United Food & Commercial Workers Union v. Super Fresh Food Markets, Inc.

Citation: 352 F. App'x 721Docket: No. 08-3906

Court: Court of Appeals for the Third Circuit; November 17, 2009; Federal Appellate Court

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The court opinion addresses an appeal by the United Food and Commercial Workers and the Tri-State Health Welfare Fund to recover overdue retiree health contributions from Super Fresh Food Markets and The Great Atlantic and Pacific Tea Company, Inc. (A&P). The Fund, a multi-employer and multi-union benefit plan, is governed by a Trust Agreement that mandates adherence to collective bargaining agreements (CBAs). Super Fresh and A&P entered CBAs that obligated them to contribute to the Fund for eligible active employees but included a separateness clause indicating they are distinct entities. The CBAs allow for maintenance of benefits (MOB) clauses that permit contribution rate increases if benefit costs exceed agreed rates. 

Prior to May 2003, employer contributions to the Fund were based only on active employees, but this led to discrepancies regarding retiree funding. The Trustees revised the methodology to include contributions based on both active and retired employees, a change deemed unauthorized by the District Court as it contradicted the CBAs. In 2003, employees and retirees from Local 27 were transferred to a different benefit fund, and negotiations for a new CBA commenced in 2004, resulting in a memorandum of agreement in 2005 that preserved the separateness clause. A&P was not involved in this new agreement.

Super Fresh initially agreed to transfer active employees from Local 56 to the Tri-state Fund in the MOA but did not mention A&P retirees. Following a strike threat from Local 27, Super Fresh agreed to include retirees, though it was unclear if this referred to A&P retirees. A revised MOA was signed, and Super Fresh committed to contributing for its own retirees based on a new methodology. The Trustees sought to formalize this in a Participation Agreement (PA), with several drafts exchanged. Super Fresh rejected a draft that included A&P retirees and submitted one that explicitly excluded them. The signed PA defined "Employer" as Super Fresh and required contributions only for its retirees, omitting any mention of A&P retirees. The District Court ruled that A&P retirees were not covered by the PA and that Super Fresh was not obligated to contribute for them. The Court found the PA unambiguous and did not address whether Super Fresh and A&P were alter egos. Legal standards for review include clear error for factual findings and de novo for legal conclusions. The Court determined that the Trustees lacked authority to alter the funding methodology for retiree benefits, as it conflicted with the written provisions of the applicable CBAs, which stipulated that the employer's obligations were based on active employees. While the Appellants argued that the CBAs did not specify a methodology for retiree benefits, the District Court concluded that the CBAs clearly defined the employer's contribution as a rate multiplied by active employees, asserting that the Trustees' powers needed to align with the CBAs.

The District Court determined that the Trustees lacked authority to change the contribution methodology outlined in the Collective Bargaining Agreements (CBAs), as this change contradicted the written terms. The CBAs specifically state that contributions are based on the number of active employees, and while the Trustees had some discretion regarding retiree benefits, they could not require contributions per retiree without violating the CBAs. Appellants, claiming third-party beneficiary status, argued that the Fund could adopt rules conflicting with the CBAs unless deemed arbitrary or capricious; however, the court found this standard only applies if the Trustees had the discretion to change methodologies, which they did not under the governing Trust Agreement. Consequently, the District Court's decision not to apply the arbitrary/capricious standard was correct.

Regarding retiree contributions, the District Court ruled that Super Fresh was not liable for contributions for A&P retirees transferred to the Tri-State Fund, as the Participation Agreement (PA) explicitly excluded A&P retirees. Even if the PA could be considered ambiguous, the evidence indicated that Super Fresh did not agree to fund A&P retirees. The appellants' argument that the Trustees believed Super Fresh encompassed A&P was undermined by the clear language in the PA and the rejection of a version that included A&P retirees. Thus, any potential alter-ego theory of liability under ERISA Section 515 was rendered moot, as the agreements specifically limited contributions to Super Fresh retirees.

Local 27's President communicated to the Super Fresh representative during negotiations that A&P retirees should be included in the transfer, indicating the parties recognized A&P and Super Fresh as distinct entities. The District Court correctly ruled that the Participation Agreement (PA) did not cover A&P retirees, rendering evidence of alter-ego liability irrelevant due to the absence of delinquent contributions. Appellants argue the District Court made erroneous factual findings regarding the negotiations related to the Memorandum of Agreement (MOA) and the PA, but these findings are only significant if there is ambiguity in the agreements concerning the retirees included in the Fund. The District Court found these agreements to be unambiguous, negating the need to address the appellants' claims. The Order of the District Court is affirmed. Appellees assert that the objection raised by appellants is waived on appeal as they did not present the evidence for ruling on its admissibility. Appellants counter that they did not waive this argument, having opposed the trial's bifurcation concerning the alter-ego theory. Trial counsel expressed concerns about the bifurcation affecting the resolution of related issues, particularly the Local 27 transfer. The Court did not exclude this evidence but deemed it premature and irrelevant if A&P retirees were not included in the contract. Given the objection to bifurcation, the issue will be considered.