Agreement Not Signed by Authorized Company Official Does Not Obligate Contractor to Make Benefit Fund Contributions
Benefit funds cannot collect unpaid contributions from a subcontractor because the individual who filled out the contract requiring the contributions did not have authority to bind the company, ruled the U.S. Circuit Court for the Sixth Circuit (KY, MI, OH, TN).
Skillcraft Systems of Toledo, a small, family-run specialty contractor, was working on a project for a contractor that had a collective bargaining agreement (CBA) with the Bricklayers requiring that subcontractors become bound by the CBA. The Bricklayers sent an assent form to Skillcraft for execution. Gail Mitchell, who serves as a secretary, bookkeeper, and/or office manager for Skillcraft, filled out and returned the form, including writing in the names of Skillcraft’s president and vice president on a line labeled “authorized representative and tile.” Although the form contained no signature line for a company representative, and no company representative signed the form, the union believed that it had a binding contract with Skillcraft. When Skillcraft failed to remit payments to the union benefit funds, the funds’ trustees sued the company.
The court denied the trustees’ claim, finding that Skillcraft did not have a binding contract with the union, because Mitchell did not have apparent authority to bind the company. The court has previously held that apparent authority (1) exists when one person manifests that another person is his agent, regardless of whether an actual agency relationship has been formed, and (2) exists only to the extent that it is reasonable for the third person dealing with the agent to believe that agent is authorized. The trustees here failed to satisfy the first part of the test, because Skillcraft had not explicitly or implicitly manifested that Mitchell was its agent for executing a binding CBA. They also failed to satisfy the second part, because there was no evidence that they even knew Mitchell had completed the form before the lawsuit began.
The court further found that the trustees could not rely on the fact that the form was filled out and returned “in the normal course of business.” Noting that no one at the union discussed the CBA with anyone at Skillcraft and that the form was confusing, the court commented that the trustees’ reliance argument would have been stronger had the form contained a signature line for a company official and had Mitchell filled in the line.
The court also rejected the trustees’ argument that Skillcraft should be bound by the CBA under the doctrine of promissory estoppel. The elements of promissory estoppel are: (1) conduct or language amounting to a representation of material facts; (2) the party to be estopped was aware of the true facts; (3) the party to be estopped intended that the representation be acted on or the party asserting the estoppel had a right to believe it so intended; (4) the party asserting the estoppel was unaware of the true facts; and (5) the party asserting the estoppel detrimentally and justifiably relied on the representation. The trustees failed to establish the first two elements because Mitchell, not Skillcraft, committed the conduct and was aware of the true facts. They also failed to establish the third element, according to the court.
Trustees of the Ohio Bricklayers Pension Fund v. Skillcraft Systems of Toledo, Inc., Case No. 02-4328 (6th Cir., 5/13/04).
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