Robinson et al v. Woodbridge Construction and Carpentry Inc et al

Filing 54

OPINION AND ORDER The clerk shall enter judgment for the plaintiffs and against the defendants on counts I and II of the complaint in the sum of$254,439.75. With the plaintiffs agreement, counts III and IV of the complaint are dismissed. The cle rk shall enter judgment for the plaintiffs and against the defendants on the counterclaim. The court denies the plaintiffs motion to strike certain parts of the defendants evidence; although the defendants ultimately didnt succeed on their set-off/counterclaim, the evidence was relevant to the set-off/counterclaim. Federal Rule of Civil Procedure 54(d)(2)shall govern any petition for attorney fees. ***Civil Case Terminated. Signed by Judge Robert L Miller, Jr on 5/22/14. (kjp)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
DOUGLAS ROBINSON, BOARD OF
TRUSTEES CHAIRMAN, ON BEHALF OF
NORTHWEST INDIANA REGIONAL
COUNCIL OF CARPENTERS
PENSION TRUST FUND, ET AL.,
PLAINTIFFS/COUNTER-DEFENDANTS,
VS.

WOODBRIDGE CONSTRUCTION
AND CARPENTRY, INC. AND
JOSEPH CHIARELLA,
DEFENDANTS/COUNTER-PLAINTIFFS

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CAUSE NO. 2:12-CV-178-RLM-APR

OPINION and ORDER
This is a suit by labor union pension funds and their officers to recover
unpaid contributions from an employer; the employer seeks a set-off reflecting
payments it made to other pension funds. Trial was conducted to the court
without intervention of a jury on May 16, 2014. This opinion is intended to
satisfy the requirements of Federal Rule Civil Procedure 52(a)(1).
As

a

signatory

to

a

collective

bargaining

agreement

with

the

Indiana/Kentucky/Ohio Regional Council of Carpenters, defendant Woodbridge
Construction and Carpentry, Inc. is bound by the terms of the Northwest
Indiana

Regional

Council

of

Carpenters

Pension

Trust

Fund,

the

Indiana/Kentucky/Ohio Regional Council of Carpenters Defined Contribution
Trust Fund, the Indiana/Kentucky/Ohio Carpenters Welfare Fund, the Indiana
Carpenters Apprenticeship Fund and Journeyman Upgrade Program, and the

United Brotherhood of Carpenters Apprenticeship Training Fund of North
America. The pension funds are employee benefit funds governed by the
Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §
1001, et seq.
From January 1, 1999 through June 30, 2007, Woodbridge sent
carpenters from locals in Indiana, Illinois, and Michigan to job sites in Indiana,
Illinois, and Michigan. Woodbridge paid into the Indiana pension funds benefits
that accrued for Indiana carpenters, regardless of where the work was
performed. So, no matter whether a particular carpenter associated with an
Indiana local performed work in Indiana, Illinois, or Michigan, Woodbridge sent
its payments to the Indiana pension funds. Similarly, Woodbridge sent
payments to Illinois pension funds for Illinois carpenters regardless of where
they worked and to Michigan pension funds for Michigan carpenters no matter
where they worked.
That wasn’t how things were supposed to be done. Under the various
collective bargaining agreements, Woodbridge’s payments were supposed to be
tied to the place the work was performed, rather than the state of the local to
which the carpenter belonged. As a result, the Indiana pension funds received
payments accruing from work Indiana carpenters did in Illinois and Michigan;
those payments should have gone to Illinois or Michigan pension funds.
Conversely, Woodbridge sent payments accruing from work done in Indiana to
Illinois and Michigan; the Indiana pension funds should have received those
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moneys even though they reflected work done by Illinois and Michigan
carpenters.
The pension funds (at least the Indiana funds, which are the only ones
about which evidence was presented) had no way of knowing payments were
taking detours because the payments contained no information about the
location of the work. At some point (the time isn’t clear from the record), the
Illinois pension fund had an audit performed (the record doesn’t disclose why)
and decided to take no action with respect to Woodbridge (the record doesn’t
disclose why the fund made that decision). More importantly for this case, the
Indiana pension funds caused an audit to be conducted after 2007.
The auditors found (and Woodbridge doesn’t dispute) that from 1999
through 2003, Woodbridge underpaid contributions to the Indiana funds by
$44,392.28 and deductions by $8,630.25. Late payment assessments totaled
$160.90, and adjustments arising from Woodbridge’s use of the wrong hourly
rate amounted to $682.75. The interest and liquidated damages required by
ERISA and the labor contract were $72,417.21 and 5,302.26 respectively. The
audit fees, as shown by Plaintiff’s Exhibit 9, were $42,150.00 and the auditor’s
mileage amounted to $25.22. The auditor’s fees are, at first blush, high —
nearly as much as the unpaid contributions — but field auditor Andrew Bailey
of Stewart C. Miller & Co., Inc. explained that the audits of Woodbridge were
far more time-consuming than most audits because of the way Woodbridge
kept its records.
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For the period from January 1, 2004 through June 30, 2007, the figures
were

as

follows:

underpaid

contributions

–

$25,506.24;

deductions

–

$15,679.15; interest – $24,499.95; liquidated damages – $4,118.54; audit fees
(see exhibit 11) – $10,875.00. The funds also requested an award of auditor
fees accrued through the trial, but its witness wasn’t able to provide that
figure, so that claim fails for want of proof.
Because Woodbridge didn’t make payments it was required to make on
account of work in Indiana by carpenters from Illinois and Michigan, it is liable
to the Indiana pension funds. 29 U.S.C. § 1145. The court must, ERISA says,
award the pension funds the unpaid contributions, interest on the unpaid
contributions, and the greater of that interest or liquidated damages of up to
20 percent of the unpaid contributions. 29 U.S.C. § 1132(g)(2). An award of
attorney fees also is mandatory, but that sum can be calculated and awarded
after judgment.
Adding together the unpaid contributions, deductions, late fees,
adjustments, interest, liquidated damages, and audit fees and mileage,
Woodbridge is liable to the Indiana funds in the sum of $254,439.75.
Woodbridge contends that it is entitled to a set-off (which it styled as a
counterclaim) with two components. First, to the extent Woodbridge paid the
Indiana pension funds for benefits for work done out of state by carpenters
who belonged to Indiana locals, Woodbridge contends that the Indiana pension
funds got more than they were entitled to under the memoranda of agreement.
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Woodbridge claims entitlement to credit for those overpayments. Second,
Woodbridge contends that to the extent it made payments to Illinois or
Michigan pension funds for work their carpenters did in Indiana, the Indiana
pension funds should get their money from the overpaid Illinois or Michigan
pension funds. Woodbridge believes about 80 percent of the underpayments to
the Indiana funds reflect money Woodbridge paid to the wrong jurisdiction. The
arithmetic becomes more challenging because wages were lower, while benefits
were higher, in Indiana than in the other two jurisdictions.
Why Woodbridge should get a setoff for money it paid to Illinois and
Michigan funds isn’t clear. The parties to this case agree that the collective
bargaining agreements obligated Woodbridge to pay the Indiana funds what
was due the Indiana funds, and Woodbridge didn’t make all of those payments.
The consumer who refuses to pay his electric bill because he mistakenly sent
the money to the cable company won’t have electricity much longer.
Woodbridge hasn’t cited any authority for the proposition that its payments to
the Illinois pension fund instead of to the Indiana pension fund obliges the
Indiana funds either to credit Woodbridge’s account for money it didn’t receive
or to chase after the Illinois fund to get its payment.
The law is a little more complex with respect to the first component of
Woodbridge’s claim to a setoff — apparent overpayments to Indiana reflecting
work Indiana carpenters performed outside Indiana.

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Once the employer remits contributions to a pension plan, those
contributions become assets of the pension plan, to be used exclusively for the
benefit of the plan participants and beneficiaries, 29 U.S.C. § 1103(c)(1),
though the plan may return mistakenly remitted contributions to the employer
within six months after the plan administrator discovers the contribution was
mistaken. 29 U.S.C. § 1103(c)(2)(A)(ii).
The funds venture a couple of procedural swipes at Woodbridge’s claim
to a setoff; neither is persuasive. The funds argue that the counterclaim
contains no supporting factual allegations, but that amounts to a motion under
Federal Rule of Civil Procedure 12(b)(6) to dismiss for failure to state a claim,
which had to be filed before a responsive pleading was filed. The funds also
argue that the setoff request exceeds the scope of the relief sought in the
counterclaim, but the pretrial order supersedes the pleadings, so the scope of
the relief sought in the counterclaim has no remaining significance. DeliverMed
Holdings, LLC v. Schaltenbrand, 734 F.3d 616, 628 (7th Cir. 2013). The funds
also seem to argue that ERISA allows a setoff of the sort Woodbridge seeks only
if Woodbridge made its contributions by “mistake of fact or law.” 29 U.S.C. §
1103(c)(2)(A)(ii).

The

funds

don’t

actually

contend

that

the

erroneous

contributions were anything but a mistake of fact or law, and don’t offer any
alternative modifier for Woodbridge’s misdirected contributions.
In UIU Severance Pay Trust Fund v. Local Union No. 18-U, 998 F.2d 509
(7th Cir. 1993), the court of appeals held that employers can proceed on a
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restitution theory to recover contributions mistakenly made to pension funds.
Id. at 512-513. Among the factors a court deciding such a case might consider,
the UIU Severance Pay court noted these: whether these were the sort of
payments for which equity demands refund; whether the employer has delayed
its claim so long that laches bars recovery; whether the employer’s long
continuation of the payments without question has ratified the past payments;
and whether the employer seeking relief can show the pension funds would be
unjustly enriched if the employer isn’t awarded restitution. Id. at 513. These
factors don’t favor Woodbridge, and Woodbridge hasn’t persuaded the court
that any other factors warrant equitable restitution.
The laches factor weighs most heavily. As the court understands it, plan
participants qualify for benefits by reaching threshold earning levels.
Woodbridge reported the earnings of participants who belonged to Indiana
locals, and over-reported those earnings with respect to work Indiana
carpenters performed in Illinois and Michigan. Properly calculated or not, those
reported earnings qualified plan participants for various benefits. An attempted
retroactive recalculation could affect whether a participant’s pension was truly
vested, or whether an annuity was valued accurately. Plan participants relied
on those calculations to make important life choices and likely to direct the
degree of risk they were willing to accept for their investments. Equity can’t
favor having to tell a plan participant that too few of his hours in 1999 were

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performed in Indiana to have qualified him for a benefit he thought he had
earned.
Woodbridge hasn’t shown that the Indiana funds would be unjustly
enriched if the setoff is denied. Pension funds hold their assets for the benefit
of the plan participants. The plan participants aren’t required to monitor how
the plan allocates employer contributions (certainly, a plan participant can do
so, but nothing requires it). Indeed, as just noted, plan participants rely on
what the funds report to them. If Woodbridge’s errors caused a plan participant
to receive greater or lesser benefits, this isn’t the stuff of which unjust
enrichment is made or for which equity demands a refund.
The length of time Woodbridge made these payments — eight and a half
years, spread over three collective bargaining agreements — flows through the
entire analysis. That 102 months fares poorly when compared with the six
months ERISA itself allows for refund of mistaken contributions. 29 U.S.C. §
1103(c)(2)(A)(ii). Woodbridge isn’t entitled to prevail on its counterclaim/request
for setoff on an equitable restitution theory.
For all of these reasons, the clerk shall enter judgment for the plaintiffs
and against the defendants on counts I and II of the complaint in the sum of
$254,439.75. With the plaintiffs’ agreement, counts III and IV of the complaint
are dismissed. The clerk shall enter judgment for the plaintiffs and against the
defendants on the counterclaim. The court denies the plaintiffs’ motion to
strike certain parts of the defendants’ evidence; although the defendants
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ultimately didn’t succeed on their set-off/counterclaim, the evidence was
relevant to the set-off/counterclaim. Federal Rule of Civil Procedure 54(d)(2)
shall govern any petition for attorney fees.
SO ORDERED.
ENTERED: May 22, 2014

/s/ Robert L. Miller, Jr.
Judge
United States District Court

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