United States District Court, Eastern District of New York
October 25, 1990
FRANK SCOTTO AND JOSEPH F. MANGAN, AS TRUSTEES OF THE LOCAL 807 LABOR-MANAGEMENT HEALTH FUND, PLAINTIFFS,
BRINK'S INCORPORATED, DEFENDANT.
The opinion of the court was delivered by: Sifton, District Judge.
MEMORANDUM DECISION AND ORDER
This ERISA claim is before the Court for decision following
a bench trial. Plaintiffs are trustees of the Local 807 Labor
Management Health Fund (the "Fund"). Defendant, Brink's, Inc.
("Brink's"), withdrew recognition from Local 807 upon
expiration of their last collective bargaining agreement.
Plaintiffs seek to compel defendant to make benefit
contributions to the Fund based on vacation and sick pay that
was allegedly earned before the expiration of the agreement but
received after its expiration.
The facts are essentially undisputed, except for a question
of contract interpretation. A collective bargaining agreement
between Brink's and Local 807 obligated Brink's to make
contributions to a multiemployer trust fund established by
Local 807 under Section 302 of the Labor-Management Relations
Act ("LMRA"), 29 U.S.C. § 186(g), and the Employee Retirement
Income Security Act ("ERISA"), 29 U.S.C. § 1002. A separate
Agreement and Declaration of Trust (the "Trust"), which governs
the operations of the Fund, provided that contributions shall
be made pursuant to the terms of a collective bargaining
agreement. Article XXXIV of the agreement provides: "Except as
herein provided to the contrary, this Agreement shall be in
effect as of March 21, 1983, and shall terminate at midnight as
of March 18, 1984." On March 18, 1984, the agreement expired.
Brink's has not made any contributions to the Fund since that
An initial round of litigation concerned Brink's right to
withdraw recognition of Local 807 as the bargaining
representative for its armored car general employees. Prior to
the expiration of the agreement, Brink's notified Local 807
that it was withdrawing its recognition on the ground that the
union's combined representation of guard and non-guard
employees disqualified it from representing the guard employees
pursuant to § 9(b)(3) of the National
Labor Relations Act ("NLRA"), 29 U.S.C. § 159(b)(3). Brink's
authority to withdraw recognition of Local 807 was upheld by
the National Labor Relations Board ("NLRB") on May 31, 1984.
See Wells Fargo Armored Services Corp., 270 N.L.R.B. 787
(1984). A parallel effort to compel arbitration of an issue
under § 301 of the LRMA was rejected in Local 807,
International Brotherhood of Teamsters, Chauffeurs,
Warehousemen & Helpers of America v. Brink's, Inc.,
744 F.2d 283 (2d Cir. 1984).
In this present action, plaintiffs seek contributions to the
Fund based upon vacation and sick pay allegedly accrued under
the terms of the agreement but not paid before the agreement
expired. Article XXV(b) of the agreement defines the employer's
contribution obligation as follows:
"(b) Effective as of April 1, 1983, the EMPLOYER
shall contribute to the Local 807 Labor Management
Health Fund ("Health Fund") the amount of one
dollar and fourteen cents ($1.14) per straight
time hour for all hours paid to regular, full-time
and extra*fn1 employees subject to a maximum of
forty (40) hours per week, to provide the benefits
prescribed by the Trustees of the Health Fund."
It is undisputed that contributions were paid into the Fund
for all hours of vacation and sick time actually paid out to
the regular and extra employees (the "unit employees") during
the term of the agreement. Involved in this lawsuit are
contributions allegedly due with respect to payments which
would of necessity have been made for vacation time and sick
time after the agreement terminated because of the provisions
of the agreement relating to vacation and sick pay.
The terms of the agreement relevant to the issues raised by
this lawsuit include the following. Under the agreement,
vacation "credits" were calculated on the "basis of service
performed during the preceding calendar year." Article XXI(a).
Since all of the regular and extra unit employees had at least
ten years of service as of December 31, 1983, each was entitled
to four weeks paid vacation during calendar year 1984. Article
XXI(c). The agreement further provided that, in the event of
termination of an employee for any reason, "vacation pay for
service performed during the current year shall be prorated and
shall be paid at the time of termination, together with all
vacation pay earned for service during the entire preceding
calendar year which has not been previously taken or paid for."
With respect to sick pay, all regular and extra unit
employees were entitled to a maximum of five days of sick leave
per calendar year. Article XIX(a). If at the end of a calendar
year an employee had unused sick days, he had the choice of
either carrying over to the next calendar year a maximum of
five "earned but unused" sick days or cashing them in for
payment "at the prevailing rate of pay at the time when the
days were accrued." Article XXI(b).
Subsequent to the expiration of the agreement, Brink's issued
a new Fringe Benefit, Wage Rate and Working Conditions Plan
which contained a savings provisions for the unit employees'
1984 vacation and sick pay entitlements. Those employees
entitled to vacation or sick leave pay after March 18, 1984,
for work performed during the term of the agreement have been
paid by Brink's. However, no contributions to the Fund have
been made with respect to those payments. As of October 1,
1984, benefit eligibility and Health Fund coverage for the
regular and extra unit employees was terminated pursuant to the
Fund's rules and regulations. According to plaintiffs, the unit
employees received approximately $185,000 in benefits from the
Fund between March 19 and September 30, 1984. The unit
employees are now covered by a different plan selected by
This action was commenced by plaintiffs on October 31, 1986.
On September 14, 1987, this Court denied cross-motions for
summary judgment and directed the parties
to engage in additional discovery. Subsequent to such
discovery, the parties again cross-moved for summary judgment.
On November 23, 1988, this Court ruled that this matter could
not be properly disposed of within the confines of Fed.R.Civ.P.
56. However, pursuant to the Court's proposal, the parties have
stipulated to resolution of this matter on the record.
Accordingly, they have submitted appendices, including
deposition testimony and additional memoranda of law. On
October 23, 1989, the parties appeared for oral argument before
the Court on this matter. Subsequently, they stipulated that,
if this Court finds in favor of the plaintiffs, the total
amount of contributions due to the Fund is $33,565.25.
Defendant argues that this Court lacks subject matter
jurisdiction to hear this case and that plaintiffs' cause of
action is preempted. This Court rejected these arguments on
prior motions and continues to find them without merit. What
follows sets forth the reasons for this determination.
Plaintiffs invoke this Court's jurisdiction under ERISA §
502(a)(3)(B)(ii), which provides:
"A civil action may be brought by a participant,
beneficiary, or fiduciary to obtain other
appropriate relief to enforce any provisions of
this subchapter or the terms of the plan."
More to the point, section 502(e)(1) provides:
"[T]he district courts of the United States shall
have exclusive jurisdiction of civil actions under
this subchapter brought by the Secretary or by a
participant, beneficiary, or fiduciary."
Defendant argues that this Court lacks subject matter
jurisdiction to hear plaintiffs' claim because it is preempted
by the National Labor Relations Act and is within the exclusive
jurisdiction of the NLRB. Defendant relies heavily on the
United States Supreme Court's decision in Laborers Health and
Welfare Trust Fund for Northern California v. Advanced
Lightweight Concrete Co., 484 U.S. 539
, 108 S.Ct. 830, 98
L.Ed.2d 936 (1988). In that case, the union/management contract
had expired, and negotiations for a renewal of the contract
were under way. Management ceased making contributions into the
welfare fund during the negotiations. As here, the union
brought suit under ERISA. But unlike this case, plaintiff in
that one contended that defendant's conduct was an "unfair
labor practice," violating NLRA § 8(a)(5)'s duty to bargain in
good faith and maintain the status quo during the negotiations.
The Supreme Court affirmed the district court's conclusion that
the NLRB had exclusive jurisdiction, holding that ERISA § 515
was not intended to allow enforcement by the district courts of
statutory duties created by the NLRA but only for the
enforcement of contractual promises.
Here, by contrast, plaintiffs' claim is squarely based on the
agreement itself, not on the NLRA. Unlike the defendant in
Advanced Lightweight, management here had no duty under the
NLRA to continue the status quo pending renewal negotiations,
because, as the NLRB ruled, it had rightfully withdrawn
recognition of the union under NLRA § 9(b)(3). Defendant points
to nothing else in NLRA §§ 7 or 8 that governs the welfare fund
contributions at issue here. The previously decided question of
whether management's withdrawal of recognition of the union was
permissible under NLRA § 9(b)(3) is a separate issue. It did
not decide whether the agreement's requirement of vacation and
sick pay related benefit contributions applied to vacation and
sick pay disbursed after the agreement's expiration date.
The complaint in this action makes no reference to the NLRA
or to unfair labor practices. Plaintiffs commenced this action
to enforce the terms of the agreement. Plaintiffs had
previously presented a more vague version of the benefit
contributions issue to the NLRB in the form of an NLRA
complaint, but the NLRB ruled that management's conduct did not
violate the NLRA. This ruling has no effect on plaintiffs'
Defendant also relies on language from the Second Circuit's
decision on the arbitration
dispute holding that issues concerning the union's
representative status are within the exclusive jurisdiction of
the NLRB. Local 807, 744 F.2d at 286, 287. This reliance is
misplaced because the Second Circuit said nothing about the
benefit contributions issue. The only issue before it was
whether arbitration could be compelled on the issue of
withdrawal of recognition.
Finally, defendant seizes on two phrases from the Supreme
Court's Advanced Lightweight decision. It argues that the
obligation sought to be enforced here is not a "simple
collection action," 484 U.S. at 551, 108 S.Ct. at 837, but
rather that there is a "good-faith dispute over both the
existence and the extent of the employer's liability," id. at
552, 108 S.Ct. at 837, and that Advanced Lightweight disavows
allowing ERISA enforcement of such obligations. This argument
takes the Court's words out of context. The phrases are taken
from the Court's discussion of the policy behind its holding
and are in-passing characterizations of contract-based as
opposed to NLRA-based claims. Furthermore, the Court did not
imply that ERISA enforcement of even complicated contract-based
claims is never appropriate; it merely observed that some of
ERISA's severe remedies are "problematic." 484 U.S. at 552, 108
S.Ct. at 837. Even if defendant is correct that plaintiffs'
contract-based claim here is complicated, the fact remains that
Advanced Lightweight only bars jurisdiction over NLRA-based
claims. This court can therefore adjudicate this ERISA claim.
Defendant next challenges this Court's subject matter
jurisdiction over this case on the ground that plaintiffs have
not invoked LMRA § 301. That statute, the fountainhead of the
federal common law of labor, Textile Workers Union v. Lincoln
Mills, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957),
provides in pertinent part:
"Suits for violation of contracts between an
employer and a labor organization representing
employees in an industry affecting commerce as
defined in this chapter, or between any such labor
organization, may be brought in any district court
of the United States having jurisdiction of the
parties, without respect to the amount in
controversy or without regard to the citizenship
of the parties."
Plaintiffs ask this Court to interpret the collective
bargaining agreement but do not mention this statute in their
complaint. Defendant asserts that this statute is the exclusive
jurisdictional basis on which this Court can consider
plaintiffs' claim. However, its only authority are cases
holding that the statute preempts state law causes of action.
See, e.g., Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 105
S.Ct. 1904, 85 L.Ed.2d 206 (1985); Lincoln Mills, supra;
National Metalcrafters v. McNeil, 784 F.2d 817, 824 (7th Cir.
1986). There is no authority for the proposition that § 301
preempts federal causes of action, such as plaintiffs' ERISA
Even if defendant's premise were correct, plaintiffs'
invocation of jurisdiction under ERISA rather than LMRA § 301
would not be fatal to their action. The Court has the power to
permit plaintiff to cure defective jurisdictional allegations
by granting leave to file an amended complaint. See, e.g., Sims
v. Mercy Hospital of Monroe, 451 F.2d 171 (6th Cir. 1971). See
also 5 Wright and Miller, Federal Practice and Procedure § 1214
Defendant next repeats its contention, already rejected by
this Court, that plaintiffs have failed to state a claim
because § 302(c)(5)(B) of the LMRA prohibits employer
contributions to a fund unless "the detailed basis on which
such payments are to be made is specified in a written
agreement with the employer."
The purpose of this statute is to ensure that management
payments do in fact benefit the employees. In this case, the
written agreement, although now expired, provided in theory for
certain payments to be made after expiration based on services
performed before expiration, satisfying both the purpose and
the literal language of the statute.
Defendant also argues that it it is prohibited from making
payment to plaintiffs by LMRA § 302(c)(1) unless it falls
within the exception created by the main
leg of LMRA § 302(c)(5). This exception permits employer
payments to unions only "for the sole and exclusive benefit of
the employees of such employer, and their families and
dependents (or of such employees, families, and dependents
jointly with the employees of other employers making similar
payments, and their families and dependents)."
Defendant asserts that, because the agreement between Brink's
and the Local is no longer in effect, any contributions
defendant would have been required to make to the Fund after
the expiration of the agreement would as a factual matter inure
not to the "sole and exclusive benefit" of Brink's employees
but rather to employees of other companies still represented by
the Local or to the Fund itself. This assertion would have been
true only if the terms of the Fund included no mechanism by
which formerly participating employees could collect benefits
from contributions later made on their behalf.
The agreement called for Brink's to make contributions to the
trustees of the Local 807 Health Fund "on behalf of" employees.
This Fund is governed by a separate Agreement and Declaration
of Trust, Section 3 of which defines "participant" as "any
Employee or former Employee of an Employer who is or may become
eligible to receive a benefit of any type from this Fund or
whose Beneficiaries may be eligible to receive any such
benefit." The phrase "eligible to receive a benefit" is not
defined. Nor does the Trust specify anywhere else how the
recipients of benefits are determined.
The Brink's employees were able to benefit from the Fund
after the expiration of the agreement. Therefore, if defendant
had made the contributions in question, its employees would
have benefited. Defendant concedes that the Fund retained the
discretion to allocate benefits among participants. Plaintiffs
continued to be covered by the Fund's benefit schedule through
September 30, 1984, over six months after the collective
bargaining agreement's expiration date. The employees received
reimbursements of approximately $185,000 from the Fund on
claims subsequent to March 18, 1984. Accordingly, defendant is
not entitled to judgment on this ground.
Defendant also argues that ERISA is inapplicable to this
case. Section 515 of ERISA provides:
"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."
Defendant's assertion is simply that it has no obligation
under this section because the "collectively bargained
agreement" to which it refers has expired. However, whether
defendant has a current obligation which survived the
expiration of the agreement is precisely the issue to be
decided in this case. If plaintiffs are entitled to prevail,
then they meet the requirements of Section 515.
In sum, this Court does have jurisdiction to decide this
matter, and plaintiffs' cause of action is not preempted.
Interpretation of collective bargaining agreements is
governed by federal common law and by state common law
principles to the extent compatible with federal labor policy.
Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 77 S.Ct.
912, 1 L.Ed.2d 972 (1957). In an action to recover delinquent
contributions under ERISA § 515, plaintiffs bear the burden of
demonstrating by a preponderance of the evidence that the
agreement obligated defendant to make the contributions in
question to the Fund.
Contract clauses should, if at all possible, be interpreted
on the basis of their plain and literal meaning. NLRB v. United
Technologies Corp., 884 F.2d 1569, 1575 (2d Cir. 1989). Where a
contractual provision is ambiguous, the court may consider
parol evidence to ascertain the intent of the parties.
The agreement required defendant to contribute to the Health
Fund "for all hours paid" to the unit employees. Article
XXV(b). In one sense, of course, the hours
at issue were, prior to the expiration of the agreement on
March 18, 1984, "paid hours," hours paid for by wages earned
and vacation time and sick pay accrued. In another sense,
however, the hours were not paid because the compensation in
the form of sick or vacation pay had not been put into the
hands of employees before March 18, 1984. The language of the
clause of the contract is, thus, ambiguous. Accordingly, parol
evidence is appropriately looked to in order to resolve the
ambiguity and determine the intent of the parties at the time
of the formation of the contract. While there is no evidence
that the question at issue was expressly considered by any one
at the time of the negotiation of the agreement, circumstantial
evidence concerning the contract as a whole and the parties'
practices throws light on the parties' intentions.
Fringe benefit payments to employees for past services are,
of course, the equivalent of wages to the bargaining unit
employee and the employer. See, e.g., In re Willow Cafeterias,
Inc., 111 F.2d 429, 432 (2d Cir. 1940). Vacation pay and sick
pay are alternate forms of compensation whose receipt is
delayed. Under the agreement at issue in this case, an employee
who had served at least ten years, as all of the employees
relevant to this case had, was entitled to four weeks paid
vacation during calendar year 1984, based on service performed
in 1983. The agreement also provided that in the event of
termination for any reason, "vacation pay for service performed
during the current year shall be prorated and shall be paid at
the time of termination, together with all vacation pay earned
for service during the entire preceding calendar year which has
not been previously taken or paid for." Article XXI(f). With
respect to sick pay, each employee was entitled to a maximum of
five days of sick leave per calendar year. Article XIX(a). At
the end of a calendar year, an employee had the choice of
either carrying over "earned but unused" sick days to the
following year or cashing them in for payment "at the
prevailing rate of pay at the time when the days were accrued."
Defendant's argument that, after the termination date of the
agreement, it had no contractual obligation to pay the unit
employees vacation pay or sick pay (or the equivalent) based on
work performed during the life of the agreement and that any
payments it did make were not "under the Agreement" but
represented payments under a new plan or a form of settlement
with its employees borders on the frivolous. Whether or not
such payments were in fact made by defendant, defendant had a
contractual obligation to make those payments to the unit
employees. Where an employee performs his or her work on the
employer's promise of wages and fringe benefits, the employee
is entitled to receive not only the wages but the benefits
earned for work performed during the contract period, even if
they are not to be placed in the hands of the employee or
"paid" in that sense until after the expiration of the
contract. On March 18, 1984, the date of expiration of the
agreement, the employees had a vested right to a fixed amount
of vacation and sick pay which was earned as a result of work
performed during the term of the agreement, and the fact that
the defendant did not fulfill its obligations until after that
date does not mean that the payments are any less payments for
hours covered by the agreement.*fn2
The testimony of Joseph Votta, the Local 807 Business Agent
who negotiated the agreement on behalf of the unit employees,
does not undercut plaintiffs' position. Defendant points to
Votta's testimony that he does not "negotiate for after the
agreement expired" and that "every contract is only for the
term of the agreement." However, although the agreement may
have expired, plaintiffs do not claim that the obligations
arose out of some continuation of the contract.
Payment to the Health Fund was a contractual obligation
before termination. Even though the date of expiration of the
agreement passed, defendant was bound to make contributions.
The computation of all contribution payments that were due
under the agreement could have been made on or before March 18,
1984. While under the parties' usual practices, contributions
were made on a month-to-month basis and contributions based on
vacation and sick pay were only made when that pay was actually
received by the unit employees, this did not exempt defendant
from making the final contributions that were due pursuant to
the agreement. In this context, the "hours paid" language
encompasses benefits that were earned as of that time, though
payment in the sense of the transfer of funds was delayed
because of the parties' practices and procedures until after
the expiration date of the agreement.
Defendant argues that, even if the employees were deprived of
additional wages, the Fund has no standing to enforce the
agreement to claim "wages," and the employees would have to
proceed under the Fair Labor Standards Act or the New York wage
payment law, not ERISA, because the employees were not deprived
of anything but in fact received their wages, vacation and sick
payments, and health and welfare benefits, including by
plaintiffs' account roughly $185,000 from the Fund after the
expiration of the agreement.
However, as a third-party beneficiary, the Fund, through its
trustees, does have standing to enforce defendant's promise to
the unit employees to make certain payments to the Fund on
behalf of the employees. The fact that the employees received
reimbursement of their health claims from the Fund only means
that the employees have no cause of action against the Fund. It
does not mean that the Fund is not entitled to payments that
the defendant was contractually obligated to make to it. On the
contrary, if anything, the fact that the unit employees
continued to receive benefits from the Health Fund from March
19 to September 30, 1984, in fact supports to plaintiffs'
argument. Nothing in the agreement modifies the phrase "hours
paid" by placing a limitation upon the time of payment.
Plaintiffs have put forward the most reasonable
interpretation of defendant's contractual obligations. They
have satisfied their burden of proving that the terms of the
agreement required defendant to make contributions to the
Health Fund based on vacation and sick leave pay that was
earned as compensation for work performed on or before March
18, 1984. Accordingly, defendant is liable to plaintiffs for
the amount of those contributions.
The parties have stipulated that the amount of contributions
due to the Fund, if this Court finds for the plaintiffs, is
$33,565.25. Plaintiffs also seek an award of interest,
attorney's fees, and costs. Section 502(g)(2) of the Employment
Retirement Income Security Act, 29 U.S.C. § 1132(g)(2),
"In any action under this subchapter for or on
behalf of a plan to enforce section 1145 of this
title [delinquent contributions] in which a
judgment in favor of the plan is awarded, the
court shall award the plan — (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 . . . of
the amount determined by the court under
subparagraph A, . . . [and] (D) reasonable
attorney's fees and costs of the action, to be paid
by the defendant."
29 U.S.C. § 1132(g)(2). This provision also states that
"interest on unpaid contributions
shall be determined by using the rate provided under the plan,
or, if none, the rate prescribed under section 6621 of Title
26." The award of liquidated damages or double interest is
mandatory where a fiduciary prevails in an action to enforce
contributions under § 515 of ERISA. See Central States,
Southeast and Southwest Areas Pension Fund v. Gerber Truck
Service, Inc., 870 F.2d 1148 (7th Cir. 1989) (en banc).
Neither the agreement nor the Fund's Trust contains a
provision specifying an amount of liquidated damages or a rate
of interest. Accordingly, plaintiffs are entitled to double
interest on the unpaid contributions from March 19, 1984, as
calculated under 26 U.S.C. § 6621, reasonable attorney's fees,
Plaintiffs' counsel is directed to submit its contemporaneous
time records, documentation of its costs, and a proposed