Santa Monica Culinary Welfare Fund v. Miramar Hotel Corp.

• Decision Date: 12 December 1990
• Docket Number: No. 89-55455,89-55455
• Citation: 920 F.2d 1491
• Parties: , 117 Lab.Cas. P 10,476, 13 Employee Benefits Ca 1414 SANTA MONICA CULINARY WELFARE FUND; Charles A. Conine; Victor Valenzuela, Plaintiffs-Appellants, v. MIRAMAR HOTEL CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1491

920 F.2d 1491

59 USLW 2414, 117 Lab.Cas. P 10,476,

13 Employee Benefits Ca 1414

SANTA MONICA CULINARY WELFARE FUND; Charles A. Conine Victor Valenzuela, Plaintiffs-Appellants, v. MIRAMAR HOTEL CORPORATION, Defendant-Appellee.

No. 89-55455.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 7, 1990.

Decided Dec. 12, 1990.

Henry M. Willis (Claude Cazzulino, on brief), Schwartz, Steinsapir, Dohrmann & Sommers, Los Angeles, Cal., for plaintiffs-appellants.

Gerald M. Siegel, Santa Monica, Cal., for defendant-appellee.

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

Before HUG, BOOCHEVER and BEEZER, Circuit Judges.

HUG, Circuit Judge:

This action arises from a request by the Santa Monica Culinary Welfare Fund (the "Fund") to audit the payroll records of the Miramar Hotel Corporation ("Miramar"), a contributing employer to the Fund. Miramar refused to submit to an audit, claiming that under the collective bargaining agreement its only duty to the Fund was to make the agreed upon contributions. The district court agreed with Miramar and refused the Fund's request. Because we find that the Fund had the right to audit Miramar's payroll records, we reverse.

I.

The appellants in this action are the Santa Monica Culinary Welfare Fund and two of its trustees, Charles A. Conine and Victor Valenzuela (the "Trustees"). The Fund is a multiemployer employee benefit plan governed by section 302(c)(5) of the Labor Management Relations Act, 1947, 29 U.S.C. Sec. 186(c)(5), and the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Sec. 1001 et seq., as amended (1988). The Fund was created by Local 814 of the Hotel Employees and Restaurants Employees' Union ("the Union") for the benefit of designated employees.

As required under ERISA, the Fund was established pursuant to a written Trust Agreement. The Trust Agreement authorizes the Fund "at any time" to question both the sufficiency and accuracy of employer contributions. The Trust Agreement further authorizes the Fund to "from time to time" audit the records of employers.

From August 1, 1978 through August 1, 1983, the Union and Miramar were parties to a collective bargaining agreement which required Miramar to make contributions to the Fund on behalf of certain Union-represented employees. The agreement also contained a provision adopting the terms of the Trust Agreement that established the Fund.

A second collective bargaining agreement between the Union and Miramar went into effect August 2, 1983 through July 31, 1988. Like the first agreement, this agreement also established that Miramar would contribute a set amount to the Fund. However, unlike the first agreement, the second collective bargaining agreement did not specifically incorporate the terms of the Trust Agreement. After specifying the amount of contributions Miramar was required to make to the Fund, the collective bargaining agreement contained the following clause:

The foregoing is the extent of any and all of employer's obligations to the Santa Monica Culinary Welfare Fund, and otherwise under this Article.

The collective bargaining agreement is silent on the rights and duties of the Fund's Trustees.

While the second collective bargaining agreement was in effect, an auditor selected by the Trustees sought to audit the payroll records of Miramar. Like many other employee trust funds, the Fund relies on the employer's self-reporting and conducts periodic audits to ensure the employer's compliance with its contributing obligations. The Fund's decision to have an audit conducted was part of its program to ensure Miramar's compliance with its obligations to contribute to the Fund.

Miramar refused to schedule an audit. The Fund brought an action to compel the audit and seek any delinquent contributions. The district court denied the Fund's request. This appeal followed. ¹ We reverse.

II.

We review de novo the construction of collective bargaining agreements and employee benefit plans. Operating Engineers Pension Trusts v. B & E Backhoe, Inc., 911 F.2d 1347, 1351 (9th Cir.1990).

III.

Miramar maintains that the Fund is without the power to audit because the collective bargaining agreement between it and the Union failed to incorporate the terms of the Trust Agreement. The Fund contends that ERISA gives it the right to audit Miramar's records even though the collective bargaining agreement does not expressly authorize the Fund to audit Miramar's records. We do not decide whether ERISA confers upon the Fund the right to audit because the Trust Agreement gives the Fund the right to audit Miramar's records, despite the fact that the collective bargaining agreement is silent on the issue.

ERISA requires that employee benefit plans such as the one here be established as written formal trusts. 29 U.S.C. Sec. 1103 (1988). See also NLRB v. Amax Coal Co., 453 U.S. 322, 329, 101 S.Ct. 2789, 2794, 69 L.Ed.2d 672 (1981). The Trust Agreement in this case gives the Fund the right to conduct an audit of employer records. Under section 404(a)(1)(D) of ERISA, the trustees of an employee benefit plan are required to act "in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter or subchapter III of this chapter." 29 U.S.C. Sec. 1104(a)(1)(D) (1988). Therefore, the role of the trustees is generally defined by the trust documents, to the extent these documents are consistent with the provisions of ERISA. Central States Pension Fund v. Central Transp., Inc., 472 U.S. 559, 568, 105 S.Ct. 2833, 2839, 86 L.Ed.2d 447 (1985). See also Retirement Fund Trust v. Franchise Tax Bd., 909 F.2d 1266, 1280 (9th Cir.1990); Board of Trustees of the Watsonville Frozen Food Welfare Trust Fund v. California Coop. Creamery, 877 F.2d 1415, 1420 (9th Cir.1989).

Here, the Trust Agreement establishing the Fund contemplates that employers who contribute to the Fund are bound by the terms of the Trust Agreement. In defining the term "Employer," Art. II, Section 2.01(6) of the Trust Agreement states:

The term "Employer" means the Employer signatory hereto ... and such other employers who, by contract with the Union, have agreed to be bound by the terms of this Trust Agreement and to make contributions to the Fund equal to and on the same basis and under the same conditions as those required to be made by the employers signatory hereto.

(Emphasis added). The Trust Agreement further provides that an "Employee" is

Any person within the jurisdiction of the Union employed by an Employer bound by this Agreement, covered by a collective bargaining agreement between his or her Employer and the Union.

Further, Article IX of the Trust Agreement authorizes only the Fund's Trustees to amend the Trust Agreement.

These provisions make it clear that when establishing the Fund, the Trustees intended that employer and employee participants were bound by the terms of the Trust Agreement. While Miramar is not a signatory to the Trust Agreement, it is undisputed that it contributed to the Fund and intended its employees to receive the benefits from the Fund. Miramar would not make contributions if it did not intend its employees to receive benefits from the Fund.

If Miramar's employees are participants in the Fund, then it necessarily follows that Miramar is an employer under the Trust Agreement. Miramar cannot have it both ways. The Trust Agreement contemplates that contributing employers be either signatories or contributors under a collective bargaining agreement and be bound to the terms of the Trust Agreement. Miramar and its employees cannot receive the benefits of the Fund yet escape its attendant burdens, in this case, the provision of the Trust Agreement permitting the Trustees to audit an employer's books and records.

Miramar maintains that the provision of the collective bargaining agreement specifying that the "foregoing is the extent of any and all of employer's obligations" to the Fund means that Miramar need only contribute to the Fund and should not be required to submit to the requested audit. We disagree.

First, the precise meaning of this provision is unclear. The provision simply states that the "foregoing" is the extent of Miramar's obligations. The provision does not expressly disaffirm the Trust Agreement. Moreover, the provision is silent on the rights and powers of the Trustees to audit Miramar's records.

"Where a contract's meaning is not clear on its face, its interpretation depends upon the parties' intent at the time it was executed." Laborers Health & Welfare Trust Fund v. Kaufman & Broad of N. California, Inc., 707 F.2d 412, 418 (9th Cir.1983). Here, the only relevant evidence submitted was a declaration from Miramar's president stating that the second collective bargaining agreement was "negotiated." This evidence does not assist our interpretation of this provision.

Normally, the intent of the parties in this situation is an issue for the trier of fact. Id. However, we need not remand for this purpose. There is no contention that Miramar agreed to make significant contributions to the Fund but did not intend its employees to be covered thereunder. It is clear that by making contributions to the Fund, Miramar intended its employees to receive benefits from the Fund. Once Miramar intended its employees to be covered by the Fund, the Trust Agreement governing the Fund requires Miramar to be bound to its terms.

The Trust Agreement gives the Trustees the right to audit an employer's books and records. The Supreme Court has made clear that the trust documents, if consistent with the ERISA statute, govern the scope of the trustees' rights and duties. Central States, 472 U.S. at 568, 105 S.Ct. at 2839. If the provision at issue is read as interfering with the Fund's right to audit Miramar's books, we would be altering the trust documents. Such...