Opinion
Case No.: 98-75051.
July 25, 2000.
ORDER AND OPINION (1) DENYING DEFENDANTS' MOTION TO DISMISS, AND (2) GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT
Before the Court are Plaintiffs' motion for summary judgment (Docket Entry #14) and Defendants' motion to dismiss (Docket Entry #27). The Court heard oral argument on these motions on April 5, 2000. Upon consideration of the motions, the submissions of the parties, and the applicable law, the Court denies Defendants' motion to dismiss, and grants Plaintiffs' motion for summary judgment.
I. BACKGROUND
A. Factual Development
This action involves a claim ostensibly based on the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132, 1145; and on the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186, 302. Plaintiffs, the Trustees of various carpenter union funds, filed the instant action to collect $13,472.71 in delinquent fringe benefit contributions from Defendants D.P. Letscher Company, Inc. and L.W. Kennedy, Inc.
The Plaintiffs are Trustees of Detroit Carpenters' Health and Welfare Fund; Trustees of Carpenters' Annuity Fund — Detroit and Vicinity; Trustees of Carpenters' Pension Trust Fund — Detroit and Vicinity; and Trustees of the Carpenters' Vacation Fund — Detroit and Vicinity, the Michigan Regional Council of Carpenters, and the United Brotherhood of Carpenters and Joiners of America, AFL-CIO (collectively "the Funds").
The dispute in this case arises out of the construction of a Walgreen's Drug Store ("the Project") in 1997 in Waterford, Michigan. Agree Limited Partnership and Agree Realty Corporation (collectively, "Agree") owned the real property upon which the store was to be built, and entered into a contract with L.W. Kennedy for its construction. L.W. Kennedy acted as the general contractor while D.P. Letscher performed carpentry work as a subcontractor.
David Letscher is currently the president of both L.W. Kennedy and D.P. Letscher. (See Letscher Aff, ¶ 1.)
Plaintiffs allege that pursuant to a collective bargaining agreement ("CBA") between D.P. Letscher and the Michigan Regional Council of Carpenters ("the Union"), D.P. Letscher agreed to make timely employee benefit contributions to the Funds for each employee covered by the CBA. An audit report dated March 19, 1998 showed that D.P. Letscher owed the Funds $23,472.71 arising out of the Project. Having been unsuccessful in collecting these outstanding contributions from D.P. Letscher, Plaintiffs filed a construction lien against Agree's property.
Unbeknownst to Defendants, in September 1998 Plaintiffs and Agree negotiated a settlement whereby Plaintiffs agreed to release their construction lien against the property in exchange for a compromised payment of $10,000.00 to be applied toward reducing the fringe benefits outstanding on the project. The agreement provides that Plaintiffs may continue their collection efforts against D.P. Letscher and L.W. Kennedy for the balance of fringe benefit contributions due. (See Pl. Summ. J. Br., Ex. 3.)
B. Procedural Posture
On November 28, 1998, Plaintiffs filed the instant action against Defendants seeking to recover the balance of $13,472.71 in outstanding contributions. Alleging that Plaintiffs improperly reached a settlement agreement with Agree without notice to Defendants, Defendants filed a four count counterclaim against Plaintiffs on January 19, 1999 asserting claims of breach of contract, interference, indemnification, and misrepresentation. Thereafter, on February 4, 1999, Defendants filed a third party complaint against Agree alleging that Agree failed to pay them funds related to the Project. Defendants asserted claims of indemnification, breach of contract, and misrepresentation. Finally, on February 17, 1999, Agree filed a third party complaint against Plaintiffs seeking indemnification, based on their settlement agreement, for the third party complaint Defendants filed against Agree.
On March 10, 1999, Plaintiffs filed the instant motion for summary judgment against Defendants. On March 22, 1999, Agree filed a motion for summary judgment against Defendants. Oral argument for these motions was adjourned several times to allow the parties to attempt to arbitrate the matters. On September 10, 1999 Defendants filed a motion to dismiss Plaintiffs' complaint.
On December 23, 1999, the Court entered a stipulated order dismissing Defendants' third party complaint against Agree, and dismissing Agree's third party complaint against Plaintiffs. The Stipulated Order of Dismissal indicates that on November 17, 1999 an arbitration award was entered denying Defendants' claims against Agree. Currently before the Court are Plaintiffs' motion for summary judgment and Defendants' motion to dismiss.
II. SUBJECT MATTER JURISDICTION
A. Standard of Review
In their motion to dismiss, Defendants question whether the Court has subject matter jurisdiction over Plaintiffs' Complaint. A motion under Rule 12(b)(1) seeks to dismiss a complaint for lack of subject matter jurisdiction. The Court must consider a 12(b)(1) motion prior to other challenges since proper jurisdiction is a prerequisite to determining the validity of a claim. See Gould v. Pechiney Ugine Kulmann Trefimetaux, 853 F.2d 445, 450 (6th Cir. 1988). Rule 12(b)(1) motions fall into two general categories: facial attacks and factual attacks. See FED. R. CIV. P. 12(b)(1); United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). A facial attack challenges the pleading itself. On this attack, the Court must take all material allegations in the complaint as true, and construe them in the light most favorable to the non-moving party. See id. (citing Scheuer v. Rhodes, 416 U.S. 232, 235-37 (1974)). The instant motion is a facial attack.
B. Analysis
The case at bar is properly before this Court as the Complaint raises questions relating to federal law. See 28 U.S.C. § 1331. Primarily, subject matter in this is properly founded on Section 301(a) of the LMRA, 29 U.S.C. § 185(a), which provides that suits to enforce labor contracts, including pension and welfare fund agreements, may be brought in federal district courts.
Section 301(a) of the LMRA, 29 U.S.C. § 185(a) provides:
Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter . . . may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.
The terms "labor organization representing employees" includes employee benefit funds. See Hotel Employees and Restaurant Employees Int'l v. Welfare/Pension Funds v. Caucus Club, Inc., 754 F. Supp. 539, 543 n. 4 (E.D. Mich. 1991) (Gilmore, J.) (citing Schneider Moving Storage Co. v. Robbins, 466 U.S. 364 (1984)).
In addition, Plaintiffs assert that the Funds were established pursuant to the LMRA Section 302(c), 29 U.S.C. § 186, and Sections 302 and 515 of ERISA, 29 U.S.C. § 1132 and 1145. (See Compl. ¶ 1.) Section 302 of ERISA, 29 U.S.C. § 1132 "provides a federal forum for enforcement of the various duties imposed by such trust fund agreements or by the provisions of ERISA." Hotel Employees and Restaurant Employees Int'l v. Welfare/Pension Funds v. Caucus Club, Inc., 754 F. Supp. 539, 542-43 (E.D. Mich. 1991) (Gilmore, J.). Plaintiffs also contend that, insofar as this case presents issues concerning delinquent contributions to a multiemployer plan under the terms of a collective bargaining agreement, a federal question arises under ERISA Section 515, 29 U.S.C. § 1145.
Section 502(a) of ERISA, 29 U.S.C. § 1132(a), provides:
A civil action may be brought —
by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan;
Section 515 of ERISA, 29 U.S.C. § 1145, provides:
Every 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.
However, Defendants maintain that Plaintiffs have failed to establish that any ERISA plan is at issue and that they are fiduciaries of any plan. Accordingly, Defendants assert that jurisdiction does not lie under ERISA. Plaintiffs have the burden to establish that the Funds are ERISA plans and that they are ERISA fiduciaries of the plan. See Moir v. Greater Cleveland Reg'l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990) (plaintiff has burden of establishing jurisdiction after defendant adequately challenges subject matter jurisdiction by a motion to dismiss). Plaintiffs have not provided any evidence supporting their claims that any ERISA plans are at issue and that they are plan fiduciaries under ERISA.
Nevertheless, even without ERISA, there are federal questions under the LMRA. Accordingly, this Court has subject matter jurisdiction over the instant case.
III. PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT
A. Standard of Review
The Court may properly grant a motion for summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Blankenship v. Parke Care Centers, 123 F.3d 868, 871-72 (6th Cir. 1997), cert. denied, 522 U.S. 1110, (1998). The Court is directed to view the evidence in the light most favorable to the non-moving party and determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The moving party initially has the burden to advise the Court of the basis for the summary judgment motion and of demonstrating that the record shows no material issue of fact exists. See Celotex Corp. v. Catrett 477 U.S. 317, 323 (1982). However, "the mere existence of a scintilla of evidence" in support of the non-moving party is not sufficient; a genuine issue for trial is presented when there is sufficient "evidence on which the jury could reasonably find for the [non-moving party]." Anderson, 477 U.S. at 252.
B. The CBA
Defendant D.P. Letscher questions whether the CBA obligates it to contribute to the Funds. Attached as Exhibit 1 to Plaintiffs' Complaint are the purported title and signature pages of the "1994-1997 Carpenters' Commercial Agreement." The title page incorrectly identifies "L.P. Letscher, Inc." as the "Employer." However, the signature page indicates that the name of the company is "D.P. Letscher Inc." and that on January 10, 1997, David P. Letscher signed the CBA as its president. In his affidavit, David Letscher stated that he has reviewed this exhibit, and he did not deny that he signed the proffered signature page. (See Def. Resp. Br.; Ex. 1.) Therefore, there does not appear to be any genuine question that David Letscher, on behalf of D.P. Letscher, Inc., signed the CBA.
Mr. Letscher also avers that nowhere attached to Plaintiffs' pleadings and motions is a contract which obligates D.P. Letscher to contribute to the Funds. (Letscher Aff. at ¶ 7.) While this is an accurate statement, it seems only so because Plaintiffs did not attach the full CBA to their prior pleadings and motions. In their response to Defendants' motion to dismiss, Plaintiffs attached a complete, although unsigned, copy of the CBA at issue. Article V of the CBA clearly details the obligations of the employer concerning wages and fringe benefit contributions. Therefore, as there is no assertion that the proffered text of the CBA is not the same contract that Mr. Letscher signed, the CBA obligates D.P. Letscher to contribute to the Funds at issue.
Upon initial consideration of the motions at bar, there appeared to be a discrepancy between (1) the funds identified in the CBA, (2) the funds identified in the audit letter, and (3) the funds for whom Plaintiffs are the trustees. Accordingly, on May 26, 2000 the Court issued an Order for Supplemental Briefing on this issue (Docket Entry #38). Plaintiffs filed a timely response to this Order and has established that the most recent CBA provides for the Funds at issue.
Finally, Defendants contend that the CBA is "apparently expired." (Def. Resp. Br. at 5.) Mr. Letscher signed the CBA on January 10, 1997. Article XV provides that the CBA "shall remain in full force and effect until June 1, 1997." However, the CBA states that unless one party timely notifies the other, "[t]he Employer will continue in full force and effect the provisions of this Agreement or any subsequent Agreement beyond its expiration date." (CBA; Art. XV. 1.) Defendants have not proffered any evidence that the CBA was terminated in the manner provided in Article XV.
Moreover, Plaintiffs assert that the CBA is a pre-hire agreement as provided in section 8(f) of the National Labor Relations Act ("NLRA"), 29 U.S.C. § 158(f). Plaintiff asserts that pre-hire agreements, such as the one at issue in this case, are not subject to unilateral repudiation during the term of the contract and can only be terminated in accordance with its terms. The Sixth Circuit explained section 8(f) contracts in a recent unpublished opinion:
A pre-hire agreement is "a contract agreed to by an employer and a union before the workers to be covered by the contract have been hired." Deklewa v. NLRB, 843 F.2d 770, 772-72 (3d Cir. 1988).
Section 8(f) of the NLRA, 29 U.S.C. § 158(f), permits employers and unions in the construction industry to enter into collective bargaining agreements before the union has established its majority status. Once a § 8(f) contract expires by its terms, either party is free to repudiate the collective bargaining relationship. See Gottfried v. Sheet Metal Workers Local 80, 876 F.2d 1245, 1249 (6th Cir. 1989). However, an automatic renewal clause between the parties to an § 8(f) agreement will be given effect and operates to bind the parties to a continuation of the agreement. See Cedar Valley Corp. v. NLRB, 977 F.2d 1211, 1216 n. 5 (8th Cir. 1992); W.B. Skinner, Inc., 283 NLRB 989 (1987). This is so even where the renewal clause operates to bind a party to an independent, secondary agreement, the terms of which may be open to negotiation by different parties and remain undetermined. See Farmingdale Iron Works, Inc., 249 NLRB 102 (1980)
An employer who repudiates an agreement which has not expired violates § 8(a)(5) and (1) of the NLRA unless covered employees have voted to reject the union as their bargaining representatives in a Board-conducted election. John J. Deklewa and Sons, Inc., 282 NLRB 1375 (1987), enforced sub nom. Ironworkers, Local 3 v. NLRB, 843 F.2d 770 (3d Cir. 1988). Accord NLRB v. Bufco Corp., 899 F.2d 608 (7th Cir. 1990); NLRB v. W.L. Miller Co., 871 F.2d 745, 748 (8th Cir. 1989); Mesa Verde Construction Co., v. Northern California District Council of Laborers, 861 F.2d 1124, 1137 (9th Cir. 1988) (en banc). An employer's unilateral refusal to pay wages and benefits in accord with the terms of a current collective-bargaining agreement amounts to a repudiation of the collective-bargaining relationship and thereby violates § 8(a)(5) and (1) of the NLRA. Oak Cliff-Golman Baking Co., 207 NLRB 1063 (1973).
NLRB v. Ross Bros. Constr. Co., No. 95-5135, 1997 WL 215513, *2-3 (6th Cir. Apr. 29, 1997).
Even if the CBA at issue is not a section 8(f) pre-hire agreement, the language of the agreement indicates that it was ongoing, and there is no evidence that the parties had terminated it. Accordingly, the CBA does not appear to have expired.
C. L.W. Kennedy's Liability
Defendants argue that Plaintiffs' Complaint against L.W. Kennedy should be dismissed because it was the general contractor for the Project, it was not an employer within the meaning of ERISA, and, according to Plaintiffs' exhibits, it was not contractually obligated to Plaintiffs, either directly or indirectly. Moreover, Defendants contend that a general contractor cannot be held liable for the ERISA violations or CBA obligations of one of its subcontractors. However, Plaintiffs assert that L.W. Kennedy is liable under the Michigan Builders Trust Fund Act ("MBTFA"). MICH. COMP. LAWS ANN. § 570.151, as claimed in Count II of their Complaint.
The MBTFA creates a "trust fund" to act as a security device for the benefit of owners and subcontractors on construction projects. See Selby v. Ford Motor Co., 590 F.2d 642, 643 (6th Cir. 1979). The Act provides:
In the building construction industry, the building contract fund paid by any person to a contractor . . . shall be considered by this act to be a trust fund, for the benefit of [(1)] the person making the payment. [and (2),] contractors, laborers, subcontractors or materialmen, and the contractor . . . shall be considered the trustee of all funds so paid to him for building construction purposes.
MICH. COMP. LAWS ANN. § 570.151.
Plaintiffs assert that under this Act, L.W. Kennedy is the trustee of funds owed to them. Assuming, arguendo, that Plaintiffs' claims are based on ERISA, the Court must first examine whether ERISA preempts the MBTFA.
See Part II.B, supra.
ERISA provides:
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.29 U.S.C. § 1144(a).
No Michigan or federal court has reviewed whether ERISA preempts the MBTFA. However, in Trustees for Mich. Laborers' v. Seaboard Surety Co., 137 F.3d 427 (6th Cir. 1998), the Sixth Circuit has recently held that ERISA did not preempt a similar statute, the Michigan Public Works Act, MICH. COMP. LAWS ANN. § 129.201 et seq. The Michigan Public Works Act requires a principal contractor on a public building, work, or improvement, to post a performance bond and a payment bond. See MICH. COMP. LAWS ANN. § 129.201. Mich. Laborers' arose out of the construction of a public university's library. Pursuant to the Michigan Public Works Act, the general contractor of the project purchased a payment bond from the defendant, Seaboard Surety Company. The general contractor then hired certain subcontractors. One of the subcontractors failed to pay wages it owed to its laborers, and did not make fringe benefit contributions as required under a CBA. Because of these deficiencies, the trustees of various pension funds and an individual laborer filed an ERISA action to collect payment from the bond issued by Seaboard. Mich. Laborers', 137 F.3d at 428. Seaboard argued that the trustees' attempt to collect the fringe benefit contributions to ERISA funds through the Michigan Public Works Act was preempted by ERISA. See Trustees for Mich. Laborers' Health Care Fund v. Warranty Builders, 921 F. Supp. 471, 477 (E.D. Mich. 1996), aff'd Mich. Laborers', 137 F.3d 427 (6th Cir. 1998). The district court held that ERISA did not preempt the Act, and the Sixth Circuit affirmed.
The Sixth Circuit explained that the Supreme Court "has declined to find pre-emption when the state law at issue has only `tenuous, remote, or peripheral connection with covered plans. as in the case with many laws of general applicability.'" Mich. Laborers', 137 F.3d at 429 (quoting New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 661 (1995)). Adopting the district court's reasoning, the court noted:
In reality, the Public Works Act is a statute of general applicability, which in this case will operate to compel defendant's payment of full compensation to the Plans' beneficiaries in the form of contributions due to the Plans under the terms of the beneficiaries' employment. This constitutes enforcement of the bonding contract only, not the Plans, and in no way interferes with the administration of the Plans.
Trustees for Mich. Laborers', 137 F.3d at 429 (quoting Trustees for Mich. Laborers', 921 F. Supp. at 477). The Sixth Circuit also adopted the district court's conclusion that it based on New York State Conference:
The Michigan Public Works Act treats contributions due to an ERISA fund exactly as all other forms of compensation due a laborer or furnisher of materials on a public construction project. The statute does not interfere with nor require any administrative action of the Plans. It does not cause any additional expense to the Plans. To the extent that the statute operates to ensure payment of contributions to the Plans, it is incidental to its primary objective; in this case, to compel contractors on a public works project to pay their laborer's full compensation either directly or through a bond secured as provided by law. This law does not [a]ffect an ERISA plan in any meaningful way.
The Michigan Public Works Act is a statute of general applicability which causes the surety in this case to pay compensation as provided under the terms of its bonding contract. The statute neither "relates to" nor has a "connection with" an ERISA plan and plaintiffs' action to recover contribution payments from defendant's payment bond is not preempted by ERISA.
Trustees for Mich. Laborers', 137 F.3d at 429 (quoting Trustees for Mich. Laborers', 921 F. Supp. at 477).
Similarly, in the case at bar the purpose of the MBTFA "is to protect the owner and those whose labor and materials make the performance of a construction contract possible and give rise to the owner's obligation to pay." Selby, 590 F.2d 642, 644. Like the Michigan Public Works Act, the MBFTA seems to be a statute of general applicability, and it neither "relates to" nor has a "connection with" an ERISA plan. Therefore, assuming that ERISA applies to Plaintiffs' claims, it does not preempt the MBFTA and the Court will not dismiss Plaintiffs' action against L.W. Kennedy on this basis.
By Order of this Court (Docket Entry #35), the parties filed on April 20, 2000 a stipulation of counsel indicating that L.W. Kennedy was awarded $37,198.12 pursuant to an arbitration award, and that Agree paid this sum to it. Therefore, under the MBFTA, Plaintiffs' may maintain their claims against L.W. Kennedy, and funds paid by Agree to L.W. Kennedy are held in trust for Plaintiffs.
D. Settlement Agreement with Agree
Finally Defendants argue that, based on Plaintiffs settlement agreement with Agree, Plaintiffs are estopped from pursuing their ERISA claims. Plaintiffs contend that their release of their construction lien on the property owned by Agree constituted separate consideration, and does not operate to release Defendants from their obligation to make fringe benefit contributions, except to the extent of payments made by Agree.
The Michigan Construction Lien Act provides that "[e]ach contractor, subcontractor, supplier, or laborer who provides an improvement to real property shall have a construction lien upon the interest of the owner or lessee who contracted for the improvement to the real property. . . ." MICH. COMP. LAWS ANN. § 570.1107(1). The statute also provides that "[the Act] shall not be construed to prevent a lien claimant from maintaining a separate action on a contract." MICH. COMP. LAWS ANN. § 570.1302(2).
In Old Kent Bank of Kalamazoo v. Whitaker Constr. Co., 222 Mich. App. 436 (1997) the Michigan Court of Appeals examined the meaning of § 1302(2). This case concerned two competing security interests in a construction project. The plaintiff bank had a mortgage on the property. The defendant construction company had a construction lien in the amount of $128,008 on the property for work it had performed. After the property owners defaulted on their obligations, the bank foreclosed on the property. The property owners also executed a promissory note to the construction company for $101,189, of which the bank was unaware. After receiving an order for foreclosure sale, the bank entered into a settlement agreement with the property owners in which the property was conveyed to the bank in lieu of a sale. Later, the construction company filed a separate lawsuit against the (former) property owners to recover on the promissory note. After the court entered an order in favor of the construction company for the principle due (plus costs and interest), the (former) property owner agreed to settle with the construction company for $50,000. The settlement agreement stated that the agreement did not affect the construction lien. The bank and construction company then filed a motion regarding the validity of the construction lien in light of the settlement agreement. Reversing the trial court, the court of appeals found that "neither the judgment nor the settlement agreement in the promissory note case extinguished [the construction company's] construction lien on the property." Id. at 438.
The court explained that the Construction Lien Act had two purposes "(1) protecting the rights of lien claimants to payment for wages and materials and (2) protecting owners from paying twice for such services." Id. at 438-39 (citation omitted). The court noted that possession of a construction lien does not preclude the lien holder from pursuing an action on the contract. Id. at 439. The court also explained that the plain language of § 570.1302(2) indicated that the Legislature contemplated that an action on the lien and an action on the contract could be pursued, and that "judgment on or settlement of one action would not extinguish the other." Id. However, the court did recognize that the lien holder is only permitted one satisfaction of the debt owed to it. Id. at 440.
In the case at bar, Plaintiffs and Agree entered into a settlement agreement in which for $10,000, Plaintiffs agreed to discharge their construction lien on Agree's property. (See Sept. 29, 1998 Settlement Agreement; Pl. Br. Ex. 3.) The Agreement also provides that the Agreement "shall not preclude [Plaintiffs] from pursuing [Defendants] or any related individual or entity for any outstanding amounts due the Funds." (Id.)
This agreement comports with the purpose and language of § 570.1302 (2). Plaintiffs' discharge of their construction lien only relieves Defendants of $10,000 of the alleged deficiencies, originally calculated to be $23,472.71.
IV. CONCLUSION
For the above stated reasons, the Court (1) DENIES Defendants' motion for summary judgment, and (2) GRANTS Plaintiffs' motion for summary judgment.
SO ORDERED.