Frank Kelly v. Gas Field Specialists Inc

• Court: Court of Appeals for the Third Circuit
• Decided: June 19, 2018
• Docket: 17-2654
• Status: Unpublished

Opinion

NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________

No. 17-2654 _____________

FRANK KELLY; TODD R. RAY, as Trustees of the Plumbers and Pipefitters Local No. 520 Health and Welfare Fund; Plumbers and Pipefitters Local No. 520 Pension Fund; Plumbers and Pipefitters Local No. 520 Annuity Fund

v.

GAS FIELD SPECIALISTS, INC., Appellant _____________

On Appeal from the United States District Court for the Middle District of Pennsylvania (M.D. Pa. No. 1-14-cv-00004) District Judge: Honorable Christopher C. Conner _______________

Submitted Under Third Circuit LAR 34.1(a) June 5, 2018

Before: AMBRO, JORDAN, and VANASKIE, Circuit Judges

(Filed: June 19, 2018) _______________

OPINION _______________ JORDAN, Circuit Judge.

Gas Field Specialists, Inc. (“GFS”) appeals from the District Court’s order

granting summary judgment in favor of Frank Kelly and Todd C. Ray, as trustees (the

 This disposition is not an opinion of the full court and, pursuant to I.O.P. 5.7, does not constitute binding precedent. “Trustees”) of the Plumbers and Pipefitters Local No. 520 Health and Welfare Fund,

Pension Fund, and Annuity Fund (the “Funds”), on their claim to recover delinquent

contributions under §§ 502(a) and 515 of the Employee Retirement Income Security Act

of 1974 (“ERISA”), 29 U.S.C. §§ 1132(a), 1145. For the reasons that follow, we will

affirm.

I. BACKGROUND1

At all times relevant to this appeal, GFS was an “employer” and the Plumbers and

Pipefitters Local Union No. 520 (“Local 520”) was an “employee organization” as

defined under ERISA. 29 U.S.C. § 1002(4)-(5). The Funds are ERISA multiemployer

employee benefit plans. 29 U.S.C. § 1002(3), (37). Local 520 entered into a collective

bargaining agreement with the Mechanical Contractors Association of Central

Pennsylvania on behalf of its members (the “Agreement”), which governed, among other

things, employee wages, hours, working conditions, and other benefits from 2012 to

2015. The Agreement set forth the trade and geographic scope of Local 520’s

jurisdiction and required employers to contribute to the Funds for employees covered

under the Agreement. GFS joined the Agreement after its Vice President of Operations

signed a Recognition Joinder on June 11, 2012, which provided that GFS “adopts and

1 We view the facts in the light most favorable to the nonmoving party. See infra note 3. We are addressing the scope of GFS’s contribution obligations solely as to employees covered under the 2012-2015 collective bargaining agreement between Local 520 and GFS. All references to GFS employees’ union membership pertain only to membership in Local 520. 2 agrees to be bound by the terms and conditions of the [Agreement.]” (App. at 348.) The

Funds are third-party beneficiaries to the Agreement.

In September 2013, the Funds undertook a compliance audit. It revealed that,

although GFS had employed both union and non-union employees, it had only made

monthly contributions on behalf of union employees. In January 2014, the Trustees filed

suit in the United States District Court for the Middle District of Pennsylvania, seeking a

full audit of GFS’s employment and payroll records and demanding payment of any

delinquent contributions that GFS owed to the Funds.

The parties filed cross-motions for summary judgment on liability. Neither

disputed the Agreement’s validity, and neither argued that its terms were ambiguous, but

they vigorously disputed the scope of GFS’s contribution obligations under the

Agreement. The Trustees pointed to broad language in the Agreement covering “all

employees of an Employer,” and argued that GFS had thus agreed to make contributions

for all employees. (App. at 343, App’x A.) GFS countered that it was always the

company’s understanding that any agreement with Local 520 extended only to union

employees, and it argued that it had not made contributions for non-union employees

under prior agreements for nearly a decade, without issue.

The District Court granted the Trustees’ motion, and denied GFS’s motion. It

concluded that the plain language of the Agreement required GFS to contribute to the

Funds on behalf of “all employees” falling within the Agreement’s trade and geographic

scope, regardless of union or job status or particular project assignment. (App. at 11.) It

also concluded that GFS had not shown that the Agreement was void ab initio due to

3 fraud in the execution and had not otherwise established a recognized defense to its

contribution obligations. Thus, the Court concluded that the Trustees were entitled to

summary judgment on liability, but it deferred entering judgment pending the parties’

submissions on damages.

Thereafter, auditors reviewed GFS’s employee roster and contribution records and

calculated the delinquent contributions owed to the Funds. The parties submitted those

results to the Court, reporting GFS’s outstanding liabilities as follows:

 Pension Fund: $646,021.14 in contributions, $96,903.17 in liquidated damages, and $184,608.17 in interest;

 Annuity Fund: $248,055.66 in contributions, $37,208.35 in liquidated damages, and $70,993.25 in interest; and

 Health and Welfare Fund: $648,467.35 in contributions, $97,270.10 in liquidated damages, and $185,893.68 in interest.

(App. at 19.)

GFS did not dispute the auditors’ calculations. Instead, it sought to excuse or

reduce the amount it owed based on certain alternative benefits it had provided to

employees for whom it did not make fund contributions. Specifically, GFS said that it

had provided alternative health insurance benefits at a cost of $146,166.23 and had made

contributions to a 401(k) retirement plan in the amount of $25,566.31. GFS asserted the

alternative health insurance benefits as a total defense to an ERISA damages award for

the Health and Welfare Fund. It also argued that it was at least entitled to offset the total

amount of alternative benefits from any damages awarded to the Health and Welfare

Fund and the Annuity Fund, highlighting that the Funds otherwise stood to receive an

4 unjust windfall recovery of contributions on behalf of employees for whom they did not

provide any benefits.

The District Court rejected GFS’s damages arguments. It reiterated its view that

the company had failed to establish any of the recognized defenses to contribution. The

Court explained that GFS was not entitled to unilaterally excuse or reduce its contractual

obligations to contribute to the Funds by providing alternative benefits, “[n]o matter how

well-intended” its decision. (App. at 24.) Nor was the Court persuaded by GFS’s request

for an “equitable exception” to prevent an unjust windfall to the Funds. (App. at 23.) It

therefore entered summary judgment in favor of the Trustees and against GFS for the full

amount of its delinquent contributions.2 This timely appeal followed.

II. DISCUSSION3

GFS raises the same arguments before us that it made to the District Court, and we

too are unpersuaded.

Section 515 of ERISA provides that all employers “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

2 The District Court also granted the Trustees’ motion for attorneys’ fees and costs, which GFS has not appealed. 3 The District Court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction pursuant to 28 U.S.C. § 1291. Our review of a grant of summary judgment is plenary. Deweese v. Nat’l R.R. Passenger Corp. (Amtrak), 590 F.3d 239, 244 n.8 (3d Cir. 2009). Summary judgment is appropriate if there are no genuine disputes of material fact and if the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). In reviewing a summary judgment ruling, we consider the facts in the light most favorable to the nonmoving party. Anderson, 477 U.S. at 248-49. 5 contributions in accordance with the terms and conditions of such plan or such

agreement.” 29 U.S.C. § 1145. “Congress’s purpose in enacting section 515 was to

allow multiemployer welfare funds to rely upon the terms of collective bargaining

agreements and plans as written, thus ‘permit[ting] trustees of plans to recover delinquent

contributions efficaciously[.]’” Cent. Pa. Teamsters Pension Fund v. McCormick Dray

Line, Inc., 85 F.3d 1098, 1103 (3d Cir. 1996) (first alteration in original) (citation

omitted). We apply the “basic principle of contract construction” that requires courts to

“interpret and enforce unambiguous agreements according to their terms.” Shaver v.

Siemens Corp., 670 F.3d 462, 496 (3d Cir. 2012). We have said that “[e]xtrinsic

evidence … may not be used to create an ambiguity where none exists.” Int’l Union,

United Auto., Aerospace & Agr. Implement Workers of Am., U.A.W. v. Skinner Engine

Co., 188 F.3d 130, 145 (3d Cir. 1999).

GFS appears to concede – as it must – that the Agreement, on its face, is not

limited to union employees. Rather, it provides that Local 520 is “the sole and exclusive

bargaining representative for all employees in a unit consisting of journeymen,

apprentices and other employees described in [the Agreement] in the employ of the

Employer with respect to … all work described in Article II in this Agreement.” (App. at

325 ¶ 6(b) (emphasis added).) Article II broadly defines the “trade or work jurisdiction”

of the Agreement as “cover[ing] the rates of pay, rules and working conditions of all

journeymen and apprentices engaged in” plumbing and pipefitting work as set forth in

the Agreement, with geographical and trade jurisdiction further defined in Appendix A.

(App. at 325 ¶ 7 (emphasis added).) Appendix A then states, in similarly broad language,

6 that “[t]his Agreement shall apply to and cover all employees of an Employer employed

to perform or performing plumbing, heating and piping work as listed hereinafter within

the geographical jurisdiction allocated to the local union by the United Association[.]”

(App. at 343 (emphasis added).)

The Agreement’s employer contribution provisions also contain broad, unlimited

references to “employee.” The Health and Welfare Fund and Pension Fund provisions

require contributions based on hours worked by “each apprentice and journeyman

covered by this [A]greement,” and the Annuity Fund provision requires contributions for

hours worked by “each employee.” (App. at 336-37 ¶¶ 46, 47.) The Agreement

unambiguously covers “each employee,” regardless of union membership or project

assignment. Thus, the District Court correctly concluded that GFS’s suggested reading is

betrayed by the plain language of the Agreement itself.

We also agree that GFS failed to establish a viable defense. We have recognized

three defenses for employers against a fund’s claim to recover delinquent contributions,

only one of which arguably applies here: fraud in the execution. See Agathos v. Starlite

Motel, 977 F.2d 1500, 1505 (3d Cir. 1992) (listing defenses, including (1) that the fund

contributions themselves are illegal, (2) that the agreement is void ab initio, due to fraud

in the execution, and (3) that the employees have voted to decertify the union as their

bargaining representative); accord McCormick, 85 F.3d at 1106; Connors v. Fawn Min.

Corp., 30 F.3d 483, 490 (3d Cir. 1994). We have described fraud in the execution as

tantamount to “excusable ignorance of the contents of the writing signed,” Fawn Min.

Corp., 30 F.3d at 491 (citation omitted), which GFS does not argue here. Rather, GFS

7 relies on past practices and an unwritten understanding with Local 520 as modifying the

unambiguous terms of a written collective bargaining agreement. That is insufficient.

See McCormick, 85 F.3d at 1103-04 (citing cases rejecting additional defenses such as

fraud in the inducement or oral promises to disregard the text of an agreement).

Finally, we reject GFS’s entreaty that we reduce its liability to prevent the Funds

from receiving an unjust windfall recovery. We have not previously endorsed a fourth

“equitable” defense, and we decline to do so today.4 See McCormick, 85 F.3d at 1104-06

(“If it means nothing else, section 515 means that, at least when the Trustees [of the fund]

are not implicated in the alleged misconduct, their suit cannot be thwarted by defenses

not apparent from the face of the [collective bargaining a]greement.” (first alteration in

original and emphasis omitted) (quoting Bituminous Coal Operators Ass’n v. Connors,

867 F.2d 625, 634 (D.C. Cir. 1989))).

We adhere to a bright-line interpretation of § 515, which our case law has

described “as severely limiting the defenses available to an employer who has signed an

agreement which commits it to make contributions to a benefit fund.” Fawn Min. Corp.,

4 GFS has not argued that the Trustees acted in persistent dereliction of their fiduciary duty to pursue the Funds’ contractual right of contribution, as was the concern in Agathos v. Starlite Motel, 977 F.2d at 1507. Indeed, the Trustees filed suit to recover any delinquent contributions within months of conducting an initial compliance audit. GFS’s reliance on the dissenting opinion in Central States, Southeast and Southwest Areas Pension Fund v. Gerber Truck Service, Inc., 870 F.2d 1148 (7th Cir. 1989) (en banc), is misplaced. We have cited approvingly the majority opinion in Gerber Truck at least twice. See Fawn Min. Corp., 30 F.3d at 491 (discussing Gerber Truck and distinguishing between valid defense of fraud in the execution and invalid defense of fraud in the inducement); see also McCormick, 85 F.3d at 1105-06 (discussing Gerber Truck, explaining that courts have construed § 515 as limiting defenses available to an employer sued by a welfare fund, and declining to recognize fourth defense of mutual mistake). 8 30 F.3d at 490; see also McCormick, 85 F.3d at 1105 (noting Congress’s concern that

multiemployer plans – as third party beneficiaries – “must be able to rely on the plain

language of collective bargaining agreements … in order to ensure that they have

sufficient funds to pay out required benefits”). The Funds are entitled to rely on the

Agreement as written, and GFS is liable for its delinquent contributions under that

Agreement.

III. CONCLUSION

For those reasons, we will affirm the District Court’s grant of summary judgment

in favor of the Trustees and against GFS.