Court Opinion

ID: 2977960
Source: CourtListenerOpinion
Date Created: 2015-09-22 18:16:53.54408+00
Date Added: 2024-06-11T11:44:10.099265
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                            Pursuant to Sixth Circuit Rule 206
                                   File Name: 09a0190a.06

               UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT
                                  _________________

                                                 X
 PLUMBING AND PIPEFITTING INDUSTRY IN THE -
 JOINT ADMINISTRATIVE COMMITTEE OF THE
                                                  -
 DETROIT AREA, PLUMBERS LOCAL NO. 98              -
                                                  -
                                                      No. 08-1271
 APPRENTICESHIP FUND and PIPEFITTERS
                                                  ,
                                                   >
                        Plaintiffs-Appellants, -
 LOCAL NO. 636 INSURANCE FUND,

                                                  -
                                                  -
                                                  -
          v.
                                                  -
                                                  -
                         Defendant-Appellee. -
 WASHINGTON GROUP INTERNATIONAL, INC.,
                                                  -
                                                 N
                   Appeal from the United States District Court
                  for the Eastern District of Michigan at Detroit.
                No. 06-14288—Julian A. Cook, Jr., District Judge.
                                 Argued: January 16, 2009
                            Decided and Filed: May 29, 2009
       Before: SUHRHEINRICH, BATCHELDER and SUTTON, Circuit Judges.

                                    _________________

                                         COUNSEL
ARGUED: Ronald Scott Lederman, SULLIVAN, WARD, ASHER & PATTON,
Southfield, Michigan, for Appellants. Charles C. Jackson, MORGAN, LEWIS &
BOCKIUS, Chicago, Illinois, for Appellee. ON BRIEF: Ronald Scott Lederman,
SULLIVAN, WARD, ASHER & PATTON, Southfield, Michigan, for Appellants. Charles
C. Jackson, MORGAN, LEWIS & BOCKIUS, Chicago, Illinois, for Appellee.
                               ________________________

                                  AMENDED OPINION
                               ________________________

        SUTTON, Circuit Judge.         When an employer signs a collective bargaining
agreement, it assumes certain obligations to its employees. At issue in this case are the scope
of obligations that a general contractor assumes in signing a national collective bargaining

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agreement that incorporates—in part—two local collective bargaining agreements designed
to provide fringe benefits to independent contractors working on the general contractor’s
projects.

                                             I.

        The parties. Two of the claimants in this case are benefit plans for union members:
the Plumbers Local No. 98 Apprenticeship Fund and the Pipefitters Local No. 636 Insurance
Fund. The third claimant is the Joint Administrative Committee of the Plumbing &
Pipefitting Industry in the Detroit Area (“the administrator”), which collects unpaid fringe-
benefit contributions on behalf of several Detroit-area union benefit plans, including the
apprenticeship and insurance funds. On the other side of the case is Washington Group
International (“WGI”), a civil-engineering and construction company that handles building
projects throughout the country as a general contractor.

        The agreements.      Over twenty years ago, WGI signed a national collective
bargaining agreement with fourteen international trade unions and several other national
contractors.   The agreement was designed to ensure “relative equity and uniform
interpretation and application” among the union signatories by “establish[ing] and
administer[ing] [a] Collective Agreement in concert, each with the other, and all with the
Contractor.” JA 275. The agreement obligated WGI to pay for the fringe benefits—health,
pension, vacation and others—of any union members working on a given project, as called
for by the local collective bargaining agreements covering these workers, but did not apply
to “[c]onstruction industry promotional funds.” JA 282. An industry promotion fund is
designed to benefit the industry “as a whole,” Appellee Br. at 10 n.2; see NLRB v. Sheet
Metal Workers Int’l Ass’n, 575 F.2d 394, 397 (3d Cir. 1978), and is “primarily concerned
with the relationship between the industry and the public” rather than the relationship
between the employed and the employer, McDonald v. Hamilton Elec., Inc. of Fla., 666 F.2d
509, 514 (11th Cir. 1982).

        The insurance and apprenticeship funds did not sign the national agreement. But
they are signatories to two pertinent local collective bargaining agreements (“CBAs”). As
amended in 2006, one of the CBAs purports to require contractors (such as WGI) either to
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contribute payments to an industry promotion fund or to make a like-kind contribution to the
apprenticeship fund. The other one (amended the same year) imposes a similar requirement
on behalf of the insurance fund. WGI is not a signatory to either of these local CBAs.

        The lawsuit. In September 2006, the two funds and the administrator sued WGI in
federal court, alleging that the global agreement required WGI to make “like-kind” fringe-
benefit contributions to the funds, as required by the local CBAs, and that WGI had failed
to make the payments in violation of § 515 of ERISA, 29 U.S.C. § 1145. WGI responded
that, while the national agreement obligated it to pay for “bona fide” fringe benefits required
by local CBAs, it did not require the construction company to make contributions to industry
promotion funds or like-kind contributions in its stead. The district court granted WGI’s
motion for summary judgment.

                                              II.

        This appeal presents one issue: Must WGI make these like-kind contributions to the
two funds? No—for several reasons.

        Start with the reality that WGI did not sign the local CBAs. While the local CBAs
put signatory contractors to a choice—either make payments to the industry promotion funds
or make like-kind contributions to the insurance or apprenticeship funds—that obligation by
itself has no bearing on the responsibility of a contractor that did not sign the agreements.
If WGI has any liability in this case, it cannot arise from the local CBAs alone. See Serv.,
Hosp., Nursing Home & Pub. Employees Union v. Commercial Prop. Servs., Inc., 755 F.2d
499, 503–04 (6th Cir. 1985).

        That takes us to the national agreement, which WGI did sign. It commits WGI to
pay “[f]ringe benefits as negotiated in local” CBAs, and it does so even when the local
unions are not parties to the national agreement, as is true here. JA 282. Taken by itself, this
incorporation of the fringe benefits required by local CBAs would seem to require WGI
either to contribute to the industry promotion funds or to make like-kind contributions. But
the national agreement also limits this obligation:

        Only bona fide fringe benefits which accrue to the direct benefit of the
        individual craft employee are required. This includes health & welfare
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        funds, annuity, vacation, apprenticeship, training funds, and pension funds.
        Construction industry promotional funds are not applicable under terms of
        this Agreement.
Id. The national agreement thus requires WGI to pay only “bona fide fringe benefits,” which
are defined to include benefits that “accrue to the direct benefit of the craft employee,” such
as “health & welfare funds, annuity, vacation, apprenticeship, training funds, and pension
funds.” Neither the general nor the specific definitions of fringe benefits include industry
promotional funds, and indeed the agreement expressly disclaims any obligation by WGI to
contribute to such funds.

        Another clause of the national agreement completes the picture.                  “The
Administration and Interpretation of” the national agreement, it says, “is the responsibility
and sole prerogative of the General Presidents’ Committee on Contract Maintenance at the
National level.” JA 172. In fulfilling that responsibility, the committee has addressed
today’s question twice before, and each time it concluded that a local CBA may not require
a signatory of the national agreement to make like-kind (i.e., increased) fringe-benefit
contributions in place of otherwise-barred contributions to industry promotion funds. In
1993, the committee determined that “any attempt to divert industry fund payments to any
other fringe benefit fund would circumvent the intent” of the national agreement. JA 267.
And in 1996, it determined that the contractor was “not required to remit additional
contributions to [an] Apprenticeship Training Trust Fund or any other fund in lieu of
Industry Fund contributions.” JA 268. The committee issued these governing interpretations
long before the local CBAs in this case came into being in 2001 and long before the local
CBAs added the like-kind contribution requirement in 2006. In the final analysis, every
signatory to the local CBAs, to say nothing of WGI, had no reason to think that the national
agreement would permit this requirement.

        The funds and the administrator offer several responses to this line of reasoning.
First, they note that they did not participate in the 1993 and 1996 decisions by the committee
and therefore should not be bound by them. In one sense they are right: Whatever the nature
of the proceedings that led to these decisions, the claimants did not participate in them and
thus cannot be bound by them in the same sense that they would be bound had they been
parties to the disputes. But that does not mean these decisions do not amount to relevant
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interpretations of these provisions by the committee, and it does not overcome the reality that
the national agreement places the committee in charge of resolving ambiguities in the
national agreement—giving the committee “the responsibility and sole prerogative” to
“[i]nterpret[]” the agreement. JA 172. When WGI signed the national agreement, it did so
with the expectation that any ambiguity in its meaning would be resolved by the committee,
and the claimants have no cognizable basis for altering that expectation.

        Second, even if the national agreement delegates interpretive authority to the
committee, the claimants argue that the committee’s interpretation is not a defensible one,
no matter what level of deference it receives—whether the near-conclusive deference given
to arbitration decisions, see Mich. Family Res., Inc. v. SEIU Local 517M, 475 F.3d 746, 748,
753–54 (6th Cir. 2007) (en banc), the deference given to gap-filling interpretations by
administrative agencies, Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837,
845 (1984), or some similar quantum of interpretive deference. As the claimants see it, WGI
is not being required to make contributions to industry promotion funds, which the national
agreement prohibits, but is being required only to make (increased) contributions to
authorized fringe-benefit funds, which the national agreement permits. Yet consistent with
the committee’s longstanding construction, a reasonable interpreter of the provision could
conclude that the claimants’ interpretation fails to respect its letter and spirit. As for its
letter: The national agreement commits WGI to pay only “bona fide” fringe benefits
negotiated by local CBAs. How is a required contribution to a local fringe-benefit fund
“bona fide” when its amount turns on the value of a requested contribution—for an industry
promotion fund—that WGI has declined to make and that the national agreement expressly
authorizes it not to make? It is sensible and reasonable to treat the “bona fide” modifier as
requiring only payments sought for the ordinary purpose of promoting worker welfare, not
the one-off objective of accounting for a contractor’s permissible decision not to contribute
to an industry promotion fund. As for its spirit: A required like-amount increase in covered
benefits to account for the failure by WGI to make contributions to an industry promotion
fund represents an end run around the national agreement. The committee’s interpretation
of the provision is reasonable and deserving of respect.
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        Third, while U.A. Local 342 Apprenticeship & Training Trust v. Babcock & Wilcox
Construction Co., 396 F.3d 1056 (9th Cir. 2005), shares several similarities with this case,
it does not alter our analysis. There, too, a national agreement required a general contractor
to make contributions to welfare funds negotiated through local CBAs on behalf of various
independent contractors at the same time that it excluded industry promotion funds from its
scope. Id. at 1057–58. There, too, the local CBAs purported to require the general
contractor to make like-kind contributions to welfare funds if it chose not to contribute to the
industry promotion fund. Id. There, too, the national agreement authorized a “Policy
Committee” to interpret the national agreement. Id. at 1058–59. And there, too, the
committee had not required the payments in a prior case. Id. at 1058. Yet there the Ninth
Circuit concluded that the contractor must make the like-kind payments. Id. at 1058–59.

        The language of the Babcock & Wilcox national agreement, for one, does not parallel
this agreement in at least one material respect. That agreement did not limit the obligation
to pay locally negotiated benefits to “bona fide” fringe benefits or to benefits that would
“accrue to the direct benefit” of employees. Id. at 1057–58.

        For another, it is not clear what role the policy committee played in interpreting the
national agreement in Babcock & Wilcox—or what level of deference, if any, its decision
warranted. The Ninth Circuit concluded only that the national agreement “support[ed]” the
claimants’ position, id. at 1058; it did not conclude that a contrary interpretation was
unreasonable or implausible. Here, by contrast, it may well be the case that the language
of the national agreement could be construed to “support” both sides’ positions, which is
why the committee’s prior interpretations have taken a central place in our decision.

        As we read Babcock & Wilcox, it gave no deference to a prior decision of the “Policy
Committee.” It noted that the committee’s authority stemmed from an arbitration clause, id.,
that the claimants had not signed the national agreement, id., and that “an intent to subject
third-party beneficiaries to arbitration is not presumed; it must appear from the language of
the contract, or the circumstances under which it was executed.” Id. at 1059 (internal
quotation marks omitted). Although the policy committee claimed to have “exclusive
authority to administer and interpret” the national agreement, the court responded by noting
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that this was merely an unelaborated assertion and made no mention of any language in the
contract supporting it. Id. at 1059 n.2 (internal quotation marks omitted).

        Here, however, we have a national agreement that gives the committee broad
interpretive authority over the agreement without regard to the settings in which its prior
decisions arise. That is why we are deferring to the committee’s 1993 and 1996 decisions
to the extent they are reasonable, not treating them as binding the claimants in the same sense
that a prior arbitration with the same claimants would bind them.

        Third-party-beneficiary principles support this conclusion. The claimants in this case
did not sign the national agreement; they are third-party beneficiaries of it. A “third party
beneficiary’s rights are derivative” because “the foundation of any right the third party may
have . . . is the contract between the promisor and the promisee.” 13 Richard A. Lord,
Williston on Contracts § 37:23 (4th ed. 1990); see also Schneider Moving & Storage Co. v.
Robbins, 466 U.S. 364, 370–71 (1984) (noting that the rights of a third-party beneficiary are
subject to all the defenses that arise out of the contract between promisor and promisee,
unless the parties to the contract specify otherwise). As a derivative claimant, a third-party’s
right to enforce a contract cannot “rise higher than the rights of the contracting party through
whom he claims,” 13 Williston on Contracts § 37:23 (internal quotation marks omitted),
because “[t]he beneficiary cannot accept the benefits and avoid the burdens or limitations
of a contract,” Trans-Bay Eng’rs & Builders, Inc. v. Hills, 551 F.2d 370, 378 (D.C. Cir.
1976). In the absence of language in the national agreement altering these background
assumptions, see Schneider, 466 U.S. at 370–71, 375, the claimants must accept the bitter
with the sweet—the portions of the agreement they like along with those they do not. At the
same time that the national agreement gives the claimants a right to demand certain benefits
from WGI, it limits the benefits they may demand and creates a body that has authority to
interpret the meaning of that limitation. Were we to interpret the “bona fide fringe benefits”
clause differently from the committee, even after determining that the committee’s
interpretation was reasonable, we would be permitting the plaintiffs, as third-party
beneficiaries, to recover on a claim that no signatory to the national agreement itself could
succeed in bringing. A third-party beneficiary generally does not have greater enforcement
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rights than the original promisees to a contract, and the claimants offer no cognizable basis
for ignoring that principle here.

        These principles, we acknowledge, are subject to an ERISA-grounded exception.
Because the statute obligates employers to “make . . . contributions in accordance with
the terms and conditions” of a CBA, 29 U.S.C. § 1145, “multiemployer plans are entitled
to rely on the literal terms of written commitments,” and parties to a contribution dispute
may not rely on defenses grounded solely in the subjective “intent” of the parties not
manifested in the plan, Bakery & Confectionery Union & Indus. Int’l Health Benefits &
Pension Funds v. New Bakery Co. of Ohio, 133 F.3d 955, 959 (6th Cir. 1998). Invoking
this principle, we have held that, notwithstanding subsequent handwritten modifications
to a controlling agreement, an ERISA plan may recover under the original terms of the
agreement, so long as it had no notice of “an intent to supercede the unambiguous typed
provisions.” Nw. Ohio Adm’rs, Inc. v. Walcher & Fox, Inc., 270 F.3d 1018, 1025 (6th
Cir. 2001).

        This principle and these cases do not apply here, however. The claimants have
never suggested that they lacked notice of the Policy Committee’s construction of the
national CBA at the time they drafted the relevant provisions of the local CBAs. And
by considering the Policy Committee’s reasonable reading of that language, we do not
elevate an extrinsic modification over the language of the agreement but merely give
effect to the national CBA’s plain directive about one of the ways the agreement could
be interpreted. We regularly defer to an administrative agency’s reasonable reading of
a statute it is charged with interpreting, see, e.g., Alliance for Community Media v. FCC,
529 F.3d 763, 778–80 (6th Cir. 2008), even though agencies have no authority to modify
a statute’s unambiguous meaning, see id. at 777.             Because, in embracing the
Committee’s interpretation, we enforce (rather than modify) the terms of the National
CBA—including the clause giving the Policy Committee “the responsibility and sole
prerogative” to “[i]nterpret[]” it, JA 172—and because the claimants in any event had
notice both of the Committee’s authority and of its long-standing interpretation, Walcher
& Fox and New Bakery Co. have no relevance here.
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                                       III.

      For these reasons, we affirm.