Southwest Administrators, Inc. v. Rozay's Transfer, s. 84-5689

Citation791 F.2d 769
Decision Date28 August 1986
Docket Number85-6020,Nos. 84-5689,s. 84-5689
Parties, 5 Fed.R.Serv.3d 91, 7 Employee Benefits Ca 1841 SOUTHWEST ADMINISTRATORS, INC., Plaintiff/Appellee, v. ROZAY'S TRANSFER, a California corporation, Defendant/Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

James Oswald, Davies, Roberts, Reid & Wacker, Seattle, Wash., for plaintiff/appellee.

Stephen P. Pepe, O'Melveny & Myers, Peter Marx, Los Angeles, Cal., for defendant/appellant.

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

Before WALLACE, PREGERSON, and BEEZER, Circuit Judges.

BEEZER, Circuit Judge:

Southwest Administrators, Inc., an employee benefit trust fund administrator, brought this action against Rozay's Transfer, an employer, to recover allegedly delinquent trust fund contributions. Rozay's Transfer contends Teamsters Local 208 fraudulently induced it to execute the underlying collective bargaining agreement and thus Rozay's Transfer has no obligation to pay retroactive contributions. The district court concluded that sections 502(a) and 515 of the Employee Retirement Income Security Act, 29 U.S.C. Secs. 1132(a), 1145, do not permit such a defense to non-payment. We affirm.


Prior to September 30, 1981, Rozay's Transfer, an employer in the trucking industry, and Teamsters Local 208 were parties to a collective bargaining agreement. Pursuant to the agreement, Rozay's Transfer made monthly contributions on behalf of its employees to the Western Conference of Teamsters Pension Trust Fund. This trust fund is a multiemployer pension plan as defined by subsections 3(2) and (37)(A) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. Sec. 1002(2), (37)(A).

After the agreement had expired, and while negotiations were continuing over the terms of a successor agreement, Rozay's Transfer continued to make contributions to the trust fund pursuant to the terms of the 1978-81 bargaining agreement. In July, 1982, when no successor agreement had yet been adopted, Rozay's Transfer informed the union that it had ceased making contributions to the pension fund.

In September, 1982, Local 208 filed an unfair labor practice claim with the National Labor Relations Board (NLRB) charging Rozay's Transfer under 29 U.S.C. Sec. 158(a)(5) with refusal to execute a collective bargaining agreement that had allegedly been negotiated. The NLRB charge was subsequently amended to include the charge that Rozay's Transfer had unilaterally altered benefits and conditions of employment, including cessation of payments to the pension fund. Local 208 also filed a grievance alleging the cessation of contributions to the trust fund violated the collective bargaining agreement.

While the NLRB charge and the grievance were pending, William S. Rozay, the owner of Rozay's Transfer, and Archie Murrietta, president of Local 208, eventually reached a settlement. Under this settlement, employee wages would be reduced by $1.00 and Rozay's Transfer would resume payments to the trust fund on behalf of each employee at the approximate rate of $.99 per hour.

In light of the company's precarious financial position, Rozay expressed serious concerns about being required to make retroactive pension fund contributions for the period between May, 1982 and February, 1983. Murrietta, and Maurice E. Anderson, the director of the Western Conference of Teamsters, agreed to contact the trust fund and request a waiver of the obligation to make contributions for this period. 1 Murrietta and Anderson assured Murrietta wrote to the trust fund on behalf of Rozay's Transfer requesting relief from payment of contributions for this interim period. However, on February 16, 1983, the trustees of the Western Conference of Teamsters Pension Fund, voted to deny the request to forgive the unpaid contributions.

Rozay that the delinquent payments would be forgiven, noting that the trust fund had waived the unpaid pension contributions of other employers under similar circumstances.

When the new collective bargaining agreement was executed on March 8, 1983, Murrietta had been informed of the trust fund's decision to deny a waiver of the delinquent contributions. He did not advise Rozay of this action. Rozay, assuming that unpaid contributions would be forgiven, signed the agreement, which covered the period from September 1, 1981 to September 30, 1984. The parties also executed a settlement agreement resolving the NLRB unfair practice complaint and the breach of agreement grievance. Local 208 thereafter withdrew the NLRB unfair labor practice charge and the grievance.

Subsequently, Southwest Administrators, Inc., the assignee of the Western Conference of Teamsters Pension Trust Fund, filed this action against Rozay's Transfer under sections 502(a) and 515 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Secs. 1132(a), 1145, to collect delinquent contributions for the period between May, 1982 and February, 1983.

Rozay's Transfer contended that its obligation to make pension fund contributions dated only from March 8, 1983, when the collective bargaining agreement was signed. Rozay's Transfer also filed a counterclaim seeking the return of $57,235.28 in contributions made to the trust between October, 1981 and April, 1982, the period between expiration of the old bargaining agreement and the date Rozay's Transfer ceased making payments.

The district court denied cross-motions for summary judgment on Southwest Administrators' complaint to collect delinquent contributions. However, the court did grant summary judgment against Rozay's Transfer on the counter-claim to recover contributions paid after the expiration of the old agreement. 2

After a one day bench trial, the district court held that the trust fund's right to enforce the express terms of the collective bargaining agreement, requiring pension fund contributions for the contested period, was not impaired by the union official's oral misrepresentations. The district court did find that Rozay had been "fraudulently induced" by Murrietta to sign the collective bargaining agreement, and that there had been no "meeting of the minds" on the issue of the retroactive pension fund contributions. However, as the fraud was not committed by the trust fund, the court held it was not precluded from enforcing Rozay's Transfer's obligation to make contributions as required by the express terms of the bargaining agreement.

The district court entered judgment for Southwest Administrators in the amounts of $76,133.29 in retroactive pension fund contributions, $15,226.25 in liquidated damages, $25,039.09 in interest, and $6,390.00 in attorneys fees.


We accept the district court's findings of fact because they are not clearly erroneous. See Operating Engineers Pension Trust v. Gilliam, 737 F.2d 1501, 1502 (9th Cir.1984).

Whether certain contract defenses are available in an action to recover delinquent trust fund contributions is a question of law. We review de novo a district court's conclusions of law. Maxwell v. Lucky Construction Co., Inc., 710 F.2d 1395, 1397 (9th Cir.1983).


For an employer to be obligated to make employee benefit contributions to a trust fund, there must exist a binding collective bargaining agreement. See Carpenters Southern California Administrative Corp. v. Russell, 726 F.2d 1410, 1413 (9th Cir.1984). Rozay's Transfer contends that its bargaining agreement is invalid, because it was the product of fraudulent inducement.

In an action to recover delinquent contributions, the trust fund stands in the position of a third-party beneficiary of the collective bargaining agreement. A third-party beneficiary's rights are generally subject to any contract defense which the promisor could assert against the promisee if the promisee were suing on the contract. J. Calamari & J. Perillo, The Law of Contracts Sec. 17-8, at 623-24 (2d ed. 1977).

However, a collective bargaining agreement is not a typical third-party beneficiary contract. See Lewis v. Benedict Coal Corp., 361 U.S. 459, 468, 80 S.Ct. 489, 494-95, 4 L.Ed.2d 442 (1960). For reasons of public policy, traditional contract law does not apply with full force in actions brought under the Employee Retirement Income Security Act (ERISA) to collect delinquent trust fund contributions. Southern California Retail Clerks Union and Food Employers Joint Pension Trust Fund v. Bjorklund, 728 F.2d 1262, 1265 (9th Cir.1984) ("Bjorklund ").

In recognition of the fact that millions of workers depend upon employee benefit trust funds for their retirement security, Congress and the courts have acted to simplify trust fund collection actions by restricting the availability of contract defenses, which make collection actions unnecessarily cumbersome and costly. Comment, Denying the Illegality Defense: An Enigmatic Approach to the Delinquent Pension Fund Contribution Problem, 34 Stan.L.Rev. 221, 228 (1981); see, e.g., Lewis v. Benedict Coal Corp., 361 U.S. at 468-71, 80 S.Ct. at 494-96 (precluding the employer from raising a union's strike in violation of the bargaining agreement as a defense to a trust fund collection action based on the same agreement).

In 1980, Congress amended ERISA by adding section 306(a), 29 U.S.C. Sec. 1145, to limit further the range of defenses available in an action for delinquent trust fund contributions. Bjorklund, 728 F.2d at 1265. Section 306(a) provides:

Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or 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 plan or such agreement.


To continue reading

Request your trial
270 cases
  • Lusardi Construction Co. v. Aubry
    • United States
    • California Supreme Court
    • February 24, 1992
    ...wage law. (See generally, Rozay's Transfer v. Local Freight Drivers L. (9th Cir.1988) 850 F.2d 1321; Southwest Administrators, Inc. v. Rozay's Transfer (9th Cir.1986) 791 F.2d 769.) Moreover, if the District made material misrepresentations to Lusardi, as the stipulated facts suggest, Lusar......
  • Joseph W. Davis, Inc. v. Intern, Union of Operating Eng.
    • United States
    • U.S. District Court — Eastern District of Pennsylvania
    • November 13, 2008
    ...different than it actually is." Connors v. Fawn Mining Corp., 30 F.3d 483, 490 (3d Cir. 1994) (citing Southwest Adm'rs, Inc. v. Rozay's Transfer, 791 F.2d 769, 774 (9th Cir. 1986)). Fraud in the factum is "`the sort of fraud that procures a party's signature to an instrument without knowled......
  • Trustees of the Sheet Metal Worker v. W.G. Heating
    • United States
    • U.S. District Court — Eastern District of Michigan
    • May 14, 2008
    ...Although fraudulent inducement may not normally be a defense to ERISA collection actions of this sort, see Southwest Admin., Inc. v. Rozay's Transfer, 791 F.2d 769, 774 (9th Cir.1986), that rule does not preclude a third-party complaint seeking indemnification on such a theory. There is no ......
  • Settlers' Hous. Serv., Inc. v. Schaumburg Bank & Trust Co. (In re Settlers' Hous. Serv., Inc.)
    • United States
    • U.S. Bankruptcy Court — Northern District of Illinois
    • June 30, 2014
    ...induces a party to believe the nature of his act is something entirely different than it actually is.” Sw. Administrators, Inc. v. Rozay's Transfer, 791 F.2d 769, 774 (9th Cir.1986). Fraud in the execution would take the instrument out of § 1823(e), because it would render the instrument vo......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT