U.S. Foodservice, Inc. v. Truck Drivers & Helpers Local Union No. 355 Health & Welfare Fund ( 2012 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
U.S. FOODSERVICE, INC., 
Plaintiff-Appellee,
v.
TRUCK DRIVERS & HELPERS LOCAL
UNION NO. 355 HEALTH &
WELFARE FUND,
Defendant-Appellant,
and
TRUCK DRIVERS & HELPERS LOCAL  No. 12-1108
355 RETIREMENT PENSION PLAN;
TRUSTEES OF THE TRUCK DRIVERS &
HELPERS LOCAL UNION NO. 355
RETIREMENT PENSION PLAN;
TRUSTEES OF THE TRUCK DRIVERS &
HELPERS LOCAL UNION NO. 355
HEALTH AND WELFARE FUND;
BENEFITS ADMINISTRATION
CORPORATION, INC.,
Defendants.

Appeal from the United States District Court
for the District of Maryland, at Baltimore.
J. Frederick Motz, Senior District Judge.
(1:09-cv-00266-JFM)
Argued: October 23, 2012
Decided: November 30, 2012
2 U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS
Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.
Reversed and remanded by published opinion. Judge Wilkin-
son wrote the opinion, in which Judge Keenan and Judge Diaz
joined.
COUNSEL
ARGUED: Paul Douglas Starr, ABATO, RUBENSTEIN &
ABATO, PA, Baltimore, Maryland, for Appellant. Stefan Jan
Marculewicz, LITTLER MENDELSON PC, Washington,
D.C., for Appellee. ON BRIEF: Corey S. Bott, Meghan
Horn, ABATO, RUBENSTEIN & ABATO, PA, Baltimore,
Maryland, for Appellant. Steven E. Kaplan, LITTLER MEN-
DELSON PC, Washington, D.C., for Appellee.
OPINION
WILKINSON, Circuit Judge:
The Employee Retirement Income Security Act ("ERISA"),
29 U.S.C. § 1001 et seq., provides that assets of an ERISA
plan "shall never inure to the benefit of any employer and
shall be held for the exclusive purposes of providing benefits
to participants in the plan and their beneficiaries and defray-
ing reasonable expenses of administering the plan." 29 U.S.C.
§ 1103(c)(1). As an exception to this general rule, the statute
permits the return of an employer’s plan contribution that was
the result of "a mistake of fact or law," but only "after the plan
administrator determines that the contribution was made by
such a mistake." Id. § 1103(c)(2)(A)(ii). Here, the district
court ordered return of certain allegedly mistaken employer
contributions even though the plan administrator determined
U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS 3
that the contributions were not made by mistake. Because we
find that the administrator’s decision was not an abuse of dis-
cretion, we must reverse the judgment of the district court and
remand for further proceedings consistent with this decision.
I.
A.
Teamsters Local Union No. 355 ("Local 355") is a labor
organization representing workers in various industries in
parts of Maryland, Delaware, and Virginia. Local 355 is cur-
rently party to collective bargaining agreements ("CBAs")
with approximately seventy-five employers, including appel-
lee U.S. Foodservice ("USF"). Pursuant to its CBA with Local
355, USF makes contributions on behalf of its employees to
appellant Truck Drivers and Helpers Local Union No. 355
Health and Welfare Fund (the "Health Fund"), an ERISA
multiemployer welfare benefit plan. Since 1957, USF or its
predecessor companies have been party to various CBAs with
Local 355. Each CBA has required USF to contribute a cer-
tain amount to the Health Fund based on the number of hours
worked by USF employees.
The Health Fund was established in 1957 and is governed
by a board of trustees pursuant to a trust agreement. Local 355
has also established an associated pension fund (the "Pension
Fund"). As permitted by ERISA, the trustees of both funds
have designated a third-party administrator, Benefits Admin-
istration Corporation ("BAC"), to oversee their day-to-day
operations. BAC serves at the pleasure of the trustees, who
are ultimately responsible for any decisions made on behalf of
the Funds. Section 9.5 of the Health Fund’s trust agreement
contemplates the possibility of mistaken employer contribu-
tions and provides BAC and the trustees with the following
directive: "In no event shall any Employer, directly or indi-
rectly, receive any refund on contributions made by them to
4 U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS
the Trust (except in case of a mistake, to the extent permitted
by law)."
At issue in this appeal are contributions made pursuant to
Article 20, Section 3 of USF’s CBA with Local 355, which
states:
The Company, as of [date], agrees to pay into the
Fund, [amount] for each straight time hour or frac-
tion thereof paid to each employee covered by this
Agreement or by subsequent collective bargaining
Agreements between the parties hereto up to but not
in excess of fifty (50) straight time hours in any one
(1) work week in the case of each employee.
Similar language has appeared in every CBA between USF
and Local 355 since the two parties entered into their first
CBA in 1957. Only the effective date and dollar amount to be
paid have changed. It is undisputed that from at least 1988
through early 2008, USF consistently paid the specified con-
tribution amount for each hour worked up to fifty hours per
week per employee, even though each employee’s forty-first
through fiftieth hours were generally paid at an overtime rate.
In March 2008, following the replacement of a long-time
payroll clerk, USF discovered that it may have been contribut-
ing more to the Funds than was required by the governing
CBA. USF subsequently completed an internal audit and con-
cluded that it had mistakenly contributed too much to both the
Health Fund and the Pension Fund for the period from Janu-
ary 2006 through March 2008. As relevant to this appeal, USF
determined that it had made contributions to the Health Fund
for hours paid at the overtime rate even though USF believed
the governing CBA only required contributions for hours paid
at the straight-time rate. USF halted the allegedly mistaken
contributions in March 2008 and has not resumed those con-
tributions to date.
U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS 5
On September 26, 2008, USF notified the Funds of the
alleged overpayments and requested a refund of the relevant
amounts. With respect to the contributions in dispute here,
USF argued that it made payments to the Health Fund for
hours paid at the overtime rate even though the governing
CBA required contributions only "for each straight time hour
or fraction thereof." USF interpreted "straight time hour" to
include only hours paid at the straight-time rate, not hours
paid at the overtime rate.
On January 5, 2009, the Funds, acting through counsel,
responded to USF and formally "determined that no overpay-
ments were made, and that [USF] has correctly paid employee
benefit contributions for its employees in accordance with the
[CBA] to which it is signatory." The "straight time" modifier,
the Funds stated, indicates that contributions for each employ-
ee’s first fifty hours of work each week "are owed at the
applicable contribution rate" and not at any premium contri-
bution rate "regardless of the rate of pay earned by the compa-
ny’s employee for the particular hour." The Funds further
explained:
To interpret the CBA as limiting contributions to the
Health Fund for hours worked by employees to forty
(40) hours per week because U.S. Foodservice was
paying its employees time and one half for hours in
excess of forty (40) per week is contrary to the terms
of the CBA which requires contributions on up to
fifty (50) hours [per week].
The Funds thus declined to return any of the requested contri-
butions.
B.
On February 5, 2009, USF filed suit in the District of
Maryland against, inter alia, the Health Fund and the Pension
Fund, seeking recovery of allegedly mistaken contributions
6 U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS
for the period from January 2006 through March 2008. USF
brought its claims under both ERISA Section 403 and the fed-
eral common law of unjust enrichment. The main issue in dis-
pute was whether contributions for overtime hours were
required by the CBA.
The district court granted USF’s motion for summary judg-
ment and denied the Funds’ cross-motion. The court held that
the CBA language "is clear and unambiguous": "straight
time" is "time that does not include overtime or premiums."
J.A. 1245. Therefore, "as written in the CBA, ‘straight time’
modifies the word ‘hour’ such that contributions are required
only for the ‘straight time hours’ the employee is paid, and
not for overtime hours." Id. The district court rejected the
Funds’ alternative construction as "untenable" and declined to
consider extrinsic evidence because it found the CBA lan-
guage to be unambiguous. J.A. 1246.
USF moved for summary judgment on the amount of resti-
tution and proffered evidence indicating that the Health Fund
owed it $858,135.35 for mistaken overtime-related payments
during the period from January 1, 2006, through March 31,
2008. The district court again granted USF’s motion for sum-
mary judgment, setting the restitution figure at $858,135.35.
J.A. 1385. The court entered final judgment in the case, and
the Health Fund timely noted this appeal.
II.
ERISA is "a comprehensive statute designed to promote the
interests of employees and their beneficiaries in employee
benefit plans," Shaw v. Delta Airlines, Inc., 463 U.S. 85, 90
(1983), and it provides a clear framework for our analysis in
this case. We thus begin with a discussion of how the statute
treats the circumstances under which an employer may obtain
a refund of mistaken plan contributions.
As discussed above, ERISA Section 403(c)(1), also known
as the "anti-inurement provision," e.g., Chao v. Malkani, 452
U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS 7
F.3d 290, 297 (4th Cir. 2006), provides that "the assets of a
plan shall never inure to the benefit of any employer and shall
be held for the exclusive purposes of providing benefits to
participants in the plan and their beneficiaries and defraying
reasonable expenses of administering the plan." 29 U.S.C.
§ 1103(c)(1). Congress intended for the provision "to estab-
lish uniform fiduciary standards to prevent transactions which
dissipate or endanger plan assets." 120 Cong. Rec. 29,932
(1974). The Supreme Court has emphasized that section
403(c)(1) was crafted "to discourage abuses such as self-
dealing, imprudent investment, and misappropriation of plan
assets, by employers and others." Raymond B. Yates, M.D.,
P.C. Profit Sharing Plan v. Hendon, 541 U.S. 1, 23 (2004).
In short, section 403(c)(1) exists to protect plan assets and
ensure that they benefit the participating employees for
whom, after all, the plans were established.
But the anti-inurement provision does not transform every
ERISA plan into a lockbox from which mistaken contribu-
tions may never be sprung free. Section 403(c)(2) provides
that if a contribution or payment "is made by an employer to
a multiemployer plan by a mistake of fact or law," section
403(c)(1) "shall not prohibit the return of such contribution or
payment to the employer within 6 months after the plan
administrator determines that the contribution was made by
such a mistake." 29 U.S.C. § 1103(c)(2)(A)(ii).
The import of these provisions is apparent. They vest the
plan administrator with broad discretion in determining when
a refund is appropriate: if the administrator "determines that
the contribution was made by . . . mistake," then the anti-
inurement provision "shall not prohibit the return of such con-
tribution." The statute is clear that the administrator is to
decide in the first instance whether a particular contribution
was made by mistake. If the administrator does determine that
a contribution was mistaken, the administrator may then
decide whether to return the payment. By its terms, the statute
neither prohibits nor requires return of a mistaken contribu-
8 U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS
tion, leaving the decision in the first instance to the sound dis-
cretion of the plan administrator.
Congress was faced with two potential problems when it
considered how to deal with mistaken ERISA contributions.
A recovery mechanism that was too restrictive might make
employers reluctant to contribute to plans in the first place out
of fear of never being able to recover in the case of an over-
sight. And a mechanism that was too favorable to employers
might seriously undermine the financial stability of plans and
leave them prey to unilateral withdrawals by an employer
under the guise of a "mistake." In crafting the exception in
section 403(c)(2)(A)(ii), Congress sought to strike a balance:
"[R]ecognizing the inequity that may arise when employers
incur costly losses for honest errors," Congress provided a
mechanism through which mistaken contributions could be
returned. Malkani, 452 F.3d at 297. But also mindful that
"[u]ncertainty and instability could easily ensue from an
open-ended remedy for mistaken contributions," Congress
"secured peace of mind for plans and their participants" by
providing the plan administrator with discretion to determine
in the first instance (1) whether a given contribution was actu-
ally the result of a mistake and (2) whether a mistaken contri-
bution should be returned to the contributing employer. Id.
We again note our agreement with those sister circuits that
have found that an administrator’s determination with respect
to the requirements of section 403(c)(2)(A)(ii) is subject to
review for an abuse of discretion. See Provident Life & Acci-
dent Ins. Co. v. Waller, 906 F.2d 985, 993 (4th Cir. 1990)
(recognizing that "several courts have cited to [section
403(c)(2)(A)] in creating a common law remedy for employ-
ers in their suits to recover erroneous payments to pension
funds"); see also Frank L. Ciminelli Const. Co. v. Buffalo
Laborers Supp. Unemployment Benefit Fund, 976 F.2d 834,
835-36 (2d Cir. 1992); Teamster’s Local 348 Health & Wel-
fare Fund v. Kohn Beverage Co., 749 F.2d 315, 321 (6th Cir.
1984); Peckham v. Bd. of Trs. of Int’l Bhd. of Painters &
U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS 9
Allied Trades Union, 719 F.2d 1063, 1066 (10th Cir. 1983).
For instance, in Kohn Beverage, the Sixth Circuit stated that
ERISA Section 403(c) "places the determination as to
whether a mistaken contribution was made in the hands of the
benefit plan administrator." 749 F.2d at 321. It elaborated:
"The trustees’ action is conclusive unless arbitrary or capri-
cious, not supported by substantial evidence, or erroneous on
a question of law." Id.Narrow review of an administrator’s decision accords both
with the permissive language of section 403(c)(2)(A)(ii),
which leaves to the administrator the initial determination of
whether a given contribution was made by mistake, and with
Congress’s belief "that the risk of mistaken contributions
should rest largely with the employer." Ciminelli, 976 F.2d at
836. This allocation of risk is reasonable given that funds
often "cannot easily determine whether a payment is mis-
taken, whereas employers have readily available and accurate
information concerning factors such as the number of hours
each employee worked in each pay period." Id. Judicial
review protects employers from administrators who might act
arbitrarily, while the limited scope of that review protects
administrators and beneficiaries from unexpected, unilateral
plan withdrawals by employers. And the scheme laid out in
section 403(c) is effective in practice, as suggested by the fact
that, in the shadow of judicial review in this very case, the
Funds agreed to return over one hundred thousand dollars for
overpayments (not disputed by the parties) related to short-
term disability and workers’ compensation benefits.
In sum, section 403(c) is clear that it is the plan administra-
tor — not a reviewing court — that determines in the first
instance (1) whether a given contribution was made by mis-
take and (2) if so, whether it should be returned to the contrib-
uting employer. A court may review the administrator’s
determinations for an abuse of discretion, but that standard
has always been synonymous with deference.
10 U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS
III.
As explained above, at issue in this appeal are contributions
made pursuant to Article 20, Section 3 of USF’s CBA with
Local 355, which states:
The Company, as of [date], agrees to pay into the
Fund, [amount] for each straight time hour or frac-
tion thereof paid to each employee covered by this
Agreement or by subsequent collective bargaining
Agreements between the parties hereto up to but not
in excess of fifty (50) straight time hours in any one
(1) work week in the case of each employee.
Virtually identical language has appeared in every collective
bargaining agreement between USF and Local 355 since the
two parties entered into their first CBA in 1957. The Health
Fund contends that, since 1957, USF has consistently made
contributions for each employee’s first fifty hours worked
each week, even though the forty-first through fiftieth hours
were generally paid at overtime rates pursuant to other CBA
provisions. USF argues that its verifiable contribution history
stretches back only to the late 1980’s, but it concedes that it
made the allegedly mistaken payments for over twenty years.
Despite its past practices, USF now asserts that it is not
obligated to make contributions for overtime hours because
the CBA language requires a contribution only "for each
straight time hour or fraction thereof paid to each employee."
USF argues that the CBA language is unambiguous and
requires USF to contribute for up to fifty hours paid at the
"straight time" rate but not for any hours paid at the overtime
rate. The Health Fund, on the other hand, argues that the CBA
obligates USF to contribute for the first fifty hours worked by
each employee each week, regardless of the rate of pay for
those hours. In the Health Fund’s view, the "straight time"
language "was the parties’ attempt to evidence that despite
USF’s obligation to pay employees wages at a higher rate for
U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS 11
hours worked over forty, it was not obligated to pay a higher
contribution rate for those hours." Health Fund Br. at 21.
Again, Congress has vested in the plan administrator—not
the courts—the discretion to determine in the first instance
whether USF’s contributions were made by mistake. By its
letter of January 5, 2009, to USF’s Director of Labor Rela-
tions, the Health Fund, acting through counsel, set forth its
view. It expressly rejected USF’s claim that the overtime con-
tributions were the result of a mistake and concluded that the
"plain language of the CBA requires employee benefit contri-
butions on up to fifty (50) hours per week." The "straight
time" modifier, the Health Fund elaborated, "indicates that
contributions are owed at the applicable contribution rate
regardless of the rate of pay earned by the . . . employee for
the particular hour." As the Health Fund explained:
To interpret the CBA as limiting contributions to the
Health Fund for hours worked by employees to forty
(40) hours per week because U.S. Foodservice was
paying its employees time and one half for hours in
excess of forty (40) per week is contrary to the terms
of the CBA which requires contributions on up to
fifty (50) hours. Such an interpretation would negate
any obligation of an employer to make contributions
on hours beyond forty (40) per week, and would ren-
der the plain language of the CBA meaningless. This
was not the intention of the bargaining parties and is
contrary to well settled tenets of contract interpreta-
tion.
Even in the face of Congress’s clear instructions, USF
would have us overlook the Health Fund’s determination and
decide de novo whether the disputed contributions should be
returned. But, as we have stated, the text of section
403(c)(2)(A)(ii) leaves room for only a limited review of a
plan administrator’s decision. We need not decide whether the
Health Fund’s interpretation is the best one, the better one, or
12 U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS
the one that we would reach were we construing the contract
de novo. Rather, we need decide only whether the Health
Fund acted reasonably when it determined that the overtime
contributions were not the result of a mistake. We conclude
that it did.*
Here the fact that USF’s argument is plausible hardly
means that the Health Fund’s is not. In addition to its textual
argument noted above, the Health Fund’s interpretation of the
disputed CBA language is reasonably supported by the par-
ties’ course of dealing. See Transp.-Commc’n Emp. Union v.
Union Pac. R.R. Co., 385 U.S. 157, 161 (1966). It is certainly
true that evidence extrinsic to the contract itself must be han-
dled with caution. See Clark v. Ryan, 818 F.2d 1102, 1105
(4th Cir. 1987). But here the course of dealing is not in dis-
pute. From at least 1988 through March 2008, USF — in
accordance with the Health Fund’s interpretation of the CBA
language—made contributions for up to fifty hours per week
per employee, even though some of those hours were paid at
an overtime rate. The language at issue here did not change
across the seven CBAs that were negotiated over the two dec-
ades during which USF admittedly made overtime contribu-
tions. By USF’s own calculations, the contributions amounted
to a substantial sum -– approximately $400,000 per year in
2006 and 2007.
To hold that the Health Fund’s determination was unrea-
sonable would require us to infer that USF itself acted with
great imprudence for at least two and perhaps as many as five
decades by ignoring a clear error in the Health Fund’s inter-
pretation and by mistakenly contributing hundreds of thou-
*As reasoned above, section 403(c)(2)(a)(ii) permits -– but does not
require—return of contributions after the administrator has made the
threshold determination that the contributions were, in fact, made by mis-
take. Because we hold that the Health Fund did not abuse its discretion in
determining that USF’s overtime contributions were not the result of a
mistake, we do not reach the question of whether the Health Fund abused
its discretion in declining to return those contributions.
U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS 13
sands of dollars per year for overtime hours. Such an
inference is untenable, given the sophistication of the parties
and their ongoing review of the CBA terms as part of periodic
renegotiations. Were the Health Fund’s determination
patently unreasonable, as USF would have us hold, one must
wonder why the alleged mistake took decades to come to
light.
Moreover, the Health Fund is not alone in reading the CBA
language as it does. The record indicates that at least eight
employers other than USF are parties to CBAs with Local 355
that include the same "straight time" language in dispute here.
All eight of these employers, including United Parcel Service,
Acme Paper & Supply Co., Avis Rent-A-Car, and The Hertz
Corporation, have historically contributed to the Health Fund
for up to fifty hours per week per employee, even when some
of those hours were paid at an overtime rate. Only one has
recently changed its position and adopted USF’s interpreta-
tion of the CBA language. Notwithstanding this dissenting
voice, the fact that so many other large companies agree with
the Health Fund’s interpretation supports our conclusion that
the Health Fund’s determination was, at the very least, rea-
sonable.
Finally, the trust agreement itself—incorporated by refer-
ence into each CBA—also supports the Health Fund’s inter-
pretation. Section 4.1(e) states that each employer "shall make
contributions to the Trust Fund on behalf of employees for all
‘hours worked’ and/or all ‘hours paid’ as these terms may be
employed in any collective bargaining agreement." Although
the CBA is clear that USF need not contribute to the Health
Fund for more than fifty hours per week per employee, the
references to "all hours worked" and "all hours paid" reason-
ably support the Health Fund’s conclusion that contributions
are due and owing regardless of whether a particular hour was
paid at the straight-time rate or the overtime rate.
14 U.S. FOODSERVICE v. TRUCK DRIVERS & HELPERS
IV.
For the reasons stated above, the Health Fund’s reading of
the collective bargaining agreement was a reasonable one and
thus by definition not an abuse of discretion. The parties are
in accord that the result on USF’s refund claims applies to any
delinquent contributions owed by USF under the collective
bargaining agreement provision discussed above. We must
therefore reverse the district court’s grant of summary judg-
ment to USF both on its claims and on the Health Fund’s
counterclaims. We remand for such further proceedings as are
required by this decision.
REVERSED AND REMANDED