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noting that there was no expression of an intent that the provisions of the CBA prevail over the terms of the Trust and that the side letter at issue "expressly subjugates itself to the Trust Agreement. . . ."
Summary of this case from United Food v. Super Fresh Food Markets Inc.Opinion
Civil No. 02-1818 ADM/AJB
March 24, 2003
Ruth S. Marcott, Esq., Felhaber, Larson, Fenlon Vogt, P.A., Minneapolis, MN, appeared for and on behalf of Plaintiffs.
Jack D. Rowe, Esq., Lathrop Gage L.C., Kansas City, MO, and Timothy J. Ewald, Esq., Gray Plant Mooty, Minneapolis, MN, appeared for and on behalf of Defendant.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
On January 21, 2003, the Motion for Summary Judgment [Docket No. 6] of Defendant Tension Envelope Corporation ("Tension"), and the Motion for Summary Judgment [Docket No. 8] of Plaintiffs Trustees of the Graphic Communications International Union Local 1B Health and Welfare Fund "A" ("Fund A") and the Trustees of the Graphic Communications International Union Local 1B Health and Welfare Fund "B" ("Fund B") (collectively, "Plaintiffs" or "Trustees"), were argued before the undersigned United States District Judge. For the reasons set forth below, Defendant's Motion is denied and Plaintiffs' Motion is granted.
II. BACKGROUND
The Trustees of both Funds bring this action to collect monthly premiums for medical and dental coverage allegedly owed by Tension on behalf of certain of its married employees. In short, the Trustees assert that the Funds' governing documents require Tension to make a contribution for every employee, including the circumstance where an employee is married to another covered Tension employee for whom contributions are made. By contrast, Tension argues that the collective bargaining agreement ("CBA") negotiated between Tension and the Graphics Communication International Union Local 1B, Twin Cities (the "Union"), properly incorporates a side agreement requiring Tension to pay only one monthly premium for employees married to each other.
The Funds are multiemployer plans, jointly administered pursuant to Section 302(c)(5) of the Labor Management Relations Act, which provide benefits to members of the Union paid for by employers' contributions to the Funds. The Funds are operated by a Board of Trustees consisting of half Union-appointed trustees and half Employer-appointed trustees. Fund A provides health and medical benefits, along with life and disability insurance, while Fund B provides dental benefits to its participants. Tension is a participating employer in both Funds. The effective Participation Agreement with the Funds is dated February 14, 1990. Hurley Aff. Ex. B.
Plaintiffs contend the appropriate contribution amounts are determined by two sets of documents governing the Funds. With respect to Fund A these documents are (1) the Restated Agreement and Declaration of Trust for Graphic Communications Local 1B Health and Welfare Fund "A" ("Trust Agreement") and accompanying amendments, and (2) the Rules and Regulations of the Graphic Communications Local 1B Health and Welfare Fund "A" Relating to Setting Contribution Levels and Maintaining Reserves ("Rules and Regulations"), adopted by the Trustees September 1, 1999. Hurley Aff. Exs. A, C. The governing documents for Fund B are a Trust Agreement and Rules and Regulations that are essentially identical to Fund A's. Amundson Aff. Exs. B, C. Section 8.1(a) of the Fund A and Fund B Trust Agreements states that:
As amended March 15, 1993. Hurley Aff. Ex. A at 3.
Effective April 1, 1993. Amundson Aff. Ex. B at 26.
The Trustees shall establish the plan or plans of benefits to be provided by this Fund. Having done so, the Trustees shall establish the necessary contribution level that will support the plan of benefits being provided by this Fund. Such contribution level or levels may be changed from time to time by action of the Trustees. In order for benefits to be provided, contributions at the level required by the Trustees shall be paid on behalf of each participant who is to receive benefits under this Fund. Contributions may be received through self-pay, contributions required under collective bargaining agreements, or contributions required under participation agreements with this Fund, or a combination thereof.
Hurley Aff. Ex. A at 3; Amundson Aff. Ex. B at 19 (emphasis added).
Section 7.1(n) of both Trust Agreements also states that the Trustees shall have the "power and dut[y]" to:
[I]nterpret, construe and apply the terms and provisions of this agreement and any construction of the Agreement and Declaration of Trust shall be binding upon all parties hereto, all parties dealing with the Fund and all persons claiming any benefits hereunder.
Hurley Aff. Ex. A at 17, 21; Amundson Aff. Ex. B at 14, 17.
Contribution levels for the plans are discussed in the Rules and Regulations of the two Funds. The Rules and Regulations state that:
Fund A Rules and Regulations were established by the Trustees on September 1, 1999, while Fund B established similar Rules and Regulations on November 19, 2001. Amundson Aff. Ex. C.
[T]he Trustees have determined that it is in the best interest of the participants and beneficiaries of the Plan to provide:
— a monthly contribution rate per employee which reflects the costs of providing benefits under this Plan;
— a monthly contribution rate per employee which properly reflects the amount of funds necessary to ensure the contribution of benefit payments pursuant to the plan of benefits offered by the Fund and which takes into account claim fluctuation factors, changes in business climate which could affect the Fund and sudden and unexpected interruptions in Fund income;
— a method to assist the trustees in setting contribution rates from time to time to meet the above described objectives[.]
Hurley Aff. Ex. C at 1; Amundson Aff. Ex. C at 1 (emphasis added). Both Funds rely on the Fund actuary to set contribution rates by determining the total cost per employee needed to provide health or dental care coverage and to pay administration expenses for the Fund. Hurley Aff. ¶ 12. Tension entered into a Participation Agreement on February 14, 1990. Id. Ex. B. The Participation Agreement contains the following relevant provisions:
1. The parties hereto agree to be bound by the Agreement and Declaration of Trust establishing the Fund, together with any amendments thereto and the rules and regulations adopted thereunder, provided that such rules and regulations have been communicated in writing to the Employer.
. . .
5. This Participation Agreement does not:
(a) Alter any provision of the Labor Agreement [CBA] between the Employer and the Union which would require a contribution level higher than that provided for in this Participation Agreement;
(b) Prevent any employer from requiring Participant contributions as may be set forth in the Labor Agreement [CBA];
(c) Except as provided in paragraph 6, modify or supersede any side agreement entered into between an Employer and the Union, or alter any other provision of the Labor Agreement [CBA].
. . .
11. This Participation Agreement and any interpretation thereof will be governed according to federal law and the laws of the State of Minnesota.
12. This Agreement is not binding upon the Fund until accepted by the Trustees and confirmation of same is sent out over the signature of an authorized Fund representative.
Hurley Aff. Ex. B at 1, 2, 4.
Tension argues that the CBA between itself and the Union, effective April 1, 2000, through March 31, 2004, materially affects its obligations to pay contributions for employees married to each other. Schuler Aff. ¶ 3, Ex. A. Articles 26 and 27 of the CBA require Tension to make premium contributions to the medical and dental health and welfare funds administered by Plaintiffs. Id. Ex. A. Tension asserts the CBA also incorporates a "Side Letter to [the] Agreement" ("Side Letter") affecting both Articles 26 and 27. Id. Ex. B. The Side Letter, dated April 9, 2002, is from Henk Boon, General Manager of Tension, to Joyce Hurley, President of Graphic Communications International Union Local 1B. Id. The Side Letter states that for both the medical and dental funds:
[I]f there are eligible employees married to one another, the Employer will pay only one monthly medical [or dental] premium, and the spouse would be covered as a dependent on the other employee and would not pay any monthly medical contribution amount. Any costs for services borne by an employed dependent spouse (regarding coordination of benefits) would be reimbursed by the Employer upon written documentation of such. If the Union can provide documentation of a prior agreement where the Employer agreed to pay for both spouses, the Employer will withdraw this subparagraph.
Id. Plaintiffs contend the governing documents of the Funds provide this documentation. The Side Letter concludes by stating:
It is understood that this side letter provision is subject to the Restated Agreement and Declaration of Trust for the Graphic Communications Local 1B Health and Welfare Fund
A, and for Fund B, and the Rules and Regulations adopted by the Trustees. Id. The legal significance of this Side Letter is the crux of this lawsuit. Tension argues no legally sufficient prior agreement exists and thus, beginning in July 2002, Tension stopped paying contributions for five employees who are married to other Tension employees (for whom Tension made all required contributions). Plaintiffs now seek recovery under the Employee Retirement Income Security Act ("ERISA") of alleged delinquent employer contributions of the five employees, and recovery of attorneys' fees and costs.
The affected employees are Petar and Spomenka Budisa, Armin and Fatma Dzihic, Muharem and Nusreta Huskic, Ahmet and Fikreta Jaganjac, and Norman and Sonja Marsolek. Hurley Aff. ¶ 7.
III. DISCUSSION
Federal Rule of Civil Procedure 56(c) provides that summary judgment shall issue "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In considering each of the Parties' cross-motions for summary judgment, the Court views the evidence in the light most favorable to the nonmoving party. Ludwig v. Anderson, 54 F.3d 465, 470 (8th Cir. 1995). The nonmoving party may not "rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial." Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995). Further, "the mere existence of some alleged factual dispute between the parties is not sufficient by itself to deny summary judgment . . . . Instead, `the dispute must be outcome determinative under prevailing law.'" Get Away Club, Inc. v. Coleman, 969 F.2d 664, 666 (8th Cir. 1992) (citation omitted). Here, the Parties concur that there are no material facts in dispute and summary judgment is the appropriate resolution.
Tension argues that the CBA is the primary authority for determining "for whom" contributions are to be made, and that the authority of the Trustees vested by the Trust Agreement and accompanying documents is limited to establishing contribution levels for the employees identified by the CBA. Tension relies on Central Hardware Co. v. Central States, Southeast and Southwest Areas Pension Fund, 770 F.2d 106 (8th Cir. 1985), for its argument that a fund can refuse an employer's participation in the plan, but cannot interpret a CBA. In Central Hardware, the plaintiff, a corporation with a CBA with its local Union, made benefit payments to the defendant, a multiemployer pension fund. Id. at 107-08. A "mid-term memorandum of understanding" sought to alter the conditions of the CBA regarding the class of employees for whom employer contributions were required. Id. at 108. Plaintiff argued the defendant was bound by the trust agreement governing documents, along with the CBA, such that the "mid-term memorandum of understanding" was invalid. Id. The parties agreed that the trust agreement documents determined the powers of the trustees of the fund. Id. In resolving the dispute, the Eighth Circuit noted that portions of both the CBA and trust agreement supported the plaintiffs, but ultimately relied on various provisions of the CBA, sections of the participation agreement, and at least six sections of the trust agreement, taken together, to hold that the defendant trustees for the funds were empowered to construe the trust agreement consistent with their obligation to care for the trust fund and protect its actuarial soundness, such that the terms of the "mid-term memorandum of understanding" were not binding on the defendants. Id. at 109-10. As such, Central Hardware is not controlling on the issue of a conflict in terms between trust documents and a CBA.
Tension also argues the Participation Agreement is limited to obligating Tension to make contribution payments for employees identified under the CBA. For this, Tension relies on § 5(c) of the Participation Agreement, stating that: "The Participation Agreement does not: . . . modify or supersede any side agreement entered into between an Employer and the Union, or alter any other provision of the Labor Agreement [CBA]." Hurley Aff. Ex. B at 2. Section 1.4 of the Trust Agreement states that:
The term "Collective Bargaining Agreements" as used herein shall mean the collective bargaining agreement or agreements in force and effect between the Union and the Employers plus any amendments thereto or successor agreements which provide for contributions to be made to the fund created by this Agreement and Declaration of trust.
Hurley Aff. Ex. A at 5 (emphasis added). Section 1.8 of the Trust Agreement defines the term "Employer Contributions" as "payments required of an Employer by the Collective Bargaining Agreement the trust fund herein created . . . ." Id. at 6. Thus, Tension argues the CBA governs "for whom" contribution payments are required.
Tension points also to § 10.1(e) of the Trust Agreement, which states that "no amendment [to the Trust Agreement] shall be adopted which: . . . (e) Changes the amount of contributions required to be made by the Employers; the amount of said contributions being governed by the later of the applicable collective bargaining agreements executed between the Union and the Employer or by Participation Agreements signed between the Trust and the Employer." Hurley Aff. Ex. A at 25-26. Tension relies on Carpenters Fringe Benefit Funds of Ill. v. McKenzie Eng'g, 217 F.3d 578 (8th Cir. 2000), to further argue the supremacy of the CBA over the Trust Agreement provisions. Tension submits that Carpenters is "directly on point and should control the present dispute." Def.'s Reply Mem. at 4. In Carpenters, defendant McKenzie, a union contractor, was party to CBAs with craft unions. Id. at 580. Plaintiff benefit funds sued for unpaid contributions under ERISA. Id. The court found that McKenzie was bound by its agreements to participate in the CBAs, and all claims were for breach of the applicable CBA's. Id. at 581. The issue was not whether the CBA terms were to govern, but rather whether the governing CBA terms covered a particular type of project or not. Id. at 582. The court found the CBAs to apply to the disputed project, but held that the "Funds failed to prove that the applicable [CBAs] required McKenzie to pay the amounts claimed . . . ." Id. at 580, 582. Carpenters did not involve a direct dispute between Trust Agreement terms and alleged CBA requirements, as is the case here, and therefore does not stand for the proposition that a CBA categorically "trumps" a Trust Agreement in determining contribution requirements.
Section 515 of ERISA provides that:
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.29 U.S.C. § 1145 (2003). Plaintiffs also seek the mandatory award of attorneys' fees, costs and liquidated damages for a prevailing party under ERISA § 502(g)(2). 29 U.S.C. § 1132(g)(2) (2003); see Central States, Southeast and Southwest Areas Pension Fund v. Gerber Truck Serv., Inc., 870 F.2d 1148, 1156 (7th Cir. 1989).
The Trustees rely on Central Pa. Teamsters Pension Fund v. W L Sales, Inc., 778 F. Supp. 820 (E.D.Pa. 1991), for the proposition that the provisions of the Trust Agreement rather than the CBA provide the proper framework to analyze the employer's obligations to a fund. Id. at 829. In W L Sales, plaintiff, a multiemployer pension trust fund, was to receive contribution payments from defendant, a contributing employer, pursuant to a Trust Agreement and the terms of a CBA with the local union. Id. at 822-23. The terms of the governing documents in W L Sales were similar to those present here: the Trust Agreement required contribution payments "pursuant to the [CBA]," the Trust Agreement stated that "[a]ny . . . interpretation adopted by the Trustees shall be binding . . . ," the relevant Retirement Income Plan defines "contributions" as payments "required . . . [by] the terms of a [CBA]," the plaintiffs were signatories to the Trust Agreement wherein they agreed to be bound to its terms, and the governing documents included references to CBAs. Id. at 823-29. The parties disputed whether or not payments for "casual employees" were required where the Trust Agreement and governing documents did not define such employees, but where a later CBA provision purported to exempt defendant from making such payments on behalf of "casual employees" and the Trust Agreement contained many references to CBAs. Id. at 829. This situation closely parallels the conflict at issue. The W L Sales court found defendant's argument that the CBA terms controlled employee eligibility for pension benefits "both legally incorrect and unreasonable." Id. The court found that "the provisions of the trust agreement provide the framework with which a court should analyze an employer's obligation to a . . . fund." Id. (citing Hinson v. NLRB, 428 F.2d 133, 139 (8th Cir. 1970)). The CBA provision distinguishing "casual employees" was held invalid, and "the Trust Agreement [and other governing documents,] not the [CBA] between the defendant and the union, control the determination of pension eligibility." Id. at 832. The fact dispute at issue in W L Sales more closely resembles the instant case than does that in Carpenters.
This result is supported by Bidwell v. Garvey, 943 F.2d 498 (4th Cir. 1991), where the Fourth Circuit held that the plaintiffs were empowered by the relevant trust documents to raise benefit levels notwithstanding the fact that the CBA terms set benefit levels. Id. at 506. The Bidwell court stated that: "[I]t is a settled principle of trust law that the powers of the trustees are determined by the terms of the trust document." Id.; see also Sinai Hosp. of Baltimore, Inc. v. National Benefit Fund for Hosp. Health Care Employees, 697 F.2d 562 (4th Cir. 1982) (holding that trustees had not exceeded their authority in the face of an express conflict between the trust instrument and a CBA).
Here, the Trust Agreements and the accompanying Rules and Regulations give the Trustees the authority to establish contribution rates. The Trust Agreements state that "[T]he Trustees shall establish the necessary contribution level that will support the plan of benefits being provided by this Fund." Trust Agreement § 8.1(a). "[C]ontributions at the level required by the Trustees shall be paid on behalf of each participant who is to receive benefits under this Fund." Id. The Trust Agreement also states that the Trustees have the power to interpret, construe and apply its terms; this construction is "binding upon all parties hereto." Trust Agreement § 7.1(n). The Rules and Regulations set forth "a monthly contribution rate per employee which reflects the costs of providing benefits." Hurley Aff. Ex. C at 1; Amundson Aff. Ex. C at 1 (emphasis added). The Participation Agreement entered into by Tension states that the parties are "to be bound by the [Trust Agreement] together with [the Rules and Regulations]." Participation Agreement ¶ 1. No expression of an intent that the provisions of the CBA shall prevail over the terms of the Trust appears in the Agreement. The Side Letter to the CBA expressly subjugates itself to the Trust Agreement governing documents: "It is understood that this side letter provision is subject to the [Trust Agreement] and the Rules and Regulations adopted by the Trustees." Schuler Aff. Ex. B.
The terms of the Trust Agreement require Tension to pay the established contribution for each employee, including those married to other employees. This requirement cannot be circumvented by the Side Agreement. See Bidwell, 943 F.2d at 506 (holding that "neither an employer nor a union, singly or together, can alter the terms of a trust instrument . . .") (internal citation omitted).
Moreover, the Side Letter expressly states that "[i]f the Union can provide documentation of a prior agreement where the Employer agreed to pay for both spouses, the Employer will withdraw this subparagraph." Schuler Aff. Ex. B. Additional evidence that Tension was required by the Participation Agreement, Trust Agreement, Rules and Regulations, and the CBA, to pay contributions for each employee without distinguishing spouses of covered employees, is Tension's actual payment of such contributions for at least 12 years prior to the origin of the Side Letter. By its own terms, the Side Letter is ineffective in light of Tension's prior agreement to terms requiring it to pay contributions for both spouses.
Accordingly, summary judgment in favor of Plaintiffs is appropriate. Tension is obligated to make the required delinquent payments for the five relevant employees under 29 U.S.C. § 1145, and Plaintiffs are entitled to a fee award in conformity with 29 U.S.C. § 1132(g)(2).
IV. CONCLUSION
Based on the foregoing, and all the files, records and proceedings herein, IT IS HEREBY ORDERED that:
1. Defendant's Motion for Summary Judgment [Docket No. 6] is DENIED, and
2. Plaintiffs' Motion for Summary Judgment [Docket No. 8] is GRANTED.
LET JUDGMENT BE ENTERED ACCORDINGLY.