Raines et al v. Dow Acoustics, Inc.
MEMORANDUM OPINION AND ORDER: The Trustee's Motion for Summary Judgment (Doc. No. 22 ) is DENIED. (Written Opinion) Signed by Judge Donovan W. Frank on 2/9/2018. (las)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
John Raines and Tim McGough, as Trustees of
the Carpenters & Joiners Welfare Fund, Twin
City Carpenters Pension Master Trust Fund, and
Twin City Carpenters Vacation Fund; John
Raines as Trustee of the Carpenters and Joiners
Apprenticeship and Journeymen Training Trust
Fund, and each of their successors,
Civil No. 16-2624 (DWF/LIB)
OPINION AND ORDER
Dow Acoustics, Inc.,
Amanda R. Cefalu, Esq., and Bryan J. Morben, Esq., Kutak Rock, counsel for Plaintiffs.
Mark S. Mathison, Esq., Meghann F. Kantke, Esq., and Tara Craft Adams, Esq., Gray
Plant Mooty, counsel for Defendant.
The plaintiffs in this case filed suit to recover unpaid fringe benefit contributions
from the defendant. This matter is before the Court on the plaintiffs’ motion for
summary judgment. For the reasons discussed below, the Court denies the plaintiffs’
Plaintiffs are trustees over various fringe benefit funds (the “Trustees”). Plaintiffs
filed suit against Defendant Dow Acoustics, Inc., alleging that Dow failed to make the
required contributions for its employees’ fringe benefits pursuant to certain collective
bargaining agreements. Dow contends that it never agreed to the CBAs.
In 1979, David Wood started Dow, which installs acoustic ceilings and wall
panels. (Doc. No. 28 (“Adams Decl.”) ¶ 2, Ex. 1 (“David Wood Dep.”) at 6.) Dow was a
nonunion company. (Id. at 7.) But around 2003, one of Dow’s general contractors
required Dow to join a union to continue working on a project. (Id. at 8.) David Wood
then approached one of his employees about joining the union to continue the job. (Id. at
9.) Dow apparently agreed with the union to have one person join the union who would
work on all of Dow’s union jobs. (Id. at 10.) David Wood signed a one-page Acceptance
of Agreement and a one-page Independent Contractor Work Sheet. (Adams Decl. ¶ 3,
Ex. 2.) The Acceptance of Agreement provided that Dow agreed to be bound by a CBA
and that Dow had received a copy of the CBA. The Independent Contractor Work Sheet
identifies the project for which the CBA applied. According to David Wood, despite
agreeing to the contrary, the union never gave him the CBA. (David Wood Dep. at 12.)
In 2004, Dow signed identical contracts for two more projects. (Adams Decl. ¶¶ 4-5,
Exs. 3 & 4.)
In 2006, Jim Wood, David’s son, bought Dow. (Doc. No. 25 (“Cefalu Aff.”) ¶ 2,
Ex.1 (“Jim Wood Dep.”) at 22.) According to Jim Wood, the union’s business agent,
Mike Harrom, would come by once or twice a year to get Dow to join the union. (Jim
Wood Dep. at 32-34.) Harrom disputes this and states that he was trying to convince
Dow to join unions in other states where Dow did business. (Cefalu Aff. ¶ 3, Ex. 2
(“Harrom Dep.”) at 52-53.) Jim Wood stated that he was always clear with Harrom that
Dow could not join the union. (Jim Wood Dep. at 33.)
Despite the apparent misunderstanding, Dow would sign Acceptance of
Agreements each year, which included provisions stating that Dow agreed to the terms of
the CBA and that Dow received a copy of the CBA. (See Jim Wood Dep. at 115-17;
Cefalu Aff. ¶¶ 5-7, Exs. 4-7.) Jim Wood contends that Harrom explained that the
Acceptance of Agreements would continue the agreement that only a few Dow
employees would be union members. (Jim Wood Dep. at 115-17.) Both David Wood
and Jim Wood testified that they never received a copy of the CBA, despite signing an
agreement stating the opposite. (Id. 113-14; David Wood Dep. at 12.)
As relevant here, Dow signed Acceptance of Agreements for 2012, 2013, and
2014. (Cefalu Aff. ¶¶ 5-7, Exs. 4-7.) Unlike the 2003 and 2004 Acceptance of
Agreements, however, the agreements for 2012 through 2014, did not include an
Independent Contractor Work Sheet identifying the projects for which the CBAs applied.
(See id.) For the 2012 agreement, Plaintiffs could not produce evidence that Dow was
given the entire CBA, but Harrom testified that his usual practice was either to send a
contract early or to leave one. (Harrom Dep. at 106-07.) For the 2013 agreement,
Plaintiffs produced a letter sent to Dow with a copy of the CBA. (Doc. No. 35 (“Morben
Aff.”) ¶ 1, Ex. 2.) But the 2013 agreement was intercepted by Dow’s office manager,
who apparently never showed the CBA to Jim Wood and forged his signature on the
agreement. (Jim Wood Dep. at 38-40.) For the 2014 agreement, Harrom testified that he
left a full CBA with Dow (Harrom Dep. at 98-99), but Jim Wood testified that he never
received one. (Jim Wood Dep. at 113-14.)
In 2015, the fund’s third-party administrator discovered that Dow had not been
paying for fringe benefits for all of its employees for 2012 through 2014. On August 4,
2016, the Trustees filed suit and now move the Court for summary judgment. 1
Summary judgment is appropriate if the “movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). Courts must view the evidence, and the inferences that may be
reasonably drawn from the evidence, in the light most favorable to the nonmoving party.
Weitz Co., LLC v. Lloyd’s of London, 574 F.3d 885, 892 (8th Cir. 2009). However,
“[s]ummary judgment procedure is properly regarded not as a disfavored procedural
shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed
‘to secure the just, speedy, and inexpensive determination of every action.’” Celotex
Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1).
The moving party bears the burden of showing that there is no genuine issue of
material fact and that it is entitled to judgment as a matter of law. Enter. Bank v. Magna
The Court cites to Plaintiffs’ Memorandum in Support of the Motion for Summary
Judgment (Doc. No. 24) as “Pls.’ Memo.”; Defendant’s Opposition Brief (Doc. No. 27)
as “D.’s Opp.”; and Plaintiffs’ Reply Brief (Doc. No. 32) as “Pls.’ Reply.”
Bank, 92 F.3d 743, 747 (8th Cir. 1996). The nonmoving party must demonstrate the
existence of specific facts in the record that create a genuine issue for trial. Krenik v. Cty.
of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995). A party opposing a properly supported
motion for summary judgment “may not rest upon the mere allegations or denials of his
pleading, but must set forth specific facts showing that there is a genuine issue for trial.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).
The Trustees moved for summary judgment seeking to recover unpaid
contributions, liquidated damages, and attorney fees and costs. Dow argues that
summary judgment is inappropriate because: (1) genuine issues of material fact remain
regarding whether the CBAs are void ab initio due to fraud in the execution of the
agreements; and (2) Plaintiffs have failed to prove the amount owed. 2
Fraud in the Execution
Dow’s contributions are covered by ERISA. Section 515 of ERISA governs
claims concerning nonpayment of fund contributions. Bigham v. R&S Heating & Air
Conditioning, Inc., 182 F. Supp. 3d 919, 923 (D. Minn. 2016). The Eighth Circuit has
explained that § 515 is intended to “simplify actions to collect delinquent contributions,
avoid costly litigation, and enhance the actuarial planning necessary to the administration
Dow contends that the Trustees are seeking contribution for two individuals who
worked for Dow as independent contractors. In their reply, the Trustees accepted that
Dow did not owe contributions for those two individuals and amended the damages
calculation. (Pls.’ Reply at 24.) Because the Court concludes that material fact issues
exist precluding summary judgment, the Court declines to address Dow’s argument
regarding damages. The parties can address this issue to the extent that it remains
through a motion in limine.
of multiemployer pension plans.” Cent. States, SE & SW Areas Pension Fund v. Indep.
Fruit & Produce Co., 919 F.2d 1343, 1348 (8th Cir.1990). Section 515 places “pension
fund[s] in a better position than that which [they] would otherwise occupy in relation to
the collective bargaining agreement” by eliminating certain “contract defenses--for
example, fraud in the inducement, oral side agreements or course of performance.” Id.
“[S]ection 515 means that . . . suit [by a trustee] cannot be thwarted by defenses not
apparent from the face of the Agreement.” Id. at 1349 (quoting Bituminous Coal
Operators’ Ass’n v. Connors, 867 F.2d 625, 634 (D.C. Cir.1989)). Thus, “courts
recognize only two defenses to a collection action: that the pension contributions are
themselves illegal or that the collective bargaining agreement is void.” Id.
Fraud in the execution is a valid defense under § 515 and renders the agreement
void ab initio. Laborers’ Pension Fund v. A & C Envtl., Inc., 301 F.3d 768, 780 (7th Cir.
2002). “Fraud in the execution occurs where there is a ‘misrepresentation as to the
character or essential terms of a proposed contract,’ and a party signs without knowing or
having a ‘reasonable opportunity to know of its character or essential terms.’” Hetchkop
v. Woodlawn at Grassmere, Inc., 116 F.3d 28, 31 (2d Cir. 1997) (quoting Restatement
(Second) of Contracts § 163 cmt. a (1981)); see also A & C Envtl., Inc., 301 F.3d at 780
(“In order to establish the defense of fraud in the execution, A & C had to prove that it
did not know that it was signing a collective bargaining agreement that obligated it to
make contributions to the Funds and that its ignorance was excusable because it had
reasonably relied upon the representations of the union representative.”).
Dow argues that Harrom misrepresented the scope of the CBAs and that Harrom
denied Dow the opportunity to review the CBAs. In Hetchkop, the Second Circuit
reversed the lower court’s grant of summary judgment because fact issues existed
regarding the employer’s fraud-in-the-execution defense. 116 F.3d at 33. The union in
Hetchkop agreed to a limited CBA and then switched the contract for a full CBA while
the employer looked away. Id. at 29-30. The court of appeals determined that a
factfinder could find that the employer in Hetchkop did not have a reasonable opportunity
to review the document. Id. at 34. Here, the Court concludes that, interpreting the facts
in the light most favorable to Dow, a reasonable factfinder could find that Dow did not
have a reasonable opportunity to review the contract given Harrom’s alleged
misrepresentations regarding the scope of the agreement and the fact that Jim Wood was
not given a copy of the CBA. See Local 49 Operating Eng’rs Health & Welfare Fund v.
Flueger Const. Co., Civ. No. 03-2798, 2004 WL 2066849, at *3 (D. Minn. Aug. 18,
2004) (denying summary judgment when employer did not understand the nature of the
agreement with the union due to misrepresentations).
The Trustee’s arguments to the contrary are unpersuasive. The Trustees argue that
no genuine issue of fact exists regarding whether Dow had a reasonable opportunity to
review the CBA. The Trustees rely on T.E.A.M. Scaffolding Systems, Inc. v. United
Brotherhood of Carpenters & Joiners of America, where the Eighth Circuit affirmed the
district court’s rejection of the fraud-in-the-execution defense after a bench trial.
29 F. App’x 414, 416 (8th Cir. 2002). But in that case the employer was given the CBA
and just did not read the terms. Id. Here, fact issues remain regarding whether Dow
received the CBAs and had a reasonable opportunity to review them. Thus, the Court
concludes that Plaintiffs’ motion for summary judgment should be denied. 3
Plaintiffs also point to the fact that Dow affirmatively agreed that it had received a
copy of the CBA and had agreed to the terms. But issues of fact remain regarding
whether Dow actually received the CBA. Indeed, Harrom admits that he can recall
giving Dow a copy of the CBA only in 2014. (Harrom Dep. at 98-99.) While it may be
the case that Dow’s failure to learn the terms of the CBA was unreasonable, a factfinder
must make such a determination. Thus, the Court declines to grant summary judgment.
Based upon the foregoing, IT IS HEREBY ORDERED that the Trustee’s Motion
for Summary Judgment (Doc. No. ) is DENIED.
Dated: February 9, 2018
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
Plaintiffs also cite to Central States, Southeast. & Southwest. Areas Pension Fund
v. Gerber Truck Serv., Inc., 870 F.2d 1148 (7th Cir. 1989), in which Judge Easterbrook
concluded that a side agreement with the union to have only a few employees join the
union could not override a clear CBA, which required contributions for all employees.
Id. at 1151. Here, in contrast, the union did not enter into a side agreement, but instead
misrepresented the scope of the CBA. Courts in this District have distinguished similar
facts from Gerber. See Flueger Const. Co., 2004 WL 2066849, at *3 (concluding that a
side agreement to maintain the status quo could not defeat the clear language of the CBA,
but that the CBA may be void based on the union representative’s misrepresentations
about the scope of the agreement). Thus, the Court concludes summary judgment is
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