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Painters District Council No. 58 v. Architectural Painting Services, Inc.

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

April 5, 2017

PAINTERS DISTRICT COUNCIL NO. 58, et al., Plaintiffs,
v.
ARCHITECTURAL PAINTING SERVICES, INC., et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          RODNEY W. SIPPEL UNITED STATES DISTRICT JUDGE

         Plaintiffs-Painters District Council No. 58 and its business manager, several employee benefit plans, and several individuals in their capacities as trustees of those plans-seek to collect unpaid fringe benefit contributions, union dues, liquidated damages, attorneys' fees, and costs from Defendants Architectural Painting Services, Inc., Architectural Painting Services, LLC, and Joseph Sherrillo. Plaintiffs bring this suit under Section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, and Section 502 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132. I held a non-jury trial on November 3, 2016. After consideration of the evidence and arguments presented, I make the following findings of fact and conclusions of law. See Fed. R. Civ. P. 52(a).

         FINDINGS OF FACT

         I entered a case management order in this case per Federal Rule of Civil Procedure 16 that set a non-jury trial for October 11, 2016 and ordered the parties to submit their pretrial materials no later than 20 days prior to that date. Plaintiffs submitted timely pre-trial materials, including a proposed joint stipulation of uncontested facts, which stated Plaintiffs contacted Defendants' counsel regarding the required joint stipulation of uncontested facts but received no response. Defendants failed to comply with the pretrial order and did not submit any pretrial materials or object to any of Plaintiffs' materials. As a result, I accept Plaintiffs' joint stipulation of uncontested facts as established and need not recite them exhaustively here. See ECF No. 25. I will address the facts relevant to Plaintiffs' damages calculation and Defendants' limited challenges to liability and damages.

         Plaintiffs are Painters District Council No. 58 (the Union), the Union's business manager, a number of employee benefit plans (St. Louis Painters Pension Trust, St. Louis Painters Welfare Trust, St. Louis Painters Vacation Trust, and Painters District Council No. 2 Apprenticeship and Journeyman Training Trust, or “the Trusts”), and the trustees of those plans. Plaintiffs seek unpaid employee benefit contributions under ERISA and unpaid union dues and contributions under the LMRA. Plaintiffs also seek liquidated damages, audit costs, and attorney's fees and costs under ERISA, the LMRA, and the terms of the parties' collective bargaining agreement (CBA). Defendants are Architectural Painting Services, Inc., a Missouri corporation (APS Inc.); Architectural Painting Services LLC, a Missouri limited liability corporation (APS LLC); and Joseph Sherrillo, an individual who was an officer of APS Inc. and the organizer of APS LLC.

         APS Inc. and APS LLC were bound by CBAs with the Union at all times relevant to this case. The CBAs provide the Union and the Trusts the right to perform a payroll examination of the financial books and records of APS Inc. and APS LLC when they deem it necessary or desirable.[1] Joseph Sherrillo, in his individual capacity, also signed an unconditional guaranty document personally guarantying “all existing and future indebtedness of the Company to Union, its members and the Trust Funds” as well as “all damages, cost, fees and expenses which the union . . . or the Trustees of the Trust Funds may be entitled to recover from the Company pursuant to collective bargaining agreement or under any local, state, or federal law.” Pls. Ex. 2. Under the terms of the CBAs, APS Inc. and APS LLC were required to make contributions to the Trusts and to the Labor Management Cooperation Fund and the St. Louis Painters and Decorating Industry Advancement Fund on the basis of all hours worked by employees covered by the CBAs. The CBAs required APS Inc. and APS LLC to self-report the number of hours covered employees worked and the amount of contributions due by submitting weekly contribution report forms. The CBAs also required APS Inc. and APS LLC to remit union dues on behalf of covered employees to the Union. The CBAs require APS Inc. and APS LLC to pay liquidated damages of 10% on delinquent contributions up to the first 30 days of the delinquency, after which liquidated damages are calculated at a rate of 1‒1/2% that is compounded monthly until the contributions are fully paid. The CBAs require APS Inc. and APS LLC to pay attorneys' fees and accounting costs, in addition to other relief prescribed by law, in a suit to recover unpaid contributions, union dues, or liquidated damages.

         Plaintiffs asked the accounting firm Grabel, Schnieders, Hollman & Co., P.C. to perform a payroll examination of APS Inc. and APS LLC's books and records to aid Plaintiffs in evaluating the contributions Defendants owed for the period of June 30, 2013 through May 31, 2016. Accountant Charles Kinder of Grabel, Schnieders, Hollman & Co., P.C. reviewed documents provided by APS Inc. and APS LLC at Defendants' counsel's offices on June 20, 2016. Kinder determined that the documents Defendants provided were not sufficient for him to complete the payroll examination. On July 19, 2016, Kinder emailed Joseph Sherrillo a list of documents he needed Defendants to provide in order to complete the payroll examination, including Form 941s for eight quarters, all form W-2s for 2014 and 2015, and employee earnings records for certain designated periods of time. Defendants did not provide any of these requested documents before Kinder released his written findings on August 10, 2016.

         In October 2016, Defendants provided Kinder with two of the documents he had requested, the Form 941 for the third quarter of 2014 and the first quarter of 2015. Kinder determined that these two additional documents did not provide him sufficient documentation to complete the payroll examination or to change the findings of the payroll examination that he completed in August 2016. When Defendants provided these two additional documents to Kinder, they made no representation that they had other documentation available or had previously provided any other documents to the Union for the payroll examination.

         As a result of Defendants' failure to provide Kinder with sufficient documentation to complete the payroll examination, Kinder invoked Section 15 of the parties' CBA and presumed that all of Defendants' employees who had any hours reported by Defendants during a weekly pay period worked 40 hours during that pay period. Section 15 of the CBA states, in relevant part:

The employer shall maintain a time keeping system, which accurately reflects all hours worked by employees covered by this Agreement. This system must be presented to the Union at the signing of the Agreement. The system shall be maintained for the length of the Agreement, and any change in the system must be approved by the Union. In the event that the Employer shall fail to maintain or, on request from the Union or the Trustees of any of the fringe benefit funds, fails to produce such records, then for purposes of computing fringe benefit contributions, dues check-off and Industry Fund contributions, there shall be a rebuttable presumption that any employee who worked for an Employer within particular weekly pay period worked a total of 40 hours in such pay period for such Employer.

         Pls.' Exs. 9-10, at 16. As a result of invoking Section 15, Kinder calculated that from June 30, 2013 to May 31, 2016, Defendants incurred a delinquency of $42, 976.91. This calculation included unpaid delinquent contributions ($31, 073.55); liquidated damages on those delinquent contributions, computed through August 31, 2016 ($10, 540.55); and costs of the payroll examination that Kinder performed ($1, 362.81).[2] Defendants did not provide Kinder with any documents or explanations to contradict the findings of the payroll examination.

         Defendants argued at trial that some of the amounts included in Kinder's payroll examination were included in prior settlement agreements and a consent judgment entered in a prior case between these parties, Case No. 4:12 CV 2379 JCH (E.D. Mo.). On review of the prior agreements, the consent judgment, and the explanations the parties provide about what occurred in the prior case, I do not find any support for concluding that the amounts paid in Case No. 4:12 CV 2379 JCH overlap with the amounts Kinder found as being owed in the payroll examination.

         Plaintiffs explain that in the prior case, Defendants paid outstanding principal amounts due per a payroll examination covering the period of February 1, 2010 to June 30, 2013. The parties' settlement then covered the remaining amounts Defendants owed from that period, namely, liquidated damages, interest, and attorney's fees and costs, all calculated through February 14, 2014. Kinder's payroll examination picked up where that audit left off, starting at June 30, 2013. The first week that Kinder found any amounts owed in his current payroll examination report was March 28, 2014.

         Later the parties entered into a second agreement that included a settlement of the amounts owed on the prior agreement as well as amounts for additional delinquent contributions and attorneys' fees Defendants had incurred. See Pls. Ex. 1. Unpaid principal contributions for periods overlapping with the time period at question in this case were included in this second agreement, but these amounts were based only on Defendants' weekly contribution reports. The agreement stated that the Contractor agreed it may owe additional amounts that could be uncovered by an audit and explicitly allowed the Funds to conduct an audit of the Contractor's records to determine what additional damages may be owed. Plaintiffs then conducted that audit-resulting in the payroll examination report in this case-which led them to uncover the damages they now request. Based on the evidence presented, I find no overlap between the prior settlement agreements/consent judgment in Case No. 4:12 CV 2379 JCH and the payroll examination Kinder conducted in this case.

         CONCLUSIONS OF LAW

         Plaintiffs seek to recover unpaid employee benefit contributions, liquidated damages, attorneys' fees, and costs under ERISA, 29 U.S.C. §§ 1132 and 1145. They also seek to recover unpaid union dues and contributions, liquidated damages, and attorneys' fees and costs under the LMRA, 29 U.S.C. § 185.

         Section 1145 of ERISA provides that “[e]very employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.” 29 U.S.C. § 1145. Section 1132(g)(2) provides for awards in actions by a fiduciary for or on behalf of a plan to enforce § 1145. The plaintiff bears the burden of ...


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