TRUSTEES OF THE NATIONAL ELEVATOR INDUSTRY PENSION, HEALTH BENEFIT, EDUCATIONAL, ELEVATOR INDUSTRY WORK PRESERVATION FUNDS et al v. CENTURY ELEVATOR, INC. et al
Filing
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MEMORANDUM AND/OR OPINION RE: THE PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT AND MOTION FOR ATTORNEY'S FEES AND COSTS (DOC. NO.4). SIGNED BY HONORABLE MARY A. MCLAUGHLIN ON 10/11/2011. 10/11/2011 ENTERED AND COPIES E-MAILED.(kk, )
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
TRUSTEES OF THE NATIONAL
ELEVATOR INDUSTRY PENSION,
HEALTH BENEFIT, EDUCATIONAL,
ELEVATOR INDUSTRY WORK
PRESERVATION FUNDS, et al.
v.
CENTURY ELEVATOR, INC.,
et al.
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CIVIL ACTION
NO. 11-3792
MEMORANDUM
McLaughlin, J.
October 11, 2011
This is an action by trustees of various National
Elevator Industry benefit and trust funds (the “Trust Funds”) to
recover unpaid contributions to an employer benefit fund, amounts
found due in an audit, plus costs, interest, attorney’s fees, and
liquidated damages pursuant to the Employee Retirement Income
Security Act (“ERISA”).
Pending before the Court is the
plaintiffs’ motion for default judgment.
As the defendants have
yet to appear or defend in this action, the motion is unopposed.
For the reasons that follow, the Court will grant the motion.
I.
Procedural History
The trustees filed this action on June 10, 2011
against defendants Century Elevator, Inc. and John M. Powers.
The complaint brings ERISA claims against Century Elevator to
recover unpaid monthly contributions, amounts due from an audit,
costs, interest, attorney’s fees, and liquidated damages.
The
trustees also seek an injunction requiring timely reports and
contributions to the Trust Funds.
The complaint also brings a
claim against John Powers for breach of fiduciary duty pursuant
to section 409 of ERISA, 29 U.S.C. § 1109(a).
The record shows that although the defendants were duly
served on June 17, 2011, they have not appeared, answered, moved,
or otherwise responded to the complaint.
On July 12, 2011, the
Clerk of Court entered a default against the defendants.
The
plaintiffs now move for default judgment pursuant to Fed. R. Civ.
P. 55(b).
II.
Factual Background1
The plaintiffs are trustees of the Trust Funds, which
are multi-employer employee benefit plans established pursuant to
sections 3(3) and 3(37) of ERISA, 29 U.S.C. §§ 1002(3), (7).
Century Elevator is a Massachusetts corporation transacting
business as a contractor or subcontractor in the elevator
industry.
and owner.
John Powers is Century Elevator’s officer, president,
Complaint ¶¶ 2-4.
1
Because this is a motion for default judgment, the Court
accepts as true any factual allegations, other than those as to
damages, contained in the complaint. DIRECTV, Inc. v. Pepe, 431
F.3d 162, 165 n.6 (3d Cir. 2005).
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Century Elevator, by its president John Powers, signed
a Collective Bargaining Agreement (“CBA”) with the International
Union of Elevator Constructors (the “Union”) on July 9, 2002.
The CBA binds Century Elevator to the terms of the various
agreements and declarations of trust establishing the Trust
Funds, and amendments thereto (hereinafter the “Trust
Agreements”).
Complaint, Ex. 1 (hereinafter “CBA”) §§ 3-7.
Under the CBA and the Trust Agreements, Century Elevator is
obligated to file monthly reporting forms with the trustees
indicating the number of hours worked by employees covered by the
CBA.
For each hour worked, Century Elevator must pay certain
sums of money at set hourly contribution rates into the Trust
Funds.
Id. §§ 3-7; Pls.’ Resp. to Court Request for Prod. of
Docs., Ex. 2 (hereinafter “Trust Agreements”), Eighth Amend.,
Art. VI ¶ 4.
These contributions finance the Trust Funds and
provide pension, medical, and educational benefits to the
defendants’ elevator constructor mechanics and apprentices.
The Trust Agreements state that if the trustees must
file suit to collect amounts due to the Trust Funds, the trustees
“shall seek liquidated damages in the amount of twenty percent
(20%) of contributions due at the time the lawsuit is filed,” as
well as interest, costs, and attorney’s fees.
Eighth Amend., Art. VI ¶ 6.
Trust Agreements,
Under the Trust Agreements, interest
on monies due will be at the rate charged by the Internal Revenue
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Service at the time of delinquency.
Id.
participating employer may be audited.
In addition, any
In the event an audit
discloses unpaid contributions of five percent or more of
contributions due during the audit period, the Trust Agreements
provide for assessment of audit costs against the employer.
Id.,
Eighth Amend., Art. VI ¶ 8.
Century Elevator reported but failed to remit
contributions for the months of September 2010 and February
through May 2011.
Although the parties entered into a Settlement
Agreement regarding the delinquent monthly contributions, a
balance still exists in the amount of $35,212.89, plus interest.
Mot. for Default Judgment, Ex. 2 (“Betts Aff.”) ¶¶ 6-7.
Furthermore, an audit of Century Elevator for the period of
January 1, 2007 through March 31, 2009, revealed that Century
Elevator owed under-reported contributions and interest, for
which a balance of $4,896.74 exists.
Id. ¶ 10.
Lastly, Century
Elevator owes interest for the late payment of contributions for
the months of August 2010 through and including May 2011 in the
amount of $499.30.
Id. ¶ 11; id., Ex. 6 (Misc. Assessments
Report).
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III. Analysis
A.
Counts I & II: Delinquent Contributions & Equitable
Relief against Century Elevator
Under section 1145 of ERISA, every employer who is
obligated to make contributions to a multi-employer plan under
the terms of the plan or under the terms of a collectively
bargained agreement shall make such contributions in accordance
with the terms of the plan or agreement.
29 U.S.C. § 1145.
Section 1132(g)(2)(E) authorizes equitable relief in actions to
enforce section 1145.
See Trustees of the Nat’l Elevator Indus.
Pension, Health Ben., Educ., Elevator Indus. Work Pres. Funds v.
Gateway Elevator, Inc., No. 09-4206, 2011 WL 2462027, at *4 (E.D.
Pa. June 21, 2011).
Furthermore, ERISA provides that in any
action by a fiduciary against delinquent employer contributors in
which judgment in favor of the plan is awarded, the court shall
award the plan:
(A) the unpaid contributions,
(B) interest on the unpaid contributions,
(C) an amount equal to the greater of (i) interest on the unpaid contributions, or
(ii) liquidated damages provided for under the plan in
an amount not in excess of 20 percent (or such higher
percentage as may be permitted under Federal or State
law) of the amount determined by the court under
subparagraph (A),
(D) reasonable attorney’s fees and costs of the action, to
be paid by the defendant, and
(E) such other legal or equitable relief as the court deems
appropriate.
29 U.S.C. § 1132(g)(2) (emphasis added).
Section 1132(g) also
provides that interest on unpaid contributions shall be
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determined by using the rate specified by the plan, or, if none,
the rate prescribed.
Here, the facts set forth above demonstrate that
Century Elevator and the Union entered into a CBA that required
remittance of monthly contributions.
They show that Century
Elevator has breached the CBA, is delinquent on contributions for
September 2010 and February through May 2011, and owes amounts
found due in an audit for the period of January 1, 2007 through
March 31, 2009.
Furthermore, the Trust Agreements provide for
liquidated damages in the amount of twenty percent of the
contributions due at the time the lawsuit is filed and set the
interest rate for delinquent contributions at the IRS rate.
Trust Agreements, Eight Amend., Art. VI ¶ 6.
The Court therefore
finds that the plaintiffs are entitled to the unpaid monthly
contributions, amounts due on the audit, liquidated damages in
the amount of twenty percent, interest according to the IRS
interest rate, attorney’s fees, and costs.
Furthermore, the
Court finds that the equitable relief requested is appropriate
here, as in Gateway Elevator.
B.
Count III: Breach of Fiduciary Duty against John Powers
A fiduciary is personally liable for a breach of
fiduciary duty under ERISA, 29 U.S.C. § 1109(a).
In Count III,
the trustees seek to hold individual defendant Powers personally
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liable as a fiduciary of the Trust Funds under ERISA § 3(21)(A),
29 U.S.C. § 1002(21)(A).
The Court finds that the plaintiffs
have alleged sufficient facts to hold Powers liable as a
fiduciary.
1.
Defendant Powers as a Fiduciary
Under ERISA, 29 U.S.C. § 1002(21)(A), a person is a
fiduciary to the extent:
(i) he exercises any discretionary authority or
discretionary control respecting management of such plan or
exercises any authority or control respecting management or
disposition of its assets,
(ii) he renders investment advice for a fee or other
compensation, direct or indirect, with respect to any moneys
or other property of such plan, or has any authority or
responsibility to do so, or
(iii) he has any discretionary authority or discretionary
responsibility in the administration of such plan.
The statutory definition requires that a fiduciary “must be
someone acting in the capacity of manager, administrator, or
financial advisor to a plan.”
Pegram v. Herdrich, 530 U.S. 211,
222 (2000) (internal quotations omitted).
The statute uses
different criteria in imposing fiduciary obligations for each of
these three roles.
In this case, the applicable provision is
§ 1002(21)(A)(i) because plaintiffs seek to hold Powers liable as
a manager, not an administrator or financial advisor.
See Bd. Of
Trustees of Bricklayers and Allied Craftsmen Local 6 of N.J.
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Welfare Fund v. Wettlin Assocs., Inc., 237 F.3d 270, 272 (3d Cir.
2001) (hereinafter Bricklayers).
“Fiduciary status attaches to a
person managing an ERISA plan under subsection (i) of
§ 1002(21)(A) if that person exercises discretion in the
management of the plan, or if the person exercises any authority
or control over the management or disposition of the plan’s
assets.”
Srein v. Frankford Trust Co., 323 F.3d 214, 220-21 (3d
Cir. 2003) (emphasis in original).
Lower courts have used a two-part test to determine
whether fiduciary liability attaches to individuals: (1) unpaid
contributions must be “plan assets,” and (2) the individual must
either exercise discretion in the management of the plan or
exercise any authority or control over the plan assets.
See
Gateway Elevator, 2011 WL 2462027, at *5 n.6; see also Teamsters
Health and Welfare Fund v. World Trans., Inc., 241 F. Supp. 2d
499, 505 (E.D. Pa. 2003) (citing Curcio v. John Hancock Mut. Life
Ins. Co., 33 F.3d 226, 233 (3d Cir. 1994)).2
2
The difference between the second prong of the test as set
forth in Teamsters and Gateway Elevator is whether discretion is
required. The Third Circuit has stated that one need not have
discretion in exercising authority or control over the management
or disposition of plan assets in order to qualify as a fiduciary
under § 1002(21)(A)(I). In re Mushroom Transp. Co., Inc., 382
F.3d 325, 346 (3d Cir. 2004); Srein, 323 F.3d at 220-21;
Bd. Of
Trs. Of Bricklayers and Allied Craftsmen Local 6 of New Jersey
Welfare Fund v. Wettlin Assocs. Inc., 237 F.3d 270, 273-74 (3d
Cir. 2001) (stating that Congress established a lower threshold
for fiduciary status where control of assets is at stake).
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The plaintiffs here have met their burden as to both
prongs against Powers.
a.
Plan Assets
The record here supports a finding that the unpaid
contributions are plan assets.
ERISA regulations define “plan
assets” as amounts that a participant pays to an employer, or
amounts that a participant has withheld from his wages by an
employer.
29 C.F.R. § 2510.3-102(a)(1).
Here, the CBA provides
that Century Elevator shall deduct wages from plan participants
at an hourly contribution rate and deposit the contributions into
the Trust Funds.
CBA §§ 3-7.
Furthermore, the CBA specifically states: “Title to all
the monies paid into and/or due and owing to [the Trust Funds]
shall vest in and remain exclusively in the Trustees of said
Funds, respectively.”
CBA § 7.
In a case brought by the same
plaintiff trustees based on a similar CBA against a different
elevator company, Judge Pratter held that this exact language
supported a finding that the unpaid employer contributions were
plan assets.
Gateway Elevator, 2011 WL 2462027, at *5; see also
Galgay v. Gangloff, 677 F. Supp. 295, 301 (M.D. Pa. 1987)
(finding that unambiguous language stating that title to monies
“due and owing” shall be vested in the fund made delinquent
employer contributions plan assets).
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Thus, the CBA in this case supports a finding that the
unpaid contributions are plan assets.
b.
Authority or Control
The plaintiffs have also demonstrated that Powers
exercises authority or control over the disposition of the plan
assets.
In Gateway Elevator, Judge Pratter found that the
plaintiffs demonstrated that an individual exercised authority or
control because he was (1) responsible for authorizing the checks
for the payment of employee contributions and settlement funds to
the Trust Funds; (2) he signed every check that made payments to
the Trust Funds in the relevant time period; (3) he is the
president, only board member, registered agent, and 100 percent
shareholder, as well as signatory to the CBA and settlement
agreements.
2011 WL 2462027 at *5.
By contrast, in Teamsters, the Court found that the
individual defendant did not exercise discretionary control over
plan assets because he was only minimally involved with fund
contribution procedure.
In that case, the human resources
department would calculate fund contributions, request a check
from the financial department, and have an officer sign the
check.
The defendant in Teamsters only occasionally signed
company checks; other officers and departments handled the
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contributions and the relationship to the funds.
241 F. Supp. 2d
at 506.
In this case, the complaint sets forth the following
with respect to Powers’s authority and control over Century
Elevator: (1) Powers is officer, president, and owner of Century
Elevator; (2) Powers signed the CBA on behalf of Century Elevator
Co.; (3) Powers exercises control over Century Elevator’s
payroll, including decisions regarding collection and
disbursement of payroll deductions authorized by the employees;
(4) Powers determined the total amount of Century Elevator’s
monthly contributions, retained a portion of the payment that
should have been sent to the Trust Funds, and chose to use the
monies for other purposes; (5) Powers failed to have Century
forward the monies due to the Trust Funds for the relevant time
periods; (6) Powers deducted the amounts owed in contributions
from employee paychecks and forwarded monthly remittance forms,
yet failed to remit those amounts to the Trust Funds and
deposited those amounts in Century Elevator’s general accounts
instead; and (7) Powers commingled plan assets with Century’s
general assets and used plan assets to pay other creditors.
Complaint ¶¶ 4, 30, 31, 35, 38; CBA at 4.
Unlike in Gateway Elevator, the plaintiffs here have
not alleged anything specific regarding Powers signing checks or
being a 100 percent shareholder.
However, the plaintiffs do
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allege that Powers deducted amounts owed in contributions from
employee paychecks, forwarded monthly remittance forms to the
Trust Funds, and failed to remit the amounts due to the Trust
Funds.
Furthermore, plaintiffs allege that Powers comingled plan
assets with Century Elevator’s general assets and used plan
assets to pay other creditors.
Complaint ¶¶ 35, 38.
These
facts, which the Court must accept as true, are far more specific
and demonstrate more control than the individual defendant had in
Teamsters.
Indeed, they demonstrate that Powers exercised
authority and control over the plan assets.
Therefore, the Court finds that Powers is a fiduciary,
as defined by ERISA.
2.
Breach of Fiduciary Duties
The plaintiffs have demonstrated that Power’s conduct
in the exercise of his fiduciary authority breached a defined
ERISA fiduciary duty.
To support a section 409 claim for breach of fiduciary
duty, a plaintiff must show causation between the breach of
fiduciary duty and the loss.
In re Unisys Savings Plan Litig.,
74 F.3d 420, 445 (3d Cir. 1996).
ERISA fiduciaries are
responsible for the “proper management, administration, and
investment of [plan] assets, the maintenance of proper records,
the disclosure of specific information, and the avoidance of
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conflicts of interest.”
Mertes v. Hewitt Assocs., 508 U.S. 248,
252 (1993) (citation omitted); see also Renfron v. Unisys Corp.,
– F.3d –, 2011 WL 3630121, at *5 (3d Cir. 2011).
Here, the record adequately supports the plaintiffs’
contention that Powers breached his fiduciary duties by failing
to timely remit contributions to the Trust Funds.
Thus, the
plaintiffs are entitled to default judgment against Powers as a
fiduciary.
An appropriate order shall issue separately.
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