

On September 21, 1987 Jumbo Market tendered the Trust Funds $38,752.22 representing the sum of money it believed due as a result of the audit. The Trust Funds disagreed with Jumbo Market's estimate of what was due and brought this action on February 1, 1988.

PROCEEDINGS

On cross-motions for summary judgment the district court reduced the number of unreported random hours for which recovery could be had to 102.54. The district court found that all of the hours relating to retirees should have been paid for. As to the vacation hours, the district court found that 33,774 hours had not been reported because of a computer error. Of the total, the district court held that 8,940.18 hours occurred after February 1, 1984 and, therefore, were not barred by the applicable statute of limitations. The remaining hours the district court held to be barred by the four-year California statute. No tolling of the statute was found.

The Trust Funds appeal.

ANALYSIS

The district court was correct in finding that the statute of limitations was the four-year statute provided by California law for breach of a written contract. Cal. of Civ.Proc.Code Sec. 337 (West 1982). In ERISA actions the federal courts employ a state statute of limitations. Hawaii Carpenters Trust Fund v. Waiola Carpenter Shop, 823 F.2d 289, 298 (9th Cir.1987).

Because the cause of action is federal, however, federal law determines the time at which the cause of action accrues. Under federal law that time is when the plaintiff knows or has reason to know of the injury that is the basis of the action. Pierce County Hotel Employees and Restaurant Employees Health Trust v. Elks Lodge, 827 F.2d 1324, 1328 (9th Cir.1987). Neither the parties nor the district court focused on the time at which the Trust Funds had reason to know of the underpayment. The record is unclear as to when they did have reason to know. It will be necessary for this date to be determined.

In determining the date the Trust Funds had reason to know, the district court may consider evidence showing that the shift in September 1984 to reporting the correct number of hours was so great a change that the Trust Funds should have been alerted to the fact that the previous reporting had been erroneous. The question centered on the facts known to the Trust Funds from which they reasonably should have known that there was past substantial error.

There was, however, no duty under the trust agreement on the Trust Funds to make an independent verification in September 1984 if the facts known to them did not give them reason to know of the error. The employer-contributors were engaged in a program with the Union for the benefit of the retail clerks who were their employees. The employers and the Union were not in all respects hostile, arm's length parties to a contract. In a variety of situations a person or entity who is not an express trustee may take on responsibilities of another which impose a fiduciary obligation. See 5 A. Scott & W. Fratcher, The Law of Trusts, Sec. 495 (1989). The employers in ascertaining and reporting the hours worked put themselves in such a fiduciary relation.

The notion that the employers were free to cheat their employees or bury their reporting mistakes is repugnant to...