Teamsters & Employers Welfare v. Gorman Bros., 99-3059.
| Decision Date | 17 April 2001 |
| Docket Number | No. 99-3059.,99-3059. |
| Citation | 139 F.Supp.2d 976 |
| Parties | TEAMSTERS & EMPLOYERS WELFARE TRUST OF ILLINOIS, Plaintiff, v. GORMAN BROTHERS READY MIX, Defendant. |
| Court | U.S. District Court — Central District of Illinois |
Patrick J. O'Hara, Cavanagh & O'Hara, Springfield, IL, for Plaintiff.
Lee W. Barron, Alton, IL, for Defendant.
This is in fact the nature of the equitable; it is a rectification of law where it fails through generality.
ARISTOTLE, THE NICOMACHEAN ETHICS OF ARISTOTLE, Bk. 5, XIV, p. 172 (J.E.C. Weldon trans., Macmillan and Co., Ltd.)(1930).
Gorman Brothers Ready Mix ("Gorman Brothers") is a small, multi-purpose business located in Jerseyville, Illinois. Gorman Brothers provides a variety of services in the Jerseyville area, including excavation work, sewage system installation, pre-cast work, demolition work, road construction, and (most important for purposes of this case) Ready Mix concrete services. Gorman Brothers is an employer engaged in an industry affecting interstate commerce within the meaning of the Employee Retirement Income Security Act ("ERISA") and employs individuals who were and are members of the Teamsters, Chauffeurs and Helpers Local Union No. 525 ("the Union"). 29 U.S.C. § 1002(5), (11), (12), & (14). Since 1980, Gorman Brothers has been managed by Eric Leonhardt.2
On May 1, 1991,3 Gorman Brothers entered into a collective bargaining agreement with the Union.4 Gorman Brothers subsequently entered into collective bargaining agreements with the Union on July 1, 1994, and, again, on June 23, 1996.5 All three of these collective bargaining agreements required Gorman Brothers to make fringe benefit contributions on behalf of its employees to the Teamsters & Employers Welfare Trust of Illinois ("the Trust Fund").6
However, Gorman Brothers did not have to make contributions to the Trust Fund for all of its employees; rather, Gorman Brothers only had to make contributions for its employees who were performing work covered by the collective bargaining agreements. For all intents and purposes, "covered work" was driving a Ready Mix concrete truck. Thus, Gorman Brothers did not have to make contributions to the Trust Fund for its secretarial help or for its employees who worked exclusively at installing sewer systems, performing demolition work, etc.
Nevertheless, the collective bargaining agreements were worded very broadly in favor of the Trust Fund. According to the terms of the collective bargaining agreements, if a Gorman Brothers' employee "has worked any portion of a payroll week" performing work covered by the collective bargaining agreements (i.e., driving a Ready Mix truck), then Gorman Brothers was required to contribute to the Trust Fund on behalf of that employee for the entire work week. Thus, for example, if during a regular 40 hour work week a Gorman Brothers' employee worked 39 hours installing a sewer system and worked only one hour driving a Ready Mix truck, Gorman Brothers would be required to contribute to the Trust Fund for that employee for the entire work week.
Despite this language in the collective bargaining agreements, Gorman Brothers did not make contributions to the Trust Fund for all of its employees when its employees performed Ready Mix work; rather, since at least the 1980's, Gorman Brothers only made contributions for a maximum of seven of its employees. Gorman Brothers made contributions for these seven employees because the employees were vested in the Trust Fund's pension plan and/or because these seven employees received their health insurance benefits through the Trust Fund. At no time, however, did Gorman Brothers make contributions to the Trust Fund for any of its other employees, regardless of whether or not they had driven a Ready Mix truck during any portion of the work week.
In the early 1990's, the Trust Fund initiated an audit of Gorman Brothers ("the first audit"). However, no one knows the whereabouts of the audit, whether it was completed, or what the audit revealed. According to Dale Stewart, who is currently the secretary/treasurer/ business representative of the Union and who is also currently the chairman of the Trust Fund, he informed the auditor that Gorman Brothers was only required to make contributions to the Trust Fund for employees who were performing work covered by the collective bargaining agreement (i.e., driving Ready Mix trucks). Other than this conversation with the auditor, Stewart said that he does not have any information regarding the audit and that he does not know what happened to the audit.
Conversely, Leonhardt testified that he knows exactly what happened to the audit: Stewart made it go away. According to Leonhardt, Stewart told him that he [Stewart] did Gorman Brothers a favor and "made the audit go away." Because (at least in part) Stewart had quashed the audit, Leonhardt signed the collective bargaining agreements with the Union on July 1, 1994, and on June 23, 1996.
Moreover, Leonhardt explained that Gorman Brothers could not financially make contributions to the Trust Fund as required under the collective bargaining agreements and remain solvent. Therefore, Leonhardt testified that he advised Stewart that Gorman Brothers was only going to make contributions to the Trust Fund for its employees who were vested in the Trust Fund's pension plan and/or maintained their health insurance through the Trust Fund but for no one else. Stewart denies that either of these conversations ever occurred or that he made the audit "go away."
After receiving some complaints from employees of Gorman Brothers' competitors that non-union members were driving Ready Mix trucks for Gorman Brothers, the Trust Fund initiated a second audit of Gorman Brothers in December 1998. This audit, performed by Michael Cox, revealed that Gorman Brothers was not making contributions to the Trust Fund for its employees who were performing Ready Mix work as required under the collective bargaining agreements. Specifically, the audit indicated that Gorman Brothers owed the Trust Fund $151,965.70 in delinquent contributions for the months of May 1992 through September 1998.7 Accordingly, the Trust Fund filed the instant case pursuant to ERISA § 515 (29 U.S.C. § 1145) seeking the $151,965.70 in delinquent contributions as well as liquidated damages in the amount of $15,196.50, interest on the delinquent contributions in the amount of $27,353.82, audit fees in the amount of $617.50, and costs and attorney's fees in the amount of $8,802.25, for a total of $203,318.27.
ERISA § 515 provides:
Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.
29 U.S.C. § 1145. In order to prevail on an ERISA § 515 cause of action, a trust fund must prove that "(1) it is a multiemployer plan as defined by section 3(1) of ERISA, 29 U.S.C. § 1002(37)(A); (2) defendant is an employer obligated to pay contributions under the terms of the plan; and (3) defendant failed to pay contributions in accordance with the terms of the plan." National Boilermaker Indus. Health and Welfare Joint Trust v. Servcote, Inc., 1997 WL 106107, * 3 (N.D.Ill. Feb.11, 1997).8
In the instant case, Gorman Brothers conceded at the final pretrial conference and again during the bench trial that the Trust Fund has established its prima facie case for the collection of delinquent contributions under ERISA § 515. Specifically, Gorman Brothers admitted that the Trust Fund is a multiemployer plan as defined by ERISA § 3(1), that it is obligated to make contributions to the Trust Fund pursuant to the three collective bargaining agreements which it entered into with the Union (and pursuant to the trust agreement), and that it failed to make those contributions.
Nevertheless, Gorman Brothers argues that the Court should not enter judgment in the Trust Fund's favor because the Trust Fund's action is barred by one of its four asserted affirmative defenses. Specifically, Gorman Brothers contends that the Trust Fund's recovery is barred by the affirmative defense of fraud in the inducement,9 unjust enrichment, equitable estoppel, and/or laches.10 Gorman brothers asserts that the Trust Fund, through Stewart, fraudulently induced it to enter into the collective bargaining agreements with the Union by fraudulently representing that it would not be required to make contributions to the Trust Fund for all of its employees who performed covered work. In addition, Gorman Brothers asserts that, because none of its employees ever have or ever will make a claim for benefits from the Trust Fund, the Trust Fund would be unjustly enriched if it is required to pay the delinquent contributions which the Trust Fund seeks from it.
Furthermore, Gorman Brothers argues that the Trust Fund is equitably estopped from recovering the delinquent contributions because the Trust Fund, via Stewart, represented that it was only required to make contributions for a select few of its employees and has, through a course of dealing over the years, accepted contributions on behalf of only a few of its employees. Finally, Gorman Brothers claims that laches bars the Trust Fund's recovery because the Trust Fund did not complete an audit of it sooner.11
As a general rule, an employer who is obligated to make contributions to a pension or welfare trust fund pursuant to the terms of a collective bargaining agreement may not assert contractual or equitable affirmative defenses pertaining to the formation of the collective bargaining agreement or to the union's conduct in an action by the trust fund to collect delinquent contributions. Robbins v....
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Teamsters & Employers Welfare v. Gorman Ready Mix
...After a bench trial, the district judge held the suit barred by the doctrine of laches and so entered judgment for the company. 139 F.Supp.2d 976 (C.D.Ill.2001). Gorman had signed a three-year collective bargaining agreement with a Teamsters local in 1991. The agreement required Gorman to c......
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Suit for contributions not barred by laches.
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