Appeal from summary judgment entered in the United States District Court for the Northern District of New York (McCurn, J.) permitting plaintiff to offset overpayments made to multiemployer pension fund against future obligations to the fund where the overpayments were not made within the three-year refund limitation period established by the defendant trustees.
Newman and Miner, Circuit Judges.*fn*
Defendants-appellants appeal from a summary judgment entered in the United States District Court for the Northern District of New York (McCurn, J.) in favor of plaintiff-appellee Dumac Forestry Services. Dumac, an employer required to make contributions on behalf of its employees to defendant-appellant National Electrical Benefit Fund, brought suit to recover overpayments erroneously made to the pension fund outside the fund's three-year refund limitation rule. Dumac also alleged pendent state law claims based on fraud and negligence. The district judge permitted Dumac to reduce its future payments to the fund by the amount of overpayments made outside the three-year refund period. The district judge rejected Dumac's claims for interest on the overpayments, and dismissed the pendent state law claims. The district court's opinion is reported at 637 F. Supp. 529 (N.D.N.Y. 1986). Defendants appeal the district court's allowance of offsets against Dumac's future payments, and Dumac cross-appeals the district court's disallowance of interest. For the reasons set forth below, we affirm the denial of appellee's claim for interest, and we reverse and remand as to the district court's summary judgment in favor of Dumac.
Plaintiff-appellee Dumac Forestry Services is an employer bound by a series of collective bargaining agreements between the New York State Tree Trimming and Line Clearance Contractors and Local Union No. 1249, International Brotherhood of Electrical Workers. Under the labor contracts, Dumac was required to make contributions on behalf of its employees to defendant-appellant National Electrical Benefit Fund ("NEBF" or "Fund") in an amount equal to one percent of its gross monthly payroll. NEBF is a multiemployer pension benefit plan within the purview of the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (1982) ("ERISA"). The NEBF trustees have adopted a policy limiting refunds of employer overpayments to contributions made within three years of NEBF's knowledge of the overpayments.
During the five-year period from October of 1977 through June of 1982, Dumac erroneously made contributions to the fund amounting to three percent of its payroll. These overpayments were attributable partially to the fact that Dumac's bookkeeper, who began employment with the company in 1977, was unaware of the actual terms of the labor contracts, and partially to the forms provided Dumac by NEBF to accompany the company's contributions. The front of the NEBF forms contained instructions for contributions amounting to three percent of payroll, while the reverse side contained instructions directing use of the accurate one percent contribution rate.
The overpayments were discovered during a routine audit conducted by NEBF in July 1982, and Dumac was promptly notified of the erroneous payments. Dumac subsequently demanded reimbursement for all overpayments. On November 9, 1982, NEBF refunded $48,893.44 -- an amount representing the overpayments made during the three-year period from July 1979 through June 1982. Pursuant to its three-year refund limitation policy, NEBF refused to return $20,733.11 -- the amount of overpayments Dumac had made outside the three-year period.
In October of 1983 Dumac instituted this action in the United States District Court for the Northern District of New York to recover the remaining overpayments with interest, as well as legal fees and punitive damages. Dumac's complaint also included pendent state common law claims based on fraud and negligence. The district judge dismissed the pendent claims, finding that ERISA has preempted state law. Judge McCurn noted that, as to Dumac's federal claims, pension fund trustees' actions are to be reviewed under an arbitrary and capricious standard. Judge McCurn denied NEBF's motion for summary judgment because he did not find "that the trustees' policy limiting refunds to three years is, as a matter of law, reasonable and not arbitrary." The district judge also denied Dumac's summary judgment motion for a refund because Dumac "failed to show that the trustees' policy is, as a matter of law, arbitrary." Judge McCurn determined, however, that general equitable principles were applicable to the dispute and, citing the absence of any evidence that the financial stability of the fund would be jeopardized, granted Dumac's motion for summary judgment and permitted Dumac to charge the amount of its overpayments as offsets against its future obligations to the fund. Judge McCurn also denied Dumac's claims for interest on the overpayments, legal fees, and punitive damages.
Before us are NEBF's challenge to the district judge's determination that Dumac could recover the overpayments made beyond the three-year period, as well as Dumac's cross-appeal from the district judge's refusal to award interest.
Section 403(c)(1) of ERISA sets forth the general rule that "the assets of a [multiemployer pension] plan shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries. . . ." 29 U.S.C. § 1103(c)(1) (1982). This sweeping prohibition is tempered by a number of limited exceptions, one of which is pertinent to this appeal:
(2)(A) In the case of a contribution, or a payment of withdrawal liability . . .
(ii) made by an employer to a multiemployer plan by a mistake of fact or law . . ., paragraph (1) shall not prohibit the return of such contribution or payment to the employer within 6 months after the plan administrator ...