Opinion ID: 518377
Heading Depth: 1
Heading Rank: 8

Heading: aec's other defenses

Text: 36 AEC also urges that, because the trust is a third party beneficiary of the agreement, it is subject to any defense that AEC might have against the UMW. AEC asserts three such defenses: (1) that it entered into the Agreement under a unilateral mistake of fact (viz., that the contribution obligation would cease when the Trust reached full funding) of which the UMW was aware, and that AEC is therefore entitled to rely on its interpretation; (2) that AEC and the UMW, or alternatively the BCOA and the UMW, made a mutual mistake of fact to the effect that a contribution of $1.11 per ton would result in no more than full funding, with the result that there was no agreement between the parties to continue contributions after full funding; or (3) that AEC is entitled to discover the bargaining history of the Agreement in order to get evidence that the BCOA and the UMW made such a mutual mistake. A. Unilateral Mistake of Fact 37 In response to AEC's first defense, the Trustees argue that, under section 515 of ERISA, a pension trust benefitted by a collective bargaining agreement is not subject to the normal rules governing third party beneficiary contracts and that, under the contract principles properly applicable to collective bargaining agreements, the Trust is authorized to rely on and to enforce the terms of the Agreement. They contend that, whatever the force of AEC's arguments in a suit between AEC and the UMW, they are simply beside the point of this case. 38 The next issue before us therefore is whether section 515 applies to this case. In order to answer that question, however, we must first explore 39 The Origin and Purpose of Section 515. 40 In the usual case, a third party beneficiary that brings a contract claim steps into the shoes of the promisee and is therefore subject to any claim or defense that the promisor would have against the promisee. See, e.g., Schneider Moving & Storage Co. v. Robbins, 466 U.S. 364, 370, 104 S.Ct. 1844, 1848, 80 L.Ed.2d 366 (1983). There is no dispute that the Trust is a third party beneficiary of the Agreement, inasmuch as its right to receive contributions from AEC arises solely from that Agreement, although neither the Trust nor the Trustees are parties thereto. Neither is there any room for dispute, however, that a pension fund is not a typical third party beneficiary. Lewis v. Benedict Coal Corp., 361 U.S. 459, 468, 80 S.Ct. 489, 495, 4 L.Ed.2d 442 (1960). Like Cinderella's stepsisters, it does not fit comfortably into the shoes of the promisee. See Southern California Retail Clerks Union v. Bjorklund, 728 F.2d 1262, 1265 (9th Cir.1984) (range of contract defenses to trustees' collection action should be severely limited.). 41 In Benedict Coal, the trustees of the UMWA Retirement Fund of 1950 sued to recover delinquent contributions from an employer. The employer argued that it could set such contributions off against the union's liability for the damages it caused by violating the no-strike clause of the collective bargaining agreement. The Supreme Court rejected this defense, finding that the obligation to contribute to the fund should be deemed independent of the no-strike clause in light of the special character of a collective bargaining agreement. 361 U.S. at 468, 80 S.Ct. at 494. For example, because the pension fund was jointly created by the industry and the union, an employer's interest in the soundness of the fund and its management is in no way less than that of the promisee union, id. at 468-69, 80 S.Ct. at 495; moreover, because it was an industry-wide fund, any withheld contributions would impose a burden that would fall in the first instance upon the employees and their families across the country, id. at 469, 80 S.Ct. at 495, and [u]ltimately this might result in pressures upon the other coal operators to increase their royalty payments to maintain the planned schedule of benefits. Id. For these and other reasons grounded in national labor policy, the Court thought it improper to construe the ambiguity created by the silence of the collective bargaining agreement according to principles fashioned for conventional third party contexts. 42 When it enacted section 515 ERISA, Congress expressly endorsed the Court's approach in Benedict Coal. See Remarks of Senator Thompson, 126 Cong.Rec. 23,039 (Aug. 25, 1980). It therefore provided a statutory procedure intended to simplify the collection of pension contributions and to insulate the plan's entitlement to employer contributions from any potentially off-setting claims against the union. Id. Thus, section 515 straightforwardly provides that: 43 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. 44 29 U.S.C. Sec. 1145 (1982). Section 515, like other provisions of ERISA, creates a federal right of action independent of the contract on which the duty to contribute is based and may be enforced by an action brought in the district court. Id. at Sec. 1132. 45 With the origin and purpose of section 515 in mind, we now turn to 46 The Applicability of Section 515 to this Case. 47 AEC argues that Congress intended section 515 to apply only to actions by trustees to collect delinquent contributions. Because AEC has continued to make the contributions specified on the face of the Agreement--while disputing that they are in fact due now that the plan is fully funded--and seeks only to have those payments returned, it contends that section 515 is inapplicable to this action. Since nothing in the plain language of section 515 seems to support this contention, AEC points out that the section is entitled Delinquent Contributions, 94 Stat. 1295, and that there are several references to delinquencies in the legislative history of the statute. 48 It is clear enough that, in enacting section 515, Congress was primarily concerned with overdue contributions; the problem that it sought to address had consistently arisen in situations where a pension fund was seeking to collect overdue payments from employers. Indeed, as AEC points out, all three cases referred to above involved a claim for overdue contributions. 49 The same problems arise, however, whenever actual contributions are--or would be, if the employer were entitled to withhold facially required amounts--less than expected contributions. As Judge Easterbrook noted for the court in Robbins v. Lynch, 836 F.2d 330, 333 (7th Cir.1988), a pension fund must determine benefit levels by reference to actuarial calculations based not only upon past and current contribution levels, but also upon agreed future levels as well. If one employer contributes less than had been expected of it, then a burden falls either on the beneficiaries, whose pensions must be decreased, or on other employers, whose contributions must be increased. It hardly matters whether a pension plan is unable to collect past due contributions that it was expecting, or must return contributions that it has already received and was expecting to have available for the payment of benefits. Thus, we cannot agree that section 515 applies only to delinquent contributions; rather, it entitles pension funds to rely upon, and to enforce, the written terms of collective bargaining agreements insofar as they relate to pension contributions, whether delinquent or anticipated. Therefore, section 515 applies to this case; the only issue that remains is 50 The Effect of Section 515. 51 In AEC's view, section 515 does nothing more than create, for an employer who already has a contractual duty to contribute to a multi-employer pension fund, a coextensive statutory duty; thus, [i]f no contractual duty to contribute exists, then an employer has no statutory duty to contribute. Under this theory, section 515 would have no independent bearing on this case. 52 AEC takes too narrow a view of section 515. Under ordinary contract principles, the employer in Benedict Coal would surely have been entitled to set off its damages from the union's strike in violation of the collective bargaining agreement against its contribution to the fund. For the Court to have reached the result that it did, it must needs have concluded that the trustees of a pension fund are in a position superior to that of the union in enforcing the collective bargaining agreement against the employer. Thus, since section 515 was intended, inter alia, to incorporate the Supreme Court's decision in Benedict Coal, it must be more than a mere codification of an employer's contractual obligations. 53 AEC next suggests that Benedict Coal is distinguishable (and, derivatively, that section 515 is therefore no bar to its defense), on the ground that the employer in that case did not deny that it had originally agreed to contribute the full amount sought by the fund, but only disputed whether it remained obligated for the full amount in light of events subsequent and unrelated to the formation of the contract. In this case, by contrast, AEC's claim is that it was never obligated to contribute more than was required for full funding. 54 Other circuits have construed section 515 to mean that an employer, when faced with a collection action by the trustees of a pension fund, is barred from raising defenses going to the formation of its contract with the union. In Southwest Administrators, Inc. v. Rozay's Transfer, 791 F.2d 769, 773 (9th Cir.1986), the union had promised the employer that, in view of the latter's precarious financial situation, if only the employer would sign the proposed multi-employer collective bargaining agreement, then the trustees of the pension fund would waive a portion of the required contributions. Before the agreement was executed, the trustees advised the union that they would not make such a waiver, but the union did not so advise the employer, which signed the agreement in reliance on the union's earlier promise. When the trustees sued to collect the disputed contributions, the court held that, even though the employer had been fraudulently induced into signing the agreement--and, indeed, although the agreement had been subsequently rescinded in light of the union's fraud--the trustees were nevertheless entitled by section 515 to enforce the written terms of the agreement. 55 The Seventh Circuit adopted the same approach in a similar situation. In Robbins, 836 F.2d 330, the court rejected the employer's claim that, notwithstanding the language of a me too collective bargaining agreement purporting to cover all employees, the union had orally agreed that pension contributions would actually be required for only a few of the employees covered by the written terms of the agreement. The court held that, in a suit brought by the trustees of the pension fund, this defense was foreclosed by section 515, under which pension funds get the benefit of the written terms of [collective bargaining] agreements. 836 F.2d at 333. 56 We think the reasoning of the Seventh and Ninth Circuits is persuasive in the present context. When the trustees of a pension plan created pursuant to a collective bargaining agreement sue an employer for contributions required by the plan, the employer may not defend on the ground of union misconduct in negotiating the agreement. If it means nothing else, section 515 means that, at least when the Trustees are not implicated in the alleged misconduct, their suit cannot be thwarted by defenses not apparent from the face of the Agreement. 57 Even more fundamentally, AEC's reliance on its intent when it entered into the me too agreement is entirely inapposite. AEC adopts as its own the following statement of the purposes of me too agreements: 58 [T]he basic purpose of a me-too agreement is to allow independent, usually smaller, employers to obtain all the benefits of the master collective bargaining agreement that is negotiated by the principal employers in the industry without having to participate in the industry negotiations, or to engage in separate negotiations, every few years. Thus, the independent employer is assured that (1) it will not be subject to a contract containing more onerous conditions than are applicable to its competitors, (2) it will obtain whatever protections or advantages the industry collective bargaining agreement provides other employers, (3) it will be saved the cost of expensive negotiations, and ... (4) it will be covered by an agreement whenever the rest of the industry is covered and not subject to an agreement whenever the rest of the industry is not. 59 Arizona Laborers, Teamsters and Cement Masons Trust Fund v. Conquer Cartage Co., 753 F.2d 1512, 1518 (9th Cir.1985). In other words, says AEC, it voluntarily tagged along on someone else's contract negotiation in order to avoid the transaction costs and the risks of making a separate agreement on its own. 60 Seen in this light, AEC's argument that it never intended to agree to continue contributing to the Trust past the point of full funding is peculiar indeed. AEC intended to adopt as its own the agreement between the BCOA and the UMW, and agreed to do so before that agreement had even been reached. It would be passing strange, therefore, if AEC did specifically intend to agree to a particular provision of the resulting Agreement. It is in the nature of a me too contract that the intent relevant to its interpretation is that of the leader (the BCOA), not that of the follower (AEC). AEC's intention is therefore irrelevant. B. Mutual Mistake of Fact 61 AEC's first defense of mutual mistake of fact--that the UMW and it entered into the me too agreement under a mutual mistake of fact--is subject to the objection just noted: the relevant intent is not that of the parties to the me too agreement, but that of the parties to the national agreement. AEC's next defense--that the BCOA and the Union made a mutual mistake, such that they never actually agreed that the employers' obligation to contribute would continue past the point of full funding--avoids this difficulty, however. 62 On inspection, however, we see that AEC's defense sounds not at all in mutual mistake of fact. Under that doctrine, a contract may be rescinded if the contracting parties entertained a material mistake of fact that went to the heart of their bargain. The paradigm case is, of course, Sherwood v. Walker, 66 Mich. 568, 33 N.W. 919 (1887), in which the court rescinded a contract for the sale of a barren cow when she later proved to be fertile and therefore worth significantly more than the contract price. There the mistake went to the essence of the contract; here there is no such claim. AEC does not argue that the mutual mistake entitles it to rescission of the entire Agreement. Rather, it argues that the court should fashion a reasonable term to fill the gap left by the parties' failure to anticipate that the Trust would exceed the point of full funding. 63 At bottom then, AEC is advancing a particular interpretation of the contract, viz., that the parties reached no agreement on the issue whether the employers' obligation to make contributions would continue in this circumstance. Unless we find that they did agree on this point, AEC says, we must either supply the missing term or at least remand the case to the district court so that AEC's discovery into the negotiating history of the Agreement may proceed. 64 We have determined above, of course, that the Agreement on its face requires the employers to continue to contribute to the Trust even after it has become fully funded. According to AEC, however, even that is not the end of the matter. It seeks evidence that the written contract does not accurately reflect the intent of the parties, or more precisely, that it masks their lack of intent on this question. 65 In furtherance of this theory, AEC points out that the general rule against receiving extrinsic evidence to alter the terms of a written contract intended by the parties to be an integration is inapplicable to the interpretation of collective bargaining agreements. See, e.g., Local Union 1395, International Brotherhood of Electrical Workers v. NLRB, 797 F.2d 1027, 1036 (D.C.Cir.1986). While AEC's general proposition is valid, we think it is not applicable where section 515 applies. As discussed above, section 515 was adopted in order to ease the burden of uncertainty on the trustees of a pension trust by allowing them to rely upon the language of the agreement itself. This purpose would be frustrated if the trustees were forced to meet defenses that go to the conduct of the parties to a facially valid trust agreement. 66 In the terms of section 515, there can be no question that AEC is obligated to contribute to the Trust under the terms of a collectively bargained agreement; the only question raised by AEC is whether that obligation survives full funding. As we held above, the contract on its face provides that AEC is obligated to make contributions beyond the point of full funding. The requirement of section 515 that AEC make its contributions in accordance with the terms or conditions of such ... agreement thus precludes any defense that would avoid that obligation. 67 It is thus clear that AEC's suggestion that it should be permitted to pursue discovery regarding the bargaining history of the national agreement must also fail. Section 515 ends our inquiry with a determination of what is required by the written terms of the Agreement. Since the bargaining history of the national agreement is irrelevant to the facial meaning of its terms, so too is the evidence sought by AEC irrelevant to any material fact in this action, and AEC is therefore not entitled to the discovery it seeks. 68 This is not to say that, if AEC is correct that the UMW defrauded it into entering into an agreement under which it was required to pay to the Trust monies AEC had never intended to obligate itself to pay, AEC is left without a remedy. As both the Ninth and Seventh Circuits have suggested, the proper remedy for such misconduct appears to be not an attack on the Trust, but a suit against the Union. Robbins, 836 F.2d at 334; Southwest Administrators, 791 F.2d at 777 n. 4. (Indeed, AEC did bring several claims against the Union, but for reasons unknown to us, it later voluntarily dismissed them with prejudice.) Because the evidence sought to be discovered in this case would presumably have some relevance to such an action, discovery (and the action itself) might there be allowed to proceed. This action, however, is at an end.