The opinion of the court was delivered by: SAND
This is an action commenced by the Mason Tenders District Council Welfare Fund and Pension Fund and Annuity Fund (referred to collectively as the "Funds"), and Anthony Lanza, in his fiduciary capacity as Administrator of the Funds, against defendant Charles F. Dalton, ("Dalton") and John Lowry, Jr. ("Lowry") to collect fringe benefit contributions allegedly past due to the Funds.
This suit has been brought pursuant to sections 502(a)(3) and 515 of the Employment Retirement Income Security Act of 1974, as amended ("ERISA"), (29 U.S.C. sections 1132(a)(3) and section 1145), and section 301 of the Labor-Management Relations Act of 1947 ("LMRA"), (29 U.S.C. section 185). Presently pending before the court are the defendants' motions to dismiss the complaint as failing to state a claim. These motions present the issue whether individual corporate officers with authority and control over the payment of fringe benefit contributions to employee benefit plans are personally liable under ERISA for their corporation's breach of a contractual obligation to make benefit plan contributions. For the reasons discussed below, we conclude that under the undisputed facts of this case, individual corporate officers such as Dalton and Lowry are not personally liable for delinquent contributions owing to the employee benefit plan.
We assume, for purposes of deciding these motions to dismiss, the truth of the relevant facts set forth in plaintiffs' complaint.
The Funds are jointly administered multi-employer trust funds established and maintained pursuant to a collective bargaining agreement. They qualify as employee benefit plans within the meaning of ERISA, sections 3(2), 3(3), and 502(d)(1) (29 U.S.C. sections 1002(2), 1002(3), and 1132(d)(1)), and multi-employer plans under ERISA sections 3(37) and 515 (29 U.S.C. sections 1002(37) and 1145). The purpose of the Funds is to provide fringe benefits to eligible employees on whose behalf employers contribute to the Funds in accordance with the terms of a collective bargaining agreement between the employers and the employees' union, non-party Mason Tenders District Council of Greater New York ("Union").
At all times relevant hereto, defendant Dalton was the president and defendant Lowry was the vice-president of John Lowry, Inc. ("Corporation"), an entity which is not a party to this action. The Corporation, which was an employer in the construction industry, held membership in an employers association, the Building Contractors Association, Inc. ("Association"), which is the exclusive bargaining agent for its members. Pursuant to a collective bargaining agreement (the "Collective Bargaining Agreement") between the Association and the Union, the Corporation of which Dalton and Lowry were officers was obligated to remit fringe benefit contributions to the Funds in connection with the work performed by the Corporation's employees within the Union's jurisdiction. See Collective Bargaining Agreement, Article IV, section 1. We assume, as plaintiffs allege, that both Dalton and Lowry were "vested with authority and control over the . . . payment of the required monetary contributions" to the Funds owed by the Corporation under the Collective Bargaining Agreement.
See Complaint at paragraphs 8 and 9.
Pursuant to the terms of the Collective Bargaining Agreement, representatives of the Funds conducted an audit of the books of the Corporation. The auditors determined that the Corporation had failed to remit $81,554.34 of fringe benefit contributions to the Funds during the period from June 25, 1981, to September 30, 1983. Plaintiffs now seek to recover payment from Dalton and Lowry individually of the delinquent benefit contributions, plus interest, statutory damages, costs and attorneys' fees in accordance with ERISA section 502(g)(2) (29 U.S.C. section 1132(g)(2)). The legal foundation of plaintiffs' claim for the imposition of personal liability on Dalton and Lowry is the contention that the defendants, as principal corporate officers of the Corporation vested with the authority and control over the payment of benefit contributions, fall within the definition of an "employer" under Title I of ERISA and are therefore liable for unpaid benefits under sections 515 and 502(g)(2).
We begin our analysis with the relevant provisions of ERISA. According to section 515:
"Every employer who is obligated to make contributions to a multiemployer 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 such agreement."
As a mechanism to enforce this statutory obligation, ERISA provides plan fiduciaries such as plaintiff Lanza with the right to maintain a civil lawsuit under section 502(a)(3) to recover section 515 delinquent contributions. The present suit is based on these provisions.
The plain language of section 515 indicates that the statutory obligation to make timely contributions to an employee benefit plan rests on "(e)very employer who is obligated" to make such contributions "under the terms of a collectively bargained agreement." 29 U.S.C. section 1145. The legislative history of section 515, which was added to ERISA by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA") confirms Congress' intent in enacting this statutory provision. According to a report issued by the Senate Committee on Labor and Human Resources, section 515 "imposes a statutory duty to contribute on employers that are already obligated to make contributions to multiemployer plans" (emphasis supplied). Senate Committee on Labor and Human Resources (Staff), 96th Congress, 2d Sess. S.1076, The Multiemployer Pension Plan Amendments of 1980: Summary and Analysis Consideration (Comm. Print) (1980 at 44). The legislative purpose underlying section 515 was not, as plaintiffs claim, to impose personal liability on corporate officers for delinquent contributions.
Congress' imposition of a statutory obligation to make benefit contributions, specifically tied to the employer's contractual obligation to contribute, was designed "to discourage delinquencies and simplify delinquency collection." 126th Cong.Rec. Record, 23288 daily ed., August 26, 1980 (statement of Sen. Williams and Sen. Javits). Prior to the enactment in 1980 of ERISA section 515, there was no ERISA cause of action for the collection of overdue benefit contributions. It appeared to the principal sponsors of the 1980 amendments, Senators Williams and Javits, that the "(r)ecourse available for collecting delinquent contributions" had become "unnecessarily costly and cumbersome." Id.
In particular, employers had managed to transform "(s)ome simple collection actions brought by plan trustees . . . into lengthy, costly, and complex litigation concerning claims and defenses unrelated to the employer's promise and the plan's entitlement to contributions." Id. Section 515 was designed to rectify the problems that had arisen in these pre-1980 collection suits and to implement the principles enunciated in three judicial decisions which the sponsors expressly endorsed: (i) Huge v. Long's Hauling Company, Inc., 590 F.2d 457 (3d Cir.1978), (ii) Lewis v. ...