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Michigan Regional Council of Carpenters Employee Benefits Fund v. Infinity Homescapes, LLC

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

April 9, 2018

TRUSTEES OF MICHIGAN REGIONAL COUNCIL OF CARPENTERS' EMPLOYEE BENEFITS FUND, et al., Plaintiffs,
v.
INFINITY HOMESCAPES, LLC, et al., Defendants.

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT (DOC. 23)

          GEORGE CARAM STEEH UNITED STATES DISTRICT JUDGE.

         I. Overview

         Plaintiff trustees of employer trust funds have brought this Employee Retirement Income Security Act (“ERISA”) suit for unpaid fringe benefits owing against two companies, and their sole owner Jamey Woodson and his wife, Josie Lewis. Plaintiffs also include the Michigan Regional Council of Carpenters United Brotherhood of Carpenters and Joiners of America (the “Union”) and six employees of Defendant Infinity Homescapes, LLC (“Homescapes”). Plaintiffs also brought claims under the Fair Labor Standards Act (“FLSA”) and related state law claims. Now before the court is Plaintiffs' motion for summary judgment.

         This matter had been scheduled for oral argument on March 29, 2018. On March 28, 2018, Defendants Woodson and Lewis notified the court that they had filed a petition for bankruptcy and that an automatic stay pursuant to Section 362(a) of the Bankruptcy Code applied. Based on the automatic stay, this court does not address the claims against the individual Defendants Woodson and Lewis. On the date scheduled for oral argument, the court met with counsel for both sides in chambers to discuss the matter. During the in chambers conference, defense counsel admitted to liability only on behalf of Defendant Homescapes and the parties agreed that they would submit a proposed order to that effect and agreed that it was unnecessary to put their agreement on the record. Thereafter, defense counsel e-mailed Plaintiffs' counsel that she agreed that Homescapes was liable for some fringe and wage benefits, but was not waiving her argument that the matter must be arbitrated or that judicial estoppel barred the action, and noted her intent to appeal. Based on this procedural background, the court decides the pending motion based on the written submissions.

         For the reasons set forth below, the court GRANTS Plaintiffs' motion as to liability only on ERISA and FLSA claims as to Defendant Homescapes, and DENIES summary judgment on the claim for the filing of fraudulent W-2s.

         II. Background

         Plaintiffs are a collection of Michigan Carpenter Employee Benefit Funds (collectively “Funds”), six former employees of Homescapes, and the Union. Defendants are Homescapes, a company that performs residential and commercial carpentry construction work; Infinity Millworks (“Millworks”), which performs residential carpentry work; Woodson, the sole owner of Homescapes and Millworks; and his wife, Lewis. Lewis is an attorney who performs legal work for both companies. In addition, she handles administrative and secretarial work. In addition to being a named defendant, Lewis also represents all Defendants in this lawsuit.

         Homescapes came into existence in 2016. Plaintiffs allege that Homescapes grossed over $500, 000 in 2016, based on invoices of slightly less than $500, 000 and $175, 000 in change orders from one of Homescapes' largest jobs. Although Lewis testified at her deposition that the $175, 000 was owing, Homescapes now claims the $175, 000 sum was an estimate not of sales, but of expenses for two other projects.

         On September 16, 2016, Homescapes executed a collective-bargaining agreement (the “CBA”) with the Union. Following execution of the CBA, Homescapes employed, among others, the six named Plaintiffs in this lawsuit: (1) John Duval, (2) Brian Patterson, (3) Robert Swixx, (4) Carl Touchette, (5) Jeff Roettger, and (6) Damien Hirst. Also, in September, 2016, Homescapes suffered financial difficulties when general contractor, Thorndale Construction Services (“Thorndale”), failed to pay amounts owing.

         Plaintiffs contend that Defendants' answers to interrogatories and deposition testimony establish that Defendants failed to pay wages, issued payroll checks on accounts with insufficient funds, unlawfully issued 1099s to workers, and issued incorrect W-2s. Indeed, in their answers to interrogatories, Defendants admit that Plaintiffs Roettger, Hirst, Swixx, Touchette, Patterson, and Duval worked for Homescapes during the time periods in late October, 2016 stated, and admitted that they were told not to cash their checks because of insufficient funds. (Doc. 23, Ex. G at PgID 801-804, Ex. C at 42, PgID 607). At his deposition, Woodson admitted that his workers were not paid wages or fringe benefits for that time period, but that he paid suppliers. (Doc. 23, Ex. B at PgID 592). An audit conducted by the Funds auditors confirmed that Homescapes failed to make the required fringe benefit contributions. (Doc. 23, Ex. H). According to the audit, Homescapes owes $111, 187.07. (Doc. 23, Ex. H at PgID 819). Homescapes also admits that some employees were issued 1099s, which are tax forms used to report income to independent contractors, because they were “minimizing” their tax liability. (Doc. 23, Ex. C at 37-38, PgID 606). Homescapes also admitted that it issued W-2s that were inaccurate because they included unpaid wages, and did not contain wages reported on the 1099s. (Doc. 23, Ex. C at 96, PgID 615).

         Plaintiffs' Complaint alleges eleven counts. Count I seeks delinquent contributions under ERISA. Count II alleges failure to permit updated audit. Count II is now moot as an updated audit took place on December 1, 2017. Count III alleges breach of fiduciary duty under ERISA against Homescapes, Woodson, and Lewis. Count IV alleges violations of the Michigan Building Contract Fund Act (“MBCFA”), Mich. Comp. Laws § 570.151 et seq. Count V alleges federal minimum wage violations pursuant to the Fair Labor Standards Act (“FLSA”). Count VI alleges state minimum wage violations. Count VII alleges federal overtime violations pursuant to the FLSA. Count VIII alleges state overtime violations. Count IX alleges failure to pay wages in violation of Michigan law. Count X alleges failure to pay amount of dishonored checks pursuant to Mich. Comp. Laws § 600.2952. Finally, Count XI alleges filing fraudulent W-2s in violation of 26 U.S.C. § 7434.

         III. Standard of Law

         Federal Rule of Civil Procedure 56(c) empowers the court to render summary judgment "forthwith 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 judgment as a matter of law." See Redding v. St. Eward, 241 F.3d 530, 532 (6th Cir. 2001). The Supreme Court has affirmed the court's use of summary judgment as an integral part of the fair and efficient administration of justice. The procedure is not a disfavored procedural shortcut. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986); see also Cox v. Kentucky Dep't of Transp., 53 F.3d 146, 149 (6th Cir. 1995).

         The standard for determining whether summary judgment is appropriate is "'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.'" Amway Distributors Benefits Ass'n v. Northfield Ins. Co., 323 F.3d 386, 390 (6th Cir. 2003) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)). The evidence and all reasonable inferences must be construed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Redding, 241 F.3d at 532 (6th Cir. 2001). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original); see also National Satellite Sports, Inc. v. Eliadis, Inc., 253 F.3d 900, 907 (6th Cir. 2001).

         If the movant establishes by use of the material specified in Rule 56(c) that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law, the opposing party must come forward with "specific facts showing that there is a genuine issue for trial." First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 270 (1968); see also McLean v. 988011 Ontario, Ltd., 224 F.3d 797, 800 (6th Cir. 2000). Mere allegations or denials in the non-movant's pleadings will not meet this burden, nor will a mere scintilla of evidence supporting the non-moving party. Anderson, 477 U.S. at 248, 252. Rather, there must be evidence on which a jury could reasonably find for the non-movant. McLean, 224 F.3d at 800 (citing Anderson, 477 U.S. at 252).

         IV. Analysis

         A. Arbitration

         Defendants argue that this case must be dismissed because Plaintiffs have not exhausted the grievance procedure and arbitration set forth in Article XV of the CBA. Upon review of the arbitration clause in the CBA and applicable law, Defendants' argument lacks merit. First, the court considers Plaintiffs' claim for unpaid fringe benefit contributions under Section 502 of ERISA. The Supreme Court's decision in Schneider Moving & Storage Co. v. Robbins, 466 U.S. 364 (1984) is dispositive on this issue. In Schneider, as here, trustees of multi-employer trust funds brought an ERISA action against two companies for delinquent contributions as required by the trust agreement, as incorporated into the terms of the applicable collective bargaining agreement. The Court held that the presumption of arbitrability did not apply to disputes between trustees and employers. Id. at 372-73. The Court then examined the trust agreement and collective bargaining agreement and found that neither evidenced an intent on the part of the parties to require arbitration of disputes between trustees and the employers. Id.

         This case presents an even stronger argument that the parties evidenced no intent to require arbitration between Plaintiff Trust Funds and Defendant Employers over delinquent contributions as the Trust Fund specifically provides, “No matter respecting the foregoing, or any difference arising thereunder, or any matter involved in this Trust Agreement, shall be subject to the grievance procedure established in any Collective Bargaining Agreement.” (Doc. 1-2 at PgID 127). Based on this express language in the Trust Agreement, Plaintiff Trust Funds are not subject to ...


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