Manuel Pantoja v. Edward Zengel & Sons Express, Inc.

Case: 12-10036 Date Filed: 12/11/2012 Page: 1 of 11
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-10036
________________________
D. C. Docket No. 1:10-cv-20663-JAL
MANUEL PANTOJA,
Plaintiff-Appellant,
versus
EDWARD ZENGEL & SON EXPRESS, INC.,
a Florida corporation,
a.k.a. Edward Zengel & Son, Inc.,
EDWARD ZENGEL, SR.,
EDWARD ZENGEL, JR.,
MARIE ZENGEL,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(December 11, 2012)
Before DUBINA, Chief Judge, PRYOR and ANDERSON, Circuit Judges.
PER CURIAM:
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This appeal presents the question whether an employer’s unpaid fringe
benefit contributions owed to an employee 401(k) plan are “plan assets” within the
meaning of the Employee Retirement Income Security Act (“ERISA”), and thus,
whether an employer breaches its fiduciary duty to the plan’s beneficiary by failing
to contribute. The district court found the unpaid contributions were not “plan
assets” because the unpaid contributions were not clearly identified as “plan
assets” in the governing plan documents. Therefore, the district court entered
judgment in favor of the employer because it did not breach a fiduciary duty as a
matter of law. We affirm the district court’s judgment.
I.
Edward Zengel & Son Express, Inc. (“EZS”) is a family-owned trucking
corporation that contracts with the United States Postal Service (the “Postal
Service”) to haul mail. Pursuant to the McNamara-O’Hara Service Contract Act of
1965 (the “SCA”), EZS’s contract with the Postal Service obligates EZS to provide
certain minimum wages and fringe benefits to its employees who perform services
related to the contract. See 41 U.S.C. § 6702–6703. A contractor like EZS may
satisfy its fringe benefit obligation by either paying the fringe benefits as wages or
directly providing benefits, e.g., depositing the money into an employee 401(k)
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plan. EZS elected the 401(k) method of paying fringe benefits and created the
Edward Zengel & Son, Inc. Employee Retirement Plan (the “Plan”) in 2007.
The Plan allows for both employee and employer contributions. Employees
may contribute by electing to defer a percentage of their salary. For employer
contributions, the Plan states that if work performed is subject to prevailing wage
laws, such as the SCA, “then [EZS] will make contributions to th[e] Plan to help
satisfy the fringe benefit requirements of the law.” [R. 51-4 at 8.] Furthermore,
the Plan’s “Adoption Agreement” provides that the contribution to the Plan “shall
be an amount equal to the balance of the fringe benefit payment for health and
welfare of each Participant” and that the contribution “shall be fully Vested.” [Id.
at 44.] A “Vested” contribution is “the nonforfeitable portion of any account
maintained on behalf of a [Plan] Participant.” [R. 46-5 at 44.] All money
contributed to the Plan is held in a “Trust Fund” that consists of “the assets of the
Plan and Trust as the same shall exist from time to time.” [Id.]
Manuel Pantoja (“Pantoja”) worked for EZS for approximately six months
in 2009. From February until August 2009, EZS withheld fringe benefits totaling
$3,472.17 without depositing most of the money owed to Pantoja into the Plan. 1
1
In the district court, Pantoja asserted that EZS, Edward Zengel Sr., Edward Zengel Jr.,
and Marie Zengel (collectively “Appellees”) withheld wages from his paycheck, and in fact,
Appellees’ answer to Pantoja’s original complaint admitted that the withheld funds were
employee contributions. However, in response to Pantoja’s amended class action complaint,
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Instead, EZS used the money to pay its payroll taxes. Pantoja learned there was
less than $300 in his 401(k) account when Hartford Life Insurance Company, the
plan manager, sent him a balance statement in late 2009. After Pantoja filed this
lawsuit, EZS subsequently remitted to the Plan the funds owed to him, plus
interest. 2
In March 2010, Pantoja filed suit against EZS, and three corporate officers:
Edward Zengel Sr., Edward Zengel Jr., and Marie Zengel. The amended class
action complaint alleged a breach of fiduciary duty under 29 U.S.C. § 1132(a)(2)
(Count I), requested injunctive relief pursuant to 29 U.S.C. § 1132(a)(3) (Count II),
and sought additional redress under 29 U.S.C. § 1132(a)(1)(A) and (c) for failure
to provide requested information and documents (Count III).
After the district court denied his motion to certify a class, Pantoja
Appellees withdrew the admission, and on appeal, Pantoja concedes that he never elected to
make employee contributions to the Plan and that the unpaid funds were in fact statutorily-
mandated employer contributions for fringe benefits owed. Nevertheless, Pantoja asserts the
district court should not have disregarded Appellees’ withdrawn admission that the fringe
benefits were employee contributions. His assertion is unfounded. The district court had no
obligation to hold Appellees to their inadvertent, prior admission, especially because Appellees
asserted from the beginning, in discovery, that the funds were employer—rather than
employee—contributions. Regardless, amended pleadings become the operative documents in
litigation. 6 ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE §
1476 (3d ed. 2012) (“[A]ny admissions in the initial responsive pleading will be superseded by
the amended answer.”).
2
Standing is not at issue in this appeal. Though EZS’s subsequent payment of the
withheld benefits would seem to eliminate the injury prerequisite for standing, Pantoja could
theoretically recover additional relief under ERISA, such as investment gains or profits, in
addition to his requested injunction against future misconduct.
4
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sought partial summary judgment on the issue of Appellees’ liability for breach of
fiduciary duties (Counts I and II). Appellees opposed the motion and also
requested summary judgment on the issue of ERISA liability. The court denied
Pantoja’s motion and granted partial summary judgment in favor of Appellees,
finding that the wrongfully-withheld fringe benefits were not “plan assets,” and
therefore, Appellees did not breach a fiduciary duty as a matter of law. The parties
mediated and reached a settlement agreement on Count III. The district court then
entered final judgment on Counts I and II. Pantoja timely appealed.
II.
“We review a district court’s grant of summary judgment de novo
considering all the facts and reasonable inferences in the light most favorable to the
non-moving party.” Mann v. Taser Int’l, Inc., 588 F.3d 1291, 1303 (11th Cir.
2009). However, this court reviews an order denying class certification for abuse
of discretion. Wooden v. Bd. of Regents of Univ. Sys. of Ga., 247 F.3d 1262, 1271
(11th Cir. 2001).
III.
ERISA was enacted to protect employee pensions and other benefits.
Lanfear v. Home Depot, Inc., 679 F.3d 1267, 1278 (11th Cir. 2012) (citation
omitted). It empowers plan beneficiaries to bring civil actions to recover benefits
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owed and to enjoin actions that violate the statute or the terms of an ERISA plan.
29 U.S.C. § 1132(a). “Any person who is a fiduciary with respect to a plan who
breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries
by [ERISA]” is personally liable for the breach. Id. § 1109(a). As relevant to this
appeal, a person is an ERISA fiduciary if “he exercises any discretionary authority
or discretionary control respecting management of [a] plan or exercises any
authority or control respecting management or disposition of its assets.” Id. §
1002(21)(A)(i) (emphasis added). A fiduciary owes the plan beneficiaries and
participants the highest standard of care known to the law. See Herman v.
NationsBank Trust Co. (Ga.), 126 F.3d 1354, 1361 (11th Cir. 1997); see also 29
U.S.C. § 1104(a)(1) (stating that fiduciaries must discharge their duties “solely in
the interest of the participants and beneficiaries”).
While ERISA itself does not define the term “assets,” federal regulations do
prescribe that ERISA “plan assets”
include amounts (other than union dues) that a participant or
beneficiary pays to an employer, or amounts that a participant has
withheld from his wages by an employer, for contribution or
repayment of a participant loan to the plan, as of the earliest date on
which such contributions or repayments can reasonably be segregated
from the employer’s general assets.
29 C.F.R. § 2510.3-102 (emphasis added). Thus, an employee’s elective
contributions to an ERISA plan, withheld from his wages, are “plan assets” even
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when the funds remain in the employer’s possession. See United States v. Grizzle,
933 F.2d 943, 947 (11th Cir. 1991). However, federal regulations do not address
employer contributions to an ERISA plan—the issue in this appeal.
Recognizing this absence of regulation, we have held that unpaid employer
contributions are not “plan assets” unless specific and clear language in the plan
documents or other evidence so indicates. See ITPE Pension Fund v. Hall, 334
F.3d 1011, 1013–14 (11th Cir. 2003). We have been hesitant to hold otherwise
because of the unfairness in imposing strict fiduciary responsibilities—and
personal liability—upon corporate officers who are not clearly aware of their status
as fiduciaries. See id. at 1015–16 (quoting Herman, 126 F.3d at 1366); see also In
re Halpin, 566 F.3d 286, 292 (2d Cir. 2009) (noting that “if unpaid employer
contributions [are] plan assets, the employer would automatically become an
ERISA fiduciary once it failed to make payments” and thus, an “employer would
owe the plan undivided loyalty at the expense of competing [interests]”). 3
Furthermore, our sister circuits have recognized that an employer’s failure to
pay contributions owed simply makes the employer a debtor of the ERISA plan,
3
Notably, the Supreme Court has also strongly indicated that unpaid employer contributions are
not plan assets. See Jackson v. United States, 553 U.S. 1163, 129 S. Ct. 1307 (2009), vacating
and remanding, 524 F.3d 532 (4th Cir. 2008). In Jackson, the Fourth Circuit held that employer
contributions are plan assets “when they bec[o]me due and payable” to the plan. 524 F.3d at
542. However, on appeal to the Supreme Court, the Solicitor General took the position that
unpaid employer contributions are not plan assets. The Court subsequently vacated and
remanded the case in light of this assertion.
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but not a fiduciary of plan assets. See, e.g., Halpin, 566 F.3d at 290; Graphic
Commc’ns Intern. Union Upper Midwest Local 1M Health & Welfare Plan v.
Bjorkedal, 516 F.3d 719, 732 (8th Cir. 2008) (“Corporate assets do not become
plan assets merely because an employer has a corporate obligation to make
payments to the plan.”); In re Luna, 406 F.3d 1192, 1205 (10th Cir. 2005) (stating
that although the contractual right to unpaid funds is itself a plan asset, “a
delinquent employer-contributor is merely a debtor, not a fiduciary”); see also
Cline v. Indus. Maint. Eng’g & Contracting Co., 200 F.3d 1223, 1234 (9th Cir.
2000) (“Until the employer pays the employer contributions over to the plan, the
contributions do not become plan assets over which fiduciaries of the plan have a
fiduciary obligation; this is true even where the employer is also a fiduciary of the
plan.” (citing Local Union 2134, United Mine Workers of Am. v. Powhatan Fuel,
Inc., 828 F.2d 710, 714 (11th Cir. 1987))). Thus, absent language to the contrary,
courts have been unwilling to find that an employer is a fiduciary of “plan assets”
simply because it has a contractual obligation to contribute to a plan.
Yet Pantoja argues this case is distinguishable because of the mandatory
nature of the Appellees’ obligation to make contributions. He posits that the
district court should have construed the unpaid funds as employee contributions
because the fringe benefits were not to be paid at Appellees’ discretion, but rather,
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the funds were “required” and “due” pursuant to law. In effect, Pantoja argues that
mandatory, non-elective, unpaid employer contributions should be considered the
legal equivalent of elective employee contributions.
Pantoja is incorrect. First, his argument ignores that the employers in ITPE
Pension Fund, Halpin, Bjorkedal, Luna, and Cline were each contractually-bound
to contribute fringe benefits for their employees. That this mandatory obligation
arose from a contractual arrangement rather than the SCA, as in this case, is
inapposite. In each case, employees had a legal right to the unpaid benefits. But
this right, without a clear intent to create a fiduciary relationship, does not
transform unpaid employer contributions into plan assets.
Second, the other cases cited by Pantoja in apparent support of his position
in actuality serve only to reinforce this court’s precedent. In each case, the court
found the unpaid employer contributions were plan assets only because the plan
documents clearly indicated contributions became assets when “due” or “owing,”
rather than when they were actually remitted to the plan. See Plumbers Local 98
Defined Benefit Funds v. Controlled Water, Inc., No. 03-CV-72888-DT, 2006 WL
2708544, at *5 (E.D. Mich. Sept. 19, 2006) (finding that the “Plaintiffs’ [plan]
documents, incorporated into the [contract], provide that contributions become
vested plan assets when due” (emphasis added)); NYSA-ILA Med. & Clinical Servs.
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Fund v. Catucci, 60 F. Supp. 2d 194, 200–01 (S.D.N.Y. 1999) (plan documents
defined the plan as consisting of, inter alia, “money received from or owing from
any other person, corporation, or Fund required to make contributions or payments
to this Fund” (emphasis added)); Galgay v. Gangloff, 677 F. Supp. 295, 301 (M.D.
Pa. 1987) (express terms of the wage agreement provided that “[t]itle to all the
monies paid into and/or due and owing said fund shall be vested in . . . the fund”
(emphasis added) (internal quotations omitted)). Thus, each case cited by Pantoja
is consistent with our holding that unpaid employer contributions, absent
contractual language or other evidence indicating the contrary, are not plan assets,
and the failure to pay is not a breach of fiduciary duty under ERISA.
IV.
Upon examination of the Plan documents, we find no clear and specific
language indicating the fringe benefits are “plan assets” before they are actually
remitted to the Plan. Indeed, unlike the plan documents in ITPE Pension Fund,
this contract is not even susceptible to such a reading. See 334 F.3d at 1016.
Without clear language or any evidence indicating otherwise, we conclude that the
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unpaid funds cannot be construed as plan assets; therefore, the Appellees did not
breach a fiduciary duty as a matter of law.4
AFFIRMED.
4
This holding moots the issue of class certification. See Rink v. Cheminova, Inc., 400
F.3d 1286, 1297 (11th Cir. 2005).
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