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Bakery and Confectionery Union and Industry International Pension Fund v. Ralph's Grocery Co.

July 9, 1997






Appeal from the United States District Court for the District of Maryland, at Greenbelt.

Alexander Williams, Jr., District Judge. (CA-94-2630-AW)

Before MURNAGHAN, Circuit Judge, and BUTZNER and PHILLIPS, Senior Circuit Judges.

BUTZNER, Senior Circuit Judge

Argued: April 11, 1997

Reversed and remanded by published opinion. Senior Judge Butzner wrote the opinion, in which Judge Murnaghan and Senior Judge Phillips joined.


The Confectionery Union and Industry International Pension Fund (Fund) and its trustees filed this suit pursuant to section 515 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Section(s) 1145, to recover delinquent pension fund contributions from Ralph's Grocery Company (Company). The central issue in this case is whether the plan documents and the Company's collective bargaining agreement with the local union require it to make pension contributions to the Fund based on severance pay received by the Company's employees. The district court concluded that the Company was not required to make contributions for severance pay and entered summary judgment for the Company. We reverse and remand with instructions to enter judgment in favor of the Fund.

When the facts are undisputed, summary judgment is appropriate only if one party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). We review the entry of summary judgment de novo, applying the same standard as the district court. Stone v. Liberty Mutual Ins. Co., 105 F.3d 188, 190-91 (4th Cir. 1997). When reviewing cross-motions for summary judgment, we may, if appropriate, direct entry of judgment in favor of the party whose motion was denied by the district court. Monahan v. County of Chesterfield, 95 F.3d 1263, 1265 (4th Cir. 1996).


Section 515 of ERISA, 29 U.S.C. Section(s) 1145, states:

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.

Section 515 "creates a federal right of action independent of the contract on which the duty to contribute is based." Bituminous Coal Operators' Ass'n, Inc. v. Connors, 867 F.2d 625, 633 (D.C. Cir. 1989).

In a collection action based on section 515, a multiemployer plan can enforce, as written, the contribution requirements found in the controlling documents. Central Pennsylvania Teamsters Pension Fund v. McCormick Dray Line, Inc., 85 F.3d 1098, 1103 (3d Cir. 1996). In this respect, section 515 puts multiemployer plans in a stronger position than they otherwise occupy under common law contract principles. See, e.g., Central States, Southeast and Southwest Areas Pension Fund v. Independent Fruit and Produce Co., 919 F.2d 1343, 1348 (8th Cir. 1990); Conners, 867 F.2d at 633-34. Because an employer's obligation to a multiemployer plan usually arises through a collective bargaining agreement negotiated and agreed to by the employer and union, the multiemployer plan is, under common law contract principles, a third party beneficiary of the collective bargaining agreement. See Sinai Hospital of Baltimore, Inc. v. National Benefit Fund for Hospital & Health Care Employees, 697 F.2d 562, 568 (4th Cir. 1982). Although a third party beneficiary can enforce the terms of a contract that inure to its benefit, it is subject to defenses that the promisor could assert against the original party to the contract. Connors, 867 F.2d at 632. This often meant a multiemployer plan would be subject to defenses the employer could assert against the local union. Independent Fruit and Produce, 919 F.2d at 1348; but see Lewis v. Benedict Coal Corp., 361 U.S. 459 (1960) (recognizing, before the enactment of section 515, an exception to the common law third party beneficiary rule in the context of multiemployer funds).

Before section 515 was enacted, collection actions by multiemployer plans often were complicated by issues that had arisen between the employer and the local union but were unrelated to the employer's obligation to the plan. Central States, Southeast and Southwest Areas Pension Fund v. Gerber Truck Service, Inc., 870 F.2d 1148, 1152-53 (7th Cir. 1989); Independent Fruit and Produce, 919 F.2d at 1348. Injecting these tangential issues into collection actions consumed plan resources by increasing the cost and delay involved in litigation. See, e.g., Independent Fruit and Produce, 919 F.2d at 1348. And, in cases in which the employer's defense was successful, the plan was left without contributions it had been promised and had expected. See, e.g., id. Ultimately, these losses were shouldered by employee beneficiaries through reduced benefits and other employers through increased contributions. Id.; Gerber Truck Service, 870 F.2d 1151; Benson v. Brower's Moving & Storage, Inc., 907 F.2d 310, 314 (2d Cir. 1990). Because multiemployer plans typically involve many employers and unions across the nation, in most cases it would be difficult and costly for such plans to monitor the problems or understandings that arise between the individual unions and employers. McCormick Dray Line, 85 F.3d at 1103; Gerber Truck Service, 870 F.2d at 1151.

Section 515 strengthens the position of multiemployer plans by holding employers and unions to the literal terms of their written commitments. Because an employer's obligation to a multiemployer fund is determined by the plain meaning of the language used in the collective bargaining agreement, the actual intent of the contracting parties (i.e., the employer and the local union) is immaterial when the meaning of that language is clear. Independent Fruit and Produce, 919 F.2d at 1349, 1352-53; see also Connors, 867 F.2d at 635-36. Consequently, an employer is not permitted to raise defenses that attempt to show that the union and the employer agreed to terms different from those set forth in the agreement. See, e.g., Gerber Truck Service, 870 F.2d 1148 (refusing to enforce an oral agreement between employer and union). Nor is an employer permitted to raise defenses that relate to claims the employer may have against the union. See, e.g., Agathos v. Starlite Motel, 977 F.2d 1500, 1505 (3d Cir. 1992) (fraud in the inducement); Connors, 867 F.2d at 632-36 (mistake of fact). By allowing multiemployer funds to enforce the literal terms of an employer's commitment, section 515 increases the reliability of their income streams, reduces the cost and delay associated with collection actions, and reduces or eliminates the cost of monitoring the formation of collective bargaining agreements. Nevertheless, multiemployer funds are not permitted to"enforce a nonexistent contractual obligation." Teamsters Industrial Employees Welfare Fund v. Rolls-Royce Motor Cars, Inc., 989 F.2d 132, 138 (3d Cir. 1993).


The Fund is a multiemployer defined benefit pension plan, which was created in 1955 to provide retirement benefits for employees working in the baking and candy industries. The Fund was formed through an Agreement and Declaration of Trust (trust) and is administered by a board of trustees, which is composed of an equal number of employer and union representatives. Pension benefits are funded by participating employers through periodic contributions. Currently, 1,100 employers with over 60,000 employees participate in the Fund, and the Fund pays benefits to over 40,000 retired employees.

The Company is a member of the Food Employers Council, Inc. (Council), which was formed by the grocery supermarket industry in Southern California. The Council is a labor relations association that negotiates and administers industry-wide collective bargaining agreements with unions representing employees of the Council's members.

The Company has participated continuously in the Fund since 1957. Its commitment to the Fund has been set forth in the collective bargaining agreements that it has negotiated through the Council. In 1992, the Company and the Bakery, Confectionery, and Tobacco Workers International Union, Local No. 37 (Union) entered into a three-year collective bargaining agreement, which consists of 35 sections and the standard clause. The Union represents the employees at one of the Company's plants. The Company and the Union were parties to similar collective bargaining agreements during past years.

The collective bargaining agreement includes a provision that entitles the Company's employees to severance pay under specified circumstances. The severance pay provision, section XV, states:

[T]he Employer shall not be required to make Benefit Fund, Pension or any other contributions of any nature on any Severance Pay paid pursuant to the provisions of this SECTION.

Section XXVI of the collective bargaining agreement provides that the Company shall make contributions to the Fund of an agreed amount. This section of the bargaining agreement makes reference to an agreement supplement that sets forth "the terms and conditions of section XXVI in more detail." This supplement is the Standard Collective Bargaining Clause, which the Union and the Company executed as a part of their collective bargaining agreement. The Fund requires every participating employer and union, as a condition on participation in the Fund, to include the standard clause in their collective bargaining agreement. The standard clause establishes each ...

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