International Union of Operating Engineers Local 98 Health and Welfare Fund et al v. S&R Corporation

Filing 98

Judge Michael A. Ponsor: MEMORANDUM AND ORDER entered granting 72 Motion for Partial Summary Judgment; granting 72 Motion for Attorney Fees; granting 72 Motion for Costs; denying as moot 93 Motion to Consider Plaintiff Fund's Redact ing Arbitration Award in any Summary Judgment Determination. "... On or before April 30, 2015, counsel for Plaintiffs shall submit to the court supplemental materials specifying the exact amount of fees and expenses incurred in prosecuting thi s action to date, along with affidavits attesting to the reasonableness of the hourly rates charged by its attorneys. Counsel for Defendant may respond to this submission on or before May 30, 2015. The court will consider these submissions on the pap ers. Also by April 30, counsel for Plaintiffs will submit a proposed schedule for any potential further proceedings seeking payment of delinquencies, if any, revealed by the audit. Counsel for Defendant may resond by May 30. The court will thereafter determine what further proceedings are necessary." See Memorandum and Order for further details. (Healy, Bethaney)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

INTERNATIONAL UNION OF
OPERATING ENGINEERS LOCAL 98
HEALTH AND WELFARE FUND,
ET AL.,
Plaintiffs,
v.
S&R CORPORATION,
Defendant.

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C.A. No. 12-cv-30192-MAP

MEMORANDUM AND ORDER REGARDING
PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
AND ATTORNEYS’ FEES AND COSTS AND
DEFENDANT’S MOTION TO CONSIDER ARBITRATION AWARD
(Dkt. Nos. 72 & 93)
March 23, 2015
PONSOR, U.S.D.J.
I.

INTRODUCTION

Plaintiffs1 bring this action pursuant to the Employee
1

Plaintiffs are: Barbara Lane, Administrative Fund
Manager of the International Union of Operating Engineers
Local 98 (“Local 98") Annuity Fund; Local 98 Pension Fund,
Local 98 Health and Welfare Fund, and Local 98
Apprenticeship and Training Fund (“Funds”); Donald Mason and
Eugene Melville, Jr., Trustees of the Local 98 Employers
Cooperative Trust Fund (“ECT”); Michael Fanning, the Chief
Executive Officer of the Central Pension Fund; and Eugene
Melville, Jr., the Business Manager of the Local 98, AFL-CIO
(“Union”).

Retirement Income Security Act of 1974 (“ERISA”) as amended,
29 U.S.C. §§ 515 & 502(g)(2), and Labor-Management Relations
Act of 1947(“LMRA”), 28 U.S.C. § 185, to compel Defendant
S&R Corporation to produce certain unredacted books and
records for audit.

The complaint offers two counts: Count I

for failure and refusal to produce all of its books and
records for an audit, as required under the Collective
Bargaining Agreement (CBA) and Declarations of Trust, as
well as for payment of any contributions determined to be
delinquent as a result of the audit; and Count II for
equitable relief, enjoining Defendant from violating the
Agreement, the Trust policies, and ERISA and compelling
Defendant to produce the requested records and to pay any
delinquent contributions.
Plaintiffs have filed a motion for partial summary
judgment, attorneys’ fees, and costs.

(Dkt. No. 72.)

Defendant opposes and has also filed a motion requesting the
court to consider a recent arbitration award between the
parties.

(Dkt. No. 93.)

For the reasons that follow, the

court will allow Plaintiffs’ motion and deny Defendant’s
motion.
2

II.

BACKGROUND

The facts are recited in the light most favorable to
the non-moving party, as required by Fed. R. Civ. P. 56.
A.

Facts
In June 2010, Defendant entered into a CBA with the

Union (the Hoisting & Portable Engineers, Local 98 and the
International Union of Operating Engineers, AFL-CIO).2
Defendant committed to participating in several trust funds,
including the Plaintiff Funds.

The Funds’ declaration gave

to the Trustees of the Funds the “right to inspect at all
reasonable times, the individual payroll records and such
other records of an Employer as are deemed necessary and
pertinent to determine whether such Employer is making due
and full payment of its Employer Contributions.”
12, Attach. 1 at 10.)

(Dkt. No.

Defendant agreed “to be bound by the

[CBA] and Declaration of Trust entered into as of September
7, 1960, establishing the Central Pension Fund of the
[Union] and by any amendments to said Trust Agreement.”
(Id. at 11.)
The CBA also contained provisions governing situations
2

The CBA at issue terminated May 31, 2013.
3

when the Trustees of the Fund could not agree.

Under those

circumstances, “the arbitration provisions contained in the
Pension Protection Act will be activated and implemented on
a timely basis.

Additionally, any applicable dispute

mechanisms provided for in the Funds Trust Agreements may be
utilized.”

(Id. at 12.)

The arbitration provisions of the

CBA state that “[i]n any case of violation,
misunderstanding, disagreement or difference in the
interpretation of this [CBA] by either party, either party
shall refer the matter to the Business Agent.”
12, Attach. 1 at 19.)

(Dkt. No.

If the Business Agent’s decision does

not settle the misunderstanding, either party may refer the
matter to the Grievance Committee.

If this committee cannot

reach an agreement, it shall choose an Umpire to make a
final decision.

If the committee cannot agree upon an

Umpire, “the matter in dispute shall be referred to the
American Arbitration Association.”

(Id.)

Each of the Plaintiff Trusts has a “Restated Agreement
and Declaration of Trust” memorializing the agreements
between the Union and all Employers who are or become

4

parties to the plan.3
9.)

(See, e.g., Dkt. No. 31, Attach. 2 at

The Trust agreements give the Trustees, or their duly-

appointed representative, “the power to demand, collect and
receive Employer payments and all other money and property
to which the Trustees may be entitled.”

(Id. at 10.)

Trustees are also empowered to institute legal or
administrative proceedings for the purpose of collecting
such payments, money and property, should they determine
that institution of these proceedings is in the best
interest of the Trust.

(Id. at 10-11.)

For the purposes of

proper trust oversight, Employers must promptly furnish on
demand whatever information the Trustees “may reasonably
require in connection with the administration of the Trust
Fund.”

(Id. at 11.)

Finally, the trust documents provide a

collections policy, which states that an employer is liable
for attorneys’ fees and costs incurred by the Funds in
engaging legal services to obtain an audit or to access
documents necessary for an audit.

3

(Funds Collection Policy

The language for each of the declarations is largely
the same. The following quoted sections come from the
Pension Fund’s trust declaration. (Dkt. No. 31, Attach. 2.)
5

§ 2, Dkt. No. 33, Attach. 2 at 69-70.)
Plaintiff Funds are jointly-administered benefit plans,
which is to say their boards comprise both Trustees
appointed by the union and Trustees appointed by the
employer or management.
23, Attach. 2 at 2-3.)

(Schweitzer Aff. ¶¶ 4-8, Dkt. No.
The Local 98 Funds Board of Trustees

holds the responsibility to implement the collections
policy.

(Id. ¶ 10.)

On June 28, 2012, the Board of

Trustees met via conference call.
Attach. 2 at 74.)

(Minutes, Dkt. 23,

Present at that meeting were three union

Trustees and three employer Trustees.

(Id.)

At that time,

they unanimously authorized commencement of this legal
action against Defendant for the purposes of compelling
production of documents and an audit.

(Id. at 84;

Schweitzer Aff. ¶ 16.)
B.

Procedural History
On November 12, 2012, Plaintiffs filed their complaint,

alleging that Defendant had not supplied, and continued to
refuse to supply, all of its books and records for the
period January 1, 2006, to date, for an audit for the Fringe
Benefit Fund.

Additionally, or alternatively, Plaintiffs
6

alleged that Defendant had failed to timely remit
contributions, deductions, and reports to Plaintiffs.
Defendant’s Answer denied that it had refused to provide the
requested documents; in fact, Defendant had offered to
produce all appropriate records, but with certain
confidential information redacted.

Defendant further

alleged that this litigation had been improperly instituted,
because the management Trustees, despite the unanimous vote
approving it, supposedly never authorized this action.
Furthermore, Defendant brought a counterclaim against
Plaintiffs alleging that the primary issue in Plaintiffs’
complaint -- that certain documents could not be redacted -was subject to the arbitration provision of the CBA.
(Answer & Countercl. ¶ 3, Dkt. No. 8 at 4.)
On January 17, 2013, Defendant filed a motion to
dismiss, or alternatively to stay the action pending
referral of the dispute to arbitration.
Plaintiffs opposed.4

(Dkt. No. 11.)

Before argument on Defendant’s motion

4

Plaintiffs also filed a motion to strike affidavits
relied upon by Defendant in its motion to dismiss. (Dkt.
No. 24.) The court granted this motion on September 30,
2013. (Dkt. No. 48.)
7

to dismiss, on May 25, 2013, Plaintiffs filed their first
motion for partial summary judgment (Dkt. No. 31), which
Defendant opposed.

In support of their summary judgment

motion, Plaintiffs supplied the affidavit of one of the
Funds’ auditors, who averred that the unredacted documents
sought in this suit were necessary for an effective audit
and that the review of these unredacted documents was
consistent with industry standards.
Dkt. No. 31, Attach. 4 at 4.)

(Shannon Aff. ¶¶ 5-7,

In September 2013, the court

heard argument on both motions, after which the court denied
Defendant’s motion to stay and delayed ruling on Plaintiffs’
motion for summary judgment until after the parties
attempted to negotiate a protective order.
49.)

(Dkt. Nos. 48 &

The parties succeeded and submitted a confidentiality

stipulation and order, which the court entered on November
12, 2013.
During this period, the question of whether employers
should be permitted to redact certain information from the
documents supplied for the auditing process continued to be
an issue of contention between the employer Trustees and the
union Trustees on the Board.

Accordingly, pursuant to the
8

CBA, the issue was submitted to arbitration.

Defendant

again moved to stay the action (Dkt. No. 50), arguing that
the court should wait to see if the issue would be resolved
in arbitration.

Plaintiffs opposed, asserting that any

arbitration decision would only apply prospectively and not
cover the current dispute.
On December 16, 2013, the parties appeared before the
court for argument on the motion to stay.

The court again

delayed action, instead ordering the parties to negotiate,
as well as to explore the possibly of conducting depositions
of the employer Trustees on the issue whether any
arbitration award would apply to this dispute.
60.)

(Dkt. No.

In February 2014, the parties reported separately that

they could reach no agreement on the arbitration issue;
Plaintiffs asked the court to rule on their motion for
summary judgment.

On March 3, 2014, the court denied

Plaintiffs’ earlier partial summary judgment motion without
prejudice, as well as Defendant’s motion to stay, and gave
the parties until April 4, 2014, to depose the employer
Trustees on the issue of whether any arbitration decision
would apply to this action, or would have only prospective
9

effect.

(Dkt. No. 71.)

On May 5, 2014, after those depositions took place,
Plaintiffs renewed their motion for summary judgment, (Dkt.
No. 72), which Defendant again opposed.

As before,

Plaintiffs argued that the Trustees authorized this action
to access unredacted documents for an audit and that the
depositions of the employer Trustees did not establish that
any employer-favorable arbitration decision would apply to
the earlier-filed action here.

Defendant countered that

whether the Trustees intended the arbitration decision to
apply to this case was a disputed issue of material fact.5
On December 5, 2014, the Fund Trustees adopted a
revised audit protocol; the revision was a product of the
arbitration process.

The revised protocol now allows

certain non-owner-operated employers to submit a somewhat
limited class of redacted documents as part of a compliance

5

Defendant also moved to take further depositions of
the management (employer) Trustees. (Dkt. No. 79.) On June
30, 2014, Magistrate Judge Kenneth P. Neiman denied
Defendant’s motion. (Dkt. No. 84.) Defendant objected to
his ruling, and the court overruled this objection on July
31, 2014. (Dkt. No. 88.)
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audit.6

Importantly, the new protocol specifically provides

that the new rules “shall have no retroactive application
with respect to any matter that the Trustees have referred
to the Fund Counsel to commence litigation or is in
litigation as of the effective date of this Agreement.”
(Final Local 98 Agreement ¶ 7, Dkt. No. 95, Attach. 1 at 8.)
Subsequently, Defendant filed a motion seeking to have
the court take the new protocol into account in ruling on
Plaintiffs’ pending motion for summary judgment, attorneys’
fees, and costs, offering two arguments.

(Dkt. No. 93.)

First, Defendant contends -- despite the explicit language
in the protocol agreement to the contrary -- that the court
should not resolve this retrospective dispute in a manner
that conflicts with the prospectively-focused arbitration
award.

Defendant argues that it should not be penalized for

6

The new protocol permits only specified, limited
redaction of documents. Non-owner-operated employers can
independently redact the amount of wages paid to up to five
of the company’s principal owners. If the employer seeks to
redact any other information, it has to submit complete,
unredacted files to a designated “Special Reviewing
Partner,” who will be someone other than the auditor
conducting the compliance review. That person will
determine whether the additional information can be redacted
without compromising the work of the auditor. (Final Local
98 Agreement ¶ 3, Dkt. No. 95, Attach. 1 at 7.)
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taking a position that has now formally been adopted by the
Trustees prospectively.

Second, Defendant asserts that it

should not have to pay for all the costs and fees of this
litigation, since the arbitration process effectively
resolved the issue of proper redactions for the future, and
Plaintiffs should not be rewarded for pursuing this
litigation.
Plaintiffs have opposed Defendant’s motion, pointing
out that the language of the new protocol clearly states
that it does not apply to current litigation.

Moreover,

Plaintiffs say, even the new protocol -- which in any event
only applies prospectively -- does not permit the breadth of
redaction that Defendant are now arguing for.

For example,

Defendant still seeks to redact records of any political or
charitable contributions, which cannot be redacted under the
new protocol.
III.

DISCUSSION

The court will grant summary judgment where there is no
genuine disagreement over the material facts and the movant
is entitled to judgment as a matter of law.
56(a);

Fed. R. Civ. P.

Bonneau v. Plumbers & Pipefitters Local Union 51
12

Pension Trust Fund, 736 F.3d 33, 36 (1st Cir. 2013).
Plaintiffs seek an order from the court compelling
production of the requested documents necessary for an
audit, in addition to the attorneys’ fees and costs of this
litigation.7

At this point, there is no question that this

suit was properly initiated by the Trustees pursuant to
their authority under the Trust Agreements.

(Mem. & Order

2, Dkt. No. 48 (“In this case, the record is clear that the
lawsuit was properly authorized.”).)

Additionally, it

cannot be disputed that this suit does not fall under the
auspices of the new arbitration-generated protocol governing
redactions.

(Final Local 98 Agreement 3, Dkt. No. 95,

Attach. 1 (“The policies and protocols stated herein shall
have no retroactive application with respect to any matter
that the Trustees have referred to the Fund Counsel to
commence litigation or is in litigation as of the effective
date of this Agreement.”).)

Accordingly, the sole issue is

whether, consistent with the terms of the CBA and Trust
7

Plaintiffs do not at this time seek
against Defendant for the entire debt owed
Funds for delinquent contributions, since,
audit, they cannot determine whether there
delinquent contributions.
13

summary judgment
to Plaintiff
without the
are any

Agreements, Defendant is obligated to produce for audit the
unredacted documents sought by Plaintiffs.
It is well established that, if the terms of a CBA or
Trust agreement give Trustees the power to perform an audit
and to get access to documents necessary to perform the
audit, courts will enforce that contractual obligation
against an employer who refuses to comply.

See Cent.

States, Se. & Sw. Areas Pension Fund v. Cent. Transport,
Inc., 472 U.S. 559, 581 (1985) (hereinafter “Central
States”).

Moreover, the scope of document disclosure that

is necessary to permit a reasonable and proper audit must be
determined by reference to standard auditing practices and
to the expertise of experienced auditors.

Trucking Emps. of

N. Jersey Welfare Fund, Inc. v. Brockway Fast Motor Freight
Co., 130 F.R.D. 314, 324 (D. Mass. 1989) (citing Central
States, 472 U.S. at 567-68).

To defeat a plaintiff fund’s

assertion, supported by expert testimony, that certain
documents are necessary for an audit, the defendant must
offer some expert analysis to rebut the position of the
auditor responsible for the audit.

See id.

Defendant, without any expert support, takes the
14

position that it may define for itself those documents
necessary for carrying out the purposes of the Trust.

It

argues that the specific records deemed necessary by
Plaintiffs’ auditor -- the general ledger and cash
disbursement journals -- lie outside the scope of the
language of the trust agreements.

See Central States, 472

U.S. at 582 (stating that a benefit plan’s auditing powers
are generally “limited to prudent actions furthering the
legitimate purposes of the plan”).

It highlights the

language of Article IV, Section 4, which states, “The
Trustees may, by their respective representatives, examine
the pertinent employment and payroll records of each
Employer at the Employer’s place of business whenever such
examination is deemed necessary or advisable by the Trustees
in connection with the proper administration of the Trust
Fund.”

(Dkt. No. 31, Attach. 2 at 11.)

Defendant contends,

somehow, that this language evinces the clear intent of the
CBA and trust agreements that auditors be given access only
to limited payroll and employment records.
Defendant’s arguments fly in the face of both the
language of the pertinent documents and the law.
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First,

Defendant reads the CBA and trust documents selectively.

As

outlined above, the Funds’ declarations plainly authorize
the Trustees’ access to documents other than traditional
payroll and employment records: they may inspect “such other
records of an Employer as are deemed necessary and
pertinent” for an audit.

(Dkt. No. 12, Attach. 1 at 10.)

This language is clear and unambiguous.
Second, the undisputed record makes it clear that the
unredacted records sought by Plaintiffs are necessary for
the audit.

Plaintiffs have offered the detailed affidavit

of William Shannon, an auditor with experience in conducting
payroll and special audits for employee benefit plans.
(Shannon Aff. ¶¶ 1-2, Dkt. No. 31, Attach. 4 at 2-3.)

He

states, “The requested documents from audited employers are
required to determine independently whether the company has
properly and accurately reported the hours of bargaining
unit work performed in the Union’s jurisdiction.”
6.)

(Id. at ¶

Furthermore, Shannon explains how the names and dollar

amounts on cash disbursement journals and general ledgers
assist the auditors is determining whether an employer has
met the obligations of the Funds.
16

(Id. ¶¶ 7-8.)

Defendant

has offered not a shred of evidence to contradict or
undermine Shannon’s expert opinion that the unredacted
documents are necessary for the audit.8
Defendant’s final argument is that the court should
consider the arbitration settlement in reaching its decision
on summary judgment, including whether to award attorneys’
fees and costs.

As recognized earlier, this suit was

properly authorized by the Trustees, and the new protocol
specifically excludes litigation, such as this one, that was
already underway at the time the protocol was adopted.
Significantly, the new protocol permits a much more limited
scope of redaction than Defendant sought at the start of
this suit.

Even if the court were to consider the

arbitration settlement, Defendant would nonetheless need to
produce the unredacted documents sought by the auditors.
(Shannon Aff. II ¶¶ 10-11, Dkt. No. 95, Attach. 1 at 3-4.)
8

The record does contain the affidavit of Defendant’s
president, Roger Ploof, in which he states that his company
has complied with other, past audits that did not require
the information sought by Plaintiffs here. (Ploof Aff. ¶¶
8-9, Dkt. No. 40, Attach. 4 at 2.) This averment, however,
is not expert testimony (Ploof is not an auditor) and is
irrelevant to the question whether the unredacted documents
are needed here. See Trucking Emps. of N. Jersey Welfare
Fund, Inc., 130 F.R.D. at 324.
17

Similarly, nothing in the new prospective protocol
remotely undermines Plaintiffs’ claim for attorneys’ fees
and costs.

The trust documents signed by Defendant

explicitly obligate it to reimburse the Funds for legal
expenses related to enforcing the Funds’ right to access
certain employer documents.

(Funds Collection Policy § 2,

Dkt. No. 33, Attach. 2 at 69-70.)

Defendant’s position is

entirely without basis in law or the record.
The undisputed facts of record and the law permit only
one conclusion: the auditors require the unredacted records,
and Defendant is obligated to produce them.
States, 472 U.S. at 581.

See Central

The court will order entry of

partial summary judgment compelling Defendant to produce the
unredacted documents identified by the auditor, and it will
award Plaintiffs reasonable attorneys’ fees and costs.
IV.

CONCLUSION

For the foregoing reasons, Plaintiffs’ Renewed Motion
for Partial Summary Judgment and Motion for Costs and
Attorneys’ Fees, (Dkt. No. 72) is hereby ALLOWED.
Defendant’s Motion to Consider Plaintiff Fund’s Redacting
Arbitration Award in any Summary Judgment Determination,
18

(Dkt. No. 93) is hereby DENIED as moot.

The court has, in

fact, examined the arbitration-related protocol, as this
memorandum demonstrates, and found it substantially
irrelevant to the issues before it.
On or before April 30, 2015, counsel for Plaintiffs
shall submit to the court supplemental materials specifying
the exact amount of fees and expenses incurred in
prosecuting this action to date, along with affidavits
attesting to the reasonableness of the hourly rates charged
by its attorneys.

Counsel for Defendant may respond to this

submission on or before May 30, 2015.

The court will

consider these submissions on the papers.

Also by April 30,

counsel for Plaintiffs will submit a proposed schedule for
any potential further proceedings seeking payment of
delinquencies, if any, revealed by the audit.
Defendant may respond by May 30.

Counsel for

The court will thereafter

determine what further proceedings are necessary.
It is So Ordered.
/s/ Michael A. Ponsor
MICHAEL A. PONSOR
U. S. District Judge

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