Collection Actions -- Airconditioning v. J.R.D. Mechanical

[Guest J D DeBacker]

I know the case is pretty recent (December 1999)and I know it was discussed at the IF collection policy seminar this month (which I didn't attend), but has any one had any experience arguing on behalf of funds in collection actions using Airconditioning and Refrigeration Industry H&W FUnd v. J.R.D. Mechanical (99 F. Supp. 2d 1115) -- this US District Court case provides that a corporate officer breached his fiduciary duties under ERISA by using employer contributions to pay creditors and was found personally liable. Wow! (In the past, I've relied on the DOL regs regarding employee wage deductions, but never tried to expand it to employer contributions). Any thoughts?

[KJohnson]

I haven't read the decision, but you may want to look at the following:

http://www.benefitslink.com/reish/articles...s/blurline.html

This argument has been around for a while. I always thought the key to making this work is to get the employer to agree through the CBA (or through the trust document that is incorporated by reference into the CBA) that "due and owing" contribution are plan assets. I believe that HRE Funds were using this theory in New York in the mid to late 1990s, and the UMWA Funds have used it going back to the early 1990's (Connors v. Paybra--I believe in 1992 or so). Once these delinquent conributions are plan assets, anyone having discretionary control would be a fiduciary.....

Absent such language in your CBA I think that you are right to look to the plan asset regs and that only things such as elective deferrals into a 401(k) Plan and employee contributions to a welfare plan would be subject to this theory after they are "deemed" to be plan assets under the reg.

[KJohnson]

Just read the decision and it says you do not need "due and owing languge" for the delinquent contributions to be plan assets. I think this is a bit of a strech because it basically places per se personal liability on corporate officers for delinquent contributions. Who knows where this will go--but it may go the same way as the "3(5)" line of cases in the mid-80s that tried to impose personal liability based on ERISA's defintion of "employer". After kicking around in the District Courts, the Circuits rejected this.