Pipe Fitters' Retirement Fund, Local 597 et al v. J & B Mechanical, Inc.
Filing
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MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 8/11/2018: For the reasons stated in the accompanying Memorandum Opinion and Order, plaintiffs are entitled to summary judgment regarding J & B's liability for the undi sputed $2,182.44 in liquidated damages as well as $349,440.01 in unpaid contributions, $34,944.00 in liquidated damages, and $101,084.31 in interest. The Court denies plaintiffs' motion for summary judgment with regard to the undocumented expense assessment and defers ruling on attorney's fees and costs until the conclusion of the case [dkt. no. 24]. The case is set for a status hearing on August 20, 2018 at 9:30 a.m. (mk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PIPE FITTER'S RETIREMENT FUND,
LOCAL 597, et al.
Plaintiffs,
vs.
J & B MECHANICAL, INC.,
Defendant.
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Case No. 17 C 4249
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Several union-operated membership funds audited the books of an employer that
was party to a collective bargaining agreement. The funds allege the audit revealed
that the employer failed to make required contributions to the funds. The plaintiffs sued
under the Employment Retirement Income Security Act (ERISA), 29 U.S.C. § 1132, and
they have moved for summary judgment.
Background
J & B Mechanical, Inc., in a collective bargaining agreement it signed with its
unionized employees, agreed to contribute to several union funds. 1 The agreement
provides that the funds may audit the employer's books to determine whether the
employer's contributions meet its obligations under the agreement. After J & B failed to
1
The entities are the Pipe Fitters' Retirement, Welfare, and Training Funds, Local 597,
the Contracting Industry Improvement Trust, the Pipe Fitters' Association, Local 597
U.A., the Pipe Fitters' Individual Account and 401(k) Plan, and the Pipe Fitting Council
of Greater Chicago.
make contributions in March through September 2017, 2 the funds audited the
company's records—or, at least, attempted an audit. J & B did not provide many
documents; the auditor noted that the audit took an "extraordinary amount of time," as J
& B did not provide "sufficient documentation." D.E. 26, Pls.' Ex. 8 at 10 (audit report).
The Court later granted a motion to compel filed by the plaintiffs, but J & B still failed to
turn over requested documents. D.E. 19 (Dec. 13, 2017 minute entry granting motion to
compel).
An employer is liable to provide contributions to union funds only for employees
engaged in work covered under that union's collective bargaining agreement. The
funds' auditor found that J & B employed five "unverified" individuals the nature of
whose work was not clear from the documentation provided. The auditor assumed the
employees' labor was covered work and calculated $349,440.01 in unpaid contributions
for these employees. The Court will refer to this as the "unverified employee
assessment."
The auditor also found that J & B made numerous disbursements that were not
documented. For instance, the auditor found a February 11, 2014 expense marked
"American Express" for $504.79, but J & B did not provide a receipt or an invoice. The
auditor assumed it was a payment to a subcontractor, which would mean that, per the
collective bargaining agreement, J & B must make contributions into the union funds.
The auditor divided the amount by the "journeyman rate of pay," which yielded 10.97
hours of work. The auditor then multiplied those hours by the per-hour contribution rate
2
J & B later paid the missing 2017 contributions, but the liquidated damages that the
collective bargaining agreement provides were left unpaid. J & B does not dispute it
owes this payment.
2
established in the collective bargaining agreement. After applying this process for all
similar expenses, the total amount of contributions owed was $637,095.22. The Court
will refer to this as the "undocumented expense assessment."
Discussion
The plaintiffs have moved for summary judgment. On a motion for summary
judgment, the Court must "consider the factual record in the light most favorable to [the
non-moving party] and give [that party] the benefit of all conflicts in the evidence and
reasonable inferences that may be drawn from the evidence." Fish v. GreatBanc Trust
Co., 749 F.3d 671, 674 (7th Cir. 2014).
ERISA requires "[e]very employer who is obligated to make contributions to a
multiemployer plan under the terms of the plan or under the terms of a collectively
bargained agreement" to "make such contributions in accordance with the terms and
conditions of such plan or such agreement." 29 U.S.C. § 1145. Membership plans, like
the plaintiffs, may enforce the terms of an agreement that establish the plan. Cent.
States, Se. & Sw. Areas Pension Fund v. Gerber Truck Serv., Inc., 870 F.2d 1148, 1149
(7th Cir. 1989). If the plaintiffs prevail, "the appropriate remedy is the delinquent
contributions, interest, attorneys fees, and amount equal to the greater of interest
(again) or liquidated damages." Central States, Se. & Sw. Areas Pension Fund v.
Transp., Inc., 183 F.3d 623, 629 (7th Cir. 1999); 29 U.S.C. § 1132(g)(2).
J & B concedes that it owes $2,182.44 in liquidated damages for the late
contributions between March and September 2017, as well as attorney's fees and costs
related to those contributions. Def.'s Mem. in Opp. to Mot. for Summ. J. at 2. The Court
grants summary judgment on these liquidated damages but withholds summary
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judgment on fees and costs, for reasons discussed below.
J & B disputes the remainder of the auditor's findings: it contends it does not
owe $349,440.01 in unverified employee assessments or $637,095.22 in
undocumented expense assessments. In the typical ERISA case, J & B would
introduce evidence demonstrating that these expenses did not correspond to labor
costs that fall within the collective bargaining agreement. J & B hasn't introduced any
rebutting evidence, however. It contends that its evidence exists only on a
malfunctioning hard drive and asks the Court to stay the motion for summary judgment
until it can present the evidence. See Fed. R. Civ. P. 56(d) ("If a nonmovant shows by
affidavit or declaration that, for specified reasons, it cannot present facts essential to
justify its opposition, the court may . . . defer considering the motion or deny it."). But
staying a motion for summary judgment is inappropriate where, as here, the party has
not described what the additional discovery would yield and was dilatory throughout
discovery. United States v. All Assets & Equip. of W. Side Bldg. Corp., 58 F.3d 1181,
1190-91 (7th Cir. 1995). Indeed, in this case, J & B has said nothing to suggest that
evidence from the hard drive will ever be available.
In the absence of any rebutting evidence from J & B, are the plaintiffs entitled to
summary judgment on the unverified employee assessment and the undocumented
expense assessment? The Court concludes that the answer is yes for the first
assessment but no for the second. The reason turns on the operation of an evidentiary
presumption.
ERISA obliges benefit plan fiduciaries like the plaintiffs to "hold[] employers to the
full and prompt fulfillment of their contribution obligations." Michels Corp. v. Cent.
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States, Se. & Sw. Areas Pension Fund, 800 F.3d 411, 418 (7th Cir. 2015) (quoting
Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 574
(1985)). One risk that fiduciaries must consider is that employers will maintain shoddy
or nonexistent records, fail to make required contributions and then, when the fiduciary
comes knocking, rely on the absence of records to claim that nothing is owed. But "an
employer cannot escape liability 'by hiding behind his failure to keep records as
statutorily required.'" Cent. Ill. Carpenters Health & Welfare Tr. Fund v. Struben, No. 05
C 1094, 2009 WL 497393, at *11 (C.D. Ill. Feb. 24, 2009) (quoting Brick Masons
Pension Tr. v. Indus. Fence & Supply Inc., 839 F.2d 1333, 1338 (9th Cir. 1988)). Thus
if a fund shows an employer's records are deficient and "produces an apparently sound
accounting suggesting that money is owed," the Court applies a presumption in the
fund's favor, unless the employer presents rebutting evidence. Chi. Dist. Council of
Carpenters Pension Fund v. Reinke Insulation Co., 347 F.3d 262, 264-65 (7th Cir.
2003). 3
The funds are entitled to summary judgment on the unverified employee
assessment, on which they have presented an "apparently sound accounting." J & B
employs five individuals whose job description was evidently never provided to the
auditor. The auditor assumed these employees performed work covered by the
3
Some earlier cases indicate that the burden-shifting framework applies only to the
amount of an employer's damages, not liability. See, e.g., Chi. Steel & Crane, Inc. v.
Structural Ironworkers Local No. 1 Welfare Fund, No. 00 C 1615, 2002 WL 1610980, at
*6 n.12 (N.D. Ill. July 22, 2002). These cases have been superseded by later Seventh
Circuit case law, which applies the framework to liability issues. Laborers' Pension
Fund v. RES Envtl. Servs., Inc., 377 F.3d 735, 739 (7th Cir. 2004); Sullivan v. Tag
Plumbing Co., No. 08 C 3669, 2012 WL 3835526, at *6 (N.D. Ill. Sept. 4, 2012)
(applying RES and other Seventh Circuit cases to liability issue).
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collective bargaining agreement and calculated contributions accordingly. Though J &
B suggests that its faulty hard drive has kept it from mounting a defense, the argument
is unconvincing with regard to this aspect of plaintiffs' claim. The issue here involves
what sort of work these five J & B employees did. It is readily apparent that the nature
of their work easily could be established through evidence in J & B's control separate
and apart from the hard drive—including, for example, testimony (or in the present
context, affidavits) from the employees or from company management. See also RES,
377 F.3d at 739 (affirming district court's adoption of an audit's characterization of
certain employees of the defendant when the employer failed to submit records
"reflecting the type of work performed"). But J & B has offered nothing of the kind. The
Court concludes that the plaintiffs are entitled to summary judgment on the unverified
employee assessment. J & B is liable for the $349,440.01 in contributions, $34,944.00
in liquidated damages, and $101,084.31 in interest associated with this assessment. 4
By contrast, the plaintiffs have not presented an "apparently sound accounting"
regarding the undocumented expense assessment. The auditor assumed every
expense that was not documented was a payment to a third party. Many expenses
contained descriptions like "Bank of America – Bass Pro" or "Citi – AT&T Universal,"
which hardly suggest compensation for labor that falls within the collective bargaining
agreement's ambit. And nothing else indicated that these expenses were compensation
for covered work. Simply presenting an audit is insufficient to trigger a presumption in
the plaintiffs' favor—the audit must be reasonable or, in the words of Reinke,
4
The plaintiffs appear to have transposed the descriptions of the unverified employee
and undocumented expense assessment damages in their local rule 56.1 statement.
See Pls.' L.R. 56.1 Stmt. of Mat. Facts ¶¶ 24, 25.
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"apparently sound." Reinke, 347 F.3d at 264. Although it is reasonable for an auditor to
assume that employees whose job descriptions the employer will not provide are doing
work covered by the collective bargaining agreement, it is not reasonable for an auditor
to assume that every expense for which an employer will not or cannot provide more
information has paid out to a subcontractor whose labor falls within the collective
bargaining agreement—particularly when the identification of the payee indicates
otherwise.
The plaintiffs contend that, in Boudreau v. Gentile, 646 F. Supp. 2d 1016 (N.D. Ill.
2009), a court facing similar facts reached a different outcome. But the Court does not
find Boudreau directly analogous, as the reasonableness of the audit never came into
question in that case. Id. at 1026-27. Rather, more analogous is another case in this
district in which an employer sought declaratory judgment that it did not owe an ERISAgoverned fund any additional contributions. Chicago Steel and Crane, 2002 WL
1610980, at *1. In an audit, the fund contended that the employer had made out checks
to "cash," which indicated the employer was paying third-party subcontractors whose
labor fell within the collective bargaining agreement. Id. The court disagreed, finding
that the fund's failure to connect the checks marked "cash" with any evidence of any
actual third-party laborers entitled the employer to summary judgment. Id. at *6.
Similarly, the plaintiffs in the present case have failed to connect any of J & B's
undocumented expenses with third-party employment. The Court therefore denies
summary judgment on the undocumented expense assessment.
From here, the litigants will have to bring this case to a prompt conclusion. If the
funds intend to pursue the undocumented expense assessment, they will need to
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determine whether they have evidence that can connect the undocumented expenses
to third-party employment that falls within the collective bargaining agreement. Without
such evidence, they are unlikely to prevail on that aspect of their claim. And J & B will
need to swiftly resolve any issues regarding the hard drive. The Court will address the
plaintiffs' request for attorney's fees and costs at the conclusion of the litigation.
Conclusion
For the foregoing reasons, plaintiffs are entitled to summary judgment regarding
J & B's liability for the undisputed $2,182.44 in liquidated damages as well as
$349,440.01 in unpaid contributions, $34,944.00 in liquidated damages, and
$101,084.31 in interest. The Court denies plaintiffs' motion for summary judgment with
regard to the undocumented expense assessment and defers ruling on attorney's fees
and costs until the conclusion of the case [dkt. no. 24]. The case is set for a status
hearing on August 20, 2018 at 9:30 a.m.
________________________________
MATTHEW F. KENNELLY
United States District Judge
Date: August 11, 2018
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