THE BOARD OF TRUSTEES OF THE INTERNATIONAL UNION OF OPERATING ENGINEERS LOCAL 825 PENSION FUND et al v. OPERATING ENGINEERS LOCAL 825 ANNUITY FUND et al
OPINION. Signed by Chief Judge Jerome B. Simandle on 11/16/2016. (dmr)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
THE BOARD OF TRUSTEES OF THE
INTERNATIONAL UNION OF
OPERATING ENGINEERS LOCAL 825
PENSION FUND, OPERATING
ENGINEERS LOCAL 825 WELFARE
FUND, OPERATING ENGINEERS
LOCAL 825 APPRENTICESHIP
TRAINING AND RE-TRAINING FUND,
OPERATING ENGINEERS LOCAL 825
BENEFIT FUND, OPERATING
ENGINEERS LOCAL 825 SAVINGS
FUND, OPERATING ENGINEERS
LOCAL 825 ANNUITY FUND
RIVER FRONT RECYCLING
Michael Bauman, Esq.
Vincent M. Giblin, Esq.
PITTA & GIBLIN LLP
120 Broadway, 28th floor
New York, NY 10271
Attorneys for Plaintiffs
Steven Alan Berkowitz, Esq.
BERKOWITZ & ASSOCIATES, PC
10000 Lincoln Drive East
Marlton, NJ 08053
Attorney for Defendant
SIMANDLE, Chief Judge:
HONORABLE JEROME B. SIMANDLE
Civil Action No.
In this case, Plaintiffs, Trustees of the International
Union of Operating Engineers Local 825 Pension, Welfare,
Apprenticeship, Supplemental Unemployment Benefit, Savings, and
Annuity Funds seek to audit the books and records of Defendant,
River Front Recycling Aggregate, LLC, a civil construction
contractor, and to collect any unpaid contributions revealed by
Pending before the Court is Defendant River Front’s
motion to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to
state a claim upon which relief may be granted.
argues that because it was not a signatory to any of the
agreements that would require it to submit to audits, this Court
should dismiss Plaintiffs’ Complaint.
For the reasons that
follow, the Court will deny the Defendant’s motion.
Plaintiffs, the Board of Trustees of the International
Union of Operating Engineers Local 825 Benefit Funds
(“Trustees”), manage multi-employer welfare plans, pension
plans, and employee benefit plans within the meaning of the
Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§
1002(1), (2), (3).
The International Union of Operating
Engineers Local 825 is a labor organization.
For purposes of the pending motion, the Court accepts as true
the version of events set forth in Plaintiffs’ Complaint,
documents explicitly relied upon in the Complaint, and matters
of public record. See Schmidt v. Skolas, 770 F.3d 241, 249 (3d
As Trustees of the Local 825 Funds, Plaintiffs administer
the union’s employee benefit plans, which were established
pursuant to the terms of collective bargaining agreements
between Local 825 and various employers. (Compl. ¶ 5.)
Employers are required to make contributions to the Funds on
behalf of the employees covered by the collective bargaining
agreements. (Id.) The Funds provide pension, health and welfare,
annuity, apprenticeship, re-training, unemployment, and other
benefits to Local 825 employees. (Compl. ¶ 12.)
The dispute at hand arose from an agreement between Local
825 and River Front covering one job in Burlington County, New
According to Plaintiffs’ Complaint, Defendant River
Front had been “a party to and bound by” collective bargaining
agreements with Local 825 covering the period from at least
January 1, 2012 through December 31, 2014. (Id., ¶ 9.)
Front received a copy of Local 825’s standard collective
bargaining agreement and in a separate one-page Job Site
agreement, agreed to “abide by all of the Terms and Conditions
of employment for its Employees, as set forth in the said
Agreement and to pay the Wage Rates for the various
Classifications of Employment as set forth therein and to make
contributions to the [Local 825 Union], various Fringe Benefit
Plans, as further provided in said Agreement.” (Id., ¶ 10; see
also Exhibit A to Def’s Br. (reproducing the Job Site agreement
between Plaintiffs and Defendants).
Along with the standard collective bargaining agreement
described supra, Plaintiffs intend to enforce the terms of the
Trust Agreements governing the Funds as well as their Employer
Contribution Collection Policy (“Collection Policy”) against
Defendant. (Id., ¶ 2.) The Defendant was bound to both the Trust
Agreement and the Collection Policy during the period at issue.
(Id., ¶¶ 13-14.)
Together, these three agreements authorize the
Trustees to (1) bring actions to enforce an employer’s
obligations to make contributions to the Funds, and (2) to audit
the books and records of participating employers. (Id., ¶¶ 1516.)
Regarding contributions, the three aforementioned
agreements “authorize Plaintiffs to estimate the amount of
contributions when an employer fails and/or refuses to produce
books and records for audit for a particular time period.” (Id.,
Regarding the right to audit, the collective bargaining
agreement explicitly provides that the “Funds Trustees will have
the right to conduct periodic payroll audits of companies
signatory to this Agreement.” (Id., at ¶ 17.)
Article IV of the Trust Agreement and Section 16 of the
Collection Policy provide that an employer must permit a
representative of the Trustees to enter its premises during
business hours for an audit of its books and records. (Id., ¶¶
Section 16 of the Collection Policy further explains
that the purpose of these types of audits “is to determine
whether employers are fully, accurately, and timely complying
with their obligation to make contributions to the Funds and to
discover any unpaid contribution and interest which the Funds
may, thereafter, collect. (Id., ¶ 20.)
On three separate occasions – on or about August 1,
September 1, and October 19, 2015 – the Trustee’s auditors
notified Defendant that it was required to submit an audit for
the period from January 1, 2012 through November 24, 2014, and
each time, Defendant failed and refused to comply with the
request for audit, and instead completely objected to the audit
demand. (Id., ¶¶ 29-33.)
Defendant objected to the audits
because it alleges that Plaintiffs have no right to audit its
books and records, as it was not a signatory to the standard
collective bargaining agreement, the Trust Agreement, or the
Collection Policy. (Def. Br. at 3, 5.)
Both parties agree that the key document at issue is the
October 3, 2012 agreement signed between Local 825 and River
Front. (See Exhibit 2 to Def. Br.)
While Plaintiffs interpret
this document as binding Defendant as a signatory to the
standard collective bargaining agreement with Local 825, as well
as the Trust Agreement and the Collection Policy, see Opp’n at
2, Defendant argues that it is not a signatory to any of the
agreements except the “very limited Job Site Agreement that
does not give Plaintiffs the right to audit Defendants’ books
nor to obtain any unpaid contributions.” (Def. Br. at 6-7.)
Plaintiffs filed suit against Defendant on December 30,
2015 seeking injunctive relief requiring Defendants to submit to
an audit, as well as judgment in the amount found to be due and
owing after the audit. [Docket Item 1.] Defendant filed the
instant Motion to Dismiss on March 15, 2016. [Docket Item 6.]
The Court will decide this motion without holding oral argument
pursuant to Fed. R. Civ. P. 78.
STANDARD OF REVIEW
Pursuant to Rule 8(a)(2), Fed. R. Civ. P., a complaint need
only contain “a short and plain statement of the claim showing
that the pleader is entitled to relief.”
Specific facts are not
required, and “the statement need only ‘give the defendant fair
notice of what the . . . claim is and the grounds upon which it
rests.’” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (citations
While a complaint is not required to contain detailed
factual allegations, the plaintiff must provide the “grounds” of
his “entitle[ment] to relief”, which requires more than mere
labels and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555 (2007).
A motion to dismiss under Rule 12(b)(6), Fed. R. Civ. P.,
may be granted only if, accepting all well-pleaded allegations
in the complaint as true and viewing them in the light most
favorable to the plaintiff, a court concludes that the plaintiff
failed to set forth fair notice of what the claim is and the
grounds upon which it rests. Id.
A complaint will survive a
motion to dismiss if it contains sufficient factual matter to
“state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009).
Although a court
must accept as true all factual allegations in a complaint, that
tenet is “inapplicable to legal conclusions,” and “[a] pleading
that offers labels and conclusions or a formulaic recitation of
the elements of a cause of action will not do.” Id. at 678.
The Trustees bring this action pursuant to Section 502 of
ERISA, 29 U.S.C. § 1132, which allows employee benefit and
multiemployer plans, as beneficiaries, to file suit to recover
contributions due under the terms of the plan.
In its motion to
dismiss, Defendant contests all four of Plaintiffs’ causes of
action on contractual and statutory grounds, arguing that they
all are “predicated on [Plaintiffs’] misguided belief that it
has a right to audit the books and records of Defendant.” (Def.
Br. at 3).
Applying the unchallenged factual allegations in the
Complaint to the tenets of contract law and the requirements of
the ERISA demonstrates that the Plaintiffs have stated claims
upon which relief could be granted.
For the reasons that
follow, the Court will deny the Defendant’s motion to dismiss.
A. Count 1 – Unpaid Benefit Fund Contributions
The Court finds that Plaintiffs have asserted a valid cause
of action for violation of Section 515 of ERISA, 29 U.S.C. §
1145. (Compl. Count One.)
Plaintiffs allege that Defendant’s
underreporting and underpaying contributions owed to the Funds
is a breach of the three agreements in violation of Section 515.
(Compl. ¶¶ 35-37.) Section 515 provides:
Every employer who is obligated to make contributions to a
multiemployer plan under the terms of the plan or under the
terms of a collectively bargained agreement shall, to the
extent not inconsistent with law, make such contributions in
accordance with the terms and conditions of such plan or such
In the present action, the Funds seek to obtain payment of
contributions from River Front that, they allege, should have
been made in accordance with the terms of the standard CBA.
one-page Job Site Agreement explicitly requires Defendant “to
make contributions” to Local and permit the Funds to take legal
action to recover delinquent contributions. (Compl. ¶ 10.)
Moreover, “a failure of any Employer to pay required
contributions to the [Funds] . . .
“shall constitute a
violation of [the CBA].” (Standard CBA at 13.)
Plaintiffs now allege River Front has “underreported and
underpaid contributions owed to the Funds.” (Compl. ¶ 36.)
Plaintiffs have therefore sufficiently pled that River Front was
contractually obligated, via the Job Site Agreement, to make
contributions to them on behalf of Local 825's employees.
While Defendant attempts to dismiss their obligations to
contribute because their Job Site agreement as “very limited,”
they underestimate the consequences of signing these types of
agreements. (Def. Br. 6.)
Job Site agreements, “by
their very operation, must act as ‘master agreements’ that
supersede all other labor contracts (especially collective
bargaining agreements) bearing on a particular project.” Sheet
Metal Workers Intern. Ass’n Local Union No. 27, AFL-CIO v. E.P.
Donnelly, Inc., 673 F. Supp. 2d 313, 327 n. 22 (D.N.J. 2009)
(citing George Harms Const. Co., Inc. v. New Jersey Turnpike
Authority, 137 N.J. 8, 22 (1994)).
Moreover, “if obligations
arising under [Job Site] agreements were unenforceable,” the use
of these types of agreements “would be vitiated.” Id.
signed a contract promising to make contributions to the Funds,
and Plaintiffs allege that they have not followed through with
Such a claim, even without specific monetary
amounts, is sufficient to survive a motion to dismiss. See Local
Union No. 98 Intern. Broth. Of Elec. Workers v. LP Herman Co.,
No. 15-0815, 2015 WL 4273375 at *6 (E.D. Pa. Jul. 14, 2015)
(noting that allegations of “specific dollar amounts in the
Complaint” . . . “are not necessary to support” a Section 515
claim regarding unremitted contributions).
have refused Plaintiffs’ demands for an audit, see infra Section
IV.B, at this stage in the litigation, Plaintiffs cannot yet
determine the specific amount of Defendant’s unpaid
Furthermore, this Court is mindful that public policy
favors simplified Trustee collection litigation. In Central Pa.
Teamsters Pension Fund v. McCormick Dray Line Inc., 85 F.3d
1098, 1103 (3d Cir. 1996), the Third Circuit emphasized that
“Congress's purpose in enacting Section 515 [of ERISA] was to
allow multiemployer welfare funds to rely upon the terms of
collective bargaining agreements and plans as written, thus
‘permitting trustees of plans to recover delinquent
contributions efficaciously, and without regard to issues which
might arise under labor-management relations law ...’ ” Id. at
1104 (citations omitted).
Plaintiffs allege that Defendant has
not allowed the Trustees to recover delinquent contributions,
which, taken as true, would be a violation of Section 515 of
Thus, Defendant’s motion to dismiss Count I of the
Complaint is denied.
B. Count 2 – Failure to Submit Books and Records for Audit
Next, in Count 2, Plaintiffs argue that Defendant’s refusal
to submit to an audit not only violates the three agreements,
but also violates Sections 107, 209(a) and 515 of ERISA, 29
U.S.C. §§ 1027, 1059(a), and 1145. (Compl. §§ 41-42.)
Plaintiffs request injunctive relief requiring the defendant to
“present its books and records to the Trustee’s auditors for
examination.” (Compl. ¶ 44; Prayer for Relief ¶ 2.)
again argues that because it is not a signatory to the any of
the three agreements, Plaintiffs have no audit rights under
contract law or ERISA. (Def. Br. at 5; Reply Br. at 4.)
Defendant further argues that the language of the standard CBA
is clear that only signatories to the CBA are bound by the right
to audit and that Defendant did not sign that particular
For the following reasons, the Court holds that the
facts alleged in Plaintiffs’ Complaint state plausible claims
under contract law and ERISA under which Plaintiffs would be
entitled assert a claim to obtain an audit of River Front’s
books and records.
1. Contract Law
Although federal law governs the construction of collective
bargaining agreements, traditional contract principles apply
when not inconsistent with federal labor law. See Teamsters
Indus. Employees Welfare Fund v. Rolls-Royce Motor Cars, Inc.,
989 F.2d 132, 135 (3d Cir. 1993).
Defendant argues that because
it did not sign the standard CBA, which states that the Trustees
may only audit employers “signatory to [the standard CBA],”
Plaintiffs have not stated a plausible audit claim under general
principles of contract law. (Reply Br. at 6.)
While it is true
that audit rights are not explicitly discussed in the one-page
Job Site Agreement, which Defendant endorsed, Defendant
overlooks the doctrine of incorporation by reference.
doctrine allows parties to “incorporate contractual terms by
reference to a separate, contemporaneous document . . .
including a separate document which is unsigned.” 11 Williston
on Contracts § 30:25 (4th ed.)(May 2016); see also Nova Corp v.
Joseph Stadelmann Elec., Contractors, No. 07-1104, 2008 WL
746672, at *3 (D.N.J. Mar. 18, 2008) (“It is not necessary that
the document incorporated be one to which the parties to the
underlying contract are signatories.”). Incorporation by
reference is proper where the underlying contract makes clear
reference to a separate document, the identity of the separate
document may be ascertained, and incorporation of the document
will not result in surprise or hardship.” Standard Bent Glass
Corp. v. Glassrobots Oy, 333 F.3d 440, 447 (3d Cir. 2003); see
also World Fuel Services Trading, DMCC v. Hebei Prince Shipping
Co., Ltd., 783 F.3d 507, 519 n.6 (4th Cir. 2015) (“Under general
contract principles, where a contract expressly refers to and
incorporates another instrument in specific terms which show a
clear intent to incorporate that instrument into the contract,
both instruments are to be construed together.”).
order to uphold the validity of terms incorporated by reference,
it must be clear that the parties to the agreement had knowledge
of and assented to the incorporated terms.” See 11 Williston on
Contracts § 30:25 (4th ed.)(May 2016); see also Dakota Foundry,
Inc. v. Tromley Indus. Holdings, Inc., 737 F.3d 492, 496 (8th
Cir. 2013) (explaining that effectively incorporating documents
together does not require “physical attachment” nor “specific
language,” so long as there is clear evidence of an intent that
the incorporated writings are to be made part of the contractual
Here, Plaintiffs argue that because the one-page “job site
CBA” refers to and incorporates by reference the Independent
CBA, River Front is “plainly obligated to all of the terms of
the Independent agreement [which includes the right to audit],
at least for work performed on this one site.” (Opp’n at 2).
Plaintiffs also allege that the Trust Agreements “are
incorporated by reference into the collective bargaining
agreements.” (Compl. ¶ 5.)
As the governing law makes clear,
the Trustees have properly stated a claim enabling them to
enforce Defendant’s signed Job Site agreement incorporating the
CBA by reference.
Plaintiffs allege not only that Defendant
“received a copy of the Union’s standard collective bargaining
agreement for the period at issue,” showing that it had
knowledge of the CBA, but also that it exhibited assent because
in the signed Job Site agreement, Defendant agreed to “abide by
all of the Terms and Conditions of employment for its Employees,
as set forth in the [CBA]” (emphasis added). (Compl. ¶ 10.)
Courts in this Circuit and in others have found incorporation by
reference in similar contexts. See Standard Bent Glass Corp. v.
Glassrobots Oy, 333 F.3d 440 at 448 (holding that an arbitration
clause was incorporated by reference into the parties’
contract); Doug Brady, Inc. v. New Jersey Bldg. Laborers
Statewide Funds, 250 F.R.D. 171, 175 (D.N.J. 2008) (“The
incorporation of the CBA into the language of the Short Form
Agreement renders the language in the former part of the
Defendant attempts to minimize the legal effect of its
signature of the Job Site agreement as “very limited,” but
Courts have generally enforced the terms of these agreements.
See. e.g., Carpenters Local Union No. 345 Health and Welfare
Fund v. W.D. George Const. Co., 792 F.2d 64, 68-69 (6th Cir.
1986) (“[t]ypically, an employer’s assent to be bound by a
collective bargaining agreement is found in his or her signing
of a ‘short form agreement.’”).
Through the use of such one-
page agreements, often called “job site,” “participation,”
“short form,” “project,” or “me-too” agreements, a smaller,
usually independent, contractor agrees to be bound by a
collective bargaining agreement negotiated by a union and multiemployer bargaining group representing contractors within a
particular jurisdiction and pays contributions according to the
terms of such agreements. Id. at 68.
The basic purpose of these
agreements is to allow these small, independent employers to
obtain all the benefits of the standard collective bargaining
agreement that is negotiated by the principal employers in the
industry without having to participate in the industry
negotiations, or to engage in separate negotiations, every few
years. See Arizona Laborers Local 395 Health and Welfare Trust
Fund v. Conquer Cartage Co., 753 F.2d 1512, 1518-19 (9th Cir.
1985). Importantly, under Third Circuit law, whether or not the
employer signs the Job Site agreement or the standard CBA, there
is “no distinction regarding an employer’s contractual rights
and obligations,” and “the distinction between a . . . signatory
[to the CBA] and a [Job Site] signatory is without a
difference.” International Union of Bricklayers and Allied
Craftworkers, Local 5 v. Banta Tile & Marble Co., 344 F. App’x
770, 774 (3d Cir. 2009) (citing Berwind Corp. v. Comm’r of Soc.
Sec., 307 F.3d 222, 237 (3d Cir. 2002)).
Furthermore, it would be inappropriate for the court to
resolve the ambiguity of the term “signatory to this Agreement”
in the standard CBA at the current stage of the litigation.
Defendant argues that even if the Job Site agreement
incorporated the standard CBA, the standard CBA plainly states
that the Trustees “will have the right to conduct periodic
payroll audits of employers signatory to this Agreement,” and
since Defendant only signed the one-page agreement and not the
standard CBA, it should not have to submit to an audit. (Def.
Br. at 5).
On the other hand, Plaintiffs construe that language
to include Defendant’s signature to the Job Site agreement which
incorporates the CBA. (Opp’n at 3).
A contract term is
ambiguous if “it is susceptible to reasonable alternative
interpretations,” and whether a contract term is clear or
ambiguous is a question of law for the court. Sanford Inv. Co.
v. Ahlstrom Mach. Holdings, Inc., 198 F.3d 415, 421 (3d Cir.
At this stage, any facts as alleged in the Amended
Complaint and other evidence attached to the pleadings must be
construed in the light most favorable to Plaintiffs as the nonmoving parties, and any ambiguity in the CBA will be sufficient
to overcome a motion to dismiss. See Bat Blue Corp. v. Situs
Holdings, LLC, No. 15-8513, 2016 WL 3030814, at *4 (D.N.J. May
26, 2016) (“At the motion to dismiss stage, courts must bear in
mind that ‘if a contract is ambiguous as applied to a particular
set of facts, a court has insufficient data to dismiss a
complaint for failure to state [a] claim.’”).
As a result,
River Front’s motion is denied with respect to its arguments
concerning the unambiguous meaning of the term “signatory to
this Agreement” in the standard CBA.
In conclusion, by pleading sufficient facts demonstrating
that Defendant signed the Job Site agreement incorporating the
standard CBA by reference, Plaintiffs can survive Defendant’s
motion to dismiss on contract law grounds.
Plaintiffs’ Complaint also sets forth sufficient facts
establishing a claim that by refusing to submit to an audit,
River Front violated Sections 209 and 515 of ERISA, as well as
various provisions of the standard CBA and Trust Agreement.
Section 209 of ERISA requires an employer to “maintain records
with respect to each of his employees sufficient to determine
the benefits due or which may become due to such employees.” 29
U.S.C. § 1059(a).
These records must be “available for
examination for a period of not less than six years....” 29
U.S.C. § 1027.
Consistent with Section 209 of ERISA, the
standard CBA provides that “[t]he Funds Trustees will have the
right to conduct periodic payroll audits of employers signatory
to this Agreement.” (CBA at 13).
Here, Plaintiffs have alleged
that River Front, as an employer, was obligated under the CBA
that was in effect with the Union during the period of January
1, 2012 through December 31, 2014 to submit remittance reports,
pay contributions to the Funds, and provide the Funds' auditors
with all pertinent books and records as requested. (Compl. ¶¶
ERISA provides that, in addition to delinquent
contributions, a court shall award “such other legal or
equitable relief as the court deems appropriate.” 29 U.S.C.
Defendant has failed to submit its records to an
audit, (Compl. ¶¶ 30, 32, 34), and an audit constitutes an
appropriate form of relief where the amount of the delinquency
is not known. See Carpenters’ Dist. Council of Greater St. Louis
and Vicinity v. Hard Rock Foundations, LLC, No. 13-1549, 2013 WL
6037097, at *2 (E.D. Mo. Nov. 14, 2013).
have routinely interpreted this provision to allow audit costs
as part of the damages award. See Chi. Plastering Inst. Pension
Trust v. Cork Plastering Co., 570 F.3d 890, 902 (7th Cir. 2009)
(“This court, among others, have construed 29 U.S.C.
1132(g)(2)(E) to include an award of audit costs.”); see also
International Union of Operating Eng’gs of Eastern Pennsylvania
and Delaware Benefit Pension Fund v. N. Abbonizio Contractors,
Inc., 134 F. Supp. 3d 862, 867 (E.D. Pa. 2015); Board of
Trustees of Pointers, Cleaners & Caulkers Annuity Fund, Pension
Fund, and Welfare Fund v. Harbor Island Contracting, Inc., No.
13-6075, 2015 WL 1245963, at *6 (E.D.N.Y. Mar. 16,
2015)(awarding audit costs to plaintiff under § 1132(g)(2)(E));
Int’l Painters & Allied Trades Union & Indus. Pension Fund v.
J.L. Pierce Painting, Inc., 2006 WL 1071535, at *2 (D.D.C. Apr.
21, 2006) (granting the plaintiff access to an employer's books
and records under 29 U.S.C. § 1132(g)(2)(E)).
Defendant argues that Plaintiffs have not pled a plausible
audit claim under ERISA, but Plaintiffs argue that “ERISA gives
the Trustees the inherent authority to audit as a means of
marshaling the assets of the Funds in the fiduciary role they
hold to the Funds’ participants.” (Opp’n at 3.)
Court has indeed held that a benefit fund trustee has the right
to conduct an audit of contributing employers under ERISA.
Central States, Southeast and Southwest Areas Pension Fund v.
Central Transp., Inc., 472 U.S. 559 (1985).
entitled to use “such powers as are necessary or appropriate for
the carrying out of all purposes of the trust, and “ERISA
clearly assumes that trustees will act to ensure that a plan
receives all funds to which it is entitled....” Id. at 559, 571.
Here, Plaintiffs assert that an audit of Defendant’s payroll
records is necessary in order to determine “whether the Employer
is making full and prompt payments of sums required to be paid
to the Trust Fund (Compl. ¶ 18.)
As held by the Supreme Court
in Central States, this is a valid purpose for payroll
compliance audits as such information is necessary to the
administration of trusts. Id. at 579.
In essence, fund trustees
have a fundamental duty to locate and take control of fund
property – “a duty for which the right to audit is crucial.”
Jaspan v. Glover Bottled Gas Corp., 80 F.3d 38, 41 (2d Cir.
1996) (citations omitted).
The case law after Central States regarding audits is
sparse, but the cases that do exist support Plaintiffs’ audit
claim under ERISA.
In Santa Monica Culinary Welfare Fund v.
Miramar Hotel Corp., 920 F.2d 1491 (9th Cir. 1990), which both
parties discuss in their briefing, the trustees of a Fund sued
an employer, Miramar, to compel Miramar to submit to an audit of
The union and Miramar were parties to a collective
bargaining agreement that required Miramar to make contributions
to the fund.
The fund was established pursuant to a written
trust agreement, which explicitly authorized the fund to audit
the records of contributing employers. Id. at 1492.
collective bargaining agreement was silent as to whether the
fund had any right to audit the employers’ contributions and it
did not incorporate the trust agreement, so Miramar technically
was not a signatory to the Trust Agreement.
court had no difficulty holding that the fund had the right to
conduct an audit of Miramar’s records. Id. at 1494-95.
The Court first noted that “[w]e do not decide whether
ERISA confers upon the Fund the right to audit because the Trust
Agreement gives the Fund the right to audit [the employer]'s
records, despite the fact that the collective bargaining
agreement is silent on the issue.” Id. at 1493.
rely solely on ERISA, the court looked to the Trust Agreement
and held that the right to audit flowed from the Trust Agreement
and Miramar’s contributions to the fund.
This was the case,
despite the fact that the collective bargaining agreement was
silent on the issue and despite the fact that Miramar was not a
signatory to the Trust Agreement. Id. at 1493-94.
added that “Miramar and its employees cannot receive the
benefits from the Fund yet escape its attendant burdens, in this
case, the provision of the Trust Agreement permitting the
Trustees to audit an employer’s books and records.” Id. at 1494.
Furthermore, “[o]nce Miramar intended its employees to be
covered by the Fund, the Trust Agreement governing the Fund
requires Miramar to be bound to its terms. Id.
Defendant attempts to distinguish Miramar because there,
the employer signed both the Trust Agreement and CBA (Def. Br.
at 8), but its argument is incorrect.
Not only was the employer
in that case “not a signatory to the Trust Agreement,” see
Miramar, 920 F.2d at 1994 (emphasis added), but as explained
supra, River Front’s signing of the Job Site Agreement
incorporates the CBA by reference, thereby binding River Front
to the CBA provisions on audits.
Also, as explained supra, the
parties disagree as to whether or not Defendant was a signatory
to the standard CBA, or just to the one-page Job Site agreement.
The Eleventh Circuit case Plumbers and Steamfitters Local
No. 150 Pension Fund v. Vertex Constr. Co., 932 F.2d 1443, 1450
(11th Cir. 1991) also supports Plaintiffs’ position. There, the
Court found that an employer who made contributions pursuant to
collective bargaining agreement was bound to submit to audit
expressly contemplated by the Trust Agreement, despite the fact
that the collective bargaining agreement did not incorporate the
The Court added that it failed to see how an
employer “can avail itself of the benefits of the Funds without
being subjected to the rules that govern them.” Id. at 1451.
The court noted that to rule otherwise “would allow employers
and unions to bargain away the rights and powers of fund
trustees in agreements to which trustees were not a party.
a situation ultimately would result in underfunded plans that
could not pay appropriate benefits to their beneficiaries.” Id.
Because the relevant Trust Agreement explicitly
empowered the fund trustees to audit contributing employers, the
employer in Vertex was required to submit to the disputed audit.
In both Miramar and Vertex, without access to relevant
audit information, the respective Trustees could not ensure that
the employers had complied with the contribution requirements to
which they had bound themselves under their respective
collective bargaining agreements.
Consequently, the “burden” of
supplying relevant audit information was necessary to enforce
the funding provisions under the collective bargaining
agreements. Hanley v. Herrill Bowling Corp., No. 94-4611, 1995
WL 428966, at *3 (S.D.N.Y. Jul. 20, 1995).
In addition, New York State Teamsters Conference Pension &
Retirement Fund v. Boening Bros., Inc., 92 F.3d 127 (2d Cir.
1996), further supports Plaintiffs’ position, as it invokes the
common law fiduciary duties and powers of a trustee in finding a
right to audit.
There, the employer refused to submit to a Fund
audit because it claimed that it never signed or consented to be
bound to the Trust Agreement. Id. at 130.
While the court
acknowledged that the employer had not “entered into any
explicit contractual undertaking to submit to an audit by the
Fund,” it nevertheless concluded that the Trustees could audit
the employer “pursuant to their fiduciary duties under the Trust
Agreement and the common law of trusts as incorporated in
Expanding upon the rule of Central States, the
court held that “since the Trust Agreement makes no specific
Relevant common law duties of a trustee include (1) to preserve
and maintain trust assets, (2) to determine both the property
that forms the res of the trust and the identity of its
beneficiaries, and (3) to notify trust beneficiaries concerning
distributions to them. Central States, 472 U.S. at 572.
reference to audits, we believe that Central States' discussion
of an ERISA trustee's duties suggests that an employer audit may
be conducted by ERISA trustees so long as that audit is
‘necessary or appropriate to carry out the purposes of the trust
and [is] not forbidden by the terms of the trust.’” Id. at 132–
33. Thus, ERISA empowers audits so long as the Trust Agreement
“does not limit or preclude an audit of [the employer]'s
employment records,” id. at 132, and the plan trustee does not
overreach in exercising the power to audit, see id. at 133–34.
The court added that the employer “promised to contribute to the
Fund for its regular employees,” and an audit certainly
constitutes a reasonable method by which the Fund may “effect
the collection of such Employer Contributions.” Id. at 132.
Furthermore, auditing employers “is also an effective means for
the Fund to administer the fund, Restatement (Second of Trusts)
§ 169 (1959), keep appropriate accounts, id. § 172, take and
keep control of the trust property, id. § 175, and enforce
claims, id. § 177.”
Here, Plaintiffs seek an Order requiring defendant to
comply with the CBA, the Trust Agreement and with ERISA by
submitting to an audit of the relevant books and records.
(Compl. Prayer for Relief ¶ 2.)
The Complaint alleges that (1)
River Front has been a party to and bound by the CBAs with Local
825 covering the period from at least January 1, 2012 through
December 31, 2014) (Compl. ¶ 6), (2) that pursuant to the CBAs,
River Front received a copy of the Union’s standard CBA and
agreed to “abide by all of the Terms and Conditions of
employment for its Employees, as set forth in the [standard CBA]
. . .
and to make contributions to the [Union Funds], as
further provided in [the standard CBA]” (id., ¶ 10), and (3)
that River Front was bound by the Trust Agreement and the Funds’
Collection Policy. (Id., ¶¶ 13-14.)
The Complaint also
reproduces the relevant audit provisions in the Trust Agreement
and the Collection Policy. (Id., ¶¶ 18-21.)
The Court finds that these allegations, when taken as true,
are sufficient to state a cause of action under the law set
forth in Miramar, Vertex, and Boening.
That the Complaint fails
to allege that River Front actually signed the standard CBA form
or the Trust Agreement does not defeat Plaintiffs’ claim.
Court takes as true the allegation that River Front “underpaid
contributions owed to the Funds.” (Compl. ¶ 36.)
If that is in
fact the case, then it follows that River Front, like the
employer in Vertex, availed itself of the benefits of the Fund
and subjected itself to the rules that govern the Fund,
including the Trust Agreement’s requirement that employers
submit their payroll and wage records for audits.
The Court finds that the allegations that Defendant has
failed to comply with its contractual obligations and with the
statutory requirements of ERISA are sufficient to state claims
upon which relief can be granted.
C. Counts 3 and 4 – Unpaid Benefit Fund Contributions Found
in Audit; Estimated Contributions Owed for Failure to
In Count 3, Plaintiffs argue that if an audit reveals
contributions due, Defendant must pay under the three agreements
and Section 515 of ERISA. (Compl. §§ 46-48.)
In Count 4,
Plaintiffs argue that if Defendant fails to produce or has not
maintained books and records for the period sought to be
audited, Defendant has violated Sections 107, 209(a), and 515 of
ERISA. (Compl. § 52.)3
For the reasons set forth supra at
Section IV.B.2, the Court also denies Defendant’s motion to
dismiss these two Counts.
At best, Defendant’s motion to
dismiss Counts 3 and 4 is premature since no audit has been
undertaken and no funding or recordkeeping deficiencies have
An accompanying Order will be entered.
November 16, 2016
s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge
Section 515 of ERISA makes clear that if an employer who is
obligated to make contributions fails to do so in violation of
the collective bargaining agreement, then the Court may award
the plan (1) the unpaid contributions; (2) interest on the
unpaid contributions; (3) an amount equal to the greater of the
(a) interest on the unpaid contributions, or (b) liquidated
damages; (4) reasonable attorney’s fees and costs of the action;
and (5) such other legal or equitable relief as the court deems
appropriate. Teamsters Health and Welfare Fund of Philadelphia
and Vicinity v. Dimedio Lime Co., No. 06-4519, 2007 WL 4276559,
at *2 (D.N.J. Nov. 30, 2007) (citing 29 U.S.C. § 1132(g)).
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