Opinion ID: 2818736
Heading Depth: 3
Heading Rank: 1

Heading: Governing law under ERISA and the LMRA

Text: We recently explained in Operating Engineers Local 324 Health Care Plan v. G & W Construction Company, 783 F.3d 1045, 1050-51 (6th Cir. 2015), that both ERISA and the LMRA require parties to enter into written agreements governing the creation and management of multi-employer fringe benefit funds. It is one of “ERISA’s core functional requirements” that each “employee benefit plan shall be established and maintained pursuant to a written instrument.” Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 83 (1995) (quoting 29 U.S.C. ' 1102(a)(1)). Every employee benefit plan must “specify the basis on which payments are No. 14-3954 Orrand, et al. v. Scassa Asphalt, Inc. Page 7 made to and from the plan,” 29 U.S.C.§ 1102(b)(4), and “[t]he plan administrator is obliged to act ‘in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with’” ERISA provisions. Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 300 (2009) (quoting 29 U.S.C. § 1104(a)(1)(D)). This “reliance on the face of written plan documents” serves the purpose of “enabling beneficiaries to learn their rights and obligations at any time.” Curtiss-Wright Corp., 514 U.S. at 83. It also lends certainty and predictability to employee benefit plans, serving the interests of both employers and their employees. Sprague v. Gen. Motors Corp., 133 F.3d 388, 402 (6th Cir. 1998) (en banc). For benefit plans established through collective bargaining, the writing requirement is further reinforced by Section 302 of the LMRA, 29 U.S.C.§ 186(a), which bars an employer from contributing to benefit trusts designated by employee representatives unless the payments are “made in accordance with a written agreement with the employer.” Behnke, Inc., 883 F.2d at 459 (citing 29 U.S.C. § 186(c)(5)(B)). The general prohibition on contributing funds to employee representatives without written agreements seeks to prevent misappropriation and dissipation of monies that are owed to the employees. Id. “Collective bargaining agreements that establish ERISA plans are interpreted by use of ordinary contract principles to the extent those principles are not inconsistent with federal labor policy.” Operating Eng’rs Local 324 Health Care Plan, 783 F.3d at 1051 (citing M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926, 933 (2015)). Where a contract is in writing and its terms are clear and unambiguous, we ascertain the contract’s meaning in accordance with the contract’s plainly expressed intent. Id. A third governing statute is § 515 of ERISA, which protects and streamlines the process for collecting delinquent contributions to ERISA plans from employers by limiting “unrelated” and “extraneous” defenses. Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 88 & n.12 (1982). Section 515 provides: 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. No. 14-3954 Orrand, et al. v. Scassa Asphalt, Inc. Page 8 29 U.S.C. § 1145. Because “multiemployer plans are entitled to rely on the literal terms of written commitments between the plan, the employer, and the union, the actual intent of and understandings between the contracting parties are immaterial.” Bakery & Confectionery Union & Indus. Int’l Health Benefits & Pension Funds v. New Bakery Co. of Ohio, 133 F.3d 955, 959 (6th Cir. 1998). Congress adopted § 515 because “simple collection actions brought by plan trustees ha[d] been converted into lengthy, costly and complex litigation concerning claims and defenses unrelated to the employer’s promise and the plans’ entitlement to the contributions, and steps [were required] to simplify delinquency collection.” Kaiser Steel Corp., 455 U.S. at 87 (internal quotation marks omitted). The en banc Seventh Circuit articulated this congressional concern: [Multi-employer p]lans rely on documents to determine the income they can expect to receive, which governs their determination of levels of benefits. . . . Once they promise a level of benefits to employees, they must pay even if the contributions they expected to receive do not materialize . . . . Costs of tracking down reneging employers and litigating also come out of money available to pay benefits. The more complex the litigation, the more the plan must spend. Litigation involving conversations between employers and local union officials— conversations to which plans are not privy—may be especially costly, and hold out especially great prospects of coming away empty-handed. Cent. States, Se. & Sw. Areas Pension Fund v. Gerber Truck Serv., Inc., 870 F.2d 1148, 1151 (7th Cir. 1989) (en banc). Thus, employers’ written promises are enforceable if they are not inconsistent with law. Id. at 1153. “If the employer simply points to a defect in [contract] formationCsuch as fraud in the inducement, oral promises to disregard the text, or the lack of majority support for the union and the consequent ineffectiveness of the pact under labor lawCit must still keep its promise to the pension plans. . . . Anything less may well saddle the plans with unfunded obligations.” Id. While § 515 arose from congressional concern about subjecting benefit funds to timeconsuming and expensive litigation that is not related to the employers’ promises to pay, the legislative sponsors of § 515 were particularly concerned about employer defenses based on alleged union conduct. As this court observed in Behnke, Inc., Congress added § 515 to ERISA to “free[] pension and welfare funds from defenses that pertain to the unions’ conduct,” 883 F.2d at 460 (quoting Robbins v. Lynch, 836 F.2d 330, 333 (7th Cir. 1988)), and therefore “[a] claim No. 14-3954 Orrand, et al. v. Scassa Asphalt, Inc. Page 9 that the union has promised not to collect a payment called for by the agreement is not a good answer to the trustees’ suit.” Id. (quoting Robbins, 836 F.2d at 334). There is a narrow exception to this rule for conduct that could support a claim for fraud in the execution of the contract because an employee benefit fund is not permitted to enforce a nonexistent contractual obligation. Gerber Truck Serv., Inc., 870 F.2d at 1151. Fraud in the execution renders an agreement void ab initio, Elec. Workers Local 58 Pension Trust Fund v. Gary’s Elec. Serv. Co., 227 F.3d 646, 656–57 (6th Cir. 2000), and precludes the employee benefit fund from collecting. By contrast, fraud in the inducement makes a transaction merely voidable, Sw. Adm’rs, Inc. v. Rozay’s Transfer, 791 F.2d 769, 774 (9th Cir. 1986), and “cannot cut off the fund’s claims.” Behnke, Inc., 883 F.2d at 460. If no claim of fraud in the execution is raised, then the words, conduct, action, and inaction of the union are simply not relevant to a § 515 collection action that is based on the literal and unambiguous terms of an existing ERISA plan document or collective bargaining agreement. New Bakery Co. of Ohio, 133 F.3d at 959 (observing that the fund is entitled to enforce the writing without regard to the understandings or defenses of the original parties, similar to a holder in due course in commercial law). These principles bring the merits of the legal issues presented in this appeal more sharply into focus. Before each issue is addressed, however, we note that Scassa Asphalt’s appellate briefs refer repeatedly to “the Union” and do not draw the necessary distinction between the Union and the Funds. The CBA—the 2007-2010 Ohio Highway Heavy Agreement—was negotiated by the Union and the Labor Relations Division of the Ohio Contractors Association. By signing the short-form Agreement with the Union, Scassa Asphalt bound itself to abide by all of the provisions of the CBA, including the specific agreement to pay timely benefit contributions to the Funds, which stand as third-party beneficiaries under the CBA. See Behnke, Inc., 883 F.2d at 460. As the governing law makes clear, the Funds are entitled to enforce the CBA and Scassa Asphalt’s written short-form Agreement binding it to the CBA without having to defend against oral conversations that occurred between Nick Scassa and Mark Kramer of the Union. Because Congress chose to give the Funds “the upper hand” in § 515 collection litigation, see Plumbers & Pipefitters Local Union No. 572 Health & Welfare Fund v. A & H Mech. Contractors, Inc., 100 F. App’x 396, 401 (6th Cir. 2004), Scassa Asphalt seeks to avoid No. 14-3954 Orrand, et al. v. Scassa Asphalt, Inc. Page 10 liability for delinquency by arguing that it did not have an existing contract with the Union obligating it to make benefit contributions to the Funds.