Carpenters Health Fund v. S & S Fashion Floors

• Decision Date: 18 October 2007
• Docket Number: No. 05-1094.,05-1094.
• Citation: 516 F.Supp.2d 931
• Parties: CENTRAL ILLINOIS CARPENTERS HEALTH & WELFARE TRUST FUND; Mid-Central Illinois District Council of Carpenters Apprenticeship Fund; Central Illinois Carpenters Annuity Fund; Carpenters Fringe Benefit Fund; Carpenters Local 63; and Carpenters Local 644, Plaintiffs. v. S & S FASHION FLOORS, INC., and Helen M. Struben, Defendants.
• Court: U.S. District Court — Central District of Illinois

516 F.Supp.2d 931

CENTRAL ILLINOIS CARPENTERS HEALTH & WELFARE TRUST FUND; Mid-Central Illinois District Council of Carpenters Apprenticeship Fund; Central Illinois Carpenters Annuity Fund; Carpenters Fringe Benefit Fund; Carpenters Local 63; and Carpenters Local 644, Plaintiffs. v. S & S FASHION FLOORS, INC., and Helen M. Struben, Defendants.

No. 05-1094.

United States District Court, C.D. Illinois.

October 18, 2007.

James P. Moody, John T. Long, Michael O'Hara, Patrick J. O'Hara, John A. Wolters, Cavanagh & O'Hara, Springfield, IL, for Plaintiffs.

Jeffrey Alan Ryva, Husch & Eppenberger LLC, Peoria, IL, for Defendants.

ORDER and OPINION

JOHN A. GORMAN, United States Magistrate Judge.

The parties have consented to have this case heard to judgment by a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c), and the District Judge has referred the case to me. Now before the Court is Defendant Helen M. Struben's Motion for Summary Judgment on Count II[# 53]. The motion is fully briefed, and I have carefully considered all of the submissions of the parties. As explained herein, the motion is denied.

JURISDICTION

This action arises under the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1145. This Court therefore has federal question jurisdiction over the subject matter of this action pursuant to 28 U.S.C. 1331.

BACKGROUND

S & S Fashion Floors Inc. is a dissolved Illinois corporation that was party to various collective bargaining agreements, participation agreements and other trust agreements with the unions and employee benefit funds that are the plaintiffs in this case. Pursuant to those agreements, S & S was contractually obligated to make contributions to various employee benefit funds. For the sake of convenience, the Plaintiff unions and benefit funds are referred to cumulatively as the "Funds" in this Opinion.

Article IV (p.4) of the Central Illinois Carpenters Health & Welfare Trust Fund provides in pertinent part that the Trustees "shall have the power to demand, collect, sue for and receive (i) Employer contributions, (ii) Employee contributions ..." This same document provides that the Trustees administer, control and manage the operation and administration of the Fund, and that no "Employer ... or any other persons, partnership, corporation or association shall have any right, title, or interest in or to the Fund or any part thereof." Article X, Sections 2 and 3, page 10.

In the Agreement and Declaration of Trust of Carpenters Retirement Savings Fund of Illinois, it is stated that the "control, management and administration" of the Plan is "in the Trustees appointed to act hereunder, who are hereby designated as the Named Fiduciaries ..." Part III, Article I, Section 1.

At all pertinent times, the President of S & S was Helen Struben. Although S & S continued to withhold some amount for Fund contributions from employee paychecks, the withheld amounts were not paid to the Funds. The Funds performed an audit showing that S & S owed the plans over $30,000 in delinquent contributions. Struben disputed the findings of the audit, stating that it did not deduct "the amount of contributions Plaintiffs claim in their audit is due to them from the wages of its workers." (Struben's Motion, Statement of Undisputed facts, ¶ 24). In other words, while disputing the precise amount it deducted, S & S has not disputed that it deducted some amount from wages paid and that the amount deducted was payable to the Funds.

During Struben's winding down of the company's affairs, she liquidated the company's assets¹. Although the dispute about the audit remained unresolved, she used the liquidated assets to pay creditors other than the Funds, and she distributed some of the assets to herself and her son. The Funds were not paid.

The Funds then filed this lawsuit. In the three count Second Amended Complaint, Plaintiffs allege three separate violations of ERISA. In Count I, they claim that S & S failed to make contributions required by various collective bargaining agreements and participation agreements, in violation of ERISA. In Count II, the Plaintiffs assert that Helen M. Struben was an ERISA fiduciary with respect to plan assets and that she breached her fiduciary duties by paying corporate debts instead of the amounts due to the Funds. In Count III, Plaintiffs assert that Struben was an alter ego of S & S and is therefore personally liable for the company's debts.

Struben has filed a motion for summary judgment as to Count II only, arguing that she was not a fiduciary of the Funds, and that she could not, therefore, have breached any duty to them.

DISCUSSION

An ERISA claim for breach of fiduciary duty requires pleading and proof that (1) defendant is a fiduciary; (2) defendant acted with respect to the plan in some way covered by the statute; and (3) some fiduciary duty imposed upon the defendant was breached by that act (4) causing damage or loss to the Plan. Jenkins v. Yager, 444 F.3d 916, 924 (7th Cir.2006). The issue raised by the pending motion relates to the first element, namely whether Helen Struben was a fiduciary under ERISA.

The term "fiduciary" under ERISA has consistently been given a broad meaning. See, Baker v. Kingsley, 387 F.3d 649, 663-664 (7th Cir.2004) ("liberal standard for fiduciary status"); Mutual Life Ins. Co. of N.Y. v. Yampol, 840 F.2d 421, 425 (7th Cir.1988) (noting "this court's consistently broad reading" of the definition of an ERISA fiduciary).

Obviously, a claim for breach of fiduciary duty under ERISA is only valid against a "fiduciary." Plumb v. Fluid Pump Serv., Inc., 124 F.3d 849, 854 (7th Cir.1997). A person is a fiduciary with respect to an ERISA plan, "to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets." 29 U.S.C. § 1002(21)(A). Because a person is deemed a fiduciary only "to the extent" she exercises discretionary authority, "a person may be an ERISA fiduciary for some purposes, but not for others." Baker, 387 F.3d at 660, quoting Plumb, 124 F.3d at 854. "In assessing whether a person can be held liable for breach of fiduciary duty, a court must ask whether that person is a fiduciary with respect to the particular activity at issue." Baker, 387 F.3d at 660, quoting Plumb, 124 F.3d at 854.

Determining whether a person is a fiduciary is not dependent on whether that person has been formally designated as such. Instead, a fiduciary should be viewed "in functional terms of control and authority over the plan." Ruiz v. Continental Cas. Co., 400 F.3d 986, 990 (7th Cir.2005), citing Mertens v. Hewitt Assocs., 508 U.S. 248, 262, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993). Key to this functional approach is an evaluation of the conduct of the alleged fiduciary vis-a-vis a plan's assets. ERISA itself does not define what constitutes an asset of an ERISA fund. The Department of Labor has instructed that:

the assets of a plan generally are to be identified on the basis of ordinary notions of property rights under non-ERISA law. In general, the assets of a welfare plan would include any property tangible or intangible, in which the plan has a beneficial ownership interest.

Department of Labor Advisory Opinion No. 93-14A (May 5, 1993), 1993 WL 188473, at *4, quoted in Navarre v. Luna, 406 F.3d 1192, 1199 (10th Cir.2005). A definition of "plan assets" is also found in a regulation from the Department of Labor, which provides:

the assets of the plan include amounts (other than union dues) that a participant or beneficiary pays to an employer, or amounts that a participant has withheld from his wages by an employer, for contribution to the plan as of the earliest date on which such contributions can reasonably be segregated from the employer's general assets.

29 C.F.R. § 2510.3-102.

The Seventh Circuit has not decided whether unpaid contributions to an ERISA fund constitute plan assets, nor has it determined whether an employer who makes (or is obligated to make) regular contributions to an ERISA employee benefit plan is acting in a fiduciary capacity when it does so or fails to do so. Variations on these issues have, however, been resolved by several other Courts. Upon first reading of these cases, discussed below, it appears that there is significant disagreement. But much of the inconsistency between and among these cases stems from factual differences. Some of the cases deal with situations in which an employer has actually withheld amounts from employee wages but has failed to pay over those amounts to union funds. Other cases deal with the situation in which the employer stops taking any deductions from wages paid to employees and hence stops paying the union funds. In the case before this Court, S & S continued to deduct at least some amount that was payable to the Funds, but did not pay that amount to the Funds.

Struben relies almost exclusively on Navarre v. Luna, 406 F.3d 1192 (10th Cir. 2005). The Luna court found that the plan asset was not the amount of contributions that was due to the plan but rather was the right to collect the amount due under governing agreements. In that case, however, the employer had never taken any deductions from employee wages. The Court's application of the law to those facts, therefore, cannot be directly imported into this case, where deductions were actually taken. In fact, the Luna court noted precisely that:

Our holding that employers who fail to pay contractually-owed contributions to a plan are not, by virtue of that fact alone, fiduciaries, must be distinguished from the situation where an employer has control over funds that were withheld from employees' pay checks. Where the issue is not employer contributions (as here), but rather employee contributions held by the employer, courts will recognize that the employer meets ERISA's statutory...