Operating Eng'rs' Local 324 Fringe Benefit Funds v. Rieth-Riley Constr. Co.

681 F.Supp.3d 746

OPERATING ENGINEERS' LOCAL 324 FRINGE BENEFIT FUNDSand Trustees of the Operating Engineers' Local 324 Fringe Benefit Funds, Plaintiffs, v. RIETH-RILEY CONSTRUCTION COMPANY, INC., Defendant.

Case Number 20-10323

United States District Court, E.D. Michigan, Southern Division

Signed July 6, 2023

Daniel G. LeVan, Nancy H. Pearce, Finkel, Whitefield, Farmington Hills, MI, Jeffrey M. Lesser, Farmington Hills, MI, for Plaintiffs.

Christopher M. Trebilcock, Clark Hill PLC, Detroit, MI, Emily A. Kile-Maxwell, Philip J. Gutwein, II, Faegre Drinker Biddle & Reath LLP Business Litigation, Indianapolis, IN, for Defendant.

OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT, AND DISMISSING CASE WITH PREJUDICE

DAVID M. LAWSON, United States District Judge

The plaintiffs, multiemployer trust funds established to collect and administer certain fringe benefit contributions paid by employers on behalf of union workers under collective bargaining agreements, have filed this lawsuit seeking to compel the defendant employer to submit to an audit. This case was previously before the Court on the defendant's motion to dismiss for want of subject matter jurisdiction. The Court determined then, based on permissible fact finding on a motion brought under Civil Rule 12(b)(1), that the plaintiffs' claims for an audit of the defendant's fringe benefit contributions arose from a statutory obligation, not from a contract, and therefore the claim must be presented to the National Labor Relations Board, which has exclusive jurisdiction over such matters under the National Labor Relations Act, not to a court under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001, et seq. (ERISA). The court of appeals reversed that decision, holding that the question of which statute governs is a merits determination, not a jurisdictional question. On remand, the parties have filed cross motions for summary judgment, which present the question whether there are facts in the record that support the inference of a continued contractual relationship between the defendant employer and the labor unions under which the fringe benefits contributions were to be made to the plaintiff trust funds. The Court heard oral argument on June 21, 2023. The undisputed facts demonstrate what the Court previously determined: there is no continuing labor contract, and the defendant's conduct is unequivocally referrable to its statutory obligations. The plaintiffs, therefore, cannot prevail on their ERISA claims, and their complaint must be dismissed.

I.

The facts of the case are recited in the Court's earlier opinion on the defendant's motion to dismiss. Operating Eng'rs' Loc. 324 Fringe Benefit Funds v. Rieth-Riley Constr. Co., Inc., 517 F. Supp. 3d 675, 678 (E.D. Mich. 2021), rev'd and remanded, 43 F.4th 617 (6th Cir. 2022), cert. denied, — U.S. —, 143 S. Ct. 775, 215 L.Ed.2d 46 (2023). Although the parties since have taken additional discovery, their briefs recite largely the same facts and cite largely the same materials as their papers on the Rule 12(b)(1) motion. In fact, the defendant draws its statement of facts directly from the Court's opinion on the defendant's Rule 12(b)(1) motion, and the Court repeats some of those same facts here.

A. The Collective Bargaining Agreement

Defendant Rieth-Riley Construction Company is a large road and highway construction contractor that employs a number of workers represented by Operating Engineers' Local 324. Plaintiffs Operating Engineers Local 324 Fringe Benefit Funds are multiemployer trust funds established under Section 302 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, to provide benefits to union-member employees under ERISA. The funds collect contractually-mandated fringe benefit contributions from employers, pay medical expenses and pensions, and provide training and other benefits for their participants and beneficiaries. They operate under Trust Agreements that establish their scope and certain legal rights and obligations; the agreements for the six Funds are identical in all material respects. See Trust Agreements, ECF No. 77-2 through 77-6.

Rieth-Riley was a member of a trade group known as the Michigan Infrastructure and Transportation Association (MITA), which is comprised of hundreds of employers that hire Local 324's members to repair the State's roads. See, e.g., Rescisssion Letter, ECF No. 76-15, PageID.2943. Sometime before 2013, Rieth-Riley signed a power of attorney (POA) that authorized MITA to negotiate with the union on its behalf. Ibid. Rieth-Riley consequently became a party to a multiemployer collective bargaining agreement that MITA made with Local 324 on March 14, 2013, known as the Road Agreement. See Road Agreement, ECF No. 76-1, PageID.2494. The Road Agreement required that employers make periodic fringe benefit contributions to the Funds at specified rates. Id. at PageID.2521-24. Other MITA members that did not give power of attorney to MITA bargained directly with the union. See Aug. 10, 2018 Letter, ECF No. 76-3, PageID.2543.

On February 19, 2018, MITA notified Local 324 that it would terminate the Road Agreement effective June 1, 2018. Termination Letters, ECF No. 76-2, PageID.2541. The union accepted MITA's termination and withdrew from multiemployer bargaining with MITA. Id. at PageID.2540; Aug. 10, 2018 Letter, ECF No. 76-3, PageID.2543. Although MITA attempted to negotiate with Local 324 for a successor CBA, the union refused to negotiate with MITA or any other contractors that had given power of attorney to MITA (the "POA contractors"). See Termination Letters, ECF No. 76-2, PageID.2541; Jan. 2022 ALJ Decision, ECF No. 76-27, PageID.3293; Minutes of Jun. 2018 Local 324 Mtg., ECF No. 76-15, PageID.2948-49; Aug. 2018 Emails, ECF No. 76-5, PageID.2547. The union determined that it would not engage in any multi-employer bargaining or enter into another multi-employer CBA. Ibid.

After MITA terminated the Road Agreement, the Funds refused to accept post-expiration fringe benefit contributions from any POA contractors because no contract existed between the contractors and the Funds that permitted or required the Funds to accept the contributions. Ibid. The Taft-Hartley Act prohibits employer associations from making freestanding payments to employee groups such as unions. 29 U.S.C. § 186(a). And the Landrum-Griffin Act forbids payments to union-related entities unless the payments are "for the sole and exclusive benefit" of union members, and then only if the payments go into a trust fund jointly administered by employer and union management, and the "detailed basis on which such payments are to be made is specified in a written agreement with the employer." 29 U.S.C. § 186(c)(5)(B). Likewise, ERISA does not authorize contributions to a union welfare benefits plan except under a written agreement. 29 U.S.C. § 1145.

The Funds continued to accept post-expiration contributions from contractors who did not have powers of attorney with MITA because the Funds believed that they and the non-POA contractors intended to be bound by the expired CBA while a new agreement was negotiated. See Minutes of Jun. 2018 Local 324 Mtg., ECF No. 76-15, PageID.2948-49; Aug. 2018 Emails, ECF No. 76-5, PageID.2547-48; Aug. 2018 Counsel Email, ECF No. 76-7, PageID.2554. Some of those non-POA contractors had already signed a new agreement, and the remaining non-POA contractors who were in the process of forming a new contract were allowed to continue making contributions while they negotiated for a successor agreement. Ibid. The Funds' refusal to accept contributions from the POA contractors resulted in separate litigation in this district by plan participants employed by POA contractors who believed that the Funds' adherence to Local 324's preference for non-POA contractors violated the trustees' fiduciary duties. See Thompson v. Stockwell, No. 18-12392 (E.D. Mich. 2018).

Meanwhile, Local 324 decided to picket Rieth-Riley and two other contractors with whom it no longer had an active contract. Jan. 2022 ALJ Decision, ECF No. 76-27, PageID.3293. The picketing began on August 25, 2018, and on September 4, 2018, MITA and Rieth-Riley responded with a "defensive lockout." Id. at PageID.3293-94. These events spawned several unfair labor practice cases before the NLRB, including a complaint alleging that Rieth-Riley unlawfully used the lockout to force the union to engage in multiemployer bargaining, Case 07-CA-234085, and refused to provide the union with requested information regarding subcontractors and bargaining unit employees, Case 07-CA-261954; a complaint that the union wrongfully stated that it would not negotiate a successor CBA with a contractor that designated MITA as its bargaining representative, Case 07-CB-226531; and a complaint that a union picketer inflicted injury on a non-striking employee at a Rieth-Riley plant, Case 07-CB-247398. See Jan. 2022 ALJ Decision, ECF No. 76-27, PageID.3294; Jul. 2022 ALJ Decision, ECF No. 76-28, PageID.3361. Although the union and Rieth-Riley are parties to each of the NLRB proceedings, the Funds are not, nor have they made any claims for contributions or audits in any of the NLRB cases. See ibid.; Def. Resp. to 2d Admissions Request, ECF No. 77-17, PageID.3934-36.

B. Fringe Benefit Contributions

After MITA terminated the Road Agreement, Rieth-Riley continued to make fringe benefit contributions to the Funds. The Funds refused the contributions, returning every contribution made by Rieth-Riley between May and November 2018. Return Letters, ECF No. 76-9, PageID.2562-65. Each time they returned contributions, the Funds informed Rieth-Riley that they had "determined that there is no legal basis for accepting contributions without a written agreement between your Company and IUOE Local 324." Ibid. The Funds also informed Rieth-Riley that they would continue accepting...