Operating Engineers' Local 324 Fringe Benefit Funds v. J. C. Holly Contracting, Inc.

377 F.Supp.3d 762

OPERATING ENGINEERS' LOCAL 324 FRINGE BENEFIT FUNDS, et al., Plaintiffs,

v.J. C. HOLLY CONTRACTING, INC., et al., Defendants.

Case No. 17-11681

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

Signed March 29, 2019

Jeffrey M. Lesser, Jeffrey M. Lesser PC, Farmington Hills, MI, for Plaintiffs.

Jeffrey H. Bigelman, Osipov Bigelman, Southfield, MI, for Defendants.

ORDER & OPINION GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (DKT. 23)

MARK A. GOLDSMITH, United States District Judge

This is an action brought by Plaintiffs Operating Engineers' Local 324 Fringe Benefit Funds and Trustees of the Operating Engineers' Local 324 Fringe Benefit Funds (the "Funds") for unpaid fringe benefit contributions against Defendants J.C. Holly Contracting, Inc. ("J.C. Holly"), Timothy Thayer, and Brian Thayer (Dkt. 6). The Funds are multiemployer fringe benefit trust funds established to provide benefits to employees under the Employee Retirement Income Security Act of 1974, as amended, 29 U. S. C. §§ 1001 - 1461 ("ERISA"). The Funds pay medical expenses, pensions, vacation pay, and other benefits for their participants and beneficiaries. Defendants Timothy Thayer and Brian Thayer are the President and Vice President, respectively, of J.C. Holly. Although J.C. Holly is a defendant in this case, it filed a petition for bankruptcy on July 26, 2018 (Dkt. 22), which stays this matter as to J.C. Holly only. The Funds move for summary judgment against Timothy and Brian Thayer, as J.C. Holly's principals, for breaching their fiduciary duty to make fringe benefit contributions on behalf of J.C. Holly employees (Dkt. 23).¹ For the reasons that follow, the Court grants in part and denies in part the Funds' motion.

I. BACKGROUND

J.C. Holly is a construction contractor that performs concrete and earth work, site balancing, and installs water, storm, and sanitary sewers. Pl. Statement of Material Facts ("PSMF") ¶ 3 (Dkt. 23). Defendants Timothy and Brian Thayer (collectively the "Thayers") are brothers who own and operate J. C. Holly. Id. ¶ 4. They are the only functioning officers and directors of J.C. Holly. Id.

On April 10, 1986, J.C. Holly entered into a collective bargaining agreement ("CBA") with the Funds in which it agreed to abide by the "Wage Rates, Fringe Benefits, and all other terms, conditions and provisions of the most current CBA Agreement between" the Funds and seven contractor associations, including the Associated General Contractors of America, Michigan, Detroit and the Upper Peninsula Chapters ("AGC"). 1986 CBA, Ex 1 to Pl. Reply (Dkt. 29-1). Neither Timothy nor Brian Thayer ever signed a CBA in their individual capacities. The Funds claim J.C. Holly is a party to two agreements: The CBA with AGC ("AGC Agreement") and the Construction Association of Michigan Agreement ("CAM Agreement"). The Thayers dispute that J.C. Holly is a party to the CAM Agreement, Def. Sur-Reply at 2 (Dkt. 34), but not that J.C. Holly is bound by the AGC Agreement.

With the exception of the associations' names, the AGC Agreement and the CAM Agreement contain identical provisions with respect to the Funds. Compare AGC Agreement ¶¶ 29-36, Ex. 18 to Pl. Reply (Dkt. 29-5), with CAM Agreement ¶¶ 29-36, Ex. 2 to Pl. Mot. (Dkt. 23-2). Timothy R. LaLonde, a Fund Coordinator for the Funds, submitted an affidavit confirming that "[t]he agreement between Operating Engineers Local 324 and the [AGC] is substantially the same as the CAM Agreement, covering identical work and containing identical provisions with respect to the Funds." LaLonde Aff., Ex. 10 to Pl. Mot. ¶ 6. The Thayers do not dispute this point.

Timothy and Brian Thayer admit that they alone make decisions about disposition of money received by J.C. Holly, including deciding whether to pay fringe benefit contributions that J.C. Holly owes to the Funds, when to pay the contribution, and the amount of the contributions to pay. PSMF ¶ 7; Def. Statement of Material Facts ("DSMF") ¶ 7 (Dkt. 28); Brian Thayer Dep., Ex. 12 to Pl. Mot. at 35:21-24 (Dkt. 23-12); Timothy Thayer Dep., Ex. 15 to Reply at 19:8-10 (Dkt. 29-2). The Funds completed two payroll audits of J.C. Holly covering work performed from September 2008 through March 2017, and April 1, 2017 through May 12, 2017. PSMF ¶ 12. The audits found that J.C. Holly's contributions for work performed from December 2012 through May 2018 were delinquent and that it maintained a balance owing of $ 81,418.34, consisting of $ 36,166.89 in fringe benefit contributions, $ 29,960.70 in liquidated damages, and $ 15,290.75 in interest. Id. The Thayers do not dispute the amounts that J.C. Holly owes to the Funds. DSMF ¶ 12.

II. STANDARD OF REVIEW

A motion for summary judgment under Federal Rule of Civil Procedure 56 shall be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine dispute of material fact exists when there are "disputes over facts that might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "[F]acts must be viewed in the light most favorable to the nonmoving party only if there is a ‘genuine’ dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The moving party may discharge its burden by showing "that there is an absence of evidence to support the nonmoving party's case." Horton v. Potter, 369 F.3d 906, 909 (6th Cir. 2004) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ).

III. ANALYSIS

There are three issues that must be resolved in this case. First, the Funds must show that J.C. Holly failed to meet its obligation of making fringe benefit payments to the Funds. Second, the Funds must show that Timothy and Brian Thayer were fiduciaries of the unpaid fringe benefit contributions and breached their fiduciary duties. Finally, they must justify damages against Timothy and Brian Thayer. The Court will take each in turn.

A. J.C. Holly's Unpaid Fringe Benefits

The Funds' claim against J.C. Holly is brought under Section 515 of ERISA, which requires employers to make contributions to employee funds in accordance with the terms and conditions of collective bargaining agreements. 29 U.S.C. § 1145. "In any action under this subchapter by a fiduciary for or on behalf of a plan to enforce section 1145 of this title in which a judgment in favor of the plan is awarded, the court shall award the plan –"

(A) the unpaid contributions,

(B) interest on the unpaid contributions,

(C) an amount equal to the greater of--

(i) interest on the unpaid contributions, or

(ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent (or such higher percentage as may be permitted under Federal or State law) of the amount determined by the court under subparagraph (A),

(D) reasonable attorney's fees and costs of the action, to be paid by the defendant, and

(E) such other legal or equitable relief as the court deems appropriate.

29 U.S.C. § 1132(g)(2). Contributions are plan assets as soon as they are due and owing. See, e.g., Plumbers Local 98 Defined Ben. Pension Fund v. M & P Master Plumbers of Michigan, Inc., 608 F.Supp.2d 873, 877 (E.D. Mich. 2009).

The Thayers make much of the fact that the CAM Agreement was not part of the 1986 CBA signed by Brian Thayer. But this argument is immaterial, because J.C. Holly's obligation to make fringe benefit payments is identical under the AGC Agreement, which is expressly identified in the 1986 CBA. There is no dispute of material facts that J.C. Holly is obligated to make fringe benefit contributions to the Funds. There was some dispute as to the amount of unpaid contributions, but the matter was resolved through a subsequent review by Wayne B. Kless of Stefansky, Holloway & Nichols, who conducted two audits of J.C. Holly and confirmed the outstanding unpaid benefits with J.C. Holly's office manager, Janet Thayer. Kless Aff., Ex. 11 to Pl. Mot. ¶¶ 2-9 (Dkt. 23-11). The amount of unpaid fringe benefits as of August 1, 2018 is $ 36,166.89. Id. ¶ 9. The Thayers do not dispute this amount. Therefore, J.C. Holly failed to meet its obligation of making fringe benefit payments to the Funds.

B. Timothy and Brian Thayer are ERISA Fiduciaries

The Funds argue that Timothy and Brian Thayer, as President and Vice President respectively, are individually liable for breaching their fiduciary duties under ERISA to ensure that the J.C. Holly met its contribution obligations. The Thayers argue that they are not fiduciaries because the Funds unethically attempted to collect unpaid fringe benefit contributions outside of the statute of limitations. Resp. at 6-7 (Dkt. 28). They further argue that rather than misappropriating funds from J.C. Holly, they loaned money to J.C. Holly to keep the company afloat. The Thayers' arguments miss the mark.

Under ERISA, "a person is a fiduciary with respect to a plan to the extent [ ] he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets." 29 U.S.C. § 1002(21)(A). "[P]ension and benefit fund contributions are plan assets as soon as they are due and owing." Trustees of the Operating Engineers' Local 324 Pension v. Glencorp, Inc., 178 F.Supp.3d 600, 607 (E.D. Mich. 2016) (emphasis in original) (citing cases). A fiduciary must "discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries." 29 U.S.C. § 1104(a)(1).

ERISA...