Appeal from the United States District Court for the Southern District of Illinois, Alton Division. No. 84 C 5225 -- William L. Beatty, Judge.
Wood, Jr., Cudahy and Ripple, Circuit Judges.
This appeal is brought by certain health and welfare and pension funds seeking to extend the liability of a trucking company for benefit contributions on behalf of its "bargaining unit" employees. Contributions had been made for only three drivers who were union members retained from a company purchased by the employer's owner, as a sole proprietor, prior to incorporation of his company. The benefit funds also seek to extend the employer's liability to include the period through March 31, 1985, based on the employer's 1984 written notice terminating the labor contract. The district court found the employer liable only for certain unpaid contributions in connection with the three drivers. In addition, it awarded the funds accrued interest and attorney's fees. The funds also appeal, however, the court's denial of liquidated damages and other penalties.
In 1981, James H. Gerber, a sole proprietor in the trucking business, bought the assets and the operating authority of Fat's Express Truck Service ("Fat's"), which had employed three truck drivers--William Strubbe, Fred Witkus and Timothy Roarty. Gerber retained all three who had been members of Teamsters Local 50 ("Local 50"). Fat's had been a party to the 1979-1982 National Master Freight Agreement, which is the Teamsters' multiemployer collective bargaining agreement with certain truckers. This agreement entitled the three Fat's drivers, among other things, to employer-paid health and pension benefits administered by Central States, Southeast and Southwest Areas Health and Welfare Fund and Central States, Southeast and Southwest Areas Pension Fund, respectively (the "Funds").
When Gerber bought Fat's and retained its three drivers, he was already employing two drivers who were not working under a union contract. Gerber did not assume the labor contract between Local 50 and Fat's. Shortly after buying Fat's, however, Gerber contacted John Gonzales, business representative for Local 50. Gerber told Gonzales that he wished to continue providing the health and pension benefits for the three drivers who had come from Fat's. Gerber also told Gonzales that he intended to handle all other aspects of their employment, such as wages, hours and working conditions, by individual agreement. On February 4, 1981, Gerber executed the Teamsters' 1979-1982 National Master Freight Agreement and a Supplemental Agreement (collectively the "1979-1982 Agreement"). The 1979-1982 Agreement defined Gerber's bargaining unit as "all truckdrivers, helpers, dockmen, warehousemen, checkers, power-lift operators, hostlers, and such other employees as may be presently or hereafter represented by the Union," and required Gerber to pay contributions to the Funds on behalf of "covered" employees. Gerber and Gonzales contemporaneously signed a Participation Agreement, which specifically concerned only Gerber's obligation to the Funds with respect to the provision of benefits to employees. The Participation Agreement also required Gerber to pay contributions to the Funds on behalf of covered employees. This document, however, described covered employees as "DRIVERS represented by the Union," a narrower classification selected by Gerber and Gonzales to convey their mutual intent to include only the three former Fat's drivers.
Gerber did contribute to the Funds on behalf of the three Fat's drivers. As to all other terms of employment, however, Gerber reached individual agreements with all of his employees, including the Fat's three. Local 50 apparently approved of this arrangement. In its list of employees covered for purposes of Local 50 representation, it named only the Fat's three. It did not require Gerber's other employees to join the union or demand that Gerber discharge them. And it never represented the other employees for any purpose (nor the Fat's three for any purpose other than health and welfare and pension benefits). No grievances were ever filed, nor any arbitrations undertaken. The terms and conditions of the 1979-1982 Agreement were wholly inoperative from the start (except as to the Fat's three benefits already noted).
Both the 1979-1982 Agreement and the Participation Agreement had an expiration date of March 31, 1982. Article 39, Sections 1 and 2 of the 1979-1982 Agreement provided for modification or termination in compliance with Section 8(d)(1) of the Labor Management Relations Act of 1947 (the "LMRA"). 29 U.S.C. § 158(d)(1). Both agreements specified that they would continue from year to year after their stated expiration date unless either party, at least sixty days before the expiration date, notified the other in writing of a desire to cancel or terminate. The Participation Agreement also required Gerber to notify the Funds in writing of his intent to stop contributing to the Funds.
In early June 1981, Gerber incorporated his business as Gerber Truck Service, Inc. ("Gerber Truck"). Gerber Truck assumed Gerber's obligations to continue providing fringe benefit coverage for the three former Fat's drivers. In September 1981, Local 50 sent Gerber Truck a written notice of its desire to revise or change the terms and conditions of the 1979-1982 Agreement. Gonzales, in July 1982, forwarded to Gerber Truck a copy of the new National Master Agreement effective in April 1982. After several telephone conversations, Gerber orally rejected the new contract on August 15, 1982, and refused to sign another contract. Local SO ceased any attempt to negotiate with Gerber Truck.
Gerber continued to report the work history of the three Fat's drivers to the Funds. Except for intermittent periods of delinquency lasting approximately from mid-1981 through mid-1982, Gerber continued to pay the Funds the required contributions for those three drivers until two retired--Witkus in September 1983 and Strubbe in August 1984--and the third, Roarty, withdrew from the union in April 1984. Roarty, however, continued to work for Gerber Truck through October 1986. Considering his benefit obligations for the three Fat's drivers at an end, Gerber sent the Funds a letter on May 11, 1984, advising them that Roarty had withdrawn from the union and that Gerber Truck was canceling all obligations to the Funds effective April 29, 1984.
Upon auditing Gerber Truck and discovering that it employed more than the three drivers, the Funds opened health and pension benefit accounts for all of Gerber Truck's employees hired since February 4, 1981. The Funds sued Gerber Truck in July 1984 seeking benefit contributions for all of its employees--helpers and mechanics as well as drivers. After the Funds filed suit, Gerber Truck again notified the Funds, on November 5, 1984, that it was terminating any alleged obligations. On this date, Gerber Truck also notified Local 50 by letter that it was terminating the 1979-1982 and Participation Agreements.
The Funds based their complaint on section 515 of the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1145, which provides that an employer remit contributions in accordance with the terms of the collective bargaining agreement.*fn1 The Funds expressed concern that Gerber Truck's other employees might seek pension or other benefits and that the Funds would not have set aside funds sufficient to honor those demands.*fn2
The district court held that the 1979-1982 Agreement had been modified by an understanding reached between Gerber and Gonzales to have Gerber provide health and welfare and pension benefits solely to the Fat's three. In the court's view, the 1979-1982 Agreement and the Participation Agreement were executed only to ensure continued benefit coverage for the three Fat's employees. The district court also concluded that Gerber orally rejected a new agreement on August 15, 1982, resulting in the termination of the 1979-1982 Agreement on October 15, 1982. This termination, according to the district court, ended Gerber Truck's obligation to make payments to the Funds on behalf of the Fat's three. The court ordered Gerber Truck to pay to the Funds certain unpaid contributions together with accrued interest and attorney's ...