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Trustees of the Operating Engineers Pension Trust v. Nancie's Sweeping

August 14, 2009

TRUSTEES OF THE OPERATING ENGINEERS PENSION TRUST, TRUSTEES OF THE OPERATING ENGINEERS HEALTH AND WELFARE FUND, TRUSTEES OF THE OPERATING ENGINEERS VACATION-HOLIDAY SAVINGS TRUST, AND TRUSTEES OF THE OPERATING ENGINEERS TRAINING TRUST, PLAINTIFFS,
v.
NANCIE'S SWEEPING, INC., A CORPORATION DEFENDANTS.



The opinion of the court was delivered by: Stephen V. Wilson United States District Judge

I. Introduction

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Plaintiffs Trustees of the Operating Engineers Pension Trust, Trustees of the Operating Engineers Health and Welfare Fund, Trustees of the Operating Engineers Vacation-Holiday Savings Trust and Trustees of the Operating Engineers Training Trust ("Trusts Funds") allege that Defendant Nancie's Sweeping ("Nancie's Sweeping") breached the Master Labor Agreement between Southern California Contractors Association and the International Union of Operating Engineers Local Union No. 12 by failing to pay fringe benefit contributions. The Trust Funds seek damages in the amount of the unpaid fringe benefit contributions, liquidated damages of ten percent of the amount of unpaid fringe benefit contributions, prejudgment interest calculated pursuant to 26 U.S.C. § 6621, audit costs, and attorney's fees.

Having conducted a bench trial on July 8, 2009, the Court now makes the following findings of facts and conclusion of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.

II. Facts

Nancie's Sweeping is an industrial street sweeping company. Third party contractors contract with Nancie's Sweeping to supply sweeping services on projects such as street construction or street paving. On each project, Nancie's Sweeping assigns a driver and a specific street cleaning vehicle. After performing the sweeping services, the driver submits a "ticket" to the client. The ticket contains information including the driver's name, the vehicle used, the client's name, and the client's signature. The ticket serves to certify that work was performed by a Nancie's Sweeping employee on that day for the specified amount of hours. When Nancie's Sweeping eventually sends an invoice for the work done, the ticket is attached to the invoice as proof.

Nancie's Sweeping is bound to the Master Labor Agreement between the Southern California Contractors association and the International Union of Operating Engineers Local 12. Pursuant to the Master Labor Agreement and ERISA, 29 U.S.C. 1145, Nancie's Sweeping is required to make fringe benefit contributions to the Trust Funds for work that is covered by the Agreement. Street sweeping services are covered work under the Agreement. Accordingly, Nancie's Sweeping must pay fringe benefit contributions for each hour an employee of Nancie's Sweeping performs street sweeping services. Nancie's Sweeping reports the amount of covered work her employees perform by submitting monthly reports to the Trust Funds. The reports list the employees who worked that month as well as the hours each employee worked. Nancie's Sweeping then pays the corresponding amount to the Trust Funds. The current matter concerns the Trust Funds' allegation that Nancie's Sweeping underreported, and thereby, underpaid its trust contributions.

In 2008, the Trust Funds began an audit of Nancie's Sweeping. Auditor Michael Babel met with Nancie Reyes, owner and operator of Nancie's Sweeping, and requested all payroll and related records showing all the hours worked by or paid to Nancie's Sweeping employees who performed work within Local 12's jurisdiction. According to Babel, Reyes gave Babel a few copies of invoices, none of which contained numeric invoices. In response, Babel asked Reyes for copies of numeric invoices, including the supporting tickets. Babel testified that Reyes indicated that she did not maintain numeric invoices and that she did not have copies of invoices she submitted to third parties or the corresponding tickets. (See Babel Decl. ¶ 6.)

Unsatisfied with Nancie's Sweeping's recordkeeping, the Trust Funds filed the current action, and subpoenaed invoices from Nancie's Sweeping's third party clients. Babel performed an audit comparing the hours Nancie's Sweeping reported to the Trust Funds with the hours billed on the invoices to the third parties. From the audit, Babel concluded that Nancie's Sweeping had underreported hours in two categories.

First, Babel compared the hours billed to the third parties with the hours reported to the Trust Funds. Babel found that according to the third party invoices, Nancie's Sweeping's employees had billed 18,958.50 more hours to third parties than were reported to the Trust Funds on the monthly report forms. (See Ex. 16.) Babel calculated that due to the underreporting of hours, Nancie's Sweeping owes the Trust Funds $283,681.95 in unpaid fringe benefit contributions. At trial, Nancie's Sweeping pointed to various months that were not accurately reported in Babel's report. (See Ex. 57.) Babel conceded that those months should be updated to reflect the correct amount of hours reported.

Babel also concluded that there was a second category of unreported hours. In performing the audit, Babel noted that all of Nancie's Sweeping's invoices were numbered. Babel noted that there appeared to be seven different numerical sequences of invoices: (1) from 2218 through 3,000, (2) from 3,000 through 5,999, (3) from 6,000 through 6,679, (4) from 1 through 275, (5) from 6587 through 7202, (6) from 275 through 334, and (7) from 7203 through 8208. Within the sequences, Babel found that there were numbers for which Babel could find no corresponding invoice. The Trust Funds argue that every number that does not have a corresponding "known" invoice, must actually be a "missing" invoice that Nancie's Sweeping billed to an unknown client. As such, the Trust Funds argue that in total Nancie's Sweeping sent out 3,415 invoices, only 2,329 of which the Trust Funds were able to locate through the third party clients. Thus, the Trust Funds argue that 1,086 invoices are "missing." The Trust Funds argue that they are due fringe benefit contributions for these "missing" invoices.

III. Analysis

1. Underreported Hours Supported by Third Party Invoices

For the first category, the Court finds that the Trust Funds proved that Nancie's Sweeping breached the Master Labor Agreement by underreporting hours to the Trust Funds. The Trust Funds offered evidence that Nancie's Sweeping billed third party clients for ...


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