Seipel et al v. Envirotech Remediation Services, Inc.
Filing
215
MEMORANDUM OPINION AND ORDER. IT IS HEREBY ORDERED that Plaintiffs' Motion for Summary Judgment 180 is DENIED. (Written Opinion). Signed by Chief Judge Michael J. Davis on 8/26/11. (GRR)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Gary Reed and Tom Vevea,
as Trustees of the Minnesota
Laborers Health and Welfare
Fund et al.,
Plaintiffs,
v.
MEMORANDUM OPINION
AND ORDER
Civil No. 09‐1976
EnviroTech Remediation Services, Inc.
And Lindstrom Cleaning & Construction
Inc. d/b/a Lindstrom Restoration and
Lindstrom Environmental, Inc.
Defendants.
__________________________________________________________________
Pamela Hodges Nissen, Anderson, Helgen, Davis & Nissen, P.A. and
William K. Ecklund and Ruth S. Marcott, Felhaber, Larson, Fenlon & Vogt, P.A.,
Counsel for Plaintiffs.
Timothy A. Sullivan, Sarah E. Crippen and Elizabeth C. Borer, Best &
Flanagan LLP, Counsel for Defendant Lindstrom Cleaning & Construction, Inc.
___________________________________________________________________
I.
Introduction
Plaintiff Trust Funds (the “Funds”) brought this action seeking unpaid
employee benefit contributions from EnviroTech Remediation Services, Inc.
(“EnviroTech”). The Funds later added Lindstrom Cleaning & Construction, Inc.
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d/b/a Lindstrom Restoration and Lindstrom Environmental, Inc. (“Lindstrom”)
as a defendant, claiming that Lindstrom is the alter ego or successor in interest to
EnviroTech.
In their Amended Complaint, the Funds asserted four causes of action. In
Count I, the Funds sought the amount due pursuant to reports that EnviroTech
has submitted for the months May through August 2009. The Funds were
granted partial summary judgment against EnviroTech in the amount of $184,000
as to this Count. In Count II, the Funds seek the opportunity to audit all of
EnviroTech’s employment and payroll records for the audit period November 1,
2007 through the present. The Funds also ask that Lindstrom be ordered to
comply with this request, in the event that Lindstrom is in control of
EnviroTech’s records. In Count III, the Funds assert that Lindstrom is liable for
any unpaid employment benefit contributions under an alter ego or successor
liability theory. The final claim, Count IV, is a claim for damages.
On July 1, 2011, this Court denied Lindstrom’s motion for summary
judgment. The Court specifically found that there was no alter ego liability, but
that questions of fact existed as to whether Lindstrom was liable as a successor in
interest.
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Discovery is now complete, and the Funds have brought a motion for
summary judgment as to Counts II and III and as to Lindstrom’s counterclaim.
The Funds assert that EnviroTech engaged in a long‐term fraudulent payment
system in order to avoid paying contributions to the Funds. For example, the
Funds assert that many employees were paid through accounts payable checks,
rather than employee paychecks. The Funds further assert that EnviroTech
distributed envelopes of cash to employees to compensate them for hours
worked. The Funds assert that there is a possible carryover of cash payment
system to Lindstrom. The Funds have completed an audit, and now argue that
$1,089,122.97 is due and owing for unpaid contributions, $108,912.30 in
liquidated damages and $245,372.67 for single interest1.
II.
Standard for Summary Judgment
Summary judgment is appropriate if, viewing all facts in the light most
favorable to the non‐moving party, there is no genuine issue as to any material
fact, and the moving party is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56 (c); Celotex Corp. v. Catrett, 477 U.S. 317, 322‐23 (1986). The party seeking
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This amount does not include any amounts determined to be due from Lindstrom
operations or from the previous judgment entered on January 7, 2011.
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summary judgment bears the burden of showing that there is no disputed issue
of material fact. Celotex, 477 U.S. at 323. This burden can be met “by ‘showing’ ‐
that is, pointing out to the district court ‐ that there is an absence of evidence to
support the nonmoving party’s case.” Id. at 325. The party opposing summary
judgment may not rest upon mere allegations or denials, but must set forth
specific facts showing that there is a genuine issue for trial. Krenik v. County of
Le Sueur, 47 F.3d 953, 957 (8th Cir.1995).
III.
Discussion
A.
Counts II and III of the Amended Complaint
The Court finds that there are material factual disputes with respect to the
methodology used by the Funds’ expert auditor, Debbie Carlson, to determine
damages. For example, at her deposition, Carlson was unable to substantiate her
inclusion of several amounts that were obviously attributable to non‐covered
work. In particular, one audit included payments make to Glenson Contracting.
Carlson made no attempt to find out what work was done for Glenson, but if she
had, Carlson would have discovered that the work performed was concrete work
‐ which is clearly not covered employee work. Nonetheless, she included
$52,706.81 in alleged fringe fund contributions owing relating to payments made
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to Glenson. (See Crippen Aff., Ex. G (Carlson Dep. at 41‐43, 64); Carlson Aff ¶ 6.)
There is also a fact question as to the hourly rate applied to cash payments
made to EnviroTech employees. Carlson used the rate of $20 per hour, finding
such a rate was reasonable, and because $20 per hour was less than the going
rate, which is typical if an employee is paid in cash. (Crippen Aff., Ex. G (Carlson
Dep. at 65).) EnviroTech employee Dahl, however, testified that the hourly rate
was $25 in 2007, and then it was increased to $30 per hour in 2008. (Nissen Aff.,
Ex. B (Dahl Dep. at 105‐06).) Dahl’s testimony is undisputed. Applying the
higher hourly rate reduces the cash payment audit amount substantially, as
fewer hours were actually paid, resulting in fewer hours on which to base a claim
for unpaid fringe benefit contributions.
In their motion, the Funds again argue that Lindstrom is the alter ego of
EnviroTech given Dave Sobaski’s control over the combined operations of
EnviroTech and Lindstrom. This Court has already found that Lindstrom is not
the alter ego of EnviroTech, and the Funds have not introduced any new
evidence that would affect the Court’s prior ruling. The same is true with respect
to the issue of successor liability theory. The Funds have not presented any new
evidence that would affect the Court’s prior ruling on this issue. Accordingly,
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the Funds’ motion for summary judgment as to Counts II and III of the Amended
Complaint will be denied.
B.
Lindstrom Counterclaim
Lindstrom has asserted a counterclaim against the Funds, alleging that the
Funds, through their agents, engaged in tortious interference with Lindstrom’s
prospective business advantages. Lindstrom alleges that the Funds
communicated with Lindstrom’s consultants, customers and potential customers
with the object of inducing those third parties not to enter into, or to discontinue,
a business relationship with Lindstrom.
Minnesota courts have adopted the elements of an intentional interference
with prospective contractual relations claim as set forth in Restatement (Second)
of Torts § 766B (1979). United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628, 633
(Minn. 1982). Section 766B states that:
One who intentionally and improperly interferes with anotherʹs
prospective contractual relation (except a contract to marry) is subject to
liability to the other for the pecuniary harm resulting from loss of the
benefits of the relations, whether the interference consists of
(a) inducing or otherwise causing a third person not to enter into or
continue the prospective relation or
(b) preventing the other from acquiring or continuing the
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prospective relation.
To show causation, Lindstrom must show that the Funds engaged in a
wrongful act that caused Lindstrom to lose contracts or prospective contracts.
See Rainforest Café, Inc. v. Amazon, Inc., 86 F. Supp.2d 886, 909 (D. Minn. 1999)
(finding plaintiff must prove that “but for” defendant’s wrongful act, plaintiff
would have been granted the claimed business advantage). Whether actions rise
to the level of interference, intentional or justified, may turn on fact issues and
inferences from the evidence presented. Northside Mercury Sales & Serv., Inc. v.
Ford Motor Co., 871 F.2d 758, 762 (8th Cir. 1989).
The Funds assert that a trustee acting on behalf of an employment benefit
fund may also serve as an officer, employee, agent or other representative of a
union or other employer covered by the Plan. 29 U.S.C. § 1108(c)(3). By doing so,
the trustee is not automatically acting as agent of both the plan and the employer
or union. NLRB v. Construction & Gen’l Laborers’ Union Local 1140, 577 F.2d 16,
20 n.6 (8th Cir. 1978). Here, the Funds argue that during discovery, Lindstrom
asserted that the agents and representatives described in their counterclaim were
members of the Laborers District Council of Minnesota and North Dakota (the
“Union”). Lindstrom has not demonstrated, however, that these agents were
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acting on behalf of the Funds when they alleged interfered with Lindstrom’s
prospective business contracts.
The Funds further assert that Lindstrom has not specifically identified
which Trustees allegedly took action against them. The Funds assert that
Lindstrom cannot produce any evidence that any Union employee was given
authority to act as the agent of the Board of Trustees. Similarly, Lindstrom has
produced no evidence that any action was taken by someone from the Union
who has the apparent authority to act as an agent for the Board of Trustees.
Lindstrom responds that Rod Skoog, the Funds Administrator, has a
personal animus for Dave Sobaski. In support, Bill Sievers, a majority
shareholder of EnviroTech shares, testified at his deposition that he told Skoog
that EnviroTech wasn’t prepared to write out a check to the Fund because there
was no money. Sievers further testified that Skoog got angry and told Sobaski “I
will fuck up your reputation and I will fuck up your new business.” (Nissen Aff.
Ex. H (Sievers Dep. at 195‐96).)
Lindstrom further asserts that it has produced deposition testimony from
the Trustees to show that they collectively authorized their agents to contact
Lindstrom employees and industry contractors to discourage them from doing
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business with Lindstrom. (See Crippen Aff. [Doc. No. 195], Ex. B (Bartz Dep. at
85); Ex. C (Mackey Dep. 81‐82, 89, 96, 118); Ex. D (Kramer Dep. at 40); Ex. E
(Brady Dep. at 82).) Specifically, letters were sent to employees, notifying them
that they had forfeited their hour bank (a mechanism to maintain health
insurance when an employee is not working because of a layoff) if they went to
work for an employer, such as Lindstrom, that was not contributing to an
employment benefit fund. (Borer Aff., Ex. Q.) Lindstrom asserts these letters
were sent by Skoog with the Trustees’ approval.
Also, the Funds’ counsel sent a letter to customers notifying them that the
Fund had sued EnviroTech because EnviroTech did not make all contributions
due and owing, and that EnviroTech may have transferred its operations to
Lindstrom, and that the Funds would be seeking discovery from Lindstrom. (Id.,
Ex. B (Bartz Dep. Ex. 12).) Lindstrom asserts that at the time this letter was sent
out, September 15, 2009, the Funds had no information to support the assertion
that EnviroTech transferred its operations to Lindstrom.
Lindstrom further asserts that Trustee Tim Mackey testified that his
business agent contacted Fairview Riverside Hospital and that the agent was
instructed to find out if Lindstrom was doing the work. (Crippen Aff., Ex. C
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(Mackey Dep. at 89‐90, 96).)
Lindstrom asserts that other allegedly harmful acts include letters from the
Great Lakes Region Organizing Committee, sent in February and March 2001, to
school district officials encouraging them not to do business with Lindstrom
Environmental. (Id., Ex. F (Keeley Dep. Exs. 70 and 71). These letters include
information about a MNOSHA violation against EnviroTech ‐ not Lindstrom ‐
concerning an employee death that took place in 2005, a mechanics lien filed
against EnviroTech ‐ not Lindstrom ‐ and the current claims against Lindstrom
regarding alter ego liability.
The Court finds that the letters to employees concerning the forfeiture of
their hour bank are not wrongful, as it appears they were sent in compliance with
a plan term adopted by the Trustees. (Borer Aff. Ex. M.) Even if the letters were
considered wrongful, however, a claim based on the letters would be preempted
by ERISA. 29 U.S.C. § 1144 (a). See Minn. Chapter of Assoc. Builders and
Contractors, Inc. v. Minn. Dep’t of Public Safety, 267 F.3d 807 (8th Cir. 2001).
Further, it appears that Lindstrom lacks standing to assert such a claim, as the
letters were directed to individual employees, not Lindstrom.
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The Funds assert various arguments in an attempt to preclude further
evidence submitted by Lindstrom in support of its claim that persons acting on
behalf of the Trust intentionally interfered with Lindstrom’s prospective
business, but the Court finds such arguments without merit.
The question of whether a trustee is acting on behalf of trust beneficiaries
or the union is one of fact. Gen’l Laborers’ Union Local 1140, 577 F.2d at 20.
Based on the evidence submitted, the Court finds that Lindstrom has
demonstrated that genuine issues of material fact exist as to whether persons
acting on behalf of the Funds intentionally interfered with Lindstrom’s
prospective business advantages.
The Funds further assert that Lindstrom has failed to provide any evidence
that it was damaged as a result of the Funds’ alleged wrongful acts. Neither
Sobaski or Bentz, the controller for Lindstrom, testified as to any specific
damages that was caused by the Funds’ alleged interference.
Lindstrom cites to the deposition testimony of its owner, Charles
Lindstrom, who testified as to the impact this litigation as on his business ‐
including legal fees and the impact the letters have on business in general.
(Nissen Aff., Ex. K (Lindstrom Dep. at 15‐16).) The Court finds such evidence is
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sufficient to present the issue of damages to a jury.
IT IS HEREBY ORDERED that Plaintiffs’ Motion for Summary Judgment
[Doc. No. 180] is DENIED.
Date: August 26, 2011
s/ Michael J. Davis
Michael J. Davis
Chief Judge
United States District Court
Civil No. 09‐1976
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