On Appeal from the United States District Court for the District of New Jersey, D.C. Civil No. 86-1052.
Sloviter, Becker, Circuit Judges, and Fullam,*fn* Chief Judge, District Court.
This case arises under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461 (1982). Appellant I.A.M. National Pension Fund ("IAM Fund" or "Fund") is an ERISA qualified multiemployer pension plan. See 29 U.S.C. § 1002(2)(A). Appellee Perth Amboy Dry Dock Co. ("PADD"), an employer participating in the IAM Fund, alleges that it paid contributions to the Fund for the account of employee Henry F. Plucinski by mistake. The appeal requires us to decide whether employers such as PADD have either an implied right of action or a federal common law right of action under ERISA for equitable restitution of payments made to a pension fund under mistake of fact or law, as against the contention that ERISA's purpose of ensuring the stability of pension funds forecloses such actions.
Our sister circuits have split on both the implied right of action and federal common law issues. We conclude that there is no implied right under ERISA for such recovery, but that there is an action available under federal common law, which we are charged with applying interstitially in ERISA cases. See Van Orman v. American Insurance Co., 680 F.2d 301, 311 (3d Cir. 1982). More precisely, we hold that an employer may recover such funds when the court finds it equitable, but we further hold that when restitution would result in the underfunding of a plan, it would be inequitable to order it. To the extent that the district court recognized a federal common law action for restitution, we affirm. However, because the district court did not address the equities of ordering restitution in this case, we remand for a development of the record and for the district court to exercise its equitable discretion.*fn1
Plucinski was employed by PADD as a storekeeper commencing in October 1945. Beginning in 1966, PADD entered into a series of collective bargaining agreements that obligated it to make contributions to the IAM Fund on behalf of employees covered by the agreements. Members of the local union of the International Association of Machinists and Aerospace Workers ("IAM"), as well as painters, carpenters, and electricians, who were members of three other unions, were covered by the agreements. Plucinski, however, was not a member of the IAM or any other labor union. Furthermore, it is undisputed that the job classification "storekeeper" was not covered by the 1966 collective bargaining agreements or by any subsequent collective bargaining agreement between PADD and its employees.
The IAM Fund is a "defined benefit" fund, which means that eligible employees are paid a predetermined amount upon retirement. The Fund does not keep segregated accounts for individual employees; all of its assets are pooled to pay benefits for those who are eligible. The Fund was obligated to provide pensions for covered PADD employees at the time of their retirement from PADD.
In March 1972, in response to an inquiry as to whether PADD management could participate in the fund, PADD was advised in writing that the IAM Fund would not permit participation in the Fund by any more employees who were not members of the IAM. However, for reasons that are in dispute, in late 1972 or early 1973, PADD began to make contributions to the IAM Fund on behalf of Plucinski. PADD alleges that in 1971 it had become aware that Plucinski was one of several employees who was not a member of any pension plan, and that, to remedy this, PADD management reached an agreement with a union representative allowing Plucinski to participate in the IAM Fund. See Certification of Alfred C. Bruggeman at 2. The IAM Fund disputes that such an agreement had been reached and alleges that PADD made the contributions in order to defraud the IAM Fund into accepting Plucinski as a participant although he was not entitled to participate under the agreements. See Appellant's Br. at 10-11.
In October 1984, shortly before he reached age 65, Plucinski filed an application for pension benefits with the SAM Fund. The Fund denied the request for benefits on the ground that, as a storekeeper, Plucinski was not entitled to benefits under any collective bargaining agreement and that there was no other written agreement that would have made Plucinski eligible for benefits. On March 17, 1986, Plucinski brought suit in the district court for the District of New Jersey against PADD, the PADD Management Pension Fund, PADD's former President, Alfred C. Bruggeman, its Vice President, William T. Harth, and the IAM Fund, seeking to recover the value of the pension benefits that he had been promised. PADD, the Management Fund, and Messrs. Bruggeman and Harth cross-claimed against the IAM Fund and the IAM Fund cross-claimed against them.*fn2
On cross-motions for summary judgment, the district court held that PADD was solely responsible for paying Plucinski's pension. The court also directed the IAM Fund to refund to PADD the value of all contributions paid by PADD to the Fund on behalf of Plucinski, plus interest. The court rejected an argument by the IAM Fund that ERISA does not provide a cause of action for an employer to recover erroneously paid contributions, finding that it was appropriate to create a federal common law right of action for such recovery. See Dist. Ct. Bench Op. at 6-7 (April 13, 1987) [hereinafter "Bench Op. II"]. In so doing, the district court adopted the holding and reasoning of Airco Industrial Gases v. Teamsters Health & Welfare Pension Fund, 618 F. Supp. 943 (D.Del. 1985), rev'd in part on other grounds, 850 F.2d 1028 (3d Cir. 1988).
The district court directed the entry of final judgment against PADD and the IAM Fund pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, determining that there was no just reason for delay in entering a final judgment. Both PADD and the IAM Fund appealed. However, Plucinski subsequently settled his claims against PADD, the Management Fund, and Messrs. Bruggeman and Harth. PADD withdrew its appeal and the claims in the district court against the remaining defendants (the Management Fund, Bruggeman, and Harth) were dismissed by consent. Hence the only ...