Operating Eng'rs Local 324 Health Care Plan v. G & W Constr. Co.

• Decision Date: 20 April 2015
• Docket Number: No. 12–1786.,12–1786.
• Citation: 783 F.3d 1045
• Parties: OPERATING ENGINEERS LOCAL 324 HEALTH CARE PLAN, et al., Plaintiffs–Appellants, v. G & W CONSTRUCTION COMPANY; Gary Nollar, Defendants–Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

783 F.3d 1045

OPERATING ENGINEERS LOCAL 324 HEALTH CARE PLAN, et al., Plaintiffs–Appellants

v.G & W CONSTRUCTION COMPANY; Gary Nollar, Defendants–Appellees.

No. 12–1786.

United States Court of Appeals, Sixth Circuit.

Decided and Filed: April 20, 2015.

ON BRIEF: Robert A. Farr, Jr., Robert A. Farr PLLC, Novi, Michigan, for Appellants. Neil J. Juliar, Conlin, McKenney & Philbrick, P.C., Ann Arbor, Michigan, for Appellees.

Before: MOORE, KETHLEDGE, and STRANCH, Circuit Judges.

OPINION

JANE B. STRANCH, Circuit Judge.

Nine multi-employer pension and welfare fringe benefit trust funds (the Funds) sued G & W Construction Company (G & W) and its president, Gary Nollar, to recover delinquent fringe-benefit payments under a contract between G & W and Operating Engineers Local 324 (the Union). The defendants raised affirmative defenses of laches, estoppel, and waiver based on alleged conduct of the Union and the Funds. The Funds moved to strike the affirmative defenses, arguing that § 515 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1145, bars equitable defenses. The district court denied the motion to strike, but certified the case for interlocutory appeal under 28 U.S.C. § 1292(b), and we granted the Funds' petition to appeal. For the reasons stated below, we AFFIRM in part and REVERSE in part the district court's denial of the motion to strike, and we REMAND the case to the district court for further proceedings.

I. BACKGROUND

In February 2011, the Funds filed a complaint under the Labor Management Relations Act (LMRA), 29 U.S.C. § 185(a), and ERISA, 29 U.S.C. §§ 1132(a)(3), 1132(g)(2) & 1145, to collect delinquent fringe-benefit contributions from G & W. R. 1. The Funds alleged that G & W conducts business in Michigan in the building and construction industry.

Count I of the complaint alleged that G & W breached the collective bargaining agreements and trust agreements by failing to make monthly contributions to the Funds on behalf of its employees who were represented by the Union and that G & W refused to submit its records for audit. Copies of the referenced agreements were not attached to the complaint. Count II alleged that Nollar, as owner, shareholder, and officer of G & W, breached his fiduciary duties by failing to remit fringe-benefit contributions to the Funds as they were due in the period “from January 2007” and that Nollar refused to submit G & W's records for audit. Count II sought to hold Nollar personally liable to the Funds, jointly and severally with G & W, for the unpaid contributions. Count III alleged that Nollar breached his fiduciary duty under the Michigan Building Contract Fund Act, Mich. Comp. Laws § 570.151. The Funds sought declaratory relief, an audit for the period “from January 2007,” payment for all amounts the audit showed due and owing to the Funds under the agreements, prejudgment interest, costs, and attorney's fees. The defendants filed an answer raising five affirmative defenses.

The Funds then moved for summary judgment on the issue of liability but did not supply the district court with evidence necessary to resolve the issues. Consequently, the court denied the motion for summary judgment.

Within days the defendants filed an amended answer with leave of court adding affirmative defenses, including the statute of limitations and laches. The defendants also alleged waiver and estoppel:

[Plaintiffs] are estopped from obtaining the relief sought in this case, or have waived their right to such relief, based on the actions of the [Union] and Plaintiffs' own actions. The Union at all times [led] Defendants to believe that fringe benefit payments were due only for union members. In past audits Plaintiffs never sought fringe benefits for non-union members and affirmed Defendants' understanding that fringe benefits were not payable for nonmembers. Defendants relied upon the acts and omissions of the Union and Plaintiffs by bidding and accepting work on the reasonable understanding that Union wages and benefits did not apply to non-members.

R. 21, Page ID 259–60 (emphasis added).

Three weeks later, the Funds filed a motion under Federal Rule of Civil Procedure 12(f)(2) to strike the affirmative defenses of laches, estoppel, and waiver as insufficient defenses on the ground that ERISA § 515 does not permit equitable defenses to a collection action.¹ Even assuming that ERISA § 515 permits equitable defenses, the Funds argued that the defendants could not show reasonable reliance and asserted that a laches defense would not be appropriate where the matter is governed by a six-year contract statute of limitations under Michigan law, Mich. Comp. Laws § 600.5807(8).

The district court denied the motion to strike under Rule 12(f)(2), relying in part on factual information that the parties supplied in connection with the motion for summary judgment, which the court had already denied. The Funds then asked the court to amend the order denying the motion to strike to certify the matter for interlocutory appeal. The Funds appended several exhibits to the motion, including a collective bargaining agreement and a trust agreement. After the defendants failed to respond, the court granted the motion to amend, certified its order for interlocutory appeal, and stayed the case pending resolution of the appeal. We granted the Funds' unopposed petition to appeal. See 28 U.S.C. § 1292(b).

II. STANDARDS OF REVIEW

On interlocutory appeal, we restrict our review to “pure questions of law” and apply a de novo standard as we examine the district court's legal conclusions. See Bates v. Dura Auto. Sys., Inc., 625 F.3d 283, 285 (6th Cir.2010) ; Nw. Ohio Adm'rs, Inc. v. Walcher & Fox, Inc., 270 F.3d 1018, 1023 (6th Cir.2001). We ultimately review for an abuse of discretion the district court's decision to deny the motion to strike under Federal Rule of Civil Procedure 12(f). See Dassault Systemes, SA v. Childress, 663 F.3d 832, 846 (6th Cir.2011).

III. ANALYSIS

The resolution of this appeal lies at the intersection of the law applicable to motions to strike under Rule 12(f) and the legal principles governing ERISA collection actions. We must examine both areas of the law to determine whether the district court appropriately denied the Funds' motion to strike the affirmative defenses of laches, equitable estoppel, and waiver.

Rule 12(f) allows a court to “strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Motions to strike are viewed with disfavor and are not frequently granted. Brown & Williamson Tobacco Corp. v. United States, 201 F.2d 819, 822 (6th Cir.1953) ; Lunsford v. United States, 570 F.2d 221, 229 (8th Cir.1977). The function of the motion is to “avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with” them early in the case. Kennedy v. City of Cleveland, 797 F.2d 297, 305 (6th Cir.1986) (quoting Sidney–Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir.1983) ). A motion to strike should be granted if “it appears to a certainty that plaintiffs would succeed despite any state of the facts which could be proved in support of the defense and are inferable from the pleadings.”Williams v. Jader Fuel Co., 944 F.2d 1388, 1400 (7th Cir.1991) (citations and internal quotation marks omitted). The controversy before us concerns whether the Funds must litigate the affirmative defenses of laches, equitable estoppel, and waiver in this lawsuit seeking to collect delinquent fringe benefit contributions from G & W Construction and Nollar.

“When collective-bargaining agreements create pension or welfare benefits plans, those plans are subject to rules established in ERISA.” M & G Polymers USA, LLC v. Tackett, ––– U.S. ––––, 135 S.Ct. 926, 933, 190 L.Ed.2d 809 (2015). A “core functional requirement[ ]” of ERISA is that each “employee benefit plan shall be established and maintained pursuant to a written instrument. ” Curtiss–Wright Corp. v. Schoonejongen, 514 U.S. 73, 83, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995) (quoting 29 U.S.C. § 1102(a)(1) ). Written agreements must “specify the basis on which payments are made to and from the plan,” 29 U.S.C. § 1102(b)(4), and “[t]he plan administrator is obliged to act ‘in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with’ ” ERISA provisions. Kennedy v. Plan Adm'r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 300, 129 S.Ct. 865, 172 L.Ed.2d 662 (2009) (quoting 29 U.S.C. § 1104(a)(1)(D) ). Written agreements lend certainty and predictability to employee benefit plans, and this in turn serves the interests of employers and employees. Sprague v. Gen. Motors Corp., 133 F.3d 388, 402 (6th Cir.1998) (en banc ).

The writing requirement is reinforced by Section 302 of the LMRA, 29 U.S.C. § 186. This statute bars an employer from contributing to benefit trusts designated by employee representatives unless the payments are “made in accordance with a written agreement with the employer.” Cent. States, Se. & Sw. Areas Pension Fund v. Behnke, Inc., 883 F.2d 454, 459 (6th Cir.1989) (citing 29 U.S.C. § 186(c)(5)(B) ). Written agreements are required to prevent misappropriation or dissipation of monies that are owed to the employees. Id.

Collective bargaining agreements that establish ERISA plans are interpreted by use of ordinary contract principles to the extent those principles are not inconsistent with federal labor policy. M & G Polymers USA, LLC, 135 S.Ct. at 933. “Where the words of a contract in writing are clear and unambiguous, its meaning is to be ascertained in accordance with its plainly expressed intent.” Id. (quoting 11 R. Lord, Williston on Contracts § 30:6, p. 108 (4th ed.2012) (internal quotation marks omitted)).

A third aspect of federal law critical to this case is § 515 of ERISA, which protects and streamlines the procedure for collecting delinquent contributions owed to ERISA plans by...