Central States, Southeast & Southwest Areas Pension Fund v. Auffenberg Ford, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
No. 09-2964
C ENTRAL S TATES, S OUTHEAST AND
S OUTHWEST A REAS P ENSION F UND, et al.,
Plaintiffs-Appellees,
v.
A UFFENBERG F ORD , INC.,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 08 C 1103—Robert W. Gettleman, Judge.
A RGUED O CTOBER 28, 2010—D ECIDED M ARCH 11, 2011
Before M ANION, R OVNER, and S YKES, Circuit Judges.
M ANION, Circuit Judge. Central States, Southeast and
Southwest Areas Pension Fund and its trustee, Howard
McDougall (collectively “the Fund”), filed suit against
Auffenberg Ford, Inc. under the Employee Retirement
Income Security Act (“ERISA”), 29 U.S.C. § 1001, in order
to collect unpaid contributions to the Fund. The district
2 No. 09-2964
court granted summary judgment in the Fund’s favor, and
Auffenberg now appeals. Because the terms of the col-
lective bargaining agreement (“CBA”) required Auffenberg
to continue contributing to the Fund, notwithstanding
any oral agreement to the contrary, we affirm.
I.
Auffenberg is an Illinois car dealership employing
workers represented by Local Union 50, a union affiliated
with the International Brotherhood of Teamsters. The
Fund is a multiemployer pension fund in which Auf-
fenberg participated from 1980 to 1997, requiring
Auffenberg to pay contributions on behalf of its
unionized employees. Auffenberg withdrew from the
Fund in 1997, resulting in a “withdrawal liability” of
almost $50,000, which it paid in full.
In 2001, the President of Local 50, John Green, proposed
that Auffenberg re-enter the Fund. Several longtime
employees fell just short of the time needed to qualify for
a higher benefit level, so Auffenberg was interested in
extending its term with the Fund to accommodate them.
Because Auffenberg was worried about the possibility
of again incurring a “withdrawal liability,” it asked to be
eligible for the five-year “free look” exemption that
would allow it to participate in the Fund and withdraw
within five years without liability.1 In June 2001, after
1
Under 29 U.S.C. § 1390(a), “[a]n employer who withdraws
from a plan in complete or partial withdrawal is not liable to
(continued...)
No. 09-2964 3
negotiations between Auffenberg and Local 50, a CBA was
formalized. Apparently, during the negotiations, Auffen-
berg and John Green orally agreed that Auffenberg’s
obligation to contribute to the Fund would end when the
CBA expired in five years. But this condition was not
memorialized in the CBA; instead, the CBA contained
an “evergreen clause” stating that all the terms and
provisions of the CBA would remain in effect until a
new CBA was negotiated or until negotiations were
terminated.2 In addition to the CBA, Auffenberg was
a party to a Participation Agreement and a Trust Agree-
ment that required Auffenberg to pay contributions to
the Fund in accordance with the terms of the CBA.
In early 2006, Local 50 sought negotiations for a re-
placement CBA because the 2001 CBA was soon to ex-
pire. By this time, John Green of Local 50 had passed away.
Although his replacement, Scott Alexander, was at first
unaware of the alleged 2001 oral agreement, when in-
1
(...continued)
the plan [for withdrawal liability] if the employer . . . had an
obligation to contribute to the plan for no more than . . . the
number of years required for vesting under the plan.”
2
The relevant language states:
All of the terms and provisions of this contract shall be
continued in full force and effect and extended from the
termination date hereof to such time as the parties either
enter into a new Agreement, or Agreement containing
the desired modifications, or terminate further negotiation
in the manner above mentioned.
4 No. 09-2964
formed of it, Alexander orally agreed that Auffenberg
could cease contributing to the Fund as of April 30, 2006,
the day the 2001 CBA expired. In May, Auffenberg’s
lawyer mailed a letter to the Fund, stating that its ob-
ligation to contribute to the Fund had ended with the
expiration of the CBA. The Fund replied that the obliga-
tion to contribute had not ended. Negotiations for a new
CBA continued during the summer and fall of 2006.
A second letter, now signed by both Auffenberg’s presi-
dent and Local 50’s representative, was mailed to the
Fund in November 2006; the letter stated that Local 50
and Auffenberg had an understanding that Auffenberg’s
participation in the Fund ended on April 30, 2006,
but that “a written agreement formalizing this under-
standing had not been finalized.” A third letter to the
same effect was sent to the Fund by Auffenberg’s lawyer
in December 2006.
A new CBA was eventually negotiated, and on
February 10, 2007, the Fund received a copy of this agree-
ment. The Fund accepted the new CBA as ending
Auffenberg’s duty to contribute under the old 2001 CBA,
but it still claimed that Auffenberg was required to pay
contributions for the nine-month period between the
expiration of the 2001 CBA and the entry of the new
CBA, an amount totaling $46,500, not including interest,
fees, and costs. When Auffenberg refused to pay, the
Fund filed suit.
The district court granted summary judgment in the
Fund’s favor, finding that Auffenberg’s oral agreement
reached with Green during the negotiations in 2001 was
No. 09-2964 5
barred by the parol evidence rule and unenforceable in
view of ERISA’s provisions. Auffenberg appeals.
II.
We review de novo a district court’s grant of summary
judgment. Winsley v. Cook Cnty., 563 F.3d 598, 602 (7th
Cir. 2009). In its order granting summary judgment to
the Fund, the district court ruled that the 2001 oral agree-
ment was barred by the parol evidence rule. Auffenberg
does not challenge this ruling on appeal. Instead,
Auffenberg argues that the district court incorrectly
focused on the original oral agreement made between
Auffenberg and Local 50 in 2001. It also claims that the
court neglected to consider the effect of the 2006 discus-
sions between Auffenberg and Local 50’s bargaining
representative, Scott Alexander. In particular, Auffenberg
contends that during the negotiations in 2006, it came
to an oral agreement with Local 50 that it could cease
contributions as of April 30, 2006. Since the Fund was
properly informed of this oral agreement by letter,
Auffenberg claims that the 2006 oral agreement is en-
forceable and absolved it from the duty of making con-
tributions to the Fund. Auffenberg asserts that since
the district court erred by not considering the effects of
the 2006 agreement, this court should remand the case
to the district court for a determination of this issue.
As a preliminary matter, the Fund argues that
Auffenberg failed to raise this argument below and
thus has waived the opportunity to bring it now on
appeal. The parties presented sufficient evidence before
6 No. 09-2964
the district court about the events in 2006, including the
existence of an oral agreement and the written notices to
the Fund. Therefore Auffenberg has not waived its argu-
ment on appeal. The question then is whether an oral
agreement between Auffenberg and Local 50 to end
Auffenberg’s contractual obligations to contribute to
the Fund is enforceable as long as written notice is given.
It is not.
Under ERISA, the terms of employee benefit plans
must be “established and maintained pursuant to a
written instrument.” 29 U.S.C. § 1102(a)(1). Also, the
Labor Management Relations Act (“LMRA”) requires
that “the detailed basis on which such payments are to
be made is specified in a written agreement with the
employer.” 29 U.S.C. § 186(c)(5)(B). In this case, the
written “evergreen clause” of the 2001 CBA required
Auffenberg to continue making contributions to the
Fund after the CBA expired and until such time as
the parties either entered into a new agreement or termi-
nated negotiations. No written agreement modifying
the terms of the CBA was formalized and submitted to
the Fund before February 10, 2007. Instead, Auffenberg
contends that it had an oral agreement with Local
50 during its negotiations in 2006 following the expira-
tion of the 2001 CBA, and that this oral agreement was
sufficient to modify its obligations under the 2001 CBA.
The LMRA and ERISA “prevent[] a court from giving
force to oral understandings between union and
employer that contradict the writings.” Cent. States, Se. &
Sw. Areas Pension Fund v. Gerber Truck Serv., Inc., 870 F.2d
No. 09-2964 7
1148, 1154 (7th Cir. 1989) (en banc) (citing 29 U.S.C.
§ 186(c)(5)(B) and 29 U.S.C. § 1145). Auffenberg attempts
to distinguish this rule by arguing that an oral agree-
ment modifying its obligations under the CBA is enforce-
able as long as written notice of the oral agreement
is given, as was done here by notifying the Fund by
letter. But not only does Auffenberg’s contention
conflict with our ruling in Gerber Truck, it conflicts with
ERISA’s requirement that “[e]very employee benefit
plan shall be established and maintained pursuant to a
written instrument.” 29 U.S.C. § 1102(a)(1) (emphasis
added).
Auffenberg cites Central States, Southeast & Southwest
Areas Pension Fund v. Behnke, Inc., 883 F.2d 454 (6th Cir.
1989), in support of the proposition that CBAs can be
orally modified as long as written notice is given. But
the Behnke case stands for the opposite proposition: in
Behnke, the court found that an oral CBA was unenforce-
able because “the LMRA and ERISA require employer
contributions to trust funds on behalf of employees to
be pursuant to detailed written agreements specifying the
employer’s duty to contribute.” Id. at 459 (emphasis
in original). Auffenberg focuses on the binding “interim”
CBA in Behnke, claiming that it was binding because it
was communicated in writing to the pension fund, but
this overlooks the fact that the interim CBA was a
written, and not oral, agreement. See id. at 456-57.
In short, we find no support in either statutory or case
law for the proposition that, as long as written notice
is given, an oral agreement is capable of modifying a
8 No. 09-2964
written agreement requiring employee benefit contribu-
tions. Any oral agreement reached in 2006 contradicting
Auffenberg’s written obligations to contribute to the
Fund is unenforceable. We A FFIRM .
3-11-11