Summary
In Five Seasons, this court refused to rely upon an audit report similar to the report submitted by the plaintiffs in this case because it was insufficient to meet the plaintiff's burden of showing that the employees at issue had performed work covered by the collective bargaining agreement.
Summary of this case from Trustees Of, I.B.E.W. Local Union 405 v. Duball ElectricOpinion
No. C01-0027
November 5, 2002
ORDER
This matter comes before the court pursuant to the plaintiffs' August 14, 2002 motion for summary judgment (docket number 23). The parties have consented to the exercise of jurisdiction by a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). The court held oral argument on this motion on October 29, 2002, at which the plaintiffs were represented by Kay Johansen. The defendant was represented by Kelly Baier. For the reasons set forth below, the court grants the motion for summary judgment in part and denies it in part.
In this case, the plaintiffs, Trustees of the I.B.P.A.T. Local 447 Pension Plan (the Plan), allege that the defendant, Five Seasons Paint and Dry Wall, Inc., failed to make required contributions to the Plan pursuant to collective bargaining agreements. The plaintiffs move for summary judgment pursuant to the Employee Retirement Income Security Act (ERISA) and the Labor Management Relations Act (LMRA) arguing: (1) the defendant is unable to dispute the accuracy of a payroll audit that demonstrated delinquent contributions for the years of 1996 through 1997; (2) the defendant is bound by the terms of a subsequent collective bargaining agreement through its course of conduct for the period of May of 1999 through April of 2000; (3) the defendant signed a collective bargaining agreement effective for the period of May 10, 2000 through April 30, 2003 and therefore should have made the appropriate contributions pursuant to that agreement for the period of May of 2000 through November of 2000.
Summary Judgment: The Standard
A motion for summary judgment may be granted only if, after examining all of the evidence in the light most favorable to the nonmoving party, the court finds that no genuine issues of material fact exist and that the moving party is entitled to judgment as a matter of law. Kegel v. Runnels, 793 F.2d 924, 926 (8th Cir. 1986). Once the movant has properly supported its motion, the nonmovant "may not rest upon the mere allegations or denials of [its] pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial."Fed.R.Civ.P. 56(e). "To preclude the entry of summary judgment, the nonmovant must show that, on an element essential to [its] case and on which it will bear the burden of proof at trial, there are genuine issues of material fact." Noll v. Petrovsky, 828 F.2d 461, 462 (8th Cir. 1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317 (1986)). Although "direct proof is not required to create a jury question, . . . to avoid summary judgment, `the facts and circumstances relied upon must attain the dignity of substantial evidence and must not be such as merely to create a suspicion.'" Metge v. Baehler , 762 F.2d 621, 625 (8th Cir. 1985) (quoting Impro Prod., Inc. v. Herrick, 715 F.2d 1267, 1272 (8th Cir. 1983)). In applying these standards, the court must give the nonmoving party the benefit of all reasonable inferences to be drawn from the evidence. Krause v. Perryman, 827 F.2d 346, 350 (8th Cir. 1987).
Statement of Undisputed Material Facts
The plaintiffs are the trustees of an employee benefit plan governed by ERISA as defined by 29 U.S.C. § 1002(37). The Plan has been established pursuant to a collective bargaining agreement and is administered in Cedar Rapids, Iowa. The defendant is a business involved in commercial interior painting and drywalling with offices in Cedar Rapids, Iowa. The defendant has been a union contractor since 1980. The Trust Agreement for the Plan stated that all employers were to make pension contributions in accordance with the terms of the collective bargaining agreement.
The defendant agreed to be bound by the terms of the collective bargaining agreement effective for the period of May 1, 1996 through April 30, 1999. This agreement was negotiated by the Linn Chapter Painting and Decorating Contractors Association (PDCA) on behalf of the defendant and other union contractors, and the I.B.P.A.T., Local 447 (the Union). This agreement provided that all employees performing bargaining unit work were to have pension contributions submitted on their behalf at the rate of $2.40 per hour worked. After a payroll audit was conducted in February of 1998 for the period of 1996 through 1997 the plaintiff alleged that the defendant underreported 688 payroll hours for 1996 and 4874.5 hours for 1997 for a number of its employees. The auditor concluded that the defendant was delinquent in remitting pension contributions in the total amount of $13,350.00.
On February 1, 1999, Randy Feaker, president and general manager of Five Seasons, notified the PDCA and the Union that the PDCA no longer represented the defendant for purposes of negotiating a collective bargaining agreement. The PDCA and the Union then negotiated a new collective bargaining agreement effective May 9, 1999 through April 30, 2000 which required pension contributions at the rate of $2.85 per hour worked per employee. The defendant did not sign this agreement.
The defendant and the Union began their own negotiations for a collective bargaining agreement in the spring of 1999. During the course of negotiations, the defendant continued to make pension contributions at the rate provided for by the collective bargaining agreement that had expired on April 30, 1999. The defendant also paid wages for employees performing bargaining unit work at union scale pursuant to the new agreement, paid union dues on behalf of all employees performing bargaining unit work, and employed union members. From May of 1999 through November of 2000, the defendant continued paying pension contributions at the rate of $2.40 pursuant to the May 1, 1996 collective bargaining agreement.
On January 11, 2001, the Union and the defendant signed a collective bargaining agreement effective May 10, 2000 through April 30, 2003. The agreement was prepared by the Union and it was made retroactive to May 10, 2000. Mr. Feaker signed the agreement without reading it. This agreement required the defendant to make pension contributions at the rate of $3.20 per hour worked per employee. The defendant continued making pension contributions at the rate of $2.40.
Conclusions of Law
"ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries by regulating the creation and administration of employee benefit plans." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44 (1987). Section 515 of ERISA provides that:
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 agreement.29 U.S.C. § 1145. In passing this section, it is clear that Congress intended that this section would simplify actions to collect delinquent contributions, avoid costly litigation, and enhance the actuarial planning necessary to the administration of multiemployer benefit plans.See, e.g., Central States, Southeast Southwest Areas Pension Fund v. Gerber Truck Serv., 870 F.2d 1148, 1152 (7th Cir. 1989). Section 502 of ERISA allows beneficiaries of an employee benefit plan to bring a civil action to enforce the employer's compliance with the plan. 29 U.S.C. § 1132(a)(3). Therefore, the trustees of funds may sue under ERISA to recover unpaid contributions mandated by collective bargaining agreements. Under ERISA § 515, the funds may collect only those contributions that the defendant is contractually obligated to pay. Carpenter's Fringe Benefit Fund of Ill. v. McKenzie Eng'g, 217 F.3d 578, 582 (8th Cir. 2000) (citing DeVito v. Hempstead China Shop, Inc., 38 F.3d 651, 653-54 (2d Cir. 1994)). Therefore, the court must first review the language of the agreements and determine whether they obligated the defendant to contribute to the funds, and if so, the extent of the required contributions. See Ill. Conference of Teamsters Employers Welfare Fund v. Mrowicki, 44 F.3d 451, 458 (7th Cir. 1994).
1996-1997 Contributions
The plaintiffs first argue that they are entitled to summary judgment for delinquent contributions for the years of 1996 through 1997. The evidence submitted by the plaintiffs in support of this argument includes: the affidavit of the auditor, Patrick Heller; Patrick Heller's audit report; the affidavit of Scott Smith, a trustee of the Plan; and a copy of the collective bargaining agreement effective for the period of May 1, 1996 through April 30, 1999. As stated in his report and his affidavit, Mr. Heller found that the defendant was delinquent in contributions for the years 1996 and 1997 in the amount of $13,350.00 because it failed to report 5542.5 hours of work during these two years. The five employees in issue in this case are Emmett Hamed, Gary Feaker, Dennis Burrier, Gary Aldridge, and Mike Boeber. In his affidavit, Mr. Smith stated that the defendant agreed to be bound by the May 1, 1996 through April 30, 1999 collective bargaining agreement. This agreement required the defendant to make contributions on behalf of all journeymen and apprentices. The plaintiffs also included the deposition testimony of Mr. Smith, in which he stated:
Q: Anything else that you know about Mr. Hamed's work with Five Seasons other than what you've told us today?
A: Other than that he is still employed by Five Seasons, no.
Q: Gary Feaker, what do you know about Gary Feaker's work with Five Seasons in the 1996, '97 time frame?
A: He was one hell of a painter, production person, did a lot of work in a short period of time. As far as — been a painter for a long period of time, contractor on his own before he got — became employed by Five Seasons.
Q: In 1996, '97 did Mr. Feaker, Gary Feaker, perform supervisory functions for Five Seasons?
A: He may have ran jobs.
Q: Did you ever work on any jobs with Gary Feaker?
A: Not that I recall in that time period or — Well, we may have been on the same job on occasion.
Q: Anything else that you can tell me about your knowledge of Gary Feaker's work in the 1996 through '97 time frame?
A: No.
Q: You mentioned a Mr. Aldridge. What can you tell us about his work during the 1996, '97 time frame?
A: He was a drywall finisher.
Q: Did you work on any jobs with Mr. Aldridge?
A: Probably on occasion.
Q: Do you recall when?
A: I don't recall specific jobs or dates, no.
Q: Where?
A: Don't recall.
Q: Anything else that you can recall about Mr. Aldridge's work with Five Seasons in the 1996 through '97 time frame?
A: Not that this time.
Q: Anyone else that you believe Five Seasons should have made contributions for during the 1996, '97 time frame other then Mr. Hamed, Gary Feaker and Mr. Aldridge?
A: Dennis Burrier.
Q: And what can you tell me about Mr. Burrier's work for Five Seasons in the 1996, '97 time frame?
A: He was a painter.
Q: Anything else?
A: Not to my recall right now, no.
Q: Did you work any jobs with him?
A: I had worked on jobs with him, but I don't recall if there were any during that period.
"ERISA plan trustees may audit an employer's payroll records to verify that required contributions have been paid." Carpenters Fringe Benefit Funds of Ill. v. McKenzie Eng'g, 217 F.3d at 582 (citing Central States, Southeast Southwest Areas Pension Fund v. Central Transp., Inc., 472 U.S. 559 (1985)). ERISA imposes a duty on employers to maintain records of the number of hours worked by employees. Brick Masons Pension Trust v. Indus. Fence Supply, Inc., 839 F.2d 1333, 1338 (9th Cir. 1988). As part of their threshold burden, the plaintiffs must produce evidence proving there actually existed some employees who performed covered work that was unreported to the Plan. See Motion Picture Indus. Pension Health Plans v. N.T. Audio Visual Supply, Inc., 259 F.3d 1063, 1066-67 (9th Cir. 2001). "[O]nce the trustees produce evidence raising genuine questions about the accuracy of the employer's records and the number of hours worked by the employees, the burden shifts to the employer to come forward with evidence of the precise amount of work performed." Brick Masons Pension Trust v. Indus. Fence Supply, Inc., 839 F.2d at 1338. In other words, once the plaintiffs meet their threshold burden, the burden shifts to the employer to come forward with evidence of the "extent of the [damage]." Id.
In this case, the plaintiffs' claim for unpaid contributions is based entirely on the auditor's report. The plaintiffs contend they have met their threshold burden by providing a copy of the report. They further assert that the burden then shifted to the defendant to dispute the accuracy of the auditor's report and the defendant has not met that burden. However, the court need not address that issue. The court finds that the plaintiffs have not met their threshold burden. It is unclear from the auditor's report what type of work the listed employees performed during this time period. The report simply lists the names of employees and the number of their unreported hours but it does not indicate the type of work they performed. Mr. Smith's deposition testimony also does not support the plaintiffs' argument. It is clear from Mr. Smith's testimony that he cannot recall if any of these employees did in fact perform collective bargaining work during this time period. The plaintiffs are asserting a right to contributions for all hours worked by these employees during this time period, claiming the five employees performed bargaining unit work. However, the plaintiffs have provided no evidence in support of that assertion and they cannot simply assume that these employees were performing collective bargaining unit work. The plaintiffs have not met their threshold burden. Summary judgment for this time period is denied.
The defendant argues that it did not report these hours because the hours in question represent work by its employees not covered by the collective bargaining agreement. In support of its argument, the defendant has submitted: the affidavit of Randy Feaker; Randy Feaker's deposition testimony; and Randy Feaker's interrogatory answers. In his affidavit, Mr. Feaker asserted that the audit conducted was inaccurate because it did not distinguish between employees who performed bargaining unit work and those who did not. He stated in his deposition that Emmett Hamed and Gary Feaker did not do collective bargaining unit work and Denny Burrier and Gary Aldridge did union work off and on. Mr. Feaker's interrogatory answers indicated that Emmett Hamed and Gary Feaker were not performing work covered by the agreement, and Denny Burrier, Gary Aldridge and Mike Boeber were not at all times performing work covered by the agreement.
May 1999 — April 2000 Contributions
The plaintiffs next argue that the defendant is bound by the May 9, 1999 through April 30, 2000 collective bargaining agreement, even though it never signed the agreement, because of its course of conduct. Therefore, the plaintiffs assert summary judgment should be granted in their favor for delinquent contributions for the period of May of 1999 through April of 2000. In its brief, the defendant also moves for summary judgment in its favor for this time period. It is undisputed that the defendant did not sign the May 9, 1999 collective bargaining agreement. Section 302(c)(5)(B) of the LMRA does not require an agreement be signed, only that it be "written" and set forth "a detailed basis on which . . . payments are to be made" to a fund. 29 U.S.C. § 186(c)(5)(B). A contract does not need to be signed to be enforceable. "The contract needn't be in writing; if it is in writing, it needn't be signed, provided there's other evidence of acceptance. . . ."Operating Eng'rs Local 139 Health Benefit Fund v. Gustafson Constr. Corp., 258 F.3d 645, 649 (7th Cir. 2001).
A motion for summary judgment must be a document separate from a brief in resistance to another motion for summary judgment.
Therefore, the only question for the court is whether the defendant's conduct manifested an intent to adopt the unsigned agreement. In support of their argument that the defendant did manifest an intent to adopt the agreement, the plaintiffs submitted: the affidavit of Scott Smith; a letter from Randy Feaker to the Union; a copy of the collective bargaining agreement negotiated between the PDCA and the Union; several letters written between the Union and the defendant dating from May 20, 1999 through April 24, 2000; Scott Smith's deposition; Randy Feaker's deposition; and the deposition of Gary Jondle, a trustee of the Plan. In his affidavit, Mr. Smith acknowledged that Mr. Feaker notified the PDCA and the Union that the PDCA no longer had the authority to represent the defendant in negotiations for collective bargaining. Further, his affidavit indicated that after April 30, 1999, the date the previous agreement expired, the defendant continued to pay wages at union scale for all employees doing collective bargaining unit work, paid union dues and called for union workers, as was provided for in the new agreement, but continued to pay the pension contribution rate specified in the expired agreement. In a letter dated February 1, 1999 from the defendant to the Union, the defendant stated that the PDCA no longer had any authority to engage in collective bargaining on its behalf. The plaintiffs also point to the correspondence between the defendant and the Union to prove their assertion that because the defendant agreed to pay the higher contribution rate, the Union agreed to end its strike. However, this correspondence indicates nothing more than the fact that the Union and the defendant were engaged in ongoing negotiations to enter into a collective bargaining agreement of their own. In his deposition testimony, Mr. Feaker admitted that he paid wages at the collective bargaining agreement rate or above even after the previous collective bargaining agreement expired. In his deposition, Mr. Jondle described some of the negotiations between the Union and the defendant.
The defendant contends that it was not complying with the provisions of the May 9, 1999 agreement, rather, it was complying with the expired agreement while it was negotiating with the Union, as it was required to do under the LMRA. In support of its argument, the defendant's evidence includes: the letter from the defendant to the Union stating that the PDCA no longer represents it in collective bargaining negotiations; Randy Feaker's affidavit; and Randy Feaker's deposition. In his affidavit, Mr. Feaker contends that he continued to abide by the previous collective bargaining agreement after April 30, 1999 until the Union and the defendant came up with an agreement of their own. In his deposition, Mr. Feaker stated that he did not sign the collective bargaining agreement negotiated between the PDCA and the Union because he disagreed with what the PDCA was doing.
The plaintiffs rely on two cases in support of their argument. The first is Robbins v. Lynch in which the court granted summary judgment to the trustees of funds when the employer "paid the union scale, turned over dues under a checkoff system, negotiated grievances, and paid (some) pension and welfare contributions. It later invoked the termination clause of the agreement." Robbins v. Lynch, 836 F.2d 330, 332 (7th Cir. 1988). In the second case relied upon by the plaintiffs, the Seventh Circuit upheld the lower court's finding that the employer adopted a collective bargaining agreement by payment of union wages, submission of benefit reports, and accession to an audit. Trustees of Atlanta Iron Workers, Local 387 Pension Fund v. S. Stress Wire Corp., 724 F.2d 1458, 1459-60 (11th Cir. 1983) (per curium).
However, both cases are distinguishable from this one. In Robbins, the employer had promised to be bound by whatever the new collective bargaining agreement stated and promised to sign it. Robbins v. Lynch, 836 F.2d at 331. The employer later never signed the agreement but did follow all of its provisions so the court found that it adopted the agreement by a course of conduct. Id. at 332. In this case, there is no evidence that the defendant followed any of the provisions of the agreement negotiated between the Union and the PDCA except for the fact it paid union scale wages. Further, the defendant never promised to abide by the agreement, rather, the defendant specifically stated it did not intend to be bound by any agreement negotiated between the Union and the PDCA.
In Southern Stress, the court held that in addition to the fact that it was clear from a pre-hire agreement with the union that the employer adopted the collective bargaining agreement, the employer also manifested intent to be bound by the agreement when it secured all of its labor from the union hiring hall, the pay to its employees was in conformance with the pay scale established by the agreement, benefit contributions were made, and two audits were conducted pursuant to a trust established. Again, in this case, the defendant has made clear that it was no longer being represented by the PDCA and it did not intend to be bound by any agreement negotiated between it and the Union.
While it was negotiating with the Union on its own behalf, the defendant followed the provisions of the past agreement and the plaintiff has presented no evidence that the defendant was complying with the new agreement except for the fact that it was paying union scale wages. Mr. Feaker did admit that he paid union scale wages but that fact alone is not indicative of a manifestation of assent to be bound by the agreement that was negotiated between the PDCA and the Union. But for Mr. Smith's affidavit, the plaintiffs have provided no proof that the defendant was paying union dues and hiring only union workers pursuant to the new agreement or that the defendant acted with the intention of complying with this agreement. The letters between the defendant and the Union that the plaintiff points to in support of this argument appears to the court to be nothing more than correspondence between the Union and the defendant during their ongoing labor negotiations. These letters merely indicate that the defendant was individually negotiating with the Union to come up with a collective bargaining agreement of their own, using the agreement negotiated between the PDCA and the Union as a working draft between them. Throughout the course of negotiations, the defendant was never bound by any agreement, except to maintain the status quo. Scott Smith, a union negotiator and a trustee of the Plan admitted to this in his deposition.
Q: Did you believe that as a result of that March 2000 meeting there had been an agreement on a collective bargaining agreement between Local 447 and Five Seasons?
A: No. . . .
Q: At the end of that April 2000 meeting, did you think that there was a collective bargaining agreement that had been agreed to between Local 447 and Five Seasons?
A: No, not that was agreed to.
The plaintiffs' evidence does not establish an agreement to end a strike in exchange for a bargained for pension contribution increase. The defendant in no way manifested an intent to be bound by the collective bargaining agreement negotiated between the PDCA and the Union. Plaintiffs' motion for summary judgment on this issue is denied.
May 2000 — November 2000 Contributions
Finally, the plaintiffs argue that the defendant signed a collective bargaining agreement effective May 10, 2000 through April 30, 2003 and therefore, summary judgment should be granted in their favor for the period of May of 2000 through November of 2000. The plaintiff states that the agreement specifically stated that the pension contributions were to be remitted at the rate of $3.20 per hour worked per employee. Therefore, the plaintiff contends that the defendant is bound, even though Mr. Feaker claims that he did not read the agreement before he signed it.
The defendant argues that it never consented to making the agreement it signed on January 11, 2001 retroactive. Mr. Feaker claims that he signed it with the belief that the agreement would start on that day. He admitted that he did not read the agreement before signing it because he "trusted" the Union to prepare a document that accurately reflected their prior negotiations and the Union "slipped in" the date making the agreement retroactive. Therefore, the defendant asserts there was fraud in the execution of the document because Mr. Feaker signed a document the Union represented to be something completely different. Further, the defendant points to the fact that this was the first collective bargaining agreement negotiated by Mr. Feaker so it was not unreasonable for him to rely on the Union to prepare the document consistent with their negotiations.
Fraud in the execution involves deceiving a party as to the nature of an agreement so that the signing party does not actually know what he is signing. 12 Williston on Contracts § 1488, at 332 (3d ed. 1970). Fraud in the execution results in the agreement being void ab initio. Id.
Because an employer's assent procured by fraud in the execution renders the agreement void and the purported contract between the employer and the Union nonexistent, section 515 does not foreclose the defense of fraud in the execution to actions by pension funds to collect delinquent contributions.
Laborers' Pension Fund v. A C Envtl., Inc., 301 F.3d 768, 780 (7th Cir. 2002). To prevail on a claim of fraud in the execution, a party must show "excusable ignorance of the contents of the writing signed."Southwest Adm'rs, Inc. v. Rozay's Transfer, 791 F.2d 769, 774 (9th Cir. 1986) (citing U.C.C. § 3-305 cmt. 7).
In order to establish the defense of fraud in the execution, [the employer] had to prove that it did not know that it was signing a collective bargaining agreement that obligated it to make contributions to the [plan] and that its ignorance was excusable because it had reasonably relied upon the representations of the union representative.Id.
The defendant in this case does not argue that it thought the document it signed was not a collective bargaining agreement. Mr. Feaker's claim that he did not read it is an obvious non-starter. His claimed ignorance as to the dates of effectiveness is irrelevant because he had a reasonable opportunity to review the document before signing it. He only had to glance above his signature line to see the dates of effectiveness. The Union is his adversary. Mr. Feaker has been a union contractor since 1980 so he should have been familiar with union contracts and the fact they are sometimes made retroactive. The facts here do not approach fraud. Summary judgment in favor of the plaintiffs is appropriate for this time period.
Based upon the foregoing,
IT IS ORDERED that the plaintiffs' motion for summary judgment (docket number 23) is granted in part and denied in part as follows:
1. On the plaintiffs' claim that the defendant is unable to dispute the accuracy of a payroll audit that demonstrated delinquent contributions for the years of 1996 through 1997, summary judgment is denied.
2. On the plaintiffs' claim that the defendant is bound by the terms of a subsequent collective bargaining agreement through its course of conduct for the period of May of 1999 through April of 2000, summary judgment is denied.
3. On the plaintiffs' claim that the defendant signed a collective bargaining agreement effective for the period of May 10, 2000 through April 30, 2003 and therefore should have made the appropriate contributions pursuant to that agreement for the period of May of 2000 through November of 2000, summary judgment is granted.