Opinion
3:22-cv-01473-HZ
02-05-2023
REGIONAL LOCAL UNION NOS. 846 and 847, International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers, AFL-CIO; REGIONAL DISTRICT COUNCIL WELFARE PLAN AND TRUST, f/k/a LOCAL 846 REBAR WELFARE TRUST, By and Through Its Board of Trustees; REGIONAL DISTRICT COUNCIL RETIREMENT PLAN AND TRUST, f/k/a REBAR RETIREMENT PLAN AND TRUST, By and Through Its Board of Trustees; REGIONAL DISTRICT COUNCIL TRAINING TRUST, f/k/a LOCAL 846 TRAINING TRUST, By and Through its Board of Trustees; REGIONAL DISTRICT COUNCIL VACATION TRUST FUND, f/k/a LOCAL 846 VACATION TRUST, By and Through Its Board of Trustees, Plaintiffs, v. LSRI, LLC d/b/a Lone Star Rebar Installers, a Texas Limited Liability Company, Defendant.
Cary R. Cadonau Brownstein Rask Michael A. Evans Hartnett Reyes-Jones, LLC Attorneys for Plaintiffs
Cary R. Cadonau
Brownstein Rask
Michael A. Evans
Hartnett Reyes-Jones, LLC
Attorneys for Plaintiffs
OPINION & ORDER
MARCO A. HERNANDEZ, United States District Judge.
Plaintiff labor unions and employee benefit plans renew their motion under Federal Rule of Civil Procedure 55(b)(2) for an order compelling Defendant LSRI, LLC, to account for all amounts due and owing to Plaintiffs. For the following reasons, the Court grants Plaintiffs' motion in part and denies it in part.
Plaintiffs' complaint alleges violations of provisions of a collective bargaining agreement (“CBA”) between the Labor Union Plaintiffs and Defendant. ECF 1. The Employee Benefit Plan Plaintiffs are organized under the Employee Retirement Income Security Act (“ERISA”). Id. ¶¶ 2-5. Plaintiffs allege that Defendant has failed to make required contributions to the Employee Benefit Plan Plaintiffs and failed to remit check-off amounts of union dues to the Labor Union Plaintiffs. Id. ¶¶ 15-34. Defendant was served on October 6, 2022. Am. Affidavit of Personal Service, ECF 13. Defendant has failed to appear in this matter. The Court entered default at Plaintiffs' request on December 2, 2022. Order, ECF 16. Accordingly, the factual allegations relating to liability are taken as true. Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (“The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.”).
Plaintiffs previously moved for “an order compelling defendant to account for all amounts due and owing to plaintiffs from the period of February 21, 2022 to the present, so that the Court can subsequently determine and adjudicate the amount of damages for that time period and enter judgment for that amount.” Pl. Am. Mot. 2, ECF 15. The Court denied that motion because Plaintiffs had not submitted copies of the relevant trust agreements providing the right to an audit, or in the alternative briefed the issue of whether ERISA gives the right to an audit regardless of any right reserved in the trust agreements. Op. & Ord. 4-5, ECF 17. The Court also observed that Plaintiffs had not specified which accounts they wished to audit. Id. at 4.
In renewing their motion, Plaintiffs provide copies of the applicable trust agreements. Winter. Aff. Exs. 2-5, ECF 18. Defendant is bound by the terms of those agreements. Winter Aff. Ex. 1 at 11-12, ECF 18-3 (provision of CBA stating that the employer agrees to be bound by the terms of the trust agreements). Plaintiffs also clarify that they seek “a court order requiring defendant to submit the following documents within thirty days: all of its books, ledgers, payroll records, cash disbursement ledgers, bank statements, and other documents reflecting or pertaining to all hours worked by and wages paid to defendant's employees since February 21, 2022 to the present.” Pl. Mem. 5, ECF 18-1.
The evidence Plaintiffs submitted with their motion establishes that the Employee Benefit Plan Plaintiffs are entitled to an audit. The agreements for the Regional District Council Welfare Trust, Regional District Council Retirement Plan and Trust, and Regional District Council Training Trust all have a provision that reads:
The Trustees may require the employees, any individual employer, the Union, any individual employee or any other beneficiary under the Plan to timely submit to the Trustees any information, data, report or documents reasonably relevant and suitable for the purposes of such administration. The Trustees or their authorized agent or representative shall have the right to verify such information by examination of such of the records of the employers, including, without limitation,
payroll records and W-2 forms for all employees of each employer, as may be necessary to permit the Trustees to determine whether said employers are making full payment to the Trustees of the amounts required by their respective collective bargaining agreements.
Winter Aff. Ex. 2 at 18, ECF 18-4 (Welfare Trust); Ex. 3 at 18, ECF 18-5 (Retirement Plan and Trust); Ex. 4 at 19, ECF 18-6 (Training Trust). The Regional District Council Vacation Trust Fund agreement includes the following language: “[t]he Trustees shall further have the right to audit the books of a participating Employer when such is deemed necessary or desirable for the effective administration of the Trust.” Winter Aff. Ex. 5 at 10, ECF 18-7. Plaintiffs also submit a copy of the Funds' collection policy, which requires contributing employers to submit to payroll audits “at any time in the sole discretion of the Trustees.” Winter Aff. Ex. 7 at 3, ECF 18-9. The Court may order an audit pursuant to these provisions. Santa Monica Culinary Welfare Fund v. Miramar Hotel Corp., 920 F.2d 1491, 1494 (9th Cir. 1990) (holding that plaintiff employee benefit plan had the right to compel an audit of defendant employer's payroll records where the trust agreement pursuant to ERISA provided the right to an audit and the employer had agreed to be bound to the terms of the trust agreement).
The Employee Benefit Plan Plaintiffs have established that an audit is necessary. Mark Winter, an account executive at the third party administrator for the Employee Benefit Plan Plaintiffs, states that “Defendant has not submitted the monthly contribution report forms and contributions required by the collective bargaining agreement.” Winter Aff. ¶ 7. Mr. Winter further states that “[a]bsent a financial examination covering the period of February 21, 2022 to the present, it will be impossible to determine the amounts owed by defendant.” Id. ¶ 11.
The foregoing documents establish that the Employee Benefit Plan Plaintiffs have the right to audit Defendant's accounts to the extent necessary to determine the amount of unpaid contributions to the Trusts. Accordingly, the Court need not decide whether ERISA independently gives the Employee Benefit Plan Plaintiffs the right to an audit.
The trust agreements do not provide a basis to grant the Labor Union Plaintiffs' request for an audit to determine the amount of unpaid union dues. Further, an employee benefit plan's audit request is “illegitimate under the standard of loyalty if it [is] actually an effort by plan trustees to expand plan coverage beyond the class defined in the plans' terms or to acquire information about the employers to advance union goals.” Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 571 n.12 (1985). But “the mere fact that [a labor union] might benefit from some of the information acquired in the audit does not make the audit impermissible per se.” Plumber, Steamfitter & Shipfitter Indus. Pension Plan & Tr. v. Siemens Bldg. Techs. Inc., 228 F.3d 964, 969 (9th Cir. 2000). In the Plumber case, after the trustees of an ERISA employee benefit plan started an audit of the employer for unpaid contributions, the employer contended that the true motivation behind the audit was to try to help a labor union expand membership. Id. at 967-68. The audit occurred in the context of a long history of failed unionization efforts. Id. at 967. The district court found that the impermissible aim of obtaining new union dues did not motivate the audit, and the Ninth Circuit affirmed. Id. at 969.
The Court previously noted that the CBA does not mention audits. Op. & Ord. 4, ECF 17. The Court has previously relied on a provision in a Master Labor Agreement giving the plaintiff labor union the right to audit the defendant employer's payroll account in finding that the plaintiff had the right to an audit. Trustees of the Plumbers & Pipefitters Nat. Pension Fund v. John Craig Plumbing LLC, No. 3:11-CV-1325-HU, 2012 WL 1969046, at *1 (D. Or. May 25, 2012).
Here there is no evidence of an impermissible motive. The Employee Benefit Plan Plaintiffs seek to determine the amount of unpaid contributions, which is a legitimate purpose for an audit. The Labor Union Plaintiffs seek payment of unpaid check-off amounts of union dues for employees covered by the CBA to which Defendant is a party. Compl. ¶¶ 27-34; Winter Aff. Ex. 1. The Court has no reason to believe the Labor Union Plaintiffs are motivated by any goal other than the one stated in the complaint, or that the Employee Benefit Plan Plaintiffs harbor an improper motive on their behalf. Accordingly, the Employee Benefit Plan Plaintiffs may audit Defendant's accounts to the extent necessary to determine the amount of unpaid contributions to the employee benefit plans. If such an audit incidentally benefits the Labor Union Plaintiffs in revealing the amount of unpaid union dues for covered employees, the Employee Benefit Plan Plaintiffs may share that information with the Labor Union Plaintiffs under an appropriate confidentiality agreement. See Plumber, 228 F.3d at 969. The Labor Union Plaintiffs may not directly participate in the audit. This decision is without prejudice as to a future motion by the Labor Union Plaintiffs advancing an alternative basis for their right to an audit.
CONCLUSION
Plaintiffs' Second Amended Motion for Default Order to Compel Accounting [18] is GRANTED IN PART. Defendant is ORDERED to submit the following documents for an audit by auditors selected by the Employee Benefit Plan Plaintiffs within 30 days of the date of entry of this Opinion and Order: all of its books, ledgers, payroll records, cash disbursement ledgers, bank statements, and other documents reflecting or pertaining to all hours worked by and wages paid to Defendant's employees from February 21, 2022, to the present. The audit is to be conducted consistent with this Opinion. The motion is DENIED to the extent that the Labor Union Plaintiffs independently seek an audit of Defendant's accounts.
IT IS SO ORDERED.