Glazing Health & Welfare Fund v. Michael A. Lamek

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GLAZING HEALTH AND WELFARE No. 16-16155
FUND, Trustees; SOUTHERN NEVADA
GLAZIERS AND FABRICATORS D.C. No.
PENSION TRUST FUND; PAINTERS, 2:13-cv-01106-
GLAZIERS AND FLOORCOVERERS KJD-NJK
JOINT APPRENTICESHIP AND
JOURNEYMAN TRAINING TRUST;
PAINTERS, GLAZIERS AND OPINION
FLOORCOVERERS SAFETY TRAINING
TRUST FUND; IUPAT POLITICAL
ACTION COMMITTEE; SOUTHERN
NEVADA PAINTERS AND
DECORATORS AND GLAZIERS LABOR-
MANAGEMENT COOPERATION
COMMITTEE TRUST; IUPAT
INDUSTRY PENSION TRUST FUND;
SOUTHERN CALIFORNIA, ARIZONA,
COLORADO AND SOUTHERN NEVADA
GLAZIERS, ARCHITECTURAL METAL
AND GLASS WORKERS PENSION
TRUST FUND,
Plaintiffs-Appellants,
v.
MICHAEL A. LAMEK; KELLY D.
MARSHALL,
Defendants-Appellees,
2 GLAZING HEALTH & WELFARE FUND V. LAMEK
and
ACCURACY GLASS & MIRROR
COMPANY, INC.,
Defendant.
Appeal from the United States District Court
for the District of Nevada
Kent J. Dawson, Senior District Judge, Presiding
Argued and Submitted November 17, 2017
San Francisco, California
Filed March 21, 2018
Before: Richard R. Clifton and Michelle T. Friedland,
Circuit Judges, and Sharon L. Gleason, * District Judge.
Opinion by Judge Friedland;
Dissent by Judge Gleason
*
The Honorable Sharon L. Gleason, United States District Judge for
the District of Alaska, sitting by designation.
GLAZING HEALTH & WELFARE FUND V. LAMEK 3
SUMMARY **
Employee Retirement Income Security Act
The panel affirmed the district court’s dismissal of an
ERISA action brought by employee benefit trust funds,
seeking unpaid contributions owed under the contracts
governing the benefit plans that the trust funds managed for
Accuracy Glass & Mirror Company.
The trust funds argued that, pursuant to those contracts,
the unpaid contributions were trust assets over which the
owners and officers of Accuracy exercised control and that
the trust funds therefore could sue these individuals as
fiduciaries to collect the contributions. The panel held that
the trust funds’ claim was foreclosed by Bos v. Bd. of
Trustees (Bos I), 795 F.3d 1006 (9th Cir. 2015), which held
that employers are not fiduciaries under ERISA as to unpaid
contributions to ERISA benefit plans.
Dissenting, Judge Gleason wrote that she disagreed with
the majority’s interpretation of Bos I and would find that
outside of the bankruptcy context unpaid employer
contributions to employee benefit plans may constitute plan
assets when the ERISA plan document expressly defines
them as such.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
4 GLAZING HEALTH & WELFARE FUND V. LAMEK
COUNSEL
Wesley J. Smith (argued) and Daryl E. Martin, Christensen
James & Martin, Las Vegas, Nevada, for Plaintiffs-
Appellants.
Mark S. Dzarnoski (argued), Gentile Cristalli Miller Armeni
Savarese, Las Vegas, Nevada, for Defendants-Appellees.
OPINION
FRIEDLAND, Circuit Judge:
The trustees of Glazing Health and Welfare Fund and
several other employee benefit trust funds (collectively, “the
Trusts”) appeal from the district court’s dismissal of their
lawsuit against Michael Lamek and Kelly Marshall, the sole
owners and officers of Accuracy Glass & Mirror Company,
Inc. (“Accuracy”). The lawsuit sought unpaid contributions
owed under the contracts governing the benefit plans that the
Trusts managed for Accuracy. The Trusts argue that,
pursuant to those contracts, the unpaid contributions were
trust assets over which Lamek and Marshall exercised
control and that the Trusts therefore could sue the
individuals as fiduciaries to collect those contributions. We
agree with the district court that Bos v. Board of Trustees
(Bos I), 795 F.3d 1006 (9th Cir. 2015), cert. denied, 136 S.
Ct. 1452 (2016), which held that parties to an ERISA plan
cannot designate unpaid contributions as plan assets,
forecloses the Trusts’ claim. 1 We therefore affirm.
1
ERISA is the federal statute that governs the pension and health
and welfare benefit plans in this case. See Employee Retirement Income
GLAZING HEALTH & WELFARE FUND V. LAMEK 5
I.
Accuracy was a Nevada corporation that operated as a
glass and glazing contractor. 2 Marshall served as the
president of the corporation, and Lamek served as the
secretary and treasurer. Accuracy was a party to two Master
Labor Agreements (“MLAs”) that required it to contribute
to the Trusts from 2007 to 2011 and 2013 to 2015 to provide
employee benefits, including health insurance and pensions.
In addition, each Trust was governed by its own Trust
Agreement, which purported to treat unpaid contributions as
trust assets. For example, a document governing the Glazing
Health and Welfare Fund stated that “monies (whether paid,
unpaid, segregated, or otherwise traceable, or not) become
Trust Fund assets on the Due Date.”
This dispute arose when the Trusts alleged that Accuracy
failed to make payments required by the MLAs. The Trusts
filed suit in the United States District Court for the District
of Nevada, asserting claims against Lamek and Marshall,
including for breach of fiduciary duty. 3 Those claims were
initially dismissed, but, after amendment, the fiduciary duty
claim survived a second motion to dismiss. After Bos I was
decided, however, Lamek and Marshall filed a motion for
reconsideration of their second motion to dismiss in light of
that decision. The district court granted the motion and
Security Act of 1974 (“ERISA”), Pub.L.No. 93-406, 88 Stat. 829
(codified as amended in scattered sections of 29 U.S.C.).
2
It is not clear from the record or briefing whether Accuracy is still
in business. We use the past tense for convenience.
3
The Trusts also asserted separate claims against Accuracy. The
court granted summary judgment to the Trusts on those claims, a ruling
that is not at issue in this appeal.
6 GLAZING HEALTH & WELFARE FUND V. LAMEK
dismissed the fiduciary duty claim, reasoning that, under Bos
I, “an employer’s contractual requirement to contribute to an
employee benefits trust fund” does not make it a “fiduciary
of unpaid contributions,” and that therefore “Lamek and
Marshall are not subject to fiduciary liability under ERISA”
for the unpaid contributions at issue. The Trusts timely
appealed.
II.
We agree with the district court that our case law
forecloses the Trusts’ fiduciary duty claim. 4 In Cline v.
Industrial Maintenance Engineering & Contracting Co.,
200 F.3d 1223 (9th Cir. 2000), we adopted the general rule
that “[u]ntil 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.” Id. at 1234. Although in Carpenters Pension
Trust Fund for Northern California v. Moxley, 734 F.3d 864
(9th Cir. 2013), we left open whether to recognize an
exception to Cline’s rule that would apply when plan
documents expressly define the fund to include future
payments, id. at 870, we rejected such an exception in Bos I. 5
4
Because we hold that this case is controlled by Bos I, we need not
reach the parties’ additional arguments about whether the Trust
Agreements were binding on Lamek and Marshall.
5
The dissent contends that Bos I left that question open. To the
contrary, although Bos I initially explained that we had “not yet
determined whether to recognize . . . an exception to Cline,” 795 F.3d at
1009, we then proceeded to do exactly that, see id. at 1010–11 (agreeing
“with the view taken by the Sixth” Circuit, which we described as having
“declined to apply an exception to the general rule that an employer
cannot be an ERISA fiduciary with respect to unpaid contributions”).
GLAZING HEALTH & WELFARE FUND V. LAMEK 7
Bos I concerned a dispute similar to this one. Bos
Enterprises, Inc. (“BEI”) had agreed to be bound by a master
agreement that required BEI to contribute to the trust funds
that were parties to that agreement. 795 F.3d at 1007. The
associated trust agreements generally “defined each fund to
include . . . any other money received or held because of or
pursuant to the trust.” Id. Gregory Bos, as president of BEI,
“personally had full control over BEI’s finances, as well as
authority to make payments on behalf of BEI” to the funds.
Id. at 1007–08. When BEI struggled to make payments as
required by the master agreement, the trustees of the funds
filed a grievance against BEI and Bos individually. Id. at
1008. An arbitrator granted awards against both. Id.
Bos then filed for bankruptcy. Id. The trustees
responded by filing a complaint in his bankruptcy
proceeding, arguing that pursuant to the Bankruptcy Code,
which provides that an individual debtor cannot discharge a
debt “for fraud or defalcation while acting in a fiduciary
capacity,” 11 U.S.C. § 523(a)(4), the debt owed to the trusts
was not dischargeable. Bos I, 795 F.3d at 1008 & n.2.
Under our case law, if an individual is a fiduciary under
ERISA, he or she “is also treated as a fiduciary for purposes
of § 523(a)(4).” Id. at 1008. Thus, Bos I addressed whether
Bos was a fiduciary of the trusts under ERISA and therefore
was properly considered a fiduciary under § 523(a)(4). Id.
at 1008–09; see also id. at 1007 (“We must decide whether
an employer’s contractual requirement to contribute to an
employee benefits trust fund makes it a fiduciary of unpaid
contributions.”).
After recognizing disagreement in our sister circuits over
whether an individual who controls money contractually
8 GLAZING HEALTH & WELFARE FUND V. LAMEK
owed to ERISA funds is a fiduciary under ERISA, 6 we sided
with the circuits that “declined to apply an exception to the
general rule that an employer cannot be an ERISA fiduciary
with respect to unpaid contributions.” Bos I, 795 F.3d at
1010; see also id. at 1010–11 (agreeing with the Tenth and
Sixth Circuits). In other words, we held that even an ERISA
plan that treats unpaid contributions as plan assets does not
make an employer a fiduciary with respect to those owed
funds.
The Trusts argue that Bos I does not control in this
ERISA case because Bos I was a bankruptcy case, and
fiduciary duties are construed more broadly under ERISA
than under the Bankruptcy Code. Compare In re Cantrell,
329 F.3d 1119, 1125 (9th Cir. 2003) (“[W]e have adopted a
narrow definition of ‘fiduciary’ for purposes of
§ 523(a)(4).”), with John Hancock Mut. Life Ins. Co. v.
Harris Tr. & Sav. Bank, 510 U.S. 86, 96 (1993) (“To help
fulfill ERISA’s broadly protective purposes, Congress
commodiously imposed fiduciary standards on persons
whose actions affect the amount of benefits retirement plan
participants will receive.” (footnote omitted)). But in Bos I,
we declined to recognize an exception to the “general rule
that unpaid contributions to employee benefit funds are not
plan assets” and accordingly held that Bos was not a
fiduciary under ERISA. 795 F.3d at 1012; see also id. at
1008–11. We then concluded that because Bos was not a
6
See Bos I, 795 F.3d at 1009–11 (comparing, among others, ITPE
Pension Fund v. Hall, 334 F.3d 1011 (11th Cir. 2003), and Bricklayers
and Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Moulton
Masonry & Constr., LLC, 779 F.3d 182 (2d Cir. 2015), with In re Luna,
406 F.3d 1192 (10th Cir. 2005), and In re Bucci, 493 F.3d 635 (6th Cir.
2007)).
GLAZING HEALTH & WELFARE FUND V. LAMEK 9
fiduciary under ERISA, he was also not a fiduciary under
§ 523(a)(4). 7 See Bos I, 795 F.3d at 1008 (“If an individual
is a fiduciary for purposes of [ERISA], the individual is also
treated as a fiduciary for purposes of § 523(a)(4).” (citing In
re Hemmeter, 242 F.3d 1186, 1190 (9th Cir. 2001))). Thus,
contrary to the Trusts’ assertions, the implications of Bos I
extend beyond bankruptcy to ERISA.
Even if the wording of Bos I left room for doubt on this
score, the same panel of our court clarified in a later
published order that in Bos I it had “concluded that [Bos]
was not a fiduciary under ERISA, and thus [that] the
Bankruptcy Code’s ‘fiduciary’ exception to discharge could
not be applied to him.” Bos v. Bd. of Trs. (Bos II), 818 F.3d
486, 489 (9th Cir. 2016) (citing Bos I, 795 F.3d at 1008–12).
That rule applies equally here and dictates that the
district court was correct to conclude that Lamek and
Marshall were not fiduciaries of the Trusts. Although the
Trusts argue that this result conflicts with ERISA policy, we
as a three-judge panel are bound by Bos I regardless. See
7
The dissent argues that Bos I’s holding is limited to bankruptcy
given that Bos I reasoned that an individual could not be a fiduciary with
respect to unpaid contributions under § 523(a)(4) because “the event that
created the debt—the nonpayment of the funds—was the same event that
created the fiduciary status.” 795 F.3d at 1011. Although the dissent is
correct that this justification is unique to the bankruptcy context, we
provided two additional justifications for our decision in Bos I that apply
to ERISA. See id. (“[S]uch asset could be classified as the contractual
right to collect payments once they become due. . . . Thus, because an
employer would lack the requisite control over such plan asset, it could
not qualify as a fiduciary for purposes of either ERISA or § 523(a)(4).”);
see also id. at 1011–12 (declining to classify the asset “as amounts which
the employer must eventually contribute to the plan” and again
emphasizing that Bos did not have the requisite control over the plan
asset to make him a fiduciary).
10 GLAZING HEALTH & WELFARE FUND V. LAMEK
Miller v. Gammie, 335 F.3d 889, 892–93 (9th Cir. 2003) (en
banc) (explaining that a prior circuit decision on a question
of federal law is binding on a three-judge panel in the
absence of an intervening Supreme Court decision).
III.
For the foregoing reasons, we AFFIRM.
GLEASON, District Judge, dissenting:
I respectfully dissent.
“The plan, in short, is at the center of ERISA.” US
Airways, Inc. v. McCutchen, 569 U.S. 88, 101 (2013). “This
focus on the written terms of the plan is the linchpin of ‘a
system that is not so complex that administrative costs, or
litigation expenses, unduly discourage employers from
offering ERISA plans in the first place.’” Heimeshoff v.
Hartford Life & Acc. Ins. Co., 134 S. Ct. 604, 612 (2013)
(quoting Varity Corp. v. Howe, 516 U.S. 489, 497 (1996)
(alterations omitted)). But despite the Supreme Court’s view
on the primacy of plan language, the majority opts to
expansively interpret and then apply Bos v. Board of
Trustees (Bos I), 795 F.3d 1006 (9th Cir. 2015), cert. denied,
136 S. Ct. 1452 (2016), a circuit opinion from a bankruptcy
case, and thereby void any contractual provision between
employers and employee trusts that would have made an
employer liable as a fiduciary for failing to make employer
contributions to the trust.
The sole issue in Bos I was whether the debtor in a
bankruptcy proceeding was a “fiduciary” under 11 U.S.C.
§ 523(a)(4). The majority states that “Bos I held that parties
GLAZING HEALTH & WELFARE FUND V. LAMEK 11
to an ERISA plan cannot designate unpaid contributions as
plan assets.” But Bos I did no such thing. To the contrary,
it expressly did not decide whether, outside of a bankruptcy
context, contracting parties to an ERISA plan may designate
unpaid employer contributions as plan assets 1 Indeed, Bos I
recognized that “such asset could be classified as the unpaid
past-due contributions.” Bos I, 795 F.3d at 1011 (citing
ITPE Pension Fund v. Hall, 334 F.3d 1011, 1014 (11th Cir.
2003)). But the Bos I court then concluded that in the
bankruptcy context, the nonpayment of the funds would be
“the same event that created the fiduciary status, and thus,
the debt would not fall under § 523(a)(4).” Bos I, 795 F.3d
at 1011 (citing In re Hemmeter, 242 F.3d 1186, 1190 (9th
Cir. 2001)). In Hall, cited with approval in Bos I, the
Eleventh Circuit held it would impose fiduciary liability
when “either clear contractual language or clear, shared
intent of the parties” demonstrates it was “clearly intended
by the parties to make unpaid employer contributions assets
of the Fund.” Hall, 334 F.3d at 1012, 1016.
Furthermore, the majority’s extension of Bos I’s holding
to outside of the bankruptcy context is inconsistent with the
language of Bos I itself. Bos I repeatedly defines the
question before it as whether Bos’s conduct made him a
fiduciary under § 523(a)(4) of the Bankruptcy Code. See,
e.g., Bos I, 795 F.3d at 1011 (“[I]t comports with the limited
approach we take in recognizing fiduciary status,
particularly in the §523(a)(4) context. . . . Moreover, a
typical employer never has sufficient control over a plan
asset to make it a fiduciary for purposes of §523(a)(4).”).
1
See Bos I, 795 F.3d at 1009 (“We have not yet determined whether
to recognize such an exception to Cline [v. Indus. Maint. Eng'g &
Contracting Co., 200 F.3d 1223 (9th Cir. 2000)],” which established the
general rule that unpaid contributions are not plan assets).
12 GLAZING HEALTH & WELFARE FUND V. LAMEK
Bos I cites to § 523 of the Bankruptcy Code a total of 26
times. The precise holding in Bos I—that “Bos did not
engage in defalcation for purposes of §523(a)(4)”—makes
clear its holding was limited to bankruptcy proceedings.
The majority cites Bos v. Board of Trustees (Bos II),
818 F.3d 486, 489 (9th Cir. 2016), as confirming that Bos I
established a broad rule that fiduciary liability can never
attach to employers over unpaid contributions to ERISA
plans. 2 However, the sentence in Bos II that the majority
cites is simply a prelude to the distinct legal issue that was
then before the court, which involved only a dispute over
attorney’s fees incurred during the underlying case. This
casual shorthand (and inaccurate) summary of Bos I’s
holding in Bos II is not binding on a subsequent panel. See
In re Wal-Mart Wage & Hour Emp’t Practices Litig.,
737 F.3d 1262, 1268 n.8 (9th Cir. 2013) (“[N]ot every
statement of law in every opinion is binding on later panels.
Where it is clear that a statement is made casually and
without analysis, where the statement is uttered in passing
without due consideration of the alternatives, or where it is
merely a prelude to another legal issue that commands the
panel’s full attention, it may be appropriate to re-visit the
issue in a later case.” (citations omitted)).
The majority’s holding puts the Ninth Circuit at odds
with other circuits, including the Seventh and Second, which
have held that unpaid employer contributions may constitute
plan assets when the parties explicitly agree to treat them as
2
“Bos then appealed to this Court and we concluded that he was not
a fiduciary under ERISA, and thus the Bankruptcy Code’s ‘fiduciary’
exception to discharge could not be applied to him.” Bos II, 818 F.3d at
489. But this summary of Bos I is inaccurate; as discussed above, Bos I
did not broadly hold that Bos “was not a fiduciary under ERISA.”
GLAZING HEALTH & WELFARE FUND V. LAMEK 13
such. See Hall, 334 F.3d at 1013; Bricklayers & Allied
Craftworkers Local 2, Albany, N.Y. Pension Fund v.
Moulton Masonry & Constr., LLC, 779 F.3d 182, 189 (2d
Cir. 2015). The majority notes that other circuits have held
to the contrary, citing In re Luna, 406 F.3d 1192 (10th Cir.
2005) and In re Bucci, 493 F.3d 635 (6th Cir. 2007). See
Bos I, 795 F.3d at 1010 (stating that “[o]ther circuits [such
as the Tenth and Sixth] have declined to apply such an
exception, particularly in the context of § 523(a)(4)”). As
the court noted in Bos I, Bucci and Luna were each
bankruptcy cases. And neither case held that parties to an
ERISA plan cannot designate unpaid contributions as plan
assets. See Bucci, 493 F.3d at 643 (“The act that created the
debt—[the employer’s] breach of his contractual obligation
to pay the employer contributions—is also the exercise of
control that the Funds allege made [the employer] an ERISA
fiduciary. But for a trust relationship to satisfy § 523(a)(4),
the alleged fiduciary must have duties that preexist the act
creating the debt.”); 3 Luna, 406 F.3d at 1201, 1203 (holding
that contractual right to unpaid contributions is a plan asset,
but employer “cannot become an ERISA fiduciary merely
because it breaches its contractual obligations to a fund”).
Consistent with my reading of Bos I and the directives of
the Supreme Court, I would find that unpaid employer
contributions to employee benefit plans may constitute plan
3
Bos I agreed with the Sixth Circuit’s determination “that an
employer cannot commit defalcation under § 523(a)(4) simply by failing
to make contractually-required contributions, even if the plan defines the
fund as including future contributions.” See Bos I at 1011.
14 GLAZING HEALTH & WELFARE FUND V. LAMEK
assets when the ERISA plan document expressly defines
them as such. 4
For the foregoing reasons, I respectfully dissent.
4
I would then remand to the district court to determine in the first
instance whether the relevant plan documents so provided.