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Operating Engineers Local 324 Health Care Plan v. Diversicon Excavating LLC

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

January 16, 2015



ARTHUR J. TARNOW, District Judge.

This case involves Plaintiffs' claims that Defendants have violated their collective bargaining agreements ("CBAs") by not paying fringe benefits. Plaintiffs are eight separate trust funds of Operating Engineers Local 324. Defendants are businesses and an individual owner who conduct business in the building and construction industry, and who are obligated by collective bargaining agreements to make monthly contributions to the Plaintiff pension funds. According to the same CBAs, Defendants are required to submit to periodic auditing of their books by Plaintiffs to ensure proper contributions are being made. Before discovery during this lawsuit, Defendants had refused to allow any audits since January 2010.

Before the Court is Plaintiffs' Motion for Summary Judgment [20], Defendants' Response [21], and Plaintiffs' Reply [22] and Errata Sheets [25, 26]. For the reasons that follow, Plaintiffs' Motion for Summary Judgment [20] is GRANTED as to Counts I, II, and IV-Diversicon Excavating, LLC and Diversion, Inc.'s violation of the CBA and Defendant Farrell's personal liability under the Michigan Builders Trust Fund Act; and DENIED as to Plaintiff's Motion [20] as to Count III-Defendant Farrell's violation of fiduciary duty under ERISA.


Plaintiffs are trust funds established under and administered pursuant to 29 U.S.C. § 186-the Labor-Management Relations Act of 1947 ("LMRA")-and ERISA. Defendant Mark Farrell owns Defendants Diversicon Engineering LLC and The Diversicon Company, Inc. On April 1, 1999, Farrell executed a short-form CBA with the International Union of Operating Engineers Local 324. That agreement and the other CBAs relevant to this lawsuit obligated Diversicon Excavating, LLC to remit fringe benefit contributions to Plaintiffs for all work covered by the CBA. Throughout the relevant period, Diversicon, Inc. performed work and/or subcontracted work for which fringe benefit contributions were required to be paid. During discovery, Plaintiffs audited Defendant. The audit determined that Defendants owe Plaintiff $83, 788.40 in unpaid fringe benefits and $8, 343.57 in liquidated damages for the audit for a total of $92, 131.97 for the period of January 2010 through June 2013. The audit identifies two employees, with the bulk of contributions in arrears for only one of them. In previous cases before Judge Battani and Judge Roberts, Diversicon Excavating, LLC was determined to be bound by the CBAs relevant to this matter.


Summary judgment is appropriate "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). The moving party has the burden of establishing that there are no genuine issues of material fact, which may be accomplished by demonstrating that the nonmoving party lacks evidence to support an essential element of its case. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A genuine issue for trial exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).


As a preliminary matter, Defendants argue that Plaintiffs do not have standing to bring this case due to the generic rule that the beneficiaries of trusts, not the trust itself has standing to bring cases. However, 29 U.S.C. § 1132(d)(1) specifically allows an ERISA "employee benefit plan [to] sue or be sued under this subchapter as an entity."

Defendants also point to the terms of the specific CBAs at issue to argue that Plaintiffs lack standing. Defendants point to a section of the CBA that contemplates actions brought by trustees against the trust or other trustees "arising out of the administration of the Trust Fund" to argue that only trustees as beneficiaries may initiate suits. Defendants' argument fails because the term they cite relates only to cases "arising out of the administration of the Trust Fund, " which this case does not-this case is about unpaid fringe benefit contributions. Another preliminary argument that Defendants raise is asserting that Plaintiffs' motion is untimely. After each of several status conferences, the Court set report back dates, but no hard filing deadlines. Plaintiffs discovered new evidence of what type of work Defendants performed-in the form of exhibits to Defendants' Response [21]-after they filed their Motion for Summary Judgment [20]. The Court finds good cause to excuse any untimeliness of Plaintiff's Motion [20] that may exist.

Count I: Breach of the CBA as to Diversicon Excavating LLC

Plaintiffs assert that Diversicon Excavating, LLC was bound by and breached the CBAs during the relevant time period. Diversicon Excavating, LLC does not dispute is bound by a CBA with Plaintiffs. Diversicon Excavating, LLC argues that it did not breach the CBA because it did not perform any work during the relevant time period. Diversicon Excavating, LLC ceased all operations prior to January 2010 and has not had employees since prior to that time. Plaintiffs' Reply [22] argues that Diversion, Inc. is a continuation of Diversicon Excavating, LLC and that Defendants may have created Diversion, Inc. to shirk Diversion, LLC's CBA obligations. Whether the Diversion, Inc. may be held liable for Diversicon Excavating, LLC's CBA obligations will be analyzed infra. In the alternative, Diversicon Excavating, LLC argues that even if the work in the audit can be attributed to Diversicon Excavating, LLC, it is not covered work. Defendants argue that the only work covered by the CBAs is underground construction work. Plaintiffs' Reply [22] argues that multiple CBAs contemplate a broader range of work that would require Defendants to make fringe benefit contributions.

The short form agreement that Diversion, LLC executed states:

[t]he undersigned Employer agrees to abide by the Wage Rates, Fringe Benefits, and all other terms, conditions, and provisions in the most recent Collective Bargaining Agreements between [ten expressly identified and distinct trade associations] and the Union for the entire state of Michigan, and further agrees that the Wage Rates, Fringe Benefits, and all other terms, conditions, and provisions contained in the aforementioned ...

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