*1191 MEMORANDUM OF OPINION
This lawsuit involves the right to restitution of various employers who made mistake contributions to the California Butchers’ Pension Trust Fund (“Fund”) on behalf of ineligible employees.
The Court’s Memorandum of Opinion filed on December 27, 1977,
The major substantive dispute between the parties concerns whether ERISA or California law determines defendants’ right to restitution. Section 514(a) of ERISA, 29 U.S.C. § 1144(a), states that except as provided in § 514(b), ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by ERISA. Subsection (a) goes on to specify that “This section shall take effect on January 1, 1975.”' Section 514(b)(1) explicitly provides that ERI-SA does not preempt “any cause of action which arose, or any act or omission which occurred, before January 1, 1975.” 1
As §§ 514(a), 514(b)(1), and 414(a), 29 U.S.C. § 1114(a) (effective date of fiduciary standards is January 1, 1975) make clear, Congress did not intend ERISA to apply retroactively to conduct which occurred before its effective date.
Morgan v. Laborers Pension Trust Fund,
There is some uncertainty under California law about when a cause of action for restitution for mistake accrues. The time of accrual is “the moment when the party owning [a cause of action] is entitled to begin and prosecute an action thereon.”
Van Hook v. Southern California Waiters Alliance,
The Court need not decide whether defendants’ cause of action for restitution under Cаlifornia law arose before January 1, 1975, because defendants’ mistaken contributions to the Fund were “act[s] * * * which occurred, before January 1, 1975” within the meaning of § 514(b)(1). The Court assumes for the purposes of this opinion that refusal to make restitution or failure to do so within a reasonable time after the payor’s demand is an element of a cause of action for restitution and that defendants’ cause of action therefore accrued in March, 1975, when plaintiffs refused to make as complete restitution as defendants demanded. 2
This lawsuit presents an example of the general case where the course of conduct on which a benefit plan’s potential liability is based straddles the effective date of ERISA. Plaintiffs’ refusal here to make complete voluntary restitution, an assumed element of a cause of action for restitution based on mistake, occurred after January 1, 1975, although all the other elements of defendants’ state claim wеre complete before that date. The fact that some of the relevant acts in this lawsuit occurred before January 1, 1975, does not necessarily mean that state law controls; if the occurrence before January 1, 1975, of any act or omission relevant to a cause of action, even if it constituted аn element of a multi-element cause of action, made state law controlling, the clause of § 514(b)(1) concerning the accrual of a cause of action would be superfluous. Although it is not at all clear what acts and omissions Congress referred to in § 514(b)(1), that clause was apparently intended to permit courts tо apply state law, even if the cause of action accrued after January 1, 1975, in cases where that result most fairly accommodates the interests of all affected parties — the beneficiaries, participants, and fiduciaries of and contributors to ERISA trusts. Courts must try to phase ERISA in as rapidly as possible without judging the conduct of affected persons by standards different from those which applied when they acted.
The Court concludes that the payment of money by mistake of law is an act within the meaning of § 514(b)(1) because three factors coalesce. .Those factors are (1) that the subsequent acts in satisfaction of the priоr demand rule which permit the institution of suit for restitution amount to an exhaustion of internal remedies, (2) that an alternative construction would impose severe hardships on the contributors, and (3) that the Court’s construction does not significantly undermine the purposes of ERISA.
First, the rule that the mistaken payor must make a demand on the pаyee for restitution and wait a reasonable time for response before instituting suit in effect constitutes a requirement of exhaustion of private remedies to give the parties an opportunity to settle their dispute without judicial intervention. The exhaustion requirement is not designed to affect the substantive rule of liability. The stаte of mind which § 1578 of the California Civil Code defines as a mistake of law exists at the time the payment whose restitution the payor seeks is made, which in defendants’ case happened before January 1, 1975. The problem concerning the applicable law arose in this case only because the period during which thе trustees had' the employers’ claims under submission included the effective date of ERISA. It would be anomalous if the trustees were required to apply pre-ERISA standards to claims submitted and decided before January 1, 1975, and if the applicable standards then changed overnight for claims under submission even *1193 though the conduct to which those new standards were applied was unchanged and completed. Although technically the cause of action may not accrue until the private remedies are exhausted, compliance with the exhaustion requirement should not affect the substantive liability. The purpose of § 514(b)(1) is to ensure that the conduct of trustеes, beneficiaries, and contributors is judged by the standards existing at the time of the conduct, and that purpose is furthered by applying state law to acts occurring before January 1, 1975, if the additional acts necessary to complete a cause of action under state law must be performed in order to satisfy a requirеment of exhaustion of private remedies.
Second, the Court’s construction of § 514(b)(1) avoids a serious hardship for individuals who make payments to pension funds by mistake of law before January 1, 1975, but who cannot sue for restitution until after that date.
Section 403(c) prohibits fiduciaries of benefit plans from making restitution of contributions paid by mistake of law after the effective date of ERISA. The inclusion of restitution for mistake of fact among the exceptions to the general rule of § 403(c)(1) prohibiting payment of trust funds to employers implies that restitution to employers would otherwise be prohibited. Under the principle of construction “expressio uni-us est exclusio alterius,” the failure to provide for restitution for mistake of law indicates that Congress intended to ban restitution for that reason.
Cf. National Railroad Passenger Corp. v. National Ass’n of Railroad Passengers,
Defendants argue that Congress could not have intended to prohibit restitution based on mistake of law, a result which they contend is unfair, out of step with current legal developments, and unnecessary to carry out the purposes of § 403(c). It is unquestionably true that this interpretation of § 403(c) places a heavy burden on employers to make sure that emplоyees are eligible for benefits before they make contributions to benefit plans on their behalf. It nevertheless seems clear that Congress intended this harsh rule, and only Congress can change it.
By prohibiting restitution of money paid by mistake of law, § 403(c) terminates the right under California law to restitution under those circumstances. See Cal.Civ.Code §§ 1689(b)(1) and 1692. When a legislature eliminates the remedy for the violation of a right and thereby eliminates the right itself, it must give the possessors of that right a reasonable opportunity to exercise it before they lose it.
Central Missouri Telephone Co. v. Conwell,
The Court emphasizes that its analysis of the hardship on employers does not involve any question of the constitutional validity of a retroactive change in a substantive right to restitution. The Court therefore need not consider abstruse questions relevant to the constitutionаl issue, such as whether an employer’s right to restitution is “vested” at the time of the mistaken payment or only when the cause of action accrues. See generally 2 Sutherland, Statutory Construction § 41.06 (Sands ed. 1973). Even if the unfairness to employers of barring causes of action for restitution based on mistakes of law made before January 1, 1975, is not severе enough to make § 514(b)(1) unconstitutional, it is severe enough to require the Court to adopt an alternative construction of which § 514(b)(1) is reasonably susceptible and which avoids serious constitutional questions.
The third factor that supports the Court’s construction of § 514(b)(1) is that it does not undercut the purposes of ERISA. The reason why § 403(c)(2)(A) prоhibits restitution based on mistake of law is to encourage employers ,to determine the eligibility of the individuals on whose behalf the contribution is made before the payment to the Fund is made. That purpose could no longer be served concerning payments already made before the effective date of § 403(c)(2)(A). ERISA’s intent to guarantee the financial soundness of pension plans would also not be significantly impaired. Although restitution would diminish the assets of the Fund, it would also reduce the number of beneficiaries, and the contributions on behalf of eligible employees should be adequate to provide for the payments of their benefits.
For these reasоns, the Court concludes that ERISA does not govern an employer’s right to restitution for payments made to the Fund before January 1, 1975, by mistake of law. Because the parties agree that no federal law other than ERI-SA, including §§ 301(a) and 302(c)(5) of the Labor Management Relations Act of 1947, 29 U.S.C. §§ 185(a) and 186(c)(5), define the trustees’ duties under these circumstances, the right to restitution of defendants and members of the defendant class who made contributions to the Fund by mistake of law before January 1, 1975, is governed by California law.
Some members of the defendant class apparently made their mistaken payments *1195 to the Fund after January 1, 1975. Their claim to restitution is governed by ERISA since their stаte cause of action did not accrue until after January 1,1975, and since their payments were made after that date. ERISA’s prohibition of the return of contributions to employers who paid by mistake of law, see p. 1193, supra, requires the Court to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) the claims of these employers for failure to state a claim upon which relief may be granted.
Pursuant to the understanding reached in open court, the parties are directed to prepare an appropriate decree in accordance with the decision reached herein and submit it to the Court for execution within sixty (60) days of the date of this opinion.
Notes
. Section 514(a) and (b)(1) provides in full:
“(a) Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This sectiоn shall take effect on January 1, 1975.
“(b)(1) This section shall not apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975.”
. Defendants make no claim that plaintiffs could have processed the refund applications faster than they did.
. The result would be the same if § 403(c)(2)(A) is interpreted, as defendants propose, only to change the statute of limitations for actions for restitution based on mistakes of law. Under that interpretation, § 403(c)(2)(A) alters the previous statute of limitations in two significant ways: it shortens the period from three years to one, and it makes the period run from the dаte of payment instead of the date of discovery. Compare § 403(c)(2)(A) with Cal. Civ.Proc.Code § 338(4). As a result of this change and given the 120-day grace period between the date of enactment and the effective .date of ERISA, any employer who made a mistaken contribution to the Fund before January 1, 1974, would be faced with a one-year stаtute of limitations two thirds of which in effect had run instead of a three-year statute which had not yet begun to run, and the employer would have to investigate all his previous contributions and make a demand on the Fund all within the 120-day period.
A new and reduced statute of limitations can be constitutionally applied to accrued сauses of action provided it gives affected parties a reasonable time to avail themselves of the remedy before the statute takes effect.
Central Missouri Telephone Co. v. Conweli, supra,