Opinion ID: 165803
Heading Depth: 2
Heading Rank: 1

Heading: The Contractual Right to Unpaid Contributions is an Asset Under ERISA

Text: 10 ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), states, in part, that a person may become a fiduciary to an ERISA plan to the extent they exercise[ ] any authority or control respecting management or disposition of its assets.  (emphasis added). Whether unpaid contributions are assets of an ERISA plan is a matter of first impression in this circuit, one that we review de novo. United States v. Telluride Co., 146 F.3d 1241, 1244 (10th Cir.1998) (interpretation of federal statutes is a legal question reviewed de novo). As discussed below, we hold that the contractual right to collect the unpaid contributions is a plan asset. 11 The Trustees argue that unpaid contributions become plan assets at the time they become due and owing. Aplt. Br. at 10. The Lunas, by contrast, argue that contributions owed to the Pension Fund did not become plan assets until they [are] paid to it. Aple. Br. at 12. The Lunas do not dispute that they had an obligation under the CBA to make monthly contributions; they argue only that this obligation was contractual in nature rather than fiduciary, much like any other account payable or financial obligation of the company. As their brief puts it, the contractual obligation[] owed by Luna Steel, Inc. to Appellants/Funds is simply a contractual obligation.... Id. at 17. The district court accepted this argument and held that the unpaid contributions do not amount to plan assets. 12 ERISA itself does not define what constitutes an asset of an ERISA fund. 3 Therefore, as in any case of statutory construction, we begin our analysis by looking to the plain meaning of the words used by Congress. See Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999) (in ERISA context, noting that our analysis begins with the language of the statute. And where the statutory language provides a clear answer, it ends there as well) (citations and quotation omitted); Gardner v. Chrysler Corp., 89 F.3d 729, 736 (10th Cir.1996) (applying plain meaning rule). We presume Congress intended for the courts to apply the plain language of the statute unless such interpretation would lead to an absurd result. Resolution Trust Corp. v. Westgate Partners, Ltd., 937 F.2d 526, 529 (10th Cir.1991). 13 An asset is defined as 1. An item that is owned and has value. 2. The entries on a balance sheet showing the items of property owned, including cash, inventory, equipment, real estate, accounts receivable, and goodwill. 3. All the property of a person available for paying debts. BLACK'S LAW DICTIONARY 112 (7th ed.1999). Central to the definition of asset, then, is that the person or entity holding the asset has an ownership interest in a given thing, whether tangible or intangible. In determining ownership interests, the obvious starting point is the common law of property. Cf. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992) (relying on common law definition of employee because ERISA does not helpfully define that term). Indeed, the Department of Labor has instructed that the assets of a plan generally are to be identified on the basis of ordinary notions of property rights under non-ERISA law. In general, the assets of a welfare plan would include any property, tangible or intangible, in which the plan has a beneficial ownership interest. Department of Labor Advisory Opinion No. 93-14A (May 5, 1993), 1993 WL 188473, at . 14 Under ordinary notions of property rights, an ERISA plan does not have a present interest in the unpaid contributions until they are actually paid to the plan. In other words, the plan cannot use, devise, assign, transfer, or otherwise act upon contributions that it has not yet received. This does not mean, however, that the plan has no property interest in the unpaid contributions. It does. Pursuant to ordinary notions of property rights, the plan holds a future interest in the collection of the contractually-owed contributions. A future interest in property is an interest ... which is not, but may become a present interest. RESTATEMENT (FIRST) PROPERTY § 153(1)(a) (1936). A chose in action, for example, is a future interest, and, like all property interests, it is transferrable. 4 See id. § 163 cmt. b. Applying these principles here, although the plan does not possess the unpaid contributions themselves, it does possess the contractual right to collect them. 5 15 At least one court has followed a similar line of reasoning and held that the contractual obligation to make contributions to a plan is an asset under ERISA. In United States v. LaBarbara, 129 F.3d 81 (2d Cir.1997), the defendant was convicted under 18 U.S.C. § 664 of aiding and abetting theft or embezzlement from an employee-benefit plan. As in our case, the employer in LaBarbara had entered into a collective bargaining agreement whereby he agreed to make regular contributions to an employee benefit plan. Id. at 83. The employer, however, fraudulently diverted plan contributions for other uses and then paid large sums of money to the defendant, a principal officer of the union that had negotiated the collective bargaining agreement. Id. 16 On appeal, the defendant argued his conviction was invalid. According to the defendant, the unpaid contributions were not fund assets because moneys owed to an ERISA plan are not assets until banked. Id. at 88. The Second Circuit, relying on a common definition of what constitutes an asset, disagreed. The court held that [o]nce wages were paid to Local 66 members, [the employer] had contractual obligations to the Funds that constituted `assets' of the Funds by any common definition. Certainly, an audit of the Funds would have to include such fixed obligations as assets. Id. 17 We agree with the reasoning and outcome in LaBarbara. The plain meaning of the term asset includes a chose in action to collect contractually-owed contributions. Certainly, as noted by the Second Circuit, an audit of the Funds would treat such fixed obligations as assets. Id. We therefore hold the district court erred in concluding that the contributions owed by the Lunas to the Funds were not plan assets under ERISA. Under ordinary notions of property rights, although the plan did not own the contributions themselves, it did own a contractual right to collect them. 18 In reaching this conclusion, we are mindful that some courts look to the language of the operative documents in deciding whether unpaid contributions amount to plan assets. See, e.g., ITPE Pension Fund v. Hall, 334 F.3d 1011, 1013-14 (11th Cir.2003) (The proper rule ... is that unpaid employer contributions are not assets of a fund unless the agreement between the fund and the employer specifically and clearly declares otherwise.) (citations omitted). Indeed, that is the method followed by the bankruptcy court and district court in this case. 6 In our view, however, the CBA and other trust documents in this case are at best ambiguous regarding the point when unpaid contributions become plan assets. More importantly, although we agree that in some cases reference to the plan documents will aid in the determination of what constitutes a plan asset, a court's purpose in cases such as this is to construe ERISA and give effect to its plain meaning. Having done so, we conclude that the contractual right to the unpaid contributions is an asset under ERISA. 19