Central States v. Genl Materials Inc ( 2008 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 08a0269p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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CENTRAL STATES, SOUTHEAST & SOUTHWEST
Plaintiffs-Appellants/Cross-Appellees, -
AREAS PENSION FUND; HOWARD MCDOUGALL,
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Nos. 07-1392/1473
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v. >
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GENERAL MATERIALS, INCORPORATED, dba
Defendant-Appellee/Cross-Appellant. -
Wholesale Materials Company,
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Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 04-73593—John Corbett O’Meara, District Judge.
Argued: April 23, 2008
Decided and Filed: July 30, 2008
Before: DAUGHTREY, COOK, and FARRIS, Circuit Judges.*
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COUNSEL
ARGUED: Albert M. Madden, Rosemont, Illinois, for Appellants. Richard C. Lindsey, Jr.,
MARCOUX, ALLEN, ABBOTT, SCHOMER, BOWER, NICHOLS, KENDALL & LINDSEY,
P.C., Jackson, Michigan, for Appellee. ON BRIEF: Albert M. Madden, Rosemont, Illinois, for
Appellants. Richard C. Lindsey, Jr., MARCOUX, ALLEN, ABBOTT, SCHOMER, BOWER,
NICHOLS, KENDALL & LINDSEY, P.C., Jackson, Michigan, for Appellee.
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OPINION
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COOK, Circuit Judge. Plaintiff Central States Pension Fund (the “Fund”) and a
representative trustee appeal the district court’s grant of summary judgment for defendant employer
General Materials (“General”) on the Fund’s claim for overdue pension payments. We affirm,
holding that General’s duty to contribute to the Fund ended with the expiration of the collective
bargaining agreement (“CBA”) referenced in the correlating Participation Agreement.
*
The Honorable Jerome Farris, Circuit Judge of the United States Court of Appeals for the Ninth Circuit, sitting
by designation.
1
Nos. 07-1392/1473 Central States, et al. v. General Materials, Inc. Page 2
I. BACKGROUND
A.
General is a small, family-owned lumberyard in Jackson, Michigan. The Fund is an ERISA
“multiemployer plan,” 29 U.S.C. § 1002(37), that collects pension contributions under labor
agreements between employers and local unions. In 1969 General entered into the first of several
CBAs with Local 164. These CBAs set pay scales and provided for union dues, welfare payments,
and pension-fund payments. When signing each CBA, General and Local 164 also signed a
Participation Agreement drafted by the Fund that remained substantively the same from contract to
contract.
The Participation Agreement included provisions that incorporated and relied on the CBA’s
terms. For example, the Participation Agreement bound General to the Fund’s Trust Agreement,
which required each employer to “remit continuing and prompt contributions to the [Fund] as
required by the applicable collective bargaining agreement.” Under paragraph 5(a) of the
Participation Agreement, General would contribute a set amount for a set period “for its bargaining
unit Employees pursuant to the terms of the collective bargaining agreement.” Paragraph 6
provided that payments would be made “only on behalf of employees in the collective bargaining
unit.” Under paragraph 13, the Participation Agreement defined an “Employer” and “Employee”
in terms of their responsibilities under the CBA.
Pursuant to the Participation Agreement, General reported the work history of eligible
employees and paid monthly contribution invoices that contained a clause (the “Certification
Clause”) stating that General “hereby reaffirms [its] obligation to make contributions required by
the Collective Bargaining Agreement and further represents that all employees eligible to participate
in the Fund . . . are being reported . . . .” The Participation Agreement also provided that it would
“continue in full force and effect” absent written notice of termination.
From 1969 until 1991, these CBAs and Participation Agreements required General to make
monthly pension contributions to the Fund on behalf of its union employees. General and Local 164
signed the CBA and Participation Agreement relevant to this case on December 17, 1991
(respectively, the “1991 CBA” and the “1991 Participation Agreement”). By its terms, the 1991
CBA expired on December 31, 1993, and would “continue in full force and effect from year to year
thereafter unless written notice of desire to cancel or terminate the Agreement is served by either
party upon the other at least sixty (60) days prior to the date of expiration.” JA 509 (emphasis
added). On October 21, 1993, General sent Local 164 a certified letter notifying the union that
General intended to terminate the 1991 CBA. All parties concede that General did not notify the
Fund itself of termination until this litigation began.
When the 1991 CBA expired on December 31, 1993, General had only two union employees,
James Smith and Roy Swihart. Although General continued to contribute to the Fund for Swihart
and Smith—under an alleged oral agreement with Local 164—it entered into no other CBAs or
Participation Agreements but instead instituted its own pension and profit-sharing plan, contributing
to that plan for its non-union employees.
B.
After General rebuffed the Fund’s attempted audit by providing only Swihart’s records, the
Fund filed a complaint for overdue contributions. General then sent a written request to the Fund’s
Trustees, asking for a refund of the contributions it paid on behalf of Swihart and Smith after the
1991 CBA expired. The Trustees denied the request and General filed a counterclaim for the refund.
Nos. 07-1392/1473 Central States, et al. v. General Materials, Inc. Page 3
Both sides filed motions for summary judgment, and the Fund then filed a Federal Rule of
Civil Procedure 37(c)(1) motion to strike portions of General’s response to the Fund’s motion for
summary judgment. After a hearing, without discussing the motion to strike, the district court held
that the parties’ conduct suggested “an understanding . . . that the 1991 CBA did not remain in full
force and effect by way of the 1991 Participation Agreement,” but terminated on December 31,
1993. The court then granted summary judgment to General on the Fund’s claims for overdue
pension payments. As for General’s counterclaim, the court granted summary judgment for the
Fund, holding that because “[General’s union] employees realized a significant increase in the
pension benefits paid to them,” the Trustees did not act arbitrarily or capriciously in denying General
a refund. Both parties appealed.
II. ANALYSIS
We review de novo a district court’s decision to grant summary judgment, affirming where
the evidence, viewed in the light most favorable to the non-movant, demonstrates that “there is no
genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(c). The Fund argues that the court erred because: (1) the 1991 Participation
Agreement obligated General to contribute; (2) the Certification Clause obligated General to
contribute; and (3) the court failed to rule on the Fund’s motion to strike. We hold that neither the
1991 Participation Agreement nor the Certification Clause obligated General to contribute after the
1991 CBA expired, and the court’s failure to rule on the motion to strike is harmless error.
A.
The Fund contends that the 1991 Participation Agreement required General to contribute
after the 1991 CBA expired. Citing a suit decided in its favor, Central States Pension Fund v.
Behnke, Inc., 883 F.2d 454 (6th Cir. 1989), the Fund argues that federal courts can “enforce
contractual obligations to contribute . . . established by independent, unexpired trust and
participation agreements, which, by their terms, extend beyond the expiration of a CBA,” id. at 464.
Behnke, however, is inapposite.
First, in Behnke, the duty to contribute continued after a CBA expired because employer
Behnke entered into a Participation Agreement and Trust Agreement during the negotiation period
for a new CBA. The Participation Agreement in Behnke, effectively the same as the one involved
here, incorporated language from the Trust Agreement providing that “[t]he obligation to make such
contributions shall continue during periods when the collective bargaining agreement is being
negotiated.” Id. at 461 (emphasis added). In other words, the Participation Agreement alone did
not extend Behnke’s duty to contribute—the Participation Agreement became significant only
because it incorporated the Trust Agreement’s provision for continuing contributions during
negotiations for a new CBA. See id. (“The Trust Agreement incorporated into the Participation
Agreement extends the obligation.”) (emphasis added). General entered into no such negotiations
after the 1991 CBA expired.
Second, unlike the Participation Agreement in Behnke, the 1991 Participation Agreement
can be understood only by reference to the contemporaneously signed 1991 CBA. General and
Local 164 signed the 1991 CBA and 1991 Participation Agreement on the same day, unlike the
Participation Agreement in Behnke, which Behnke and the union signed after one CBA expired and
before the next became effective.1 The fact that General signed the two documents on the same day
1
After a CBA expired on March 31, 1982, Behnke and the local union immediately began negotiations for a
new CBA. Behnke, 883 F.2d at 456–57. Effective April 1, 1982, Behnke and the union entered into an Interim
Agreement that expired on April 1, 1985. On June 9, 1983, Behnke and the union signed the Participation Agreement
incorporating the Fund’s Trust Agreement, which extended the duty to contribute until Behnke and the union signed a
Nos. 07-1392/1473 Central States, et al. v. General Materials, Inc. Page 4
supports the view that the 1991 Participation Agreement cannot be understood apart from the 1991
CBA. In fact, the terms of the 1991 Participation Agreement depend wholly on the 1991 CBA. The
1991 Participation Agreement sets forth contribution rates dictated by the 1991 CBA, defines
covered employees as those employed under the terms of the 1991 CBA, and defines an employer
as one bound by the 1991 CBA. After the 1991 CBA expired, the orphan 1991 Participation
Agreement became incognizable. Cf. Laborers Health & Welfare Trust Fund v. Leslie G. Delbon,
Inc., 199 F.3d 1109, 1111 (9th Cir. 2000) (“[A] contract to contribute to a trust fund of a Union with
which [the employer] has no ongoing collective bargaining agreement makes no sense.”) (citation
and internal quotation marks omitted). As a result, the 1991 Participation Agreement did not
obligate General to contribute after the 1991 CBA expired.
B.
We likewise find lacking the Fund’s contention that the Certification Clause included in its
monthly bills extended General’s duty to contribute. For support, the Fund points to a Seventh
Circuit decision and an unpublished decision from the Northern District of Illinois. In Bricklayers
Local 21 v. Banner Restoration, Inc., 385 F.3d 761 (7th Cir. 2004), the Seventh Circuit stated: “[W]e
consider the certification language on the monthly reports and the accompanying payments as
entitled to some weight in an analysis of whether Banner’s conduct manifested intent to abide by the
collective bargaining agreement.” Id. at 767 n.3 (emphasis added). In Banner, however, the court
considered certification language only because the employer did not sign a CBA but conducted itself
as though a CBA existed. In any event, the Banner court observed that the Seventh Circuit is
undecided as to whether certification clauses are “entitled to some weight . . . and maybe a lot,” id.
(quoting Operating Eng’rs Local 139 Health Benefit Fund v. Gustafson Constr. Corp., 258 F.3d
645, 650 (7th Cir. 2001)), or are only “weak evidence,” id. (quoting Dugan v. R.J. Corman R.R. Co.,
344 F.3d 662, 668 (7th Cir. 2003)).
The Fund also cites Central States Pension Fund v. Kabbes, No. 02 C 1809, 2004 WL
2644515 (N.D. Ill. Nov. 18, 2004), where the Northern District of Illinois reasoned that “[e]ven
when the Defendants did not sign the reporting forms, they manifested their intent to be bound by
the Certification Clause by completing the reporting forms and submitting their checks . . . .” Id.
at *17. Although Kabbes allows certification clauses to bind an employer, the Kabbes court relied
in part on the Behnke decision and, in doing so, read Behnke too broadly. See id. at *14 (citing
Behnke despite Behnke’s silence on whether certification clauses could extend an employer’s duty
to contribute). No Sixth Circuit case law supports the Fund’s contention. Given the paucity of
pertinent Sixth Circuit precedent—as well as the equivocal weight the Seventh Circuit gives
certification clauses—we conclude that the Certification Clause did not obligate General to
contribute after the 1991 CBA expired.
C.
Finally, the Fund contends that the district court erred by not ruling on its motion to strike.
Generally, district courts should resolve discovery motions before granting summary judgment.
Lexicon, Inc. v. Safeco Ins. Co. of Am., 436 F.3d 662, 673 (6th Cir. 2006). But if a court can rule
on a summary judgment motion without resorting to information contained in a discovery motion,
the failure to rule is harmless error. Id. The Fund’s motion to strike argued that, in its response brief
to the Fund’s summary judgment motion, General offered affirmative defenses based on new
evidence. The evidence at issue included General’s reports on employee changes, the significant
drop in contributions after the 1991 CBA expired, the lack of an increase in General’s pension
contribution rate over a thirteen-year period, and the Fund’s contact with General concerning
new CBA in November 1985. Id. at 457, 461–62.
Nos. 07-1392/1473 Central States, et al. v. General Materials, Inc. Page 5
untimely payments. Reviewing the record as a whole, we conclude that even were the district court
to strike the disputed portions, the court would reach the same resolution of the summary judgment
motion. The failure to rule on the Motion to Strike is therefore harmless error.
III. CONCLUSION
Because the district court properly granted summary judgment for General as to the Fund’s
claim for overdue pension contributions, we affirm.