United States District Court, D. Minnesota
Jeff Heimerl and Fred Jahnke, as Trustees of the IBEW Local No. 292 Health Care Plan; Trustees of the Electrical Workers Local No. 292 Pension Fund; as Trustees of the Electrical Workers Local No. 292 Annuity & 401(k) Fund; as Trustees of the Electrical Workers Local No. 292 Vacation & Holiday Fund; and as Trustees of the Minneapolis Electrical Industry Board/JATC/LMCC; and each of their successors, Plaintiffs,
Tech Electric of Minnesota, Inc., Defendant
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Amanda R. Cefalu, Pamela Hodges Nissen, and Rebecca A. Peterson, Anderson, Helgen, Davis & Nissen, PA, Minneapolis, Minnesota, for Plaintiffs.
Chad A. Kelsch, Fuller, Seaver, Swanson & Kelsch, P.A., Golden Valley, Minnesota, for Defendant.
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER FOR JUDGMENT
SUSAN RICHARD NELSON, United States District Court Judge.
This matter came before the undersigned Judge of the District Court for trial on July 15 and 16, 2013. Plaintiffs were represented by Pamela H. Nissen, Esq., and Defendant Tech Electric of Minnesota Inc. (" Tech Electric" ) was represented by Chad A. Kelsch, Esq. Based on the evidence presented at trial and in post-trial submissions, the legal arguments in the parties' briefing, and all of the files and proceedings in this matter, the Court makes and enters the following Findings of Fact and Conclusions of Law.
FINDINGS OF FACT
1. Pursuant to § 502 of the Employee Retirement Income Security Act (" ERISA" ), 29 U.S.C. § 1132, Plaintiffs seek to conduct an audit of Tech Electric's payroll and employment records, and to recover amounts due for any unpaid fringe benefit contributions owed on behalf of Tech Electric's employees for the period of January 1, 2009 to December 31, 2011 for hours worked within the jurisdiction of the IBEW Local 292 Inside Agreement. (Stipulation ¶ 2 [Doc. No. 61]; Am. Compl. ¶ ¶ 16-24 [Doc. No. 18].) Defendant claims that it is no longer bound to the applicable labor agreement for the period subsequent to May 1, 2010. (Stipulation ¶ 2 [Doc. No. 61].)
2. Plaintiffs Jeff Heimerl and Fred Jahnke are trustees (the " Trustees" ) of the IBEW Local No. 292 Health Care Plan, the Electrical Workers Local No. 292 Pension Fund, the Electrical Workers Local No. 292 Annuity & 401(k) Fund. the Electrical Workers Local No. 292 Vacation & Holiday Fund; and the Minneapolis Electrical Industry Board/JATC/ LMCC (collectively, " the Fringe Benefit Plans" or " the Plans" ). (Pls.' Trial Exs. 3-6).
3. The Plans for which the Plaintiffs are trustees are employee benefit plans, as defined under 29 U.S.C. § 1001, et seq.
4. The Trustees' duties are to act on behalf of the Plans and the participants in the Plans. (Tr.1 at 45; 89 [Doc. No. 67].)
5. The Plans are administered by Jody Roe-Hardie. (Id. at 49.)
6. Defendant Tech Electric is a Minnesota corporation engaged in the electrical industry. (Stipulation ¶ 1 [Doc. No. 61].) The owner of Tech Electric is Scott Schmidt. (Tr.1 at159 [Doc. No. 67].)
7. The Minneapolis Chapter of the National Electrical Contractors Association (" NECA" ) is an employer association representing electrical contractors, primarily in the area of labor relations. In that capacity, NECA negotiates collective bargaining agreements (" CBAs" ) with the local unions, including the International Brotherhood of Electrical Workers (" IBEW" ) Local Union Number 292 (" Local 292" ). (Tr.1 at 76-77 [Doc. No. 67].) Defendant estimates that only 25% of all licensed electricians belong to unions. (Def.'s Letter Brief of 3/21/14 at 2 [Doc. No. 96].)
8. Local 292 is a labor organization under the IBEW. (Pls.' Trial Ex. 2.)
9. On October 20, 2000, Tech Electric signed a Letter of Assent as an " employer" authorizing the Minneapolis NECA Chapter to be the company's bargaining representative with respect to the Inside Collective Bargaining Agreement (" Inside Agreement" ) between the Minneapolis NECA Chapter and Local 292. (Stipulation ¶ 3 [Doc. No. 61]; Pls.' Trial Ex. 1.) The other signatory to the Letter of Assent, in the capacity of " union," was Local 292. (Pls.' Trial Ex. 1.)
10. The Letter of Assent bound Tech Electric to the terms of the Inside Agreement between IBEW and NECA and authorized NECA to represent Tech Electric in the bargaining of the Inside Agreement with Local 292. (Tr.1 at 38-39 [Doc. No. 67]; Pls. Trial Exs. 1 & 2.)
11. The Inside Agreement was in effect from May 1, 2006 though April 30, 2010. (Pls.' Trial Ex. 2, § 1.01.) However, it contained an " evergreen provision," so that unless changed or terminated, the Inside Agreement would continue in effect from May 1 until April 30 of each year. (Id.)
12. The Inside Agreement requires signatory employers, such as Tech Electric, to make monthly contributions to the Plans for all hours its employees work within the jurisdiction covered by the Agreement. (Stipulation ¶ 5 [Doc. No. 61]; Pls.' Trial Ex. 2.)
13. Fringe benefit contributions must be made on a monthly basis on behalf of all employees covered by the Inside Agreement for the purpose of funding employees' healthcare, pension, vacation and educational benefits. (Stipulation ¶ 6 [Doc. No. 61]; Pls.' Trial Ex. 2.)
14. Per the Inside Agreement, employers such as Tech Electric are required to compute their monthly contribution obligation and pay it to the agent of the Trustees on or before the 15th day of the month following the month for which the contribution is being made. Employers are required to submit the fringe fund report to the Plaintiffs, or their agent. (Stipulation ¶ 7 [Doc. No. 61]; Pls.' Trial Ex. 2, § 6.13(c)(1).) Employers submit their monthly payment reports to the Plans electronically, and Plaintiffs' Plan Administrator believed that that was the case in 2010 as well. (Tr.1 at 114 [Doc. No. 67].) Plaintiffs may also demand that employers furnish all necessary payroll and/or employment information for audit and examination, or any records deemed relevant in connection with the administration of the fringe benefit fund. (Stipulation ¶ 7 [Doc. No. 61]; Pls.' Trial Ex. 2, § 6.13(c)(1).)
15. The Inside Agreement grants collection authority to appointed receiving agents to sue and collect for all monies due to any of the Funds. (Pls.' Ex. 2, § 6.13(b).) In addition, the Inside Agreement vests the Trustees with the right to seek legal redress if an employer is delinquent in its contributions:
The Trustees of any fringe benefit fund, may for the purpose of collecting any payments required to be made to such funds, including damages and costs and for the purpose of enforcing rules of the Trustees concerning the inspection and audit of payroll records, seek any appropriate legal, equitable and administrative relief. . . . In the event it becomes necessary to commence any such legal, equitable or administrative action, arbitration or grievance procedure against any Employer, such Employer shall be obligated to pay to the respective fringe benefit fund, or funds, attorney's service of papers.
(Pls.' Ex. 2, § 6.13(c)(3).
16. Pursuant to the Inside Agreement, when an employer fails to submit payment in a timely manner, or if the employer remains delinquent subsequent to the last day of the month following the month in which work was performed, the employer is required to pay a penalty of liquidated damages in the amount of 5% of the amount owed, or $1,000, whichever is greater. (Pls.' Ex. 2, § 6.13(c)(2); Heimerl Aff. ¶ 8 [Doc. No. 85].)
17. The Inside Agreement covers the Local 292 jurisdiction, which comprises the following geographical areas: Belle Plaine, Minnesota to just north of St. Cloud and west to the South Dakota border. Specifically, the counties include all of Hennepin, Carver and Scott Counties, and all that part of Anoka County containing these Cities: Andover, Anoka, Columbia Heights, Coon Rapids, Fridley, Hilltop, Ramsey and Spring Lake Park; all of Wright County and that portion of Benton and Sherburne Counties east of State Highway 25 to Highway 10 and an imaginary line straight west to the Mississippi River. (Tr.1 at 42 [Doc. No. 67], Pls.' Trial Ex. 2 at 1.)
18. The obligations under the Inside Agreement are triggered by work performed by signatory employers within the stated jurisdiction: " [t]his Agreement shall apply in the [Local 292] geographical area," and " shall apply to all firms who sign a Letter of Assent to be bound by the terms of this Agreement." (Pls.' Trial Ex. 2 at 1.)
19. Named Plaintiff Jeff Heimerl, a Trustee of Local 292, and representative of the Plans, testified that non-signatory electrical contractors may perform work in the Local 292 jurisdiction. (Tr.1 at 71 [Doc. No. 67].) Performing work in the Local 292 jurisdiction does not trigger obligations for employer contributions or for submitting payroll information to the Plans unless the employer is a signatory to the Inside Agreement. (Id. at 71-73.)
20. The Agreement covers the following time period:
Section 1.01. AGREEMENT DATES - This Agreement shall take effect May 1, 2006, and shall remain in effect until April 30, 2010, unless otherwise specifically provided for herein. It shall continue in effect from year to year thereafter from May 1 until April 30 of each year, unless changed or terminated in the way later provided herein.
(Pls.' Trial Ex. 2, Art. I, § 1.01.)
21. Collectively, the Letter of Assent
and the Inside Agreement contemplate three different, potentially relevant periods of notice: 150 days, 90 days, and 10 days. (Pls.' Trial Ex. 1; Pls.' Trial Ex. 2, § 1.02(a) & (d).) The Letter of Assent and the Inside Agreement each contain general notice provisions. The Letter of Assent provides that it " shall remain in effect until terminated by [Tech Electric] giving written notice to the Minneapolis Chapter, [NECA] and to the Local Union at least one hundred fifty (150) days prior to the then current anniversary date of the applicable approved labor agreement." The Inside Agreement, on the other hand, provides that " an Employer withdrawing representation from the Chapter...desiring to change or terminate this Agreement must provide written notification at least ninety (90) days prior to the expiration date of the Agreement or any anniversary date occurring thereafter." (Tr.1 at 40; 45; 77-78; 82-83 [Doc. No. 67]; Pls.' Trial Exs. 1 & 2.)
22. The Inside Agreement also provides for additional notice in a specific context: voluntary, 10-days' additional notice after the expiration period of the Inside Agreement to give the parties an opportunity to possibly salvage the relationship and avoid termination:
In the event that either party, or an Employer withdrawing representation from the Chapter . . ., has given a timely notice of proposed changes and an Agreement has not been reached by the expiration date or by any subsequent anniversary date to renew, modify, or extend this Agreement . . . either party or such an Employer, may serve the other a ten (10) day written notice terminating this Agreement. The terms and conditions of this Agreement shall remain in full force and effect until the expiration of the ten (10) day period.
(Pls.' Trial Ex. 2, Art. I, § 1.02(d)) (emphasis added).
23. The purpose of the termination requirements is to provide notice to Local 292 and NECA of an employer's wish to terminate its participation in the Inside Agreement. (Tr.1 at 95 [Doc. No. 67].)
24. If the Letter of Assent is not terminated, it remains in effect and is renewed with each successive CBA. (Tr.1 at 78 [Doc. No. 67]; Pls.' Trial Ex. 1.) Negotiations for successive agreements usually commence several months in advance of the expiration date. (Tr.1 at 151 [Doc. No. 67].) Thus, negotiations for a successive agreement with an April 30 expiration date would typically begin a few months earlier, in January or February. (Id.)
25. The Plaintiffs/Trustees, who are not signatory parties to the Letter of Assent or to the Inside Agreement, do not negotiate the terms of the Inside Agreement. (Tr.1 at 49-50; 89-90 [Doc. No. 67]. Nor are they authorized to terminate either agreement. (Tr.1 at 59; 90 [Doc. No. 67].) The Plaintiffs/Trustees Plaintiffs are third-party beneficiaries of the Inside Agreement. (Pls.' Trial Ex. 2; see also Tr.1 at 28; 124-25 [Doc. No. 67].)
26. At no point did anyone from NECA or Local 292 review the contents of the Inside Agreement with Tech Electric or Schmidt, including the termination provision. (Id. at 26.)
27. On or about November 25, 2009, Scott Schmidt of Tech Electric sent a letter to Tony Maghrak, then the Business Manager of Local 292, advising that Tech Electric was withdrawing from any affiliation with Local 292. In the letter, Schmidt stated, " It is the intent of Tech Electric to immediately withdraw from any affiliation from IBEW #292." Tech Electric copied NECA's then-Chapter Manager Jeff Ohman on the letter and sent a copy of the letter to NECA. Schmidt's purpose in sending the letter was to terminate Tech Electric's obligations under the Inside Agreement. (Tr.1 at 163-164 [Doc. No.
67]; Tr.2 at 39 [Doc. No. 68]; Pls.' Trial Ex. 7.)
28. Scott Schmidt testified that multiple reasons led him to terminate the Inside Agreement including his belief that Local 292 was unwilling to negotiate, as well as concerns about Local 292's handling of audits and working dues. (Tr.2 at 66-67 [Doc. No. 68].)
29. Tech Electric's November 25, 2009 termination letter, sent 90 days prior to the April 30, 2010 expiration date of the Inside Agreement, is consistent with § 1.02(a) of the Agreement, under which termination notice was due by January 30, 2010. (Pls.' Trial Ex. 2, Tr.1 at 52 [Doc. No. 67].) Moreover, it complies with the 150-day notice requirement of the Letter of Assent, under which termination notice was due by December 1, 2009. (Pls.' Trial Ex. 1.)
30. Plaintiff Jeff Heimerl testified to his understanding that Tech Electric did not provide the voluntary follow-up written notice 10 days after the Inside Agreement's expiration date of April 30, 2010. (Pls.' Trial Ex. 2, § 1.02(d); Tr.1 at 67 [Doc. No. 67]; see also T.2 at 16 [Doc. No. 68].)
31. Scott Schmidt of Tech Electric believes that in the spring of 2010 he re-sent the November 25, 2009 termination letter to Local 292 and NECA. (Tr.1 at 163-64 [Doc. No. 67].)
32. Jeff Ohman of NECA testified that he did not receive a copy of Tech Electric's November 25, 2009 termination letter until sometime in 2010. (Tr.1 at 84-85 [Doc. No. 67].) Ohman was aware of Tech Electric's notice of termination by virtue of receiving Local 292's letter of December 21, 2009 from Tony Maghrak to Mr. Ohman. (Pls.' Trial Ex. 11.)
Local 292 Grievance Letter
33. In his former capacity as Local 292's Business Manager, Tony Maghrak represented union members under various contracts in the electrical industry. (T.1 at 144 [Doc. No. 67].) Maghrak has ...