Fourth Circuit: Company Manifested Intent to be Bound by CBA and Is Subject to Exit Contributions under ERISA

In Bd. of Trustees, Sheet Metal Workers’ Nat’l Pension Fund v. Four-C-Aire, Inc., No. 20-2181, __F.th__, 2022 WL 2963188 (4th Cir. July 27, 2022), the Board of Trustees for the Sheet Metal Workers’ National Pension Fund filed suit against Four-C-Aire, Inc. for delinquent exit contributions pursuant to ERISA. This is this case’s second trip to the Court of Appeals. On the first go-around, Four-C-Aire moved to dismiss for failure to state claim and the district judge granted the motion and dismissed the case. After the Trustees appealed, the Fourth Circuit reversed and remanded. At the district court on remand, following discovery, the parties cross-moved for summary judgment. The district court granted the Trustees’ motion and denied Four-C-Aire’s motion. Four-C-Aire appealed, and the Fourth Circuit affirmed the district court.

The court held that Four-C-Aire, by its conduct, adopted the collective-bargaining agreement (CBA) between Local 58 (the local union), and the Contractors Association (the multiemployer bargaining unit of which Four-C-Aire was a member). The court found the following conduct as manifesting Four-C-Aire’s intent to be bound by the CBA: (1) it regularly contributed to the Fund under the agreement’s terms throughout the contract period; (2) the Wage Sheet, which Four-C-Aire signed, lists all of Four-C-Aire’s wage and contribution obligations under the CBA, including those to the Fund; (3) Four-C-Aire deducted Local 58 union dues from its employees’ pay and responded to letters demanding late remittance; (4) the company’s owners themselves joined the union and authorized Local 58 to represent them for purposes of Collective Bargaining, and on their behalf, to negotiate and conclude all agreements as to hours of labor, wages, and other conditions of employment; (5) the company complied with the Fund’s payroll audit, which the CBA authorized; and (6) Four-C-Aire communicated with the union in a manner that evinced it knew it was governed by the CBA.

The court also held that the adoption-by-conduct doctrine does not violate the Labor Management Relations Act (LMRA). The court’s decision in Trustees of the Plumbers & Pipefitters National Pension Fund v. Plumbing Services, Inc., 791 F.3d 436, 448 (4th Cir. 2015) forecloses this argument because the court, like several of its sister circuits, have held that employers may owe contributions to a benefit plan under a written CBA if it adopted the agreement by conduct. Nothing about this case distinguishes it from Plumbing Services.

The court rejected Four-C-Aire’s other arguments. It found that the district court did have jurisdiction because exit contribution operates as a subset of withdrawal liability payments. Four-C-Aire did not repudiate its contract with Local 58 and even if it could lawfully repudiate the CBA, it did not. Lastly, Four-C-Aire did not preserve the argument that the Fund’s governing documents violate Section 302 because there is no evidence the Fund operates as a qualifying “trust fund.”