Sheet Metal Workers' Local Union No. 100 Wash., D.C. Area Pension Fund v. W. Sur. Co.

• Decision Date: 17 May 2016
• Docket Number: Case No.: GJH-15-1175
• Citation: 187 F.Supp.3d 569
• Parties: Sheet Metal Workers' Local Union No. 100 Washington, D.C. Area Pension Fund, et al., Plaintiffs, v. Western Surety Company, Defendant.
• Court: U.S. District Court — District of Maryland

187 F.Supp.3d 569

Sheet Metal Workers' Local Union No. 100 Washington, D.C. Area Pension Fund, et al., Plaintiffs,
v.
Western Surety Company, Defendant.

Case No.: GJH-15-1175

United States District Court, D. Maryland, Southern Division.

Signed May 17, 2016

187 F.Supp.3d 572

Ellen O. Boardman, O'Donoghue and O'Donoghue, Randall Richard Hopp, Rebecca Walsh Richardson, O'Donoghue and O'Donoghue LLP, Washington, DC, for Plaintiffs.

John Christopher Nosher, Bonner Kiernan Trebach & Crociata LLP, Annapolis, MD, Dawn C. Stewart, Setliff & Holland, PC, Washington, DC, Richard Thomas Pledger, Thomas J. Moran, Setliff and Holland PC, Glen Allen, VA, for Defendant.

MEMORANDUM OPINION

GEORGE J. HAZEL, United States District Judge

In this action, Plaintiffs, the Sheet Metal Workers' Local Union No. 100 (the "Union"), Sheet Metal Workers' Local Union No. 100 Washington, D.C. Area Pension Fund,

187 F.Supp.3d 573

Sheet Metal Workers' Local Union No. 100 401(k) Fund, Sheet Metal Workers' Local Union No. 100 Washington, D.C. Area Apprenticeship Fund, Sheet Metal Workers' Local Union No. 100 Washington, D.C. Area Vacation Fund, and Sheet Metal Workers' Local Union No. 100 Washington, D.C. Area Health Fund (collectively, "Benefit Funds") seek to recover on a fringe benefit bond on which Defendant, Western Surety Company ("Western Surety"), is the surety. Currently pending before the Court is Plaintiffs' Motion for Summary Judgment. ECF No. 30. No hearing is necessary to resolve the Motion. See Local Rule 105.6 (D. Md.). For the reasons that follow, Plaintiffs' Motion is GRANTED, in part, and DENIED, in part.

I. BACKGROUND¹

Before it ceased operations, United Sheet Metal, Inc. ("United") was a sheet metal subcontractor that employed members of the Union on various construction projects. ECF No. 32 at 1.² In July 2009, the Union and United entered into a collective bargaining agreement ("CBA") in which United agreed to pay set amounts or contributions to the Benefit Funds. ECF No. 30-2 at 37. In a "Washington, D.C. Area Addendum" to the CBA (the "Addendum"), the Union and United agreed to maintain and operate through trustees the various distinct trust funds, which were to be governed in accordance with the Labor-Management Relations Act, 29 U.S.C. §§ 157 et seq. and the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. 1001 et seq.³ Id. The Union and United also agreed to be bound by the terms of the Benefit Funds' respective Restated Agreements and Declarations of Trust ("Trust Agreements"). Id. at 37-38. Pursuant to the Trust Agreements, the trustees were authorized to enforce the payment of contributions in the manner in which they deemed proper, and they were not required to compel or enforce payment if, in the opinion of the trustees, any such enforcement would "involve an expense greater to the [Benefit] Fund than the amount to be obtained from any effort to compel or enforce the payment of the [c]ontributions." Id. at 73: see also id. at 107, 152, 186-87, 235.

Pursuant to the CBA, United was required to make contributions to each fund for "all hours worked" by Union members no later than the 20th day of the month following the month during which the work was performed; United was deemed "in default" if it failed to abide by this deadline. See id. at 3, 37-39. United was responsible for sell-reporting the number of hours worked by each Union member and, accordingly, for calculating the amount of contributions owed in any given month, though the trustees of the Benefit Funds were required to periodically audit United to ensure that hours were being properly reported and all applicable contributions

187 F.Supp.3d 574

were paid. Id. at 23, 39. In accordance with this obligation, each month, United submitted remittance reports to Plaintiffs detailing the number of hours worked and contributions owed. See id. at 3.

The CBA also required that United post a bond "to ensure the payment of wages, contributions and deductions ...." Id. at 39. On September 1, 2011, Western Surety issued a Contractors Fringe Benefits Bond (the "Bond") in the amount of $500,000 naming United as its principal and the Union and Benefit Funds as its obligees. Id. at 250-251. The two-page Bond contract provided, in relevant part:

WHEREAS, the above-named Principal [i.e. , United] is employing employees for the purpose of performing sheet metal work in the territory within the jurisdiction of the Union as defined in the collective bargaining agreement now in full force and effect between the Principal and the Union ... which results in the Principal being obligated to pay wages to the employees, pay dues to the Union and pay contributions to the Funds.

NOW, THEREFORE, the conditions of this Bond are such that if the Principal timely pays the amounts due [to] the [Benefit] Funds, the Union and the Employees under the terms of the collective bargaining agreement, any successor thereto, and any other agreement, then the obligation under this Bond shall be void; otherwise the same shall remain in force and effect. It is expressly understood and agreed that the Surety shall become obligated under this Bond to pay such wages, dues, and contributions as are due and unpaid by the Principal. The Surety further agrees to pay any liquidated damages in the amount of 20% of the delinquent contributions, interest on the delinquent contributions at the rate of 1% per month from date due to date paid, and all attorneys' fees and costs incurred by the Union and the [Benefit] Funds in collecting such amounts as are due.

Id. The Bond further provided that Western Surety agreed to pay the Union and Benefit Funds "promptly after receipt of a notice from the Union or the [Benefit] Funds to the Surety of the delinquency in payment of wages, dues or contributions by [United]." Id. at 251. Finally, the Bond allowed Western Surety to cancel it by providing 90 days written notice to Plaintiffs and United. Id.

On October 4, 2010,⁴ United and Western Surety entered a General Agreement of Indemnity ("Indemnity Agreement"), in which United agreed to indemnify Western Surety "against every claim, demand, liability, cost, charge, suit, judgment and expense which [Western Surety] may pay or incur in consequence of having executed ... [the Bond] ...." ECF No. 30-3 at 20. Under the Indemnity Agreement, in the event of a default by United, Western Surety was entitled to all of United's rights under various bonded agreements, all proceeds from bonded contracts, and an assignment of United's "machinery, plant, equipment, tools and materials ...." Id. at 21. Additionally, United was required to provide Western Surety with free access to its books and records, and was required to submit to a credit report at the time the Indemnity Agreement was entered, as well as "in any review or renewal, at the time of any potential or actual claim, or for any other legitimate purpose as determined by [Western Surety] in its reasonable discretion." Id.

187 F.Supp.3d 575

Around October or November of 2013, United fell behind in contributions owed to the Union and Benefit Funds. The Union sent a letter to United on December 5, 2013 notifying United that it owed contributions for work performed in September and October of 2013. ECF No. 30-2 at 253-54, 258. In response, United indicated that it was having difficulty obtaining payment from certain customers and it requested a payment plan to make up for the delinquencies. See id. at 256-57. On December 6, 2013, Plaintiffs and United entered a settlement agreement in which they acknowledged that United was behind on payments for September and October and that it appeared unlikely that United would be able to timely submit contributions for November 2013. Id. at 262. Pursuant to the settlement, United agreed to make weekly payments of $100.000 to pay all amounts due for the periods up to and including the work month of November 2013. Id. In consideration of the settlement agreement, Plaintiffs agreed to forebear from filing suit or pursing a claim under the Western Surety Bond or filing any bond claims with mechanical or other contractors for that time period. Id. at 263.

On January 20, 2014, United requested that certain contributions owed for work performed in December 2013 be added to the amounts owed under the settlement payment plan, and Plaintiffs agreed to do so. See id. at 265. And on February 20, 2014, United requested that certain contributions owed for work performed in January 2014 also be added to the payment plan, and Plaintiffs again agreed. See id. at 267. At no point between October 2013 and February 2014 was Western Surety provided notice of United's delay in submitting contributions during those months, or of the payment plan entered between Plaintiffs and United. ECF No. 32 at 2.

United continued to submit weekly payments of $100.000 to Plaintiffs through March 6, 2014. ECF No. 30-2 at 6. Then, on March 13, 2014, the Union received notice that United had ceased operations and laid off its employees. Id. ; see also id. at 270. As of that date, United had submitted weekly payments sufficient to pay Plaintiffs for all amounts owed through December 2013, as well as part of the contributions owed for January 2014. Id. at 6.

On...