Multiemployer Fund Is Entitled To Bring Suit Under ERISA Section 502(e) As A Plan Fiduciary

Posted on February 11, 2010 by Michael Rigney

LINE CONSTRUCTION BENEFIT FUND v. ALLIED ELECTRIC CONTRACTORS (January 8, 2010)

Allied Electric Contractors has been a member of the National Electrical Contractors Association (NECA), an association of union employers, since 2002. It has been making employee benefit contributions to Line Construction Benefit Fund since the 1990s. In 2005, NECA entered into a Collective Bargaining Agreement (CBA) with the union. It set forth the terms of employer contributions to the Fund and increased the hourly contribution by a quarter. By its own terms, it bound all employers who signed a letter of consent. Although Allied did not sign a letter of consent until December of 2006, it continued to make the required contributions, including the extra quarter, until July 2006. It failed to make contributions for July, August, and December of 2006 as well as for January and February of 2007. The Fund brought suit under ERISA. The court denied Allied's motion to dismiss and granted summary judgment to the Fund. Allied appeals.

In their opinion, Judges Cudahy, Wood, and Tinder affirmed. The Court first addressed Allied's argument that the Fund had no cause of action under ERISA. It concluded that a multiemployer plan is authorized to bring suit under section 502(e) of ERISA as a plan fiduciary, reaffirming its holding in Vanguard Car Rental. The Court then rejected Allied's position that the CBA requirement of a signed letter of consent excused its nonpayment. Conduct manifesting consent, said the Court, is sufficient. Here the undisputed events, including the payments in early 2006 and the payments reflecting the additional quarter contribution, established that consent. Finally, the Court concluded that the CBA met the LMRA's requirement that an employer must have a written agreement before it makes contributions to employee benefit funds.

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Pension Fund Violated Automatic Stay When It Withheld Benefits Of Debtor To Apply Them To Unpaid Default Judgment Against Debtor

Posted on August 14, 2009 by Michael Rigney

IN RE: RADCLIFFE (April 23, 2009)

Barry Radcliffe owned Glass Service, Inc. The company made pension contributions as part of a labor agreement. When the company became delinquent, Radcliffe provided his personal guarantee. When he failed to perform on his guarantee, the pension fund sued and obtained a default judgment. Radcliffe requested his own pension benefits from the fund and, shortly thereafter, declared bankruptcy. The fund refused to turn over his benefits. Instead, they said they would apply the money to the default judgment. Radcliffe filed an adversary action in the bankruptcy court. The court ordered the fund to pay damages, interest, punitive damages and attorney's fees. The district court affirmed. The pension fund appeals.

In their opinion, Judges Kanne, Rovner and Evans affirmed. The first issue the Court addressed was whether the fund violated the automatic stay. The automatic stay takes effect immediately upon the filing of the bankruptcy petition and prevents creditors from taking any action to collect on a debt. The Court agreed with the district court that the fund’s refusal to pay the benefits violated the automatic stay. The Court also agreed that the fund’s conduct was intentional, taken with full knowledge of the existence of the bankruptcy proceeding, a requirement for punitive damages. The next issue was whether the court should have lifted the stay. One of ERISA's goals is to safeguard pension benefits. One way in which it does that is to prevent benefits from being assigned or alienated. As such, Radcliffe's pension benefits never became part of the bankruptcy estate. The Court found no abuse of discretion in the lower court’s refusal to lift the stay.

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Pension Fund Must Make Up Benefits Resulting From Delay In Initiation Of Monthly Payments After Retirement Date - Either By Later Payment Or By Actuarial Adjustment

Posted on July 16, 2009 by Michael Rigney

CONTILLI v. LOCAL 705 INTERNATIONAL BROTHERHOOD OF TEAMSTERS PENSION FUND (March 23, 2009)

Vito Contilli reached retirement age in 1995 but continued to work for two years. He retired in October of 1997 and applied for his retirement benefits in January of 1998. Applying their rule that a retiree had to apply for benefits, the union Pension Fund began paying his monthly pension payments in February. The Fund neither paid Contilli for the interim months nor increased his monthly benefit to take those months into account. Contilli brought an action, claiming that the approach violated ERISA’s non-forfeiture rule. The district court found in favor of the Fund. Contilli appeals.

In their opinion, Chief Judge Easterbrook and Judges Ripple and Rovner vacated and remanded. The Court agreed that the retiree application requirement was not a problem – nor was a deferral of retirement without any benefit payment while the retiree is still working. Section 1053(a) requires, however, that any delay in benefits once a retirement is effective must be made up with payments for the missing months or with an actuarial adjustment to payments in future months.

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