Ragan v. Tri-County Excavating, Inc.

• Decision Date: 07 August 1995
• Docket Number: TRI-COUNTY,No. 542,Nos. 94-1388 and 95-1189,542,s. 94-1388 and 95-1189
• Parties: Michael J. RAGAN, as Administrator and Fiduciary of the International Union of Operating Engineers LocalPension, Health and Welfare, Apprenticeship, Training and Safety, Supplemental Unemployment Benefit and Annuity Funds; International Union of Operating Engineers, Local 542 v.EXCAVATING, INC.; United States Fidelity and Guaranty Company; Hartford Fire Insurance Company, Hartford Fire Insurance Company, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 501

62 F.3d 501

Michael J. RAGAN, as Administrator and Fiduciary of the International Union of Operating Engineers Local No. 542 Pension, Health and Welfare, Apprenticeship, Training and Safety, Supplemental Unemployment Benefit and Annuity Funds International Union of Operating Engineers, Local 542 v. TRI-COUNTY EXCAVATING, INC.; United States Fidelity and Guaranty Company; Hartford Fire Insurance Company, Hartford Fire Insurance Company, Appellant.

Nos. 94-1388 and 95-1189.

United States Court of Appeals Third Circuit.

Argued Oct. 24, 1994.

Decided Aug. 7, 1995.

Sam L. Warshawer, Jr. (argued), Edward Seglias, Venzie, Phillips & Warshawer, Philadelphia, PA, for appellant.

Robert T. Carlton, Jr. (argued), McAleese, McGoldrick & Susanin, King of Prussia, PA, for appellees.

Before STAPLETON, HUTCHINSON, and GARTH, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge:

Defendant-Appellant Hartford Fire Insurance Company is the surety on a labor and material payment bond purchased by Mele Construction Co., Inc. ("Mele"). Hartford's bond required prospective claimants who were not in a "direct contract" with Mele to give written notice of their claims within 90 days after they ceased work. Plaintiffs-Appellees, tardy claimants on Hartford's bond, are the International Union of Operating Engineers, Local 542 and Michael J. Ragan as administrator of various "fringe benefit" funds associated with Local 542 (collectively, "Local 542").

Local 542 had a collective bargaining agreement with Tri-County Excavating, Inc., a corporation owned by the three daughters of John Mele, president of Mele. Hartford rejected Local 542's claim, made roughly 120 days after Local 542 ceased work, because Local 542 was not in a "direct contract" with Mele and so was required to give notice of its claim within 90 days of the last labor performed. Local 542 responded that Tri-County was the corporate "alter ego" of Mele, and that inasmuch as Local 542 had contracted with Tri-County it had, ipso facto, contracted with Mele.

Following a bench trial, the district court held that Tri-County was indeed the alter ego/instrumentality of Mele and entered judgment in favor of Local 542. The district court held that under the terms of the bond Hartford was liable to Local 542 for Tri-County's unpaid "fringe benefit" contributions, union dues, liquidated damages and attorney fees.

On appeal, Hartford advances three arguments: first, that the district court erred in its alter ego determination under Pennsylvania law; second, that the Employees Retirement Income Security Act, 29 U.S.C. Secs. 1001-1461 ("ERISA"), preempts Local 542's state-law action on the bond; and third, that the bond does not obligate Hartford to pay liquidated damages and attorney fees.

We agree with all of the district court's holdings except its holding that Hartford was obliged to pay liquidated damages and attorney fees. Consequently, we will affirm the district court's award of unpaid fringe benefit contributions and union dues. However, because we conclude that Hartford cannot be held liable for attorney fees and liquidated damages, we will reverse so much of the district court's orders of March 2, 1994, and February 13, 1995, as granted judgment against Hartford for those damages. We will accordingly remand to the district court with directions that its judgment against Hartford and in favor of Local 542 on Count IV be modified to delete all awards of attorney fees and liquidated damages.

I.

Mele purchased the bond ("the Bond") from Hartford to cover Mele's wage and labor obligations in connection with earth work which Mele was hired to perform on Crown America Corporation's (Crown's) Viewmont Mall project in Lackawanna County, Pennsylvania. Crown is named as obligee on the bond.

For the past twenty years Mele, which owns heavy earth moving equipment, has sub-contracted with Tri-County on a job-by-job basis whereby Tri-County provided operating engineers to operate Mele's earth moving equipment. Tri-County is part of a group of at least five companies owned by the extended Mele family.

Under its contracts with with Mele, Tri-County would furnish Mele with Tri-County employees who were members of Local 542. Tri-County and its employees were subject to the terms of a Collective Bargaining Agreement ("CBA"), negotiated between Local 542 and Tri-County in 1988, and a Pension Fund Agreement ("PFA") entered into between Local 542 and the General Building Contractors Association and the Contractors Association of Eastern Pennsylvania and Delaware in 1974.

When Crown hired Mele for the Viewmont project in the summer of 1990, Mele looked to Tri-County for operating engineers and, as it had done in the past, Tri-County engaged members of Local 542 pursuant to the CBA and PFA. As is particularly relevant to the present dispute, the CBA obligated Tri-County to make regular "fringe benefit" contributions to Local 542's Pension, Health and Welfare, Apprenticeship, Training and Safety, Supplemental Unemployment Benefit, and Annuity funds (the "Funds") during the time that Local 542 members were in Tri-County's employ. The CBA also required Tri-County to pay "supplemental union dues" and provided for the payment of a specific monetary penalty should Tri-County become delinquent in its fringe benefit contributions. The PFA provided that in the event of a lawsuit against an employer to collect unpaid contributions, the employer was obliged to pay costs and reasonable attorney fees.

Work on the Viewmont project commenced some time in August of 1990, and Tri-County began making the required fringe benefit contributions to the Funds as required by the CBA.

The Viewmont project foundered in the spring of 1991, with disastrous results: Crown stopped paying Mele, Mele fell behind in progress payments to Tri-County, and Tri-County in turn failed to make the fringe benefit contributions to the Funds for the period March-June, 1991. Within months, Mele had filed for bankruptcy and Tri-County became insolvent. By this time the Funds were owed roughly $78,000.00 in unpaid contributions.

On or about November 1, 1991, Local 542, having been informed by Tri-County that it was unable to satisfy its obligations to the Funds, turned to Hartford for payment.

Hartford's Bond contained the following provision:

No suit or action shall be commenced hereunder by any claimant, (a) unless claimant, other than one having a direct contract with the principal, shall have given written notice to any two of the following: the principal, the owner or the surety ..., within ninety days after such claimant did or performed the last of the work or labor ... for which said claim is made.

App. 97 (emphases added).

Under this provision, all claimants who had not contracted directly with Mele were required to give written notice to any two of Mele, Hartford or Crown within 90 days after ceasing work.

As shown by Tri-County records, the "last labor" provided by Local 542 on the Viewmont job was for the week ending June 28, 1991. Local 542 did not give notice of its claim until on or about November 1, 1991, more than 120 days after "last labor" was performed. Hartford rejected Local 542's request on the ground that Local 542 had failed to make timely notice of its claim.

On January 3, 1992, Local 542 commenced this action in the federal district court for the Eastern District of Pennsylvania on the basis of diversity of citizenship, seeking delinquent fringe benefit contributions, union dues, liquidated damages and attorney fees. ¹ Local 542 claimed that Tri-County was Mele's alter ego, and that Local 542 was therefore in a "direct contract" with Mele and so was not subject to the Bond's 90 day notice provision.

The district court agreed with Local 542. Following a bench trial, the district court, by order dated March 2, 1994, entered judgment against Hartford and awarded Local 542 $78,794.79 in unpaid fringe benefit contributions, $5,719.11 in unpaid union dues, and $42,190.21 in liquidated damages, less $480.00 in prepayment. The district court also awarded reasonable attorney fees to Local 542, but did not quantify those fees until it entered its order of February 13, 1995, which set attorney fees at $19,881.73.

Hartford appealed from the district court's March 2, 1994 order on March 29, 1994, and timely appealed the February 13, 1995 order. ²

II. Appellate Jurisdiction

As noted above, the district court's March 2, 1994 order entered judgment in favor of Local 542 and among other things awarded reasonable attorney fees but did not quantify the amount of those fees. Although Hartford appealed the March 2, 1994 order on March 29, 1994, it was not until February 13, 1995 that the district court entered an order setting attorney fees at $19,881.73. Neither party questioned the jurisdiction of this court to hear Hartford's appeal. However, we must consider our appellate jurisdiction as a threshold matter. See Trent Realty Associates v. First Fed. Sav. and Loan Ass'n of Philadelphia, 657 F.2d 29, 36 (3d Cir.1981) ("A federal court is bound to consider its own jurisdiction preliminary to consideration of the merits.").

The district court's award of attorney fees was premised on a provision in the Pension Fund Agreement between Local 542 and Tri-County which provides that in the event of a lawsuit to collect delinquent contributions the employer "shall pay all costs and reasonable attorney's fees incurred." App. 133.

In Beckwith Machinery Co. v. Travelers Indem. Co., 815 F.2d 286 (3d Cir.1987), we held that when an award of attorney fees is based on a contractual provision and is an "integral part of the contractual relief sought," the order does not become final and appealable until the attorney fees are quantified. Id. at 287. Accord Vargas v. Hudson County Bd. of Elections, 949 F.2d 665, 670 (3d Cir.1991) (where attorney fees are sought as part of damages, and not as prevailing party, ...