BRICKLAYERS AND ALLIED CRAFTWORKERS LOCAL 5 OF NEW JERSEY PENSION & ANNUITY FUNDS et al v. CHANREE CONSTRUCTION CO., INC.
Filing
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MEMORANDUM ORDER filed. Signed by Judge Freda L. Wolfson on 11/19/2012. (eaj)
**NOT FOR PUBLICATION**
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
____________________________________
:
BRICKLAYERS AND ALLIED
:
CRAFTWORKERS LOCAL 5 OF
:
NEW JERSEY PENSION & ANNUITY
:
FUNDS, et al.,
:
:
Civ. No. 12-3897 (FLW)
Plaintiffs,
:
:
MEMORANDUM
v.
:
OPINION
:
CHANREE CONSTRUCTION CO., INC., :
:
Defendant.
:
____________________________________:
Presently before the Court is a motion by Defendant Chanree Construction Co., Inc.
(“Chanree”) to dismiss the complaint of Plaintiff Bricklayers and Allied Craftworkers Local 5 of
New Jersey Pension & Annuity Funds (“Bricklayers”), Trustees of the B.A.C. Local 4 Pension and
Annuity Funds, Richard E. Tolson as Trustee and Fiduciary of the Bricklayers and Allied
Craftworkers Local 5 of New Jersey Pension & Annuity Funds and as Administrator of BAC
Administrative District Council of New Jersey, Trustees of the New Jersey BM&P Apprentice and
Education Fund, Trustees of the Bricklayers & Trowel Trades International Pension Fund, and
Trustees of the International Masonry Institute (collectively, “Plaintiffs”). The complaint asserts
an unpaid pension contribution claim pursuant to Sections 502 and 515 of the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132 and § 1145, respectively, as well as
Section 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185. The Court held
oral argument on the motion on November 28, 2012. For the following reasons, Defendant’s motion
to dismiss is granted and Plaintiffs are granted leave to file an amended complaint.
BACKGROUND
Plaintiffs are employee benefit plans and Chanree is a general contractor that hires employeelaborers whose pensions are administered by Plaintiffs. According to Plaintiff’s Complaint, Chanree
is party to a collective bargaining agreement (“CBA”) with the International Union of Bricklayers
and Allied Craftworkers/Administrative District Council of New Jersey, Local Union Nos. 2, 4, &5
under which Chanree agreed to pay certain fringe benefit contributions related to work by laborers
on the Sayreville Life Long Learning Center Project in Sayreville, New Jersey (“the Project”).
Palmer Construction NJ, Inc. (“Palmer”) worked as a subcontractor of Chanree’s on the Project.
The CBA directs signatories, such as Chanree, to pay fringe benefits on a monthly basis. See Def.
Mov. Br., Exh. E. It, further, provides that general contractors, like Chanree, “agree[ ] not to sublet,
assign, or transfer any work covered by [the CBA] to be performed at the site of a construction
project . . . except where the subcontractor subscribes and agrees in writing to be bound by the full
terms of the [CBA] and complies with all of the terms and conditions of the [CBA].” Id., Art. XVI
(p. 26). Plaintiff does not allege that Palmer agreed to be bound by the CBA.
On March 4, 2010, Bricklayers1 filed a suit in this Court, that was assigned to the Honorable
Anne E. Thompson, U.S.D.J. in order to recover payment of the fringe benefits. This suit originally
named Palmer and Palmer’s principal—Carmine Mazza—as the sole defendants. See Bricklayers
v. Palmer, et al., Civil Action No. 10-1123 (AET). Palmer subsequently added Chanree as a thirdparty defendant, alleging that “because [Bricklayers] entered into a joint check agreement with
Palmer and Chanree . . ., in which the Plaintiff was also a signatory, both Chanree and Palmer are
1
This earlier suit was filed in Bricklayers name only, and not in the name of the other
Plaintiffs in this suit. However, some of the Plaintiffs in this suit executed the settlement
agreements, described herein, that were reached in the Bricklayers’ suit.
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liable for the[ ] delinquent payments.” Civ. Action No. 10-1123, Def. Answ. and Third-Party
Compl., ¶ 2. Thereafter, Bricklayers moved to amend to add Chanree as a defendant, asserting that
“both Palmer and Chanree are liable for these delinquent contributions.” Id., Afft. in Supp. of Mot.
for Leave to Amend Compl. (Docket Entry No. 9-1).
While the suit before Judge Thompson was pending, Bricklayers engaged in settlement
negotiations with Palmer and Chanree. On or about April 20, 2010, these two parties entered into
a structured settlement agreement that obligated Palmer to pay the delinquent contributions. When
Palmer failed to make all of its scheduled payments, Plaintiffs engaged in further settlement
negotiations—this time, with both Palmer and Chanree. A second settlement agreement between
Palmer and Plaintiffs was executed on June 21, 2010. This agreement obligated Chanree to pay
$300,000, although Chanree was not a signatory to the agreement. See Def. Mov. Br., Exh. D.
The case was then dismissed as settled on June 23, 2010, although the Judge reserved
jurisdiction over the suit for the purpose of enforcing the settlement. Chanree paid its $300,000,
however, Palmer failed to satisfy its obligations under the second settlement agreement. See
Compl., ¶ 22. Hence, on November 23, 2010, Bricklayers filed a motion to enforce the settlement
against Palmer and Mazza. The Judge ruled on the motion on January 18, 2011, granting
Bricklayers’ motion to enforce against those two parties, and ordering them to pay $924,537.99 in
damages. Around six months later, in August of 2011, Mazza filed for Chapter 7 bankruptcy and,
during his bankruptcy proceeding, he testified that Palmer was no longer in business. Id. at ¶ 24-25.
Thereafter, Bricklayers’ counsel sought to collect the past due balance from Chanree, but to no avail.
Plaintiffs now bring the instant action to collect the unpaid contributions.
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STANDARD OF REVIEW
When reviewing a motion to dismiss on the pleadings, courts “accept all factual allegations
as true, construe the complaint in the light most favorable to the plaintiff, and determine whether,
under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Philips v.
County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citation and quotations omitted). As the
Third Circuit has stated, “a claim requires a complaint with enough factual matter (taken as true) to
suggest the required element. This does not impose a probability requirement at the pleading stage,
but instead simply calls for enough facts to raise a reasonable expectation that discovery will reveal
evidence of' the necessary element.” Id. at 234 (quoting Bell Atlantic Corporation v. Twombly, 550
U.S. 544, 547 (2007)) (internal quotation marks omitted). In other words, “only a complaint that
states a plausible claim for relief survives a motion to dismiss.” Ashcroft v. Iqbal, 556 U.S. 662, 663
(2009).
Moreover, in deciding a motion to dismiss, the Court may consider the allegations in the
complaint, exhibits attached to the complaint, matters of public record, and documents that form the
basis of Plaintiff's claim. Lum v. Bank of Am., 361 F.3d 217, 222 n. 3 (3d Cir. 2004). Hence the
Court may consider the judicial records in Bricklayers’ prior suit, as well as the CBA and the other
exhibits attached to the parties’ papers that form the basis of Plaintiffs’ unpaid contributions claim.
DISCUSSION
Pursuant to section 515 of ERISA, “[e]very employer who is obligated to make contributions
to a multiemployer plan 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.” 29 U.S.C. ¶ 1145. The purpose underlying this fringe benefit
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funding requirement is “to protect employees from the inequity of underfunded employee benefit
plans that cannot deliver on promises made.” Gastronomical Workers Union Local 610 v. Dorado
Beach Hotel Corp., 476 F.Supp.2d 99 (D.P.R. 2007) (citing S.Rep. No. 93-127, at 4846 (1974))
(“[A] major issue in private pension plans relates to the adequacy of plan funding.... The Promise
and commitment of a pension can be fulfilled only when funds are available to pay the employee
participant what is owed to him. Without adequate funding, a promise of a pension which may be
illusory and empty.”). See also Pittsburgh Mack Sales & Serv., Inc. v. Int'l Union of Operating
Eng'rs, 580 F.3d 185, 194 (3d Cir. 2009) (“ERISA was enacted to ensure that pension funds will be
adequately funded . . . and that employees who are relying on those funds will be protected.”)
(internal quotation marks omitted).
With respect to the interpretation of collective bargaining agreements in the ERISA context,
the Third Circuit has explained what law governs such determinations:
Although federal law governs the construction of collective
bargaining agreements, traditional contract principles apply when not
inconsistent with federal labor law. Under these principles, whether
a contract term is clear or ambiguous is a question of law for the
court and is thus subject to plenary review on appeal. “A [contract]
term is ambiguous if it is susceptible to reasonable alternative
interpretations.” In determining whether a term is ambiguous, we
must consider the contract language, the meanings suggested by
counsel, and the extrinsic evidence offered in support of each
interpretation. Extrinsic evidence may include the structure of the
contract, the bargaining history, and conduct of the parties that
reflects their understanding of the contract's meaning.
Einhorn v. Fleming Foods of Pennsylvania, Inc., 258 F.3d 192, 194-95 (3d Cir. 2001) (internal
citations omitted).
While under state law contract interpretation principles courts are often advised against
considering extrinsic evidence in determining whether a contract is ambiguous, federal common law
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supplies a different rule here. As the Third Circuit has made clear, “in deciding whether a CBA is
ambiguous [and b]efore making a finding concerning the existence or absence of ambiguity, we
consider the contract language, the meanings suggested by counsel, and the extrinsic evidence
offered in support of each interpretation.” IBEW Local Union No. 102 v. Star-Lo Elec., Inc., 444
Fed.Appx. 603, 607-08 (3d Cir. 2011) (quoting Teamsters Indus. Emp. Welfare Fund, et al. v.
Rolls–Royce Motor Cars, Inc., 989 F.2d 132, 135 (3d Cir. 1993)) (emphasis added).
Relatedly, “if a collective bargaining agreement is silent or otherwise ambiguous regarding
a particular term, proof of mutual acceptance of a past practice may be relevant to establish that the
term is to be implied in the agreement.” Richard A. Lord, Extrinsic Evidence, 20 Williston on
Contracts § 55:23 (4th ed.). This rule is attributed to the Supreme Court’s statement over fifty-years
ago in United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 581-582
(1960) that “[t]he labor arbitrator’s source of law is not confined to the express provisions of the
contract, as the industrial common law—the practices of the industry and the shop—is equally a part
of the collective bargaining agreement although not expressed in it.” See Ludwig Honold Mfg. Co.
v. Fletcher, 405 F.2d 1123 (3d Cir. 1969) (quoting same). Third Circuit cases continue to recognize
the viability of this doctrine, noting that terms may be implied into a CBA based upon past practice,
see, e.g., Conroy v. Township of Lower Merion, 77 Fed.Appx. 556, 560 (3d Cir. 2003) (“[P]ast
practice can be considered an implied term of the CBA ....”) (citing Consolidated Rail Corp. v.
Railway Labor Executives’ Ass’n, 491 U.S. 299, 311-12, 109 S.Ct. 2477, 105 L.Ed.2d 250 (1989)),
unless the CBA expressly forbids reliance on such practices. See, e.g., Armstrong County Memorial
Hosp. v. United Steel, Paper and Forestry, Rubber, Mfg., Energy, Allied Indus. and Service Workers
Intern. Union, 419 Fed.Appx. 217, 222 (3d Cir. 2011) (reversing arbitrator’s reliance on prior
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practices where CBA provided that “management rights were not limited by ‘existing or prior
practices’”).
Courts outside this circuit have also implied CBA terms based upon a party’s past practice.
See, e.g., Cruz-Martinez v. Department of Homeland Sec., 410 F.3d 1366 (Fed. 2005) (implying
CBA provision that permitted arbitrator to close out all grievances upon which the union had not
taken any action in one full year); Bonnell/Tredegar Industries, Inc. v. N.L.R.B., 46 F.3d 339 (4th
Cir. 1995) (implying Christmas bonus formula into CBA based on employer’s prior, long standing
conduct). In this regard, the the Fourth Circuit has noted:
“[C]ollective bargaining agreements may include implied as well as
express terms.” Consolidated Rail Corp. v. Ry. Labor Executives'
Ass'n, 491 U.S. 299, 311, 109 S.Ct. 2477, 2485, 105 L.Ed.2d 250
(1989); Hill v. Norfolk & Western Ry. Co., 814 F.2d 1192, 1198 (7th
Cir. 1987) (Posner, J.). An employer’s established past practice can
become an implied term of a collective bargaining agreement. See,
e.g., Railway Labor Executives v. Norfolk & Western Ry. Co., 833
F.2d 700, 705 (7th Cir. 1987) ( “parties’ collective agreement ...
includes both the specific terms set forth in the written agreement and
any well established practices that constitute a ‘course of dealing’
between the carrier and employees”) (footnote omitted);
Brotherhood of Maintenance of Way Employees v. Chicago & North
Western Transp. Co., 827 F.2d 330, 334 (8th Cir. 1987) (rule
subjecting workers to discipline for possession, use, or sale of illegal
drugs, which was not an express term of the collective bargaining
agreement, “by virtue of the parties' longstanding and recognized
custom and practice, has become an implied term in the agreement of
the parties”), cert. denied, 485 U.S. 988, 108 S.Ct. 1291, 99 L.Ed.2d
502 (1988).
Bonnell, 46 F.3d at 344 (internal citations omitted). The Eighth Circuit has further reasoned that
“[p]ast practices rise to the level of an implied agreement when they have ‘ripened into an
established and recognized custom between the parties.’” Id. (quoting Brotherhood Ry. Carmen v.
Missouri Pacific Ry. Co., 944 F.2d 1422, 1429 (8th Cir. 1991) (quoting Alton & S. Lodge No. 306
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v. Alton & S. Ry., 849 F.2d 1111, 1114 (8th Cir. 1988), cert. denied, 492 U.S. 905, 109 S.Ct. 3214,
106 L.Ed.2d 565 (1989)).
With this legal backdrop in mind, I turn to the parties’ arguments here. Defendant argues
that it is not legally responsible for Palmer’s deficiencies because there is no express language in
the CBA making it secondarily liable therefor. Plaintiff acknowledges that there no express
langauge in the agreement to this effect. Indeed, the only language in the CBA addressing
subcontractor contributions is the prohibition against hiring subcontractors that do not agree to be
bound to the CBA: “[Chanree] agrees not to sublet, assign, or transfer any work covered by [the
CBA] to be performed at the site of a construction project . . . except where the subcontractor
subscribes and agrees in writing to be bound by the full terms of the [CBA] and complies with all
of the terms and conditions of the [CBA].” Id., Art. XVI.
Defendant cites to Schoemehl v. Renaissance Elec. Co., Inc., 334 Fed.Appx. 772, 777 (8th
Cir. 2009), for the proposition that a general contractor may not be held liable for a subcontractor’s
failure to pay fringe benefit contributions unless there is express language in the CBA imposing a
direct or guarantee obligation on the general contractor. That court reasoned:
The Funds cite to cases where a general contractor was held liable,
either directly or as a guarantor, for contributions accrued by the
employees of its subcontractors. However, in each of those cases, the
contract in question created that obligation on its face. See, e.g.,
Walsh v. Schlecht, 429 U.S. 401, 406, 97 S.Ct. 679, 50 L.Ed.2d 641
(1977) (contract stated that general contractor “shall be liable” for
payment into fringe benefit funds). Unlike the contracts in those
cases, however, the PLA creates neither a direct nor a guarantee
obligation in Hunt or Daktronics to pay the contributions on behalf
of Renaissance's employees.
Id. It is true that the cases researched by this Court that imposed secondary liability each relied upon
express language in the CBA. See, e.g., Chicago Dist. Council of Carpenters Pension Fund v. Faith
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Builders, Inc., Civ. Action No. 00 C 1036, 2001 WL 99839, *1-3 (N.D.Ill. Jan. 30, 2001); Mason
Tenders v. Abatement Intern./Advatex Ass'n, Inc., 82 F.Supp.2d 175 (S.D.N.Y. 2000) (“Any
Employer who subcontracts any such work shall be responsible for the payment of wages, fringe
benefits fund contributions, and working dues check-offs by such subcontractor.”) (emphasis
added); Laborers' Pension Fund v. Concrete Structures of The Midwest, Inc., 999 F.2d 1209 (7th
Cir. 1993); Orange Belt Dist. Council of Painters No. 48 v. Maloney Specialties, Inc., 639 F.2d 487
(9th Cir. 1980).
But these cases do not prove the inverse point—that courts have imposed liability in the face
of express language speaks nothing about how those courts would respond where no such language
exists. In my view, this case is better analyzed under the line of cases addressing implied CBA
terms. In this connection, at oral argument, Plaintiff’s Counsel recounted instances in the parties’
longstanding relationship in which Chanree behaved as if it was secondarily liable for Palmer’s and
other of its subcontractors’ unpaid pension contributions. Such conduct, if true, could suggest that
this is a case in which implying into the CBA general contractor liability for subcontractor
contributions would be appropriate. As the aforesaid case law suggests, it is quite possible to imply
terms into a CBA where there has been a long-standing practice.
The problem for Plaintiff here, however, is that there is no reference to these prior dealings
in the complaint, and Plaintiffs’ Counsel’s representations at oral argument certainly do not suffice
to amend the complaint. Accordingly, the Court finds it appropriate to allow Plaintiff to amend its
complaint to incorporate more specific allegations regarding Chanree’s past practices. In this
regard, the Court notes that Plaintiffs’ allegations about Chanree’s conduct in the prior
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litigation2—such as its willing participation in settlement negotiations and agreement to pay
$300,000 toward a settlement for an obligation it now argues did not lie under the CBA—may also
be relevant to the extent that its conduct is reflective of a longstanding practice that has “ripened into
an established and recognized custom between the parties.” Bonnell, 46 F.3d at 344 (internal
quotation marks omitted).
Finally, the Court notes that paragraph 27 of the current complaint makes reference to nonPalmer unpaid fund contributions for which Chanree is allegedly liable. Specifically, the paragraph
alleges: “In addition, Defendant Chanree has become delinquent to Plaintiffs the Local 5 Pension
and Annuity Funds for work performed by members of Bricklayers and Allied Craftworkers Local
5 on projects that did not involve Palmer.” Plaintiff may re-incorporate this allegation in its
amended complaint, however, Plaintiffs are advised to incorporate more detail regarding to which
project these contributions relate, and whether the contributions are Chanree’s own or that of a
different subcontractor. Otherwise, Plaintiff would likely face a motion for a more definite
statement with respect to these non-Palmer contributions.
CONCLUSION
For the foregoing reasons, Defendant’s motion to dismiss is granted. Plaintiff is, further,
granted leave to amend its complaint within 15 days in accordance with the strictures of this
Opinion. An Order will follow.
2
The Court notes that Chanree has not invoked any preclusion principles in this case,
hence I express no opinion on whether res judicata or collateral estoppel doctrines should apply
regarding any prior litigation between the parties.
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Dated: November 29, 2012
/s/ Freda L. Wolfson
FREDA L. WOLFSON, U.S.D.J.
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