Because third party beneficiary consent is not required under the
PA, Central States’ claim is without merit.

Finally, Central States asserts that Local 146 and Pneumatic
lack the authority to retroactively eliminate vested rights.
Central States is correct that an employer cannot agree with a
union to modify existing obligations to a multi-employer pension
plan retroactively. ERISA contains anti-forfeiture rules, 29
U.S.C. §§ 1053, which prohibit a plan from adopting an amendment
eliminating or reducing benefits that have already been earned.
See Central Laborers’ Pension Fund v. Heinz, 124 S. Ct. 2230
{2004). Central States’ final argument therefore supplements its
principal claim and requires Pneumatic to contribute until its
obligation was prospectively terminated by Central States’ receipt
of the executed May 5, 2004 Amendment. Central States’ claim is
moot, however, because the Court has already held that Pneumatic
must make contributions for the time period beginning in June 2003
and continuing through July 15, 2004.

Iv. CONCLUSION

For the reasons stated above, Pneumatic’s Motion for Summary
Judgment is DENIED. Central States’ Motion for Summary Judgment is
GRANTED in part with respect to the conclusion that Pneumatic owes
contributions from June 1, 2003 through and including July 15,

2004. Central States’ Motion for Summary Judgment is DENIED in

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with the NLRB against Local 164. See id. @ 12. The parties
eventually agreed to settle the case, and in December 2003,
Local 164 entered into a settlement agreement with Pneumatic. See
id., Ex. H. Under the settlement agreement, Local 164 agreed to
sign the contract amendment proposed by Pneumatic, provided that it
was approved by a majority of the bargaining unit. See id., Ex. I-
J. A majority of the bargaining unit approved Pneumatic’s proposal
on January 31, 2004. See id. 9 17. On May 5, 2004, Local 164
executed the amendment requiring Pneumatic to switch from
contributions to Central States to the 401(k) plan, which purports
to be effective on June 1, 2003 (the “Amendment”). See id.
Central States did not’ participate in the NLRB proceeding or the
NLRB settlement and did not sign or participate in the negotiation
of the Amendment. (Priede Aff. 4 27). Pneumatic asserts that a
copy of the Amendment was received by Central States’ Contracts
Department on July 16, 2004. (Pls. SOF @ 55). Central States
conversely claims that it did not receive a signed copy of the
Amendment until August 11, 2004. (Pls. ASOF 7 76).

Pneumatic ceased making contributions to Central States on
June 1, 2003. See id. @ 75. Pneumatic also stopped making
contributions to the § 401(k) plan for the period prior to July 31,

2004. See id. § 77.


In Gerber, the Seventh Circuit held unenforceable the oral
modification of an employer’s obligation to pay into a pension
fund. 870 F.2d at 1156. The pension fund “is like a holder in due
course in commercial law . . . entitled to enforce the writing
without regard to the understandings or defenses applicable to the
original parties.” Id. at 1149 (citations omitted). The Court in
Gerber reached its conclusion based both on the text of ERISA § 515
as well as the legislative history of the ERISA amendments. See
id. at 1152-53. Such history reflects that delinquent
contributions can threaten the viability of the plans because a
pension plan becomes obligated to employees under the terms of the
PA and must pay an employee’s pension regardless of whether the
employer actually contributes. Id. at 1153. Like Gerber,
Section 302 of the Labor Managements Relations Act provides that an
employer’s promise to remit contributions must be reduced to
writing. 29 U.S.C. § 186(c) (5). Therefore, even if an oral
agreement to amend the CBA existed between Local 406 and Pneumatic,
such amendment is not enforceable.

Here, the Amendment was not reduced to writing and signed by
Local 146 and Pneumatic until May 5, 2004. Central States did not
sign or participate in the Amendment. Although Pneumatic stopped
making contributions on June 1, 2003, its contribution obligations
under the PA did not cease until Central States received written

notification of the Amendment. The parties dispute the date that


(ii) liquidated damages provided for under the
plan in an amount not in excess of 20 percent
(d) reasonable attorney’s fees and costs
+ « # and
(e) such other legal or equitable relief as
the court deems appropriate.
» . interest on unpaid contributions shall be
determined by using the rate provided under the plan, or,
if none, the rate prescribed under . . . Title 26.
29 U.S.C. 1132(g) (2).
B. Applicable Agreements
1. The 1999-2004 CBA
The CBA states, in relevant part, that:
[Pneumatic] agrees to pay into the Central States,
Southeast and Southwest Areas Pension Fund for each
[e]lmployee covered by this [a]greement who has completed
(30) days of employment unless otherwise specified, a
contribution of: $49.00, Effective August 1, 1999;
$55.00, Effective August 1, 2000; $61.00, Effective
August 1, 2001; $65.00, Effective August 1, 2002; and
$69.00, Effective August 1, 2003...
(Pls. SOF @ 8). The pension clause of the CBA also incorporates
the Central States Trust Agreement, the Central States Pension
Plan, and all rules and regulations adopted by the Trustees of the
Pension Fund. See id. @71 16-17. The duration clause stipulates
that the “Agreement shall be in full force and effect from
August 1, 1999 to and including August 1, 2004...” Id. 47.
2. The Participation Agreement
The PA, while incorporating certain terms of the CBA, is
independent from the CBA and can remain in effect even after the

termination of the CBA. See Central States, Southeast and

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TI. LEGAL STANDARD
A. Applicable Law
Central States bring this Motion under Section 515 of ERISA,
as amended, 29 U.S.C. § 1145. Section 515 of ERISA provides that:
Every employer who is obligated to make contributions to
a multi-employer 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 (1994). Section 515 gives pension funds, the
right to “enforce the writings according to their terms.” Central
States, Southeast & Southwest Areas Pension Fund v. Gerber Truck
Serv., Inc., 870 F.2d 1148, 1149 (7th Cir. 1989) (en banc)
(“Gerber”). There is no dispute that Central States is a multi-
employer plan and that Pneumatic is an employer within the meaning
of the statute. (Stipulation of Facts 47 2, 4). Therefore, the
Court must look to the language of the agreements at issue to
determine the extent of Pneumatic’s contributions obligations.
A successful fund under Section 515 may receive various forms
of relief. Section 502(g) (2) of ERISA provides:
(2) In any action under this subchapter by a fiduciary
for or on behalf of a plan to enforce section 1145
of this title in which a judgment in favor of the
plan is awarded, the court shall award the plan -
{a) the unpaid contributions;
(b) interest on the unpaid contributions;

(c) an amount equal to the greater of -
(i) interest on the unpaid contributions, or



Central States’ Contracts Department and contained sample language
for an amendment from a fax from Thomas Freyling, a Local 406
employee, to Richard Schwartz, President of Pneumatic. The
amendment was not signed. Pneumatic acknowledges that Central
States could not have received the letter until on or about
October 22, 2003. (Def.’s Resp. Mem. at 4). Thus, the Court
concludes that Pneumatic is liable to Central States at minimum for
the delinquent contributions between June 1, 2003 and October 22,
2003. The parties contest Pneumatic’s liability for the period
following October 22, 2003.

The crucial fact in this case is when Central States’ received
the required notice eliminating Pneumatic’s contribution
obligations under the PA. The Court concludes that the October 22,
2003 letter fails to provide adequate notice because it contains
only an unsigned copy of sample language for the proposed
amendment. The letter, even if sent to the appropriate department
at Central States, did not provide a legal basis for Pneumatic to
terminate its obligation to contribute. Both parties acknowledge
that any proposed amendment was not reduced to writing and signed
by the parties until after bargaining rights were transferred to
Local 164. At most, the October 22 letter provided Central States
with notice of an oral agreement between the former union and the
employer. Therefore, Pneumatic’s duty to contribute was not

terminated by the October 22, 2003 letter.



Mina Order Form (0697)

United States District Court, Northern District of Ilinois

Name of Assigned Jud; ji Sitting Judge if Othe
oor Magistrate Jeane Harry D. Leinenweber than Ascigued Judge
CASE NUMBER 04 C 298 DATE 12/3/2004
CASE Central States, et al vs. Pneumatic Trucking, Inc.
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
q@ Qo Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due
(3) oO Answer brief to motion due. . Reply to answer brief due. .
(C)) Qo Ruling/Hearing on set for at :
(5) MM Status hearing set for 15 Dec. 04 at 9:00 A.M..
(6) Oo Pretrial conference[held/continued to] [set for/re-set for] on set for at -
(7) Oo Trial[set for/re-set for] on at
(8) Oo {Bench/Jury trial] [Hearing} held/continued to at
(9) Qa This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
COFRCP4(m) OlLocal Rule 41.1 OFRCP41(a\(1) COFRCP4I(a)2).
ao [Other docket entry] ENTER MEMORANDUM OPINION AND ORDER: Pneumatic’s Motion
for Summary Judgment is DENIED. Central States’ Motion for Summary Judgment is GRANTED IN
PART with respect to the conclusion that Pneumatic owes contributions from June 1, 2003 through and
including July 15, 2004. Central States’ Motion for Summary Judgment is DENIED IN PART with
respect to the disputed two-week time period and the amount of contributions owed or damages.
ai ff [For further detail see order attached to the original minute order.]
No notices required, advised in open court.
No notices required.
Notices mailed by judge's staff.
Notified counsel by telephone.

oS | Docketing to mail notices.

Mail AO 450 form.

Copy to judge/magistrate judge.
WAP deputy's Caz
initials — ———
~ ++" “Dale/tyhe received in
central Clerk's Office



B. Central States’ Remaining Arguments

Central States also submits four other arguments in supporting
memoranda. Central States’ second claim is that Central States’
rules, which are incorporated in the PA and CBA, prohibit a mid-
contract termination of Pneumatic’s contribution obligations. Here,
Pneumatic accurately notes that the PA specifically provides at the
method by which an employer and a union can terminate obligations
to Central States. Although the pension fund’s rules include a
“Bargain Out Rule,” that rule provides that a collective bargaining
agreement will only be acceptable if the agreement requires the
employer to make contributions for the entire term of the
agreement. The “Bargain Out Rule” only addresses whether a
contract can be rejected, and does not require the parties to a
collective bargaining agreement to give up their right to modify
their agreement. To the contrary, the PA outlines the procedural
requirements for an employer and a union to terminate their
respective obligations.

Central States third claim that Pneumatic’s mid-contract
change defense is prohibited by Section 515 of ERISA similarly
fails. Section 515 of ERISA does not stand for the proposition
that a pension plan agreement can never be amended. Section 515 of
ERISA mandates that an employer must “make . . . contributions in
accordance with the terms and conditions of . . . [the] plan or

agreement.” 29 U.S.C. § 1145 (1994). The terms and conditions of

-1l1-



Central States received the May 5, 2004 amendment. Pneumatic
claims that Central States received the amendment on July 16, 2004,
and submits in support what appears to be a signed, undated return
mail receipt. Central States, on the other hand, submitted an
affidavit in support of its contention that it did not receive the
notice until August 11, 2004. Because Central States has only
requested delinquent contributions through July 31, 2004, the
relevant factual dispute concerns the period between July 16, 2004
and July 31, 2004.

The Court concludes that the parties have presented a genuine
issue of disputed fact with regard to the date on which Central
States received notice of the amendment. The Court holds that
Pneumatic was contractually obligated to contribute to the pension
fund for the time period beginning on June 1, 2003, through and
including July 15, 2004. Summary judgment is thus granted in part
in favor of Central States’ on this basis. The disputed material
issue is whether Central States, as required by the PA, received a
copy of the May 5, 2004 amendment to the CBA on July 16, 2004 or
August 11, 2004. Resolution of this factual dispute is material
because it affects Pneumatic’s obligations for contributions as
well as the amount of damages. Pneumatic may or may not owe
contributions for the time period from July 16, 2003 through
July 31, 2004. Therefore, Central States’ Motion is denied with

respect to the disputed two-week period and any resulting damages.

-10-


Southwest Areas Pension Fund v. Marine Contracting Corp., 878 F.
Supp. 1176 (N.D. Ill. 1995). The PA, by its terms, obligates
Pneumatic to contribute to Central States “in accordance with its
collective bargaining agreement with the Union . . .” (Pls. SOF
{| 11), as follows in relevant part:
This Agreement and the Employer’s obligation to pay
contributions shall not termination until either a) the
Trustees decide to terminate the Agreement and provide
written notice of their decision to the Employer or b)
the Employer is no longer obligated by a contract or
statute to contribute to the Fund(s) and the Fund(s) have
received a written notice directed to the Fund[s’]
Contracts Department . . . sent by certified mail with
return receipt requested which describes the reason why
the Employer is no longer obligated to contribute.
(PA 1 5).
III. DISCUSSIO!

Central States submit five arguments in support of its Motion
for Summary Judgment. The Court addresses the arguments in turn.
A. Pneumatic Owes Contributions Under The Amendment

Central States’ principal claim is that the Amendment only
eliminates Pneumatic’s duty to contribute under the CBA and does
not alter Pneumatic’s independent duty to contribute under the
unexpired PA. Pneumatic responds that the Amendment terminated
Pneumatic’s obligations under both the CBA and the PA. Pneumatic
further claims that the October 22, 2003 letter from a Pneumatic
attorney to Central States’ manager of collections provided the
specific required notice to satisfy paragraph five of the PA

outlined above. Pneumatic sent the letter by certified mail to

-7-



Pneumatic and Local 406 after the January meeting, both parties
agree that the proposed amendment was not reduced to writing and
signed by the parties until after the IBTs transferred
administration of Pneumatic’s collective bargaining agreement to
Teamsters Local 164. (D. SOF @ 10). A facsimile sent by Thomas
Freyling, an employee of Local 406, containing proposed language
for the amendment was sent prior to the time when the parties
executed a written agreement.

The parties exchanged various items of correspondence in 2003,
including a letter on October 22, 2003 from a Pneumatic attorney to
Central States’ manager of collections. The letter also copied
Central States’ Contracts Department and was sent by certified
mail. In the letter, Pneumatic claims that it had not been
obligated to contribute to Central States since May 11, 2003.
(Oct. 22 letter, Ex. P). The letter also indicates that Pneumatic
is no longer obligated to contribute due to an agreement with
Local 406. See id. Pneumatic enclosed an unsigned copy of sample
language for the proposed amendment sent by Local 406 employee
Freyling with the letter.

Beginning about January 11, 2003, Pneumatic requested that
Local Union 164 enter into a written amendment of the CBA to
provide for a 401(k) plan rather than contributions to Central
States. (Stip. Facts 7 13). Local 164 did not comply with this

request. See id. Pneumatic filed an unfair labor practice charge



part with respect to the disputed two-week tyfie period) and the
amount of contributions owed or damages.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court

Dated: of

-14-



to collective bargaining agreements with local International
Brotherhood of Teamsters (“IBT”) unions. (Stip. Facts {I 1-2).
Central States holds and invests contributions to provide benefits
to plan participants and beneficiaries. See id. 4 2. Pneumatic is
an employer who made contributions to the Central States fund.

On or about June 19, 2000, Pneumatic and Teamsters Local 406
entered into a collective bargaining agreement covering the period
from November 29, 1999 through July 31, 2004 (the “CBA”). See id.
@ 7. The CBA required that Pneumatic make weekly contributions to
Central States on behalf of its bargaining unit employees. (Pls.
SOF @ 8). Pneumatic and Local 406 also entered into a
participation agreement with an effective date of November 29, 1999
(the “PA”’), which set forth the terms and conditions for
Pneumatic’s participation in the pension fund. (Stip. Facts 45).
Under the PA and the CBA, Pneumatic was bound by the Central States
Trust Agreement, the Central States Pension Plan, and all rules and
regulations adopted by the Trustees of the Pension Fund. (Pls. SOF
Gi 16-17).

Pneumatic claims that in January 2001, it agreed with
Local 406 to amend the CBA such that Pneumatic would be obligated
to contribute to a 401(k) plan instead of contributing to Central
States. (Def. SOF @ 9). In 2002, the IBT transferred the
bargaining rights from Local 406 to Local 164. (Stip. Facts % 11).

Although Central States denies that an agreement existed between


IN THE UNITED STATES DISTRICT COURT F I L E D

FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CENTRAL STATES, SOUTHEAST and JUDGE 1 nec 3 2004
ST em Ta. rete atom
Plaintiffs, Case No. 04 C 0298
v. Hon, Harry D. Lein

PNEUMATIC TRUCKING, INC.,

Defendant.

MEMORANDUM OPINION AND ORDER
Plaintiffs Central States, Southeast andesgatsaw
Pension Fund, a multi-employer benefit plan and trust, and Howard
McDougall, a Central States trustee, (hereinafter, collectively
“Central States”) bring this ERISA action to recover delinquent
contributions allegedly owed by Defendant Pneumatic Trucking, Inc.
(hereinafter, “Pneumatic”), an employer. Central States claims
Pneumatic owes contributions for the period of June 1, 2003 through
July 31, 2004 pursuant to a collective bargaining agreement and a
participation agreement. Before the Court are both parties’
Motions for Summary Judgment. For the following reasons, Central
States’ Motion is GRANTED in part and DENIED in part and
Pneumatic’s Motion is DENIED.
I. BACKGROUND
Central States is an employee benefit plan and trust financed

by contributions paid by multiple participating employers pursuant

er


the CBA and PA allow for the termination of an employer’s
obligation to the pension fund under certain conditions. If
Pneumatic provided effective notice of the prospective amendment,
the obligation under the PA would have ended “in accordance with
the terms and conditions” of the agreement.

Although Central States cites Gerber in support of its claim,
the court in Gerber held only that oral side agreements between the
Union and employer cannot alter an employer’s obligation to pay
into a pension fund. Gerber, 870 F.2d at 1149. The other cases
cited by Central States in support of its third claim are
distinguishable or supportive of Pneumatic’s position on this
issue. For example, in Dwyer v. Climatrol Industries, Inc., 544
F.2d 307, 310 (7th Cir. 1976), the Seventh Circuit upheld an
amendment to a pension plan because it “affected only future
contributions to the pension plan .. .” and because the pension
plan agreement “provided for the right to modify.” Id. at 310.
Similarly here, ERISA does not prohibit the termination of the duty
to pay contributions once an amendment is executed by the parties
and Pneumatic provides adequate notice in accordance with the PA.

Central States’ next claims that contracts for the benefit of
an intended third party cannot be modified without the third
party’s consent. Central States claims to be the third party
beneficiary of the PA, which specifically provides the procedure

required to terminate an employer’s contribution obligations.

-12-