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United Food and Commercial Workers v. Super Fresh Food Markets Inc.

August 19, 2008

UNITED FOOD AND COMMERCIAL WORKERS AND PARTICIPATING FOOD INDUSTRY EMPLOYERS TRI-STATE HEALTH AND WELFARE FUND, ET AL., PLAINTIFFS,
v.
SUPER FRESH FOOD MARKETS INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: RENÉE Marie Bumb United States District Judge

OPINION

Plaintiffs, United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Health and Welfare Fund, Brian String and John Calleri, as trustees and fiduciaries of the United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Health and Welfare Fund, (hereinafter referred to collectively as "Tri-State" or the "Fund"), allege that the Defendants, Super Fresh Food Markets, Inc., ("Super Fresh") and the Great Atlantic and Pacific Tea Company, Inc., ("A&P") have failed to pay the Fund the full amount for retiree medical coverage from May 2003 to the present and, by failing to pay, are in violation of Section 515 of ERISA, 29 U.S.C. § 1145. Plaintiffs also aver that this failure to pay constitutes a prohibited transaction as described in Section 406(a)(1)(B) of ERISA, 29 U.S.C. § 1106(a)(1)(B). Moreover, Plaintiffs allege that the Defendants are jointly and severally liable to pay all retiree contributions due and owing to the Fund as Super Fresh and A&P constitute a single common enterprise and/or a single employer for purposes of remitting retiree contributions to the Fund, such that Super Fresh is responsible for A&P's retiree contributions.

In a prior summary judgment ruling, this Court found that it was presented with four disputed issues: 1) whether A&P or Super Fresh is obligated to contribute for the benefits provided their retirees; 2) whether the cost of A&P's retirees can be allocated to Super Fresh because both entities are in fact a single employer; 3) whether A&P is obligated to contribute for the benefits of its retirees despite having no active employees; and, 4) whether the agreement regarding the return of Super Fresh's employees, including retirees, that were members of United Food and Commercial Workers (hereinafter "UFCW") Union Local 27 from the UFCW Local 56 Fund, included Local 27 members who were former A&P employees. In the oral opinion addressing the motion, this Court found that it only needed to reach the first two questions at that time because, as the opinion stated, "judgment for the [D]efendants on the first two questions [was] premature at [that] point." Op. Tr. at 10:6-8.

As to the first two questions, this Court found that the CBAs at issue were ambiguous, in part, because the CBAs appear to cover retiree benefits, but are silent as to whether those benefits are for current or future retirees. Id. at 13:9-25. Moreover, the CBAs do not define the terms employee or associate and use both terms at different items and intermittently refer to "active employees." Thus, despite the Defendants' contention that retiree coverage was precluded, the Court found that there was ambiguity on this point sufficient to create a material issue of fact. This Court also held that there were issues of material fact that precluded summary judgment as to whether A&P and Super Fresh constitute a single entity for purposes of retiree benefits contributions. Id. at 15:2-5.

At this current stage, there are several issues remaining that have been more clearly defined by the parties in their pre-trial submissions: 1) whether the CBAs at issue contain a method for employer contributions to the Fund; 2) whether the Trustees had the authority to change the contribution methodology in 2003; 3) if that methodology change was permissible, are A&P and Super Fresh considered a single entity (as a joint employer or alter ego) for purposes of contribution liability; and, 4) whether former A&P retirees were transferred back to the Fund as part of the move from the Local 56 Fund.*fn1

This Court held a bench trial on these issues on November, 14 and 15, 2007, December 10-12, 2007, May 6, 7, 9, 2008, May 12-16, 2008, May 27 and 28, 2008, and June 11, 12, 13, 16, 17, 24, 2008.*fn2 On July 21, 2008, the parties submitted their respective "Proposed Findings of Fact and Conclusions of Law." The following, presented pursuant to Federal Rule of Civil Procedure 52, constitutes this Court's Findings of Fact and Conclusions of Law. While not required, this Court will set forth the most relevant of the parties' stipulated facts in its findings because these facts are necessary to understand this Court's ultimate Findings.*fn3

I. Findings of Fact

A. Background of the Fund and Trust Agreement

1. The Tri-State Fund is a multiemployer trust fund which provides health and welfare benefits to eligible beneficiaries. This plan is subject to the terms of the Employment Retirement and Income Security Act of 1974, "ERISA." Stip. Facts at ¶1.

2. In addition to being subject to the terms of ERISA, the Fund is subject to Section 302(c)(5) of the Taft-Hartley Act, 29 U.S.C. § 186(c)(5). Stip. Facts at ¶ 5.

3. The Fund was created in 1966 via execution of a Trust Agreement. A&P was a party to the Trust Agreement and, as an original signatory, is a settlor of the Fund. Stip. Facts at ¶¶ 2 & 3; P-38.

4. The Trust Agreement which governs the Fund was Restated in 1980 ("the Restated Trust Agreement"). Stip. Facts at ¶ 32.

5. Defendant A&P was an original signatory to the 1980 Restated Trust Agreement. Stip. Facts at ¶ 33.

6. Super Fresh was created in 1982 as a wholly owned subsidiary of A&P. Stip. Facts at ¶ 6.

7. Employers who were not original signatories to the Trust could participate in the Trust by signing a participation agreement. Trial Tr. Vaccaro 12/11/07 767:25-768:3.

8. A participation agreement would be signed for each employer and union on whose behalf that employer would make contributions to the Fund. Trial Tr. Vaccaro 12/11/08 768:4-21.

9. In 1994, Super Fresh executed three separate participation agreements with three separate union locals: UFCW Local 27, UFCW Local 1358, and UFCW 1360. P-132; Trial Tr. Vaccaro 12/11/07 769:16-24.

10. In 1998, A&P signed a participation agreement with UFCW Local 1360. P-132.

11. Pursuant to these three participation agreements, Super Fresh agreed to make contributions as required under its collective bargaining agreement or successor agreement with each union. Trial Tr. Vaccaro 12/11/07 770:20-25.

12. Pursuant to its participation agreement, A&P agreed to make contributions as required under its collective bargaining agreement or successor agreement with Local 1360. P-132.

13. Section 4.1 of the Trust Agreement sets forth the Powers and Duties of the Trustees and makes clear that,

[i]n operating and administering the Health and Welfare Fund and Plan, the Trustees shall, subject to and consistent with the applicable provisions of the then existing collective bargaining agreements, have the power and/or duty:

p. To make, adopt, amend or repeal by-laws, rules and regulations not inconsistent with the terms of this Trust Agreement, as the Trustees may deem necessary or desirable for the purpose of the carrying out the purpose of this Trust.

s. The Trustees shall construe the terms and provisions of this Trust Agreement, the health and Welfare Plan and all other supplementary and amendatory documents. The construction adopted by the Trustees in good faith shall be binding upon the Employer, the Union, the Employees, Participants and all other persons who may be involved or affected. P-38.

14. The CBAs at issue in this case are not "supplementary or amendatory documents." When the Trust document refers to the collective bargaining agreements, it does so directly and makes clear that the Trustees, in discharging their duties, including making rules as laid out in subsection 4.1p or construing the Trust agreement as set forth in 4.1s, must do so subject to and consistent with the existent CBA. P-38 at 11, Section 4.1; Trial Tr. Witt 6/12/08 3980:12-24; 3982:1-18; Vaccaro 11/14/07 94:18-25; 12/11/07 718:4-18; Calleri 5/15/08 2595:3-8.

15. Section 9.2 of the miscellaneous provisions of the Trust Agreement, which provides that the interpretation of the Trust Agreement and Plan, "shall be binding upon the Union, the Employer as well as upon the Employees . . .," does not change the overarching restriction on the powers and duties of the Trustees contained in section 4.1, i.e. - that the Trustees must carry out that interpretation subject to and consistent with the CBAs. P-38.

16. Pursuant to the Trust Agreement, the Trustees could not change or add any obligation that would be inconsistent with the CBAs in place at that time. P-38 at 11, Section 4.1; Trial Tr. Vaccaro 12/11/07 718:4-18.

17. All the benefits received by beneficiaries of the Fund are funded through contributions made by participating employers. Stip. Facts at ¶ 21.

18. The Fund must provide benefits in accordance with the collective bargaining agreements. Trial Tr. Vaccaro 11/14/07 68:19-22.

19. An employer and union, in a collective bargaining agreement, may agree that if the cost of the existing plan of benefits rises above what the initial contribution rate agreed to in the CBA provides, the Trustees may raise the contribution rate in order to maintain the existing level of benefits. This is referred to as a "maintenance of benefits" provision, commonly abbreviated as "MOB". Stip. Facts at ¶ 22.

20. Under an "uncapped" or full MOB provision, the Fund's third-party administrator would annually calculate MOB rates required to maintain the current level of benefits. If the new annual MOB rate assessed to the participating employer was greater than the rate stated for that year in the CBA, the participating employer was required to pay the higher MOB rate through the contribution year. Stip. Facts at ¶ 23; Trial Tr. Vaccaro 11/14/07 98:1-6.

B. The Super Fresh Collective Bargaining Agreements

i) Local 27

21. Super Fresh executed a CBA with Local 27, having a term of October 31, 1999 through October 30, 2004. This CBA contains a Preamble which states:

This Agreement made and entered into as of October 31, 1999, by and between SUPER FRESH FOOD MARKETS, INC. (hereinafter referred to as "Employer"), and UNITED FOOD AND COMMERCIAL WORKERS UNION, LOCAL 27 [1358, 1360] (hereinafter referred to as "Union") affiliated with the UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION, AFL-CIO. It is intended and agreed that SUPER FRESH FOOD MARKETS, INC. and THE GREAT ATLANTIC AND PACIFIC TEA COMPANY, INC. (A&P) are different and separate operating retail units and shall be so considered for purposes of this agreement.

Stip Facts at ¶ 14; D-76 at 1.

22. This "Separateness Preamble" clarifies that Super Fresh and A&P are different bargaining units. Trial Tr. Rogers 6/16/08 4285:2-5.

23. The 1999-2004 CBA between Super Fresh and Local 27 governed the terms and conditions of employment of those Super Fresh bargaining unit employees who were represented by Local 27 for purposes of collective bargaining. Stip. Facts at ¶ 76.

24. Article 25 of the 1999-2004 CBA between Super Fresh and Local 27 states that the "Employer agrees to participate in and make contributions on behalf of eligible associates to the appropriate Health Plan described in Appendix C." D-76 at 14, Art. 25.

25. "Eligible associates" refers to active Super Fresh employees. Trial Tr. Vaccaro 812:16-24; Witt 6/12/08 3991:15-25.

26. Appendix C states that "The Employer agrees to contribute to the TRI-STATE HEALTH AND WELFARE FUND as follows:

A. Full-Time Clerks

1. Monthly contributions shall be made for each full-time employee on the payroll as of 10/1/90 commencing with the month following the completion of one (1) year of contributions full time service with the Employer and who is active during the first full week fo each month. * * * The coverage for full-time associates indicated shall be as follows: Plan I cost/mem/mo 5/1/99 $620.70. * * * Plan H cost/mem/mo 5/1/00 $439.61.

D-76 at Appx. C & superseding language; Trial Tr. Vaccaro 12/11/07 825:1-25.

27. "Full-time associates" means full-time employees. Trial Tr. Vaccaro 12/11/07 822:1-16; Witt 6/12/08 3991:15-25.

28. It was clear from the language in the 1999-2004 CBA between Super Fresh and Local 27 that Super Fresh was to pay a stated dollar rate multiplied by each of its active employees per month. Trial Tr. Vaccaro 12/11/07 818:12-17; 825:22-826:1.

29. "Cost/mem/mo" means cost per member per month. Cost per member does not mean per retiree. Trial Tr. Rogers 4302:10-4303:15.

30. Appendix C contains menus of benefits for Plans I and H. These menus contain, inter alia, entries for "Retiree Rx Drug, Retiree Vision, Retiree Dental. . . ." D-76.

31. These menus of benefits illustrate the types of benefits to be provided by the Fund but do not represent a contractual duty on behalf of Super Fresh to provide particular benefits. Trial Tr. Witt 6/13/08 4050:4-8.

32. The phrase "coverage for full-time associates indicated shall be as follows" refers to the contribution rate, not the menu of benefits. Trial Tr. Rogers 4352:5-4353:9.

33. Retiree benefits were provided under the Super Fresh and Local 27 CBA. D-76 at 25, Appx. C (A)(1)(1); Trial Tr. Vaccaro 11/15/07 256:9-15; 257:9-16.

34. The formula for determining the cost of these retiree benefits was not set forth in Appendix C of the Super Fresh -Local 27 contract. Trial Tr. Vaccaro 12/11/07 826:9-10.

35. The language of the 1999-2004 CBA between Super Fresh and Local 27 did not require Super Fresh to make a contribution multiplied by the number of its own retirees. Trial Tr. Vaccaro 12/11/07 825:11-21.

36. It had been the practice of the Fund, of which the bargaining parties were well aware, to allocate the costs of benefits for all retirees of the Fund as a built-in component of the active rate. Trial Tr. Vaccaro 12/11/07 831:18-24.

37. The retiree component was not the direct cost of Super Fresh's own retirees but that an equal share of the total retiree costs for the pool of retirees in the Fund. Trial Tr. Vaccaro 11/14/07 112:2-7; 113:9-13; 12/11/07 689:24-690:1; 853:18-25; Camp 6/12/08 3939:11-19; Calleri 5/15/08 2462:23-2463:4.

38. The 1999-2004 CBA between Super Fresh and Locals 27 contained "uncapped" or full MOB provisions. Stip Facts at ¶ 24; D-76 at 27; Trial Tr. Vaccaro 11/15/07 196:19-20.

39. Appendix C further provides that "[s]hould the unallocated surplus relative to total expenses be less than six (6) months, the MOB amount will be adjusted to re-establish the unallocated surplus to the equivalent of six (6) months of total expenses." This is commonly referred to as the "Maintenance of Reserves" or "MOR" clause. Stip. Facts at ¶ 26; D-76 at 27.

40. Appendix C of the CBA between Super Fresh and Local 27 states that "all questions involving Health & Welfare, not specifically set forth herein, shall be determined by the provisions of the Agreement and Declaration of Trust governing the Plan." Stip. Facts. at ¶ 29; D-76 at 28.

41. Where a question is unanswered involving Health & Welfare in the Local 27 CBA, requiring reference to the Agreement and Declaration of Trust, decisions made pursuant to the Trust Agreement must still be subject to and consistent with the existent provisions in the CBA. P-38 at 11, Section 4.1; Trial Tr. Witt 6/12/08 3980:12-24.

ii) Local 1358

42. Super Fresh executed a CBA with Local 1358 having a term of October 31, 1999 through October 30, 2004. This CBA contains a Preamble which states:

This Agreement made and entered into as of October 31, 1999, by and between SUPER FRESH FOOD MARKETS, INC. (hereinafter referred to as "Employer"), and UNITED FOOD AND COMMERCIAL WORKERS UNION, LOCAL 27 [1358, 1360] (hereinafter referred to as "Union") affiliated with the UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION, AFL-CIO. It is intended and agreed that SUPER FRESH FOOD MARKETS, INC. and THE GREAT ATLANTIC AND PACIFIC TEA COMPANY, INC. (A&P) are different and separate operating retail units and shall be so considered for purposes of this agreement.

Stip. Facts at 14; P-151 at 1.

43. This "Separateness Preamble" confirms that Super Fresh and A&P are different bargaining units. Trial Tr. Rogers 4344:4-20.

44. The 1999-2004 CBA between Super Fresh and Local 1358 governed the terms and conditions of employment of those Super Fresh bargaining unit employees who were represented by Local 1358 for purposes of collective bargaining. Stip. Facts at ¶ 75.

45. Article 25 of the 1999-2004 CBA between Super Fresh and Local 1358 states that "The Employer agrees to participate in and make contributions on behalf of eligible associates to the appropriate Health Plan described in Appendix 'C'." P-151 at 19.

46. "[E]ligible associates" refers to active employees of Super Fresh. Trial Tr. Vaccaro 12/11/07 790:2-9; Witt 6/12/08 3991:15-25.

47. Appendix C states that "The Employer agrees to contribute to the TRI-STATE HEALTH AND WELFARE FUND as follows:

A. Full-Time Clerks

1. Monthly contributions shall be made for each full-time employee on the payroll as of 10/1/90 commencing with the month following completion of one (1) year of continuous full-time service with the Employer and who is active during the first full week of each month. * * * The coverage for full-time associates indicated shall be as follows: Plan I cost/mem/mo 5/1/99 $565.29. * * * Plan H cost/mem/mo 5/1/00 $386.78.

P-151 at Appx. C.

48. "Full-time associates" means full-time employees. Trial Tr. Vaccaro 12/11/07 822:1-16; 828:13-24; Witt 6/12/08 3991:15-25.

49. It was clear from the language in the 1999-2004 CBA between Super Fresh and Local 1358 that Super Fresh was to pay a stated dollar rate multiplied by each of its active employees per month. P-151; Trial Tr. Vaccaro 12/11/07 790:22-791:9.

50. "Cost/mem/mo" means cost per member per month. Cost per member does not mean per retiree. Trial Tr. Rogers 4347:22-4348:6.

51. Appendix C contains menus of benefits for Plans I and H. These menus contain, inter alia, entries for "Retiree Rx Drug, Retiree Vision, Retiree Dental. . . ." P-151; Trial Tr. Vacarro 112:16-23.

52. These menus of benefits illustrate the types of benefits to be provided by the Fund but do not represent a contractual duty on behalf of Super Fresh to provide particular benefits. Trial Tr. Witt 6/13/08 4050:4-8.

53. The phrase "coverage for full-time associates indicated shall be as follows" refers to the contribution rate, not the menu of benefits." Trial Tr. Rogers 4352:5-4353:9.

54. Retiree benefits were provided under the Super Fresh and Local 1358 CBA. P-151 at 26, Appx. C (1)(A)(1); Trial Tr. Vaccaro 11/14/07 108:13-18; 262:25-263:3.

55. The formula for determining the cost of these retiree benefits was not set forth in Appendix C of the Super Fresh -Local 1358 contract. Trial Tr. Vaccaro 11/14/07 159:7-9.

56. The language of the 1999-2004 CBA between Super Fresh and Local 1358 did not require Super Fresh to make a specific contribution at a stated dollar rate multiplied by its own retirees. Trial Tr. Vaccaro 12/11/07 793:20-24.

57. It had been the practice of the Fund, of which the bargaining parties were well aware, to allocate the costs of benefits for all retirees of the Fund as a built-in component of the active rate. Trial Tr. Vaccaro 12/11/07 793:3-12; 796:2-13.

58. The retiree component was not the direct cost of Super Fresh's own retirees but that an equal share of the total retiree costs for the pool of retirees in the Fund. Trial Tr. Vaccaro 11/14/07 112:2-7; 113:9-13; 12/11/07 689:24-690:1; 853:18-25; Camp 6/12/08 3939:11-19; Calleri 5/15/08 2462:23-2463:4.

59. The 1999-2004 CBA between Super Fresh and Local 1358 contained "uncapped" or full MOB provisions. P-151 at 27.

60. Appendix C further provides that "Should the unallocated surplus relative to total expenses be less than six (6) months, the MOB amount will be adjusted to re-establish the unallocated surplus to the equivalent of six (6) months of total expenses." This is commonly referred to as the "Maintenance of Reserves" or "MOR" clause. Stip. Facts at ¶ 26; P-151 at 27.

61. Appendix C of the CBA between Super Fresh and Local 1358 states that "all questions involving Health & Welfare, not specifically set forth herein, shall be determined by the provisions of the Agreement and Declaration of Trust governing the Plan." Stip. Facts. at ¶ 29; P-151 at 28.

62. Where a question is unanswered involving Health & Welfare in the Local 1358 CBA, requiring reference to the Agreement and Declaration of Trust, decisions made pursuant to the Trust Agreement must still be subject to and consistent with the existent provisions in the CBA. P-38 at 11, Section 4.1; Trial Tr. Witt 6/12/08 3980:12-24.

iii) Local 1360

63. Super Fresh executed a CBA with Local 1360 having a term of October 31, 1999 through October 30, 2004. This CBA contains a Preamble which states:

This Agreement made and entered into as of October 31, 1999, by and between SUPER FRESH FOOD MARKETS, INC. (hereinafter referred to as "Employer"), and UNITED FOOD AND COMMERCIAL WORKERS UNION, LOCAL 27 [1358, 1360] (hereinafter referred to as "Union") affiliated with the UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION, AFL-CIO. It is intended and agreed that SUPER FRESH FOOD MARKETS, INC. and THE GREAT ATLANTIC AND PACIFIC TEA COMPANY, INC. (A&P) are different and separate operating retail units and shall be so considered for purposes of this agreement.

Stip Facts. at ¶ 14; P-129 at 1.

64. This "Separateness Preamble" confirms that Super Fresh and A&P are different bargaining units. Trial Tr. Rogers 4376:5-12.

65. The 1999-2004 CBA between Super Fresh and Local 1360 governed the terms and conditions of employment of those Super Fresh bargaining unit employees who were represented by Local 1360 for purposes of collective bargaining. Stip. Facts at ¶ 74.

66. Article 25 of the 1999-2004 CBA between Super Fresh and Local 1360 states that "The Employer agrees to participate in and make contributions on behalf of eligible associates to the appropriate Health ...


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