An employer is not entitled to restitution of $548,257 it mistakenly overpaid
to multiemployer health and pension funds, the U.S. Court of Appeals for the
Eighth Circuit ruled
Nov. 23 (Greater St. Louis Construction Laborers
Welfare Fund v. Park-Mark Inc., 8th Cir., No. 11-3746, 11/23/12).
The employer mistakenly paid the contributions to the funds for work
performed by its employees on projects that were outside the jurisdiction of the
applicable collective bargaining agreement. The employer ceased making any
CBA-required contributions after the funds determined that the employer was not
entitled to credit for the overpayments.
Judge Bobby E. Shepherd, writing for the court, determined that the employer
demonstrated that it mistakenly made the overpayments but failed to demonstrate
that restitution was equitable.
Park-Mark Inc. executed a CBA in October 2001 with the Eastern Missouri
Laborers' District Council that required it to make monthly contributions for
hours worked by covered employees to the Employee Retirement Income Security
Act-governed funds. An audit conducted by the funds in February 2010 determined
that Park-Mark overpaid $548,257 between April 2004 and September 2009.
Park-Mark unilaterally decided to withhold contributions to the funds after
the funds refused to credit Park-Mark with the overpayments. Park-Mark asserted
that ERISA Section 403 permitted it to offset the overpayments because they were
made “by a mistake of fact or law” and that ERISA did “not prohibit the return”
of the overpayment within six months after the plan administrator determined
that the contribution was made by mistake.
The funds filed a lawsuit in the U.S. District Court for the Eastern District
of Missouri in November 2010, seeking to recover unpaid and untimely
contributions under ERISA Section 502(g)(2). Park-Mark argued that a setoff
should be applied to any recovery the funds received and later included a
counterclaim seeking restitution. The funds later moved for summary
In November 2011, the district court recognized that a federal common-law
cause of action exists for overpayments mistakenly made under ERISA but
determined that “equity did not demand a refund” of Park-Mark's overpayment (213
PBD, 11/3/11; 38 BPR 2062, 11/8/11; 52 EBC 2615). Park-Mark appealed.
Park-Mark argued that the district court incorrectly dismissed its setoff
defense and failed to consider its restitution counterclaim. The appeals court
determined that the same legal and factual analysis applied to both arguments
and considered them together.
The appeals court agreed that ERISA Section 403(c)(2)(A)(ii) permitted
reimbursement of overpaid contributions “within 6 months after the plan
administrator determines that the contribution was made by such a mistake” and
that an employer can seek restitution of erroneous payments to an ERISA plan.
“Park-Mark properly asserted the first prerequisite in asserting a federal
common-law claim for restitution by alleging it made a mistake of law or fact in
contributing to the Funds,” the appeals court said.
According to the appeals court, “a refund is not automatic,” even though
Park-Mark established that overpayments were made. Courts within the Eighth
Circuit apply several factors before determining whether restitution of overpaid
contributions to ERISA plans is equitable, the appeals court said.
The court explained that restitution was inequitable if Park-Mark obtained a
benefit from the overpayments and now sought repayment. The fund argued that
“Park-Mark employees received insurance-coverage benefits and pension benefits
reflecting the greater overpayments” and that the fund would have to “deduct
pension credits from Park-Mark's employees that were based on the overpayments”
if restitution were ordered. According to the appeals court, “Park-Mark
presented insufficient evidence to refute the Funds' proof that refunding the
overpayments would adversely affect Park-Mark's employees.”
Additionally, Park-Mark unduly delayed seeking reimbursement because
restitution would require the funds to “unwind six years of payments by trying
to calculate whether Park-Mark's employees truly received benefits from the
payments,” the appeals court said. The appeals court also determined that
Park-Mark failed to offer evidence that the funds were unjustly enriched by the
overpayments, which weighed against Park-Mark's attempt to seek restitution.
Finally, the appeals court disagreed with Park-Mark's contention that the
funds' decision to retain the overpayments was arbitrary and capricious. The
funds retained the overpayments “after investigating the matter and determining
that refunding the overpayments would negatively impact the pension credits
Park-Mark's employees had accrued,” which was not an arbitrary and capricious
decision, the appeals court said.
The appeals court concluded that equity did not favor refunding Park-Mark's
overpayments and affirmed the district court decision.
Judges Kermit E. Bye and Raymond W. Gruender joined in the decision.
The funds were represented by Janine M. Martin of Hammond & Shinners, St.
Louis. Park-Mark was represented by Kristen N. James of Bearden &
Breckenridge, St. Louis.
The full text of the opinion is at http://op.bna.com/pen.nsf/r?Open=mmaa-92bqas.