Opinion ID: 2818736
Heading Depth: 3
Heading Rank: 2

Heading: Scassa Asphalt’s termination defense

Text: The company contends that the Union’s February 10, 2010 letter notifying it that the CBA was set to expire in April had the effect of terminating the short-form Agreement that bound the company to the requirements of the CBA. Because the short-form Agreement was terminated, the company argues, it had no obligation to pay benefit contributions and the Funds are barred from bringing this collection action. Our unpublished cases have permitted a limited examination of certain termination defenses, “at least where it is evident upon ‘a cursory review of the parties’ actions’ that the contract has been terminated.” Laborers Pension Trust Fund-Detroit & Vicinity v. Interior Exterior Specialists Constr. Grp., Inc., 394 F. App’x 285, 290 (6th Cir. 2010) (per curiam); Plumbers & Pipefitters Local Union No. 572 Health & Welfare Fund, 100 F. App’x at 403. This position is consistent with published decisions in several other circuits permitting a termination defense. See e.g., DeVito v. Hempstead China Shop, Inc., 38 F.3d 651, 653–54 (2d Cir. 1994); Teamsters Indus. Employees Welfare Fund v. Rolls-Royce Motor Cars, Inc., 989 F.2d 132, 138 (3d Cir. 1993); Bakery & Confectionary Union & Industry Int’l Pension Fund v. Ralph’s Grocery Co., 118 F.3d 1018, 1022 (4th Cir. 1997); La. Bricklayers & Trowel Trades Pension Fund & Welfare Fund v. Alfred Miller Gen. Masonry Contracting Co., 157 F.3d 404, 409 n.12 (5th Cir. 1998). But see Twin City Pipe Trades Serv. Ass’n, Inc. v. Frank O’Laughlin Plumbing & Heating Co., 759 F.3d 881, 885 (8th Cir. 2014) (avoiding recognition of a termination defense, but finding that facts would not support such a defense in any event). Cf. Carpenters Health & Welfare Trust Fund v. Bla-Delco Constr., Inc., 8 F.3d 1365, 1369 (9th Cir. 1993) (holding that, because the CBA was not “void,” but merely “voidable,” the employer’s purported termination of the CBA was not a legitimate defense to a trust fund collection action). In both Laborers Pension Trust Fund-Detroit and Plumbers & Pipefitters Local Union No. 572, our court allowed employers to assert termination defenses, provided the inquiries were “superficial.” 394 F. App’x at 290; 100 F. App’x at 403. This approach “sensibly balances the competing interests in avoiding complex litigation that starves a fund’s necessary contributions No. 14-3954 Orrand, et al. v. Scassa Asphalt, Inc. Page 11 and ensuring that the employer has a legitimate contractual obligation to make employee contributions.” Plumbers & Pipefitters Local Union No. 572, 100 F. App’x at 403. The limited inquiry must confirm that the employer unequivocally communicated its intent to withdraw from the CBA. Laborers Pension Trust Fund-Detroit, 394 F. App’x at 290. “A notice to terminate must be clear and explicit. . . . A notice of modification is not a notice of termination and does not affect termination of the contract.” Chattanooga Mailers’ Union, Local No. 92 v. Chattanooga News-Free Press Co., 524 F.2d 1305, 1312 (6th Cir. 1975) (internal quotation marks omitted), overruling on other grounds recognized by Bacashihua v. U.S. Postal Serv., 859 F.2d 402, 404 (6th Cir. 1988). In addition, whether a contract continues in force during contract negotiations “depends on the consequence intended by the parties when they exchanged notices of their desire to amend the contract.” Id. at 1311. In this case, the district court reasoned that the Union’s February 10, 2010 notice letter to Scassa Asphalt was a notice of contract modification, not a notice of termination, because the Union expressly stated its “desire to modify, amend, and/or negotiate a new agreement” and “to open negotiations for a new agreement covering wages, hours and conditions of employment.” R. 36, Page ID 269. The language of the Union’s letter also indicated a desire on the part of the Union to continue the relationship between the parties, not to terminate it. Id. at 270. Even construing all reasonable factual inferences in favor of Scassa Asphalt, the district court concluded that the February 10, 2010 letter “cannot be construed as a termination under the terms of the contract.” Id. Moreover, even though the CBA was set to expire on April 30, 2010, “the short-form agreement that Scassa signed, by its very terms, never expires except upon written termination.” Id. n.7. In accordance with our precedent, the district court reasonably construed the February 10, 2010 letter as a request to modify the short-form Agreement and CBA and not as a request to terminate those agreements. Scassa Asphalt did not reply to the letter or at any other time provide clear and explicit written notice to the Union that Scassa Asphalt wished to withdraw from, and terminate, the short-form Agreement binding it to the CBA. Scassa Asphalt assumed that its short-form Agreement was terminated by Nick Scassa’s verbal communication to Mike No. 14-3954 Orrand, et al. v. Scassa Asphalt, Inc. Page 12 Kramer in February 2009, and that the CBA expired by its terms, effective April 30, 2010. Neither of these assumptions was correct under the signed agreements or governing law. As the district court accurately observed, moreover, both the short-form Agreement Scassa Asphalt signed and the CBA contained legally valid “evergreen” clauses. See Trustees of the B.A.C. Local 32 Ins. Fund v. Fantin Enters., Inc., 163 F.3d 965, 968 (6th Cir. 1998). “When a contract is renewed via the operation of an evergreen clause, all of the attendant contractual obligations naturally continue for the period of renewal.” Id. at 968–69. The short-form Agreement between Scassa Asphalt and the Union provided: This Agreement shall be effective as of the date set forth and shall remain in full force and effect unless modified by mutual agreement of the parties until expressly terminated by notice in writing from one party to the other party at least sixty (60) days prior to its anniversary date. R. 23-3, Page ID 94. Article XI of the CBA read: THIS AGREEMENT shall be effective as of May 1, 2007 and shall continue in force and effect through April 30, 2010 and thereafter, from year to year until terminated at the option of either party, after sixty (60) days notice in writing to the other party. R. 24-1 Page ID 151. Under these evergreen clauses, both contracts remained in force because neither the Union nor Scassa Asphalt gave timely written notice to the other party of an intent to terminate. Scassa Asphalt cites three cases that do not advance its arguments. The company first relies on Laborers Pension Trust Fund-Detroit, where the employer clearly notified the union in writing that the contract between the employer and the union would not be renewed unless it was renegotiated to the employer’s satisfaction. 394 F. App’x at 291. In that situation, this court held that the employer successfully terminated its obligations under the CBA. Id. at 292. By contrast, Scassa Asphalt did not send any writing to the Union expressing its intent to withdraw from or terminate the short-form Agreement binding it to the CBA. The company’s reliance on Trustees of the B.A.C. Local 32 Ins. Fund v. Norwest Tile Co., No. 04-2436, 2005 WL 3440431 (6th Cir. Dec. 14, 2005), is similarly misplaced. In that case, the employer sent an unambiguous letter to the union withdrawing from the CBA and stating that No. 14-3954 Orrand, et al. v. Scassa Asphalt, Inc. Page 13 the employer would not be bound by a new agreement, although it desired to negotiate a new individual agreement with the union. Id. at . Scassa Asphalt did not submit any similar written withdrawal letter to the Union. The company also relies on Kaufman & Broad Home Sys., Inc. v. Int’l Bhd. of Firemen and Oilers, AFL-CIO, 607 F.2d 1104, 1109 (5th Cir. 1979), which held that a duration clause in a CBA should be construed so that the union’s notice to modify prevented automatic extension of the CBA. That case was not a § 515 collection action, and the language of the CBA’s duration clause was different from the wording of the duration clause in this CBA. Because that case turned on interpretation of the specific contract language, it affords little assistance in this case. Here, the district court reasonably construed the Union’s February 10, 2010 letter as a notice to modify, which does not constitute notice of termination under our law. See Chattanooga Mailers’ Union, Local No. 92, 524 F.2d at 1312; Int’l Union of Operating Eng’rs, Local No. 181 v. Dahlem Constr. Co., 193 F.2d 470, 475 (6th Cir. 1951). Scassa Asphalt’s remaining arguments regarding the termination defense are unavailing. The company contends that “the Union” waited nearly four years to assert that the contracts remained in force and, during that four-year period, the company did not receive “from the Union” a request for payment of delinquent contributions or a request for audit. We construe these arguments as directed to the Funds, not the Union, but we reiterate that the Funds may enforce the written agreements because they are not required to defend against conduct of the contracting parties that is extraneous to the terms of the written agreements. See Behnke, Inc., 883 F.2d at 459; New Bakery Co. of Ohio, 133 F.3d at 959. Finally, Scassa Asphalt did not develop legal arguments in support of a laches defense against the Funds and will not be permitted to do so for the first time in this appeal. See Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 552–54 (6th Cir. 2008).