Whitworth Bros. Storage Co. v. Central States Southeast & Southwest Areas Pension Fund

• Decision Date: 16 February 1993
• Docket Number: No. 92-3085,92-3085
• Citation: 982 F.2d 1006
• Court: U.S. Court of Appeals — Sixth Circuit
• Parties: 16 Employee Benefits Cas. 1386 WHITWORTH BROTHERS STORAGE COMPANY, Plaintiff-Appellant, v. CENTRAL STATES, SOUTHEAST & SOUTHWEST AREAS PENSION FUND; Board of Trustees, Central States, Southeast & Southwest Areas Pension Fund; and Executive Director, Central States, Southeast & Southwest Areas Pension Fund, Defendants-Appellees.

Page 1006

982 F.2d 1006

16 Employee Benefits Cas. 1386

WHITWORTH BROTHERS STORAGE COMPANY, Plaintiff-Appellant, v. CENTRAL STATES, SOUTHEAST & SOUTHWEST AREAS PENSION FUND;

Board of Trustees, Central States, Southeast & Southwest

Areas Pension Fund; and Executive Director, Central States,

Southeast & Southwest Areas Pension Fund, Defendants-Appellees.

No. 92-3085.

United States Court of Appeals, Sixth Circuit.

Argued Nov. 30, 1992.

Decided Jan. 11, 1993.

Rehearing Denied Feb. 16, 1993.

Harlan D. Karp (briefed), Eugene I. Selker (argued and briefed), Selker & Furber, Cleveland, OH, for plaintiff-appellant.

Thomas C. Nyhan, Francis J. Carey, Joan P. Simmons, William W. Leathem (argued and briefed), James D. O'Connell, Central States, Southeast & Southwest Areas Health & Welfare & Pension Funds, Rosemont, IL, for defendants-appellees.

Before: MILBURN and BATCHELDER, Circuit Judges; and CONTIE, Senior Circuit Judge.

CONTIE, Senior Circuit Judge.

Plaintiff-appellant, Whitworth Brothers Storage Company, appeals the district court's grant of summary judgment to defendants-appellees, Central States, Southeast & Southwest Areas Pension Fund; Board of Trustees, Central States, Southeast & Southwest Areas Pension Fund; and Executive Director, Central States, Southeast & Southwest Areas Pension Fund, in this action for restitution under federal common law for a refund of contributions plaintiff mistakenly made to Central States. For the following reasons, we affirm in part, reverse in part, and remand the case to the district court for further proceedings.

I.

Defendant-appellee, Central States Southeast and Southwest Areas Pension Fund ("Central States" or "the Fund"), is a multiemployer employee pension benefit plan as defined in 29 U.S.C. § 1002(2)(A) of the Employee Retirement Income Security Act ("ERISA") of 1974. Plaintiff-appellant, Whitworth Brothers Storage Company ("Whitworth Bros. Storage" or "the Company"), is an employer that paid contributions to the Fund for the accounts of employees William Whitworth ¹ and Ernest Whitworth in the mistaken belief that they were employees who were eligible to receive pension benefits from the Fund.

William and Ernest Whitworth were co-owners, shareholders, and officers of Whitworth Bros. Storage, a family-operated business begun by their father. The two brothers drove trucks and carried furniture and were members of the Teamsters and Local Union 392.

Plaintiff claims that the mistake underlying this lawsuit began in 1955 when a union official informed the Whitworth brothers that as members of the Teamsters Union they were covered by the Union's collective bargaining agreement that required contributions to Central States for pension benefits. Neither plaintiff nor defendants sought verification of William and Ernest Whitworths' eligibility to receive pension benefits from the Fund. The Fund accepted Whitworth Bros. Storage's representation that it owed the Fund monthly contributions for Ernest and William Whitworth and billed them accordingly. ² Whitworth Bros. Storage alleges that for over twenty-five years, it made contributions totaling $20,000 to the Fund on behalf of William and Ernest Whitworth. ³

Seeking to retire in late 1978 or early 1979, William Whitworth wrote to the Board of Trustees ("the Trustees") of the Fund regarding his pension. On January 26, 1979, the Director of Pension History at Central States, Mr. Bey, wrote William Whitworth indicating that inasmuch as his employer was Whitworth Bros. Storage, the Fund believed that he may not be an employee covered by the collective bargaining agreement who was eligible to receive pension benefits. The letter asked whether he held any ownership in the Company and informed him that owners and managers normally did not fall within the category of employees covered by the collective bargaining agreement. (Appendix, p. 51).

On February 3, 1979, William Whitworth responded to Mr. Bey:

Re: My Status:

There is no change in my status here since I joined the union in 1934. I carried furniture for a living then, with my father and brother.... So for the past 45 years I have been a member in good standing and still am a working, paying member.

What I want to know is: when I decide not to carry furniture any more, what can I expect from my union's pension fund to which I have contributed since its inception.

Note: This also concerns my brother (Ernest Whitworth) with whom I am presently working.

/s/ Wm. Whitworth

(Appendix, p. 121).

The record is unclear about the manner in which Central States responded as a letter that Central States wrote to Local 392 on March 14, 1979 (a copy of which was sent to William Whitworth) is not a part of the record. Central States continued billing Whitworth Bros. Storage for contributions on behalf of both brothers.

On March 1, 1980, William Whitworth ceased working and Whitworth Bros. Storage ceased making contributions to Central States on his behalf. On his March 30, 1980 bill, William Whitworth wrote: "I retired as of March 1, 1980. Waiting for pension ck." On June 16, 1980, Central States wrote William Whitworth regarding his application for pension benefits, asking him if he had the right to hire or fire while employed at Whitworth Bros. Storage. (Appendix, p. 54). On August 20, 1980, Central States wrote William Whitworth telling him that his eligibility to receive pension benefits had not been established and that his application was being placed in the Fund's rejection files. The letter stated that if additional information were submitted, the application would be reopened. (Appendix, pp. 52-53).

On November 4, 1980, plaintiff Whitworth Bros. Storage obtained counsel, who wrote to Central States, demanding that Central States pay William Whitworth pension benefits as a beneficiary or return to the Company all contributions toward pension benefits made to the Fund on his behalf. Central States received this letter on November 10, 1980. (Appendix, p. 56).

After further correspondence between plaintiff's counsel and the Fund, on May 19, 1981, Whitworth Bros. Storage conceded in a letter that since William Whitworth had been paid as an owner, not as an hourly employee of the Teamsters Union, he was not covered by the collective bargaining agreement as an employee and not eligible to receive pension benefits. ⁴ The letter repeated a demand for a refund of the contributions paid by mistake by the Company on William Whitworth's behalf. (Appendix, p. 57).

On July 23, 1981, Central States denied Whitworth Bros. Storage's request for a refund of $7,890 covering the period of May 31, 1964 through March 1, 1980 for contributions made on behalf of William Whitworth. It is Central States' policy to limit refunds for contributions made by a mistake of fact or law to the one year prior to a formal request for a refund. Pursuant to this policy, Central States granted plaintiff Whitworth Bros. Storage a refund of $384.00 for the contributions made on behalf of William Whitworth between November 11, 1979 and March 1, 1980. Central States stated that it had received a refund request in regard to contributions made on behalf of William Whitworth on November 10, 1980 from Eugene Selker, attorney for the Company, and that pursuant to its one-year refund limitation policy, it would allow a refund for contributions made from November 11, 1979 (one year prior to the date of the November 10, 1980 refund request) until March 1, 1980, when the Company ceased making contributions on behalf of William Whitworth. (Appendix, pp. 59-62).

In July 1981, after the refund request on behalf of William Whitworth was denied, Whitworth Bros. Storage ceased making contributions on behalf of Ernest Whitworth without ever requesting a refund of the contributions previously made by the Company on his behalf.

Central States continued assessing and billing Whitworth Bros. Storage for contributions for Ernest Whitworth through May 1983. Until August 1984, Central States billed Whitworth Bros. Storage monthly for previous delinquent contributions, assessed interest penalties, and threatened collection action. ⁵

On September 15, 1983, plaintiff Whitworth Bros. Storage filed a complaint against defendant Central States in the United States District Court for the Northern District of Ohio. On Count I, plaintiff sought an $11,000 refund for contributions it had made on behalf of William Whitworth from January 1, 1975 through March 1980 and on behalf of Ernest Whitworth from January 1, 1975 through July 1981 in the mistaken belief that William and Ernest Whitworth were employees covered by the collective bargaining agreement who were eligible to receive pension benefits. A refund of contributions mistakenly made is permissible under 29 U.S.C. § 1103(c)(2)(A)(ii), a provision of ERISA enacted on January 1, 1975.

On Count II, plaintiff sought a refund of approximately $9,000 for contributions it had made from 1955 through December 31, 1974 on behalf of William and Ernest Whitworth in the mistaken belief that they were employees covered by the collective bargaining agreement. Plaintiff invoked jurisdiction for a claim for these pre-ERISA contributions pursuant to a pendent state law action for restitution.

On Count III, plaintiff sought a declaratory judgment on whether the Company owed back contributions to the Fund for the period from August 1981 through May 1983 in regard to Ernest Whitworth.

On January 15, 1985, the district court dismissed the complaint for lack of subject matter jurisdiction, holding that under 29 U.S.C. § 1132(a)(1), employers are not authorized to maintain an ERISA action. On appeal, this court in Whitworth Brothers Storage Co. v. Central States, Southeast and Southwest Areas Pension Fund, 794 F.2d 221 (6th Cir.), cert. denied, 479 U.S. 1007, 107 S.Ct. 645, 93 L.Ed.2d 701 (1986) ("Whitworth I ") reversed and remanded. This court held that the plaintiff-employer, Whitworth Bros....