Michigan Elec. Employees v. Encompass Elec.
| Decision Date | 19 May 2008 |
| Docket Number | No. 1:07-cv-140.,1:07-cv-140. |
| Citation | 556 F.Supp.2d 746 |
| Parties | MICHIGAN ELECTRICAL EMPLOEES PENSION FUND, Michigan Electrical Employees Health Plan, National Electrical Benefit Fund, National Electrical Annuity Fund, Lansing Electrical Joint Apprenticeship and Training Committee Trust, and Lansing Labor-Management Cooperation Fund, Plaintiffs, v. ENCOMPASS ELECTRIC & DATA, INC.; Encompass Electric & Telecom, Inc.; James K. Price, Jr., both individually and d/b/a Encompass Electric & Data, Inc.; and Kevin Glanz, both individually and d/b/a Encompass Electric & Data, Inc. and d/b/a Encompass Electric & Telecom, Inc., Defendants. |
| Court | U.S. District Court — Western District of Michigan |
Hope L. Calati, George H. Kruszewski, Sachs Waldman PC, Detroit, MI, for Plaintiffs.
Jeffrey S. Theuer, Loomis Ewert Parsley Davis & Gotting PC, Lansing, MI, for Defendants.
This is an action for pension, medical, and other employee fringe-benefit contributions and other relief under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1131 et seq. ("ERISA"); the Labor Management Relations Act, as amended, 29 U.S.C. § 185 et seq. ("LMRA"); and the Michigan Building Contract Fund Act, M.C.L. § 570.151 et seq. ("MBCFA"). The plaintiffs have filed a motion for summary judgment. For the reasons that follow, the court will grant summary judgment on Count I (Data's failure to pay delinquent contributions); Count II (Telecom's liability for said contributions as alter ego of Data); and the portion of Count III which claims that Price and Glanz breached their fiduciary duties under ERISA and thus are personally liable for Data/Telecom's CBA obligations. The court will deny the plaintiffs' motion (without prejudice) as moot as to any claim that Price and Glanz should be held personally liable on additional grounds, such as piercing the corporate veil of Data and/or Telecom. Having disposed of all the federal claims, the court will follow our Circuit's usual practice and decline supplemental jurisdiction over the plaintiffs' MBCFA claim (a portion of Count III).
The court will retain jurisdiction and keep the case open in order to determine the amount of the defendants' liabilities.
As to the grant of summary judgment to the plaintiffs on Count I, the court determines that defendant Encompass Electric & Data, Inc. ("Data") entered into a valid, enforceable, written contract when defendant James K. Price, Jr., in his role as Data's President, signed letters of assent that required Data to adhere to three collective-bargaining agreements ("CBAs"). First, even if the court accepted Price's allegation that he was not given and did not read the CBAs before signing the letters, that would not prevent the formation or enforcement of the contract under these circumstances. Second, even if the court accepted Price's allegation that the union's business manager orally represented that Data would not be required to adhere to those CBAs for a period of time, such an oral representation cannot affect a modification of the written contract under our Circuit's ERISA law. Third, as a matter of law, under published Sixth Circuit precedent interpreting ERISA and LMRA, customary state contract-law defenses such as waiver and estoppel are not available in an action to collect employee benefits due under the express terms of a written CBA (or a writing that incorporates or binds a party to a CBA). Fourth, the court determines that those CBAs required Data to make the benefit contributions calculated by the plaintiffs for the period October 10, 2003 through December 2004, and that Data did not make said contributions. Fifth, the court determines that the CBAs require the defendants to make Data's records and defendant Encompass Electric & Telecom, Inc. ("Telecom")'s records available to the plaintiffs so they can conduct an audit and ascertain whether Data/Telecom has additional liabilities from December 2004 onward.
As to the grant of summary judgment to the plaintiffs on Count II, the court determines that defendant Encompass Electric & Telecom, Inc. ("Telecom") is the alter ego of Data and, during any period when they existed and operated simultaneously, formed a "single enterprise" or "double-breasted employer" with Data.
As to the grant of summary judgment to the plaintiffs on Count III, the court determines that Price and Glanz were ERISA fiduciaries and breached their ERISA fiduciary duties by failing to make the benefit contributions and reports required by the CBAs on behalf of Data and Telecom, rendering them personally liable for those liabilities of Data and Telecom.
In light of this disposition, the court will not consider whether Price and Glanz might also be held personally liable for those same obligations under the federal piercing-the-corporate-veil doctrine and/or "due to their failure to maintain the corporate status of EED," see Comp. ¶ 35. Nor will the court consider the state-law claim embedded in Count III, which the plaintiffs may attempt to pursue in state court if they wish.
The plaintiffs—the Michigan Electrical Employees' Pension Fund, the Michigan Electrical Employees Health Plan, the National Electrical Benefit Fund, the National Electrical Annuity Fund, the Lansing Electrical Joint Apprenticeship and Training Committee Trust, and the Lansing Labor-Management Cooperation Fund (collectively "the Fund)—were established through a collective-bargaining process and are administered pursuant to the Labor Management Relations Act of 1947, codified at 29 U.S.C. § 186 et seq., as amended ("LMRA") and the Employee Retirement Income Security Act of 1974, codified at 29 U.S.C. § 186 et seq., as amended ("ERISA")." Am. Comp. ¶ 1.
Data was formed on September 4, 2003, had its principal place of business in Grand Ledge, Michigan, and conducted business as an electrical contractor in the Lansing, Michigan area. See Defs.' Opp'n, Ex A (Affidavit of James K. Price dated Feb. 27, 2008 ("Price Aff.")) ¶ 9. When Data was formed, it employed defendant James K. Price ("Price") as President and defendant Glanz as Secretary. Id. Data operated out of Price's home, used Glanz's cellular telephone as its business line, and primarily used tools, and a van, already owned by Price and Glanz. Id.
Data filed a certificate of dissolution with the State of Michigan in June 2005, Am. Comp. ¶ 2, so by operation of law it was dissolved at that time.1 Data took its last new work order on May 20, 2005, see Opp'n Ex H (Data's "job book"), and after Data's dissolution "[a]ll project owners for whom Telecom submitted bids or performed work were clearly notified in writing that the bids were submitted and the work was being performed by Telecom." Opp'n Ex A (Price Aff.) ¶ 22.
Defendant Telecom is also a corporation that did business in the construction industry and had its principal place of business in Grand Ledge, Michigan, and it remains intact. Am. Comp. ¶ 3; see also Ans. ¶ 3 ().
Price and Glanz both do business as Data and Telecom, and they are both shareholders in Data. Am. Comp. ¶¶ 4-5. Data is no longer in existence and no longer conducting business, but Price and Glanz were shareholders and officers of Data before its June 2005 dissolution. Ans. ¶ 4.
In the fall of 2003, Price contacted IBEW Local 665 business manager Bill Patrick ("Patrick") to inform him that he and Glanz had formed Data. Price Aff ¶ 4. Patrick advised Price to sign onto the Local's collective bargaining agreements ("CBAs") so that Data would not have problems with the union. Id. According to the defendants, Price expressed concern that Data could not afford to pay union wages and benefits and remain competitive, and Patrick responded that Data would not be required to pay union wages and benefits until Data "got on its feet." Price Aff ¶ 5; see also Defs.' Opp'n (Deposition of James K. Price dated Jan. 17, 2008 ("Price Dep.")) 36:4-14.
On October 10, 2003, Price signed three letters of assent in his role as president of Data. The first letter of assent provided, in pertinent part,
In signing this letter of assent, the undersigned firm does hereby authorize [the] Michigan Chapter, Lansing Division, Nat'l Electrical Contractors Assoc as its collective bargaining representative for all matters contained in or pertaining to the current and any subsequent approved RESIDENTIAL labor agreement between the MI Chapter, Lansing Div, Nat'l Electrical Contractors Assoc and Local Union 665, IBEW In doing so, the undersigned firm agrees to comply with, and be bound by, all of the provisions contained in said current and subsequent approved labor agreements. This authorization, in compliance with the current approved labor agreement, shall become effective on the 10th day of Oct., 2003. It shall remain in effect until terminated by the undersigned employer giving written notice to the MI Chapter, Lansing Div, Nat'l Electrical Contractors Assn and to the Local Union at least one hundred fifty (150) days prior to the then current anniversary date of the applicable approved labor agreement.
The Employer agrees that if a majority of its employees authorize the Local Union to represent them in collective bargaining, the Employer will recognize the Local Union as the NLRA Section 9(a) collective bargaining agent for all employees performing electrical construction work within the jurisdiction of the Local Union on all present and future jobsites.
In accordance with Orders issued by the United States District Court for the District of Maryland on ...
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