Haw. Annuity Trust Fund for Operating Eng'rs v. Kauai Veterans Express Co.

HAWAII ANNUITY TRUST FUND FOR OPERATING ENGINEERS, BY ITS TRUSTEES, LANCE WILHELM, KATHLEEN THURSTON, MARNIE KOGA HURSTY, CHAD GOODFELLOW, LEONARD DEMPSEY, RUSSELL E. BURNS, PANE MEATOGA, JR., DAN REDING, STEVE INGERSOLL AND MICHAEL AKAU; Plaintiff, v. KAUAI VETERANS EXPRESS COMPANY, LTD., A HAWAII CORPORATION; Defendant.

CIV. NO. 16-00615 JMS-KSC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

December 1, 2017

ORDER GRANTING PLAINTIFFS TRUSTEES OF THE HAWAII ANNUITY TRUST FUND FOR OPERATING ENGINEERS' RENEWED MOTION FOR PARTIAL SUMMARY JUDGMENT, ECF NO. 37, AND DENYING DEFENDANT KAUAI VETERANS EXPRESS COMPANY, LTD.'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT, ECF NOS. 39, 48

I. INTRODUCTION

Plaintiffs ("Trustees") are trustees of the Hawaii Annuity Trust Fund for Operating Engineers ("the Trust"), a multiemployer employee benefit plan established pursuant to a trust agreement incorporated in a collective bargaining agreement ("CBA") between Defendant Kauai Veterans Express Company, Ltd. ("Kauai Veterans") and the Operating Engineers Local Union No. 3 of the International Union of Operating Engineers, AFL-CIO ("the Union"). See Compl. ¶¶ 1-5, ECF No. 1. Trustees seek summary judgment on their asserted right to audit Kauai Veterans' payroll records to determine whether funds are due to the Trust. Mot. at 1, ECF No. 37. And they seek a judgment finding invalid Kauai Veterans' defense based on the Union's alleged breach of the CBA's Favored Nations clause. Id.

Also before the court, are Kauai Veterans' motion for partial summary judgment regarding its "Favored Nations" defense and its amended motion for partial summary judgment regarding the alleged end-date of its obligation to make payments to the Trust. ECF Nos. 39, 48. For the reasons stated below, the Trustees' motion is granted, and Kauai Veterans' motions are denied.

II. BACKGROUND

Kauai Veterans and the Union entered into a CBA entitled "Kauai Trucking Agreement 2011-2014" ("the 2011 Agreement"). ECF No. 1-1. It incorporated the trust agreements applicable to the "Operating Engineers Pension/Annuity Trust" which is a multiemployer benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"),29 U.S.C. §§ 1001 et seq. Id. § 14.02.00; Compl. ¶ 3. Among other things, the CBA required Kauai Veterans to make certain regular payments to the Trust. 2011 Agreement §§ 14.02.00-14.03.02. It also required Kauai Veterans to "provide the appropriate Trustees or their authorized representative(s) with information and records necessary to carry out the [Trust's] purposes" and "permit an audit of [its] payroll records . . . to ascertain whether all contributions due have been paid." Id. § 14.03.02. By its terms, the 2011 Agreement was in effect until at least June 30, 2014, and it remained in effect thereafter unless Kauai Veterans provided the Union with written notice of termination consistent with "Section 8(d) of the National Labor Relations Act, as amended." Id. § 01.01.00.

In approximately July or August 2014, Kauai Veterans and the Union entered into another agreement ("the 2014 Agreement"), which states, "It is understood that unless modified by this Memorandum of Agreement, the terms and conditions of the existing collective bargaining Agreement shall be unchanged." ECF No. 1-2 at 1. The 2014 Agreement provides that it is effective from July 1, 2014 through at least June 30, 2019. Id.

Kauai Veterans underwent audits for 2014 and 2015 that were performed by Hawaii Benefit Administrators, Inc. ("HBA"). Noelle Tagaban Decl. ¶¶ 4-5, ECF No. 28-3. The initial auditor for those periods, who isapparently no longer with HBA, raised no issues or concerns during his review, but the current auditor states that as a result of "further review of said audit results, our office came to the conclusion that further audit was necessary given clear discrepancies in the self-reported data provided by [Kauai Veterans]." Id. ¶ 6. Kauai Veterans refused to submit to further audits. Compl. ¶ 12.

On November 11, 2016, Trustees filed their complaint requesting Kauai Veterans be ordered to submit reports and payments in accordance with the CBA and Trust agreement and to permit Trustees to audit its "payroll books and records for the period of January 1, 2015 to the present," and earlier if necessary. Compl. at 9. Trustees also requested damages based on any sums due following the audit. Id.

On February 1, 2017, Kauai Veterans sent an email to counsel for the Union and Trustees purporting to withdraw recognition of the Union effective July 1, 2017. ECF No. 49-8 ¶ 3; ECF No. 49-10 at 1. Attached to the email was a letter addressed to Kauai Veterans' counsel Jeffrey Harris that contained the following paragraphs:

On January 26, 2017 a meeting between Shop Steward James K. Kanei 3rd, other employee (sic) was conducted in which they decided that they no longer desired to be part of the Operating Engineers Local Union #3.

They decided to withdraw their membership from the union immediately upon your approval of the proper correspondence to facilitate their request to the union sothey can stop further financial contributions to the Operating Engineers Local Union #3.

ECF No. 49-10. at 2. The letter included a chart listing the names and signatures of nine employees¹; checkmarks appeared next to each employee's name in a column marked "Leave." Id. Below that chart, however, was the following statement: "My initial and signature above indicates my . . . individual desire to participate as a member of Operating Engineers Local Union #3. This choice was made of my own free will and desire and was not coerced in making my decision."² Id.

In February and August, 2017, the Union filed charges of unfair labor practices against Kauai Veterans with the National Labor Relations Board ("NLRB"), encompassing actions bearing on the Union's alleged loss of majority support.³

Trustees filed their motion for partial summary judgment on August 8, 2017. ECF No. 37.⁴ Kauai Veterans filed its motion for partial summary judgment on its Favored Nations defense the same day. ECF No. 39. It filed an opposition to Trustees' motion on November 7, 2017. ECF No. 58. And Trustees replied on November 14, 2017.⁵ ECF No. 59.

Kauai Veterans filed its motion for summary judgment regarding the end-date of its contribution obligation on August 29, 2017. ECF No. 48. Trustees opposed the motion on November 7, 2017. ECF No. 55. And Kauai Veterans replied on November 14, 2017.⁶ ECF No. 61.

A hearing was held on November 28, 2017.

III. STANDARD OF REVIEW

Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The burden initially lies with the moving party to showthat there is no genuine issue of material fact. T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). Nevertheless, "summary judgment is mandated if the non-moving party 'fails to make a showing sufficient to establish the existence of an element essential to that party's case.'" Broussard v. Univ. of Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). An issue of fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is material if the resolution of the factual dispute affects the outcome of the claim or defense under substantive law governing the case. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 919 (9th Cir. 2001). When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

"One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses[.]" Celotex, 477 U.S. at 323-24. "There is no genuine issue of fact if the party opposing the motion 'fails to make an adequate showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bearthe burden of proof at trial.'" Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989) (quoting Celotex, 477 U.S. at 322). Moreover, there is no genuine issue of material fact if, taking the record as a whole, a rational trier of fact could not find in favor of the non-moving party. Matsushita, 475 U.S. at 586; Taylor, 880 F.2d at 1045.

IV. DISCUSSION

A. Favored Nations Defense

The parties have both moved for summary judgment regarding the viability of Kauai Veterans' so-called "Favored Nations" defense, which is based on the following CBA provision.

If the Union grants to any Employer in the Trucking Industry on the island of Kauai any terms or conditions better than those of this Agreement, then such better terms or conditions and application shall be made automatically available to all other Employers in the Trucking Industry on the island of Kauai under this Agreement with the Union, and the Union shall immediately notify the Employers of such concessions.

§ 25.01.01. ECF No.1-1. Kauai Veterans contends that because the Union has not enforced auditing and contribution obligations with other trucking industry employers on Kauai, this clause "automatically entitle[s] Kauai Veterans not to comply with the audit and contribution terms and conditions of the agreement." Opp'n at 5, ECF No. 58. Trustees contend that "an alleged breach of a [favored nations clause] is not a valid defense to a trust fund action to enforcecontributions." Reply at 7, ECF No. 59. Both parties rely principally on Lewis v. Benedict Coal Corp., 361 U.S. 459 (1960), but they draw differing conclusions as to its effect on this case.

Benedict Coal considered whether a CBA may "be construed as making performance of union...