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IUOE Local 324 Retirement Trust Fund v. LGC Global FM, LLC

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

September 27, 2019

IUOE LOCAL 324 RETIREMENT TRUST FUND, ET AL., Plaintiffs,
v.
LGC GLOBAL FM, LLC (f/k/a Lakeshore Rickman JV, LLC) and AVINASH RACHMALE, Defendants.

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT

          LINDA V. PARKER U.S. DISTRICT JUDGE

         This is an action to recover fringe benefit contributions allegedly owed to Plaintiffs, which are pension and welfare benefit trust funds established and administered pursuant to Section 302 of the Labor Management Relations Act of 1947, as amended, 29 U.S.C. § 186 (“LMRA”), and the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. The funds provide health care, pension, retirement, and apprenticeship training benefits for members of Operating Engineers Local 324, a labor union. Pursuant to an audit of Defendant LGC Global FM, LLC (“LGC”), Plaintiffs claim that LGC owes $272, 467.73 for unpaid contributions to the funds for the periods October 2015-January 2016 and April 2018-June 2018. Plaintiffs seek to hold Defendant Avinash Rachmale (“Mr. Rachmale”) personally liable for the unpaid contributions as an ERISA fiduciary.

         Presently before the Court is Plaintiffs’ motion for partial summary judgment in which Plaintiffs ask the Court to enter judgment in their favor against LGC and Mr. Rachmale and award Plaintiffs the above amount, in addition to fees and costs, liquidated damages, and interest. (ECF No. 36.) Plaintiffs also ask the Court to order LGC to submit to an audit to determine amounts due and owing for all unaudited periods beginning June 2016. The motion has been fully briefed (ECF Nos. 41, 42) and the Court held a motion hearing on September 11, 2019. At the Court’s request, the parties filed supplemental material following the hearing.[1](ECF Nos. 47, 48.)

         Factual and Procedural Background

         LGC, initially named Lakeshore Rickman JV, LLC, was awarded a contract in 2014 to perform operations management at a number of Detroit Public Schools. (Defs.’ Resp. Ex. 1 ¶¶ 2, 3, ECF No. 41-1 at Pg ID 412.) At first, the company performed the work using its own employees. (Id. ¶ 5, Pg ID 413.) It therefore entered a collective bargaining agreement (“CBA”) with the International Union of Operating Engineers Local 324 (hereafter “Local 324” or “Union”), which covered the work performed by Stationary Engineers and Boiler Operators in DPS buildings.[2] (Pls.’ Mot. Ex. A, ECF No. 36-2.) Roderick Rickman, Lakeshore-Rickman’s Chief Executive Officer, signed the CBA on October 1, 2014.

         The CBA was effective from August 13, 2014 through August 12, 2017. (Id.) However, the CBA contained the following renewal provision:

This Agreement shall remain in full force and effect through August 12, 2017, and thereafter shall be renewed from year to year unless either party shall notify the other party in writing at least sixty (60) days prior to any anniversary date of this Agreement. Such written notice shall be sent by registered or certified mail to the other party.

(Id. at Art. XXXVIII, Pg ID 313.)

         Under the CBA, signatory employers were required to make contributions to Local 324 funds according to contribution rates set forth in the agreement. (Id.) The rates were based on the hours worked by covered employees. (Id.) Pursuant to the CBA, the Trust Agreements establishing the plans, together with any insurance or related agreements approved by a majority of the Plan Trustees, were incorporated into the CBA. (Id.) The Trust Agreement for the health care plan provides inter alia that contributions employers are required to make to the health care fund pursuant to the CBA “become vested Plan assets at the time they become due and owing to the Fund.” (Pls.’ Mot. Ex. G at 2, ECF No. 36-8 at Pg ID 355.) The Trust Agreement also grants the Trustee authority “to impose a reasonable cost of collection assessment upon a delinquent Employer, in the nature of liquidated damages and not as a penalty, as decided by the Trustees, for delinquent Contributions as well as attorney, accounting, audit and related costs and fees.” (Id. at 9, Pg ID 362.) Trust documents set forth the liquidated damages to be paid on unpaid contributions, which is at least 10% of the total amount due. (Pls.’ Supp. Exs. A ¶¶ 3(b)-(d), Ex. B § 4.5, ECF Nos. 47-2, 47-3.)

         In December 2015, LGC contracted with Tiskono & Associates, LLC (“Tiskono”) to perform LGC’s responsibilities under the DPS contract. (Defs.’ Resp. Ex. 1 ¶ 7, ECF No. 41-1 at Pg ID 413.) It appears that Tiskono assumed LGC’s responsibilities under the CBA; however, LGC has not contested its continued liability as signatory to the CBA if Tiskono failed to fulfill its obligations. (See Id . ¶ 8.) Tiskono in fact failed to meet its financial obligations under the CBA and Local 324 filed a complaint with the National Labor Relations Board against LGC, Tiskono, and another entity (“NLRB Complaint”). (Id.; see also Defs.’ Resp. Ex. 3, ECF No. 41-3.)

         The complaints filed in the NLRB action alleged that LGC failed to meet its financial and other obligations under the CBA since February 2016. (Defs.’ Resp. Ex. 3 ¶ 18, ECF No. 41-3 at Pg ID 488; Defs.’ Supp. Ex. 1 ¶ 18, ECF No. 48-2 at Pg ID 827.) This included LGC’s obligation to make contributions to the following Local 324 funds: health and welfare plan; retirement savings plan; and education and apprenticeship fund. (Id.) The NLRB matter eventually was resolved through a settlement agreement, which LGC President Shashidar Shastri (“Mr. Shastri”) signed on March 21, 2017. (Defs.’ Resp. Ex. 4, ECF No. 41-4 at Pg ID 502.)

         In the settlement agreement, the charged parties agreed to inter alia “make retirement, annuity, and training fringe benefit contributions in the amount of $324, 600 to satisfy the parties’ collective-bargaining agreement, and comply with the contractual provisions requiring continued fringe benefit fund contributions.” (Id. at 2, ECF No. 41-4 at Pg ID 500.) The agreement contained a “Scope of the Agreement” provision, which reads in pertinent part:

This Agreement settles only the allegations in the above-captioned cases, and does not settle any other cases or matters. It does not prevent persons from filing charges, the General Counsel from prosecuting complaints, or the Board and the courts from finding violations with respect to matters that happened before this Agreement was approved regardless of whether General Counsel knew of those matters or could have easily found them out.

(Id. at 3, Pg ID 501.)

         According to Mr. Shastri, now LGC’s Executive Vice President, LGC entered into an agreement with Ringo Services, Inc. (“Ringo”), pursuant to which Ringo performed the DPS work from January 7, 2017 through March 30, 2018. (Defs.’ Resp. Ex. 1 ¶ 14, ECF No. 41-1 at Pg ID 414; see also id. Ex. 5.) Mr. Shastri states that in June 2017, he authorized Dan Ringo, Ringo’s President, to exercise LGC’s right not to renew the CBA. (Defs.’ Resp. Ex. 1 ¶ 17, ECF No. 41-1 at Pg ID 415.) In an email to Mr. Ringo dated July 3, 2017, Mr. Shastri wrote:

I recall you sent a mail/letter to Jim Arini notifying intent [sic] not to renew CBA after expiry on August 12th, 2017 ……… please confirm you sent the notice by certified/registered mail as required by article XXXVII of CBA. The clause required 60 day notice.

(Id. Ex. 6, ECF No. 41-6 at Pg ID 521.) Mr. Ringo responded on the same Dated: “It was sent.” (Id.)

         In fact, Mr. Ringo sent a letter to Jim Arini, Local 324’s Business Representative, which stated:

Ringo Services will exercise its rights under Article XXXVII of the Collective Bargaining Agreement and hence said rights will be executed according to Article XXXVII of the current labor agreement.

(Pls.’ Reply Ex. 1, ECF No. 42-2.) The letter is dated June 26, 2017. (Id.)

         From April through June 2018, LGC employed its own personnel to work on the DPS contract. (Id. ¶ 15, Pg ID 415.) LGC did not make contributions to Plaintiffs’ funds pursuant to the CBA during this period or thereafter because, according to Mr. Shastri, the CBA had long since expired. (Id. Ex. 1 ¶ 15, ECF No. 41-1 at Pg ID 415.) Mr. Shastri provides that LGC treated all of its employees as non-union employees during this period and offered them benefits options available to non-union employees. (Id. ¶ 18, Pg ID 416.) He further provides that Local 324 continuously pressured LGC to sign a new CBA during this period. (Id. ¶ 19, Pg ID 416.)

         According to his declaration, Mr. Rachmale is an officer of LGC. (Defs.’ Resp. Ex. 7, ECF No. 41-7 at Pg ID 523.) However, when asked to list each and every officer and/or director of LGC, and the office that each holds or has held for the past three years, Defendants answered: “As a limited liability company, [LGC] does not have officers or directors.” (Pls.’ Mot. Ex. D at 7, ECF No. 36-5 at Pg ID 336.) In response to Plaintiffs’ Interrogatory No. 4, asking Defendants to state Mr. Rachmale’s duties and responsibilities with LGC, Defendants responded: “Avinash Rachmale’s responsibility is to sign checks on behalf of the entity. He is not involved in the management of the entity.” (Id. at 5, Pg ID 334.) Plaintiffs’ Interrogatory No. 5 asked:

Please state the name, job title and job duties of each individual that makes determinations of what company bills and/or invoices to pay, including but not limited to the purchase of materials and/or supplies, and/or the payment of employee benefit contributions to Plaintiff Funds.

(Id.) Defendants answered: Jinansh Shah, Account Executive, and Neetu Khullar, Senior Accountant. (Id. at 6, Pg ID 335.)

         On December 5, 2017, Plaintiffs filed this lawsuit against LGC and Mr. Rachmale. Plaintiffs assert the following claims in an Amended Complaint filed January 11, 2019: (I) against LGC for breach of the CBA and violations of ERISA; (II) against Mr. Rachmale for breach of his fiduciary duties in violation of ERISA; (III) against LGC to hold it liable for contributions due for Tiskono’s employees under the theory that Tiskono is an alter-ego/single employer of LGC. (Compl., ECF No. 34.) Pursuant to a Scheduling Order entered initially in this matter on April 26, 2108, [3] and amended on July 12, 2018 and again on August 13, 2018, the deadline for discovery was December 12, 2018. Plaintiffs filed the pending motion for partial summary judgment on February 11, 2019.

         During the pendency of this action, Plaintiffs’ auditor completed audits based on records provided by LGC. According to letters from the auditor to LGC, dated February 11, 2019, the following contributions are owed for the periods October 2015 to January 2016 and April through June 2018: (a) Annuity Fund: $22, 330.21; (b) Training Fund: $7, 443.41; (c) Pension Fund: $66, 990.61; and (d) Health Care Fund: $175, 703.50. (Pls.’ Mot. Ex. B, ECF No. 36-3.) In addition to the $272, 467.73 in unpaid contributions, the audit results list the liquidated damages due (i.e., 10% of the outstanding contributions) and the cost of the audits. (Id.)

         Applicable Standard of Review

         Plaintiffs seek partial summary judgment under Rule 56 of the Federal Rules of Civil Procedure. Summary judgment pursuant to Rule 56 is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The central inquiry 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.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). After adequate time for discovery and upon motion, Rule 56 mandates summary judgment against a party who fails to ...


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