Court Opinion

ID: 2742671
Source: CourtListenerOpinion
Date Created: 2014-10-15 22:01:10.236901+00
Date Added: 2024-06-11T09:35:01.150983
License: Public Domain

In the

      United States Court of Appeals
                     For the Seventh Circuit
                           ____________________  

No.  13-­‐‑3613  
JAMES  RUSS,  et  al.,  
                                                          Plaintiffs-­‐‑Appellants,  
                                         v.  

SOUTH  WATER  MARKET,  INC.,  and  WILLIAM  STEINBARTH,  
                                         Defendants-­‐‑Appellees.  
                           ____________________  

            Appeal  from  the  United  States  District  Court  for  the  
              Northern  District  of  Illinois,  Eastern  Division.  
               No.  10  C  6337  —  Ronald  A.  Guzmán,  Judge.  
                           ____________________  

  ARGUED  SEPTEMBER  29,  2014  —  DECIDED  OCTOBER  15,  2014  
                 ____________________  

    Before  EASTERBROOK,  WILLIAMS,  and  SYKES,  Circuit  Judges.  
     EASTERBROOK,  Circuit  Judge.  South  Water  Market  and  Lo-­‐‑
cal   703   of   the   Teamsters   Union   had   a   collective   bargaining  
agreement  that  ran  from  2004  through  April  30,  2007.  From  
April  to  September  2007  they  negotiated  to  reach  a  new  deal.  
On  September  12,  2007,  they  shook  hands  on  an  agreement.  
Michael  Abramson,  South  Water  Market’s  bargaining  repre-­‐‑
sentative,   was   supposed   to   write   up   the   agreed   terms   and  
send  them  to  the  Union.  
2                                                               No.  13-­‐‑3613  

     Nothing  happened.  Howard  Murdoch,  the  Union’s  pres-­‐‑
ident,   began   sending   Abramson   emails   asking   for   the   text.  
Abramson  promised  to  provide  one  but  didn’t.  By  February  
2008   Murdoch   was   worried   that   the   pension   and   welfare  
funds   covering   South   Water   Market’s   employees   represent-­‐‑
ed   by   the   Teamsters   would   cut   off   participation   (since   the  
only   written   contract   had   expired)   or   sue.   On   March   21,  
2008,   Abramson   begged   off,   stating:   “I’m   having   trouble  
with  my  notes.”  
    On  April  3  Murdoch  sent  Abramson  a  document  with  the  
terms  that  Murdoch’s  notes  said  had  been  agreed.  Abramson  
did  not  reply,  one  way  or  the  other—but  South  Water  Mar-­‐‑
ket  did  begin  paying  the  wages,  and  making  the  pension  and  
welfare  contributions,  specified  in  Murdoch’s  text.  Murdoch  
also   sent   the   document   to   the   pension   and   welfare   funds,  
telling   them   that   South   Water   Market   had   agreed   to   its  
terms.  The  funds  (all  of  them  multi-­‐‑employer  plans)  submit-­‐‑
ted   bills   calculated   according   to   those   terms.   South   Water  
Market  paid  them—until  August  2009.  
    At  the  end  of  July  2009  Juventino  Castillo  retired.  He  had  
been  one  of  two  workers  in  the  “Warehouse/Driver”  classifi-­‐‑
cation;   he   received   higher   wages,   and   larger   fringe-­‐‑benefit  
contributions,  than  workers  in  the  “Grocery  Workers”  classi-­‐‑
fication.  The  parties  have  referred  to  workers  in  the  “Ware-­‐‑
house/Driver”  classification  as  “full  boat”  employees,  mean-­‐‑
ing  that  they  enjoy  maximum  wages  and  fringe  benefits.  For  
simplicity  we  refer  to  “driver”  and  “grocery”  as  the  two  cat-­‐‑
egories.   The   document   that   Murdoch   sent   Abramson   (and  
the   funds)   in   April   2008   provided   that   South   Water   Market  
would   employ   at   least   two   drivers.   After   Castillo   retired,   it  
refused   to   provide   more   than   one   of   its   workers   with   the  
No.  13-­‐‑3613                                                               3  

wages   and   fringe   benefits   of   the   driver   classification.   The  
pension  and  welfare  funds  contend  in  this  suit  under  §515  of  
the   Employee   Retirement   Income   Security   Act   (ERISA),   29  
U.S.C.   §1145,   that   South   Water   Market   must   make   delin-­‐‑
quent  contributions  for  a  second  driver  position.  
    South   Water   Market’s   defense   is   that   it   never   agreed   to  
the  terms  that  Murdoch  drafted  in  April  2008.  After  a  bench  
trial,  the  district  judge  agreed  with  South  Water  Market.  Our  
narration   comes   from   the   district   judge’s   findings   of   fact,  
which   largely   rest   on   the   parties’   stipulations.   The   basis   of  
the  district  judge’s  ruling  boils  down  to  the  observation  that  
Abramson  never  signed  Murdoch’s  draft  and  did  not  convey  
assent  in  any  other  way,  such  as  by  return  email.  All  South  
Water   Market   did   was   comply   with   Murdoch’s   terms   until  
August   2009,   and   performing   according   to   someone   else’s  
proposal  is  not  enough,  the  district  judge  ruled,  to  require  an  
employer  to  continue  doing  so  indefinitely.  
     The   fundamental   problem   with   the   district   court’s   ap-­‐‑
proach  is  that  the  Labor  Management  Relations  Act  makes  a  
written   agreement   essential   to   participation   in   a   pension   or  
welfare   plan,   29   U.S.C.   §186(c)(5)(B),   and   ERISA   provides  
that   multi-­‐‑employer   pension   and   welfare   funds   can   enforce  
these   agreements   as   written.   South   Water   Market   does   not  
contend  that  it  wants  to  drop  out  of  the  pension  and  welfare  
plans,  or  that  it  did  withdraw  in  September  2007.  But  if  the  
April  2008  document  is  not  the  indispensible  written  agree-­‐‑
ment,  then  what  is?  At  oral  argument,  South  Water  Market’s  
lawyer   replied:   “the   2004   collective   bargaining   agreement.”  
That  won’t  do.  The  2004  agreement  expired  by  its  own  terms  
in   2007;   what’s   more,   the   parties   formally   terminated   it.  
Nothing   remains   except   the   April   2008   document.   If   South  
4                                                                     No.  13-­‐‑3613  

Water  Market  is  to  participate  at  all,  those  are  the  only  avail-­‐‑
able  terms.  
     More   than   that:   performance   under   a   proposal   is   one  
means  of  giving  assent  to  be  bound.  Bricklayers  Local  21  of  Il-­‐‑
linois   Apprenticeship   and   Training   Program   v.   Banner   Restora-­‐‑
tion,   Inc.,   385   F.3d   761,   766   (7th   Cir.   2004);   Robbins   v.   Lynch,  
836  F.2d  330,  332  (7th  Cir.  1988);  Restatement  (Second)  of  Con-­‐‑
tracts  §30.  Murdoch  reduced  the  terms  to  writing;  South  Wa-­‐‑
ter   Market   performed   for   more   than   a   year,   paying   wages  
and   making   contributions   at   rates   higher   than   those   speci-­‐‑
fied   in   the   2004   agreement.   It   now   maintains   that   its   pay-­‐‑
ments   to   the   funds   did   not   really   show   assent   to   the   two-­‐‑
drivers  clause,  because  until  August  2009  it  had  two  drivers.  
Making   fringe   benefit   contributions   for   two   was   only   to   be  
expected;   until   some   difference   developed   between   what  
South  Water  Market  wanted  and  what  the  April  2008  docu-­‐‑
ment   required,   its   performance   was   ambiguous.   Yet   South  
Water  Market  put  all  other  terms  of  the  April  2008  document  
into  effect,  and  it  is  hard  to  see  why  an  employer  would  do  
that  if  it  thought  the  document  merely  a  union’s  proposal.  If  
it  wanted  to  accept  some  clauses  and  reject  others,  it  should  
have   said   so   in   April   2008.   Yet   its   first   protest   came   in   re-­‐‑
sponse  to  the  funds’  August  2009  bills.  
    Pension   and   welfare   funds   are   entitled   to   rely   on   the  
writings   they   receive.   Central   States   Pension   Fund   v.   Gerber  
Truck   Service,   Inc.,   870   F.2d   1148   (7th   Cir.   1989)   (en   banc),  
analogizes   them   to   holders   in   due   course,   not   to   simple  
third-­‐‑party   beneficiaries   whose   rights   can   be   cut   off   at   the  
contracting  parties’  whim.  Usually  they  are  not  privy  to  ne-­‐‑
gotiations   between   unions   and   employers;   they   cannot   tell  
when   one   or   the   other   (or   both)   had   mental   reservations.  
No.  13-­‐‑3613                                                                     5  

Pension  and  welfare  funds  set  both  benefit  levels  and  contri-­‐‑
bution  rates  based  on  actuarial  calculations,  and  those  calcu-­‐‑
lations   depend   on   the   terms   of   the   written   agreements   that  
control   coverage   and   eligibility.   That’s   why   funds   can   en-­‐‑
force  the  writings  they  receive.  Gerber  Truck  Service  held  that  
a   multi-­‐‑employer   pension   fund   can   enforce   a   contract   as  
written  even  though  the  union  and  the  employer  have  a  side  
agreement  that  certain  parts  of  the  contract  will  be  ignored.  
See   also,   e.g.,   Central   States   Pension   Fund   v.   Schilli   Corp.,   420  
F.3d   663   (7th   Cir.   2005);   Central   States   Pension   Fund   v.   Joe  
McClelland,  Inc.,  23  F.3d  136  (7th  Cir.  1994).  Whatever  reser-­‐‑
vations  Abramson  had  were  not  conveyed  to  the  funds  until  
August  2009,  much  too  late.  
   The   judgment   in   favor   of   South   Water   Market   is   re-­‐‑
versed.  The  case  is  remanded  for  calculation  of  how  much  it  
owes   under   the   April   2008   document   and   entry   of   a   judg-­‐‑
ment  in  that  amount.