Detroit Carpenters Fringe Benefit Funds v. Patrie Construction Co. et al

Filing 65

OPINION AND ORDER granting 52 Motion to Dismiss. Signed by District Judge Marianne O. Battani. (BThe)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

TRUSTEES OF THE DETROIT
CARPENTERS FRINGE BENEFIT
FUNDS,
Plaintiffs,
CASE NO. 2:12-cv-10987
v.
HON. MARIANNE O. BATTANI
PATRIE CONSTRUCTION CO.,
FRANCESCO WOODWORK, INC., and
ANDREA M. BERCICH,
Defendants.
_________________________________/
OPINION AND ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
This matter is before the Court on Defendants Patrie Construction Company,
Francesco Woodwork, Inc., and Andrea Bercich’s Motion to Dismiss pursuant to Fed. R.
Civ. P. 12(b)(6).

Plaintiffs, Detroit Carpenters Fringe Benefits Funds, brought the

instant action alleging Defendants Patrie and Francesco operated collectively in an
effort to avoid Patrie’s financial obligations to the funds pursuant to the Collective
Bargaining Agreement (“CBA”). Plaintiffs assert the companies are alter egos of one
another, and thus both companies must contribute to the funds. For the reasons stated
below, Defendants’ motion is GRANTED.
I.

STATEMENT OF FACTS
Plaintiffs, Detroit Carpenters Fringe Benefits Funds, are a voluntary association

of several funds established under the Labor Management Relations Act of 1947
(“LMRA”) and the Employee Retirement Income Security Act of 1974 (“ERISA”).

Defendant Patrie Construction Co. (“Patrie”) was incorporated in 1968 and is in the
business of general construction.

Incorporated in April 1992, Defendant Francesco

Woodwork, Inc. (“Francesco”) is in the business of producing and supplying millwright
goods. Defendant Andrea Bercich is involved in the daily operation of Francesco and
became the 100% owner subsequent to the death of her husband in late 2007. She
also acquired his stock in Patrie and was gifted the remaining stock during 2008-2010 to
acquire 100% ownership.
On October 28, 1992, Patrie entered into a CBA with the Michigan Regional
Council of Carpenters. The CBA requires payment of fringe benefits for work involving
“the milling, fashioning, joining, assembling, erecting, fastening, or dismantling of all
material of wood, plastic, metal, fiber, cork, or composition.” Plaintiffs assert that Patrie
and Francesco share the same management, business purpose, operating facility, work
on the same projects, share equipment, and service the same customers, and thus are
essentially the same entity.

Defendants maintain that although the companies are

owned by the same individual, they are distinct entities engaged in different trades.
Defendants claim Patrie is a general construction contractor and Francesco is a supplier
of millwork.
Plaintiffs filed the instant action on March 5, 2012 alleging three counts: (1)
request for an audit of Defendants Patrie and Francesco’s records and payment of
benefits due under ERISA, (2) violation of Michigan Builders’ Trust Fund Act (“MBTFA”),
and (3) breach of fiduciary duty under ERISA. The Court granted Defendants’ first
motion to dismiss without prejudice, but permitted Plaintiffs to amend the complaint to
more definitively allege facts regarding the statute of limitations issue. Plaintiffs filed

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their amended complaint on May 30, 2013. Soon thereafter, Defendants filed their
second motion to dismiss arguing that Plaintiffs’ claims are barred by the statute of
limitations and fail to state a claim upon which relief may be granted. Subsequent to
Defendants’ motion, Plaintiffs filed a motion to compel discovery. Defendants then filed
a motion to stay discovery until resolution of their motion to dismiss. In a telephone
conference, the Court denied both motions, noting that it would not consider
Defendants’ alternate prayer of relief for summary judgment as discovery is pending.
II.

STANDARD OF REVIEW
Dismissal is appropriate under Fed. R. Civ. P. 12(b)(6) for failure to state a claim

upon which relief can be granted if “‘it fails to give the defendant fair notice of what the .
. . claim is and the ground upon which it rests.’” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). A court
must determine whether the complaint contains “enough facts to state a claim to relief
that is plausible on its face.” Id. at 570. A complaint need not contain detailed factual
allegations, but it must include more than labels and legal conclusions. Id. at 555;
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.”). “A claim
has facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678. If the complaint contains well-pleaded factual allegations, the
court must assume their veracity; but it need not assume the truth of bare legal
conclusions. Id. “[W]here the well-pleaded facts do not permit the court to infer more

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than the mere possibility of misconduct, the complaint has alleged-but it has not
‘show[n]’- ‘that the pleader is entitled to relief.’” Id. (quoting Fed. R. Civ. P. 8(a)(2)).
III.

ANALYSIS
In order for Plaintiffs’ claims to survive the motion to dismiss, the Amended

Complaint must plausibly allege that Patrie and Francesco engaged in a double
breasted operation to avoid Patrie’s obligations under the CBA. In other words, Patrie
operated Francesco to perform nonunion work covered by the CBA, usually performed
by Patrie employees, so that Patrie could avoid contributing to the benefit funds. This is
equally applicable to Plaintiffs’ MBTFA claim, as a failure to establish a double breasted
operation undermines any duty on the part of Bercich to contribute to the funds on
behalf of Francesco employees. The Court notes that it broadly ruled Plaintiffs properly
alleged their MBTFA claim in a prior order. See (ECF No. 46). However, the Court’s
order only applies to the extent that MBTFA claims apply in the ERISA context. The
Court had yet to decide whether Plaintiffs properly alleged their ERISA claims, upon
which the MBTFA claim necessarily depends.
In the Amended Complaint, Plaintiffs allege, in relevant part:
4.
Patrie Construction Co., and Francesco Woodwork, Inc. share
management.
5.
Patrie Construction Co., and Francesco Woodwork, Inc. share
equipment.
6.
Patrie Construction Co., and Francesco Woodwork, Inc. share
facilities.
7.
Patrie Construction Co., and Francesco Woodwork, Inc. share
employees.
8.
Patrie Construction Co., and Francesco Woodwork, Inc. share
customers.
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9.
Patrie Construction Co., and Francesco Woodwork, Inc. share
owners.
10.
Patrie Construction Co., and Francesco Woodwork, Inc., are both
engaged in the commercial carpentry business.
11.
For all relevant purposes, Patrie Construction Co., and Francesco
Woodwork, Inc., are one and the same, constituting a single employer,
with each being the alter ego of each other.
19.
Plaintiffs became aware that Patrie Construction Company was
operating an alter ego operation with Francesco Woodwork, Inc., in
violation of ERISA and its collective bargaining agreements with the
Union, on the White Lake Rehab Center in December of 2011, (the “White
Lake Project”).
20.
Plaintiffs became aware that Patrie Construction Company was
operating an alter ego operation with Francesco Woodwork, Inc., to evade
its fringe benefit obligations under its collective bargaining agreements
with the Union in December of 2011, in violation of ERISA and its
collective bargaining agreements with the Union.
21.
Plaintiffs became aware that employees of Patrie Construction
Company were performing covered carpentry work on jobs as employees
of Francesco Woodwork, Inc., on Patrie Construction Company jobs at the
direction of Patrie Construction Company in December of 2011, to allow
Patrie Construction Company to avoid paying fringe benefits to the
Plaintiffs for all covered carpentry work performed pursuant to Patrie
Construction Company’s collective bargaining agreements with the Union,
in violation of ERISA and its collective bargaining agreements with the
Union.
22.
Plaintiffs became aware in December of 2011, that Patrie
Construction Company was subcontracting covered carpentry work on
jobs, including the White Lake Project, to non-union carpentry contractors
to avoid paying fringe benefits to the Plaintiffs for covered work performed
by the non-union sub-contractors in violation of Patrie Construction
Company’s collective bargaining agreements with the Union, in violation of
ERISA.
(Pl.s’ Amend. Compl. ¶¶ 4-11, 19-22, ECF No. 47). Plaintiffs assert these allegations
are sufficient under Twombly. In contrast, Defendants argue these allegations merely
recite the elements of Plaintiffs claims and lack any factual support.
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The alter ego or “double breasted operation” doctrine binds union employers who
operate a separate nonunion business to avoid their obligations under an existing CBA.
See NLRB v. Fullerton Transfer & Storage, 910 F.2d 331, 336 (6th Cir. 1990). In this
instance, the two businesses “are in fact one business, separated only by corporate
form.”

Id.

The test is “whether the two enterprises have substantially identical

management, business, purpose, operation, equipment, customers, supervision, and
ownership.” Id. In addition, an employer is a fiduciary of an ERISA-established benefit
fund to the extent that she “exercises any authority or control respecting management
or disposition of its assets.” 29 U.S.C. § 1002(21)(A)(i). A fiduciary becomes personally
liable for breach of her obligations for failing to pay fringe benefits when they become
due. 29 U.S.C. § 1109(a).
Here, Plaintiffs allegations merely recite the bare elements of the ERISA claims.
The Complaint contains five paragraphs that essentially reiterate the same legal
conclusion: that Patrie and Francesco operate to as alter egos to avoid their obligations
under the CBA. See (Pl.’s Amend. Compl. at ¶ 11, 19-22). The Court is not required to
accept these legal conclusions and declines to do so. In addition, Plaintiffs fail to allege
any facts regarding what information Plaintiffs obtained to alert them that Patrie was
avoiding financial obligations though the operation of Francesco.

There are no

allegations regarding specific employees who worked for both companies, dates, times,
covered work performed by Francesco employees, or any factual allegations relating to
the alleged illegal operation of Francesco. A reading the entirety of the allegations fails
to raise any inference that Patrie and Francesco operated as alter ego companies in
violation of the CBA.

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Moreover, the allegations merely raise the possibility of misconduct, failing to tip
the scale to plausibility.

See Iqbal, 556 U.S. at 678.

Plaintiffs merely recite the

elements of their claims and provide the Court with nothing more than legal conclusions
unsupported by any factual content. This falls far short of the standard required under
Fed. R. Civ. P. 8(a).

See Metal Lathers Local 46 Pension Fund v. River Ave.

Contracting, 2013 WL 3791409 at *5 (S.D.N.Y. July 22, 2013) (holding that fund
adequately alleged alter ego claims where allegations were “extensive regarding the
connections among [the companies]” and contained detailed factual allegations
underlying the connections).

Notwithstanding the Plaintiffs’ failure to support their

allegations with any facts, there is no allegation that Patrie possessed any motivation to
violate its agreement with the Union or engaged in any action to conceal any alleged
attempt to violate the CBA, which could potentially raise an inference of improper
conduct. See Ret. Plan of UNITE HERE Nat’l Ret. Fund v. Kombassan Holding A.S.,
629 F.3d 282, 288 (2d Cir. 2010) (holding that “anti-union animus or an intent to evade
union obligations is not a necessary factor” but may be a “sufficient basis to impose
alter ego status”).

Although Plaintiffs are not required to provide overly detailed

allegations, a recitation of the bare elements of their claims along with legal conclusions
mandates dismissal of the Amended Complaint.

See Iqbal, 556 U.S. at 678

(“Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.”).
IV.

CONCLUSION
Accordingly, Defendants’ motion to dismiss is GRANTED.
IT IS SO ORDERED.

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s/Marianne O. Battani
MARIANNE O. BATTANI
UNITED STATES DISTRICT JUDGE

DATE: October 3, 2013
CERTIFICATE OF SERVICE
I hereby certify that on the above date a copy of this Opinion and Order was
served upon all parties of record via the Court’s ECF Filing System.
s/Bernadette M. Thebolt
Case Manager

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