Chicago Regional Council of Carpenters Pension Fund et al v. Ruane Construction, Inc.

Filing 92

MEMORANDUM Opinion and Order signed by the Honorable Andrea R. Wood on 8/17/2017. Mailed notice(ef, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CHICAGO REGIONAL COUNCIL OF
CARPENTERS PENSION FUND, et al.,
Plaintiffs,
v.
RUANE CONSTRUCTION, INC.,
Defendant.

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No. 12-cv-09335
Judge Andrea R. Wood

MEMORANDUM OPINION AND ORDER
Plaintiffs Chicago Regional Council of Carpenters Pension Fund, Chicago Regional
Council of Carpenters Supplemental Retirement Fund, Chicago Regional Council of Carpenters
Welfare Fund, and Chicago Regional Council of Carpenters Apprentice Training Fund
(collectively, the “Funds”) are employee pension and welfare plans that receive contributions
pursuant to collective bargaining agreements entered into between the Chicago Regional Council
of Carpenters (“CRCC”) and employers, contractors, and subcontractors. This case concerns
claims that Defendant Ruane Construction, Inc. failed to comply with its obligations under its
collective bargaining agreement with the CRCC to properly report and pay fringe benefit
contributions for certain workers performing carpentry work. The Funds sued Ruane
Construction pursuant to the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.
§§ 1131 et seq., and the Taft–Hartley Act, 29 U.S.C. §§ 141 et seq., alleging that Ruane
Construction breached the collective bargaining agreement by underpaying contributions owed
to the Funds for hours worked by employees and subcontractors. An audit was subsequently
conducted. After the parties worked together to resolve most of their disagreements regarding
the audit results, on August 8, 2016, the Court conducted a bench trial to determine whether

Ruane Construction still owes certain contributions to the Funds. For the reasons detailed below,
the Court finds that Ruane Construction owes $1,858.19 with respect to one contractor.
BACKGROUND
In advance of the bench trial, the parties submitted a Joint Statement of Stipulated Facts
for Trial (Dkt. No. 78), as well as copies of the CBA (Ex. B to Pls.’ Position Stmt., Dkt. No. 802) and the Memorandum of Agreement between CRCC and the Residential Construction
Employers’ Council (Ex. C to Pls.’ Position Stmt., Dkt. No. 80-2). The parties also submitted
position statements on the issues to be decided (Dkt. Nos. 80, 81). As the material facts were not
disputed, no witnesses testified at trial and instead the parties agreed that the case would be
decided based on the application of the governing law to the stipulated facts. Those facts include
the following.
Ruane Construction entered into an agreement to be bound by a collective bargaining
agreement (“CBA”) that requires it to pay certain monthly fringe benefit contributions to the
Funds for each hour of carpentry1 work that it contracted out. (Joint Stmt. Stip. Facts for Trial
¶ 5, Dkt. No. 78.) Specifically, Articles 12.1, 13.1, and 14.1 of the CBA state in relevant part that
“each EMPLOYER shall pay into the [relevant Funds]. . . an amount per hour for each hour
worked for an EMPLOYER during each calendar month by all of its Employees who are
covered by this Agreement.” (Id. ¶ 6.) Article 3.4 further provides, in relevant part, that “[a]ny
EMPLOYER who sublets any [carpentry] work . . . shall assume the obligations of any
subcontractor to the extent of Carpenter labor employed on work under contract with the
EMPLOYER for prompt payment of Employee’s Wages, Health and Welfare, Pension and
Apprentice Training Contributions . . . .” (Id. ¶ 7.) Article 3.2 prohibits an employer from

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Section 1.1 of the CBA provides a detailed explanation of the kind of work covered by the CBA. As that
issue is not disputed, for convenience the Court refers to the covered work here simply as carpentry work.

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contracting or subcontracting any carpentry work to any entity not covered by the CBA. (Ex. B
to Pls.’ Position Stmt. at 7 of 23, Dkt. No. 80-2.) If the employer contracts or subcontracts work
to any person who is not a signatory to the CBA, then under Article 3.5 the employer must
require that the subcontractor be bound by the CBA or the employer must maintain daily records
of the subcontractor’s jobsite hours and remit the appropriate contributions to the Funds. (Id.)
Mark Ruane is the president and sole shareholder of Ruane Construction. (Joint Stmt.
Stip. Facts for Trial ¶ 8, Dkt. No. 78.) Ruane has another company called Ruane Construction
Services, Inc. (“Ruane Services”), which owns the trucks used for Ruane Construction’s
business. (Id. ¶ 9.) During the audit period, Ruane was building his own family residence for in
Naperville, Illinois. (Id. ¶ 12.) He oversaw the construction himself and did not contract with a
homebuilder to act as a general contractor. (Id. ¶ 15.) Ruane contracted with a number of
different companies and individuals to perform various aspects of the construction. (Id. ¶ 16.) He
did not contract with Ruane Construction or Ruane Services but, on occasion, he used checks
drawn on Ruane Construction accounts to pay for the work done on his residence. (Id. ¶¶ 17–
18.) Similarly, although Ruane Construction and Ruane Services had separate checking
accounts, sometimes Ruane Construction’s expenses were paid using checks drawn on Ruane
Services’s account. (Id. ¶¶ 10–11.)
After the Funds sued Ruane Construction and the audit was completed, the Funds
initially claimed that Ruane Construction owed $3,773,882.30 in unpaid contributions. Ruane
Construction challenged the audit findings and the Funds revised their claimed amount of unpaid
contributions to $39,485.60. Ruane Construction subsequently agreed that $19,103.02 of the
claimed unpaid contributions related to six of its employees and the parties resolved an
additional claim to contributions with respect to one contractor in the amount of $1,205.08. But

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Ruane Construction disputes that it owes the remaining $19,177.50. This disputed amount relates
to work performed by individuals Len Beatty, Jesus Cahue, Marcos Rivera, and Don Daly, and
companies Schneider Custom Stairs and Soffit & Siding Master. All of these contractors were
paid by means of checks from Ruane Construction. (Id. ¶¶ 19, 25, 36, 45, 54, 62.) They worked
on 3 different projects:
(1)

Beatty, Cahue, Rivera, and Schneider Custom Stairs all did work on the
Ruane residence. (Id. ¶¶ 21, 27, 29, 38, 47.) According to Ruane, the work
performed by Beatty, Cahue, Rivera, and Schneider Custom Stairs was
performed at Ruane’s own direction and on his behalf, individually, and
not at the direction of Ruane Construction or on its behalf. (Id. ¶¶ 24, 33,
42, 51.)

(2)

Soffit & Siding Master did work to repair a neighboring house damaged
by Ruane Construction. (Id. ¶ 57.) The homebuilder for whom Ruane
Construction was working arranged for Soffit & Siding Master to do the
work; Ruane Construction did not direct that work, but merely paid Soffit
& Siding Master’s costs. (Id. ¶¶ 57, 58.) Indeed, Ruane Construction has
never contracted out any of its work on any of its projects to Soffit &
Siding Master. (Id. ¶ 61.)

(3)

Daly performed work for Ruane Construction for the build out of an
office. (Id. ¶ 64.) That office was to be used by Ruane Construction itself
and was not constructed for a separate customer. (Id.)

Ruane Construction did not report any hours worked by these individuals and companies
to the Funds and did not make any fringe benefit contribution payments in connection with their
work. (Id. ¶¶ 20, 26, 37, 46, 55, 63.) There was no written contract, subcontract, or purchase
order between Ruane or Ruane Construction and any of these individuals and companies. (Id.
¶¶ 22, 23, 31, 32, 40, 41, 49, 50, 59, 60, 66, 67.) Beatty, Cahue, Rivera, and Daly were never on
Ruane Construction’s payroll, and Ruane Construction never issued a W-2 or 1099 form to any
of these individuals. (Id. ¶¶ 34, 35, 43, 44, 52, 53, 69, 70.)

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DISCUSSION
Based upon the Court’s consideration of the governing law, the stipulated facts, and the
documentary evidence submitted by the parties, the Court enters the following conclusions of
law and findings of fact pursuant to Federal Rule of Civil Procedure 52.
I.

Conclusions of Law

The Court has federal question jurisdiction over this matter as it arises under federal
statutes—namely, ERISA and the Taft–Hartley Act. See 28 U.S.C. § 1331. Under ERISA, plan
beneficiaries may bring civil actions “[t]o recover benefits due to [them] under the terms of [the]
plan, to enforce [their] rights under the terms of the plan, or to clarify [their] rights to future
benefits under the terms of the plan.” 29 U.S.C § 1132(a)(1)(B). When disputes arise between
employers and labor unions pursuant to a collective bargaining agreement, the Taft–Hartley Act
grants federal courts jurisdiction to resolve them. 29 U.S.C. § 185(c). The parties agree that the
CBA is the relevant plan document for purposes of ERISA and governs whether Ruane
Construction is required to pay contributions for each of the individuals and entities that remain
at issue. Specifically, under the language of the CBA, Ruane Construction owes contributions
for those workers if they were employed by Ruane Construction or if Ruane Construction sublet
any work to them. In light of this, the Court thus considers the stipulated facts to determine
whether Ruane Construction owes contributions for the contested contractors.
II.

Findings of Fact

The parties agree that Ruane Construction did not employ any of the six contractors, so
the principal question before the Court is whether Ruane Construction sublet work to them. The
six individuals and corporations for which there is a dispute fall into three categories: (1) Beatty,
Cahue, Rivera, and Schneider Custom Stairs, who worked on the Ruane residence; (2) Soffit &

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Siding Master, who repaired damage done by Ruane Construction to a third party’s home during
a home-building project; and (3) Daly, who worked on a Ruane Construction office build out.
The Court considers them in turn.
A.

Work on the Ruane Residence 

Len Beatty, Jesus Cahue, Marcos Rivera, and Schneider Custom Stairs all worked on the
Ruane residence. The Court determines that, based on the record, Ruane Construction did not
sublet any work to them within the meaning of the CBA. Ruane Construction did not have any
written contract, subcontract, or purchase order with any of the workers. The only evidence that
might suggest that Ruane Construction sublet work to them is the checks from Ruane
Construction. But Ruane Construction has explained that Ruane failed to abide by corporate
formalities and paid for services rendered to him—as an individual—with funds from Ruane
Construction’s bank account. In the absence of any other evidence, the Court finds Ruane
Construction’s explanation convincing and concludes that Ruane contracted with and directed
these workers to perform work for his own benefit, namely to work on his own personal
residence. Ruane used Ruane Construction checks, and perhaps Ruane Construction funds, to
pay for their work, but that does not transform the workers into Ruane Construction
subcontractors.
Ruane’s failure to abide by corporate formalities might or might not have been an
innocent mistake. The Funds argue that Ruane and Ruane Construction made such payments not
by accident but instead for tax benefits and that they should not be able to reap such benefits
without paying their contribution obligations. This argument is unconvincing. If Ruane and his
company’s failure to abide by corporate formalities was intentional to achieve favorable (albiet
undeserved) tax implications, that is a matter for the tax authorities and for which there are other

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legal remedies. It is not a reason to give the Funds a windfall in contributions if Ruane
Construction did not actually subcontract with the workers.
As plaintiffs, the Funds bear the burden of proof for their claims. 21 Charles Alan Wright
& Kenneth W. Graham, Federal Practice & Procedure: Evidence § 5122 (3rd ed., 2001 Supp.).
That means that the Funds must show by a preponderance of the evidence that Ruane
Construction subcontracted with the workers. See Migliorisi v. Walgreens Disability Benefits
Plan, 2008 WL 904883, at *12 (N.D. Ill. Mar. 31, 2008) (stating that party seeking to enforce
benefits under a plan bears burden of proving entitlement by a preponderance of the evidence)
(citing Ruttenberg v. U.S. Life Ins. Co., 413 F.3d 652, 663 (7th Cir. 2005)); see also Grove v.
Johnson Controls, Inc., 176 F. Supp. 3d 455, 467 (M.D. Pa. 2016) (applying preponderance
standard to case concerning denial of welfare benefits between employer and labor union). The
Funds’ case here is thin: all that the Funds have done is point to payments that were made by the
wrong entity. Indeed, the Funds conceded at trial that had Ruane made the check payments from
his own bank account, they would have no claims. In light of the evidence that Ruane and his
companies did not vigilantly allocate payments from the correct entities and Ruane’s assertion
that he contracted with and directed these workers for his own benefit, the Court concludes that
the Funds have not carried their burden of showing that Ruane Construction owes contributions
for the work on Ruane’s residence.
B.

Repair of Damage to Third Party’s Home on Ruane Construction Project

Soffit & Siding Master did work to repair a neighboring house that had been damaged by
Ruane Construction. (Joint Stmt. Stip. Facts for Trial ¶ 57, Dkt. No. 78.) Just as before, Ruane
Construction only owes contributions for Soffit & Siding Master’s work if Ruane Construction
sublet any work to Soffit & Siding Master.

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The stipulated facts make clear that Ruane Construction neither employed nor sublet
work on this project to Soffit & Siding Master. Ruane Construction caused damage to a
neighboring house and thereafter Ruane Construction’s client—the homebuilder for whom
Ruane Construction was working—arranged to fix the damage using Soffit & Siding Master’s
services.2 (Id. ¶¶ 57, 58, 61.) Ruane Construction did not employ or contract with Soffit & Siding
Master. (Id.) Rather, the homebuilder who arranged for the work to be done demanded that
Ruane Construction pay for the damage and so Ruane Construction agreed and remitted payment
to Soffit & Siding Master. (Id. ¶ 57.) This does not fall under the purview of the CBA, and thus
Ruane Construction does not owe any contributions for the work performed by Soffit & Siding
Master.
C.

Ruane Construction’s Office Build Out

With respect to Daly, Ruane Construction admits that it contracted with him to perform
work for its office build out. At trial, the parties stipulated that Daly was not a signatory to the
CBA. Read together, Articles 3.2 and 3.5 of the CBA prohibit employers from contracting with
non-signatories of the CBA for any work within the CBA’s purview unless either (1) the
employer requires the worker to be bound by all provisions of the CBA or (2) the employer
maintains daily records of the worker’s jobsite hours and makes corresponding contributions.
(Ex. B to Pls.’ Position Stmt. at 7 of 23, Dkt. No. 80-2.) At trial, Ruane Construction argued that
under the CBA it was entitled to hire non-signatories to the CBA to do carpentry work for
itself—such as for building out its own office space—without making contributions. The Court
has reviewed the CBA and sees no such exception, nor has Ruane Construction pointed to any

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The Funds mistakenly contend that Ruane Construction is arguing that it does not owe contributions for
Soffit & Siding Master’s work because Ruane was directing payment to Soffit & Siding Master. (Pl.’s
Position Stmt. at 6, Dkt. No. 80.) But that is Ruane Construction’s argument with respect to the work
done on Ruane’s residence, not with respect to Soffit & Siding’s work.

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language in the CBA creating such an exception. Thus, the Court finds that Ruane Construction
violated the CBA by not keeping daily records of Daly’s jobsite hours and remitting
contributions to the Funds accordingly.
Based on the fact that Ruane Construction paid Daly $2,400, the auditor determined that
Daly performed 76.5 hours of work and that Ruane Construction owed $1,858.19 in contribution
payments. Ruane Construction does not argue otherwise. Rather Ruane Construction argues that
Daly was paid for both labor and materials and because the Funds cannot establish how much of
the $2,400 was labor, the auditor’s contribution calculation is without justification. (Def.’s Trial
Memo. at 7–8, Dkt. No. 81.) This argument fails. Article 3.5 of the CBA required that Ruane
Construction keep daily records of Daly’s jobsite hours. Ruane Construction failed to do so and
indeed failed to present any evidence on the breakdown of the $2,400 payment. Thus, in the
absence of any evidence rebutting the auditor’s findings, the Court will accept the auditor’s
calculation that Ruane Construction owes $1,858.19 in delinquent contributions. See, e.g.,
Illinois Conference of Teamsters & Employers Welfare Fund v. Steve Gilbert Trucking, 71 F.3d
1361, 1367 (7th Cir. 1995) (stating, in the context of summary judgment, that if trust fund has
proved that employer is liable for delinquent contributions and that employer has failed to keep
adequate records, burden shifts to employer to come forward with evidence that fund's
calculations of damages are not accurate) (citing Brick Masons Pension Trust v. Indus. Fence &
Supply, 839 F.2d 1333, 1338–39 (9th Cir. 1988); Combs v. King, 764 F.2d 818, 822 (11th Cir.
1985)).
CONCLUSION
For the foregoing reasons, the Court determines that Ruane Construction is not liable for
any contributions relating to the work performed by Beatty, Cahue, Rivera, Schneider Custom

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Stairs, and Soffit & Siding Master. Ruane Construction is liable, however, for contribution
payments for the work performed by Daly in the amount of $1,858.19. In addition, ERISA and
the trust agreements provide for, inter alia, liquidated damages, interest, and reasonable
attorney’s fees. The Court will set a schedule for determination of these additional damages and
fees at a later date.
ENTERED:

Dated: August 17, 2017

__________________________
Andrea R. Wood
United States District Judge

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