# United States Court of Appeals **For the Eighth Circuit**

___________________________ No. 13-2521

___________________________ Twin City Pipe Trades Service Associati on, Inc., a Minnesota non-profit corporation

lllllllllllllllllllll Plaintiff - Appellant

v. Frank O'Laughlin Plumbing & Heating Comp any, a Minnesota corporation, doing business as O'Laughlin Plumbing & Heating

lllllllllllllllllllll Defendant - Appellee

____________ Appeal from United States District Court for the District of Minnesota - Minneapolis

____________ Submitted: May 15, 2014 Filed: July 17, 2014

____________ Before WOLLMAN, BYE, and BENTON, Circuit Judges.

____________ BYE, Circuit Judge.

This is an action brought pursuant to 29 U.S.C. § 1145 1 to collect fringe benefits allegedly owed to union employee benefit f unds by a plumbing company. The district court determined Frank O'Laughlin Plumbing & Heating Company (O'Laughlin)

1 Section 515 of the Employee Retiremen t Income Security Act (ERISA).unequivocally terminated its participation in a collective bargai ning agreement (CBA) with Plumbers and Pipe Fitters Local 6 (the Union), and thus was not required to contribute fringe benefits for work perform ed by O'Laughlin's employees. We reverse and remand for further proceedings.

I

O'Laughlin has been a signatory contract or to successive CBAs with the Union since at least 2000. At the start of th e 2011 calendar year, O'Laughlin was a signatory to the CBA then in effect. The terms of the pertinent CBA stated it was in full force and effect between December 1, 2009, and April 30, 2011, a nd required O'Laughlin to contribute to employee benefit funds for all pipe work performed by its employees. The CBA further provided it would "remain in effect from year to year thereafter" unless either party "notif[ied] the other inwriting ninety (90) days prior to the expiration date of the intent to cancel or amend this Agreement, or to renegotiate a new Agreement."

On January 27, 2011, O'Laughlin sent a letter to the Union which stated the plumbing company would be "terminating its existing work agreement[] with Local # 6 Plumbers & Fitters Effective January 31 2011." By its plain terms, then, the letter purported to terminate O'Laughlin's particip ation in the CBA on a date different than the CBA's expiration date of April 30, 2011, and purported to give only four days' notice rather than the ninety-day notice required by the CBA. For the three months following January 31, 2011, however, O'Laughlin nonetheless complied with the terms of the CBA by making fringe benefit c ontributions on behalf of its employees.

In the spring of 2011, the Union began negotiations with the other signatory contractors for a new CBA commencing May 1, 2011. Corey O'Laughlin, one of the owners of O'Laughlin, attende d several negotiation meetings with members of the Union's management between February 15, 2011, and April 26, 2011. O'Laughlin's

-2-principal owner, Kim O'Laughlin, also me t with Union management several times after May 1 – when the new CBA was in place – in attempts to negotiate specific CBA terms to address O'Laughlin's difficultie s competing in the market (O'Laughlin operates in Winona County, a smaller mark et than the Minneapolis/St. Paul area where most of the signatory contractors operate, and O'Laughlinwas having difficulty competing with non-union plumbers in Winona County). O'Laughlin acknowledged he met with union representatives to discuss O'Laughlin's difficulties competing against non-union plumbers and to see what the Union "could do to help them out."

After May 1 – when the new CBA was inplace – and throughout the rest of the 2011 calendar year, O'Laughlin continued to make fringe benefit contributions on behalf of its employees. In December 2011, the terms of the new CBA increased the local pension rate by six cents per hour. For the month of December, O'Laughlin's fringe benefits contributions included the rate increase set forth in the new CBA.

On December 27, 2011, O'Laughlin sent th e Union a second letter. This letter stated O'Laughlin "will be terminating a ll existing work agreement with Local #6 Plumbers and Pipe fitters effective January 1, 2011. We will not be employing any union members, paying any dues at that tim e." Shortly thereafter, four O'Laughlin employees sent letters to the Union resi gning their membership in the Union. Beginning January 1, 2012, O'Laughlin stopped submitting fringe benefits contributions on behalf of its employ ees, but continued to employ individuals performing work of the kind subject to the CBA.

Twin City Pipe Trade Services Association (Twin City) is the non-profit corporation designated to receive the fringebenefit payments made by the signatory contractors to the CBA. After O'Laughlin stopped making contri butions on behalf of its employees, Twin City brought this action to collect fringe benefits allegedly owed by O'Laughlin. Twin City contended O'Laughlin never effectively terminated its

-3-participation in the 2009-2011 CBA, and therefore remained obligated to contribute fringe benefits on behalf of its employees.

Twin City moved for summary judgment in the district court. In response, O'Laughlin filed affidavits and other evidence to explain the two letters it sent on January 27 and December 27, 2011, its partic ipation in the negotiations for a new CBA, and the fringe benefit contributions it made on behalf of its employees throughout 2011.

As to the first letter sent on January 27, Kim O'Laugh lin explained the letter's stated termination date of January 31 was intended to reflect compliance with the ninety-day notice period in the 2009-2011 CBA, rather than a reference to the actual termination date of the CBA. As to the second letter sent on December 27, Kim O'Laughlin explained it merely reiterated that the CBA wa s no longer in effect. Kim O'Laughlin did not explain the second letter' s reference to an effective termination date of January 1, 2011, whic h was inconsistent with th e January 31 date referenced in the first letter, and inconsistent withO'Laughlin's post hoc explanation that the January 31 date was intended to reflect the beginning of the ninety-day notice period. O'Laughlin now contends the second lette r's reference to January 1, 2011, was a typographical error, and the letter should have said January 1, 2012. A January 1, 2012, termination date is, however, also inconsistent with the first letter and inconsistent with the CBA's expiration date of April 30, 2011.

With respect to its participation innegotiations for a new CBA during the spring of 2011, Corey O'Laughlin explained he attended the meetings to see if the parties could reach a special deal that would have brought O'Laughlin back into a CBA with the Union, but the negotiations were unsuccessful.

Finally, with respect to the fringe bene fit contributions O'Laughlin continued to make on behalf of its employees thr oughout the 2011 calendar year (which included

-4-complying with rate increases set fo rth in the new CBA during the month of December), Kim O'Laughlin explained the payments were only made voluntarily as a "gesture of good will," and thus O'Laughlin did not consider itself still bound by the CBA when making the payments.

After considering the parties' summary judgment filings, the district court granted summary judgment in favor of O'Laughlin. 2First, the district court noted courts generally limit the defenses an employer can raise in a suit brought pursuant to 29 U.S.C. § 1145 to collect fringe benefits, and the purported termination of the CBA is not widely recognized as such a defense. See Central States, Se. & Sw. Areas Pension Fund v. Indep. Fruit & Produce Co. , 919 F.2d 1343, 1349 (8th Cir. 1990) ("In sum, the courts recognize only two defenses to a collection action: that the pension contributions are themselves illegal or th at the collective bargaining agreement is void.") (citing Benson v. Brower's Moving & Storage , 907 F.2d 310, 314 (2d Cir. 1990)). The district court nonetheless heldO'Laughlin could argue it had terminated its participation in the CBA as a defense in this collection action, citing a decision from the Sixth Circuit and a Minnesota di strict court decision recognizing such a defense. See Laborers Pension Trust Fund-Detroit & Vicinity v. Interior Exterior Specialists Constr. Grp. , 394 F. App'x 285, 290 (6th Cir. 2010) ("[W]hile many traditional contract defenses are unavailabl e in collection actions, trust funds are not entitled to enforce a nonexistent contractual obligation, at least where it is evident upon a cursory review of the parties' actions that the contract has been terminated[.] Allowing the assertion of a te rmination defense provided the inquiry is superficial . . . sensibly balances the competing interests in a fund's avoiding complex litigation . . . and ensuring that the employer has a le gitimate contractual obligation to make employee contributions.") (internal quotati on marks and citations omitted); Heimerl

2 O'Laughlin did not formally bring a cr oss-motion for summary judgment. But in opposing Twin City's motion for summary judgment, O'Laughlin requested summary judgment in its favor if the district court found the CBA was properly terminated.
-5-v. Tech Elec. of Minn., Inc. , No. 12-cv-612, 2013 WL 1364249, at *5-6 (D. Minn. Apr. 4, 2013) (recognizing a termination defe nse in a fringe benefit collection action). 3

Having determined O'Laughlin could rais e a termination defense, the district court limited its inquiry to a cursory review of the parties' actions to determine whether O'Laughlin unequivocally communicat ed its intent to withdraw from the CBA. 4 See Laborers Pension Trust , 394 F. App'x at 290 ("For a termination to be effective, this limited inquiry must reveal that the employer unequivocally communicated the intent to withdraw." ) (internal quotation marks and citation omitted). In its limited review of the parties' actions, th e district court credited Kim O'Laughlin's explanation of the first lette r sent on January 27, 2011, finding the letter unequivocally expressed O'Laughlin's intent to terminate its participation in the CBA and complied with the CBA's 90-day notice re quirement. The district court further determined O'Laughlin's subsequent conduct in making voluntary payments throughout 2011 did not invalidate the termina tion, nor did O'Laughlin's participation in negotiations for a new CBA. The district court concluded: "O'Laughlin is a small company that tried to do the right thing and made some missteps in the process. These missteps, however, are not enough to negate its unequivocal termination of the CBA."

3 Other courts also appear to have r ecognized a termination defense in a fringe benefits collection action. See, e.g. , La. Bricklayers & Trow el Trades Pension Fund & Welfare Fund v. Alfred Miller Gen. Masonry Contracting Co. , 157 F.3d 404, 409 n.12 (5th Cir. 1998).

4 To the extent courts have held a termination defense is available in an action to collect fringe benefits, they have limited their inquiry to a cursory review of the parties' actions in order to keep th e collection action from becoming complex or costly. See Central States , 919 F.2d at 1348 (explaining that collections actions had become complex and costly prior to the enactment of § 1145, riddled with various contract formation defenses, and Congre ss intended to simplify such actions by passing the statute).
-6-Twin City filed a timely appeal. On app eal, Twin City argues the district court erred in concluding O'Laughlin unequivocally terminated its participation in the CBA.

II

We review the district court's grant of summary judgment de novo. Stein v. Chase Home Finance, LLC , 662 F.3d 976, 979 (8th Cir. 2011).

On appeal, O'Laughlin urges this court to recognize termination as a valid defense in a fringe benefits collection action brought pursuant to 29 U.S.C. § 1145. O'Laughlin further asks us to affirm the di strict court's determination that O'Laughlin unequivocally expressed its intent to terminate its participation in the CBA. We decline to formally recognize a termination defense in this case, however, because the circumstances involved here would not support such a defense in a ny event. The two letters O'Laughlin sent to the Union in January and December 2011 purporting to terminate O'Laughlin's participation in the CBA, when viewed alongside O'Laughlin's inconsistent conduct throughout 2011 by conti nuing to make fringe benefit payments, do not evince the unequivocal intent necessary to terminate participation in a CBA. See, e.g. , Int'l Union of Operating Eng'rs, Local No. 181 v. Dahlem Constr. Co. , 193 F.2d 470, 475 (6th Cir. 1952) (indicating the "notice to terminate [a CBA] must be clear and explicit").

We conclude O'Laughlin did not unequivoca lly express an intent to terminate its participation in the CBA for two reasons . First, under the circumstances involved in this case, our examination of O'Laughlin's conduct is paramount to our consideration of the two letters it sent to the Union. An employer's conduct is important because "it is well established th at a collective bargai ning agreement is not dependent on the reduction to writing of the parties' intention to be bound. All that is required is conduct manife sting an intention to abid e and be bound by the terms of an agreement." Capitol-Hus ting Co., Inc. v. N.L.R.B. , 671 F.2d 237, 243 (7th Cir.

-7-1982) (internal citation omitted); see also Central States , 919 F. 2d at 1353 (citing Robbins v. Lynch , 836 F.2d 330, 332 (7th Cir. 1988)). 5 Here, O'Laughlin manifested an intention to abide and be bound by the terms of the CBA by continuing to make fringe benefit contributions on behalf of its employees throughout the 2011 calendar year.

The district court discounted O'Laughlin's conduct because Kim O'Laughlin explained he made the fringebenefit contributions voluntarily as a gesture of good will. But a benefit fund such as Twin City "is entitled to 'assume that all participating employers in a plan are following the stated terms : no other approach permits accurate actuarial computations and proper deci sions about which claims to pay.'" Id. at 1349 (quoting Robbins , 836 F.2d at 333) (emphasis added in Central States ). The stated terms of the CBA do not contemplate employers making voluntary payments. When an employer's objective conduct indi cates a continued acceptance of the CBA, while at the same time the employer inconsis tently states it intends to terminate the CBA, we are hard pressed to conclude the in tent to terminate is clear, explicit, and unequivocal. See Miner v. Local 373 , 513 F.3d 854, 861 (8th Cir. 2008) (determining the validity of a CBA based on "the objec tive intent of the parties – not their subjective beliefs"). If we concluded otherw ise, the administrator of a benefit plan would have no concrete manner by which to determine whether an employer is bound or not bound by the terms of the CBA.

5 In Robbins , an employer who had signed a master CBA in 1975, "never signed the 1979-82 agreement . . . [but] paid the union scale, turned over dues under a checkoff system, negotiated grievances, and paid (some) pension and welfare contributions. It later invoked the termination clause of the agreement. Employers may adopt a collective bargaining agreement by a course of conduct . . . [Employer] did so . . . [Employer] may have had a private intent [to no longer be bound], but the signs visible to the union all pointed to [Employer's] acceptance of the collective bargaining agreement. [Employer] is bound by its terms." 836 F.2d at 332.
-8-Second, the two letters O'Laughlin sent to the Union we re ineffective to express an unequivocal intent to terminate participation in the CBA in any event. The first letter clearly stated O'Laughlin intended to terminate its participation in the CBA "effective January 31, 2011." This statemen t was ineffective b ecause O'Laughlin was obligated to participate in the CBA thr ough April 30, 2011, and could not unilaterally terminate the CBA on a different date. The first letter did not explicitly refer to the CBA's 90-day notice provision, nor did it re ference the correct termination date of April 30, 2011. Thus, the first letter was notthe type of "clear and explicit" notice required to express an unequivocal intent to terminate.

The second letter added nothing to help cl arify the first letter. Like the first letter, it did not refer to the correct termination date of April 30, 2011. Indeed, the second letter merely added to the confusion because it was in consistent with the first letter. The first letter purported to termin ate participation in the CBA at the end of January 2011, while the second letter purported to terminat e participation in the CBA at the beginning of January 2011. Even if we credited O'Laughlin's explanation of the second letter as containing a typographical error, the two letters would still be inconsistent – the first letter would have purported to terminate participation in the CBA at the end of January 2011, while the second letter would have purported to terminate participation in the CBA eleven m onths later. Neither of those dates was a permissible date upon which to terminate the CBA pursuant to its provisions. The two letters did not, therefore, unequivoca lly express the clear and explicit intent necessary to terminate participation in a CBA.

III

We reverse the district court and remand this case for further proceedings to determine what amounts O'Laughlin is still obligated to contribute to the employee benefit plans managed by Twin City.

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