Operating Engineers' Local 324 Fringe Benefit Funds v. Rieth-Riley Constr. Co.
| Decision Date | 04 February 2021 |
| Docket Number | Case Number 20-10323 |
| Citation | 517 F.Supp.3d 675 |
| Court | U.S. District Court — Eastern District of Michigan |
| Parties | OPERATING ENGINEERS’ LOCAL 324 FRINGE BENEFIT FUNDS and Trustees of the Operating Engineers’ Local 324 Fringe Benefit Funds, Plaintiffs, v. RIETH-RILEY CONSTRUCTION COMPANY, INC., Defendant. |
Jeffrey M. Lesser, Farmington Hills, MI, for Plaintiffs.
Christopher M. Trebilcock, Clark Hill PLC, Detroit, MI, Emily A. Kile-Maxwell, Philip J. Gutwein, II, Faegre Drinker Biddle & Reath LLP Business Litigation, Indianapolis, IN, for Defendant.
Collective bargaining agreements negotiated between employer associations and labor unions nearly always provide for fringe benefits (medical insurance, retirement benefits, and other employee welfare benefits) to be paid to workers by employers. The benefits typically are paid to and administered by a multi-employer trust fund, like the plaintiffs in this case. When an employer fails to make a fringe benefit payment, the law authorizes the trust fund to sue for collection. But the trust fund must choose the correct forum in which to bring its action.
Under the Employee Retirement Income Security Act of 1974 (ERISA) and the Labor Management Relations Act (LMRA), the funds may sue in federal district court to enforce a CBA's fringe benefit contribution obligation against an employer. But to do so, there must be a live, enforceable contract in place. If, on the other hand, the employer's obligation arises by statute after a collective bargaining agreement expires, the place to sue is the National Labor Relations Board (NLRB), which has "exclusive jurisdiction" over such claims framed as unfair labor practices.
In this case, plaintiffs Operating Engineers’ Local 324 Fringe Benefit Funds and the Trustees of the Operating Engineers’ Local 324 Fringe Benefit Funds chose the first option, but they cannot point to an enforceable, live contract as the basis for their claims. They insist that defendant Rieth-Riley Construction Company manifested an intent to continue operating under an expired CBA, which it plainly did by, among other things, tendering fringe benefit payments on behalf of its employees. However, the plaintiffs refused to accept the payments and clearly and unequivocally rebuffed every attempt by the defendant to extend the contract while a new one could be negotiated. The defendant's obligation to maintain the status quo for fringe benefit contributions on behalf of its employees arises solely from the National Labor Relations Act (NRLA). The plaintiffs’ remedy for any post-CBA failure to pay by the defendant, therefore, lies with the NLRB, where, apparently, they already have a case pending against Rieth-Riley. The defendant moves to dismiss the case in this Court alleging lack of subject matter jurisdiction. Because exclusive jurisdiction over the claim lies in the NLRB, the motion will be granted, and the case will be dismissed without prejudice.
Defendant Rieth-Riley presents a factual attack on the Court's subject matter jurisdiction, which requires the Court to consider evidence beyond the pleadings. Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co. , 491 F.3d 320, 330 (6th Cir. 2007). The following facts are taken from the complaint, motion papers, and exhibits, which the plaintiffs do not dispute, although they believe they are incomplete.
Defendant Rieth-Riley Construction Company is a large road and highway construction contractor that employs a number of workers represented by Operating Engineers’ Local 324. Plaintiffs Operating Engineers Local 324 Fringe Benefit Funds are multiemployer trust funds established under Section 302 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, to provide benefits to union-member employees under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001, et seq. The funds collect contractually mandated fringe benefit contributions from employers and pay medical expenses and pensions and provide training and other benefits for their participants and beneficiaries.
Rieth-Riley was a member of a trade group known as the Michigan Infrastructure and Transportation Association (MITA), which is comprised of hundreds of employers that hire Local 324's members to repair the state's roads. Sometime before 2013, Rieth-Riley signed a power of attorney that authorized MITA to negotiate with the union on its behalf. Consequently, as a POA Contractor, it became a party to a multiemployer collective bargaining agreement that MITA made with Local 324 on March 14, 2013, known as the Road Agreement. The CBA expired on May 31, 2018.
There were other MITA members that did not give power of attorney to MITA. Each of those non-POA contractors bargained directly with the union.
Rieth-Riley also entered into other agreements with Local 324 that derived from the CBA. On March 1, 2017, it entered into a Winter Maintenance Agreement, which specified that employees working under it were covered by the MITA CBA at reduced fringe benefit contribution rates compared to the CBA. That agreement expired on February 29, 2020. The parties also entered into market recovery agreements before June 2018, which enabled Rieth-Riley to avail itself of Local 324's market recovery program, allowing Rieth-Riley to pay reduced wages on certain projects.
The Road Agreement contained an evergreen clause (an automatic renewal provision), which MITA avoided by terminating the CBA when it expired in May 2018. Local 324 accepted MITA's termination and individually terminated the expired CBA as to "each and every" POA Contractor, including Rieth-Riley. MITA attempted to negotiate with Local 324 for a successor CBA. However, Local 324 withdrew from multiemployer bargaining with MITA and refused to negotiate with MITA or any of the POA Contractors.
In addition to refusing to negotiate with MITA or any of the POA contractors, the Funds also refused to accept post-expiration fringe benefit contributions from any POA contractors because no contract existed between the contractors and the Funds that permitted or required the Funds to accept the contributions. The Taft-Hartley Act prohibits employer associations from making payments to employee groups such as unions. 29 U.S.C. § 186(a). And the Landrum-Griffin Act forbids payments to union-related entities unless the payments are "for the sole and exclusive benefit" of union members, and then only if the payments go into a trust fund jointly administered by employer and union management, and the "detailed basis on which such payments are to be made is specified in a written agreement with the employer." 29 U.S.C. § 186(c)(5)(B). Likewise, ERISA does not authorize contributions to a union welfare benefits plan except under a written agreement. 29 U.S.C. § 1145.
The Funds continued to accept post-expiration contributions from contractors who did not have powers of attorney with MITA because the Funds believed that they and the non-POA contractors intended to be bound by the expired CBA while a new agreement was negotiated. Some of those non-POA contractors had already signed a new agreement, while the remaining non-POA contractors who were in the process of forming a new contract were allowed to continue making contributions while they negotiated for a successor agreement. The Funds’ refusal to accept contributions from the POA Contractors resulted in separate litigation in this district by plan participants employed by POA Contractors who believed that the Funds’ adherence to Local 324's preference for non-POA contractors violated the trustees’ fiduciary duties. See Thompson v. Stockwell , No. 18-12392 (E.D. Mich. 2018).
During this time, Rieth-Riley says that it "fought hard to force the Funds to accept its post-expiration contributions — and the Funds fought just as hard to refuse them." In July 2018, Rieth-Riley and the other POA contractors offered to enter into an "Assent of Participation" agreement with the Funds, which would have allowed the POA contractors to "participate and remain a party in the same manner and form as any other participating employer." The Funds’ Board of Trustees never approved the agreement and the Funds rejected the offer, believing that the Assent of Participation was "unilaterally created by MITA" and did therefore did not create independent contractual contribution obligations. Rieth-Riley never withdrew the offer, although the Funds never accepted it, and the Assent of Participation never was signed.
Believing that the powers of attorney presented the main obstacle to the POA contractors’ efforts to negotiate a successor CBA, in August 2018 MITA revoked all powers of attorney with the POA contractors, including Rieth-Riley. The union still rejected the POA contractors’ negotiation attempts. Rieth-Riley then tried to rescind its power of attorney with MITA. The union rejected that as well and continued to block the Funds from accepting and crediting fringe benefit contributions from contractors who had rescinded powers of attorney with MITA.
From June 2018 through August 2020, Rieth-Riley tried to pay fringe benefit contributions to the Funds, but the Funds rejected the attempts until October 2018, when the parties learned that the Funds were statutorily obligated to accept the contributions. With each fringe benefit contribution, Rieth-Riley filed separate fringe benefit reports, which stated the names of employees, the hours they worked, and the wages they earned. The reports included the following boilerplate language above the signature lines:
To continue reading
Request your trial