Source: http://openjurist.org/472/us/559/central-states-southeast-and-southwest-areas-pension-fund-v-central-transport-inc
Timestamp: 2014-03-09 16:33:06
Document Index: 26463101

Matched Legal Cases: ['§ 1001', '§ 302', '§ 186', '§ 1001', '§ 1', '§ 3', '§ 14', '§ 4', '§ 5']

472 US 559 Central States Southeast and Southwest Areas Pension Fund v. Central Transport Inc | OpenJurist
472 U.S. 559 - Central States Southeast and Southwest Areas Pension Fund v. Central Transport Inc	Home472 us 559 central states southeast and southwest areas pension fund v. central transport inc
472 US 559 Central States Southeast and Southwest Areas Pension Fund v. Central Transport Inc 472 U.S. 559
105 S.Ct. 2833
86 L.Ed.2d 447
CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, et al., Petitionersv.CENTRAL TRANSPORT, INC., et al.
No. 82-2157.
Rehearing Denied Aug. 28, 1985.
Petitioners are multiemployer benefit plans governed by the Employee Retirement Income Security Act of 1974 (ERISA). The plans operate under trust agreements for the purpose of providing health, welfare, and pension benefits to employees performing work that is covered by collective-bargaining agreements negotiated between a labor union and respondent trucking companies. Under these collective-bargaining agreements, each employer must make weekly contributions to petitioners for each such employee, and each employer agrees to be bound by the trust agreements. Because they are so large, petitioners rely on employer self-reporting to determine the extent of an employer's contribution liability, and police this self-reporting system by conducting random audits of the participating employers' records. When respondents refused to allow petitioners' requested audit of respondents' payroll, tax, and personnel records, including records of employees who respondents claimed were not plan participants, petitioners filed an action in Federal District Court seeking an order permitting the audit. The District Court granted summary judgment in favor of petitioners. The Court of Appeals reversed, holding that petitioners had to show "reasonable cause" to believe that a specific employee was covered by the plans before gaining a right of access to that employee's records.
Held: Respondents must allow petitioners to conduct the requested audit. Pp. 565-581.
(a) Various provisions of the trust agreements granting the trustees power to enable them to administer the trusts properly, including a provision granting power to demand and examine pertinent employer records, support the right to audit claimed by petitioners. Moreover, petitioners' assertion that the requested audit is highly relevant to the trust agreements' legitimate interests fully conforms to generally accepted auditing standards. Pp. 565-568.
(b) Petitioners' trustees' interpretation of the trust agreements as authorizing the requested audit is not inconsistent with ERISA, and indeed, is entirely reasonable in light of ERISA's policies. Rather than explicitly enumerating all of the powers and duties of trustees, Congress invoked the common law of trusts to define the scope of their authority and responsibility. Under the common law, trustees have all such powers as are necessary or appropriate for the carrying out of the trust purposes, and an examination of ERISA's structure in light of the common law leaves no doubt as to the validity and weight of the audit goals on which petitioners rely. Both the concerns for fully informing participants of their rights and status under a plan and for assuring the financial integrity of the plans by determining the class of potential benefit claimants and by holding employers to the full and prompt fulfillment of their contribution obligations are proper and weighty within ERISA's framework. Pp. 568-574.
(c) A benefit plan should not have to rely on union monitoring of an employer's compliance with its trust obligations as an alternative to audits by the plans themselves. Cf. Schneider Moving & Storage Co. v. Robbins, 466 U.S. ----, 104 S.Ct. 1844, 80 L.Ed.2d 366. A trustee's duty extends to all participants and beneficiaries of a multiemployer plan, whereas a union's duty is confined to current employees employed in the bargaining unit in which it has representational rights. Nor would the Department of Labor's policing of employer compliance be an acceptable alternative. That Department has insufficient resources for such policing, and neither ERISA's structure nor its legislative history shows any congressional intent that benefit plans should rely primarily on centralized federal monitoring of employer contributions requirements. Pp. 575-579.
(d) To rely on covered employees themselves to come forward to assure that employers make the required contributions would not be feasible. While ERISA's reporting requirements are designed to assure that participants receive information about their status and rights, they do so by placing a reporting duty on the plans. Thus, to give participants initial notice of their status, the plans would need to know the participants' identities, the very information that the requested audit here sought to verify. Pp. 579.
(e) The fact that a benefit plan could bring an action against a delinquent employer as the employer's breaches of its obligations are discovered does not foreclose the plan from seeking to deter such breaches or discover them early. To suggest that a plan should be so foreclosed ignores the trustees' various fiduciary duties under ERISA and conflicts with ERISA's concern that plans should assure themselves of adequate funding by promptly collecting employer contributions. Pp. 580-581.
698 F.2d 802 (CA 6 1983), reversed.
Russell N. Luplow, Bloomfield Hills, Mich., for petitioners.
Joshua I. Schwartz, Washington, D.C., for the U.S. as amicus curiae in support of petitioners, by special leave of Court.
Patrick A. Moran, Birmingham, Mich., for respondents.
Justice MARSHALL delivered the opinion for the Court.
The issue presented is whether an employer who participates in a multiemployer benefit plan that is governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., must allow the plan to conduct an audit involving the records of employees who the employer denies are participants in the plan.
Petitioners are two large multiemployer benefit plans, the Central States, Southeast and Southwest Areas Pension Fund and the Central States, Southeast and Southwest Areas Health and Welfare Fund (hereinafter referred to collectively as Central States).1 Governed by § 302(c)(5) of the Labor Management Relations Act, 1947, 29 U.S.C. § 186(c)(5), and the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, 29 U.S.C. § 1001 et seq., as amended by the Multiemployer Pension Plan Amendments Act of 1980, Pub.L. 96-364, 94 Stat. 1208, these plans operate as trusts for the purpose of providing specified health, welfare, and pension benefits to employees performing work that is covered by collective-bargaining agreements negotiated by various affiliates of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (Teamsters).
Respondents (hereinafter referred to collectively as Central Transport) are 16 interstate trucking companies, each of which, either individually or through a multiemployer association, engages in collective bargaining with the Teamsters. Pursuant to that bargaining, each has become a signatory to the National Master Freight Agreement and supplemental, individual collective-bargaining agreements. Under these collective-bargaining agreements, each employer must make weekly contributions to Central States for each employee who performs work covered by the collective-bargaining agreements, and each employer agrees to be bound by the trust agreements that govern Central States.
Because the plans are so large—with thousands of participating employers—Central States relies principally on employer self-reporting to determine the extent of an employer's liability.2 Central States polices this self-reporting system by conducting random audits of the records of participating employers.
On December 5, 1979, Central States contacted Central Transport to arrange an audit, which it described as part of a program of " 'periodic reviews of participating employer contributions for the benefit of Plan Participants and their Beneficiaries.' " 522 F.Supp. 658, 662 (ED Mich.1981). The audit was to take place at Central Transport's offices and was to encompass, among other subjects, the " '[d]etermination of eligible Plan Participants covered by Collective Bargaining Agreements.' " Ibid. Among the documents the auditors requested access to were payroll, tax, and other personnel records of those employees who the employer claimed were not plan participants.
Central States explained that access to these records would allow the auditors independently to determine the membership of the class entitled to participate in the plans, and thus to verify that Central Transport was making all required contributions.3 Central Transport, however, insisted that 60% of its employees were not covered by the plans, and that Central States had no right to examine any records of noncovered employees. When Central Transport refused to allow the requested audit, Central States filed an action in Federal District Court seeking an "order permitting its auditors to conduct an independent verification of Central Transport's complete payroll records in order to determine whether the duties and status of each of its employees has been accurately reported by Central Transport." Id. at 660.4
The parties agreed that the facts of the case were not in dispute, and that the court should treat their pleadings as cross-motions for summary judgment. The District Court granted summary judgment in favor of Central States. After examining Central States' contractual relationship with Central Transport and Central States' responsibilities under ERISA, the court concluded that Central States had a right to conduct the requested audit. The audit was a reasonable means of "independently verify[ing] the status and duties of all individuals employed by Central Transport in order to insure that proper benefit contribution payments are being made." Ibid. The court thus ordered "that Central Transport provide to the audit representatives of Central States all of the documentation requested and that the audit procedure undertaken by Central States be allowed to continue." Ibid.5
The Court of Appeals for the Sixth Circuit reversed. 698 F.2d 802 (1983). Interpreting the collective-bargaining agreements and trust documents in light of ERISA, the Court of Appeals held that Central States had to show "reasonable cause" to believe that a specific employee was covered by the plans before gaining a right of access to that employee's records. Id., at 809-812. We granted certiorari, 467 U.S. 1250, 104 S.Ct. 3531, 82 L.Ed.2d 837 (1984), and we now reverse the judgment of the Court of Appeals.
The documents governing Central Transport's contractual relationship with Central States include the collective-bargaining agreements between Central Transport and various affiliates of the Teamsters and the trust agreements of the Central States plans. Generally, the collective-bargaining agreements obligate Central Transport to participate in the Central States plans and to be bound by Central States' trust agreements. The trust agreements, which have been signed by Central Transport, govern the operation of the plans.
These trust documents include a number of provisions that are highly supportive of the right to audit claimed by Central States' trustees.
We note first that the Pension Fund trust agreement6 places on each participating employer the responsibility to make "continuing and prompt payments to the Trust Fund as required by the applicable collective bargaining agreement." App. to Pet. for Cert. A-44 (Art. III, § 1). The trustees are designated the recipients of all contributions and are "vested with all right, title and interest in and to such moneys." Ibid. (Art. III, § 3).
The agreement contains various specific and general grants of power to the trustees to enable them to administer the trusts properly. Most generally, the agreements authorize the trustees to "do all acts, whether or not expressly authorized . . ., which [they] may deem necessary or proper for the protection of the property held [under the trust agreement]." Id., at A-47 (Art. IV, § 14(e)). The agreement also grants broad powers relating to the collection of employer contributions, such as the power "to demand and collect the contributions of the Employers to the Fund," id., at A-45 (Art. III, § 4), and the power to "take such steps . . . as the Trustees in their discretion deem in the best interest of the Fund to effectuate the collection or preservation of contributions . . . which may be owed to the Trust Fund." Ibid.
Among the more specific grants of trustee power is a power to demand and examine employer records:
"Production of Records—Each employer shall promptly furnish to the Trustees, upon reasonable demand the names and current addresses of its Employees, their Social Security numbers, the hours worked by each Employee and past industry employment history in its files and such other information as the Trustees may reasonably require in connection with the administration of the Trust. The Trustees may, by their representatives, examine the pertinent records of each Employer at the Employer's place of business whenever such examination is deemed necessary or advisable by the Trustees in connection with the proper administration of the Trust." Id., at A-46 (Art. III, § 5) (emphasis added).
Central States' trustees interpret these provisions as authorizing random field audits like the one at issue in this case. In particular, they argue that the records of not-concededly-covered employees are "pertinent records" because their examination is a "proper" means of verifying that the employer has accurately determined the class of covered employees. The plans have a substantial interest in verifying the employer's determination of participant status, the trustees argue, because an employer's failure to report all those who perform bargaining unit work may prevent the plans from notifying participants and beneficiaries of their entitlements and obligations under the plans and may create unfunded liabilities chargeable against the plans.7 Moreover, an employer has an incentive to underreport the number of employees covered, because such underreporting would reduce his liability to the plans.
The reasonableness and propriety of the audit are confirmed, the trustees argue, by the accounting profession's generally accepted auditing standards, which articulate the elementary principle that for an auditor to verify a certain selection decision, he must refer to a universe broader than the selection itself:
"When planning a particular sample, the auditor should consider the specific audit objective to be achieved and should determine that the audit procedure, or combination of procedures to be applied will achieve that objective. The auditor should determine that the population from which he draws the sample is appropriate for the specific audit objective. For example, an auditor would not be able to detect under