Geiman v. L.E.C. Civil Contractors

1

GREGORY A. GEIMAN, as he is ADMINISTRATOR, INTERNATIONAL UNION OF OPERATING ENGINEERS LOCAL 4 HEALTH AND WELFARE FUND, et al., Plaintiffs, v. L.E.C. CIVIL CONTRACTORS, LLC, et al., Defendants.

Civil Action No. 22-10231-JCB

United States District Court, D. Massachusetts

April 17, 2024

ORDER ON PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT [DOCKET NOS. 88]

JENNIFER C. BOAL, UNITED STATES MAGISTRATE JUDGE

The Plaintiff Funds^[1]have moved for summary judgment against all defendants. Docket No. 88.^[2] For the following reasons, this Court denies the motion.

I. PROCEDURAL BACKGROUND

The Plaintiff Funds brought this ERISA action to enforce the obligation of Defendants L.E.C. Civil Contractors, LLC (“LEC”) and Linskey Excavating Co. (“Excavating”) (collectively, the “Corporate Defendants”) to make contributions under the terms of a collective bargaining agreement and to recover damages for alleged fraud and misrepresentation. In addition to the Corporate Defendants, the amended complaint names William M. Linskey, Jr., who is the owner and manager of LEC and owner and sole officer of Excavating. See Amended Verified Complaint (“AC”) at ¶¶ 11, 12.

On March 15, 2023, this Court granted Defendants' counsel's motion to withdraw. Docket No. 72. This Court warned the Corporate Defendants that because corporations are unable to appear pro se, failure to retain successor counsel may result in a default judgment. See id. at 3. To date, no counsel has made an appearance on behalf of the Corporate Defendants. Accordingly, on September 22, 2023, this Court granted the Plaintiffs' motion for entry of default and entered a default against the Corporate Defendants. Docket Nos. 83, 84. Also on that date, this Court denied the Plaintiff Funds' motion for a default judgment against the Corporate Defendants without prejudice to renewal after all claims in this action were resolved. Docket No. 85.

On October 27, 2023, the Plaintiffs filed a motion for summary judgment against all Defendants. Docket No. 88. Linskey did not file an opposition to the motion by the deadline. On December 6, 2023, this Court entered an order giving Linskey another opportunity to respond to the motion by December 29, 2023. Docket No. 94. To date, Linskey has not filed an opposition.

This Court held a hearing on the motion for summary judgment on March 20, 2024. Linskey did not appear. On March 22, 2024, the Plaintiffs filed a supplemental memorandum in support of their motion for summary judgment (the “Geiman Supp. Aff.”). Docket No. 99.

II. FACTS^[3]

On July 13, 2020, LEC agreed in writing to be bound to the terms of the Restated Agreements and Declarations of Trust establishing the Plaintiff Funds, to the terms of a collective bargaining agreement (“CBA”) with the International Union of Operating Engineers Local 4 requiring contributions to the Plaintiff Funds.^[4] The CBA requires employers to make contributions to the Plaintiff Funds for each payroll hour worked by each employee covered by the CBA.^[5]

Employers are required to submit remittance reports delineating payroll hours for each of their covered employees no later than the 19th day of the month following the month in which the work is performed.^[6] Delinquent contributions are charged interest at the rate of 1% per month.^[7]

LEC became delinquent in payment of benefit contributions in the spring of 2021.^[8]LEC and Linskey pledged two pieces of equipment as collateral to secure a payment plan.^[9]The Funds duly perfected their security interest by filing a UCC-1 financing statement.^[10] LEC and Linskey grossly under-reported the hours worked by LEC employees from July 2020 through the payment period in the amount of $149,515.32.^[11]They also gave false information regarding the collateral pledged to secure the debt in an effort to avoid paying benefit contributions for covered work.^[12]

LEC submitted certified payroll records, signed by Linskey, to the Town of Salem, New Hampshire that contain false information.^[13]Specifically, the certified payroll records include operators who do not appear on LEC's remittance reports or payroll records.^[14]

On February 16, 2022, Judge Casper approved an attachment on certain property and equipment believed to be owned by LEC.^[15]The Deputy Sheriff executed the attachment order on February 19, 2022.^[16]An UCC-1 financing statement was filed an hour after the Court's order of attachment issued.^[17]The financing statement was filed by LEC's surety and claimed to perfect a security interest in equipment under a security agreement dated November 13, 2020 with various LEC affiliates.^[18]The Funds' interest in the collateral was senior to the surety's interest because it was perfected earlier, but the surety's interest in the other three pieces appeared to be senior to the Funds' interest.^[19] The Funds immediately notified the surety of their seizure of LEC's equipment.^[20] The surety did not make any demand for return of any equipment.^[21]On May 4, 2022, when the Funds were preparing for a sale of the collateral on which the Funds had foreclosed, the surety's counsel gave the Funds documents showing that one of the pieces of collateral, the Caterpillar 336 DL Hydraulic Excavator serial number W3K01237 (“Cat Excavator”), is not owned by LEC or Linskey but by Excavating and there is a senior lien.^[22]Defendants also warned that the other piece of equipment pledged as collateral was also owned by Excavating.^[23]

LEC and Linskey made numerous false statements in the Security Agreement as to the ownership of the collateral and the lack of other liens.^[24] Despite the signed and notarized representations and certifications in the Security Agreement, including a certification under oath, neither LEC nor Linskey owned the collateral.^[25]

LEC and Linskey pledged collateral belonging to Excavating to secure a debt owned by LEC.^[26]As a result, the Funds were unable to sell the equipment and requested that the Deputy Sheriff arrange for its return, which required the Funds to pay $60,805.00 for storage and transport fees, which would ordinarily be deducted from the proceeds of a sale or auction.^[27]The Deputy Sheriff's Office substantially reduced the storage and transport fees in view of the Funds' inability to sell the equipment due to the Defendants' fraud.^[28]

Judge Casper issued a preliminary injunction ordering Excavating to produce its payroll records for an audit.^[29]Excavating complied in part and allowed the Funds to perform a partial payroll audit.^[30] The Funds were able to recover from a third-party surety the principal amount owed by Excavating as determined by the partial payroll audit.^[31]The Funds have not recovered the interest charges on late payments or legal fees and costs associated with the partial audit.^[32]

Since May 5, 2022, the Plaintiffs were able to recover three payments from third parties such as the surety and the Town of Salem, NH in the respective amounts of $101,797.74, $34,432.80, and $47,000.000.^[33]The final payment was a compromise of the Funds' claim for $65,077.63 based on the surety's arguments regarding hours that may not have been spent on covered work.^[34] As a result of the Plaintiffs' efforts, Defendants now owe the Funds a total of $158,004.03, broken down as follows:

$15,816.98 Interest on late-paid contributions;

$15,816.98 Statutory liquidated damages;

$6,286.80 Auditor's fees

$59,278.27 Legal fees and costs of collection $60,805.00 Equipment Transport and storage fees^[35]

III. ANALYSIS

A. There Is No Need To Enter Summary Judgment Against The Corporate Defendants Because They Have Been Defaulted

The Plaintiffs seek entry of summary judgment against all Defendants, including the Corporate Defendants. See Docket No. 88. It appears unnecessary to seek summary judgment against the Corporate Defendants, however, as they have been defaulted. “A defaulting party ‘is taken to have conceded the truth of the factual allegations in the complaint as establishing the grounds for liability as to which damages will be calculated.'” Ortiz-Gonzalez v. Fonovisa, 277 F.3d 59, 62-63 (1st Cir. 2002) (citation omitted). Based on the allegations in the Amended Verified Complaint, this Court finds that there is a factual basis for liability against the Corporate Defendants on Counts I (delinquent contributions in violation of ERISA against LEC), Count II (delinquent contributions and deductions from employees' wages in violation of the Labor Management Relations Act (“LMRA”) against LEC), Count IV (intentional misrepresentation and fraud on ERISA funds against LEC), and Count V (alter ego liability of Excavating). In addition, the Plaintiffs have provided sufficient evidence to support their request for damages in the amount of $158,004.03.

As discussed below, this Court finds that the Plaintiff Funds have not shown that they are entitled to judgment as a matter of law on their claims against Linskey. Accordingly, for the same reasons set forth in this Court's September 22, 2023 order, this Court will not enter a final judgment against the Corporate Defendants at this time.

B. Motion For Summary Judgment Against Linskey

1. Standard Of Review

Here despite being given additional time to respond to Plaintiffs' motion, see Docket No. 94, Linskey did not file an opposition or otherwise respond to the motion. “Even so, a court confronted with an unopposed summary judgment motion is still required ‘to test the undisputed facts in the crucible of the applicable law in order to ascertain whether [summary] judgment is warranted.'” Rivera-Aponte v. Gomez Bus Lines, Inc., 62 F.4th 1, 8 (1st Cir. 2023) (citations omitted). However, the court may “take as uncontested all evidence presented with” the unopposed motion. ...