Carpenters Fringe Ben. Funds v. Able Bros. Const., No. 90 C 6482.

• Decision Date: 18 February 1993
• Docket Number: No. 90 C 6482.
• Citation: 813 F. Supp. 643
• Parties: CARPENTERS FRINGE BENEFIT FUNDS OF ILLINOIS, Plaintiffs, v. ABLE BROS. CONSTRUCTION, INC., a corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

813 F. Supp. 643

CARPENTERS FRINGE BENEFIT FUNDS OF ILLINOIS, Plaintiffs, v. ABLE BROS. CONSTRUCTION, INC., a corporation, Defendant.

No. 90 C 6482.

United States District Court, N.D. Illinois, E.D.

February 18, 1993.

Bernard M. Baum, James Merrill Neuman, Alan H. Auerbach, Baum & Sigman, Ltd., Chicago, IL, for plaintiffs.

Robert Patrick Casey, Dwight D. Pancottine, Michelle T. Barrett, Murphy, Smith & Polk, Chicago, IL, for defendant.

MEMORANDUM OPINION AND ORDER

HOLDERMAN, District Judge:

This is an action brought by Carpenters Fringe Benefit Funds of Illinois, jointly-administered, labor-management fringe benefit funds ("plaintiffs"), alleging that Able Bros. Construction, Inc. ("defendant") has failed to pay all necessary contributions for work performed by beneficiaries of the plaintiffs. The action is brought pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. §§ 1132, 1145. The plaintiffs have moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons stated herein, the plaintiffs' motion is denied.

BACKGROUND

This dispute focuses on alleged benefit contributions that were not made by the defendant to the plaintiffs.

The defendant and the Fox River Valley District Council of Carpenters of the United Brotherhood of Carpenters and Joiners of America ("Union") executed a document entitled "Memorandum of Agreement" on September 17, 1970. (Defendant's Rule 12(N) Statement, No. 3).

The one-page document is set out in relevant portion below.

MEMORANDUM OF AGREEMENT

THIS AGREEMENT made and entered into in Aurora, Illinois, by and between ABLE BROS. CONST. ("EMPLOYER") and Fox River Valley District Council of Carpenters of the UNITED BROTHERHOOD OF CARPENTERS AND JOINERS OF AMERICAN ("UNION").

In consideration of the mutual promises of each other, the parties hereby AGREE as follows:

1. The EMPLOYER recognizes the UNION as the sole and exclusive bargaining representative for and on behalf of the employees of the EMPLOYER now or hereafter employed within the territorial and occupational jurisdiction of the UNION.

2. The parties do hereby adopt the latest Agreement, and all approved amendments thereto between the UNION and the ASSOC. and agree to be bound by all of the terms and conditions thereof for the duration of such Agreement and for the period of any subsequent extensions including any amendments which may be subsequently made, unless either party serves written notice upon the other at least one hundred twenty (120) days prior to the stated expiration date in the Agreement or to any subsequent expiration date of a desire to terminate this Memorandum of Agreement.

3. This Agreement shall become effective upon the date of execution.

IN WITNESS WHEREOF, the parties have executed this Agreement the 17th day of September, 1970.

(Smith Affidavit, Exhibit A.)

This Memorandum of Agreement has not been terminated by written notice.

The plaintiffs claim that Memorandum of Agreement binds the defendant to the collective bargaining agreements and trust agreements referenced therein. This includes the voluminous Joint Agreement between the Union and the Fox Valley General Contractors Association. (Smith Affidavit, Exhibit B.) The defendant maintains that it never received, reviewed or executed any copies of the association agreement or trust agreements allegedly incorporated by reference in the Memorandum of Agreement. (Defendant's Memorandum in Opposition to Plaintiffs' Motion for Summary Judgment, p. 2.) Defendant asserts that it believed the Memorandum Agreement only applied to union carpenters, and only required the defendant to pay union wages and fringe benefits to the union carpenters that defendant hired. (Defendant's Memorandum in Opposition, p. 2.) Defendant further states that, other than paying union wages and fringe benefits to its union carpenter employees, defendant was never required to conform its employment practices to the requirements contained in association agreement. (Defendant's Memorandum in Opposition, p. 3.)

The defendant asserts that it has made all the contributions to the plaintiffs which the defendant believes were required since signing the Memorandum of Agreement in 1970. (Estes Affidavit, ¶ 4.) The plaintiffs have submitted documentation that the defendant has made contributions at least through April 1990. (Plaintiffs' Memorandum in Reply, Exhibit 1.) The defendant is a presently defunct corporation that has not operated since the Spring of 1991. (Estes Affidavit, p. 1.)

The plaintiffs assert that the defendant has several obligations under the agreements and declarations of trust:

Defendant is obligated by the agreements to make fringe benefit contributions to Plaintiffs under the agreements and declarations of trust pursuant to which the Plaintiffs are maintained. Defendant is specifically required to do the following:

(a) To submit for each month a report stating the names, social security numbers and number of hours worked in such month by each and every person on whose behalf contributions are required to be made by Defendant to Plaintiffs, or if no such persons are employed, to submit a report so stating;

(b) To accompany the aforesaid reports with payment of contributions based upon an hourly rate as stated in the applicable collective bargaining agreement or agreements;

(c) To make all of its payroll books and records available to Plaintiffs for the purpose of auditing the same to verify the accuracy of Defendant's past reporting upon request made by Plaintiffs;

(d) To compensate Plaintiffs for the additional administrative costs and burdens imposed by the delinquent or untimely payment of contributions by way of the payment of liquidated damages in the amount of 10 percent of any and all contributions which are not received by Plaintiffs for a particular month prior to the 10th day of the succeeding month, or the sum of 20 percent of such contributions as liquidated damages should there be further delay in payment as necessitates the filing of a lawsuit by Plaintiffs against Defendant.

(Plaintiffs' 12(N) Statement, ¶ 5.)

An audit of the defendant's payroll books and records for the months of January 1985 through April 1990 was conducted on behalf of the plaintiffs on May 29, 1990.¹ (Halfpenny Affidavit, p. 8, Exhibit A.) Total alleged delinquencies found for the period were $17,581.00 in connection with two employees, L. Roberson and G. Hegeman.

ERISA Section 515, under which the plaintiffs have brought this action, provides:

Every employer who is obligated to make contributions to a multi-employer 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 (1985).

The plaintiffs claim damages as a consequence of this delinquency of $20,039.58, which is composed of the $17,581.98 delinquency, $1,758.20 liquidated damages (10% of the delinquency) and $699.40 in audit fees. (Plaintiffs' Memorandum in Support, p. 4.) The plaintiffs also claim $3,500 in costs and attorney's fees. (Plaintiffs' Memorandum in Support, pp. 4-5.)

The plaintiffs' damages track ERISA Section 502(g), which lists available damage awards:

(g) Attorney's fees and costs; awards in actions involving delinquent contributions

(1) In any action under this subchapter (other than an action described in paragraph (2)) by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party.

(2) In any action under this subchapter by a fiduciary for or on behalf of a plan to enforce section 1145 of this title in which a judgment in favor of the plan is awarded, the court shall award the plan —

(A) the unpaid contributions,

(B) interest on the unpaid contributions,

(C) an amount equal to the greater of —

(i) interest on the unpaid contributions, or

(ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent (or such higher percentage as may be permitted under Federal or State law) of the amount determined by the court under subparagraph (A),

(D) reasonable attorney's fees and costs of the action to be paid by the defendant, and

(E) such other legal or equitable relief as the court deems appropriate.

For purposes of this paragraph, interest on unpaid contributions shall be determined by using the rate provided under the plan, or, if none, the rate prescribed under section 6621 of Title 26.

29 U.S.C. § 1132 (1985).

The defendant has responded to the plaintiffs' motion with three legal theories as to why defendant is not liable in this case:

1. the Memorandum of Agreement did not bind the defendant to the multi-employer association and trust agreements because there was no mutual assent;

2. the Memorandum of Agreement is no longer in effect; and

3. the employees in question did not do carpentry work and are not covered by the agreements; therefore the defendant does not owe the amount claimed.

The plaintiffs have replied with three legal theories:

1. contract formation defects do not relieve employers of liability under ERISA;

2. by its own terms, and the defendant's conduct, the Memorandum of Agreement is still in effect; and

3. the burden is upon the defendant to show that the employees were not carpenters and the defendant did not meet this burden.

DISCUSSION

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

Mutual Assent/Contract Formation

The defendant asserts that the 1970 Memorandum of Agreement is...