MICHAEL J. DAVIS, Chief District Judge.
This matter is before the Court on Plaintiffs' Motion for Entry of Judgment. [Docket No. 21]
Plaintiffs Terry Nali and William Grimm are the Trustees and fiduciaries of the Twin City Floor Covering Industry Pension Fund and the Twin City Floor Covering Industry Fringe Benefit Trust Fund ("Funds"). (December 17, 2010, Findings of Fact, Conclusions of Law, and Order for Default Judgment and Injunction ("Dec. 2010 Order") at 1.) Defendant MaxPro Flooring, LLC ("MaxPro") was bound by the terms of the Collective Bargaining Agreement ("CBA") with the Carpet, Linoleum, Resilient Tile Layers Local #596 of the Lakes and Plains Regional Council of Carpenters and Joiners. (
The CBA itself states that it is effective "from June 1, 2007 to May 31, 2010 and shall continue in full force and effect from year to year thereafter unless written notice of intention to terminate or modify this [CBA] is made by either party to the other sixty (60) days prior to the date of expiration or any anniversary date." (Nali Aff., Ex. A, CBA ¶ 27.01.) Plaintiffs aver that, according to their records, neither party has abrogated or terminated the CBA, so it is still in place. (Nasstrom Aff. ¶ 7.)
Under the CBA, Defendants were required to make contributions on behalf of covered employees by the tenth day of the following month. (Dec. 2010 Order at 2; Nali Aff., Ex. A, CBA § 23.07.) A penalty of $10.00 or ten percent of the amount due, whichever is greater, is assessed for amounts not paid by the twenty-first day of the month. (
The CBA provides that the Funds have the authority to audit MaxPro and Johnson's records when deemed necessary by Plaintiffs and that Defendants shall make their records available to the Funds for that purpose. (Dec. 2010 Order at 2-3; CBA § 23.09.) If the audit shows a discrepancy of more than 5% of the money paid to the Funds, Defendants shall cover the cost of the audit. (Dec. 2010 Order at 3-4; CBA § 23.09.) Additionally, the CBA requires that Defendants pay all "legal costs" incurred by the Funds in collecting delinquent contributions. (Dec. 2010 Order at 3-4; CBA § 23.07.)
On August 6, 2009, Nali and Grimm sued MaxPro and Johnson in the District of Minnesota in
Defendants eventually produced the requested fringe reports for June, July, and August 2009; they self-reported an amount due of $16,088.50; and Plaintiffs sought entry of a default judgment for the amounts reported by Defendants. (ADM Case [Docket No. 7-10].)
In November 2009, Defendants released a check for $20,169.67 to Plaintiffs from MCI, an account receivable, in connection with a pre-judgment garnishment served in the ADM Case. (Cefalu Aff., Ex. C.) At that time, Johnson signed an authorization to release the funds, and the authorization named the ADM Case. (
On December 1, 2009, the Court entered judgment for $19,993.46 in the ADM Case, consisting of $16,088.50 in fringe fund contributions, $1,608.85 in liquidated damages, and $2,296.11 in attorney's fees and costs. (ADM Case [Docket Nos. 13, 16].) The Court specifically held: "Pursuant to the fringe fund reports untimely submitted for the months of June, July and August, 2009, $16,088.50 is due and owing for delinquent fringe fund contributions." (ADM Case [Docket No. 13] at 3.)
On December 18, 2009, a few weeks after obtaining judgment in the ADM Case, Plaintiffs filed the current Complaint against MaxPro and Johnson in this Court. The Complaint alleges: Count I: Breach of Contract/Failure to Submit to an Audit and Count II: ERISA Damages. The Complaint seeks an order requiring Defendants to submit to an audit and to pay "all unpaid fringe benefit contributions discovered to be due pursuant to the audit of the period of May 1, 2009 to the present plus all additional amounts to which the Plaintiffs are entitled." (Compl. at 6-7.)
On April 13, 2010, the Summons and Complaint were served on MaxPro and Johnson. [Docket No. 2] Defendants failed to answer or otherwise respond. On May 6, 2010, the Clerk granted Plaintiffs' motion and entered Default against Defendants. [Docket No. 6]
On September 14, 2010, Plaintiffs filed a Motion for Default Judgment and Injunction. [Docket No. 8] Despite being personally served with the motion and accompanying papers [Docket No. 13], Defendants failed to appear or otherwise respond.
Plaintiffs averred that the Funds' auditor requested that Defendants produce records for the months of May 2009 through the present ("Audit Period"). (Nali Aff. ¶ 9.) After the Complaint was filed, Defendants produced some bank records and cancelled checks, but failed to produce the remaining requested records for the Audit Period. (
After a default hearing on December 17, 2010, the Court granted Plaintiffs' motion. [Docket Nos. 14-15] The Court's Order required Defendants to provide the payroll and employment records for May 2009 through the present (December 17, 2010), to the Funds within ten days from the date that the Order was served on Defendants. The Court held that, once the audit information was provided, Defendants would be liable for the amount of delinquent contributions found owing pursuing to the audit, liquidated damages, audit fees, and reasonable costs and attorney's fees incurred. Plaintiffs would file a motion for entry of a money judgment based on the results of the audits, and Defendants would have ten days to respond. There would be no need for a hearing, unless the Court orders otherwise. The Court would then enter judgment.
Defendants satisfied the ADM Case judgment. Johnson claims that Plaintiffs received full payment for the ADM Case judgment sometime in 2010. (Johnson Aff. ¶ 21.) Defendants have also submitted copies of three checks showing payment by Defendants to the Union in March 2010, totaling $878.00. (Isakson Aff., Ex. M.) There is no indication on these checks that they were written to satisfy any particular obligation, such as the ADM Case judgment. Plaintiffs filed a Satisfaction of Judgment in the ADM Case on March 26, 2012. (ADM Case [Docket No. 17].)
In February 2012, Plaintiffs commenced a garnishment action in the ADM Case against Johnson's personal bank account. (Johnson Aff. ¶¶ 23-24; Isakson Aff., Ex. H.) There is no evidence regarding how much money, if any, that Plaintiffs collected through that garnishment action.
Using documents provided by Defendants, Plaintiffs performed an audit of the fringe benefits owed for the period May 2009 through December 10, 2010, based on MaxPro's bank records. (Nasstrom Aff. ¶¶ 3, 5, 8.) Johnson avers that MaxPro did not keep or require time cards. (Johnson Aff. ¶ 14.) The only financial records for MaxPro are Wells Fargo account statements and copies of checks. (
On July 24, 2012, Plaintiffs sent a letter to the Court stating that Plaintiffs had completed the audit for the time period of May 2009 through December 2010; Defendants had retained an attorney; Plaintiffs had served the current Motion for Entry of Default on Defendants in April 2012; and Defendants had objected to the amount found owing under the audit.
Plaintiffs now move for an entry of money judgment in the amount of $33,631.09, consisting of fringe benefit contributions of $24,828.99, liquidated damages of $2,482.90, attorney's fees of $5,612.50, and costs of $706.70, all for the Audit Period of May 2009 through December 2010.
Defendants filed their objection and seek a hearing, a finding that the judgment in this case has already been satisfied, denial of Plaintiffs' motion, an order vacating the default judgment entered against Defendants as satisfied, dismissal of the Complaint with prejudice, and an order awarding Defendants their costs and fees expended in defending this allegedly duplicative matter.
Defendants claim that the motion is based on a previously satisfied judgment in the ADM Case, and so the motion is barred by Federal Rule of Civil Procedure 60(b)(5), accord and satisfaction, res judicata, and collateral estoppel. Defendants also claim that the audit reports are inaccurate.
Defendants claim that accord and satisfaction bars the current motion because Plaintiffs have already collected more than $20,000 from Defendants for contributions owed under the CBA.
Defendants argue that Plaintiffs have already accepted payment of more than $20,000 for benefits owed by Defendants under the terms of the CBA. They claim that the judgment in the ADM Case functioned as a contract between the two parties, and Defendants satisfied that debt. Defendants further argue that this Court should relieve them of the judgment currently existing in this case because it has already been satisfied and its existence is no longer equitable.
The Court rejects Defendants' theory of accord and satisfaction. Here, the Court can objectively determine that the ADM Case and the Order issued in that case related solely to Defendants' failure to comply with their monthly reporting obligation. The final order in the ADM Case specifically provided that the judgment was based only on the "fringe benefit reports" submitted by Defendants for the months of June, July, and August 2009. (ADM Case [Docket No. 13] at 3.) Thus, the ADM Case judgment did not foreclose Plaintiffs' ability to audit Defendants' payroll records for the same period.
The approximately $20,000 receivable check signed over to Plaintiffs was clearly provided in satisfaction of the ADM Case only — that case is specifically referenced in the document signed by Johnson. In turn, the ADM Case judgment is explicitly based only on the amounts self-reported by Defendants in the fringe benefit reports provided for June, July, and August 2009. There was no agreement between the parties to perform an audit or to satisfy any amount that might be found owing after an audit. This lawsuit relates to under-reported hours not included in the fringe benefit reports Defendants submitted in conjunction with the ADM Case, while the ADM Case related to hours that Defendants voluntarily reported. There have been no agreements between the parties pursuant to the ADM Case that related to Plaintiffs' right to audit Defendants' payroll and employment records.
Defendants argue that both collateral estoppel and res judicata bar Plaintiffs' current motion.
"The preclusive effect of a federal-court judgment is determined by federal common law."
Collateral estoppel applies when
Collateral estoppel and res judicata are both affirmative defenses, subject to waiver if not pled by the party asserting them.
The Court concludes that, by defaulting in this case, Defendants have waived the affirmative defenses of res judicata and collateral estoppel. Defendants defaulted in this case — they filed no answer or motion in this case at all, let alone one that asserted the affirmative defenses of res judicata or collateral estoppel. They failed to contest the Complaint or appear at the default hearing. The Court entered judgment in this matter in December 2010, definitively concluding that Plaintiffs will be liable for any delinquent contributions found during the audit for the time period specified. It is too late, two years later, for Defendants to now assert res judicata and collateral estoppel. Application of these new affirmative defenses for the first time, years after judgment was already entered, would result in unfair surprise and prejudice to Plaintiffs.
The Court concludes that the only issue before the Court at this time is the accuracy of the amounts found owing under the audit. The Court must ensure that Defendants do not pay twice for the same fringe benefits owed. But it will not apply res judicata or collateral estoppel at this point in the litigation.
Defendants note that Plaintiffs currently seek judgment for an Audit Period ending in December 2010. They claim, however, that the CBA between the parties was only in place from May 14, 2009 through May 31, 2010. Defendants also argue that Plaintiffs' Complaint only sought relief for May 1, 2009 through the "present," which, at the time of the filing of the Complaint, was December 18, 2009. Thus, they claim that the proper Audit Period should be May 2009 through December 18, 2009.
The Court rejects Defendants' argument that they owe no fringe benefits after May 2010 because the CBA expired in that month, not in December 2010. Defendants waived that argument by defaulting on this case. In its December 2010 Order, the Court already determined that the applicable period for audit and payment was through December 2010. (December 2010 Order at 3-5.) Judgment was entered on that Order. Moreover, Plaintiffs accurately point out that the CBA automatically renews unless one of the parties gives proper notice of termination. Plaintiffs aver that there is no evidence of termination by either party. Defendants offer no evidence to the contrary. Even if Defendants had not waived that argument through default, the Court would find that the CBA was in effect until December 2010.
Additionally, the fact that the Complaint in this case sought benefits owed through the "present" does not bar recovery beyond the date of the filing of the Complaint. The Court reiterates that Defendants defaulted in this case and failed to respond in any manner before the Court entered judgment in December 2010 setting the Audit Period through December 2010, so Defendants have waived that argument.
Defendants argue that Plaintiffs improperly seek benefits for employee Dan Dagostino from January 2009. (Isakson Aff., Ex. I, Audit Report.) However, Defendants did not enter the CBA until May 14, 2009.
The Court rejects Defendants' argument regarding Dagostino. While it is true that the original audit report does state that Dagostino worked in January 2009, that date is clearly a typographical error. The hours on the original invoice for Dagostino were incorrectly listed as 1/09 instead of 10/09, for October 2009. (Nasstrom Aff. ¶ 4.) Auditor Nasstrom avers that he intended to write 10/09. (
Defendants claim that employees Dennis Babineau and Steven Damsgaard did not work in the second half of May 2009, once the Agreement was in effect; therefore, the hours for these employees should not be included on the invoice.
The Court rejects Defendants' objection. The Funds' records, received directly from the employees, show that Babineau worked between May 17-29, 2009, and Damsgaard worked 84.5 hours from May 18-31, 2009 — although Defendants only reported 40 hours for that time period. (Nasstrom Aff. ¶ 5; Nasstrom Aff., Ex. B.)
Defendants argue that Plaintiffs' audit report is partly based on checks that do not represent wages paid to employees. Specifically, Plaintiffs point out that check number 1030 was issued to Anthony Stark on September 25, 2009, in the amount of $3,500 with the memo "start-up reimbursement" noted on the check. (Isakson Aff., Ex. J; Johnson Aff. ¶ 30.) Also, check number 1054 was issued to Stark on November 13, 2009 for $1,000 for "tool rental." (Isakson Aff., Ex. J; Johnson Aff. ¶ 30.) Defendants assert that the payments to Stark were not for wages but, instead, were for tools or start-up costs.
The auditor was unable to use timecards to finalize the audit because Defendants did not maintain time cards or produce more accurate records. Instead, MaxPro made lump sum payments, so Plaintiffs used the wage rate to calculate the number of hours worked. If the auditor was not sure of whether the payment was issued for wages, he invoiced for it.
Defendants have produced no evidence to substantiate Johnson's claim that the checks were for non-wage payments. When a signatory employer's records are inadequate to determine whether hours identified by an ERISA auditor are covered by the CBA and there are payments to persons previously identified as covered employees or carpenters, the Fund's auditor treats the work as covered. (Nasstrom Aff. ¶ 5.) Plaintiffs' practice is appropriate in light of the fact that ERISA places the burden on employers to maintain accurate records regarding contributions. 29 U.S.C. § 1059(a)(1) ("[E]very employer shall, in accordance with such regulations as the Secretary may prescribe, maintain records with respect to each of his employees sufficient to determine the benefits due or which may become due to such employees.");
Because Defendants blatantly violated their statutory duty to keep records sufficient to determine the amount of fringe benefits owed, the Funds are entitled to shift the burden to Defendants to prove that a payment is not for covered work. Here, Defendants fail to rebut the presumption that the payment to Stark was for covered work. The Court rejects Defendants' objection.
Defendants argue that Plaintiffs' audit also includes amounts due for months that were fully satisfied in the ADM Case judgment. They conclude that any claims for May 2009 through August 2009 were satisfied by the ADM Case judgment. Defendants also claim that the fringe benefit report hours were inflated in the ADM Case.
Defendants did not appeal the final order or judgment in the ADM case; the Court rejects their attempt to collaterally attack the amount of that judgment now. The Court also reiterates that, because Defendants violated their statutory duty to keep records of employee hours worked, they bear the burden of showing that work is not covered and that the audit is inaccurate.
Defendants have no evidence to support their claim that the hours already paid in the 2009 judgment in the ADM Case are included in this motion. The auditor has specifically averred in his affidavit that the purpose of this audit was to review Defendants' records for hours which were not already reported to the Funds. (Nasstrom Aff. ¶¶ 3, 5.) Rather, the audit reflects hours which should have been — but were not — reported by Defendants in the fringe benefit reports upon which the ADM Case judgment was based. Thus, for example, the auditor discovered that Damsgaard worked 84.5 hours between May 18-31, 2009, but that Defendants only reported 40 hours. (
Plaintiffs are entitled to judgment for the full amount of the audit invoice.
"The special remedy against employers who are delinquent in meeting their contractual obligations that is created by § 502(g)(2) includes a mandatory award of prejudgment interest plus liquidated damages in an amount at least equal to that interest, as well as attorney's fees and costs."
Under ERISA, an award of reasonable attorney's fees and costs is mandatory when a fiduciary has successfully sued to enforce an employer's obligation to make contributions to a multiemployer plan.
Accordingly, based upon the files, records, and proceedings herein
