United States District Court, N.D. Illinois, Eastern Division
December 3, 2004.
CENTRAL STATES, SOUTHEAST and SOUTHWEST AREAS PENSION FUND, and HOWARD McDOUGALL, Plaintiffs,
PNEUMATIC TRUCKING, INC., Defendant.
The opinion of the court was delivered by: HARRY LEINENWEBER, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs Central States, Southeast and Southwest Areas
Pension Fund, a multi-employer benefit plan and trust, and Howard
McDougall, a Central States trustee, (hereinafter, collectively
"Central States") bring this ERISA action to recover delinquent
contributions allegedly owed by Defendant Pneumatic Trucking,
Inc. (hereinafter, "Pneumatic"), an employer. Central States
claims Pneumatic owes contributions for the period of June 1,
2003 through July 31, 2004 pursuant to a collective bargaining
agreement and a participation agreement. Before the Court are
both parties' Motions for Summary Judgment. For the following
reasons, Central States' Motion is GRANTED in part and DENIED
in part and Pneumatic's Motion is DENIED.
Central States is an employee benefit plan and trust financed
by contributions paid by multiple participating employers
pursuant to collective bargaining agreements with local International
Brotherhood of Teamsters ("IBT") unions. (Stip. Facts ¶¶ 1-2).
Central States holds and invests contributions to provide
benefits to plan participants and beneficiaries. See id. ¶ 2.
Pneumatic is an employer who made contributions to the Central
On or about June 19, 2000, Pneumatic and Teamsters Local 406
entered into a collective bargaining agreement covering the
period from November 29, 1999 through July 31, 2004 (the "CBA").
See id. ¶ 7. The CBA required that Pneumatic make weekly
contributions to Central States on behalf of its bargaining unit
employees. (Pls. SOF ¶ 8). Pneumatic and Local 406 also entered
into a participation agreement with an effective date of November
29, 1999 (the "PA"), which set forth the terms and conditions for
Pneumatic's participation in the pension fund. (Stip. Facts ¶ 5).
Under the PA and the CBA, Pneumatic was bound by the Central
States Trust Agreement, the Central States Pension Plan, and all
rules and regulations adopted by the Trustees of the Pension
Fund. (Pls. SOF ¶¶ 16-17).
Pneumatic claims that in January 2001, it agreed with Local 406
to amend the CBA such that Pneumatic would be obligated to
contribute to a 401(k) plan instead of contributing to Central
States. (Def. SOF ¶ 9). In 2002, the IBT transferred the
bargaining rights from Local 406 to Local 164. (Stip. Facts ¶
11). Although Central States denies that an agreement existed
between Pneumatic and Local 406 after the January meeting, both parties
agree that the proposed amendment was not reduced to writing and
signed by the parties until after the IBTs transferred
administration of Pneumatic's collective bargaining agreement to
Teamsters Local 164. (D. SOF ¶ 10). A facsimile sent by Thomas
Freyling, an employee of Local 406, containing proposed language
for the amendment was sent prior to the time when the parties
executed a written agreement.
The parties exchanged various items of correspondence in 2003,
including a letter on October 22, 2003 from a Pneumatic attorney
to Central States' manager of collections. The letter also copied
Central States' Contracts Department and was sent by certified
mail. In the letter, Pneumatic claims that it had not been
obligated to contribute to Central States since May 11, 2003.
(Oct. 22 letter, Ex. P). The letter also indicates that Pneumatic
is no longer obligated to contribute due to an agreement with
Local 406. See id. Pneumatic enclosed an unsigned copy of sample
language for the proposed amendment sent by Local 406 employee
Freyling with the letter.
Beginning about January 11, 2003, Pneumatic requested that
Local Union 164 enter into a written amendment of the CBA to
provide for a 401(k) plan rather than contributions to Central
States. (Stip. Facts ¶ 13). Local 164 did not comply with this
request. See id. Pneumatic filed an unfair labor practice charge with the NLRB against Local 164. See id. ¶ 12. The parties
eventually agreed to settle the case, and in December 2003, Local
164 entered into a settlement agreement with Pneumatic. See id.,
Ex. H. Under the settlement agreement, Local 164 agreed to sign
the contract amendment proposed by Pneumatic, provided that it
was approved by a majority of the bargaining unit. See id., Ex.
I-J. A majority of the bargaining unit approved Pneumatic's
proposal on January 31, 2004. See id. ¶ 17. On May 5, 2004, Local
164 executed the amendment requiring Pneumatic to switch from
contributions to Central States to the 401(k) plan, which
purports to be effective on June 1, 2003 (the "Amendment").
See id. Central States did not participate in the NLRB proceeding or
the NLRB settlement and did not sign or participate in the
negotiation of the Amendment. (Priede Aff. ¶ 27). Pneumatic
asserts that a copy of the Amendment was received by Central
States' Contracts Department on July 16, 2004. (Pls. SOF ¶ 55).
Central States conversely claims that it did not receive a signed
copy of the Amendment until August 11, 2004. (Pls. ASOF ¶ 76).
Pneumatic ceased making contributions to Central States on June
1, 2003. See id. ¶ 75. Pneumatic also stopped making
contributions to the § 401(k) plan for the period prior to July
31, 2004. See id. ¶ 77. II. LEGAL STANDARD
A. Applicable Law
Central States bring this Motion under Section 515 of ERISA, as
amended, 29 U.S.C. § 1145. Section 515 of ERISA provides that:
Every employer who is obligated to make contributions
to a multi-employer plan under the terms of the plan
or under the terms of a collectively bargained
agreement shall, to the extent not inconsistent with
law, make such contributions in accordance with the
terms and conditions of such plan or agreement.
29 U.S.C. § 1145 (1994). Section 515 gives pension funds, the
right to "enforce the writings according to their terms." Central
States, Southeast & Southwest Areas Pension Fund v. Gerber Truck
Serv., Inc., 870 F.2d 1148
, 1149 (7th Cir. 1989) (en banc)
("Gerber"). There is no dispute that Central States is a
multi-employer plan and that Pneumatic is an employer within the
meaning of the statute. (Stipulation of Facts ¶¶ 2, 4).
Therefore, the Court must look to the language of the agreements
at issue to determine the extent of Pneumatic's contributions
A successful fund under Section 515 may receive various forms
of relief. Section 502(g)(2) of ERISA provides:
(2) In any action under this subchapter by a
fiduciary for or on behalf of a plan to enforce
section 1145 of this title in which a judgment in
favor of the plan is awarded, the court shall award
(a) the unpaid contributions;
(b) interest on the unpaid contributions;
(c) an amount equal to the greater of
(i) interest on the unpaid contributions, or (ii) liquidated damages provided for under the plan
in an amount not in excess of 20 percent . . .;
(d) reasonable attorney's fees and costs . . .; and
(e) such other legal or equitable relief as the court
. . . interest on unpaid contributions shall be
determined by using the rate provided under the plan,
or, if none, the rate prescribed under . . . Title
29 U.S.C. 1132 (g) (2).
B. Applicable Agreements
1. The 1999-2004 CBA
The CBA states, in relevant part, that:
[Pneumatic] agrees to pay into the Central States,
Southeast and Southwest Areas Pension Fund for each
[e]mployee covered by this [a]greement who has
completed (30) days of employment unless otherwise
specified, a contribution of: $49.00, Effective
August 1, 1999; $55.00, Effective August 1, 2000;
$61.00, Effective August 1, 2001; $65.00, Effective
August 1, 2002; and $69.00, Effective August 1, 2003
. . .
(Pls. SOF ¶ 8). The pension clause of the CBA also incorporates
the Central States Trust Agreement, the Central States Pension
Plan, and all rules and regulations adopted by the Trustees of
the Pension Fund. See id. ¶¶ 16-17. The duration clause
stipulates that the "Agreement shall be in full force and effect
from August 1, 1999 to and including August 1, 2004 . . ." Id. ¶
2. The Participation Agreement
The PA, while incorporating certain terms of the CBA, is
independent from the CBA and can remain in effect even after the
termination of the CBA. See Central States, Southeast and Southwest Areas Pension Fund v. Marine Contracting Corp.,
878 F. Supp. 1176 (N.D. Ill. 1995). The PA, by its terms, obligates
Pneumatic to contribute to Central States "in accordance with its
collective bargaining agreement with the Union . . ." (Pls. SOF ¶
11), as follows in relevant part:
This Agreement and the Employer's obligation to pay
contributions shall not termination until either a)
the Trustees decide to terminate the Agreement and
provide written notice of their decision to the
Employer or b) the Employer is no longer obligated by
a contract or statute to contribute to the Fund (s)
and the Fund (s) have received a written notice
directed to the Fund[s'] Contracts Department . . .
sent by certified mail with return receipt requested
which describes the reason why the Employer is no
longer obligated to contribute.
(PA ¶ 5).
Central States submit five arguments in support of its Motion
for Summary Judgment. The Court addresses the arguments in turn.
A. Pneumatic Owes Contributions Under The Amendment
Central States' principal claim is that the Amendment only
eliminates Pneumatic's duty to contribute under the CBA and does
not alter Pneumatic's independent duty to contribute under the
unexpired PA. Pneumatic responds that the Amendment terminated
Pneumatic's obligations under both the CBA and the PA. Pneumatic
further claims that the October 22, 2003 letter from a Pneumatic
attorney to Central States' manager of collections provided the
specific required notice to satisfy paragraph five of the PA
outlined above. Pneumatic sent the letter by certified mail to Central States' Contracts Department and contained sample
language for an amendment from a fax from Thomas Freyling, a
Local 406 employee, to Richard Schwartz, President of Pneumatic.
The amendment was not signed. Pneumatic acknowledges that Central
States could not have received the letter until on or about
October 22, 2003. (Def.'s Resp. Mem. at 4). Thus, the Court
concludes that Pneumatic is liable to Central States at minimum
for the delinquent contributions between June 1, 2003 and October
22, 2003. The parties contest Pneumatic's liability for the
period following October 22, 2003.
The crucial fact in this case is when Central States' received
the required notice eliminating Pneumatic's contribution
obligations under the PA. The Court concludes that the October
22, 2003 letter fails to provide adequate notice because it
contains only an unsigned copy of sample language for the
proposed amendment. The letter, even if sent to the appropriate
department at Central States, did not provide a legal basis for
Pneumatic to terminate its obligation to contribute. Both parties
acknowledge that any proposed amendment was not reduced to
writing and signed by the parties until after bargaining rights
were transferred to Local 164. At most, the October 22 letter
provided Central States with notice of an oral agreement between
the former union and the employer. Therefore, Pneumatic's duty to
contribute was not terminated by the October 22, 2003 letter. In Gerber, the Seventh Circuit held unenforceable the oral
modification of an employer's obligation to pay into a pension
fund. 870 F.2d at 1156. The pension fund "is like a holder in due
course in commercial law . . . entitled to enforce the writing
without regard to the understandings or defenses applicable to
the original parties." Id. at 1149 (citations omitted). The Court
in Gerber reached its conclusion based both on the text of ERISA
§ 515 as well as the legislative history of the ERISA amendments.
See id. at 1152-53. Such history reflects that delinquent
contributions can threaten the viability of the plans because a
pension plan becomes obligated to employees under the terms of
the PA and must pay an employee's pension regardless of whether
the employer actually contributes. Id. at 1153. Like Gerber,
Section 302 of the Labor Managements Relations Act provides that
an employer's promise to remit contributions must be reduced to
writing. 29 U.S.C. § 186(c)(5). Therefore, even if an oral
agreement to amend the CBA existed between Local 406 and
Pneumatic, such amendment is not enforceable.
Here, the Amendment was not reduced to writing and signed by
Local 146 and Pneumatic until May 5, 2004. Central States did not
sign or participate in the Amendment. Although Pneumatic stopped
making contributions on June 1, 2003, its contribution
obligations under the PA did not cease until Central States
received written notification of the Amendment. The parties
dispute the date that Central States received the May 5, 2004 amendment. Pneumatic
claims that Central States received the amendment on July 16,
2004, and submits in support what appears to be a signed, undated
return mail receipt. Central States, on the other hand, submitted
an affidavit in support of its contention that it did not receive
the notice until August 11, 2004. Because Central States has only
requested delinquent contributions through July 31, 2004, the
relevant factual dispute concerns the period between July 16,
2004 and July 31, 2004.
The Court concludes that the parties have presented a genuine
issue of disputed fact with regard to the date on which Central
States received notice of the amendment. The Court holds that
Pneumatic was contractually obligated to contribute to the
pension fund for the time period beginning on June 1, 2003,
through and including July 15, 2004. Summary judgment is thus
granted in part in favor of Central States' on this basis. The
disputed material issue is whether Central States, as required by
the PA, received a copy of the May 5, 2004 amendment to the CBA
on July 16, 2004 or August 11, 2004. Resolution of this factual
dispute is material because it affects Pneumatic's obligations
for contributions as well as the amount of damages. Pneumatic may
or may not owe contributions for the time period from July 16,
2003 through July 31, 2004. Therefore, Central States' Motion is
denied with respect to the disputed two-week period and any
resulting damages. B. Central States' Remaining Arguments
Central States also submits four other arguments in supporting
memoranda. Central States' second claim is that Central States'
rules, which are incorporated in the PA and CBA, prohibit a
mid-contract termination of Pneumatic's contribution obligations.
Here, Pneumatic accurately notes that the PA specifically
provides at the method by which an employer and a union can
terminate obligations to Central States. Although the pension
fund's rules include a "Bargain Out Rule," that rule provides
that a collective bargaining agreement will only be acceptable if
the agreement requires the employer to make contributions for the
entire term of the agreement. The "Bargain Out Rule" only
addresses whether a contract can be rejected, and does not
require the parties to a collective bargaining agreement to give
up their right to modify their agreement. To the contrary, the PA
outlines the procedural requirements for an employer and a union
to terminate their respective obligations.
Central States third claim that Pneumatic's mid-contract change
defense is prohibited by Section 515 of ERISA similarly fails.
Section 515 of ERISA does not stand for the proposition that a
pension plan agreement can never be amended. Section 515 of ERISA
mandates that an employer must "make . . . contributions in
accordance with the terms and conditions of . . . [the] plan or
agreement." 29 U.S.C. § 1145 (1994). The terms and conditions of the CBA and PA allow for the termination of an employer's
obligation to the pension fund under certain conditions. If
Pneumatic provided effective notice of the prospective amendment,
the obligation under the PA would have ended "in accordance with
the terms and conditions" of the agreement.
Although Central States cites Gerber in support of its claim,
the court in Gerber held only that oral side agreements between
the Union and employer cannot alter an employer's obligation to
pay into a pension fund. Gerber, 870 F.2d at 1149. The other
cases cited by Central States in support of its third claim are
distinguishable or supportive of Pneumatic's position on this
issue. For example, in Dwyer v. Climatrol Industries, Inc.,
544 F.2d 307, 310 (7th Cir. 1976), the Seventh Circuit upheld an
amendment to a pension plan because it "affected only future
contributions to the pension plan . . ." and because the pension
plan agreement "provided for the right to modify." Id. at 310.
Similarly here, ERISA does not prohibit the termination of the
duty to pay contributions once an amendment is executed by the
parties and Pneumatic provides adequate notice in accordance with
Central States' next claims that contracts for the benefit of
an intended third party cannot be modified without the third
party's consent. Central States claims to be the third party
beneficiary of the PA, which specifically provides the procedure
required to terminate an employer's contribution obligations. Because third party beneficiary consent is not required under the
PA, Central States' claim is without merit.
Finally, Central States asserts that Local 146 and Pneumatic
lack the authority to retroactively eliminate vested rights.
Central States is correct that an employer cannot agree with a
union to modify existing obligations to a multi-employer pension
plan retroactively. ERISA contains anti-forfeiture rules,
29 U.S.C. §§ 1053, which prohibit a plan from adopting an amendment
eliminating or reducing benefits that have already been earned.
See Central Laborers' Pension Fund v. Heinz, 124 S. Ct. 2230
(2004). Central States' final argument therefore supplements its
principal claim and requires Pneumatic to contribute until its
obligation was prospectively terminated by Central States'
receipt of the executed May 5, 2004 Amendment. Central States'
claim is moot, however, because the Court has already held that
Pneumatic must make contributions for the time period beginning
in June 2003 and continuing through July 15, 2004.
For the reasons stated above, Pneumatic's Motion for Summary
Judgment is DENIED. Central States' Motion for Summary Judgment
is GRANTED in part with respect to the conclusion that
Pneumatic owes contributions from June 1, 2003 through and
including July 15, 2004. Central States' Motion for Summary
Judgment is DENIED in part with respect to the disputed two-week time period and the
amount of contributions owed or damages.
IT IS SO ORDERED.
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