Retirement: Company liable for delinquent contributions to multiemployer benefit plans

Where a benefit fund demonstrates that the employer failed both to pay contributions owed and to maintain pertinent records, the burden shifts to the employer to prove the precise amount of damages. And if the employer cannot do so, the fund is entitled to a damages award in an amount approximated as a matter of just and reasonable inference.

Background

In this civil action, the eight plaintiffs are multiemployer benefit plans seeking to recover delinquent contributions for health, pension and other sheet metal worker benefits from Stromberg Metal Works Inc. The district court denied Stromberg’s motion for summary judgment, granted the funds’ cross-motion for summary judgment and awarded the funds more than $823,000 in delinquent contributions and more than $430,000 in liquidated damages and interest on the delinquency.

Liability

Stromberg has abandoned most of the arguments that it raised in the district court, leaving only the contention that its 2019 settlement with Local 5 relieved it of any obligation to make contributions to the plaintiff funds related to the temporary sheet metal workers. Stromberg maintains both that the terms of the 2019 settlement excused Stromberg from making contributions to the funds and that the 2019 settlement is binding on the funds even though it was not a party to that settlement agreement.

In rejecting Stromberg’s contention, the district court focused on the reach, rather than the substance, of the 2019 settlement and concluded that it is “not binding on the plaintiff Funds” and does not “preclude the Funds from seeking delinquent contributions from Stromberg.” This court takes the same approach and reaches the same conclusion.

Multiemployer benefit plans “necessarily do not have the same duties and interests as local labor unions or employers.” Thus, ERISA § 515 “leaves for separate litigation any matters between the employer and the union arising from their individual CBA, to which the plan was not a party.” At the same time, § 515 “strengthens the position of multiemployer plans by holding employers and unions to the literal terms of their written commitments.” And as a consequence of § 515, “an employer is not permitted to raise defenses that attempt to show that the union and the employer agreed to terms different from those set forth in the [CBA].”

Here, the district court explained “that the law in this circuit clearly sets out that the settlement agreements between Local 5 and Stromberg” “are not binding on the plaintiff Funds nor do they preclude the Funds from seeking delinquent contributions from Stromberg.” This court agrees with the district court and thus affirms its liability ruling.

Damages

Although this court has not previously considered the implications of ERISA’s recordkeeping requirement in an action for delinquent contributions, several other courts of appeals have concluded that — where a plaintiff benefit fund has demonstrated that the defendant employer failed both to pay contributions owed and to maintain pertinent records — the burden shifts to the employer to prove the precise amount of damages. And if the employer cannot do so, the plaintiff fund is entitled to a damages award in an amount approximated as a matter of just and reasonable inference.

Here, the district court essentially ruled that — because of Stromberg’s failures to pay all contributions owed, to maintain pertinent records and to prove the precise amount of damages by some other evidence — the funds are entitled to a damages award in an amount approximated as a matter of just and reasonable inference, and that the CBA’s “default” ratio constitutes the funds’ means of approximation. This court rejects Stromberg’s efforts to convince of error with respect to these issues.

However, Stromberg is entitled to contest the reasonableness of the funds’ approximation. In other words, although Stromberg has lost its broad challenge to the funds’ use of the CBA’s ratio, Stromberg is entitled to challenge the accuracy and reasonableness of the funds’ approximation, and has proffered sufficient evidence of computational and methodological errors to survive the funds’ motion for summary judgment. The court therefore vacates the district court’s damages ruling awarding summary judgment to the funds on their claim for damages in the amount requested and remands for further proceedings regarding the adequately disputed damages issue.

Affirmed in part, vacated in part and remanded.

Sheet Metal Workers’ Health and Welfare Fund of North Carolina v. Stromberg Metal Works Inc., Case No. 21-2134, Oct. 3, 2024. 4th Cir. (King), from EDNC at Raleigh (Boyle). Douglas Ray Pierce for Appellant. Karla M. Campbell for Appellees. VLW 024-2-271. 30 pp.