Trustees of the Construction Industry and Laborers Health and Welfare Trust et al v. Sheryl Archie et al, No. 2:2012cv00225 - Document 78 (D. Nev. 2014)

Court Description: ORDER Granting 67 Plaintiffs' Motion for Summary Judgment. IT IS FURTHER ORDERED that 70 Defendants' Motion for Summary Judgment is DENIED. IT IS FURTHER ORDERED that plaintiffs shall submit a proposed judgment. Signed by Judge James C. Mahan on 3/3/14. (Copies have been distributed pursuant to the NEF - EDS)
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Trustees of the Construction Industry and Laborers Health and Welfare Trus... v. Sheryl Archie et al Doc. 78 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 DISTRICT OF NEVADA 7 TRUSTEES OF THE CONSTRUCTION INDUSTRY AND LABORERS HEALTH AND WELFARE TRUST, et al., 8 9 10 2:12-CV-225 JCM (VCF) Plaintiff(s), 11 12 v. 13 SHERYL ARCHIE, et al., 14 Defendant(s). 15 16 ORDER Presently before the court is plaintiffs’ motion for summary judgment. (Doc. # 67). 17 18 Defendants have filed a response (doc. # 72) and plaintiffs have filed a reply (doc. # 75). Also before the court is defendants’ motion for summary judgment. (Doc. # 70). Plaintiffs 19 20 have filed a response (doc. # 73) and defendants have filed a reply (doc. # 76). 21 I. 22 23 24 Background This action arises under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001-1500. Plaintiffs claim to be fiduciaries for the purposes of ERISA. Plaintiffs collect, or covered 25 employers are required to remit, employee benefit trust funds that provide pension, health and 26 welfare, vacation and training benefits to certain covered employees. 27 According to plaintiffs, defendants were the officers, directors and/or owners of a corporation 28 James C. Mahan U.S. District Judge 1 named Floppy Mop. Floppy Mop and the Laborers International Union of North America, Local no. 2 872 signed a collective bargaining agreement (“CBA”). The CBA required Floppy Mop to submit 3 monthly remittance reports and to make timely contributions based on those reports to plaintiffs on 4 behalf of each employee who performed work covered by the CBA. 5 In a prior lawsuit in this district, Trustees of the Construction Industry and Laborers Health 6 and Welfare Trust et al v. Floppy Mop Inc., case number 2:10-cv-01603-KJD-GWF, plaintiffs 7 obtained a judgment against Floppy Mop in the amount of $535,158, based on its failure to make 8 required contributions. Plaintiffs have now filed the instant lawsuit against Sheryl Archie and James 9 McKinney, whom plaintiffs claim are liable for Floppy Mop’s outstanding judgment by virtue of 10 their ownership and control of Floppy Mop. 11 The instant complaint contains two claims for fiduciary liability, one against Archie and one 12 against McKinney. Both parties have filed cross motions seeking summary judgment in their favor. 13 II. Legal Standard 14 The Federal Rules of Civil Procedure provide for summary adjudication when the pleadings, 15 depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 16 show that “there is no genuine issue as to any material fact and that the movant is entitled to a 17 judgment as a matter of law.” Fed. R. Civ. P. 56(a). A principal purpose of summary judgment is 18 “to isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 19 323–24 (1986). 20 In determining summary judgment, a court applies a burden-shifting analysis. “When the 21 party moving for summary judgment would bear the burden of proof at trial, it must come forward 22 with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial. 23 In such a case, the moving party has the initial burden of establishing the absence of a genuine issue 24 of fact on each issue material to its case.” C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 25 F.3d 474, 480 (9th Cir. 2000) (citations omitted). 26 In contrast, when the nonmoving party bears the burden of proving the claim or defense, the 27 moving party can meet its burden in two ways: (1) by presenting evidence to negate an essential 28 James C. Mahan U.S. District Judge -2- 1 element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving party failed to 2 make a showing sufficient to establish an element essential to that party's case on which that party 3 will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323–24. If the moving party 4 fails to meet its initial burden, summary judgment must be denied and the court need not consider 5 the nonmoving party's evidence. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 159–60 (1970). 6 If the moving party satisfies its initial burden, the burden then shifts to the opposing party 7 to establish that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith 8 Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, the opposing 9 party need not establish a material issue of fact conclusively in its favor. It is sufficient that “the 10 claimed factual dispute be shown to require a jury or judge to resolve the parties’ differing versions 11 of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 631 (9th 12 Cir. 1987). 13 In other words, the nonmoving party cannot avoid summary judgment by relying solely on 14 conclusory allegations that are unsupported by factual data. See Taylor v. List, 880 F.2d 1040, 1045 15 (9th Cir. 1989). Instead, the opposition must go beyond the assertions and allegations of the 16 pleadings and set forth specific facts by producing competent evidence that shows a genuine issue 17 for trial. See Celotex Corp., 477 U.S. at 324. 18 At summary judgment, a court’s function is not to weigh the evidence and determine the 19 truth, but to determine whether there is a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 20 477 U.S. 242, 249 (1986). The evidence of the nonmovant is “to be believed, and all justifiable 21 inferences are to be drawn in his favor.” Id. at 255. But if the evidence of the nonmoving party is 22 merely colorable or is not significantly probative, summary judgment may be granted. See id. at 23 249–50. 24 III. Discussion 25 In Trustees of the Construction Industry and Laborers Health and Welfare Trust et al v. 26 Floppy Mop Inc., case number 2:10-cv-01603-KJD-GWF, plaintiffs obtained a judgment against 27 Floppy Mop in the amount of $535,158. The only question before this court is whether Archie and 28 James C. Mahan U.S. District Judge -3- 1 2 McKinney are personally liable for the judgment against Floppy Mop. As a preliminary matter, the court acknowledges that defendants are proceeding pro se. 3 Documents filed pro se are held to less stringent standards. Erickson v. Pardus, 551 U.S. 4 89, 94 (2007) (“A document filed pro se is to be liberally construed, and a pro se complaint, however 5 inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by 6 lawyers.”) (internal quotations and citations omitted). However, “pro se litigants in the ordinary civil 7 case should not be treated more favorably than parties with attorneys of record.” Jacobsen v. Filler, 8 790 F.2d 1362, 1364 (9th Cir. 1986). 9 (A) Fiduciary Liability 10 Defendants spend the majority of their opposition arguing only that the judgment obtained 11 against Floppy Mop was somehow fraudulent and is therefore invalid. Defendants provide no 12 evidence to support this assertion. In the prior matter, Floppy Mop failed to initially respond or 13 otherwise participate. As a result, default judgment was entered against Floppy Mop in the amount 14 of $535,158. See Trustees of the Construction Industry and Laborers Health and Welfare Trust et 15 al v. Floppy Mop Inc., case number 2:10-cv-01603-KJD-GWF. It was not until nearly three years 16 later that Archie and McKinney, purporting to act on behalf of Floppy Mop, filed a motion to set 17 aside the default judgment. The court denied that motion without prejudice because a corporation 18 may not be represented pro se, the motion was excessively tardy, and the court doubted that Archie 19 and McKinney had standing to bring the motion. Floppy Mop did not obtain counsel and did not 20 participate further in that lawsuit. 21 Archie and McKinney now make conclusory assertions in the instant suit that Floppy Mop 22 was not a party to the subject CBA and related agreements. Defendants’ arguments are misplaced. 23 It has already been established that Floppy Mop is liable to plaintiffs for the unpaid contributions.1 24 The inquiry here is limited to whether or not Archie and McKinney can be held personally liable for 25 26 27 28 James C. Mahan U.S. District Judge 1 Defendants’ claim that Floppy Mop is distinct from Floppy Mop & D-Clutter, and that the former was not bound by the CBA is itself suspect. The timeline of the two companies’ incorporations and the submission of remittances seem to contradict this claim. Moreover, the CBA with local 702 incorporates by reference the local 872's master labor agreement. Thus, Floppy Mop need not sign the 872 agreement in order to be bound by it. In any event, this lawsuit is not the proper vehicle to in which to attack the default judgment against Floppy Mop. -4- 1 the default. On that point, defendants do not proffer evidence or otherwise argue that they did not 2 exercise discretion or control over the disbursement of those contributions. 3 Under ERISA, “a person is a fiduciary of a plan to the extent he exercises any discretionary 4 authority or discretionary control respecting management of such plan or exercises any authority or 5 control respecting management or disposition of its assets.” 29 U.S.C. § 1002(21)(A)(I). A 6 fiduciary is required to “discharge his duties with respect to a plan solely in the interest of the 7 participants and beneficiaries. . .for the exclusive purpose of (I) providing benefits to participants 8 and their beneficiaries. . .” 29 U.S.C. § 1104(a)(1)(A)(I). A fiduciary who breaches his or her 9 fiduciary responsibilities, obligations, or duties is “personally liable to make good to such plan any 10 losses to the plan resulting from such breach. ..” 29 U.S.C. § 1109(a). 11 Defendants argue that the unpaid contributions owed to the plaintiffs on behalf of Floppy 12 Mop’s covered employees are not considered “assets” under ERISA. This is incorrect. It is true, as 13 a general rule, that “[u]ntil the employer pays the employer contributions over to the plan, the 14 contributions do not become plan assets over which fiduciaries of the plan have a fiduciary 15 obligation. . .” Cline v. The Indus. Maint. Eng’g & Contracting Co., 200 F.3d 1223, 1234 (9th Cir. 16 2000). “Nonetheless, although the Ninth Circuit has not addressed the issue, other circuits and 17 district courts in the Ninth Circuit following the Cline rule have recognized an exception where the 18 agreement governing the plan identifies unpaid employer contributions as plan assets.” Trustees of 19 Electrical Workers Health and Welfare Trust v. Campbell, No. 2:07-cv-00724, 2010 WL 582553, 20 *3 (D. Nev. Feb. 11, 2010)(citations omitted). “Where documents of a plan describe its assets as 21 including contributions that are required to be paid, unpaid employer contributions are considered 22 plan assets.” Trustees of the Bricklayers & Allied Craftworkers Local 13 Defined Contribution 23 Pension Trust for S. Nevada v. Granite Works, Inc., 2:10-cv-00767-HDM-PAL, 2011 WL 3159099, 24 *3 (D. Nev. July 26, 2011). “Language deemed sufficient has included: (1) sums ‘due and owing’; 25 (2) sums that ‘shall be paid’ or are ‘required to be made’; or (3) sums that ‘become Trust assets on 26 the Due Date.’” Id. (citations omitted). By contrast, “[u]npaid employer contributions have not been 27 considered plan assets where plan documents describe assets as including simply ‘contributions,’ 28 James C. Mahan U.S. District Judge -5- 1 without more.” Id. (citations omitted). 2 Here, the trust fund’s collection policy provides that “all money owed to the Trusts, which 3 money (whether paid, unpaid, segregated or otherwise traceable, or not) becomes a Trust asset on 4 the Due Date.” (Laborers Joint Trust Funds Amended and Restated Collection Policy and 5 Procedures, doc. # 67, ex. 8, p. 1, section II(B))(emphasis added). The collection policy further 6 states that “[c]ontributions must be received by the 20th of the month. . .or such contributions are 7 delinquent and the employer shall immediately be liable. . .” (Id. at p. 2, section III(B)). In addition, 8 the trust agreements state: Contributions paid, and due but not yet paid, are Trust Fund Assets, without regard to whether the Employer has segregated or designated such funds as Contributions, as of the date the Employees performed the work for which such Contributions are due. In addition, in the event Contributions are due but not yet paid, and are therefore Trust Fund assets hereunder, but the Employer does not possess such funds, any accounts receivable or future receipts of any kind that are owed or paid to such Employer shall also be deemed Trust Fund assets to the extent of all amount owed to the Trust Funds by such Employer. For purposes of this definition, “Contributions” also includes any ancillary amounts due in relation to any owed Contribution, such as attorneys’ fees, liquidated damages, audit fees, or the like. 9 10 11 12 13 14 15 16 (Trust Agreement for local 872 and employers, doc. #67, ex. 2, amend. 4, LAB000035) (emphasis 17 added). 18 Under the relevant case law, the language contained in the instant agreements and policies 19 makes sufficiently clear that due but unpaid contributions qualify as “trust fund assets.” See, e.g., 20 Campbell, no. 2:07-cv-00724, 2010 WL 582553 (D. Nev. Feb. 11, 2010). 21 Because the unpaid contributions are trust assets in this case, plaintiffs must now demonstrate 22 that these defendants exercised authority or control over those assets in order to hold them personally 23 liable. Id. at *2 (“Defendants are liable as fiduciaries if (1) the unpaid contributions are trust assets, 24 and (2) Defendants exercised authority or control over those assets.”)(citations omitted). 25 An individual's status as an officer alone does not establish a defendant as a fiduciary 26 under ERISA. Id. at *4 (citing Acosta v. Pac. Enterprises, 950 F.2d 611, 618 ("[A] person's actions, 27 not the official designation of his role, determine whether he enjoys a fiduciary status."). Rather, a 28 James C. Mahan U.S. District Judge -6- 1 court "must look to Defendants' acts and responsibilities to determine whether they are fiduciaries." 2 Id. (citing Acosta, 950 F.2d at 618). Plaintiffs have provided ample evidence, taken from the 3 defendants’ own depositions, that demonstrate they did exercise control and authority over Floppy 4 Mop’s operations and financials, including management of plan assets. In particular, plaintiffs point 5 to the following deposition excerpts and supporting documents: 6 • Archie and McKinney formed and owned Floppy Mop. (Doc. # 67, 7 ex. 11 (Archie deposition excerpts) at 61:7-20; ex. 12 (McKinney 8 deposition excerpts) 37:25-38:4). 9 • at 62:12-16). 10 11 No other individuals were ever owners of Floppy Mop. (Id., ex. 11 • Archie and McKinney were the only officers of Floppy Mop. (Id., 12 ex. 10 (Nevada Secretary of State business entity information for 13 Floppy Mop, Inc.); ex. 11 at 66:14-24; 67:9-14; ex. 12 at 69:5-15)). 14 • (Id., ex. 11 at 67:7-20; ex. 12 at 46:11-20). 15 16 Archie and McKinney ran the day-to-day operations of Floppy Mop. • Archie and McKinney were responsible for bidding and running jobs 17 for Floppy Mop and no other individual shared that responsibility. 18 (Id., ex. 11 at 71:2-73-6; ex. 12 at 43:13-45:16, 46:7-10). 19 • Archie and McKinney both could issue checks from Floppy Mop 20 and no other individual had authority to do so for Floppy Mop. (Id., 21 ex. 11 at 78:6-14; ex. 12 at 47:4-16). 22 • pay Floppy Mop's bills. (Id., ex. 11 at 80:8-18; ex. 12 at 150:19-25). 23 24 Archie and McKinney both had the responsibility and authority to • Archie and McKinney were both responsible for employment 25 decisions including hiring and firing workers and for paying 26 workers, and no other individuals had such responsibilities. (Id., ex. 27 12 at 51:7-21, 75:25-77:3). 28 James C. Mahan U.S. District Judge -7- 1 • Archie and McKinney had the sole responsibility to prepare and sign 2 the monthly remittance reports to the trust funds that reported the 3 amount of work performed by covered employees and the amount of 4 contributions owed and to pay the contributions owed. (Id., ex. 11 5 at 93:5-19,96:2-97:6; ex. 12 at 65:3-66:4). • 6 McKinney signed remittance reports to the trust funds indicating that 7 he was an owner and a secretary of Floppy Mop. (Id., ex. 13 8 (Remittance Report for November 2008); ex. 14 (Remittance Report 9 for November 2009)). 10 Defendants have not put forth any evidence contradicting these facts. They have instead dedicated 11 their opposition, in large part, to disputing Floppy Mop was ever a party to the CBA. Again, Floppy 12 Mop’s liability has already been established in the prior matter. By failing to offer any evidence 13 disputing their authority and control over the plan assets, defendants have failed to satisfy their 14 burden in opposing summary judgment. See Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989) 15 (nonmoving party cannot avoid summary judgment by relying solely on conclusory allegations that 16 are unsupported by factual data). 17 The Ninth Circuit has held that “[t]he words of the ERISA statute, and its purpose of assuring 18 that people who have practical control over an ERISA plan’s money have fiduciary responsibility 19 to the plan’s beneficiaries, require that a person with authority to direct payment of a plan’s money 20 be deemed a fiduciary.” IT Corp. v. Gen. Am. Life Ins., 107 F.3d 1415, 1421 (9th Cir. 1997). The 21 evidence offered by plaintiffs sufficiently demonstrate that Archie and McKinney controlled the 22 payment of the contributions. As a result, they are considered fiduciaries under ERISA. Because 23 there is no genuine issue of material fact remaining, summary judgment is entered in favor of 24 plaintiffs. 25 IV. Conclusion 26 The court finds that Archie and McKinney exercised discretion and/or authority over the 27 contributions Floppy Mop was required to make to the trusts. As such, they are fiduciaries as 28 James C. Mahan U.S. District Judge -8- 1 defined by ERISA. By virtue of their failure to make the contributions as required by the CBA, 2 Archie and McKinney are both individually and personally liable for the judgment against Floppy 3 Mop. 4 Accordingly, 5 IT IS HEREBY ORDERED, ADJUDGED, and DECREED that plaintiffs’ motion for 6 7 8 9 10 summary judgment (doc. # 67) be, and the same hereby is, GRANTED. IT IS FURTHER ORDERED that defendants’ motion for summary judgment (doc. # 70) be, and the same hereby is, DENIED. IT IS FURTHER ORDERED that plaintiffs shall submit a proposed judgment. DATED March 3, 2014. 11 12 UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 James C. Mahan U.S. District Judge -9-