Twin City Pipe Trades Service Ass'n v. Frank O'Laughlin Plumbing & Heating Co. , 759 F.3d 881 ( 2014 )

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 13-2521
___________________________
Twin City Pipe Trades Service Association, Inc., a Minnesota non-profit corporation
lllllllllllllllllllll Plaintiff - Appellant
v.
Frank O'Laughlin Plumbing & Heating Company, a Minnesota corporation, doing
business as O'Laughlin Plumbing & Heating
lllllllllllllllllllll Defendant - Appellee
____________
Appeal from United States District Court
for the District of Minnesota - Minneapolis
____________
Submitted: May 15, 2014
Filed: July 17, 2014
____________
Before WOLLMAN, BYE, and BENTON, Circuit Judges.
____________
BYE, Circuit Judge.
This is an action brought pursuant to 29 U.S.C. § 11451 to collect fringe benefits
allegedly owed to union employee benefit funds by a plumbing company. The district
court determined Frank O'Laughlin Plumbing & Heating Company (O'Laughlin)
1
Section 515 of the Employee Retirement Income Security Act (ERISA).
unequivocally terminated its participation in a collective bargaining agreement (CBA)
with Plumbers and Pipe Fitters Local 6 (the Union), and thus was not required to
contribute fringe benefits for work performed by O'Laughlin's employees. We reverse
and remand for further proceedings.
I
O'Laughlin has been a signatory contractor to successive CBAs with the Union
since at least 2000. At the start of the 2011 calendar year, O'Laughlin was a signatory
to the CBA then in effect. The terms of the pertinent CBA stated it was in full force
and effect between December 1, 2009, and April 30, 2011, and required O'Laughlin
to contribute to employee benefit funds for all pipe work performed by its employees.
The CBA further provided it would "remain in effect from year to year thereafter"
unless either party "notif[ied] the other in writing ninety (90) days prior to the
expiration date of the intent to cancel or amend this Agreement, or to renegotiate a
new Agreement."
On January 27, 2011, O'Laughlin sent a letter to the Union which stated the
plumbing company would be "terminating its existing work agreement[] with Local
# 6 Plumbers & Fitters Effective January 31 2011." By its plain terms, then, the letter
purported to terminate O'Laughlin's participation in the CBA on a date different than
the CBA's expiration date of April 30, 2011, and purported to give only four days'
notice rather than the ninety-day notice required by the CBA. For the three months
following January 31, 2011, however, O'Laughlin nonetheless complied with the
terms of the CBA by making fringe benefit contributions on behalf of its employees.
In the spring of 2011, the Union began negotiations with the other signatory
contractors for a new CBA commencing May 1, 2011. Corey O'Laughlin, one of the
owners of O'Laughlin, attended several negotiation meetings with members of the
Union's management between February 15, 2011, and April 26, 2011. O'Laughlin's
-2-
principal owner, Kim O'Laughlin, also met with Union management several times
after May 1 – when the new CBA was in place – in attempts to negotiate specific CBA
terms to address O'Laughlin's difficulties competing in the market (O'Laughlin
operates in Winona County, a smaller market than the Minneapolis/St. Paul area
where most of the signatory contractors operate, and O'Laughlin was having difficulty
competing with non-union plumbers in Winona County). O'Laughlin acknowledged
he met with union representatives to discuss O'Laughlin's difficulties competing
against non-union plumbers and to see what the Union "could do to help them out."
After May 1 – when the new CBA was in place – and throughout the rest of the
2011 calendar year, O'Laughlin continued to make fringe benefit contributions on
behalf of its employees. In December 2011, the terms of the new CBA increased the
local pension rate by six cents per hour. For the month of December, O'Laughlin's
fringe benefits contributions included the rate increase set forth in the new CBA.
On December 27, 2011, O'Laughlin sent the Union a second letter. This letter
stated O'Laughlin "will be terminating all existing work agreement with Local #6
Plumbers and Pipe fitters effective January 1, 2011. We will not be employing any
union members, paying any dues at that time." Shortly thereafter, four O'Laughlin
employees sent letters to the Union resigning their membership in the Union.
Beginning January 1, 2012, O'Laughlin stopped submitting fringe benefits
contributions on behalf of its employees, but continued to employ individuals
performing work of the kind subject to the CBA.
Twin City Pipe Trade Services Association (Twin City) is the non-profit
corporation designated to receive the fringe benefit payments made by the signatory
contractors to the CBA. After O'Laughlin stopped making contributions on behalf of
its employees, Twin City brought this action to collect fringe benefits allegedly owed
by O'Laughlin. Twin City contended O'Laughlin never effectively terminated its
-3-
participation in the 2009-2011 CBA, and therefore remained obligated to contribute
fringe benefits on behalf of its employees.
Twin City moved for summary judgment in the district court. In response,
O'Laughlin filed affidavits and other evidence to explain the two letters it sent on
January 27 and December 27, 2011, its participation in the negotiations for a new
CBA, and the fringe benefit contributions it made on behalf of its employees
throughout 2011.
As to the first letter sent on January 27, Kim O'Laughlin explained the letter's
stated termination date of January 31 was intended to reflect compliance with the
ninety-day notice period in the 2009-2011 CBA, rather than a reference to the actual
termination date of the CBA. As to the second letter sent on December 27, Kim
O'Laughlin explained it merely reiterated that the CBA was no longer in effect. Kim
O'Laughlin did not explain the second letter's reference to an effective termination
date of January 1, 2011, which was inconsistent with the January 31 date referenced
in the first letter, and inconsistent with O'Laughlin's post hoc explanation that the
January 31 date was intended to reflect the beginning of the ninety-day notice period.
O'Laughlin now contends the second letter's reference to January 1, 2011, was a
typographical error, and the letter should have said January 1, 2012. A January 1,
2012, termination date is, however, also inconsistent with the first letter and
inconsistent with the CBA's expiration date of April 30, 2011.
With respect to its participation in negotiations for a new CBA during the
spring of 2011, Corey O'Laughlin explained he attended the meetings to see if the
parties could reach a special deal that would have brought O'Laughlin back into a
CBA with the Union, but the negotiations were unsuccessful.
Finally, with respect to the fringe benefit contributions O'Laughlin continued
to make on behalf of its employees throughout the 2011 calendar year (which included
-4-
complying with rate increases set forth in the new CBA during the month of
December), Kim O'Laughlin explained the payments were only made voluntarily as
a "gesture of good will," and thus O'Laughlin did not consider itself still bound by the
CBA when making the payments.
After considering the parties' summary judgment filings, the district court
granted summary judgment in favor of O'Laughlin.2 First, the district court noted
courts generally limit the defenses an employer can raise in a suit brought pursuant to
29 U.S.C. § 1145 to collect fringe benefits, and the purported termination of the CBA
is not widely recognized as such a defense. See Central States, Se. & Sw. Areas
Pension Fund v. Indep. Fruit & Produce Co., 919 F.2d 1343, 1349 (8th Cir. 1990) ("In
sum, the courts recognize only two defenses to a collection action: that the pension
contributions are themselves illegal or that the collective bargaining agreement is
void.") (citing Benson v. Brower's Moving & Storage, 907 F.2d 310, 314 (2d Cir.
1990)). The district court nonetheless held O'Laughlin could argue it had terminated
its participation in the CBA as a defense in this collection action, citing a decision
from the Sixth Circuit and a Minnesota district court decision recognizing such a
defense. See Laborers Pension Trust Fund-Detroit & Vicinity v. Interior Exterior
Specialists Constr. Grp., 394 F. App'x 285, 290 (6th Cir. 2010) ("[W]hile many
traditional contract defenses are unavailable in collection actions, trust funds are not
entitled to enforce a nonexistent contractual obligation, at least where it is evident
upon a cursory review of the parties' actions that the contract has been terminated[.]
Allowing the assertion of a termination defense provided the inquiry is superficial . . .
sensibly balances the competing interests in a fund's avoiding complex litigation . . .
and ensuring that the employer has a legitimate contractual obligation to make
employee contributions.") (internal quotation marks and citations omitted); Heimerl
2
O'Laughlin did not formally bring a cross-motion for summary judgment. But
in opposing Twin City's motion for summary judgment, O'Laughlin requested
summary judgment in its favor if the district court found the CBA was properly
terminated.
-5-
v. Tech Elec. of Minn., Inc., No. 12-cv-612, 2013 WL 1364249, at *5-6 (D. Minn.
Apr. 4, 2013) (recognizing a termination defense in a fringe benefit collection action).3
Having determined O'Laughlin could raise a termination defense, the district
court limited its inquiry to a cursory review of the parties' actions to determine
whether O'Laughlin unequivocally communicated its intent to withdraw from the
CBA.4 See Laborers Pension Trust, 394 F. App'x at 290 ("For a termination to be
effective, this limited inquiry must reveal that the employer unequivocally
communicated the intent to withdraw.") (internal quotation marks and citation
omitted). In its limited review of the parties' actions, the district court credited Kim
O'Laughlin's explanation of the first letter sent on January 27, 2011, finding the letter
unequivocally expressed O'Laughlin's intent to terminate its participation in the CBA
and complied with the CBA's 90-day notice requirement. The district court further
determined O'Laughlin's subsequent conduct in making voluntary payments
throughout 2011 did not invalidate the termination, nor did O'Laughlin's participation
in negotiations for a new CBA. The district court concluded: "O'Laughlin is a small
company that tried to do the right thing and made some missteps in the process. These
missteps, however, are not enough to negate its unequivocal termination of the CBA."
3
Other courts also appear to have recognized a termination defense in a fringe
benefits collection action. See, e.g., La. Bricklayers & Trowel Trades Pension Fund
& Welfare Fund v. Alfred Miller Gen. Masonry Contracting Co., 157 F.3d 404, 409
n.12 (5th Cir. 1998).
4
To the extent courts have held a termination defense is available in an action
to collect fringe benefits, they have limited their inquiry to a cursory review of the
parties' actions in order to keep the collection action from becoming complex or
costly. See Central States, 919 F.2d at 1348 (explaining that collections actions had
become complex and costly prior to the enactment of § 1145, riddled with various
contract formation defenses, and Congress intended to simplify such actions by
passing the statute).
-6-
Twin City filed a timely appeal. On appeal, Twin City argues the district court
erred in concluding O'Laughlin unequivocally terminated its participation in the CBA.
II
We review the district court's grant of summary judgment de novo. Stein v.
Chase Home Finance, LLC, 662 F.3d 976, 979 (8th Cir. 2011).
On appeal, O'Laughlin urges this court to recognize termination as a valid
defense in a fringe benefits collection action brought pursuant to 29 U.S.C. § 1145.
O'Laughlin further asks us to affirm the district court's determination that O'Laughlin
unequivocally expressed its intent to terminate its participation in the CBA. We
decline to formally recognize a termination defense in this case, however, because the
circumstances involved here would not support such a defense in any event. The two
letters O'Laughlin sent to the Union in January and December 2011 purporting to
terminate O'Laughlin's participation in the CBA, when viewed alongside O'Laughlin's
inconsistent conduct throughout 2011 by continuing to make fringe benefit payments,
do not evince the unequivocal intent necessary to terminate participation in a CBA.
See, e.g., Int'l Union of Operating Eng'rs, Local No. 181 v. Dahlem Constr. Co., 193
F.2d 470, 475 (6th Cir. 1952) (indicating the "notice to terminate [a CBA] must be
clear and explicit").
We conclude O'Laughlin did not unequivocally express an intent to terminate
its participation in the CBA for two reasons. First, under the circumstances involved
in this case, our examination of O'Laughlin's conduct is paramount to our
consideration of the two letters it sent to the Union. An employer's conduct is
important because "it is well established that a collective bargaining agreement is not
dependent on the reduction to writing of the parties' intention to be bound. All that
is required is conduct manifesting an intention to abide and be bound by the terms of
an agreement." Capitol-Husting Co., Inc. v. N.L.R.B., 671 F.2d 237, 243 (7th Cir.
-7-
1982) (internal citation omitted); see also Central States, 919 F. 2d at 1353 (citing
Robbins v. Lynch, 836 F.2d 330, 332 (7th Cir. 1988)).5 Here, O'Laughlin manifested
an intention to abide and be bound by the terms of the CBA by continuing to make
fringe benefit contributions on behalf of its employees throughout the 2011 calendar
year.
The district court discounted O'Laughlin's conduct because Kim O'Laughlin
explained he made the fringe benefit contributions voluntarily as a gesture of good
will. But a benefit fund such as Twin City "is entitled to 'assume that all participating
employers in a plan are following the stated terms: no other approach permits
accurate actuarial computations and proper decisions about which claims to pay.'" Id.
at 1349 (quoting Robbins, 836 F.2d at 333) (emphasis added in Central States). The
stated terms of the CBA do not contemplate employers making voluntary payments.
When an employer's objective conduct indicates a continued acceptance of the CBA,
while at the same time the employer inconsistently states it intends to terminate the
CBA, we are hard pressed to conclude the intent to terminate is clear, explicit, and
unequivocal. See Miner v. Local 373, 513 F.3d 854, 861 (8th Cir. 2008) (determining
the validity of a CBA based on "the objective intent of the parties – not their
subjective beliefs"). If we concluded otherwise, the administrator of a benefit plan
would have no concrete manner by which to determine whether an employer is bound
or not bound by the terms of the CBA.
5
In Robbins, an employer who had signed a master CBA in 1975, "never signed
the 1979-82 agreement . . . [but] paid the union scale, turned over dues under a
checkoff system, negotiated grievances, and paid (some) pension and welfare
contributions. It later invoked the termination clause of the agreement. Employers
may adopt a collective bargaining agreement by a course of conduct . . . [Employer]
did so . . . [Employer] may have had a private intent [to no longer be bound], but the
signs visible to the union all pointed to [Employer's] acceptance of the collective
bargaining agreement. [Employer] is bound by its terms." 836 F.2d at 332.
-8-
Second, the two letters O'Laughlin sent to the Union were ineffective to express
an unequivocal intent to terminate participation in the CBA in any event. The first
letter clearly stated O'Laughlin intended to terminate its participation in the CBA
"effective January 31, 2011." This statement was ineffective because O'Laughlin was
obligated to participate in the CBA through April 30, 2011, and could not unilaterally
terminate the CBA on a different date. The first letter did not explicitly refer to the
CBA's 90-day notice provision, nor did it reference the correct termination date of
April 30, 2011. Thus, the first letter was not the type of "clear and explicit" notice
required to express an unequivocal intent to terminate.
The second letter added nothing to help clarify the first letter. Like the first
letter, it did not refer to the correct termination date of April 30, 2011. Indeed, the
second letter merely added to the confusion because it was inconsistent with the first
letter. The first letter purported to terminate participation in the CBA at the end of
January 2011, while the second letter purported to terminate participation in the CBA
at the beginning of January 2011. Even if we credited O'Laughlin's explanation of the
second letter as containing a typographical error, the two letters would still be
inconsistent – the first letter would have purported to terminate participation in the
CBA at the end of January 2011, while the second letter would have purported to
terminate participation in the CBA eleven months later. Neither of those dates was
a permissible date upon which to terminate the CBA pursuant to its provisions. The
two letters did not, therefore, unequivocally express the clear and explicit intent
necessary to terminate participation in a CBA.
III
We reverse the district court and remand this case for further proceedings to
determine what amounts O'Laughlin is still obligated to contribute to the employee
benefit plans managed by Twin City.
______________________________
-9-