Chi. Reg'l Council of Carpenters Pension Fund v. Ruane Constr., Inc.

• Court: U.S. District Court — Northern District of Illinois
• Writing for the Court: Judge Andrea R. Wood
• Decision Date: 17 August 2017
• Docket Number: No. 12-cv-09335,12-cv-09335
• Citation: Chi. Reg'l Council of Carpenters Pension Fund v. Ruane Constr., Inc., No. 12-cv-09335 (N.D. Ill. Aug 17, 2017)
• Parties: CHICAGO REGIONAL COUNCIL OF CARPENTERS PENSION FUND, et al., Plaintiffs, v. RUANE CONSTRUCTION, INC., Defendant.

CHICAGO REGIONAL COUNCIL OF CARPENTERS PENSION FUND, et al., Plaintiffs, v. RUANE CONSTRUCTION, INC., Defendant.

No. 12-cv-09335

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

August 17, 2017

Judge Andrea R. Wood

MEMORANDUM OPINION AND ORDER

Plaintiffs Chicago Regional Council of Carpenters Pension Fund, Chicago Regional Council of Carpenters Supplemental Retirement Fund, Chicago Regional Council of Carpenters Welfare Fund, and Chicago Regional Council of Carpenters Apprentice Training Fund (collectively, the "Funds") are employee pension and welfare plans that receive contributions pursuant to collective bargaining agreements entered into between the Chicago Regional Council of Carpenters ("CRCC") and employers, contractors, and subcontractors. This case concerns claims that Defendant Ruane Construction, Inc. failed to comply with its obligations under its collective bargaining agreement with the CRCC to properly report and pay fringe benefit contributions for certain workers performing carpentry work. The Funds sued Ruane Construction pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1131 et seq., and the Taft-Hartley Act, 29 U.S.C. §§ 141 et seq., alleging that Ruane Construction breached the collective bargaining agreement by underpaying contributions owed to the Funds for hours worked by employees and subcontractors. An audit was subsequently conducted. After the parties worked together to resolve most of their disagreements regarding the audit results, on August 8, 2016, the Court conducted a bench trial to determine whether Ruane Construction still owes certain contributions to the Funds. For the reasons detailed below, the Court finds that Ruane Construction owes $1,858.19 with respect to one contractor.

BACKGROUND

In advance of the bench trial, the parties submitted a Joint Statement of Stipulated Facts for Trial (Dkt. No. 78), as well as copies of the CBA (Ex. B to Pls.' Position Stmt., Dkt. No. 80-2) and the Memorandum of Agreement between CRCC and the Residential Construction Employers' Council (Ex. C to Pls.' Position Stmt., Dkt. No. 80-2). The parties also submitted position statements on the issues to be decided (Dkt. Nos. 80, 81). As the material facts were not disputed, no witnesses testified at trial and instead the parties agreed that the case would be decided based on the application of the governing law to the stipulated facts. Those facts include the following.

Ruane Construction entered into an agreement to be bound by a collective bargaining agreement ("CBA") that requires it to pay certain monthly fringe benefit contributions to the Funds for each hour of carpentry¹ work that it contracted out. (Joint Stmt. Stip. Facts for Trial ¶ 5, Dkt. No. 78.) Specifically, Articles 12.1, 13.1, and 14.1 of the CBA state in relevant part that "each EMPLOYER shall pay into the [relevant Funds]. . . an amount per hour for each hour worked for an EMPLOYER during each calendar month by all of its Employees who are covered by this Agreement." (Id. ¶ 6.) Article 3.4 further provides, in relevant part, that "[a]ny EMPLOYER who sublets any [carpentry] work . . . shall assume the obligations of any subcontractor to the extent of Carpenter labor employed on work under contract with the EMPLOYER for prompt payment of Employee's Wages, Health and Welfare, Pension and Apprentice Training Contributions . . . ." (Id. ¶ 7.) Article 3.2 prohibits an employer fromcontracting or subcontracting any carpentry work to any entity not covered by the CBA. (Ex. B to Pls.' Position Stmt. at 7 of 23, Dkt. No. 80-2.) If the employer contracts or subcontracts work to any person who is not a signatory to the CBA, then under Article 3.5 the employer must require that the subcontractor be bound by the CBA or the employer must maintain daily records of the subcontractor's jobsite hours and remit the appropriate contributions to the Funds. (Id.)

Mark Ruane is the president and sole shareholder of Ruane Construction. (Joint Stmt. Stip. Facts for Trial ¶ 8, Dkt. No. 78.) Ruane has another company called Ruane Construction Services, Inc. ("Ruane Services"), which owns the trucks used for Ruane Construction's business. (Id. ¶ 9.) During the audit period, Ruane was building his own family residence for in Naperville, Illinois. (Id. ¶ 12.) He oversaw the construction himself and did not contract with a homebuilder to act as a general contractor. (Id. ¶ 15.) Ruane contracted with a number of different companies and individuals to perform various aspects of the construction. (Id. ¶ 16.) He did not contract with Ruane Construction or Ruane Services but, on occasion, he used checks drawn on Ruane Construction accounts to pay for the work done on his residence. (Id. ¶¶ 17-18.) Similarly, although Ruane Construction and Ruane Services had separate checking accounts, sometimes Ruane Construction's expenses were paid using checks drawn on Ruane Services's account. (Id. ¶¶ 10-11.)

After the Funds sued Ruane Construction and the audit was completed, the Funds initially claimed that Ruane Construction owed $3,773,882.30 in unpaid contributions. Ruane Construction challenged the audit findings and the Funds revised their claimed amount of unpaid contributions to $39,485.60. Ruane Construction subsequently agreed that $19,103.02 of the claimed unpaid contributions related to six of its employees and the parties resolved an additional claim to contributions with respect to one contractor in the amount of $1,205.08. ButRuane Construction disputes that it owes the remaining $19,177.50. This disputed amount relates to work performed by individuals Len Beatty, Jesus Cahue, Marcos Rivera, and Don Daly, and companies Schneider Custom Stairs and Soffit & Siding Master. All of these contractors were paid by means of checks from Ruane Construction. (Id. ¶¶ 19, 25, 36, 45, 54, 62.) They worked on 3 different projects:

(1) Beatty, Cahue, Rivera, and Schneider Custom Stairs all did work on the Ruane residence. (Id. ¶¶ 21, 27, 29, 38, 47.) According to Ruane, the work performed by Beatty, Cahue, Rivera, and Schneider Custom Stairs was performed at Ruane's own direction and on his behalf, individually, and not at the direction of Ruane Construction or on its behalf. (Id. ¶¶ 24, 33, 42, 51.)

(2) Soffit & Siding Master did work to repair a neighboring house damaged by Ruane Construction. (Id. ¶ 57.) The homebuilder for whom Ruane Construction was working arranged for Soffit & Siding Master to do the work; Ruane Construction did not direct that work, but merely paid Soffit & Siding Master's costs. (Id. ¶¶ 57, 58.) Indeed, Ruane Construction has never contracted out any of its work on any of its projects to Soffit & Siding Master. (Id. ¶ 61.)

(3) Daly performed work for Ruane Construction for the build out of an office. (Id. ¶ 64.) That office was to be used by Ruane Construction itself and was not constructed for a separate customer. (Id.)

Ruane Construction did not report any hours worked by these individuals and companies to the Funds and did not make any fringe benefit contribution payments in connection with their work. (Id. ¶¶ 20, 26, 37, 46, 55, 63.) There was no written contract, subcontract, or purchase order between Ruane or Ruane Construction and any of these individuals and companies. (Id. ¶¶ 22, 23, 31, 32, 40, 41, 49, 50, 59, 60, 66, 67.) Beatty, Cahue, Rivera, and Daly were never on Ruane Construction's payroll, and Ruane Construction never issued a W-2 or 1099 form to any of these individuals. (Id. ¶¶ 34, 35, 43, 44, 52, 53, 69, 70.)

DISCUSSION

Based upon the Court's consideration of the governing law, the stipulated facts, and the documentary evidence submitted by the parties, the Court enters the following conclusions of law and findings of fact pursuant to Federal Rule of Civil Procedure 52.

I. Conclusions of Law

The Court has federal question jurisdiction over this matter as it arises under federal statutes—namely, ERISA and the Taft-Hartley Act. See 28 U.S.C. § 1331. Under ERISA, plan beneficiaries may bring civil actions "[t]o recover benefits due to [them] under the terms of [the] plan, to enforce [their] rights under the terms of the plan, or to clarify [their] rights to future benefits under the terms of the plan." 29 U.S.C § 1132(a)(1)(B). When disputes arise between employers and labor unions pursuant to a collective bargaining agreement, the Taft-Hartley Act grants federal courts jurisdiction to resolve them. 29 U.S.C. § 185(c). The parties agree that the CBA is the relevant plan document for purposes of ERISA and governs whether Ruane Construction is required to pay contributions for each of the individuals and entities that remain at issue. Specifically, under the language of the CBA, Ruane Construction owes contributions for those workers if they were employed by Ruane Construction or if Ruane Construction sublet any work to them. In light of this, the Court thus considers the stipulated facts to determine whether Ruane Construction owes contributions for the contested contractors.

II. Findings of Fact

The parties agree that Ruane Construction did not employ any of the six contractors, so the principal question before the Court is whether Ruane Construction sublet work to them. The six individuals and corporations for which there is a dispute fall into three categories: (1) Beatty, Cahue, Rivera, and Schneider Custom Stairs, who worked on the Ruane residence; (2) Soffit &Siding Master, who repaired damage done by Ruane Construction to a third party's home during a home-building project; and (3) Daly, who worked on a Ruane Construction office build out. The Court considers them in turn.

A. Work on the Ruane Residence

Len Beatty, Jesus Cahue, Marcos Rivera, and Schneider Custom Stairs all worked on the Ruane residence. The Court determines that, based on the record, Ruane Construction did not sublet any work to them within the meaning of the CBA. Ruane Construction did not have...