Sam Giardono v. George M. Jones

EASTERBROOK, Circuit Judge,

concurring.

One portion of a subsection of ERISA provides that “the assets of a [pension or welfare] plan shall never inure to the benefit of any employer”, 29 U.S.C. § 1103 (c)(1), from which my colleagues deduce that Jones — formerly an employee and now his own boss in a proprietorship — may not contend that a welfare plan and a union violated duties owed to him. If he prevailed, then “the assets of a plan [would] inure to the benefit of [an] employer”. How far does this “plain language” take us? Suppose Jones did some plastering work for a pension plan’s offices and tried to collect his fee. Could the plan balk on the ground that the price specified by contract would inure to the benefit of an employer? Closer to the point, suppose Jones had acquired vested rights to pension benefits before setting up his own business and had applied for payments while continuing to run his firm. Could the plan turn him down on the ground that by going into business he forfeited everything?

Language is a social tool. Every utterance takes meaning from its contexts — linguistic, structural, cultural, functional. Even so bald a command as “Keep Off The Grass!” is less than universal: it does not speak to the gardener. Mathematical statements, sometimes offered as the epitome of precision, also depend on context. The statement “a2 + b2 = c2” is vapid standing alone and correct only if we know from another source that the letters repre *415 sent the length of the sides of right triangles, and if variables properly may be used in place of numbers, a point denied by some mathematicians until mid-eighteenth century. See Morris Kline, Mathematics: The Loss of Certainty 124-26 (1980). The contexts of § 1103(c)(1) matter too.

Section 1103(c)(1) says in full (emphasis added):

Except as provided in paragraph (2), (3), or (4) or subsection (d) of this section, or under sections 1342 and 1344 of this title (relating to termination of insured plans), the assets of a 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 and defraying reasonable expenses of administering the plan.

An employer with vested benefits is still a “participant” in the plan. “The term ‘participant’ means any ... former employee of an employer ... who is or may become eligible to receive a benefit of any type from an employee benefit plan”. 29 U.S.C. § 1002 (7). This description fits the current employer entitled to benefits on account of earlier work as an employee. Section 1103(e)(1) tells us that the assets of the plan are to be used to pay benefits to which participants are entitled. Jones, as participant, may seek to recover even if Jones, as employer, may not. Only losing sight of the linguistic context and function of the provision that “assets ... shall never inure to the benefit of any employer” could lead to the conclusion that Jones may not seek recovery against the plan for any reason while he continues to operate his own business.

It may well be that a sole proprietor cannot enroll himself in a plan alongside his employees. So Peckham v. Board of Trustees, 653 F.2d 424 (10th Cir.1981), held on the authority of § 1103(c)(1) and 29 C.F. R. § 2510.3-3(c)(1). This does not mean that courts must dismiss all claims by owner-employees, however, for proprietors may be participants within the meaning of § 1002(7) and under some circumstances may obtain restitution from a plan, a point the Tenth Circuit made in a clarifying decision. Peckham v. Board of Trustees, 719 F.2d 1063 , modified, 724 F.2d 100 (10th Cir.1983). The regulation on which Peck-ham relied says that a person “shall not be deemed to be [an] employee[ ] with respect to a trade or business ... which is wholly owned by the individual”, § 2510.3-3(e)(1) (emphasis added), suggesting that the capacity in which the person acts or files suit matters. Cf. Reiherzer v. Shannon, 581 F.2d 1266, 1272-76 (7th Cir.1978) (the principal stockholder and manager of a closely-held firm may participate in a pension plan, for the corporation alone is the “employer”). The majority relies on the first Peck-ham opinion (supra at 411-12) and neglects the second and third; it cites Chase v. Trustees, 753 F.2d 744 , 748 (9th Cir.1985), as in accord with Peckham but overlooks the fact that Chase endorsed only the third Peckham opinion.

Jones pursued his counterclaim in his role as a “participant” in his former employer’s plan. He did not seek benefits on account of his years as a proprietor. He contended, instead, that the pension trusts and the local union defrauded him at the time he set up his business by assuring him that he could remain a participant in the welfare fund in order to keep health insurance at favorable rates. A contention of this sort is not barred by § 1103(c)(1). It may fail to state a claim on which relief may be granted, for the documents governing the nature of pension and welfare plans convey accurate information, and a person who neglects to read the dispositive documents may not contend that he did not know their significance. See Acme Propane, Inc. v. Tenexco, Inc., 844 F.2d 1317 (7th Cir.1988). But it does not founder as a consequence of § 1103(c)(1).

Jones’s counterclaim invoked both ERISA and state-law theories. The district court dismissed the counterclaim on jurisdictional grounds to the extent it depended on ERISA. Section 1103(c)(1), even if it applies, is not a “jurisdictional” statute; it is no more than a reason why a claim cannot succeed. Moreover, Jones did not need ERISA as a source of jurisdiction. Both the district court and the majority *416 treat ERISA as the only source of subject-matter jurisdiction for the counterclaim, and the state-law aspects of the counterclaim as pendent to the jurisdiction supplied by the ERISA counterclaim. Yet the counterclaim, and all of its theories of liability, was a compulsory counterclaim to the welfare fund’s suit. See Fed.R.Civ.P. 13(a). There is no need for an independent source of subject-matter jurisdiction over a compulsory counterclaim, and the rejection of the claim to the extent it was based on ERISA does not call for (or even permit) the termination of the counterclaim to the extent it was based on state law.

The district court rejected the state-law claims to the extent they concerned the union because the union had not been joined as a party. It dealt with the state-law claims against the plan on the ground that “they do not allege with adequate specificity an action against the trust fund.” This rationale supports dismissal of the entire counterclaim, whether founded on ERISA or on state law. The pertinent portion of the counterclaim says:

5. Plaintiffs [trustees of the welfare plan], acting in concert with the Union, falsely told Jones that only by signing a contract with the Union and by maintaining his Union membership as a “contractor-member”, could he continue his participation in the Rockford Welfare Fund.

This is not the particularity that Fed.R. Civ.P. 9(b) requires when a party alleges fraud. Jones omits who said what, when, to whom. It is scarcely possible to imagine a more generic allegation. So the counterclaim had to be dismissed.

Concerning attorneys’ fees, the district court said: “[w]ith the change of a few factual findings, the plaintiffs may have had a meritorious claim.” That is an understatement. Given Robbins v. Lynch, 836 F.2d 330 (7th Cir.1988), which was decided after the trial of this case, the welfare fund had a meritorious claim. Jones signed a contract with the fund promising to make payments on behalf of all of his employees. Under Lynch , the local union’s willingness to wink at noncompliance with the collective bargaining agreement does not excuse Jones’s disregard of his independent obligation to the trust. The fund elected not to appeal, and its willingness to accept a problematic judgment on the merits did not expose it to an award of fees.