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Iron Workers St. Louis District Council Annuity Trust v. United Ironworkers Inc.

United States District Court, E.D. Missouri, Eastern Division

September 8, 2016




         This matter is before the Court on cross motions for summary judgment in this action under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1145, to recover delinquent fringe benefit contributions. Plaintiffs, three multiemployer fringe benefit funds and their fiduciaries, move for summary judgment against Defendant in the amount of $795, 701.01, which they assert is the amount owed by Defendant in delinquent contributions, liquidated damages, interest, and audit costs following audits[1]of Defendant's records for the periods of January 1, 2010 through June 30, 2013, and July 1, 2013 through June 30, 2014. (Doc. No. 45.) Plaintiffs also seek an order compelling a further audit for the period of July 1, 2014 to the present.

         Defendant United Ironworkers, Inc., moves for partial summary judgment on Plaintiffs' claims for delinquent contributions, and associated penalties and interest, with respect to the following categories of discrepancies found by the audits: (1) alleged bonus payments, which Defendant asserts were not paid for hours worked; (2) hours allegedly worked on something other than ironworking, such as office or maintenance work; (3) hours allegedly worked by brothers Eugene Edwards and Gerry Edwards (together, the “Edwards Brothers”), whom Defendant asserts it did not employ as union ironworkers during the relevant period; and (4) hours worked by ironworkers in Indiana whom Defendant asserts were covered by a different union and fund, outside of Plaintiffs' jurisdictions. (Doc. No. 42). Defendant asserts that these categories of discrepancies were based on inaccurate assumptions made by the auditor, and that the parties' agreements do not require contributions with respect to these categories.

         For the reasons set forth below, the Court will grant Defendant's motion in part, to the extent it relates to alleged delinquent contributions based on bonuses, hours worked by the Edwards Brothers, and hours worked by ironworkers in Indiana; will deny Plaintiffs' motion to this extent; and will otherwise grant Plaintiffs' motion.


         Defendant is a party to various participation agreements with Plaintiffs under which it is required to make fringe benefit contributions to Plaintiffs on behalf of each union ironworker employed by Defendant, in the amount and according to the terms of the collective bargaining agreement (“CBA”) of the local ironworkers union within whose jurisdiction work was performed. The CBAs, in turn, require Defendant to remit contributions to Plaintiffs at a per-hour rate for every hour worked by covered ironworkers and to remit monthly reports reflecting those hours. The participation agreements also require Defendant to be bound by certain trust documents permitting Plaintiffs to audit Defendant's records to determine if the required contributions were made. The trust documents require Defendant to pay Plaintiffs' audit costs, attorneys' fees, and litigation costs, as well as interest and 10% liquidated damages on delinquent contributions.

         Plaintiffs performed audits of Defendant's records for the periods of January 1, 2010 through June 30, 2013, and July 1, 2013 through June 30, 2014. Auditor Brad Soderstrom testified by deposition that he interacted with Defendant's corporate secretary, Paul Dickey, in completing the audits; that Defendant cooperated with him during the audits; and that Defendant provided him all of the information he needed to complete his audits accurately. Soderstrom's audit reports contained the following disclaimer:

We were not engaged to, and did not perform an audit, the objective of which would be the expression of an opinion on the fringe benefit contributions submitted by the Employer. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

(Doc. Nos. 44-14 at 2, 44-15 at 2 & 44-16 at 2.) Rather than express a professional opinion as to how much Defendant actually owed Plaintiffs in contributions, the audit reports simply reflected what Defendant might owe Plaintiffs given the application of various assumptions to Defendant's payroll records, as explained below.

         Applying these assumptions, Soderstrom found that Defendant owed Plaintiffs $491, 664.87 in delinquent contributions, $49, 225.31 in liquidated damages, and $213, 403.08 in interest. In an affidavit submitted with Plaintiffs' motion for summary judgment, Soderstrom attested that his firm will bill Plaintiffs $41, 407.75 for performing the audits.

         Assumption Related to Bonuses

         Almost all of the delinquent contributions-$394, 973.78 of the $491, 664.87- reported in the audits were amounts due on alleged bonuses Defendant paid to its ironworkers. Defendant did not pay contributions to Plaintiffs based on payments that Defendant characterized as bonuses. These payments were labeled as various types of bonuses in Defendant's payroll records, including flat bonuses, lump sum bonuses, Christmas bonuses, and forgiven loans to employees. The audit reports state that Defendant explained to Soderstrom that Defendant paid bonuses in addition to payment for hours worked, and that its bonus system was used to reward exceptional service, was not mandatory, and could be discontinued at any time. Other than the payroll records labeling the bonuses as such, Defendant did not produce records to Soderstrom describing the bonus program or identifying the purpose of the bonuses.

         Soderstrom further testified that, in his experience performing these types of audits, there are cases in which employers might disguise hours worked as bonuses to avoid making required contributions, and there are also cases in which employers legitimately pay bonuses to workers, in addition to payment for hours worked, and are therefore not required to make contributions based on those bonuses. Soderstrom testified that his standard audit procedure is to identify bonus amounts, try to determine the purpose for the bonuses, and unless he can verify otherwise, assume that they reflect additional hours worked.[2] Soderstrom testified that he could not verify the purpose for the bonuses here from the records Defendant provided, but that he did not find any evidence that the bonuses were in fact a subterfuge for hours worked, and he had no reason to disbelieve Defendant's verbal representations that the bonuses were paid in addition to (rather than in lieu of) payment for hours worked. Soderstrom also testified that he received direction from Plaintiffs' counsel to include the bonuses as hours worked in his reports.

         Soderstrom, therefore, assumed the bonuses were paid in lieu of payments for hours worked and calculated the number of hours worked by dividing the bonus amount by the average wage rate in effect for the year; Soderstrom then multiplied this number by the fringe benefit rate. Applying this assumption and formula, Soderstrom found that Defendant owed $394, 973.78 in contributions in connection with the alleged bonuses.

         Defendant's owner, Kim Rasnick, testified in his deposition that, during the relevant periods, he paid union ironworkers the rate set by the CBAs for all hours worked but also paid his “topnotch” workers additional amounts as bonuses. He testified that approximately 20% of his employees received such bonuses and that his decision to pay bonuses was discretionary and in all cases made by verbal agreement. Rasnick further testified that he sometimes loaned his good workers money to cover personal expenses and if the money was not paid back, he treated the loan as a bonus that the worker would have otherwise received for good work and did not give the worker any further bonus. Finally, Rasnick testified that he gave Christmas bonuses to most or all employees in years that his company was profitable. (Doc. No. 44-9 at 3-6.) All of Defendant's union ironworkers who were deposed by Plaintiffs also testified that Defendant paid them per-job, lump-sum, Christmas, and other types of bonuses from time to time, and that these bonuses were paid in addition to their regular payment for hours worked.

         In their depositions, Plaintiffs' board members testified that they had no evidence, other than the audits, that Defendant paid bonuses in lieu of payment for hours worked by union ironworkers.

         Assumption Related to Hours Worked on Something Other Than Ironworking

         Iron Workers Local 392's CBA requires that Defendant make contributions to Plaintiffs “for each hour worked for each employee covered by this agreement.” (Doc. No. 45-20 at 44-45.) The CBA covered “Iron Workers and Apprentices who are employed by [Defendant] performing work described in Article 2 hereof, within the territorial jurisdiction” of the CBA; Article 2, in turn, listed various types of work related to ironworking. Id. at 5, 10-12.

         Defendant paid contributions to Plaintiffs for 29 hours worked per week by each of the following union ironworkers covered by Local 392's CBA: Jason Dagner, Michael Thornton, Christopher Wills, and David Wills.[3] Defendant paid contributions for up to 29 hours per week, regardless of the type of work performed by these ironworkers. The four ironworkers each worked more than 29 hours per week, but Defendant did not pay contributions to Plaintiffs for hours worked over the 29-hour limit. In his affidavit, Soderstrom attests that he could not determine from Defendant's records what type of work these ironworkers performed during the additional hours worked. Soderstrom assumed that contributions were owed for hours worked by the four ironworkers over 29 hours per week. Applying this assumption, Soderstrom found that Defendant owed $49, 738.23 in contributions in connection with the additional hours worked by Dagner, Thornton, Christopher Wills, and David Wills.[4]

         In their depositions and in declarations submitted with Defendant's motion for summary judgment, these ironworkers testified and declared under penalty of perjury that any additional hours they worked for which contributions were not paid were hours spent on something other than ironworking, such as office work.

         Soderstrom also included in his report hours worked by Local 392 ironworker Moises Sanchez. Defendant did not pay contributions to Plaintiff on behalf of Sanchez for these hours. It is undisputed that Sanchez did not perform ironworking during these hours but instead performed maintenance work in Defendant's warehouse. Soderstrom assumed that contributions were owed for these hours worked by Sanchez, in the amount of $7, 737.05.

         Assumption Related to Edwards Brothers

         Soderstrom included the Edwards Brothers in his report because steward reports from Local 392 showed that the brothers were on one of Defendant's jobsites for 294 hours each for the period of March through May 2013. Defendant informed Soderstrom during the audit that the Edwards Brothers had never been employed by Defendant, and that the brothers may have been on Defendant's jobsites to visit their relative and Defendant's employee, Chris Edwards. Soderstrom did not talk to the Edwards Brothers or Chris Edwards before making his report. Defendant did not pay any contributions to Plaintiffs on behalf of the Edwards Brothers.

         Soderstrom assumed that the Edwards Brothers were covered ironworkers who worked for Defendant during the hours they were present on Defendant's jobsites, and he therefore found that Defendant owed $21, 694.74 in contributions for the Edwards Brothers.

         The Edwards Brothers have submitted declarations in connection with Defendant's motion for summary judgment, in which they declare under penalty of perjury that they are both retired ironworkers; that they have never been employed or paid by Defendant; that their relative, Chris Edwards, was employed by Defendant; that, on various occasions, they visited Defendant's jobsites where Chris Edwards was working “for [their] own purposes, ” including to check on Chris's progress in the ironworking trade; and that they did not perform any work for Defendant during these visits. (Doc. Nos. 44-11 & 44-12.) Soderstrom submitted a supplemental affidavit, in connection with Plaintiffs' response to Defendant's motion, attesting that, according to Defendant's records, Chris Edwards was not present on Defendant's jobsites for slightly more than half of the time the Edwards Brothers spent there.

         Assumption Related to Hours Worked by ...

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