Trustees of Four Joint Boards v. Penn Plastics, Inc.

Citation864 F. Supp. 342
Decision Date28 September 1994
Docket NumberNo. 93 Civ. 3216 (PKL).,93 Civ. 3216 (PKL).
PartiesTRUSTEES OF the FOUR JOINT BOARDS HEALTH AND WELFARE AND PENSION FUNDS, Plaintiffs, v. PENN PLASTICS, INC., Defendant.
CourtU.S. District Court — Southern District of New York

Lillian S. Weigert, Gellert & Cutler, P.C., Poughkeepsie, NY, for plaintiffs.

Andrew Heymann, Devos and Co., New York City, for defendant.

LEISURE, District Judge:

This is an action to recover delinquent employee-benefit-fund contributions. Plaintiffs are the Trustees of the Four Joint Boards Health and Welfare and Pension Funds (the "Trustees" or the "Funds").1 Defendant is Penn Plastics, Inc. ("Penn Plastics"), a Pennsylvania corporation, with its principal place of business at Creighton, Pennsylvania. The Trustees assert liability under the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. § 1001, et seq., and a collective bargaining agreement entered into between Penn Plastics and the International Leather Goods, Plastics, Novelty Workers Union (the "Union"). This Court has subject matter jurisdiction pursuant to ERISA § 502, 29 U.S.C. § 1132, and § 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185 (1947).

The Trustees have moved for summary judgment pursuant to Fed.R.Civ.P. 56 ("Rule 56"). For reasons stated below, the Trustees' motion is granted as to liability but denied as to damages.

BACKGROUND

Penn Plastics and the Union entered into a collective bargaining agreement that purported to be effective during the three-year period from February 1, 1991 through January 31, 1994 (the "Collective Bargaining Agreement"). The Collective Bargaining Agreement expressly obligated Penn Plastics to make monthly contributions to the Funds, in amounts that would increase each year according to a formula and a procedure described in the Collective Bargaining Agreement. However, Penn Plastics encountered serious financial difficulties and, as of August 1992, became delinquent in its contributions to the Funds.

On December 4, 1992, Penn Plastics and the Union entered into an amendment to the Collective Bargaining Agreement (the "Amendment"). The Funds were not parties to the Amendment. According to Penn Plastics, the Amendment was intended, inter alia, to avert the annual increases in required rates of contributions to the Funds that, under the Collective Bargaining Agreement, were to take effect on February 1, 1993.

The Trustees filed this action on May 13, 1993, seeking delinquent contributions and a variety of ancillary relief.

DISCUSSION

The Trustees have moved for summary judgment with respect to each aspect of the relief that they have requested. Penn Plastics has not disputed that it is liable to the Funds for some amount of delinquent contributions, for prejudgment and penalty interest, and for attorneys' fees and costs. Rather, Penn Plastics disputes the amounts of delinquent contributions, prejudgment and penalty interest, and attorney's fees that are owed. Penn Plastics also disputes whether it is liable for auditors' fees and, if so, the amount thereof.

I. THE SUMMARY JUDGMENT STANDARD

"Summary judgment may be granted if, upon reviewing the evidence in the light most favorable to the non-movant, the court determines that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law." Richardson v. Selsky, 5 F.3d 616, 621 (2d Cir.1993). In deciding the motion, "the Court is required to draw all factual inferences in favor of the party against whom summary judgment is sought." Balderman v. U.S. Veterans Administration, 870 F.2d 57, 60 (2d Cir.1989). "Only when no reasonable trier of fact could find in favor of the nonmoving party should summary judgment be granted." Cruden v. Bank of New York, 957 F.2d 961, 975 (2d Cir.1992); accord Taggart v. Time, Inc., 924 F.2d 43, 46 (2d Cir.1991).

The party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion" and identifying the materials in the record that "it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). Once a motion for summary judgment is properly made and supported, however, the burden shifts to the nonmoving party to "`set forth specific facts showing that there is a genuine issue for trial.'" Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986) (quoting Fed.R.Civ.P. 56(e)).

In a dispute involving a contract's meaning, summary judgment may be granted if the contract's language is plain and unambiguous. Brass v. American Film Technologies, Inc., 987 F.2d 142, 148 (2d Cir.1993); Seiden Assoc., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir.1992). A contract's language is unambiguous if there is "`no reasonable basis for a difference of opinion'" as to the contract's meaning. Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir.1989) (quoting Breed v. Insurance Co. of North America, 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 355, 385 N.E.2d 1280, 1282 (1978)).

II. DELINQUENT CONTRIBUTIONS

The Trustees' principal claim is that, as a matter of law, pursuant to ERISA § 515, Penn Plastics is liable for delinquent contributions at a rate to be determined in accordance with the Collective Bargaining Agreement and not in accordance with the Amendment. Penn Plastics offers a different interpretation of § 515 and argues that summary judgment is inappropriate on this point because there is a genuine issue of material fact as to the proper interpretation of the Amendment — namely, whether the Amendment was intended to avert the annual increases in required rates of contributions to the Funds that, under the Collective Bargaining Agreement, were to take effect on February 1, 1993.2

ERISA § 515 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 agreement.

29 U.S.C. § 1145. The considerations that animated Congress' passage of this section have been explored at some length in several of the Circuit Courts of Appeals, see, e.g., Central States, Southeast and Southwest Areas Pension Fund v. Gerber Truck Service, Inc., 870 F.2d 1148, 1151-56 (7th Cir.1989) (en banc) (Easterbrook, J.); Bituminous Coal Operators' Association, Inc. v. Connors, 867 F.2d 625, 632-36 (D.C.Cir.1989) (D. Ginsburg, J.); Southern California Retail Clerks Union & Food Employers Joint Trust Fund v. Bjorklund, 728 F.2d 1262, 1265-66 (9th Cir.1984), including the Court of Appeals for the Second Circuit, see Benson v. Brower's Moving & Storage, Inc., 907 F.2d 310, 313-16 (2d Cir.1990). The Court will briefly review those considerations here.

Multiemployer plans, such as the Funds, operate on a so-called "defined-contribution in, defined-benefit out" basis. That is, this type of plan promises to pay out to beneficiaries a defined rate of benefits, which the plan calculates in reliance on participating employers' promises to pay in a defined rate of contributions. The rates at which individual employers promise to pay in to the plan are set forth in written agreements. These agreements often take the form of collective bargaining agreements entered into between an employer and a union, which name the plan as a third-party beneficiary. When, for whatever reason, an individual employer breaks its promise to contribute at the rate defined in the written agreement, other participating employers must contribute at higher rates, or the plan must default on its own promises to beneficiaries.

The Supreme Court recognized this point among others in Lewis v. Benedict Coal Corp., 361 U.S. 459, 466-71, 80 S.Ct. 489, 493-96, 4 L.Ed.2d 442 (1960), well before the enactment of § 515.3 There, the Court held that a multiemployer benefit fund could enforce an employer's promise to contribute to the fund, as set forth in a collective bargaining agreement, even though the union had breached the agreement. The employer could not raise the union's breach as a defense in a suit by the multiemployer fund, where the collective bargaining agreement had not preserved such a defense "in unequivocal words." Id. at 470-71, 80 S.Ct. at 496; Benson, 907 F.2d at 312.4 The Court reasoned, in part, that other employers participating in the multiemployer fund would not have been "willing to risk the threat of diminution of the fund in order to protect those of their number who might have become involved in local labor difficulties" and that many beneficiaries of the fund "may be retired, or may be dependents, and therefore without any direct voice in the conduct of union affairs." Benedict Coal, 361 U.S. at 469-70, 80 S.Ct. at 496.

In the wake of Benedict Coal, some employers seeking relief from promises that they had made to contribute to multiemployer plans took a different tack. They argued, not that their duties to pay had been discharged or modified by union conduct that occurred after the collective bargaining agreement had become effective, but rather that their duties had never come into existence because no valid collective bargaining agreement had ever been formed. See Benson, 907 F.2d at 313. Courts accepted this argument by employers in at least two cases that caught the eyes of the sponsors of § 515, Washington Area Carpenters' Welfare Fund v. Overhead Door Co. of Metropolitan Washington, 488 F.Supp. 816, 819 (D.D.C. 1980) (accepting "defense in the instant case, because it ... concerns the validity of the very agreement" that allegedly gave rise to employer's obligation to contribute), rev'd 681 F.2d 1 (D.C.Cir.1982), cert. denied, 461 U.S. 926, 103 S.Ct. 2085, 77 L.Ed.2d 296 (1983), and Western Washington...

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