Audit Services, Inc. v. Clark Bros. Contractors

No. 81-285
I N T E SUPREME COURT O THE STATE O MONTANA
H F F
1982
AUDIT SERVICES I N C . ,
a Montana C o r p o r a t i o n ,
P l a i n t i f f and A p p e l l a n t ,
VS .
C A K BROTHERS CONTRACTORS,
L R
Defendant and Respondent.
Appeal from: D i s t r i c t Court of t h e F o u r t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e County of R a v a l l i
Honorable James B . W h e e l i s , J u d g e p r e s i d i n g .
Counsel of Record:
For A p p e l l a n t :
Cure and B o r e r , G r e a t F a l l s , Montana
Maxon R. D a v i s a r g u e d , G r e a t F a l l s , Montana
F o r Respondent:
P o o r e , Roth, Robischon & Robinson, B u t t e , Montana
Donald C. Robinson a r g u e d , B u t t e , Montana
Submitted: March 2 , 1982
Decided: May 27, 1982
Filed: zr[ 1982
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Y Clerk
Mr. C h i e f J u s t i c e Frank I . Haswell d e l i v e r e d t h e O p i n i o n
of t h e C o u r t .
Audit S e r v i c e s , I n c . , a s s i g n e e of t h e c l a i m s of
c e r t a i n employee b e n e f i t t r u s t f u n d s , b r o u g h t a n a c t i o n
a g a i n s t Clark Brothers Contractors i n t h e Fourth J u d i c i a l
D i s t r i c t Court seeking t o recover delinquent f r i n g e b e n e f i t
c o n t r i b u t i o n s , l i q u i d a t e d damages, i n t e r e s t , a u d i t f e e s
and a t t o r n e y f e e s . Clark Brothers counterclaimed f o r a
r e f u n d o f c o n t r i b u t i o n s m i s t a k e n l y made t o c e r t a i n o f t h e
t r u s t funds. The D i s t r i c t C o u r t d e t e r m i n e d t h a t C l a r k B r o t h e r s
was e n t i t l e d t o a r e f u n d o f t h e amounts m i s t a k e n l y c o n t r i b u t e d ,
and C l a r k B r o t h e r s conceded t h a t i t owed A u d i t S e r v i c e s t h e
amount c l a i m e d f o r d e l i n q u e n t c o n t r i b u t i o n s . After offsetting
t h e amount C l a r k B r o t h e r s owed t o A u d i t S e r v i c e s f o r d e l i n q u e n t
c o n t r i b u t i o n s , t h e D i s t r i c t C o u r t awarded C l a r k B r o t h e r s
$4,830.16 t o g e t h e r w i t h a t t o r n e y f e e s . Audit Services appeals.
C l a r k B r o t h e r s i s a Montana c o r p o r a t i o n engaged i n con-
s t r u c t i o n work i n Montana and n e i g h b o r i n g s t a t e s . During
t h e p e r i o d i n d i s p u t e , C l a r k B r o t h e r s was bound by t h e t e r m s
of c e r t a i n c o l l e c t i v e b a r g a i n i n g a g r e e m e n t s which c o n t a i n e d
p r o v i s i o n s r e q u i r i n g C l a r k B r o t h e r s , a s a n e m p l o y e r , t o make
s p e c i f i e d f r i n g e b e n e f i t c o n t r i b u t i o n s t o employee b e n e f i t
t r u s t funds.
To i n s u r e t h a t a l l e m p l o y e r s w e r e making f u l l and p r o p e r
c o n t r i b u t i o n s , t h e t r u s t e e s of c e r t a i n of t h e t r u s t funds
formed A u d i t S e r v i c e s , a n o n p r o f i t Montana c o r p o r a t i o n , which
p e r i o d i c a l l y a u d i t e d t h e p a y r o l l r e c o r d s o f e m p l o y e r s who
contributed t o t h e t r u s t funds. A u d i t S e r v i c e s was a s s i g n e d
t h e r i g h t t o c o l l e c t from t h o s e e m p l o y e r s amounts owing t o
t h e t r u s t funds.
The p a y r o l l r e c o r d s o f C l a r k B r o t h e r s w e r e a u d i t e d i n
1975. Based on t h i s a u d i t , A u d i t S e r v i c e s d e t e r m i n e d t h a t
contributions were owing to certain of the trust funds
for the period from November 1, 1970, through December 31,
1974. Audit Services filed suit against Clark Brothers in
June 1975 seeking to recover the delinquent contributions.
Subsequently it was discovered that a number of the claimed
delinquencies were based on hours worked by supervisory
personnel who were not covered by the collective bargaining
agreements and for whom no contributions were required.
The payroll records were reaudited adding the period from
January 1, 1975, through December 31, 1976. Certain
additional amounts were discovered to be owing to the trust
funds for the additional years involved in the second audit
but the unreported hours for the supervisory personnel were
deleted from the number of hours for which contributions
were claimed. Audit Services amended its complaint to make
it consistent with the findings of the second audit. Clark
Brothers counterclaimed for a refund of the contributions
that had been mistakenly made to the trust funds.
Clark Brothers conceded in the pretrial order that it
owed the amount claimed for delinquent contributions. However,
the issue of the counterclaim remained unresolved and the
case went to trial on March 7, 1980. The ~istrictCourt
determined that Clark Brothers was entitled to a refund of
the contributions mistak.enly made and after offsetting the
amount that Clark Brothers owed to Audit Services, Clark
Brothers was awarded $4,830.16 together with attorney fees.
Audit Services appeals.
The following issues are raised in this appeal:
I. Whether the District Court properly held that
Clark Brothers was entitled to an automatic refund of all
contributions mistakenly made by it to the trust funds.
2. Whether the District Court properly awarded
Clark Brothers attorney fees.
3. Whether the District Court properly awarded Clark
Brothers a refund in excess of the amount needed to offset
the amount in delinquent contributions owed by Clark Brothers
to Audit Services, since Audit Services was merely an
assignee of the trust funds.
We note first that state courts have concurrent juris-
diction with federal courts to hear cases such as this one
brought under section 301(a) of the Labor Management Relations
Act of 1947 (29 U.S.C. S 1%5(a)). Dowd Box Co. v. Courtney
(1962)) 368 U.S. 502, 82 S. Ct. 519, 7 L. Ed. 2d 483. In such
cases the federal substantive law must be applied. Teamsters
Union v. Lucas Flour Co. (1962), 369 U.S. 95, 82 S. Ct. 571,
7 L. Ed. 2d 593.
The first issue is whether the District Court properly
determined that Clark Brothers was entitled to an automatic
refund of all contributions mistakenly made to the trust funds.
In 1974 the Employee Retirement Income Security Act
(ERISA) was enacted. See 29 U.S.C. § 1001 (1976). As
originally enacted 29 U.S.C. 9 1103 (c)(2)(A) (1976) provided
that the trust funds were not prohibited from returning con-
tributions made by an employer by a mistake of fact when the
request for a refund was made within one year after payment
of the contribution. This section was amended by the
Multiemployer Pension Plan Amendments Act of 1980. The
general rule that assets of the plan shall not inure to the
benefit of any employer was left intact. 29 U.S.C. S 1103(c)
(1) (1976). However, the exceptions were expanded and the
portion relevant to this case provides as follows:
" (2)(A) In the case of a contribution . . .
"(ii) made by an employer to a multiemployer
plan by a mistake of fact or law . . . paragraph
(1) shall not prohibit the return of such
contribution or payment to the employer within
6 months after the plan administrator determines
that the contribution was made by such a mistake
Pub.L. No. 96-364, S 410(a), 94 Stat. 1308,
amending 29 U.S.C. S 1103(c) (2) (1976).
The District Court determined that based on this
amendment Clark Brothers was entitled to an automatic
refund of the contributions it had mistakenly made since
under the 1980 amendment refunds of contributions made by
a mistake of law were no longer prohibited. Audit Services
contends that the District Court erred in awarding Clark
Brothers an automatic refund. We agree.
The statute as amended does not make recovery of
mistaken payments automatic. E. M. Trucks, Inc. v. Central
States, Etc. (D. Minn. 1981), 517 F. Supp. 1122. The
language of the statute is permissive and the principles
of equity must be considered when deciding whether a refund
should be made. - M. Trucks, Inc., supra.
E. - "[A] fund should
not be required in all circumstances to return mistakenly
made contributions for which timely application is made."
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E. X. Trucks, Inc., supra at 1125. The District Court
erred in not considering the equities before awarding a
refund of the contributions mistakenly made to the trust
funds .
Because of our decision regarding this issue it is
unnecessary to address the remaining two issues at this time.
The judgment of the District Court is vacated and the
case is remanded for a new trial.
U 4 d d! yad'
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Chief Justice
We Concur:
I N THE SUPREME COURT O THE STATE O M N A A
F F OTN
AUDIT SERVICES, I N C . ,
Plaintiff and A p p e l l a n t ,
VS. ,
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' ~ ~ 2 1 1982
14
CLARK BROTHERS CONTRACTORS,
D e f e n d a n t and R e s p o n d e n t . .
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