Court Opinion

ID: 181480
Source: CourtListenerOpinion
Date Created: 2010-12-21 17:44:37+00
Date Added: 2024-06-11T17:25:55.637853
License: Public Domain

NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                                _____________

                                   No. 10-1248
                                  _____________

             ANTHONY MAZZA; MAZZA SHEET METAL CO., INC.

                                         v.

            SHEET METAL WORKERS' NATIONAL PENSION FUND,

                                                     Appellant

                   On Appeal from the United States District Court
                            for the District of New Jersey
                                  (Civ. No. 09-281)
                      District Judge: Hon. Katharine S. Hayden

                     Submitted Under Third Circuit LAR 34.1(a)
                                November 17, 2010

           Before: BARRY, CHAGARES, and VANASKIE, Circuit Judges.

                             (Filed December 21, 2010 )

                                   ____________

                                     OPINION
                                   ____________

CHAGARES, Circuit Judge.

      Plaintiffs Anthony Mazza and Mazza Sheet Metal Company, Inc. seek a refund of

contributions made to defendant Sheet Metal Workers‟ National Pension Fund on behalf
of Anthony Mazza, as the owner-operator of Mazza Sheet Metal. Following a bench trial

on the issue, the District Court held that, as a matter of equity, the plaintiffs were entitled

to restitution of the contributions. Because we find that § 403(c) of the Employee

Retirement Income Security Act (“ERISA”) prohibits such restitution under the

circumstances, we will reverse.

                                               I.

       We write solely for the benefit of the parties and will, therefore, only briefly recite

the essential facts. In 1990, Anthony Mazza, a union sheet metal worker, started Mazza

Sheet Metal Company and became what is known in the industry as an “owner-operator.”

This meant that he could operate as an employer of other sheet metal workers, but remain

a union journeyman and perform sheet metal work alongside his employees.

       Mazza Sheet Metal entered into a collective bargaining agreement (the

“Agreement”) with Sheet Metal Workers‟ International Union Local 25 (“Local 25”),

which required Mazza Sheet Metal to make pension contributions to the Sheet Metal

Workers‟ National Pension Fund (the “Fund”) on behalf of any union journeymen hired

to work on Mazza Sheet Metal‟s contracts. The Agreement further required Mazza Sheet

Metal to contribute to the Fund on behalf of Anthony Mazza for any hours of sheet metal

work that he performed alongside his employees. If Mazza Sheet Metal‟s contributions

to the Fund failed to account for the hours of sheet metal work performed by Anthony

Mazza, it would no longer be eligible to hire union journeymen from Local 25.

       Mazza Sheet Metal began contributing to the Fund for Anthony Mazza‟s hours, as

well as for those of the union journeymen that he hired in 1991, in accordance with the

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Agreement. In July 1996, however, the Fund sent Anthony Mazza a letter advising him

that, in order to be approved as an owner-operator plan participant and receive pension

credits for the contributions made on his behalf, he had to file an owner-operator

registration statement, which would have obligated him to contribute for at least 1,680

hours of his own work per year, regardless of the hours that he actually worked. The

Fund enclosed in this letter a refund form that Anthony Mazza could submit for return of

his personal contributions if he chose not to register as an owner-operator.

       Because Anthony Mazza performed far fewer than 1,680 hours of sheet metal

work in a year, he did not file the registration statement. But, because he also did not

want to forfeit his ability to hire union journeymen, he continued to contribute to the

Fund for the hours that he actually worked, as required by the Agreement, without

responding to the Fund‟s communication. The Fund sent Anthony Mazza a “FINAL

NOTICE” in November 1996, informing him that all of his personal contributions would

be stricken within 30 days unless he filed the owner-operator registration statement. Still,

he decided not to respond to the Fund‟s communication because he needed to remain

eligible to hire union journeymen in order to complete his contracts and maintain his

company‟s economic viability.

       Effective January 1, 2002, the Fund changed its contribution requirements, such

that owner-operators could participate in the Fund without filing the owner-operator

registration statement that required them to contribute for 1,680 hours per year. Anthony

Mazza received a notice alerting him to this change. The notice also made clear,

however, that owner-operators still needed to file the registration statement in order to

                                             3
receive pension credits for hours worked before the change took effect. As such, the

Fund enclosed a retroactive registration statement, which had to be returned within sixty

days to prevent removal of pension credits for all hours worked prior to January 1, 2002.

Though Anthony Mazza received and understood this communication, he continued to

make contributions, without filing the retroactive registration statement or otherwise

responding to the Fund. Having received no response, the Fund sent a second copy of

both the policy change notice and the retroactive registration statement on December 16,

2002. Again, Anthony Mazza did not respond.

       The Fund sent Anthony Mazza a final letter on April 24, 2003, stating that,

because it had received no response from Mazza Sheet Metal, the Fund‟s Trustees had

determined that the contributions made on behalf of Anthony Mazza, prior to January 1,

2002, were remitted in error. The letter informed Mazza Sheet Metal that it had six

months to either request a refund of the mistaken contributions or file an executed

retroactive registration statement, if the contributions were not in fact mistaken. The

letter further made clear that a refund was not automatic and that a refund would no

longer be available after the six-month period lapsed. Though he acknowledges that he

received and understood this letter, Anthony Mazza still did not respond to the Fund.

       In 2008, two years after retiring, Anthony Mazza applied for a pension based on

the contributions Mazza Sheet Metal made on his behalf between 1991 and 2001, but the

Fund denied his application on the basis that he had never been a participant in the Fund

during that period. Anthony Mazza then filed this action seeking a refund of his

contributions. He alleged that it was inequitable for the Fund to retain his contributions

                                             4
without providing him a pension in return. The District Court, rejecting the Fund‟s

arguments that § 403(c) of ERISA prohibited it from refunding the contributions under

the circumstances, found that the Fund had been unjustly enriched by the contributions

and ordered restitution.

                                              II.

       The District Court had jurisdiction over this action pursuant to 28 U.S.C. § 1331

and 29 U.S.C. § 1132. We have appellate jurisdiction pursuant to 28 U.S.C. § 1291.

       “We exercise plenary review of the district court's legal conclusion[] that

restitution was an appropriate remedy. If the district court did not err in its legal

conclusions, our review of the district court's assessment of the equities is for abuse of

discretion.” Luby v. Teamsters Health, Welfare, & Pension Trust Funds, 944 F.2d 1176,

1185-86 (3d Cir. 1991).

                                             III.

       Section 403(c)(1) of ERISA establishes that the assets of a multiemployer fund

shall never inure to the benefit of an employer; rather, the fund‟s assets must be held for

the exclusive benefit of plan participants and their beneficiaries (the “anti-inurement and

exclusive benefit rule”). 29 U.S.C. § 1103(c)(1). As a general matter, therefore, it is a

violation of § 403(c)(1) to pay out to an employer, whether by way of refund or

otherwise, contributions made to a multiemployer fund. But § 403(c)(2)(A)(ii) carves out

a narrow exception: it does not violate the anti-inurement and exclusive benefit rule to

refund a contribution made mistakenly by an employer, if such refund is made within six

                                              5
months after the plan administrator determines that the employer made the contribution in

error. See 29 U.S.C. § 1103(c)(2)(A)(ii).

       While “[s]ection 403(c)(2)(A)(ii) makes it possible for the trustees of a fund to

refund mistaken contributions without facing a suit from beneficiaries for violating the

non-inurement provision of section 403(c)(1)[,]” it “neither requires such refunds to be

made, nor provides employers a right of action against the fund if such refunds are not

made.” Plucinski v. I.A.M. Nat‟l Pension Fund, 875 F.2d 1052, 1055 (3d Cir. 1989). In

the context of ERISA, however, Congress has authorized the federal courts to create

common law, where it is “„necessary to fill in interstitially or otherwise effectuate the

statutory pattern enacted in the large by Congress.‟” Id. at 1056 (quoting Van Orman v.

Am. Ins. Co., 680 F.2d 301, 312 (3d Cir. 1982)). In accordance with that authority, this

Court has held that, as a matter of federal common law, there exists “an equitable cause

of action by employers for the recovery of contributions erroneously paid to pension

funds due to a mistake of fact or law.” Id. at 1057. This cause of action is necessary to

fill in the interstices of § 403(c), which provides a framework for the return of mistaken

contributions to employers, but does not provide employers with a mechanism for

enforcing the right to a refund conferred on them by this framework. See id. “Of course,

general equitable principles govern” and the court should, in its sound discretion, award

restitution only when the equities favor such an order. Id. at 1057-58.

       Regardless of the equities at stake, however, “resort to federal common law

generally is inappropriate when its application would conflict with the statutory

provisions of ERISA. . . .” Singer v. Black & Decker Corp., 964 F.2d 1449, 1452 (4th

                                              6
Cir. 1992). “If federal common-law restitution would contravene a [statutory or

contractual] term of an ERISA plan, it will be permitted only if there is a „particularly

strong affirmative indication that such a right would effectuate a statutory policy.‟”

Luby, 944 F.2d at 1186 (quoting Van Orman, 680 F.2d at 312-13). It is for this reason

that we emphasized in Plucinski that the equitable cause of action we recognized merely

fills in the interstices of the statutory scheme enacted by Congress in § 403(c) of ERISA.

875 F.2d at 1058. Accordingly, this equitable remedy is inherently moored in and

bounded by the narrow exception to the anti-inurement and exclusive benefit rule set

forth in § 403(c)(2): no restitution may be made unless the employer establishes a right

to a refund of the amount mistakenly contributed by filing a claim within six months of

the plan administrator‟s determination that the contribution was made in error. See also

26 C.F.R. § 1.401(a)(2)-1(b) (explaining, with reference to the parallel provision of the

Internal Revenue Code, that a refund is deemed timely only if the employer files “a claim

with the plan administrator within six months after the date on which the plan

administrator determines that a mistake did occur.”).

                                             IV.

       In our analysis of this case, “[w]e begin with a fundamental premise: every claim

for relief involving an ERISA plan must be analyzed within the framework of ERISA.”

Hooven v. Exxon Mobil Corp., 465 F.3d 566, 573 (3d Cir. 2006). Notwithstanding this

dictate, the District Court held that the constraints set forth in § 403(c) of ERISA did not

govern the refund request at issue here because the applicable remedy — that created by

Plucinski — was a creature of federal common law, not a creature of statute. See 875

                                              7
F.2d at 1057. Applying only general common law principles of equity, the District Court

found that the Fund had been unjustly enriched when it accepted and retained employer

contributions on behalf of Anthony Mazza with the knowledge that he would not receive

pension credits in exchange. Because the District Court did not view the April 24, 2003,

letter against the backdrop of § 403(c) of ERISA, it found the six-month time limit placed

on any refund request to be arbitrary, especially in light of the fact that the lengthy delay

in the plaintiffs‟ refund claim had caused no demonstrable prejudice to the Fund.

Accordingly, the District Court concluded that the equities weighed in favor of the

plaintiffs and that restitution of the employer contributions was, therefore, an appropriate

equitable remedy.

       While we agree that the remedy recognized in Plucinski is a matter of federal

common law, it is not a free-standing common law cause of action. Rather, as discussed

above, the equitable cause of action for recovery by an employer of erroneously paid

pension fund contributions exists only in the interstices of § 403(c) of ERISA. Indeed,

this Court invoked general equitable principles expressly for the purpose of

“effectuat[ing] the statutory pattern enacted in the large by Congress.” Plucinski, 875

F.3d at 1056. Notably, Anthony Mazza does not dispute that, as owner of Mazza Sheet

Metal, he qualified as an “employer” for purposes of § 403(c) of ERISA. And neither is

there any dispute that the Fund is a multiemployer ERISA plan. Thus, we must conclude

that the District Court erred in deciding this case without regard to the limits of § 403(c).

With that in mind, we turn to the application of the equitable remedy recognized in

Plucinski to the facts of this case.

                                              8
       Even assuming that the equities presented by this case indeed favor the plaintiffs,

as the District Court found,1 a court should not easily fashion an equitable remedy, under

the guise of federal common law, that contravenes ERISA‟s carefully crafted statutory

scheme. Luby, 944 F.2d at 1186 (quoting Van Orman, 680 F.2d at 312-13); see also

Ryan ex rel. Capria-Ryan, 78 F.3d 123, 126 (3d Cir. 1996) (quoting Mertens v. Hewitt

Assocs., 508 U.S. 248, 258-60 (1993) (“As the Supreme Court has explained, „[t]he

authority of courts to develop a „federal common law‟ under ERISA ... is not the

authority to revise the text of the statute.‟”)). The plaintiffs admit that they did not make

the contributions at issue here in error. Instead, they very deliberately made the

contributions so as to comply with the Local 25 collective bargaining agreement. Under

such circumstances, providing the plaintiffs with a refund of the contributions runs afoul

of §403(c) of ERISA, which excuses from the requirements of the anti-inurement and

exclusive benefit rule only a refund of those employer contributions that were made on

the basis of a mistake of fact or law.

1
  Because we conclude below that the District Court erred in its legal conclusion that
restitution was an appropriate remedy, we find it unnecessary to review the District
Court‟s assessment of the equities for an abuse of discretion. Nonetheless, we note that it
is not entirely clear that the equities involved in fact favor the plaintiffs. After all, the
plaintiffs did receive a benefit from the contributions. By making the contributions on
behalf of Anthony Mazza, Mazza Sheet Metal was able to hire the union workers that it
needed to complete its contracts and remain in business, which inured to the benefit of its
owner, Anthony Mazza. And courts generally recognize that restitution is inequitable
where the payor seeks to recoup a payment, though he has obtained a benefit from that
payment which he intends to retain. See Operating Eng‟rs Local 139 Health Benefit
Fund v. Gustafson Constr., 258 F.3d 645, 651 (7th Cir. 2001).

                                              9
       Moreover, even if the contributions can indeed be deemed mistaken, restitution on

the facts of this case still falls outside the scope of § 403(c)(2)‟s narrow exception to the

anti-inurement and exclusive benefit rule because Mazza Sheet Metal failed to file a

refund claim within six months of the plan administrator‟s determination that the

contributions were made in error. Anthony Mazza admits that he received a letter from

the Fund, dated April 24, 2003, which stated that the Fund‟s Trustees had determined the

contributions made on his behalf to have been erroneous. This letter also provided a

remedy for such error that comported precisely with the requirements of ERISA, as

informed by the regulations associated with the parallel provision of the Internal Revenue

Code: it granted Mazza Sheet Metal six months from the date of the notice to file a claim

for a refund. But Anthony Mazza chose not to take advantage of this remedy because he

wanted to continue to hire union workers to fulfill Mazza Sheet Metal‟s contracts and, in

order to remain eligible to do so, his company had to make contributions to the Fund for

the hours of sheet metal work that he performed. The plaintiffs waited five more years to

seek a refund of the contributions made on Anthony Mazza‟s behalf by filing this action.

Yet, by that time, it was far too late for the Fund to refund the contributions — to have

done so would have been a violation of § 403(c)(1)‟s anti-inurement and exclusive

benefit rule.

        In short, it appears that by ordering restitution of employer contributions that were

not remitted in error, and for which no timely refund request was made, the District Court

ordered the Fund to do something, in the name of federal common law, that contravenes

§ 403(c) of ERISA. ERISA only leaves room for such a course of action when there

                                              10
exists a “particularly strong affirmative indication” that the equitable remedy ordered

“would effectuate a statutory policy.” Luby, 944 F.2d at 1186 (quotation omitted).

Section 403(c) places strict limits on the circumstances under which a multiemployer

fund may refund employer contributions in order to further ERISA‟s primary purpose of

protecting and stabilizing the assets of employee pension plans, thereby safeguarding the

interests of plan participants and their beneficiaries. See State St. Bank & Trust Co. v.

Denman Tire Corp., 240 F.3d 83, 89 (1st Cir. 2001) (citing 29 U.S.C. § 1104(a)(A)(i)-

(ii)). Viewed in this light, we can discern no “particularly strong affirmative indication”

that the purposes of ERISA would be served by restitution of employer contributions

under the circumstances presented here.2

                                            IV.

       For these reasons, we will reverse the judgment of the District Court.

2
  The District Court seems to have been persuaded that, because Anthony Mazza, as an
owner-operator, was both an employer and a plan participant, restitution of the
contributions made on his behalf would not undermine ERISA‟s primary purpose of
protecting plan beneficiaries. But, though Anthony Mazza performed sheet metal work
alongside his employees, he was only an employer in relation to the Fund. Indeed, he
admits that he understood that he did not qualify as a plan participant, but that Mazza
Sheet Metal continued to contribute to the Fund on his behalf because he wanted to
remain eligible to hire union workers.
                                             11